Doctors Hospital of Augusta, LLC v. Georgia Department of Community Health

• Court: Court of Appeals of Georgia
• Decided: April 30, 2019
• Docket: A19A0567
• Status: Published

Opinion

FIRST DIVISION BARNES, P. J., MERCIER and BROWN, JJ.

NOTICE: Motions for reconsideration m us t be physically re ceived in our clerk’s office within ten days of the date of decision to be deemed timely filed. http://www.gaappeals.us/rules

April 30, 2019

In the Court of Appeals of Georgia A19A0567. DOCTORS HOSPITAL OF AUGUSTA, LLC v. GEORGIA DEPARTMENT OF COMMUNITY HEALTH et al.

MERCIER, Judge.

In a final decision issued November 23, 2015, the Georgia Department of

Community Health (“the Department”) granted MCG Health, Inc. d/b/a Georgia

Regents Medical Center (“Georgia Regents”) a Certificate of Need (“CON”) to build

a new hospital in Columbia County. Doctors Hospital of Augusta, LLC (“DHA”),

which had competed against Georgia Regents for the CON, petitioned the superior

court for review. The superior court upheld the Department’s final decision, and we

granted DHA’s application for discretionary appeal. For reasons that follow, we

affirm. The record shows that DHA is a 354-bed acute-care hospital located in

Augusta, Richmond County, Georgia. Georgia Regents, an acute-care teaching

hospital affiliated with Georgia Regents University, is also located in Augusta. In 2014,

Georgia Regents, DHA, and University Health Systems, Inc. (“University Health”), a

third Augusta-area hospital, filed competing applications with the Department for a

CON to establish a new hospital in neighboring Columbia County. Although the

applications differed in terms of location, size, and overall cost, each proposed

construction of a new, 100-bed short-stay facility.1 Columbia County, which did not

have a hospital at the time, pledged to fund more than 20 percent of the total hospital

cost.

The Department joined the competing applications for review on July 1, 2014,

and, after evaluating the proposals, awarded the CON to Georgia Regents. The two

other applications were denied. DHA and University Health appealed the Department’s

award to the Certificate of Need Appeal Panel. Following an evidentiary hearing, a

hearing officer appointed by the Appeal Panel determined that the Department had

properly awarded the CON to Georgia Regents. DHA requested further review by the

1 A short-stay hospital is “a facility with an average length of stay of less than thirty (30) days.” Ga. Comp. R. & Regs. r. 111-2-2-.20 (2) (n).

2 Department’s Office of the Commissioner, which issued a final decision upholding the

CON award to Georgia Regents. See OCGA § 31-6-44 (m) (unless the hearing

officer’s decision becomes the Department’s final decision by operation of law, the

commissioner’s decision constitutes the Department’s final decision). Following that

ruling, DHA petitioned the superior court for judicial review of the Department’s final

decision, and the superior court affirmed.

Codified at OCGA § 31-6-40 et seq., the CON program “establishes a

comprehensive system of planning for the orderly development of adequate health care

services throughout the state.” Palmyra Park Hosp. v. Phoebe Sumter Med. Center,

310 Ga. App. 487, 488 (714 SE2d 71) (2010) (citations omitted). Entities seeking to

establish a new health care service or facility in Georgia generally must apply for a

CON. See OCGA § 31-6-40 (b). The Department, which administers the CON

program and serves as Georgia’s “lead planning agency for all health issues,” reviews

CON applications in light of 17 general considerations, including the population living

in the proposed service area, existing health service alternatives in the area, project

costs, and whether the proposed services are reasonably consistent with state health

plan goals and objectives. See OCGA §§ 31-2-1 (1); 31-6-21 (a); 31-6-42 (a). The

legislature has authorized the Department to establish procedures for managing the

3 CON program. OCGA § 31-6-21 (a). To that end, the Department has adopted

numerous administrative rules and regulations regarding program procedures and

considerations. See Ga. Comp. R. & Regs. r. 111-2-2-.01 et seq.

After the Department issues its final decision regarding a CON application, an

aggrieved party may seek judicial review of that ruling. See OCGA § 31-6-44.1.

