Cobb Hospital, Inc. v. Emory-Adventist, Inc.

SECOND DIVISION
MILLER, P. J.,
DOYLE, P. J., and MERCIER, J.

NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
https://www.gaappeals.us/rules

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COURT. ALL FILINGS MUST BE SUBMITTED WITHIN
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November 3, 2020

In the Court of Appeals of Georgia
A20A1000. COBB HOSPITAL, INC. et al. v. DO-039
EMORY-ADVENTIST, INC. et al.

DOYLE, Presiding Judge.

The instant appeal arises from a declaratory judgment action filed in superior

court by Cobb Hospital, Inc., d/b/a WellStar Cobb Hospital, Kennestone Hospital,

Inc., d/b/a WellStar Kennestone Hospital, and WellStar Health System, Inc.,

(collectively, “WellStar”) seeking to have the acquisition of Emory-Adventist

Hospital by Emory Healthcare, Inc.,1 declared null and void for violation of the

Hospital Acquisition Act (“HAA”), OCGA § 31-7-400 et seq., and for an injunction

to prevent the operation of Emory’s hospital at the location of the former Emory-

Adventist Hospital. The parties filed cross-motions for summary judgment, and the

1
Wellstar also named as defendants Emory-Adventist, Inc., and Emory
University, Inc., d/b/a Emory University Hospital Smyrna (collectively, “Emory”).
trial court granted Emory’s motion, denying Wellstar’s requests for relief. Wellstar

appeals, arguing that the trial court erred by finding that Emory’s acquisition of

Emory-Adventist Hospital did not violate the HAA. For the reasons that follow, we

affirm.

As explained in an earlier opinion of this Court,

Smyrna Hospital, Inc., an 88-bed community hospital, opened on South
Cobb Drive in Smyrna in 1974. Adventist Health System acquired the
hospital in 1976. In 1995, Emory Healthcare entered a joint venture
agreement with Adventist Health System and obtained a 35 percent
share ownership in the hospital; thereafter, the hospital was renamed
Emory-Adventist Hospital. Due to declining revenues, Emory-Adventist
ceased operations on October 31, 2014. In April 2015, Emory University
acquired sole ownership of the hospital, which was renamed Emory
University Hospital Smyrna and reopened on October 20, 2015.2

When Emory-Adventist ceased operations on October 31, 2014, it surrendered

its permit to the Department of Community Health (“DCH”). Rather than complete

revocation of its permit, Emory-Adventist advised DCH that it would temporarily

close and requested that the permit be placed on “inactive” status. Prior to Emory-

2
Cobb Hosp., Inc. v. Dept. of Community Health, 349 Ga. App. 452, 453-454
(825 SE2d 886) (2019), reversed in part by Cobb Hosp. v. Dept. of Community
Health, 307 Ga. 578 (837 SE2d 371) (2019).

2
Adventist’s closure, its representatives discussed acquisition of the hospital by

Emory, as well as whether Emory could reopen the facility within twelve months of

closure if Emory-Adventist placed the permit on inactive status.3 Emory also

discussed this issue with the director of DCH.

Thereafter, on January 14, 2015, Emory entered into a purchase and sale

agreement with Emory-Adventist for the hospital building and two medical office

buildings. On April 1, 2015, Emory representatives discussed the purchase with the

Attorney General’s office, and the Attorney General opined that review under the

HAA was not necessary. Based on the Attorney General’s representations to Emory,

no written disclosure under the HAA was filed.

In May 2015, after Emory closed on the transaction, it met with the Attorney

General’s office again, this time to discuss a proposed reopening of the old Emory-

Adventist facility and to confirm that the HAA was not implicated. In March 2016,

3
There is some evidence in the record that prior to closing, Emory-Adventist
was in discussions for a buyout with Wellstar, which had dissolved by March 2014.
At that point, discussions between Emory and Emory-Adventist had begun, which all
occurred about a year before closing on the purchase and sale agreement at issue.

