Va Dept. of Health v. Nrv Real Estate, LLC

Present: Hassell, C.J., Keenan, Koontz, Kinser, Lemons, and
Goodwyn, JJ., and Russell, S.J.

VIRGINIA DEPARTMENT OF HEALTH

v.   Record No. 081174                      OPINION BY
                                  SENIOR JUSTICE CHARLES S. RUSSELL
NRV REAL ESTATE, LLC                      June 4, 2009

                FROM THE COURT OF APPEALS OF VIRGINIA


        This appeal arises out of a dispute between the Virginia

Department of Health (VDH) and a medical care facility

concerning the facility’s right to operate nursing home beds.

It involves the interpretation of statutes relating to health

care planning.

                         Facts and Proceedings

        The essential facts are undisputed and the appeal

presents a pure question of law.     Carilion Giles Memorial

Hospital (Giles) operated 46 beds licensed by VDH.      Of those

beds, 22 were licensed as “medical/surgical” beds, three as

intensive care beds and the remaining 21 were certified for

reimbursement by the Medicaid program as nursing facility

beds.

        On June 28, 2004, Giles informed VDH that it intended to

cease operations as an intermediate-care nursing home

effective September 24, 2004.     Giles also notified Medicaid of

its intentions and its 21 Medicaid reimbursement nursing
facility beds were “de-certified” and “de-licensed” effective

September 24, 2004.

     NRV Real Estate, LLC (NRV) was the owner of a nursing

home in Radford known as Radford Nursing and Rehabilitation

Center (Radford Nursing).   On September 20, 2004, four days

before Giles’ cessation of operations as a nursing home was to

become effective, Giles entered into an agreement with NRV to

“relocate” its 21 nursing home beds from Giles to Radford

Nursing.

     On August 1, 2005, NRV filed an application with VDH for

a Certificate of Public Need (COPN) to approve the relocation

of the 21 nursing home beds from Giles to Radford Nursing.

The director of the VDH division concerned with COPN

applications replied by letter, declining to accept the

application on the ground that “execution of the proposed

project would constitute an addition to the supply of nursing

home beds in PD [Planning District] 4,” citing Code § 32.1-

102.3:2(A).

     In 1982, the General Assembly adopted a comprehensive

statutory system of health care planning laws, replacing

former statutes, to ensure that the development of health care

facilities would meet the needs of the public.   See 1982 Acts

ch. 388.   Under this system, Code § 32.1-102.3(A) provides, in

pertinent part, that “[n]o person shall commence any project”


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without obtaining a COPN from the State Health Commissioner.

The definition of “Project” includes any increase in the total

number of nursing home beds in an existing medical care

facility.   Code § 32.1-102.1.   The Commissioner may only

accept or approve an application for a COPN that would result

in an increase in the number of nursing home beds within the

planning district in which the project is located, if the

application is in response to “Requests for Applications”

issued by the Commissioner.   Code § 32.1-102.3:2(A).   It is

undisputed that Radford Nursing is located in Planning

District 4, as designated by the Commissioner, and that no

“Request for Applications” had been issued for additional

nursing home beds in that district at the time of NRV’s

application.

     The director's letter issued by VDH, refusing to accept

NRV’s application, stated:

     Although your application seems to imply that Giles
     Memorial has 21 nursing home beds available to be
     relocated, Giles Memorial does not now have such
     beds. Giles Memorial has never had nursing home
     beds, per se, but it did have 21 hospital beds
     certified for Medicaid nursing facility (“NF”)
     reimbursement until September 24, 2004, on which
     date those NF beds were de-certified pursuant to the
     hospital’s request. Since September 24, 2004, Giles
     Memorial has not had any beds that qualify as
     nursing home beds within the meaning of the statute
     governing the certificate of public need program.




                                 3
        VDH followed that letter by a formal refusal to accept

the application on the ground that it would result in an

increase of nursing home beds in Planning District 4, in

violation of Code § 32.1-102.3:2(A).     NRV appealed the

decision to the Circuit Court of Roanoke County.    VDH filed a

motion to dismiss NRV’s petition for appeal on legal grounds,

there being no issues of fact to be tried.    The circuit court,

by opinion and order, granted the motion to dismiss the

appeal, agreeing with the position taken by VDH.