Ultimately, “the reviewing court determines whether ‘substantial evidence’ supports

the [Department’s] findings of fact, and whether the conclusions of law drawn from

those findings of fact are sound.” Palmyra Park Hosp., supra at 488. The

Department’s decision may be reversed “if it was based on legal error and unlawful

procedures, was arbitrary and capricious, or prejudiced the opposing parties’

substantial rights.” Id. As long as the Department acts within its statutory authority,

however, the reviewing court defers to the Department’s “interpretation and

application of the CON statute and the rules and regulations it has enacted to fulfill the

function given it by the legislative branch.” Id at 491 (1). See also Medical Center of

Central Ga. v. Hosp. Auth. of Monroe County, 340 Ga. App. 499, 504 (3) (798 SE2d

42) (2017) (noting deferential standard). Such deference to agency interpretation and

application is appropriate because

4 agencies provide a high level of expertise and an opportunity for specialization unavailable in the judicial or legislative branches. They are able to use these skills, along with the policy mandate and discretion entrusted to them by the legislature, to make rules and enforce them in fashioning solutions to very complex problems. Thus, their decisions are not to be taken lightly or minimized by the judiciary. Review overbroad in scope would have the effect of substituting the judgment of a judge or jury for that of the agency, thereby nullifying the benefits of legislative delegation to a specialized body.

Palmyra Park Hosp., supra (citation and punctuation omitted).

1. With these principles in mind, we turn to DHA’s arguments, including its

claim that the Department improperly granted the CON to Georgia Regents pursuant

to an “invalid” exception to the statutory requirements governing CON applications.

The superior court rejected this argument. We find no error.

The Department determined that each of the three competing applications met

the 17 general CON considerations set forth in OCGA § 31-6-42 (a). Because the

applications involved a proposed short-stay hospital, however, they were also subject

to OCGA § 31-6-21 (b) (8), which requires the Department to “establish

service-specific need methodologies and criteria for . . . short stay hospital beds.” The

Department has promulgated specific short-stay hospital review criteria in Rule

5 111-2-2-.20. That rule includes a detailed “numerical need methodology designed to

assess need for the specific purpose sought in the application.” Ga. Comp. R. &

Regs. r. 111-2-2-.20 (3) (b). But it also allows the Department to make an exception

to the numerical need methodology in four limited circumstances, including when

[t]he facility is a sole community provider and more than twenty percent (20%) of the capital cost of any new, replacement or expanded facility is financed by the county governing authority . . . of the home county or the county governing authorities of a group of counties[.]

Ga. Comp. R. & Regs. r. 111-2-2-.20 (3) (c) (3).

Although the facilities proposed by Georgia Regents, DHA, and United Health

did not satisfy the numerical need methodology outlined in Rule 111-2-2-.20 (3) (b),

the Department found that all three fell within this “county-financed exception.”

Without dispute, no other hospital existed in Columbia County at the time, and the

County had agreed to pay more than 20 percent of the cost of the new hospital

proposed in the CON applications. DHA argues, however, that the Department’s

county-financed exception (generally and as applied here) contravenes the CON

statutory scheme and is unreasonable, rendering the exception invalid. See Albany

Surgical v. Dept. of Community Health, 257 Ga. App. 636, 637 (1) (572 SE2d 638)

6 (2002) (“The test for the validity of administrative regulations is based upon a two-part

analysis: (1) is the regulation authorized by statute; and (2) is the regulation

reasonable?”).

(a) When considering the meaning of a statute, “we must afford the statutory

text its plain and ordinary meaning[.]” Medical Center of Central Ga., supra at 504

(3) (punctuation omitted). The applicable CON legislation requires the Department to

“establish, by rule, need methodologies for new institutional health services and health

facilities,” including service-specific methodologies for short-stay hospitals. OCGA

§ 31-6-21 (b) (8). The Department complied with this mandate by enacting Rule 111-2-

2-.20, which sets forth extensive short-stay hospital review considerations. Those

considerations incorporate a detailed numerical formula for assessing need, subject to

four exceptions. See Ga. Comp. R. & Regs. r. 111-2-2-.20 (3) (b) & (c).