3
DCH granted Emory a new certificate of need for proposed improvements and

renovations at former Emory-Adventist to open an orthopedic surgery center.4

After contacting the Attorney General arguing that Emory’s acquisition of

Emory-Adventist violated the HAA, Wellstar filed this suit seeking declaratory and

injunctive relief. The trial court granted summary judgment, finding that Emory-

Adventist was not a hospital for purposes of the HAA. Wellstar now appeals.

When examining statutory provisions, we apply the fundamental
rules of statutory construction that require us to construe the statute
according to its terms, to give words their plain and ordinary meaning,
and to avoid a construction that makes some language mere surplusage.
Thus, a statute should be read according to its natural and most obvious
import of the language without resorting to subtle and forced
constructions for the purpose of either limiting or extending its
operation. Similarly, in construing agency regulations, we employ the
basic rules of statutory construction and look to the plain meaning of the
regulation to determine its meaning. Accordingly, when an
administrative agency decision is the subject of judicial review, judicial
deference is to be afforded the agency’s interpretation of rules and
regulations it has enacted to fulfill the function given it by the legislative
branch. And in construing administrative rules, the ultimate criterion is

4
See generally Cobb Hosp., Inc., 349 Ga. App. at 452.

4
the administrative interpretation, which becomes of controlling weight
unless it is plainly erroneous or inconsistent with the rule.5

1. Georgia’s HAA6 applies any time the sale, purchase, or lease, of 50 percent

or more of the assets of a hospital owned, controlled, or operated by a nonprofit entity

occurs. Under the Act, both the entity for sale and the acquiring entity are directed to

5
(Citations and punctuation omitted.) Cobb Hosp., Inc., 349 Ga. App. at 459-
460 (1) (c) (ii), quoting ASMC, LLC v. Northside Hosp., 344 Ga. App. 576, 582 (810
SE2d 663) (2018); Lakeview Behavioral Health System v. UHS Peachford, LP, 321
Ga. App. 820, 822 (1) (743 SE2d 492) (2013); Walker v. Dept. of Transp., 279 Ga.
App. 287, 292 (2) (a) (630 SE2d 878) (2006).
6
Approximately 20 years ago, members of this Court commented on the
opaque piece of Code that is the HAA. See Turpen v. Rabun County Bd. of Commrs.,
245 Ga. App. 190, 197 (537 SE2d 435) (2000) (physical precedent only), Smith J.
specially concurring (“I am concerned about the flaws, both ambiguities and
omissions, in the [HAA.]”); Sparks v. Hosp. Auth. of the City of Bremen &c., 241 Ga.
App. 485, 489-490 (526 SE2d 593) (1999) (physical precedent only), Smith J.
specially concurring. The statute is among approximately 19 passed in the United
States between 1996 and 1998 after a surge of for-profit takeovers of nonprofit
hospitals across the country. See Sara Collins, Bradford Gray, & Jack Hadley, The
For-Profit Conversion of Nonprofit Hospitals in the U.S. Health Care System: Eight
Case Studies, The Commonwealth Fund, (May 2001), available at
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.499.3671&rep=rep1&ty
pe=pdf. At the time, Georgia’s statute was one of three in which “legislation ha[d]
been passed which confirm[ed] attorney general oversight responsibility but ha[d] no
provision for commensurate approval of the transaction.” See ARTICLE: Assuring
Competent Oversight to Hospital Conversion Transactions, 52 Baylor L. Rev. 83 fn
521 (Winter 2000).

5
notify the Attorney General of the proposed acquisition,7 providing the specific

information set forth in OCGA §§ 31-7-402 and 31-7-403, not only as to the financial

particulars of the transaction, but also with regard to financial information of the

nonprofit entity as related to the hospital assets and individual board member’s

financial interests or continued involvement with the acquiring entity. Moreover, the