        NRV noted an appeal of right to the Court of Appeals,

which, by a unanimous panel opinion entered April 15, 2008,

reversed the judgment of the circuit court and remanded the

case.     NRV Real Estate, LLC v. Virginia Dep’t of Health, 51

Va. App. 514, 519-20, 659 S.E.2d 527, 530 (2008).      The Court

of Appeals denied a petition for rehearing en banc and we

awarded VDH an appeal.

                              Analysis

        The appeal presents a pure question of statutory

interpretation.    We review such questions de novo.

Commonwealth v. Barker, 275 Va. 529, 536, 659 S.E.2d 502, 504

(2008).    Although decisions by administrative agencies are

given deference when they fall within an area of the agency’s

specialized competence, issues of statutory interpretation




                                  4
fall outside those areas and are not entitled to deference on

judicial review.     Id. at 536, 659 S.E.2d at 505.

     The dispositive question presented by VDH is whether it

was precluded by Code § 32.1-103:2(A) from accepting NRV’s

application, as the circuit court held, or whether NRV’s

application was exempted from the effect of that section by

the “twelve-month rule” provided by Code § 32.1-102.1.

     Code § 32.1-102.1 defines certain terms used in the

relevant statutes.    The definition of “Project” contains eight

parts, one of which reads:

          (5) Introduction into an existing medical care
     facility of any new cardiac catheterization,
     computed tomographic (CT) scanning, gamma knife
     surgery, lithotripsy, magnetic resonance imaging
     (MRI), magnetic source imaging (MSI), medical
     rehabilitation, neonatal special care, obstetrical,
     open heart surgery, positron emission tomographic
     (PET) scanning, psychiatric, organ or tissue
     transplant service, radiation therapy, nuclear
     medicine imaging, except for the purpose of nuclear
     cardiac imaging, substance abuse treatment or such
     other specialty clinical services as may be
     designated by the Board by regulation, which the
     facility has never provided or has not provided in
     the previous 12 months[.]

(Emphasis added.)

     VDH argues that if an activity is contained in the above-

quoted list, or is a specialty clinical service added to that

list by a regulation adopted by the State Board of Health,

that activity will have the benefit of the “twelve-month

rule.”   Thus, VDH continues, such an activity may be relocated


                                  5
to another facility without obtaining a new COPN, if the

relocating facility has provided the same services within the

past twelve months, because such a relocation would not be a

“Project” as defined in Code § 32.1-102.1.   Conversely, VDH

contends, an activity not contained in the above-quoted

statutory list, or added thereto by regulation, is a “Project”

and thus does not have the benefit of the “twelve-month rule.”

Any “Project” must obtain a new COPN before it may be

commenced by any person.   The Commissioner of Public Health is

precluded by Code § 32.1-102.3(A) from issuing a COPN “unless

the Commissioner has determined that a public need for the

project has been demonstrated.”

     Furthermore, VDH points out, Code § 32.1-102.3:2

specifically forbids the Commissioner to accept an application

for a COPN that would have the effect of increasing the total

number of nursing home beds in a planning district unless the

Commissioner has first issued a Request for Applications

therefor.   Id.

     VDH concludes that because (1) there was no Request for

Applications pending in the planning district, (2) granting

NRV’s application would result in an increase in the number of

nursing home beds in the planning district, (3) nursing home

beds were not included in the list of activities entitled to

the benefit of the “twelve-month rule,” and (4) no regulation


                                  6
had added them to that list, then the acceptance of NRV’s

application was explicitly prohibited by law.      The circuit

court agreed with that analysis.

     In its appeal to the Court of Appeals, NRV cited several

cases in which VDH had, in the past, applied the “twelve-month

rule” to approve the relocation of nursing home beds. 1     In its

opinion, the Court of Appeals noted that VDH had not, in this

case, explained its departure from its own precedent and,

citing federal cases, held that unexplained change of position

to be arbitrary and capricious.       NRV Real Estate, 51 Va. App.

at 533-34, 659 S.E.2d at 537.   The Court of Appeals also

observed that VDH’s position “that any cessation of service in

nursing home beds necessitates a new COPN would produce an

impermissibly absurd result.”     Id. at 526, 659 S.E.2d at 533.

