An unpublished opinion of the North Carolina Court of Appeals does not constitute controlling legal authority. Citation is disfavored, but may be permitted in accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of Appellate Procedure.
IN THE COURT OF APPEALS OF NORTH CAROLINA
No. COA25-658
Filed 4 March 2026
Office of Administrative Hearings, No. 22DHR02385
FLETCHER HOSPITAL INC. d/b/a ADVENTHEALTH HENDERSONVILLE, Petitioner,
v.
NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF HEALTH SERVICE REGULATION, HEALTH CARE PLANNING AND CERTIFICATE OF NEED SECTION, Respondent,
And
MH MISSION HOSPITAL, LLLP, Respondent-Intervenor.
Appeal by petitioner from final decision on remand entered 7 March 2025 by
Administrative Law Judge David F. Sutton in the Office of Administrative Hearings.
Heard in the Court of Appeals 10 February 2026.
Wyrick Robbins Yates & Ponton LLP, by Charles George, Frank S. Kirschbaum, and Trevor Presler, for Petitioner-appellant.
Attorney General Jeff Jackson, by Special Deputy Attorney General Derek L. Hunter, for Respondent-appellee.
Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., by Iain M. Stauffer and William F. Maddrey, for Respondent-intervenor-appellee. FLETCHER HOSP., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.
Opinion of the Court
ARROWOOD, Judge.
Fletcher Hospital, Inc. d/b/a AdventHealth Hendersonville (“AdventHealth”)
appeals from a final decision on remand from this Court granting summary judgment
to North Carolina Department of Health and Human Services, Division of Health
Service Regulation, Healthcare Planning and Certificate of Need Section (“DHHS”)
and MH Mission Hospital, LLLP (“Mission”). For the following reasons, we affirm
the final decision.
I. Background
In February 2022, Mission filed a non-competitive application for a Certificate
of Need (“CON”) to build a freestanding emergency department (“FSED”) in Candler,
North Carolina. Due to public health concerns related to the COVID-19 pandemic,
DHHS did not hold an in-person public hearing on Mission’s CON application.
Instead, DHHS accepted written comments regarding the applications.
AdventHealth filed written comments in opposition to Mission’s application.
Members of the public also filed comments both in support of and in opposition to
Mission’s application. Following its review of the application and written comments,
DHHS conditionally approved Mission’s CON application on 24 May 2022.
AdventHealth filed a Petition for Contested Case Hearing on 23 June 2022
contesting DHHS’s conditional approval of Mission’s CON application. On
17 March 2023, the Administrative Law Judge (“ALJ”) granted summary judgment
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in favor of AdventHealth. The ALJ concluded that DHHS erred by failing to hold in-
person hearings and that AdventHealth’s rights were substantially prejudiced by
that error as a matter of law. Mission and DHHS appealed the ALJ’s decision to this
Court on 14 April 2023.
This Court considered Mission and DHHS’s appeal of the 17 March 2023
decision in Fletcher Hosp. Inc. v. N.C. Dep’t of Health & Hum. Servs., 293 N.C. App.
41 (2024) [hereinafter Fletcher I]. There, we explained that as the petitioner in a
contested case hearing, AdventHealth had the burden of separately establishing that
DHHS erred and that DHHS substantially prejudiced AdventHealth’s rights. Id. at
49–50. We held that AdventHealth successfully showed that DHHS erred by failing
to hold a public hearing on Mission’s CON application under N.C.G.S. § 131E-
185(a1)(2). Id. at 46–47. However, we also held that “substantial prejudice cannot
be presumed per se” and so AdventHealth had not yet met its burden to show
substantial prejudice. Id. at 50–51. We vacated the ALJ’s Order and remanded the
case for further proceedings. Id. at 51.
On remand, the ALJ reconsidered the parties’ motions for summary judgment.
AdventHealth offered additional evidence to show substantial prejudice including
findings in related disputes between the parties and testimony about the effect of
public hearings and the approval of Mission’s CON application. For example,
AdventHealth presented findings by ALJ Sutton in a separate proceeding which
stated that public hearings provide the opportunity “to speak directly to the analyst,
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express opinions that they may not be able to put as easily in writing, for DHHS to
ask questions and the public to demonstrate support or opposition to a project.”
