Present: Carrico, C.J., Lacy, Hassell, Keenan, Koontz, and
Kinser, JJ., and Compton, Senior Justice
STATE HEALTH COMMISSIONER
v. Record No. 992018 OPINION BY JUSTICE ELIZABETH B. LACY
September 15, 2000
SENTARA NORFOLK GENERAL HOSPITAL
FROM THE COURT OF APPEALS OF VIRGINIA
In this appeal, we consider whether the Court of Appeals
erred in concluding the State Health Commissioner
(Commissioner) exceeded his statutory authority and committed
reversible error by relying on evidence outside the record and
on a mistake of fact when he denied a Certificate of Public
Need (COPN) for creation of an additional liver transplant
program in Virginia.
On July 31, 1996, Sentara Norfolk General Hospital
(Sentara) submitted an application for a COPN pursuant to Code
§ 32.1-102.3 to establish a liver transplant facility in
Norfolk. In accordance with the procedures governing
consideration of an application for a COPN, § 32.1-102.6, a
public hearing was held in Norfolk on September 16, 1996.
Following the hearing, the staff of the Eastern Virginia
Health Systems Agency Board recommended that the application
be denied. The Board disagreed with the staff recommendation
and voted to recommend approval of the application.
The application was then forwarded to the Virginia
Department of Health (VDH), Division of Certificate of Public
Need, for review. The staff of VDH recommended denial of the
application. An informal non-adversarial fact finding
conference was convened pursuant to § 9-6.14:11, and a VDH
adjudication officer recommended that the application be
approved.
The adjudication officer's recommendation along with the
entire record of the proceeding was submitted to the
Commissioner for decision. The Commissioner reviewed the
agency record, rejected the adjudication officer's
recommendation, and, by letter dated November 3, 1997, denied
Sentara's application for a COPN, finding that there was
currently no public need for the project. In his letter, the
Commissioner stated three reasons for this decision. First,
the Commissioner determined that the provisions of the State
Medical Facilities Plan (SMFP) relating to liver transplants
are "inaccurate, outdated, inadequate or otherwise
inapplicable" and that "[b]ecause they fail to reflect current
standards, they should not be applied here." The Commissioner
based this finding on the fact that although the SMFP only
requires that facilities perform a minimum of 12 liver
transplant procedures annually, 12 VAC 5-280-70, "[t]he
average number of liver transplants performed per transplant
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center nationally in 1994 was 36. In 1996 the average number
of liver transplants performed per transplant center in
Virginia was 52."
Second, the Commissioner concluded that the
establishment of an additional liver transplant facility at
Sentara "may erode the quality of other transplant centers by
reducing the volume of liver transplants at the other
centers." The Commissioner made this statement based on his
finding that "[i]ndications in the healthcare system are that
the numbers of available organs may be reaching a plateau;
consequently, the actual numbers of transplantations performed
appear to be stabilizing."
Finally, the Commissioner stated that "an additional
liver transplant center at [Sentara] may seriously impact the
established liver transplant fellowship training program at
MCVH [Medical College of Virginia Hospital]" because MCVH is
required by the American College of Surgeons "to perform 45
liver transplants annually."
In conclusion, the Commissioner found that Sentara's
application for a COPN was premature because "the system
presently (i) reflects no need for additional liver
transplantation sites in light of organ supply; (ii) appears
to have no excess of transplantation procedures requiring
accommodation whereas approval of another site could result in
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an excess of facilities lacking volume to meet the national
average or to assure essential technical experience; and (iii)
should maintain and sustain necessary training programs in the
Commonwealth."
Sentara filed a petition for appeal in the Circuit Court
for the City of Norfolk, arguing that the Commissioner's
decision should be reversed because the Commissioner exceeded
the scope of his authority, relied on evidence not contained
in the record, and relied on a mistake of fact regarding the
impact of the proposed transplant program on accreditation of
the liver transplant fellowship program at MCVH. During the
circuit court proceedings, the Commissioner conceded that his
recitation of the accreditation requirement was incorrect.
