Appeals Court upholds CON ruling favoring WakeMed over Duke, UNC

The North Carolina Court of Appeals has ruled in favor of WakeMed and against Duke Health and UNC Rex Hospital in a certificate-of-need dispute involving 44 new acute-care beds in Wake County.

Both Duke and UNC challenged state health regulators’ decision to award a CON to WakeMed for new beds at its North Raleigh and Cary hospitals. That decision blocked Duke and UNC from adding new beds at their Wake County locations.

An administrative law judge issued a 2025 ruling affirming the North Carolina Department of Health and Human Services’ decision favoring WakeMed in the CON competition.

Duke and UNC argued that WakeMed had amended its CON application in a way that disqualified it from consideration. The challenges also focused on performance standards for acute-care beds, state regulators’ comparative analysis of the competing CON plans, and the administrative judge’s decision that the competitors failed to show “substantial prejudice.”

“Upon careful review, we conclude: first, WakeMed did not materially amend its application where the information was previously available to the Agency; second, the Agency properly found WakeMed conformed to the standards when reworking the projection numbers as it was allowed to do, and the decision was supported by competent evidence; and third, the Agency’s findings on the comparative analysis did not violate any statutes, and were supported by substantial evidence,” Judge Julee Flood wrote Wednesday for a unanimous three-judge Appeals Court panel. “Because we determine Petitioners did not show error in the Agency’s decision, we do not reach Petitioners’ substantial prejudice argument.”

A challenger in a CON case must prove that DHHS made an “agency error” and that the error led to “substantial prejudice.”

“Because a petitioner must show the Agency erred in tandem with showing substantial prejudice, and because we affirm the ALJ’s Final Decision that the Agency did not err, we need not address this last argument” about substantial prejudice, Flood explained.

Judges Valerie Zachary and Michael Stading joined Flood’s opinion.

The issue of “substantial prejudice” has cropped up multiple times in North Carolina court disputes involving certificates of need.

The North Carolina Supreme Court agreed in April to stay a lower court’s ruling in a western North Carolina CON dispute involving questions about “substantial prejudice.”

AdventHealth had asked for the stay as it sought the high court’s review of its challenge to a CON issued to competitor Mission Health for a free-standing emergency department in Candler.

Health care providers must secure a CON from state regulators before building a new hospital, adding hospital beds, opening many other types of health care facility, or buying the most expensive medical equipment.

AdventHealth is asking North Carolina’s highest court to take the Candler emergency department case to help clarify future legal disputes over the state CON law.

The state Appeals Court ruled in March against AdventHealth.

If the state Supreme Court takes the case, it “will have before it the very facts” the court indicated in 2025 that it needed to resolve an outstanding legal issue, according to AdventHealth’s petition filed April 8.

The high court ruled last October in Pinnacle Health Services v. NC Department of Health and Human Services that a health care provider who is denied a CON after a competitive process can claim that state regulators’ decision led to “substantial prejudice.” A plaintiff needs to show that form of prejudice, along with “agency error,” to win a CON case.

AdventHealth did not compete for the CON awarded to Mission Health’s Candler emergency department. The Supreme Court could use AdventHealth’s appeal to explain what a plaintiff must prove to win a CON dispute involving “non-competitive” CON reviews, according to the petition. “[T]here remains a need for a clearly defined standard,” AdventHealth’s lawyers wrote.

“While opponents in non-competitive reviews — typically market competitors of an applicant for a CON — have a clear statutory right to challenge a decision of a certificate of need under N.C. Gen. Stat. § 131E-188, such right is most often illusory as their challenges are repeatedly dismissed due to a purported inability [to] meet the burden to establish substantial prejudice,” the petition explained.

“Unlike obscenity, substantial prejudice should not be so difficult to define,” AdventHealth’s lawyers wrote. “In Pinnacle Health the court did it for competitive reviews, and the court should grant discretionary review in this case to do the same for all reviews.”

The petition cited other issues for the Supreme Court to consider, including the argument that state law gives “affected persons” the right to challenge a CON decision from state regulators.

“Thus, where a challenger can show that the Agency Decision is procured by false representations to the Agency as occurred in this case, or was made as a result of the Agency’s failure to abide by the law — in this case, the failure to have the statutorily required public hearing — that such matters are not excused because of a failure of a competitor to meet the nebulous standard for substantial prejudice in non-competitive cases,” AdventHealth’s lawyers wrote.

“Rather, the harm resulting from the Agency’s failure to follow the law or the harm from allowing an applicant to mislead the Agency, is precisely that the Agency failed to follow the law or was misled, harms that exist to all citizens, including competitors of the applicants,” the petition continued.

“Appeals Court upholds CON ruling favoring WakeMed over Duke, UNC” was originally published on www.carolinajournal.com.