According to DHA, the Department lacked authority to exempt applications

from the numerical need formula. The CON legislation, however, did not compel the

Department to apply any particular need assessment. It required only that, after taking

into account considerations such as population, service use patterns, accessibility, and

market economics, the Department promulgate some type of methodology or

procedure for establishing need in the short-stay hospital context. See OCGA § 31-6-

7 21 (b) (8); Me r r ia m - We bs t e r ’ s Online Dic t iona r y,

http://www.merriam-webster.com/dictionary/methodology (defining “methodology”

as “a particular procedure or set of procedures”).

The Department fulfilled this obligation by devising a numerical formula

applicable in all but four circumstances, which have their own specific criteria. Nothing

in the statutory scheme forbids an exemption from the numerical need methodology.

And although DHA argues that Georgia Regents evaded the service-specific need

requirement, the county-financed exception merely relieved Georgia Regents from the

numerical need analysis. It still had to qualify for the exception, a service-specific need

requirement in itself. Georgia Regents also had to meet the general review

considerations outlined in OCGA § 31-6-42 (a), as well as the other, more specific

short-stay hospital requirements set forth in Ga. Comp. R. & Regs. r. 111-2-2-.20 (e)

through (k). The county-financed exception, therefore, does not conflict with the CON

statutory scheme or undermine its legislative mandates.

(b) DHA contends that the county-financed exception is unreasonable because

it does not further the health-planning purposes of the CON program. Again, we

disagree.

8 “The judicial review of the reasonableness of a regulation . . . is limited, because

the regulation must be upheld if the agency presents any evidence to support the

regulation.” Albany Surgical, supra at 640 (1) (b). In assessing Rule 111-2-2-.20 (3)

(c) (3), we look first to the purpose of the CON legislation, which delegated regulatory

authority to the Department. See id. As explicitly provided by the General Assembly,

the purpose of the CON scheme is

to ensure access to quality health care services and to ensure that health care services and facilities are developed in an orderly and economical manner and are made available to all citizens and that only those health care services found to be in the public interest shall be provided in this state.

OCGA § 31-6-1.

The evidence shows that the CON regulations governing short-stay hospitals

were initially developed by a technical committee appointed “to consider the best ways

to balance consumer and payer concerns, [ensure] health system viability, minimize

gaps in service delivery, ensure continuity of care [and] quality of care[,] and support

the roles of critical access, safety net, and teaching hospitals.” The committee

conducted extensive research and analysis, ultimately producing guidelines for the

Department’s regulations, including the county-financed exception. With respect to

9 that exception, the committee determined that when a county pledges significant

financial support to the sole health care service provider in the community, the

investment “reflects commitment to economic development and a desire to make

communities more attractive places to live and work.” The committee drafted the

county-financed exception to recognize and support “such involvement by the county

government[.]”

DHA asserts that the county-financed exception does not relate to the statutory

purpose of the CON program because the exception “supports county funding and

economic development, not health planning.” As recognized by the General Assembly,

however, health planning includes the orderly and economical development of health

care services, as well as considerations of public interest. See OCGA § 31-6-1. The

evidence shows that the county-financed exception was promulgated after extensive

analysis by experts and falls within the overall purpose of the CON legislation. We find

no basis for declaring it unreasonable. See Albany Surgical, supra (“Although it is the

function of the courts to evaluate the reasonableness of an agency rule, such evaluation

should credit the relevant evidence offered to support the reasonableness of the rule.”)

(citation and punctuation omitted).

10 2. DHA challenges the Department’s determination that Georgia Regents met

the general need requirements for a new hospital in Columbia County. Noting that the

Department had previously denied CON applications for a free-standing emergency

room facility in the area, DHA claims that precedent had established a lack of need.

Need considerations for an acute care hospital, however, differ from those

surrounding a free-standing emergency room facility. And the Department found a

need for the proposed hospital based on rising population, general growth in the area,

and increased emergency room usage at hospitals in Augusta (Richmond County).

Substantial evidence supports this finding. The Department, therefore, was authorized

to conclude that Georgia Regents’s CON application met the general need

requirements for a new short-stay hospital in Columbia County. See Northeast Ga.