The circuit court affirmed the Commissioner's decision
and dismissed Sentara's petition, holding that the
Commissioner did not abuse his discretion in denying the COPN
and that, considering the record as a whole, "a reasonable
mind could not necessarily conclude that Sentara's COPN should
be approved." Additionally, the circuit court held that the
Commissioner's reliance on the mistake of fact regarding
accreditation requirements was harmless error.
Sentara appealed to the Court of Appeals, raising the
same three issues. The Court of Appeals resolved each issue
adversely to the Commissioner, holding that: (1) the
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Commissioner exceeded his authority in denying the petition
because § 32.1-102.3(A) does not allow the Commissioner to
deny an application for a COPN based on his determination that
the SMFP standards are outdated, inaccurate, inadequate, or
otherwise inapplicable; (2) the Commissioner's finding that
the number of livers available for transplantation "may be
reaching a plateau" was based on evidence outside the record,
reliance on this finding prejudiced Sentara and, therefore, it
was reversible error; and (3) the Commissioner's reliance on a
mistake of fact regarding the number of transplant procedures
necessary for a facility to maintain teaching accreditation
constituted reversible error and was not harmless. Sentara
Norfolk Gen. Hosp. v. State Health Comm'r, 30 Va. App. 267,
283, 516 S.E.2d 690, 698 (1999). The Commissioner appealed,
assigning error to the holding of the Court of Appeals on each
issue. We consider these assignments of error in order.
I. Commissioner's Statutory Authority
In his letter denying the COPN, the Commissioner stated
that the SMFP standard of 12 liver transplants per year was
"inaccurate and outdated" and "should not be applied" in this
case. The Commissioner directed that procedures for amending
the SMFP standard be initiated. Sentara claims that, in
making this determination, the Commissioner "set aside the
SMFP in order to impose a higher volume standard, rather than
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a less strict standard as permitted by the statute." In doing
so, Sentara asserts, the Commissioner exceeded his statutory
authority because § 32.1-102.3(A) allows the Commissioner to
set aside the SMFP if it is outdated and inaccurate only to
grant a COPN application, not to deny an application.
Agreeing with Sentara, the Court of Appeals held that
"[t]he plain language of the statute provides that the
Commissioner 'may issue or approve' a petition that does not
comply with an outdated or inaccurate SMFP" but it does not
provide "that he may deny or disapprove a petition on this
basis." Sentara, 30 Va. App. at 277, 516 S.E.2d at 695.
Section 32.1-102.3(A) provides in relevant part:
No person shall commence any project without first
obtaining a certificate issued by the Commissioner.
No certificate may be issued unless the Commissioner
has determined that a public need for the project
has been demonstrated . . . . Any decision to issue
or approve the issuance of a certificate shall be
consistent with the most recent applicable
provisions of the State Medical Facilities Plan;
however, if the Commissioner finds, upon
presentation of appropriate evidence, that the
provisions of such plan are not relevant to a rural
locality's needs, inaccurate, outdated, inadequate
or otherwise inapplicable, the Commissioner,
consistent with such finding, may issue or approve
the issuance of a certificate and shall initiate
procedures to make appropriate amendments to such
plan.
This section clearly authorizes the Commissioner to conclude
that provisions of the SMFP are outdated and directs the
Commissioner to initiate the process for changing the
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provisions found to be outdated. Thus, in this case, the
Commissioner acted within his statutory authority when he
determined that the existing SMFP requiring a minimum of 12
liver transplants was outdated and directed that procedures be
instituted to adopt appropriate amendments.
We agree with the Court of Appeals, however, that the
section specifically authorizes the Commissioner to grant a
COPN even if he finds provisions of the SMFP "outdated" or
"otherwise inapplicable," but does not contain similar
specific authorization to deny a COPN under such
circumstances. Denial of the COPN under such circumstances
would allow the Commissioner to unilaterally impose new, and
presumably higher, standards. The statute contemplates that
new standards would be imposed as a result of amendment
procedures initiated, not pursuant to unilateral adoption and
application of new standards by the Commissioner in the course
of the COPN process.