AdventHealth also pointed to past decisions in which DHHS relied on public hearing
comments to determine conformity with CON requirements.
In a deposition, Graham Fields, the Assistant to the President of
AdventHealth, testified that had there been a public hearing he would have been
garnering support for the opposition and “making sure the community had ample
opportunity to share its thoughts.” He also testified that based on public
participation in past hearings for other medical centers, he expected that a public
hearing on Mission’s CON application would have brought in “a great number of
people” and raised “very serious concerns” for the project.
As to prejudice resulting from the approval of Mission’s CON Application,
AdventHealth presented evidence of how Mission’s FSED would interfere with
AdventHealth’s business and operations. AdventHealth projected that Mission’s
FSED in Candler would result in over $4 million in contribution margin losses from
lost patient admissions. Additionally, AdventHealth’s employees and expert
witnesses reported that the loss of revenue would force AdventHealth to discontinue
some of its unprofitable community benefit services including maternity and mental
health.
AdventHealth also offered evidence about the effects of Mission’s specific
practices and power. Evidence demonstrated that Mission has little competition for
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acute care services in Buncombe County, in part because it received a Certificate of
Public Advantage that exempted Mission from antitrust laws and allowed it to merge
with St. Joseph’s Hospital. In a letter opposing one of Mission’s other CON
applications, the Attorney General explained that Mission’s “lack of competition
harms residents of western North Carolina by increasing the cost, and reducing the
quality, of health care services in the region.” In a separate letter, the Attorney
General stated that they had received complaints that Mission charges high prices
and prohibits insurers from encouraging patients to receive care from less expensive
providers. As to how that affects AdventHealth, AdventHealth’s CEO stated that
Mission’s monopoly-like status gives them “levers that other entities do not have”
such as the ability to control the market on pay.
On 7 March 2025, ALJ Sutton entered a final decision granting summary
judgment in favor of DHHS and Mission. AdventHealth filed notice of appeal to this
Court on 7 April 2025.
II. Discussion
AdventHealth raises three issues on appeal: 1) whether the ALJ erred by not
considering if Mission’s and DHHS’s rights were substantially prejudiced by the
initial Final Decision Granting Summary Judgment for Petitioner; 2) whether the
ALJ erred by denying AdventHealth’s motion for summary judgment; and 3) whether
the ALJ erred by failing to conclude that Mission’s misrepresentation about the
commitment of funds for its proposed project warranted reversal of DHHS’s decision.
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We address each issue in turn.
A. Standard of Review
Judicial review of an ALJ’s final decision allowing summary judgment is
governed by the North Carolina Administrative Procedure Act (“APA”) which states
in relevant part:
In reviewing a final decision allowing judgment on the pleadings or summary judgment, the court may enter any order allowed by G.S. 1A-1, Rule 12(c) or Rule 56. If the order of the court does not fully adjudicate the case, the court shall remand the case to the administrative law judge for such further proceedings as are just.
N.C.G.S. § 150B-51(d).
Pursuant to Rule 56 of the North Carolina Rules of Civil Procedure,
“[s]ummary judgment is appropriate when ‘there is no genuine issue as to any
material fact’ and ‘any party is entitled to a judgment as a matter of law.’ ” Cottle v.
Mankin, 923 S.E.2d 502, 506 (2025) (quoting Builders Mut. Ins. Co. v. N. Main
Constr., Ltd., 361 N.C. 85, 88 (2006)). “When considering a summary judgment
motion, all inferences of fact must be drawn against the movant in favor of the party
opposing the motion.” Id. (cleaned up). Lastly, “[a]s summary judgment is a matter
of law, review by this Court in this matter is de novo.” Bio-Medical Applications of
N.C. Inc. v. N.C. Dep’t of Health & Hum. Servs., 282 N.C. App. 413, 415 (2022)
(quoting Presbyterian Hosp. v. N.C. Dep’t of Health & Hum. Servs., 177 N.C. App.
