COURT OF APPEALS OF VIRGINIA
Present: Chief Judge Fitzpatrick, Judges Elder and Clements
Argued at Richmond, Virginia
CHIPPENHAM & JOHNSTON-WILLIS
HOSPITALS, INC.
OPINION BY
v. Record No. 3075-00-2 JUDGE LARRY G. ELDER
OCTOBER 9, 2001
E. ANNE PETERSON, M.D.,
STATE HEALTH COMMISSIONER,
BON SECOURS-RICHMOND HEALTH SYSTEM, INC.,
BON SECOURS-STUART CIRCLE HOSPITAL, INC. AND
BON SECOURS-ST. FRANCIS MEDICAL CENTER, INC.
FROM THE CIRCUIT COURT OF CHESTERFIELD COUNTY
James W. Haley, Jr., Judge Designate
Robert T. Adams (Thomas J. Stallings;
McGuireWoods, on briefs), for appellant.
Roscoe C. Roberts, Assistant Attorney General
(Mark L. Earley, Attorney General; Ashley L.
Taylor, Jr., Deputy Attorney General; Jane D.
Hickey, Senior Assistant Attorney General, on
brief), for appellee E. Anne Peterson, M.D.,
State Health Commissioner.
Matthew D. Jenkins (Mark S. Hedberg; Hunton &
Williams, on brief), for appellees Bon
Secours-Richmond Health System, Inc., Bon
Secours-Stuart Circle Hospital, Inc. and Bon
Secours-St. Francis Medical Center, Inc.
Chippenham and Johnston-Willis Hospitals, Inc.,
(Chippenham) appeals from a circuit court ruling affirming the
decision of E. Anne Peterson, the State Health Commissioner,
(the Commissioner). In that decision, the Commissioner
concluded that Chippenham was not a "person showing good cause,"
as that term is defined in Code § 32.1-102.6(D), and, thus, was
ineligible to participate in the informal fact finding
conference held on the application of Bon Secours-Richmond
Health Systems, Inc., Bon Secours-Stuart Circle Hospital, Inc.,
and Bon Secours-St. Francis Medical Center, Inc., (Bon Secours)
for a certificate of public need to construct a new hospital in
Chesterfield County. On appeal, we hold that Chippenham
demonstrated at least one substantial material mistake of law in
the report submitted to the Commissioner by the local health
planning agency charged with review of the application. Thus,
we hold the Commissioner erroneously denied Chippenham's
petition to participate in the application process as a "person
showing good cause," and we reverse and remand to the circuit
court with instructions to remand the matter to the Commissioner
and order her to reverse her good cause determination and to
conduct further proceedings consistent with this opinion.
I.
BACKGROUND
On July 1, 1999, Bon Secours applied to the State
Department of Health for a certificate of public need (COPN) to
build a new hospital in Chesterfield County, St. Francis Medical
Center (St. Francis), intended to replace Stuart Circle Hospital
(Stuart Circle), located in the City of Richmond. Following a
public hearing on the application, the Central Virginia Health
Planning Agency (CVHPA), the local health planning agency
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charged by Code § 32.1-102.6 to conduct an initial review of the
application, recommended conditional approval. However, during
simultaneous review, the Division of Certificate of Public Need
(DCOPN) of the State Department of Health (Department), the
Commissioner's professional health planning staff, recommended
denying the COPN application because it concluded, inter alia,
that the application did not satisfy the State Medical
Facilities Plan (SMFP).
The Department scheduled an informal fact finding
conference pursuant to the Virginia Administrative Process Act
(VAPA), Code § 9-6.14:11. Chippenham, by counsel, petitioned
the Commissioner to allow it to participate in the conference as
"a person showing good cause" pursuant to Code § 32.1-102.6.
The Commissioner concluded that Chippenham did not establish
good cause and refused Chippenham's request.
Chippenham appealed the "good cause" determination to the
circuit court. 1 During the hearing on that issue, counsel for
the Commissioner conceded that Bon Secours' application for St.