The Court’s opinion stated:   “Any closure for renovation or

even cleaning, however temporary, would require a facility to

obtain a new COPN.”   Id.   The Court also observed: “[t]he fact

that the agency may apply a rule does not mean it must . . . .

[A]n agency ‘has incidental powers which are reasonably

implied as a necessary incident to its expressly granted

powers for accomplishing [its] purposes.’ ”       Id. (citation

omitted).


     1
       Because the applicants in those cases were successful,
the cases were not subjected to judicial review.

                                  7
     We do not agree with the Court of Appeals’ analysis.     An

administrative agency’s implied and incidental powers do not

extend to a violation of unambiguous statutory language.    When

statutory language is clear and unambiguous, a court is bound

by the plain meaning of that language.     Cummings v. Fulghum

261 Va. 73, 77, 540 S.E.2d 494, 496 (2001).    Neither the trial

court, the Court of Appeals nor this Court have discerned any

ambiguity in the statutes under consideration.

     The list of services entitled to the benefit of the

“twelve-month rule” by Code § 32.1-102.1 does not include

nursing home beds.   In interpreting statutory language, we

have consistently applied the time-honored principle expressio

unius est exclusio alterius.     That rule recognizes the

competence of the legislature to choose its words with care.

In applying it, we hold that the mention of specific items in

a statute implies that all items omitted were not intended to

be included.    GEICO v. Hall, 260 Va. 349, 355, 533 S.E.2d 615,

617 (2000).    “[B]ecause [a] statute specifically lists

exceptions . . . , those exceptions are the only ones allowed

by law.”   Jackson v. Fidelity & Deposit Co., 269 Va. 303, 313,

608 S.E.2d 901, 906 (2005).

     We do not share the concern of the Court of Appeals that

applying the statutes as written would necessarily lead to an

“impermissibly absurd result.”    In another definitional


                                  8
section of Code § 32.1-102.1, subdivision (3) of the

definition of "Project," the Legislature has made express

provision for the relocation of a limited number of beds in a

nursing home to another physical facility at the same site for

a period of up to two years without the requirement of a new

COPN. 2

      Finally, we do not agree that VDH acted arbitrarily in

applying the statutes as written.   Erroneous statutory

interpretations an administrative agency may have adopted in

the past can never cause the subsequent adoption of a correct

application of the law to be arbitrary and capricious.    If an

agency has acted in error, it has no obligation to continue to

err in perpetuity.

      When the decision of an administrative agency is

challenged as arbitrary, judicial interference is permissible

only for relief against arbitrary or capricious action that

constitutes a clear abuse of the discretion delegated to the

agency.   Virginia ABC Comm'n v. York St. Inn, 220 Va. 310,

315, 257 S.E.2d 851, 855 (1979); Board of Zoning Appeals v.

Fowler, 201 Va. 942, 948, 114 S.E.2d 753, 758 (1960).     The

only discretion delegated to VDH by law in this context was to


      2
       We apply the term "absurd result" to describe a
situation in which a law would be "internally inconsistent or
otherwise incapable of operation." Cook v. Commonwealth, 268
Va. 111, 116, 597 S.E.2d 84, 87 (2004).

                                9
add, or refrain from adding, nursing home beds to the list of

services entitled to the benefit of the “twelve-month rule” by

adopting a regulation to that effect, a process requiring

public hearing after notice.   VDH exercised its discretion in

that respect by refraining from adopting such a regulation.

At the time NRV submitted its application, VDH, confronted by

a clear statutory prohibition, had no discretion in the

matter.

                           Conclusion

     For the reasons stated, we conclude that VDH acted in

compliance with the applicable statutes in declining to accept

NRV’s application.   Because we agree with the analysis made by

the circuit court, we will reverse the judgment of the Court

of Appeals, reinstate the judgment of the circuit court and

enter final judgment here dismissing NRV’s appeal.



                                    Reversed and final judgment.




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