780, 782 (2006)).
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B. Burden on Remand
AdventHealth contends that the ALJ wrongfully imposed the burden of
showing substantial prejudice on AdventHealth, when the burden should have been
imposed on Mission and DHHS. AdventHealth argues that in Fletcher I, this Court
should have applied the standard of review outlined in N.C.G.S § 150B-51(b) and that
§ 150B-51(b) requires the party challenging the ALJ’s final decision to show that the
final decision prejudiced their substantial rights. We do not agree that Mission and
DHHS needed to demonstrate substantial prejudice.
We begin with a discussion of a petitioner’s burden in a contested case hearing
and the standard of review on appeal. After DHHS issues a CON, any affected person
may initiate a contested case hearing by filing a petition. N.C.G.S. § 131E-188(a)
(2025). The petitioner’s burden in a contested case is provided in N.C.G.S. § 150B-
23(a):
A petition shall . . . state facts tending to establish that the agency named as the respondent has deprived the petitioner of property, has ordered the petitioner to pay a fine or civil penalty, or has otherwise substantially prejudiced the petitioner's rights and that the agency did any of the following:
(1) Exceeded its authority or jurisdiction.
(2) Acted erroneously.
(3) Failed to use proper procedure.
(4) Acted arbitrarily or capriciously.
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(5) Failed to act as required by law or rule.
N.C.G.S. § 150B-23(a) (2025).
“This Court has interpreted subsection (a) to mean that the ALJ in a contested
case hearing must determine whether the petitioner has met its burden in showing
that the agency substantially prejudiced the petitioner’s rights.” Bio-Medical
Applications of N.C. Inc., 282 N.C. App. at 416–17 (quoting Surgical Care Affiliates,
LLC v. N.C. Dep’t of Health & Hum. Servs., 235 N.C. App. 620, 624 (2014)). Therefore,
a petitioner in a CON case must show that the agency 1) substantially prejudiced the
petitioner’s rights and 2) that the agency erred in one of the ways outlined in N.C.G.S.
§ 150B-23(a). Surgical Care Affiliates LLC. 235 N.C. App. at 624. “These are discrete
requirements and proof of one does not automatically establish the other.” Id. at 629.
It is under N.C.G.S. § 150B-23(a) that AdventHealth bears the burden of showing
substantial prejudice.
Meanwhile, the standard of review for final decisions under the APA is
governed by § 150B-51 which provides:
(b) The court reviewing a final decision may affirm the decision or remand the case for further proceedings. It may also reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the findings, inferences, conclusions, or decisions are:
(1) In violation of constitutional provisions;
(2) In excess of the statutory authority or jurisdiction of the agency or administrative law judge;
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(3) Made upon unlawful procedure;
(4) Affected by other error of law;
(5) Unsupported by substantial evidence admissible under G.S. 150B-29(a), 150B-30, or 150B-31 in view of the entire record as submitted; or
(6) Arbitrary, capricious, or an abuse of discretion.
(c) In reviewing a final decision in a contested case, the court shall determine whether the petitioner is entitled to the relief sought in the petition based upon its review of the final decision and the official record. With regard to asserted errors pursuant to subdivisions (1) through (4) of subsection (b) of this section, the court shall conduct its review of the final decision using the de novo standard of review. With regard to asserted errors pursuant to subdivisions (5) and (6) of subsection (b) of this section, the court shall conduct its review of the final decision using the whole record standard of review.
(d) In reviewing a final decision allowing judgment on the pleadings or summary judgment, the court may enter any order allowed by G.S. 1A-1, Rule 12(c) or Rule 56. If the order of the court does not fully adjudicate the case, the court shall remand the case to the administrative law judge for such further proceedings as are just.
N.C.G.S. § 150B-51.