Francis was not consistent with the provisions of the SMFP
setting minimum occupancy rate requirements for replacing a
hospital on a non-contiguous site and limiting the ability of a
1
The Commissioner also granted conditional approval to Bon
Secours' COPN application. Because the Commissioner held
Chippenham did not establish good cause and the circuit court
affirmed, Chippenham lacked standing to appeal the issuance of
the COPN. See Tidewater Psychiatric Inst., Inc. v. Buttery, 8
Va. App. 380, 383-84, 382 S.E.2d 288, 290 (1989).
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new hospital to locate within a ten-mile radius of existing
hospitals whose occupancy rates did not meet those same minimum
standards. Counsel for the Commissioner agreed that the
demonstrated annual occupancy rate for medical/surgical beds at
Stuart Circle was less than one-half the rate stated by the SMFP
and that two existing hospitals within eight miles of the site
proposed for St. Francis had underutilized beds. Counsel
argued, however, that the Commissioner had the discretion to
deviate from the SMFP based on projected future need and
consideration of all the circumstances. The circuit court
acknowledged the deficiency in the occupancy rates and proximity
to other underutilized beds but concluded that Chippenham
demonstrated no "substantial mistake of fact or law . . . in the
report submitted by the [CVHPA]" and that the Commissioner acted
within her discretion in concluding that Chippenham failed to
demonstrate good cause.
Chippenham timely appealed the good cause determination to
this Court.
II.
ANALYSIS
On appeal of an agency decision, "[t]he sole determination
as to factual issues is whether substantial evidence exists in
the agency record to support the agency's decision. The
reviewing court may reject the agency's findings of fact only
if, considering the record as a whole, a reasonable mind
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necessarily would come to a different conclusion."
Johnston-Willis, Ltd. v. Kenley, 6 Va. App. 231, 242, 369 S.E.2d
1, 7 (1988). In making this determination, "the reviewing court
shall take due account of the presumption of official
regularity, the experience and specialized competence of the
agency, and the purposes of the basic law under which the agency
has acted." Id.
On appeal of an agency's determination on issues of law,
the standards differ. "'If the issue falls outside the area
generally entrusted to the agency, and is one in which the
courts have special competence, i.e., the common law or
constitutional law,'" the court need not defer to the agency's
interpretation. Id. at 243-44, 369 S.E.2d at 8 (quoting
Hi-Craft Clothing Co. v. NLRB, 660 F.2d 910, 914-15 (3d Cir.
1981)).
However, where the question involves an
interpretation which is within the
specialized competence of the agency and the
agency has been entrusted with wide
discretion by the General Assembly, the
agency's decision is entitled to special
weight in the courts[, and] . . . "'judicial
interference is permissible only for relief
against the arbitrary or capricious action
that constitutes a clear abuse of delegated
discretion.'"
Id. at 244, 369 S.E.2d at 8 (quoting Va. Alcoholic Beverage
Control Comm'n v. York St. Inn, Inc., 220 Va. 310, 315, 257
S.E.2d 851, 855 (1979) (quoting Schmidt v. Bd. of Adjustment, 88
A.2d 607, 615-16 (N.J. 1952))).
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Under Virginia's Health Care Planning
law, before certain projects may be
commenced, a medical care facility shall
first obtain a [COPN] issued by the
Commissioner. The Commissioner must
determine that a public need for the project
has been demonstrated[,] and any decision to
issue a [COPN] must be consistent with the
most recent applicable provisions of the
State Health Plan (SHP) and the State
Medical Facilities Plan (SMFP). . . .
. . . . For a [COPN] to be consistent
with the SHP and SMFP means "in harmony with
. . . or in general agreement with."
Id. at 245-46, 369 S.E.2d at 8-9 (quoting Roanoke Mem. Hosps. v.
Kenley, 3 Va. App. 599, 606, 352 S.E.2d 525, 529 (1987)); see
also Code § 32.1-102.3(A) (providing that "[a]ny decision to
issue . . . a [COPN] shall be consistent with the most recent
applicable provisions of the [SMFP]" (emphasis added)).