HAA directs the Attorney General to publish within ten days a notice of this proposed

acquisition in the county where the nonprofit hospital is located and to notify in

writing “the governing authority of such county.”8

The HAA’s public hearing

shall be to ensure that the public’s interest is protected when the assets
of a nonprofit hospital are acquired by an acquiring entity by requiring
full disclosure of the purpose and terms of the transaction and providing
an opportunity for local public input. The disposition of a nonprofit
hospital to an acquiring entity shall not be in the public interest unless
there has been adequate disclosure that appropriate steps have been
taken to ensure that the transaction is authorized, to safeguard the value
of charitable assets, and to ensure that any proceeds of the transaction
are used for appropriate charitable health care purposes.9

7
See OCGA § 31-7-401.
8
OCGA § 31-7-404.
9
OCGA § 31-7-406.

6
The HAA provides several sanctions for the entities that fail to comply with the

statutory scheme, including fines,10 and the revocation or suspension of any existing

permits and/or non-renewal or non-issuance of new permits.11 And finally, that any

“disposition or acquisition of assets made in violation of the notice, disclosure, and

certification requirements of this article shall be null and void[.]”12

2. As a threshold matter, Emory has moved to dismiss this appeal, presenting

numerous arguments all of which we find unpersuasive.13

(a) Improper Appellate Procedure. Emory argues that this appeal should be

dismissed because this is an agency decision, Wellstar failed to obtain an agency

ruling, and (even if the Attorney General’s letter determination was a decision)

Wellstar failed to file the necessary discretionary appeal application.14

10
See OCGA § 31-7-412 (a).
11
See OCGA § 31-7-408.
12
Id.
13
Emory presents some of these arguments in its response brief, but because
the arguments challenge the justiciability of the appeal, we treat them along with the
arguments presented in the motion to dismiss.
14
See generally OCGA § 5-6-35 (a) (1).

7
Reading the HAA as a whole, no agency determination is required in order to

pursue enforcement.15 Comparison of Georgia’s HAA to nonprofit hospital

acquisition acts in other states16 shows a stark contrast between those statutory

schemes in which the Attorney General is required to make an inquiry into an

acquisition17 and to make a specific decision as to whether the acquisition is

appropriate,18 and Georgia’s HAA, under which it is at most implied that the Attorney

15
See, e.g., Turpen, 245 Ga. App. at 190-192 (allowing citizen declaratory
judgment suit related to a proposed acquisition).
16
See generally ARTICLE: Assuring Competent Oversight to Hospital
Conversion Transactions, 52 Baylor L. Rev. at 147-150 (V) (comparing various
state’s nonprofit hospital acquisition statutory schemes).
17
See, e.g., Haw. Rev. Stat. § 323D-73 (b) (“If the [A]ttorney [G]eneral
determines that a review is unnecessary or not appropriate, then none of the other
provisions of this part applicable to review by the [A]ttorney [G]eneral shall apply.”).
Compare with OCGA § 31-7-401 (“No acquiring entity shall engage in an acquisition
without first notifying the Attorney General pursuant to this article.”).
18
See, e.g., Haw. Rev. Stat. § 19-323D-75 (a) (“the [A]ttorney [G]eneral shall
review and approve or disapprove the acquisition”). Compare with OCGA § 31-7-408
(“No permit to operate a hospital may be issued or renewed under this . . . without
notice first having been provided to the Attorney General as required by this
article.”); OCGA § 31-7-412 (a) (“Any disposition or acquisition of assets made in
violation of the notice, disclosure, and certification requirements of this article shall
be null and void, . . .”).

8
General should make a determination of whether an acquisition meets the statutory

requirements.

Moreover, under the HAA, entities other than the Attorney General may seek

to enforce violations of the Act. OCGA § 31-7-407 expressly states that while the

Attorney General has authority to ensure compliance with the HAA “any other person

with standing [may institute] judicial proceedings regarding the proposed

disposition.” Although we are mindful that the phrase “proposed disposition” could

be read to mean that individuals other than the Attorney General are prohibited from

bringing actions if an acquisition has been consummated, when read with the

remainder of the statutory scheme, we find the limitation is ambiguous. This is

because the broad language of OCGA § 31-7-412 (a) contemplates that violations of

the requirements of the HAA result in the automatic legal status of an “acquisition”

being “null and void.” Thus, an acquisition if truly “null and void” is not an

acquisition at all, and the literal limitation on actions in OCGA § 31-7-407 to

“proposed dispositions” does not actually introduce such a limitation.

