Good Hope Hospital, Inc. v. North Carolina Department of Health & Human Services

*310STEELMAN, Judge.

Petitioner, Good Hope Hospital (Good Hope), is licensed as an acute care hospital. It has been in operation since 1921 in Erwin, North Carolina. Betsy Johnson Regional Hospital, Inc. (Betsy Johnson), is located in Dunn, North Carolina. Both hospitals are located in Harnett County. Due in part to its age, Good Hope’s existing hospital is nearing the end of its useful life and suffers from multiple deficiencies.

Certificate of Need Applications

In 2001, Good Hope applied for a Certificate of Need (CON) with the Department of Health and Human Services, Division of Facility Services, Certificate of Need Section (Agency) pursuant to Chapter 131E of the North Carolina General Statutes to partially replace its existing facility. The Agency conditionally approved Good Hope’s 2001 application, but only for two operating rooms. Good Hope filed a petition for contested case hearing in the Office of Administrative Hearings (OAH). Good Hope and the Agency settled the dispute in a written agreement. On 14 December 2001, the Agency issued a CON to Good Hope for a forty-six bed hospital with three operating rooms.

Good Hope was unable to obtain funding for its hospital through HUD. As a result, Good Hope entered into a joint venture with Triad Hospital, Inc., who agreed to finance the project, and the two formed Good Hope Hospital System, L.L.C. (GHHS). GHHS filed a motion for declaratory ruling requesting it be assigned Good Hope’s 2001 CON. The Agency denied this request. GHHS appealed the denial to the Department of Health and Human Services, Division of Facility Services (Department), but obtained a stay of this appeal. Good Hope has not relinquished its 2001 CON.

On 14 April 2003, GHHS filed a new application for a CON to build what it characterized as a complete replacement hospital in Lillington. The Agency denied this application. On 10 September 2004, the Department denied GHHS’s application in a final agency decision. GHHS appealed this decision in a separate appeal. See Good Hope Health Sys., L.L.C. v. N.C. Dep’t of Health and Human Servs., 175 N.C. App. 296, 623 S.E.2d 307 (2006).

Exemption Notice

By letter dated 21 August 2003, GHHS notified the Agency that it proposed to acquire Good Hope Hospital and develop a replacement *311hospital in Lillington. GHHS asserted it was exempt from CON review pursuant to N.C. Gen. Stat. § 131E-184. GHHS gave its notice of exemption while its second application for a CON was pending. On 11 December 2003, the Agency denied GHHS’s exemption request. GHHS filed a petition for contested case hearing on 12 January 2004 with OAH. In its petition, GHHS alleged the Agency erred in refusing to recognize its proposal to replace its existing hospital as exempt from CON review under N.C. Gen. Stat. § 131E-184. The administrative law judge (AU) allowed motions to intervene by the Town of Lillington, Betsy Johnson, and Amisub of North Carolina, Inc. On 2 August 2004, the ALT issued a recommended decision to grant summary judgment against GHHS. On 1 November 2004, the Department issued its Final Agency Decision, determining GHHS’s proposal was not exempt under N.C. Gen. Stat. § 131E-184. GHHS appealed.

Argument

In GHHS’s first argument, it contends the Department improperly granted summary judgment against it because it erred in applying N.C. Gen. Stat. § 131E-184. We disagree.

Standard of Review

In determining whether an agency erred in interpreting a statute, this Court employs a de novo standard of review. Chesapeake Microfilm v. N.C. Dept. of E.H.N.R., 111 N.C. App. 737, 744, 434 S.E.2d 218, 221 (1993). We also review the grant of summary judgment de novo. Stafford v. County of Bladen, 163 N.C. App. 149, 151, 592 S.E.2d 711, 713, disc. review denied, 358 N.C. 545, 599 S.E.2d 409 (2004).

Analysis

A certificate of need (CON) is required before an entity can develop a “new institutional health service” as defined in N.C. Gen. Stat. § 131E-176(16). This includes building a new hospital. However, the CON law exempts certain projects that would otherwise be subject to CON review if they fit within any of the listed grounds contained in N.C. Gen. Stat. § 131E-184. Any part of the project which does not fit within an exempt purpose remains subject to the statutory prerequisite of CON review and approval. N.C. Gen. Stat. § 131E-184(b).

When interpreting a statute, we must apply the rules of statutory construction. Campbell v. Church, 298 N.C. 476, 484, 259 S.E.2d 558, 564 (1979). The principal rule of statutory construction is that the *312legislature’s intent controls. Id. That intent “may be inferred from the nature and purpose of the statute, and the consequences which would follow, respectively, from various constructions.” Alberti v. Manufactured Homes, Inc., 329 N.C. 727, 732, 407 S.E.2d 819, 822 (1991). “A court should always construe the provisions of a statute in a manner which will tend to prevent it from being circumvented,” otherwise, the problems which prompted the statute’s passage would not be corrected. Campbell, 298 N.C. at 484, 259 S.E.2d at 564. In addition, statutory exceptions must be narrowly construed. Publishing Co. v. Board of Education, 29 N.C. App. 37, 47, 223 S.E.2d 580, 586 (1976). The party seeking the benefit of the exception bears the burden of establishing that they fit squarely within the exception. Id. In addition, “the interpretation of a statute given by the agency charged with carrying it out is entitled to great weight.” Frye Reg’l Med. Ctr. v. Hunt, 350 N.C. 39, 45, 510 S.E.2d 159, 163 (1999) (citations and internal quotation marks omitted).