AdventHealth argues that § 150B-51(b) applied in Fletcher I and only allows
the court to “reverse or modify the decision if the substantial rights of the petitioners
may have been prejudiced[.]” AdventHealth further contends that the term
“petitioner” in § 150B-51(b) refers to the party appealing the final decision and thus
on remand the ALJ should have determined whether Mission and DHHS were
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substantially prejudiced by the ALJ’s original final decision granting summary
judgment.
To support its argument, AdventHealth cites N.C. Dep’t of Env’t & Natural
Res. v. Carroll, 358 N.C. 649, 652 (2004), because there the respondent, Carroll, filed
the original petition for a contested case hearing but the N.C. Department of
Environment and Natural Resources was listed as the “petitioner” because it filed the
action challenging the administrative agency’s final decision. However, in Carroll,
the final decision was not on the pleadings or summary judgment. Id. Additionally,
the Supreme Court of North Carolina affirmed the final agency decision and did not
engage in a substantial prejudice analysis. Id. at 676. Thus, it does not provide
support for AdventHealth’s argument that § 150B-51(b) governs here or that
AdventHealth’s original burden of proof disappears on remand and is replaced by a
burden on the appellants to show substantial prejudice.
AdventHealth ignores § 150B-51(d) which specifically applies to review of final
decisions granting summary judgment. See Krueger v. N.C. Crim. Just. Educ. &
Training Standards Comm’n, 198 N.C. App. 569, 576–77 (2009) (holding that the trial
court erred by applying § 150B-51(b) instead of following § 150B-51(d) and Rule 56).
§ 150B-51(d) allows a reviewing court to “enter any order allowed by G.S. 1A-1, Rule
12(c) or Rule 56” and requires the reviewing court to remand the case to the ALJ if
the order “does not fully adjudicate the case.” In Fletcher I, this Court reviewed the
ALJ’s decision granting summary judgment but did not fully adjudicate the case
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because we did not rule on whether AdventHealth could ultimately demonstrate
substantial prejudice. Fletcher I, 293 N.C. App. at 50. Thus, § 150B-51(d) allowed
this Court to remand for further proceedings and did not create a new burden for
Mission and DHHS to demonstrate substantial prejudice.
Instead, AdventHealth retained its original burden under § 150B-23(a) as
outlined by this Court in Fletcher I:
As the petitioner, AdventHealth has the burden of proof in this matter . . . . AdventHealth satisfied its burden of proof by showing Agency error. However, it must also separately establish that it was substantially prejudiced by the Agency’s error; it may not rest its case upon a bare allegation that it was prejudiced by Agency error alone.
Id. This Court also emphasized that though AdventHealth had not demonstrated
substantial prejudice in Fletcher I, “AdventHealth may ultimately satisfy its burden;
it may not.” Id. Accordingly, when this Court vacated and remanded the ALJ’s first
final order, it was clear that the issue on remand was whether DHHS had
substantially prejudiced AdventHealth’s rights. The ALJ followed this Court’s
directive and considered the proper issue on remand.
C. Substantial Prejudice
AdventHealth alternatively argues that it met its burden of showing
substantial prejudice under N.C.G.S. § 150B-23(a) and therefore the ALJ erred by
denying AdventHealth’s motion for summary judgment and instead granting
summary judgment in favor of Mission and DHHS. AdventHealth points to the
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evidence it presented about the harms resulting from not having an in-person
hearing, the economic and program losses AdventHealth may suffer as a result of
Mission’s proposed FSED, and the harms that arise from Mission’s monopoly.
As discussed above, substantial prejudice must be shown separate from agency
error. See Surgical Care Affiliates LLC. 235 N.C. App. at 629. “The harm required
to establish substantial prejudice cannot be conjectural or hypothetical. It must be
concrete, particularized, and ‘actual’ or imminent.” Id. at 631. Additionally,
increased competition alone is not a sufficient basis for substantial prejudice because
if it was, that “would eviscerate the substantial prejudice requirement[.]” Parkway
Urology, P.A. v. N.C. Dep’t of Health & Hum. Servs., 205 N.C. App. 529, 539 (2010);
see also Chesapeake Diagnostic Imaging Ctrs., LLC v. N.C. Dep’t of Health & Hum.