(b) Standing. Emory contends that Wellstar is not in the class of individuals

who have standing to bring an action under the HAA under OCGA § 31-7-407

because Wellstar is not an individual who could utilize the services of the hospital.

9
We decline to impose such a limit. Wellstar operates two hospitals within the county

in which Emory-Adventist also operated. As such, Wellstar was among those to

whom notice should have been made by the Attorney General after receiving it from

Emory,19 and it’s representatives could have participated in the public hearing.20

comply with the statute of limitation, which it contends is found in OCGA § 31-7-412

(a). This Code section states that “[t]he Attorney General shall institute proceedings

to impose such fine [for failure to comply with the HAA] within one year of the

unlawful disposition or acquisition.”21 But the one-year time-frame in which to

institute proceedings applies only to those proceedings seeking to institute a fine, not

for a declaratory judgment action as instituted herein. Moreover, the first sentence of

19
See OGGA § 31-7-404 (“Within ten working days after receipt of notice
under this article, the Attorney General shall publish notice of the proposed
transaction in a newspaper of general circulation in the county where the main
campus of the hospital is located and shall notify in writing the governing authority
of such county.”).
20
See OCGA § 31-7-405 (a) (“Within 60 days after receipt of the notice under
this article, the Attorney General shall conduct a public hearing regarding the
proposed transaction in the county in which the main campus of the hospital is
located.”).
21
See OCGA § 31-7-412 (a).

10
the section makes it clear that any transaction made in violation of requirements of

the HAA is null and void. As explained above, this language is clear and unbounded

by a temporal limitation because it is a perpetual legal status.22 Therefore, we deny

Emory’s motion to dismiss the appeal.

3. Turning to Wellstar’s argument on appeal, it contends that the trial court

erred by finding that Emory’s acquisition of Emory-Adventist does not constitute a

transaction to which the HAA applies.

(a) Under the HAA, an “‘[a]cquisition’ means a purchase or lease by an

acquiring entity of the assets of a hospital which is owned, controlled, or operated by

a nonprofit corporation and which meets one or more of the following conditions: (A)

Constitutes a purchase or lease of 50 percent or more of the assets of a hospital

having a permit under this chapter. . . .”23

22
Cf. McKeen v. Fed. Deposit Ins. Corp., 274 Ga. 46, 48 (549 SE2d 104)
(2001) (explaining that proceedings instituted against debtor or agreements made
with debtors in violation of the automatic stay in bankruptcy proceedings are void —
being a legal nullity of no effect); Murphy v. Murphy, 263 Ga. 280, 281 (430 SE2d
749) (1993) (explaining that statutes of limitation have no effect on judgments that
are void rather than voidable: “‘there can be no bar, estoppel[,] or limitation as to the
time when a void judgment may be attacked’”).
23
(Emphasis supplied.) OCGA § 31-7-400 (2).

11
(i) The HAA defines a “‘[h]ospital’ [as] any institution classified and having

a permit as a hospital from [DCH] pursuant to this chapter [Chapter 7] and [DCH’s]

rules and regulations.”24 Under related permitting statutes,

a ‘hospital’ is an institution which is primarily engaged in providing to
inpatients, by or under the supervision of physicians, diagnostic services
and therapeutic services for medical diagnosis, treatment, and care of
injured, disabled, or sick persons or rehabilitation services for the
rehabilitation of injured, disabled, or sick persons. Such term includes
public, private, psychiatric, rehabilitative, geriatric, osteopathic, and
other specialty hospitals.25

Under OCGA § 31-7-1, a “‘[p]ermit’ means a permit issued by [DCH] upon

compliance with the rules and regulations of [DCH],” and a hospital is a type of

‘institution’ regulated by the DCH.26 Under OCGA § 31-7-3 (a), “ . . . [p]ermits issued

shall remain in force and effect until revoked or suspended; provisional permits

issued shall remain in force and effect for such limited period of time as may be

specified by the department.”