“[T]he overriding legislative intent behind the CON process, [is the] regulation of major capital expenditures which may adversely impact the cost of health care services to the patient.” Cape Fear Mem. Hosp. v. N.C. Dept. of Human Resources, 121 N.C. App. 492, 494, 466 S.E.2d 299, 301 (1996) (citing N.C. Gen. Stat. §§ 131E-175(l)-(2), (4) and (6)-(7)). See also In re Denial of Request by Humana Hosp. Corp., 78 N.C. App. 637, 646, 338 S.E.2d 139, 145 (1986). To achieve this goal, the CON law was enacted to “limit the construction of health care facilities in this state to those that the public needs and that can be operated efficiently and economically for [the public’s] benefit.” In re Humana Hosp. Corp. v. N.C. Dept. of Human Resources, 81 N.C. App. 628, 632, 345 S.E.2d 235, 237 (1986). Thus, any entity proposing any “new institutional health services”- within this state is subject to review “as to need, cost of service, accessibility to services, quality of care, feasibility, and other criteria_” N.C. Gen. Stat. § 131E-175(7).

In its notice of exemption, GHHS asserted it was entitled to an exemption from CON review pursuant to N.C. Gen. Stat. § 131E-184(a)(l) to eliminate or prevent imminent safety hazards and under (la) to comply with state licensure standards. However, in applying the above stated principles of statutory construction, we find there is only one provision in the exemption statute, N.C. Gen. Stat. § 131E-184(a)(5), that allows the replacement of an entire facility, and then only “ [t]o replace or repair facilities destroyed or damaged by accident or natural disaster.”

*313“Under the doctrine of expressio unius est exclusio alterius, the mention of specific exceptions implies the exclusion of others.” Campbell, 298 N.C. at 482, 259 S.E.2d at 563. Thus, the legislature’s specific reference to replacement of a facility in section (a)(5) demonstrates its intent that replacement of an entire facility is not available under any other exemption contained in the statute. This interpretation is further supported by the rule of statutory construction that exemptions must be construed narrowly. Notably, another provision, section (a)(7), in the exemption statute allows for replacement, but of medical equipment. N.C. Gen. Stat. § 131E-184(a)(7). However, the replacement of such equipment is not conditioned on its destruction or damage due to accident or natural disaster, as is required in section (a)(5). This inclusion of limiting language for replacement facilities and the omission of any such language for replacement equipment further supports that the legislature meant to impose an express limitation on circumstances when replacement facilities are exempt from CON review.

As noted previously, legislative intent may also be inferred from the “consequences which would follow, respectively, from various constructions.” Alberti, 329 N.C. at 732, 407 S.E.2d at 822. “[W]here a literal interpretation of the language of a statute will lead to absurd results, or contravene the manifest purpose of the Legislature, as otherwise expressed, the reason and purpose of the law shall control and the strict letter thereof shall be disregarded.” Frye, 350 N.C. at 45, 510 S.E.2d at 163. If this Court were to interpret this statute as broadly as appellants suggest, the exception would swallow the rule. In addition, the SMFP, while recognizing what an important resource hospitals are in this state — not only for healthcare, but also for employment and economic development in their communities, states “[e]ven so, it is not the State’s policy to guarantee the survival and continued operation of all the State’s hospitals or even any one of them.” To allow Good Hope to build a entirely new facility without requiring it to comply with CON review simply because it has reached the end of its useful life would in effect grant it a franchise right to perpetual operation. Our legislature has expressly declined to allow such a result.

Most importantly, if this Court were to interpret section (a)(1), (a)(la), or any other provision contained in N.C. Gen. Stat. § 131E-184 as allowing the replacement of an entire facility, this would contravene the legislature’s purpose in enacting the CON law. Undoubtedly, the total replacement of a facility involves substantial capital expenditures. The primary purpose of the CON law is *314to regulate major capital expenditures to prevent an adverse impact on the cost of health care services to patients. Cape Fear, 121 N.C. App. at 494, 466 S.E.2d at 301.

Our decision is in accord with the legislature’s purpose and intent in enacting the CON law. We interpret N.C. Gen. Stat. § 131E-184 to allow for the total replacement of a health service facility in only one instance, where the facility is destroyed or damaged by natural disaster or accident. This interpretation adheres to the purpose of the CON law, “to control the cost, utilization, and distribution of health services and to assure that the less costly and more effective alternatives are made available.” Humana, 78 N.C. App. at 646, 338 S.E.2d at 145 (citing N.C. Gen. Stat. § 131E-175(l)-(7) and § 131E-181(a)(4)).

Good Hope was not destroyed or damaged by accident or natural disaster. Thus, the Department did not err in determining GHHS was not exempt from CON review. As a result, we need not review GHHS’s remaining arguments.

AFFIRMED.

Judge GEER concurs. Judge TYSON dissents in separate opinion.