Servs., 919 S.E.2d 301, 305 (2025). Instead, the petitioner is required “to provide
specific evidence of harm resulting from the award of the CON . . . that went above
and beyond any harm that necessarily resulted from additional . . . competition[.]”
Parkway Urology, P.A., 205 N.C. App. at 539.
“Simply quantifying the harm likely to arise out of additional competition” is
not sufficient to show substantial prejudice. CaroMont Health, Inc. v. N.C. Dep’t of
Health & Hum. Servs., 231 N.C. App. 1, 10 (2013). In CaroMont Health, Inc.,
CaroMont argued it was substantially prejudiced by DHHS’s approval of intervenor
Greater Gaston Center LLC’s (“GGC”) CON to relocate its endoscopy rooms because
CaroMont would suffer financially from the CON approval. Id. at 3, 6. CaroMont
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identified specific professionals who would shift cases to GGC, and thus away from
CaroMont, either by referring their patients to GGC or performing procedures there.
Id. at 5–6. Additionally, CaroMont presented testimony that it would lose between
$463,000.00 and $925,000.00 of net income per year. Id. at 11. This Court held that
although it was specific, CaroMont’s evidence was insufficient to show substantial
prejudice because, “the harm resulted solely from the CON’s introduction of
additional competition.” Id. at 10.
That said, as this Court noted in a previous case between these parties
concerning a separate CON, “our caselaw does not categorically preclude increased
competition from constituting substantial prejudice[.]” Fletcher Hosp. Inc. v. N.C.
Dep’t of Health & Hum. Servs., 295 N.C. App. 82, 90 (2024) [hereinafter Fletcher II].
There, we held that a market competitor challenging a CON could show substantial
prejudice by “mak[ing] a specific argument as to how that increased competition
affects their provision of services.” Id. (emphasis in original). However, for similar
reasons as in Fletcher I, we did not consider whether substantial prejudice actually
existed in that case and consequentially did not provide further guidance as to what
constitutes a specific argument or what types of interference with provisions of
services amount to substantial prejudice. See id.
Our prior case law suggests that allegations that lost revenue will compromise
the petitioner’s services is insufficient to support a finding of substantial prejudice.
Blue Ridge Healthcare Hosps. Inc. v, N.C. Dep’t of Health & Hum. Servs., 255 N.C.
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App. 451, 464 (2017). In Blue Ridge Healthcare Hospitals Inc., Blue Ridge argued
that it was substantially prejudiced by the approval of a CON because it would lose
patients and profits which in turn would compromise its neonatal and emergency
services. Id. This Court held that those harms were the result of normal competition
and thus could not constitute a showing of substantial prejudice. Id. at 464–65.
Here, the ALJ’s award of summary judgment to Mission and DHHS was proper
because AdventHealth failed to meet its burden of showing substantial prejudice.
The evidence that AdventHealth presented about the harm arising from not holding
an in-person hearing is hypothetical and fails to demonstrate specific, actual harm.
AdventHealth’s prediction that there would have been significant community
participation at an in-person hearing, and that the public would have raised serious
concerns, is purely speculative. Moreover, AdventHealth did not demonstrate that
such an in-person crowd would have had a different effect on the CON determination
than the written comments that were actually submitted from the public.
Additionally, while AdventHealth pointed to unique features of in-person
hearings, such as the ability to speak directly to an analyst, it did not identify any
specific or actual harm that resulted from being limited to written comments and
replies. Similarly, AdventHealth provided examples of past DHHS determinations
that relied on information from the public hearing but did not demonstrate that the
expanded written comments system devised by DHHS in this matter could not
provide that same information. Indeed, AdventHealth does not allege that any
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specific information was not considered as a result of DHHS’s decision to not have an
in-person hearing. Instead, AdventHealth generally argues that “context was
missed” which is not specific enough to support a claim of substantial prejudice.
AdventHealth’s evidence about how Mission’s FSED would harm
AdventHealth’s business and operations also fails to show substantial prejudice.