The [SHP and the related SMFP are] planning
and development blueprint[s] for the health
activities of the Commonwealth. . . . The
[SHP and SMFP] . . . do[] not bind the
Department and the Commissioner to act in
accordance therewith. Code § 32.1-102.3
does, however, limit the authority of the
Commissioner with respect to the issuance of
a [COPN]. First, a decision to issue or
approve the issuance of a certificate must
be consistent with the most recent
applicable provisions of the [SHP and SMFP].
Second, in determining whether such public
need for a project has been demonstrated,
the Commissioner must consider the twenty
criteria set forth in Code § 32.1-102.3(B).
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Roanoke Mem. Hosps., 3 Va. App. at 605, 352 S.E.2d at 528-29
(emphasis added). 2
2
The statute provides as follows:
A. 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.
If it is determined that a public need
exists for only a portion of a project, a
certificate may be issued for that portion
and any appeal may be limited to the part of
the decision with which the appellant
disagrees without affecting the remainder of
the decision. 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.
B. In determining whether a public
need for a project has been demonstrated,
the Commissioner shall consider [twenty
enumerated factors, including]:
1. The recommendation and the reasons
therefor of the appropriate health planning
agency [and]
2. The relationship of the project to
the applicable health plans of the Board and
the health planning agency. . . .
Code § 32.1-102.3 (emphasis added); see also 12 VAC 5-220-160;
12 VAC 5-220-270.
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"If the Commissioner finds that the provisions of either
[the SHP or SMFP] are inaccurate, outdated, inadequate, or
otherwise inapplicable, the Commissioner may nevertheless issue
a [COPN] and institute procedures to amend the plan
appropriately." Johnston-Willis, Ltd., 6 Va. App. at 245, 369
S.E.2d at 9 (citing Code § 32.1-102.3(A)). Where the
Commissioner does not make an express finding that either of the
plans is "inaccurate, outdated, inadequate, or otherwise
inapplicable," the exception does not apply. Roanoke Mem.
Hosps., 3 Va. App. at 601, 352 S.E.2d at 526.
In this appeal, Chippenham does not directly contest the
decision to issue the COPN because it lacks standing to do so.
See supra footnote 1. Rather, it challenges the Commissioner's
denial of its request to participate in the proceedings as a
"person showing good cause," as that term is defined in Code
§ 32.1-102.6. An entity may show "good cause" by establishing
the existence of "a substantial material mistake of fact or law
in the Department staff's report on the application or in the
report submitted by the health planning agency[, the CVHPA,]" or
"significant relevant information not previously presented at
and not available at the time of the public hearing." Code
§ 32.1-102.6(G).
In reviewing the Commissioner's conclusion that Chippenham
failed to establish good cause, we must consider the
relationship between the code's direction that issuance of a
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COPN shall be consistent with the SMFP, Code § 32.1-102.1(A);
see Roanoke Mem. Hosps., 3 Va. App. at 606, 352 S.E.2d at 529,
and various portions of the SMFP, which provide that a specific
criterion "should" or "should not" be met, e.g., 12 VAC
5-240-30, 12 VAC 5-240-50. 3 We addressed this relationship in
Roanoke Memorial Hospitals, which involved the licensure of new
"megavoltage radiation therapy unit[s]" (megavoltage unit(s)).
3 Va. App. at 603-08, 352 S.E.2d at 527-30. The relevant
provision of the SMFP 4 stated that "'there should be no
additional megavoltage units opened unless each existing
megavoltage unit in a given medical services area is performing
at least 6,000 treatment visits per year.'" Id. at 605, 352
S.E.2d at 529. We held that "use of the word 'should' in the
context of the [SMFP] was intended to confer an appropriate
amount of discretionary authority in the administrative body."