Medical Center v. Winder HMA, 303 Ga. App. 50, 55-56 (2) (a) (693 SE2d 110)

(2010) (in determining whether substantial evidence supported the Department’s

decision on a CON application, “we neither reweigh the evidence, perform a de novo

review, nor substitute our own judgment for that of the hearing officer as to the weight

of the evidence”).

11 3. DHA further claims that the Department misapplied the “existing alternatives”

analysis required by the CON statutory scheme. Pursuant to OCGA § 31-6-42 (a) (3),

the Department’s CON review must take into account whether:

Existing alternatives for providing services in the service area the same as the new institutional health service proposed are neither currently available, implemented, similarly utilized, nor capable of providing a less costly alternative, or no certificate of need to provide such alternative services has been issued by the department and is currently valid[.]

The administrative regulations adopted by the Department restate and expand

on this consideration, noting that:

1. The Department supports the concept of regionalization of those services for which a service-specific rule exists.

2. The Department shall consider economies of scale where need exists for additional services or facilities.

3. Utilization of existing facilities and services similar to a proposal to initiate services shall be evaluated to assure that unnecessary duplication of services is avoided. Where there exists significant unused capacity, initiating a similar service in another health care facility would require strong justification under other criteria.

Ga. Comp. R. & Regs. r. 111-2-2-.09 (1) (c).

12 DHA complains that the Department’s final decision did not specifically address

each of the existing alternatives “criteria” set forth in the statute and accompanying

regulation. The record shows, however, that the Department conducted a detailed

existing alternatives analysis, finding:

There are no existing alternatives to [Georgia Regents’s] project except for maintaining the status quo, which would not adequately serve the needs of the service area. [Cits.] The growing population, expanding westward away from Augusta, suggests that hospital services move with that population rather than continuing to tether Columbia County residents and other residents of the service area to the Augusta area.

The legislature required the Department to consider whether alternatives to a new

hospital currently existed in the proposed service area (Columbia County). See OCGA

§ 31-6-42 (a) (3). The Department conducted the necessary analysis and found no

existing alternative other than maintaining the status quo, which, it determined, would

not adequately serve the area’s health care needs. The evidence supports this finding,

and we will not substitute our own judgment for that of the Department as to the

weight of the evidence. See Northeast Ga. Medical Center, supra.

DHA also cites as error the Department’s conclusion that “there are no

adequate existing alternatives to Georgia Regents’s project within the meaning of Rule

13 111-2-2-.09 [(1)] (c).” (Emphasis supplied.) Focusing on the word “adequate,” DHA

asserts that by considering the subjective notion of adequacy, the Department

modified the objective statutory and regulatory criteria. This myopic view of the

Department’s decision lacks merit.

“[W]hen reviewing whether an agency exceeded its statutory authority, we look

at not only a portion of the agency decision but at the decision as a whole.” Palmyra

Park Hosp., supra at 498 (1). Read in this manner, the final decision reveals that no

true alternative to the proposed new hospital existed here because doing nothing – and

forcing the service area population to continue seeking hospital services in Augusta –

failed to meet the service area’s needs. The Department considered other possible

alternatives, as required by its regulations, and found that none existed, given the

circumstances. In doing so, it interpreted and applied the existing alternatives

requirement, thus fulfilling the function delegated to it by the legislature. See generally

id. at 491 (1).

4. Next, DHA argues that the Department improperly applied the “tie breaker”

priority considerations set forth in Ga. Comp. R. & Regs. r. 111-2-2-.09 (6). Because

all three of the CON applications in this case met the general and service-specific CON

criteria, the Department turned to the tie-breaking considerations used when two or

14 more competing applications satisfy the basic requirements. The record shows that

Georgia Regents benefitted from priority consideration on three grounds, while DHA

received no tie-breaker awards.

(a) Pursuant to Rule 111-2-2-.09 (6) (a) (1),

priority consideration will be given to a comparison of the applications with regard to . . . the past and present records of the facility, and other existing facilities in Georgia, if any, owned by the same parent organization, regarding the provision of service to all segments of the population, particularly including Medicare, Medicaid, minority patients and those patients with limited or no ability to pay[.]