Section 32.1-102.3(A) does not, however, require the
Commissioner to grant a COPN simply because a COPN application
complies with the provisions of the existing SMFP. The
Commissioner correctly points out that compliance with the
SMFP is only one factor in the decision. The statute provides
that to grant a COPN, the Commissioner must conclude that "a
public need for the project has been demonstrated."
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Subsection B of § 32.1-102.3 lists 20 factors which the
Commissioner must consider in addition to compliance with the
SMFP in determining whether a public need has been
demonstrated. In this case, therefore, the Commissioner
exceeded his authority under § 32.1-102.3(A) if the
Commissioner denied Sentara's application solely on the basis
that the SMFP regarding the average number of transplants was
outdated and inapplicable. While the Court of Appeals opinion
states that the Commissioner exceeded his authority "to the
extent" he denied the COPN on the ground the SMFP was
outdated, there is no discussion of the extent to which the
denial was based on that ground.
Sentara argues that the Commissioner exceeded his
authority because, in setting aside the existing SMFP, he
applied "some higher, impromptu, unspecified standard" as a
basis for denying the COPN. The record, however, contains no
evidence that the Commissioner required Sentara to satisfy
some higher standard in order to secure the COPN. The
Commissioner's only references to higher standards were those
regarding the national average for annual liver
transplantations. First, the Commissioner observed that it
was "reasonable to assume" that over time there would be an
increase in the number of liver transplants performed by
Sentara and that this would reduce the number of procedures at
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other existing transplant centers. This redistribution of
patients, the Commissioner wrote, "would place the
Commonwealth's programs below the national average of 36
transplants per center." A second reference is contained
within one of the three considerations cited in his
conclusion: "[a]pproval of another site could result in an
excess of facilities lacking volume to meet the national
average or to assure essential technical experience."
These references to the national average were made in
regard to future events, not requirements which the
Commissioner imposed on Sentara as a prerequisite to securing
a COPN in this proceeding. They are a reflection of the
record evidence that the quality of transplant medical
expertise is directly related to the number of procedures
performed, and that the clinical outcome for liver transplants
improves as the number of procedures performed in a facility
increases. Thus, they cannot be the "higher, impromptu,
unspecified standard" that Sentara argues the Commissioner
applied as a basis for denying the COPN.
Furthermore, although the Commissioner stated that the
SMFP standard was outdated and would not be applied, he
nevertheless relied on the provisions of the existing SMFP in
support of his decision that no public need existed for
Sentara's proposed project. Citing the portion of the SMFP
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that states that transplantation programs are expected "to
perform substantially larger numbers of transplants annually"
and that meeting the minimum volume "does not necessarily
indicate a need for additional transplantation capacity or
programs," the Commissioner concluded that the existing SMFP
was "not binding as to minimum acceptable volumes." The
Commissioner also stated that even the existing SMFP "does not
support" the grant of a COPN to Sentara at this time.
In his letter denying Sentara's application, specifically
in the section relating to the existing SMFP standards, the
Commissioner made no statements which support the proposition
that the COPN was denied solely on the basis of a
determination that the existing SMFP was outdated and
inapplicable. Rather, the statements as set out above
indicate that the Commissioner found that even though Sentara
complied with the existing SMFP, it had not demonstrated a
public need for the project. This conclusion was within the
discretion and authority of the Commissioner under both
§ 32.1-102.3 and the provisions of the SMFP.
For these reasons, we hold that the Commissioner did not
exceed his statutory authority in denying the COPN in this
case.