Id. at 606, 352 S.E.2d at 529. Confronted with the argument
3
The requirement of Code § 32.1-102.3(A) that a decision to
issue a COPN must be consistent with the SMFP applies directly
only to the decision made by the Commissioner. However, if a
report of the CVHPA or DCOPN recommends that the Commissioner
issue a COPN when such issuance would be inconsistent with the
SMFP, the report contains a "substantial material mistake of
fact or law," and the entity demonstrating such a mistake must
be permitted to participate in the proceedings as a "person
showing good cause" under Code § 32.1-102.6.
4
Roanoke Memorial Hospitals actually involved consistency
with the SHP rather than the SMFP. However, the relevant
provisions of the SHP have been superceded by the SMFP, and Code
§ 32.1-102.3 requires consistency with "the most recent
applicable provisions of the [SMFP]."
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that "the words 'consistent with' as used in Code
§ 32.1-102.3(A) contradict[ed] any notion of flexibility[] and
demand[ed] that the Commissioner's ruling accord exactly with
the requirements of the Code," we held that "'consistent with'"
means "'compatible with' . . . or 'in general agreement with'"
rather than "'exactly alike' or 'the same in every detail.'"
Id. Thus, we concluded,
[b]oth the Code and the [SMFP] recognize
that the Commissioner will exercise some
discretion in issuing a [COPN] to determine
whether [her] decision is "consistent with"
the standard in the [SMFP], including the
proviso that there "should be no additional
megavoltage units opened, unless each
existing megavoltage unit in a given medical
services area is performing at least 6,000
treatment visits per year."
Id.
In applying this standard to the facts of that case, we
concluded data showing that one megavoltage unit fell well below
the 6,000-visits-per-year standard did not prevent the data as a
whole from being found "consistent with" the SMFP. Id. at 607,
352 S.E.2d at 529. The average number of annual visits for all
existing treatment units in the medical services area combined
was at least 97% of the 6,000-visits standard and was expected
to exceed that standard in future years. Id. at 607, 352 S.E.2d
at 530. Under those facts, we held the Commissioner's decision
to issue the COPN was "consistent with" the SMFP. Id. at
607-08, 352 S.E.2d at 530.
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Thus, we give deference to the CVHPA's determination,
implicit in its recommendation that the Commissioner issue the
requested COPN, that issuance of the COPN was consistent with
the SMFP. We may reverse the good cause determination only if
we conclude the CVHPA's recommendations were arbitrary and
capricious in light of the consistency requirement or that its
findings of fact were not supported by substantial evidence.
The SMFP provides that:
No proposal to replace acute care inpatient
beds off-site, to a location not contiguous
to the existing site, should be approved
unless: (i) off-site replacement is
necessary to correct life safety or building
code deficiencies; (ii) the population
served by the beds to be moved will have
reasonable access to the acute care beds at
the new site, or the population served by
the facility to be moved will generally have
comparable access to neighboring acute care
facilities; and (iii) the beds to be
replaced experience an average annual
utilization of 85% for general
medical/surgical beds and 65% for intensive
care beds in the relevant reporting period.
12 VAC 5-240-30(B)(1).
The CVHPA conceded in its October 8, 1999 report that "the
beds to be replaced do not meet the 85% medical/surgical or the
65% intensive care occupancy standard." Based on an occupancy
rate of 41.2% for medical/surgical beds and 51.6% for intensive
care beds during the 1998 reporting period, the CVHPA concluded
that the 85%/65% occupancy standard would "justify the
relocation of [only] 65 medical/surgical and 7 intensive care
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beds." It opined, however, that the "development of a hospital
of 72 beds likely would not be feasible and may not meet the
demand of the proposed service area into the future should [Bon
Secours' St. Francis Medical Center] capture a significant
market share of the relatively less competitive proposed service
area." "Based on the SMFP methodology" and given an existing
inventory of 2,449 general medical/surgical beds in Planning
District 15 in 1998, it projected a surplus of 918 general
medical/surgical beds through 2004. Although acknowledging "no
need for additional beds in the planning district," the CVHPA
projected a need for additional beds in St. Francis' proposed
service area by 2003, opining that "the 130 beds proposed to be
relocated to the [St. Francis] site could meet some of the
potential demand . . . at a more convenient location" and
"would be well utilized by the area." The CVHPA reached a
similar conclusion in regard to intensive care beds, noting an
expected surplus in the planning district but predicting the
likelihood of an increased need in the proposed service area,
opining that the new intensive care beds also likely would be
"well utilized."