Applying this rule, the Department gave priority consideration to Georgia

Regents after determining that it had “historically demonstrated the most commitment

to treating patients with limited or no ability to pay.” DHA challenges this award on

appeal, complaining that the Department failed to take into account the indigent service

records of DHA’s six “sister” hospitals located in Georgia. The Department analyst

who initially reviewed the applications, however, testified that he reviewed all of the

data provided by DHA, but ultimately considered the records of the actual applicants

to determine the priority award. As he explained:

15 In my opinion it was reasonable and more practical and fair to look at each applicant as its own individual facility. If you looked at a company like [DHA’s parent company] which has a large number of facilities, they would automatically win just about everything.

We find no error. Although DHA suggests that Rule 111-2-2-.09 (6) (a) (1)

obligated the Department to add the indigent care statistics of its sister hospitals to its

own numbers, nothing in the regulatory language compels such a mechanical

approach. The rule required the Department to compare the applications based on

service records, and the record shows that the analyst did just that, reviewing all data

provided. But the rule did not compel a priority award based on any numerical

equation. And in this case, the Department reasonably determined, after significant

analysis, that priority should be given to Georgia Regents, which had “demonstrate[d]

the strongest commitment of any applicant to improving access to care for all

segments of the population, particularly including those segments of the population

deemed to have the most difficult time accessing and/or paying for care.”

(b) DHA also asserts that the Department misapplied Rule 111-2-2-.09 (6) (a)

(2), which permits priority consideration following “a comparison of the applications

with regard to . . . specific services to be offered.” Ga. Comp. R. & Regs. r.

16 111-2-2-.09 (6) (a) (2). This tie-breaker was awarded to Georgia Regents based on its

plan to include a Level II trauma center and teaching hospital within its facility. The

Department recognized that DHA proposed to offer pediatric inpatient services at its

hospital, but determined that the impact of such services would be minimal for various

reasons.

According to DHA, the Department erred in (1) considering whether DHA’s

proposed pediatric services would be valuable to the area, and (2) crediting Georgia

Regents for offering a trauma center and teaching hospital, activities that do not fall

within the statutory definition of “clinical health services.” See OCGA § 31-6-2 (8).

Rule 111-2-2-.09 (6) (a) (2), however, expressly requires the Department to compare

the specific services offered by the applicants, thus contemplating some analysis of

the value of those services. Furthermore, the rule refers to “services,” not “clinical

health services,” and we defer to the Department’s reasonable determination that a

hospital offers a service by functioning as a Level II trauma center and/or a teaching

hospital. See generally Palmyra Park Hosp., supra at 491 (1). The Department did not

misapply Rule 111-2-2-.09 (6) (a) (2).

(c) DHA objects to the Department’s application of Rule 111-2-2-.09 (6) (a) (7),

which offers tie-breaking priority to an applicant based upon “evidence of attention to

17 factors of cost containment, which do not diminish the quality of care or safety of the

patient, but which demonstrate sincere efforts to avoid significant costs unrelated to

patient care.” After reviewing the applicants’ various cost-containment efforts, the

Department declined to award an advantage under this rule to any applicant.

According to DHA, it qualified for “cost containment” priority because it

“offered the lowest cost alternative (based on the cost of construction).” But the

Department found that the proposal presented by University Health (the third

applicant) had the lowest “total project costs,” and substantial evidence supports this

finding. University Health’s proposal carried an estimated cost of $144,365,269 on

282,000 square feet of new construction (or approximately $512/square foot).

Although DHA’s estimated cost was slightly less at $140,701,134, its proposal

involved only 229,171 square feet of new construction (or approximately $614/square

foot). DHA, therefore, has not shown that it was entitled to priority on this ground.

5. Finally, DHA contends that the trial court’s order affirming the Department’s

final decision sets forth the wrong standard of review. We have concluded, however,

that the Department acted lawfully and within its authority in granting the CON to

Georgia Regents. This claim of error, therefore, presents no basis for reversal. See,

e.g., Northeast Ga. Medical Center, supra at 55 (2) (“[W]hen this Court reviews a

18 superior court’s order in an administrative proceeding, our duty is not to review

whether the record supports the superior court’s decision but whether the record

supports the final decision of the administrative agency.”) (citation and punctuation

omitted).

Judgment affirmed. Barnes, P. J., and Brown, J., concur.