II. Evidence Outside the Record
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The Commissioner's determination that a liver transplant
facility at Sentara might reduce the quality of transplants at
other facilities because a new facility would reduce the
number of such procedures at those facilities was based on his
conclusion that "the numbers of available organs may be
reaching a plateau." The Court of Appeals concluded that the
evidence on trends in organ donation rates was, at best,
inconclusive and that the proposition was faulty because the
number of liver transplants performed in Virginia increased in
1995 and 1996. Based on this rationale, the Court of Appeals
held, "as a matter of law that the evidence contained in the
record is insufficient to support the Commissioner's finding
that organ donation rates have reached a plateau," 30 Va. App.
at 279, 516 S.E.2d at 696, and, therefore, that the
Commissioner must have relied upon evidence outside the record
in making his decision. Because such evidence outside the
record constituted neither "institutional knowledge" nor "a
public statistic," the Commissioner's reliance on it was
improper. Id. at 280, 516 S.E.2d at 696. Reliance on this
improper evidence was reversible error, according to the Court
of Appeals, because the record did not otherwise support the
concerns of the Commissioner and, therefore, Sentara was
prejudiced by the Commissioner's consideration of evidence
outside the record regarding organ donation rates. Id. at
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282, 516 S.E.2d at 697. We disagree with the Court of
Appeals' analysis and conclusion.
In considering whether the record evidence is sufficient
to support a factual finding made by an agency, we apply the
substantial evidence standard of review. Virginia Real Estate
Comm'n v. Bias, 226 Va. 264, 268-69, 308 S.E.2d 123, 125
(1983). Under that standard, substantial evidence is " 'such
relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.' " Id. at 269, 308 S.E.2d
at 125 (citations omitted). An agency's factual findings
should only be rejected if, " 'considering the record as a
whole, a reasonable mind would necessarily come to a different
conclusion.' " Id.
As the Court of Appeals and trial court acknowledged, the
record in this case contains testimonial and documentary
evidence suppporting the proposition that the number of livers
available for transplantation has reached a plateau. Examples
of this evidence include a chart prepared by MCVH showing a
decline in liver donations in Virginia, testimony that MCVH
must import livers from out of state for its transplant
program, and various letters from members of the medical
community involved in liver transplantation programs. These
letters state that "there remains throughout the world, a
scarcity of donor solid organs for transplantation"; that
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"[t]here has been an increase in the numbers of liver
transplants in the state with addition of programs at UVA
(1988) and Fairfax (1992); however, over the past three years
. . . this number has reached a state-steady plateau,
indicating the driving force is now only the numbers of
available donor organs"; that "the number of livers donated in
our procurement region is inadequate to support the existing
capacity of the region to perform liver transplantations";
that "[a]t the present time, the availability of liver
transplants is limited primarily by the availability of
transplantable livers. A second transplant program . . . will
do nothing to change the one limiting factor. In addition, it
may diminish the overall quality and effectiveness of this
procedure in our area"; and "[t]he most dramatic improvements
in access to liver transplantation for the residents of
Virginia can be accomplished through initiatives directed at
improving the rate of organ donations." (Emphasis omitted.)
Applying the substantial evidence standard of review, we
conclude that the character of this evidence would not require
a reasonable person to reject it as untrustworthy or
incredible and that a "reasonable mind might accept" it to
support the conclusion that the availability of livers "may
have reached a plateau." And, in light of this evidence, we
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cannot say that a reasonable person would necessarily come to
a different conclusion.
For these reasons, we hold that the Court of Appeals
erred in finding that the Commissioner relied on evidence
outside the record in making a factual finding regarding organ
donation rates. Because the Commissioner did not improperly
base his finding on evidence outside the record, questions of
prejudice to Sentara do not arise.
III. Mistake of Fact
The third reason cited by the Commissioner for denying
Sentara's application for a COPN was that the new transplant
center "may seriously impact the established liver transplant
fellowship training program at MCVH." This conclusion was
based on the Commissioner's factual finding that "the American
College of Surgeons requires the training institution to
perform 45 liver transplants annually." This factual finding
was wrong. The accreditation requirement, which had been
changed by the American College of Surgeons during the course
of the application process, no longer required a specific
number of procedures annually by the institution but rather
required 45 procedures by the fellow as primary surgeon in the
course of the fellowship, usually two years.