Following Chippenham's petition to demonstrate good cause,
the Department's hearing officer concluded that the CVHPA's
deviation from the 85%/65% occupancy standard did not constitute
a substantial, material mistake of fact or law because the CVHPA
"properly applied the standards" but concluded that "the
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development of a 72-bed hospital would not be feasible and may
not meet the demand of the proposed service area into the
future." The Commissioner adopted this rationale without
elaboration.
The circuit court concluded that
the Commissioner's interpretation of Va.
Code § 32.1-102.3 as giving [her] discretion
in determining the degree to which a COPN
application must be, or may not be,
consistent with the SMFP is a correct
interpretation of that statute. Moreover,
it is only one of the statutory factors
which must be considered in a decision to
grant or deny the application. There was no
mistake of law. Accordingly, that
interpretation is not arbitrary and
capricious.
We conclude, pursuant to our holding in Roanoke Memorial
Hospitals, that the CVHPA's recommendation for issuance of the
COPN need not be supported by average annual occupancy data
which exactly meets or exceeds the 85%/65% occupancy standard of
the SMFP. 3 Va. App. at 606-08, 352 S.E.2d at 529-30. Rather,
the report does not contain a substantial material mistake of
law if it recommends the Commissioner exercise "some
discretion," an "appropriate amount," in concluding the issuance
of the COPN is "consistent with" the SMFP. Id. at 606, 352
S.E.2d at 529. Here, however, the record demonstrated an
undisputed average annual occupancy rate of 41.2% for Stuart
Circle's 135 medical/surgical beds, less than one-half of the
SMFP's standard of 85%. Although Stuart Circle did not seek to
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replace all 135 beds and the CVHPA recommended approval of 122,
use of these figures yields an average annual occupancy rate of
46%, still significantly below the SMFP's 85% standard. Thus,
we hold the CVHPA's report recommending issuance of the COPN
contained a substantial material mistake of law and, therefore,
was arbitrary and capricious because its recommendation that the
Commissioner issue the COPN under those circumstances was not
consistent with the SMFP.
Because we hold the CVHPA's recommendation to the
Commissioner to approve the COPN, despite an average annual
occupancy rate of 46% for general medical/surgical beds which is
not consistent with the SMFP's standard of 85%, constituted a
material mistake of law, we need not consider Chippenham's
remaining assignments of error. 5
5
Thus, we do not consider whether the CVHPA's
recommendation to the Commissioner to approve the COPN based on
an average annual occupancy rate of 51.6% for intensive care
beds as compared to the SMFP's standard of 65% constituted a
material mistake of law. We also need not consider Chippenham's
assignments of error regarding whether the CVHPA's deviation
from the combined ten-mile/minimum average occupancy standard
constituted a substantial material mistake of fact or law;
whether the CVHPA's failure specifically to mention one of the
COPN program's guiding principles was a material mistake of fact
or law; whether the CVHPA's acceptance of Bon Secours'
representations regarding its primary and secondary service
areas constituted a material mistake of fact; and whether the
fact that Bon Secours held an option to purchase land for the
construction of a hospital at an alternate site in Chesterfield
County was information "significant" and "relevant" within the
meaning of Code § 32.1-102.6.
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Accordingly, we hold the Commissioner erred in concluding
Chippenham was not entitled to participate in the application
proceeding as "a person showing good cause." Therefore, we
reverse and remand to the circuit court with instructions to
remand the matter to the Commissioner and order her to reverse
her good cause determination and to conduct further proceedings
consistent with this opinion.
Reversed and remanded.
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