24
OCGA § 31-7-400 (8).
25
(Punctuation omitted.) Ga. Dept. of Community Health v. Northside Hosp.
Inc., 295 Ga. 446, 448 (761 SE2d 74) (2014), quoting OCGA § 31-6-2 (21).
26
OCGA § 31-7-400 (8).

12
(ii) DCH regulations. Under DCH’s rules and regulations for hospitals, a

“hospital” is defined circularly as “any building, facility, or place in which are

provided two (2) or more beads [sic] and other facilities and services that are used for

persons received for examination, diagnosis, treatment, surgery, or maternity care for

periods continuing for twenty-four (24) hours or longer and which is classified by the

department as a hospital.”27 A “permit” is defined as “the authorization granted by the

D[CH] to a hospital governing body to operate the hospital’s authorized services.”28

“A permit is not transferable from one governing body to another nor from one

hospital location to another.”29

“If the hospital anticipates that it will close or cease to operate, the governing

body shall notify the Department at least thirty (30) days prior to the anticipated

closure.”30

When the hospital ceases to operate, the permit shall be returned to the
Department within ten (10) days of closure. The permit shall be
considered revoked, unless placed on inactive status as described in

27
See Ga. Comp. R. & Regs. r. 111-8-40-.02 (f).
28
Ga. Comp. R. & Regs. r. 111-8-40-.02 (o).
29
Ga. Comp. R. & Regs. r. 111-8-40-.03 (f).
30
Ga. Comp. R. & Regs. r. 111-8-40-.03 (g).

13
these rules. . . . If the hospital is closing for a period of less than twelve
(12) months, and plans to reopen under the same ownership, name,
classification, and bed capacity, the hospital may request to have the
permit placed on temporary inactive status.31

“A new permit . . . is required if the hospital . . . has a change in operational or trade

name, has a change in ownership or classification, or has a change in the authorized

bed capacity. The former permit shall be considered revoked upon the issue of a new

permit and the former permit shall be returned to [DCH].”32

court’s determination that Emory-Adventist was not a hospital because it lacked a

permit is incorrect, standing alone. A hospital, once permitted, maintains the permit

until it is revoked or suspended.33 In this case, Emory-Adventist’s permit was neither

revoked nor suspended. Nevertheless, the plain language of the statutes and

regulations do support the trial court’s determination that to constitute a hospital

31
Ga. Comp. R. & Regs. r. 111-8-40-.03 (g) (2) & (3).
32
Ga. Comp. R. & Regs. r. 111-8-40-.03 (h).
33
See OCGA § 31-7-3 (a).

14
under the HAA, the institution must be operating.34 Thus, the combination of Emory-

Adventist’s surrender of its permit, and the closure of its facility supports the trial

court’s conclusion. While we agree with Wellstar that such closures could be utilized

in order to evade the notification and public hearing required under the HAA,35 the

text of the statutes and regulations defining hospitals is clear, and the trial court did

not err by denying the motion for summary judgment and dismissing the case.

Judgment affirmed. Miller, P. J., and Mercier, J., concur in judgment only.

34
See OCGA § 31-6-2 (21) (“institution which is primarily engaged in
providing to inpatients”) (emphasis supplied); Ga. Comp. R. & Regs. r. 111-8-40-.02
(f) (“any building, facility, or place in which are provided . . . facilities and services
that are used for persons received for examination, diagnosis, treatment, surgery, or
maternity care”) (emphasis supplied).
35
To the extent that Wellstar argues that Turpen requires a different result, we
note that the case was physical precedent only and in any event, involved an
institution that held a permit at the time the agreement was consummated. See
Turpen, 245 Ga. App. at 195-196 (3); Court of Appeals Rule 33.2 (a) (2) (“An
opinion is physical precedent only (citable as persuasive, but not binding, authority),
however, with respect to any portion of the published opinion in which any of the
panel judges concur in the judgment only, concur specially without a statement of
agreement with all that is said in the majority opinion, or dissent.”).