Top NC court rejects case that could block Weaverville hospital

The North Carolina Supreme Court has decided not to take a case that could have blocked a new hospital in Weaverville. Court records show the high court dissolved a stay issued in July that prevented the project from moving forward.

The state Department of Health and Human Services granted AdventHealth a certificate of need in 2022 approving a 67-bed hospital. Regulators later approved more beds for the same hospital, and AdventHealth is seeking regulatory approval to more than double that capacity.

But competitor Mission Health challenged the CON in court. Lower courts upheld DHHS’ decision, but the state Supreme Court issued a temporary stay this summer while considering whether to take the case.

Mission asked state Supreme Court justices to resolve “contradictory” and “confusing” rulings in a series of cases involving state CON decisions. Health care providers need a CON from state government before adding any new hospital beds in North Carolina.

The court’s petition rulings list Friday indicated that the court had dissolved the stay and denied Mission’s petition to hear the case.

AdventHealth responded in August to Mission’s Supreme Court request.

“Mission states in its introduction that the Petition raises two fundamental questions of administrative law,” AdventHealth’s lawyers wrote. “Mission makes both arguments in a case that is simply not appropriate, as the issues identified are irrelevant to the underlying Final Decision from the Administrative Law Judge (‘ALJ’) or the Court of Appeals’ opinion affirming the ALJ’s Final Decision.”

“While Mission correctly acknowledges that the ALJ in this case has, both in this case and in other final decisions, pointed out the difficulty in understanding what in fact constitutes substantial prejudice in Certificate of Need cases, any determination made by this Court on that issue in this particular case would be an advisory opinion or a determination on abstract questions of law, which this Court has held that it will not undertake,” the AdventHealth court filing added.

Taking the case “would have the Court delving into abstract or theoretical matters not appropriately the subject of appellate review,” AdventHealth’s lawyers wrote.

If Mission doesn’t like current CON law, “its avenue to attack those laws is not via a petition for discretionary review, but rather is a matter for the Legislature,” according to the court filing.

The state Supreme Court offered no commentary along with the July 25 order granting Mission’s motion to stay the state Court of Appeals’ June 18 ruling in the dispute.

The specific legal battle involves state regulators’ decision to award a CON to AdventHealth for a new 67-bed hospital to serve patients in Buncombe, Graham, Madison, and Yancey counties. Advent beat out Asheville’s Mission Hospital, which had proposed adding 67 beds at its existing site.

Mission challenged the decision. Based on court precedents involving CON disputes, Mission argued that NCDHHS committed “agency error.” That error led to “substantial prejudice” against Mission, according to its complaint.

An administrative law judge upheld the state’s CON ruling. A unanimous three-judge state Court of Appeals panel affirmed the administrative judge.

Mission asked the Supreme Court to reverse that ruling.

“This petition raises two fundamental questions of administrative law,” Mission’s lawyers wrote.

“The first question asks this Court to decide what ‘substantial prejudice’ means under the Administrative Procedure Act (APA),” the petition explained. “Every petitioner challenging agency action under the APA must show not only that the agency erred, but also that the petitioner was substantially prejudiced. The Court of Appeals has addressed this substantial-prejudice requirement many times, but it has consistently refused to decide what is required under the standard. The partial answers that the Court of Appeals has given are contradictory and confusing.”

Mission’s petition cited Supreme Court Justice Richard Dietz’s observation in September 2024 that the substantial prejudice requirement “is clearly causing a lot of confusion in the lower courts.”

“The current state of the law is so incomprehensible that the Administrative Law Judge assigned to this case included a plea for clarification in his final decision. But the Court of Appeals ignored that plea,” Mission’s lawyers wrote.

“By deciding cases on a murky substantial-prejudice requirement, agencies can avoid judicial scrutiny of their errors,” the court filing continued. “That is harmful to the regulated public and the jurisprudence of this state. Because the Court of Appeals refuses to answer the question, the only remedy is discretionary review by this Court.”

The second question for the Supreme Court to address “is related to a question that three members of this Court recently flagged as needing a definitive answer,” Mission’s lawyers wrote. It cited a 2022 dissent in a case called Virginia Electric from Justice Tamara Barringer, joined by Chief Justice Paul Newby and Justice Phil Berger Jr.

“Agencies have some discretion to change their policies over time. But when they do so, must they acknowledge the change and give a good reason for it? In Virginia Electric, the majority implied that reason-giving was necessary, but it gave no framework for resolving the issue, to the disappointment of the dissenting justices,” Mission’s lawyers argued.

“Since that time — just a few months ago — the U.S. Supreme Court unanimously adopted a framework to address this recurring question in administrative law,” according to Mission’s petition. “This case is an appropriate vehicle for addressing that question in North Carolina.”

In the current dispute, Mission argued that state regulators dropped a requirement, “existing as long as anyone could remember,” that any new hospital awarded a CON must have a licensed general operating room. The AdventHealth proposal did not meet that requirement, Mission argued.

“The Department of Health and Human Services changed one of its longstanding policies to the detriment of Mission,” the Supreme Court petition explained. “Medical providers like Mission had relied on this policy. But the Department gave no contemporaneous explanation for the change.”

“Mission respectfully asks this Court to decide whether the Department violated the APA when it failed to explain its change in position, and then decide whether this error substantially prejudiced Mission,” the hospital’s lawyers wrote.

After issuing its stay in the dispute between AdventHealth and Mission, the state Supreme Court clarified the “substantial prejudice” issue in a separate CON dispute.

The court ruled on Oct. 17 in a Wake County case that an applicant who loses a CON to a competitor has suffered substantial prejudice.

“Where two eligible applicants compete for a CON, the denied applicant is inherently prejudiced because ‘but-for’ the denial, the CON would be theirs,” wrote Justice Phil Berger Jr. for the court’s majority. The ruling split the court on other issues, but all seven justices agreed on Berger’s analysis of substantial prejudice.

“Top NC court rejects case that could block Weaverville hospital” was originally published on www.carolinajournal.com.