Chesapeake Hospital Authority v. State Health Commissioner

CourtSupreme Court of Virginia
DecidedMay 19, 2022
Docket201510
StatusPublished

This text of Chesapeake Hospital Authority v. State Health Commissioner (Chesapeake Hospital Authority v. State Health Commissioner) is published on Counsel Stack Legal Research, covering Supreme Court of Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Chesapeake Hospital Authority v. State Health Commissioner, (Va. 2022).

Opinion

PRESENT: Goodwyn, C.J., Powell, Kelsey, McCullough, and Chafin, JJ., and Koontz, S.J.

CHESAPEAKE HOSPITAL AUTHORITY, D/B/A CHESAPEAKE REGIONAL MEDICAL CENTER OPINION BY v. Record No. 201510 SENIOR JUSTICE LAWRENCE L. KOONTZ, JR. May 19, 2022 STATE HEALTH COMMISSIONER, ET AL.

FROM THE COURT OF APPEALS OF VIRGINIA

Chesapeake Hospital Authority, d/b/a Chesapeake Regional Medical Center (“CRMC”)

appeals the Court of Appeals’ judgment affirming the circuit court’s decision to uphold a denial

by the State Health Commissioner (“Commissioner”) of its application for a Certificate of Public

Need (“COPN”) for a new open-heart surgery service and additional cardiac catheterization

equipment. In this appeal, the principal issue we consider is whether the harmless error doctrine

applies to an error of law in an administrative agency case under the Virginia Administrative

Process Act, Code § 2.2-4000 et seq.

BACKGROUND

The material facts necessary to our resolution of this appeal are not in dispute. CRMC is

a 310-bed, acute care general hospital located in the City of Chesapeake within Planning District

20 (“PD 20”). On July 31, 2017, CRMC applied for a COPN with the Virginia Department of

Health (“VDH”) pursuant to Code § 32.1-102.1 et seq. CRMC sought to develop an open heart

surgery program and offer expanded cardiac catheterization services by creating a “hybrid”

operating room at its existing Chesapeake facility. CRMC’s application was reviewed by the

staff of VDH’s Division of Certificate of Public Need. Thereafter, the staff report recommended conditional approval of CRMC’s application contingent upon CRMC’s acceptance of a charity

care condition.1

On November 27, 2017, Sentara Hospitals (“Sentara”), also located in PD 20, timely filed

a petition seeking good cause to be made a party in the review of CRMC’s application, pursuant

to Code § 32.1-102.6(E)(3). 2 At Sentara’s request, an informal fact-finding conference (“IFFC”)

was held on Sentara’s good cause petition. Following this IFFC, the Commissioner granted

Sentara’s petition and added Sentara as a party to the review of CRMC’s application.

On April 12, 2018, an IFFC on the merits of CRMC’s COPN application was convened,

with CRMC and Sentara presenting evidence and argument. In a case decision submitted to the

Commissioner, the adjudication officer recommended that CRMC’s application be denied after

evaluating the project in relation to the eight statutory considerations set forth in Code

§ 32.1-102.3(B).

1 During the same COPN review cycle, Sentara Virginia Beach General Hospital (“SVBGH”), a competing hospital that operates an open heart surgery program in PD 20, filed a COPN application to expand cardiac catheterization services through the addition of cardiac catheterization equipment. SVBGH’s application was subsequently approved and was no longer under consideration at the time the Commissioner denied CRMC’s application. SVBGH’s corporate parent is Sentara Hospitals, an appellee to this appeal. 2 As defined in Code § 32.1-102.6(G), “Good cause” means that

(i) there is significant relevant information not previously presented at and not available at the time of the public hearing, (ii) there have been significant changes in factors or circumstances relating to the application subsequent to the public hearing, or (iii) there is 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.

2 On August 24, 2018, the Commissioner, after reviewing the project and adopting the

recommendation and report of the adjudication officer, denied CRMC’s application. The

Commissioner cited the following reasons for the denial:

(i) CRMC’s proposed project is not consistent with the State Medical Facilities Plan;

(ii) The proposed project would likely decrease utilization at existing providers of open heart surgery, a type of surgery that consists of a highly-specialized, high- acuity, utilization-sensitive and narrow subset of cardiac surgery procedures;

(iii) The project is duplicative of existing and accessible open heart surgery services in PD 20;

(iv) The project would not significantly improve geographic or financial access for residents of PD 20 to open heart surgery services; and

(v) Open heart surgery services are fully accessible and available in PD 20, in a timely manner and within applicable driving time standards.

The report relied upon by the Commissioner specified that CRMC’s proposed project was

not consistent with the State Medical Facilities Plan (“SMFP”) as defined by VDH’s regulations.

Citing 12 VAC § 5-230-450(A)(1), the report noted that, with respect to determining a need for a

new open heart surgery service, the SMFP required CRMC to demonstrate that its existing

cardiac catheterization service performed an average of 1,200 diagnostic equivalent procedures

(“DEPs”) annually. During the IFFC, CRMC maintained this standard considered all services

performed in its two existing cardiac catheterization laboratories, with the total number of

services exceeding 1,200 DEPs during the relevant reporting period. CRMC reported a total of

1,374 DEPs in 2015. Sentara maintained that CRMC’s two cardiac catheterization laboratories

performed an average of 687 DEPs in 2015, and averaged 830 during the 2016-2017 period. The

report concluded CRMC’s project did not appear to meet the standard set forth in 12 VAC

§ 5-230-450(A)(1) with respect to average DEPs, finding that CRMC “conflated various

3 procedures capable of being performed in a cardiac catheterization laboratory to arrive at its

figures” and Sentara’s “more credible and reliable.”

The report also analyzed whether CRMC’s application complied with the SMFP

provision within 12 VAC § 5-230-450(A)(2), which states that new open heart services would

only be approved if “open heart surgery services located within the health planning district

performed an average of 400 open heart and closed heart surgical procedures for the relevant

reporting period.” CRMC argued that this provision referred to a service located at an acute care

hospital, regardless of the number of operating rooms within the hospital. CRMC reported the

three existing hospitals with open heart surgery services in PD 20 performed an average of 752

open heart and closed heart procedures in 2015. Sentara argued that “open heart surgery

services” referred to individual operating rooms within a hospital, and reported that the hospitals

in PD 20 performed an average of 167 procedures per operating room in 2015. Sentara

maintained that adopting CRMC’s interpretation of analyzing utilization per-service, rather than

per-operating room, would be “inconsistent with the remainder of the open heart surgery SMFP”

and that “one-high volume program . . . would skew the public need analysis to indicate a need

for additional services, despite other existing and underutilized services in the PD.”

The report concluded that CRMC’s project did not meet the SMFP standard under 12

VAC § 5-230-450(A)(2), reasoning that utilization rates were calculated per-operating room,

rather than per-service. The report explained that this interpretation of 12 VAC

§ 5-230-450(A)(2) was “the most reasonable reading of [this regulation]” when read in context

with 12 VAC § 5-230-450(A)(3), which requires a proposed new open heart service to estimate

utilization rates prospectively on a per-operating room basis.

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