The Court of Appeals determined that "[i]n the absence of
substantial credible evidence supporting the Commissioner's
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decision to deny the COPN, we must assume that Sentara was
also prejudiced by this mistake of fact." Sentara at 282, 516
S.E.2d at 698. We disagree with the Court of Appeals.
In determining whether an error is reversible, we apply
familiar principles.
Error will be presumed prejudicial unless it plainly
appears that it could not have affected the result.
A plaintiff in error must always show, not only
error . . . , but also error of a substantial
nature. When once he has pointed out an error of a
substantial character, he is entitled to have it
corrected if it appears from the record that there
is reasonable probability that it did him any harm.
Breeding v. Johnson, 208 Va. 652, 659, 159 S.E.2d 836, 842
(1968). The Commissioner argues that the factual mistake was
not substantial and that there is no reasonable probability
that it did Sentara any harm. We agree with the Commissioner.
In determining whether there was a public need for
Sentara's transplant program, the Commissioner was required to
consider the program's impact on "the clinical needs of health
professional training programs in the area in which the
project is proposed." § 32.1-102.3(B)(12). The gravamen of
the Commissioner's expressed concern was whether the volume of
liver transplant procedures would be sufficient to sustain
MCVH's liver transplant training accreditation if Sentara
established a transplant program. According to the record,
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MCVH performed 66 liver transplants in 1996. That year,
Sentara referred 28 patients for liver transplants and the
majority of these patients went to MCVH for the procedure.
Based on these figures, the Commissioner stated that, if the
COPN were granted, over time Sentara would perform those
transplant procedures and the volume of liver transplants at
MCVH would be reduced by 40-50%. That degree of reduction in
transplant procedures at MCVH would impact the accreditation
of MCVH's liver transplant fellowship training program under
either the current accreditation standard or the erroneous
standard considered by the Commissioner.
Furthermore, the number of procedures which must be
performed at MCVH each year to retain its accreditation under
the current standard may be as many as 45 because, under the
new standard, the requisite number of procedures must be
performed by the fellow as primary surgeon. Presumably, a
fellow will have to assist on some number of procedures before
assuming the role of primary surgeon. As noted by the trial
court, "[a]ssuming there is one new fellow each year, as well
as an expert surgeon directing the program and performing the
majority of procedures during the first year of each fellow's
training, the training facility will exceed forty-five
transplants per year."
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Therefore, we conclude that the Commissioner's use of an
accreditation requirement of 45 transplants per institution
per year, rather than 45 transplants per fellow as primary
surgeon, in considering the impact of Sentara's proposed
transplant program on MCVH's liver fellowship training
program, was not "error of a substantial nature."
Finally, as we have already noted, the Commissioner's
decision to deny the COPN was based on multiple grounds. In
addition to concern about the continued accreditation of
MCVH's training program, the Commissioner's denial was based
on the need to maintain the quality of the technical
experience and the need for additional transplant centers in
light of the availability of donated livers. These other
reasons for denying the COPN are not affected by the mistake
of fact. Thus, we cannot conclude that a different result
would have occurred in the absence of the factual error.
In summary, we hold (1) that the Commissioner did not
exceed his authority when he did not apply certain standards
in the SMFP because he found that they were outdated,
inaccurate, inadequate, and otherwise inapplicable; (2) that
he did not rely on evidence outside the record when finding
that "the numbers of available organs may be reaching a
plateau"; and (3) that his reliance on a mistake of fact was
harmless error.
17
For the foregoing reasons, the judgment of the Court of
Appeals will be reversed and the judgment of the trial court
dismissing Sentara's petition for appeal will be reinstated.
Reversed and final judgment.
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