AdventHealth argues that its projections of lost revenue due to the approval of the
CON and how that lost revenue would cause AdventHealth to discontinue certain
programs satisfies Fletcher II’s requirement that it “make a specific argument as to
how that increased competition concretely affects their provision of services.”
However, this Court has already held that quantifications of lost revenue and the
resulting compromise of certain services are not sufficient to show substantial
prejudice in CaroMont Health Inc. and Blue Ridge Healthcare Hosps. Inc.
AdventHealth has not demonstrated that its evidence of harm is significantly
dissimilar to those cases. Accordingly, we hold that CaroMont Health Inc. and Blue
Ridge Healthcare Hosps. Inc. control here and conclude that AdventHealth has not
demonstrated harm that goes above and beyond that which naturally results from
additional competition.
AdventHealth also contends that the competition it faces is not “normal”
because Mission benefits from a “state-sanctioned monopoly” so it can put significant
pressure on AdventHealth. However, “monopoly is not a ‘magic word’ ” showing
substantial prejudice. See Chesapeake Diagnostic Imaging Ctrs., LLC, 919 S.E.2d at
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305. AdventHealth must still present specific evidence of how that monopoly creates
harm that would not otherwise result from normal competition and AdventHealth
failed to do so.
AdventHealth presented several pieces of evidence, including the letters from
the Attorney General, to support its allegation that Mission has a monopoly, but did
not present specific evidence of how Mission’s large market share would substantially
prejudice AdventHealth. The CEO of AdventHealth’s statement that Mission had
more “levers” due to its monopoly-like status is general and fails to demonstrate
particularized harm. The only specific and actual harms that AdventHealth alleges
are financial harms resulting from market loss and the discontinuation of
unprofitable services, which are the same types of harm that this Court has held are
insufficient to show substantial prejudice. Without an additional demonstration that
those harms rise above and beyond that which is the natural result of increased
competition, AdventHealth cannot meet its burden of showing substantial prejudice.
Notably, our decision that AdventHealth has failed to show substantial
prejudice is consistent with this Courts recent decision in Fletcher Hosp. v. N.C. Dep’t
of Health & Hum. Servs., No. COA24-994, 2025 WL 3088028 (N.C. Ct. App. Nov. 5,
2025) [hereinafter Fletcher III], where we considered a similar issue between the
same parties in this matter. There, this Court conducted a de novo review of whether
AdventHealth had met its burden of showing substantial prejudice. Id. at *6.
AdventHealth advanced similar arguments that its projections of lost revenue and
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the resulting impact on its community services demonstrated specific evidence of
harm and that the harm did not arise from “normal” competition because of Mission’s
monopoly-like status. Id. at *4–6. We rejected both arguments.
As to the AdventHealth’s evidence about discontinuing services, we held that
under Blue Ridge Healthcare Hospitals Inc., “a petitioner’s hindered ability to provide
‘other services[,]’ due to reduced profits resulting from normal competition, does not
suffice to demonstrate substantial prejudice.” Id. at *5 (citing Blue Ridge Healthcare
Hospitals Inc., 255 N.C. App. at 464). As to AdventHealth’s monopoly argument, we
held “we will not treat this allegation [of monopoly status], without more, as
appropriate grounds for reversal[.]” Id. at *6. Ultimately, we affirmed the ALJ’s
grant of summary judgment to Mission and DHHS because AdventHealth “failed to
present specific evidence in support of a claim of substantial prejudice, which is
necessary for proper reversal of DHHS’s decision to award a CON.” Id.
D. Criterion 5
Lastly, AdventHealth argues that the ALJ erred by “fail[ing] to conclude that
Mission’s misrepresentation about the availability and commitment of funds for its
proposed project and failure to conform with Criterion 5 warranted reversal of
[DHHS’s] Decision due to the substantial prejudice to AdventHealth.” However,
AdventHealth does not present any additional evidence of substantial prejudice.
As discussed above, AdventHealth failed to meet its burden of demonstrating
that DHHS substantially prejudiced its rights. As substantial prejudice is an
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essential element for reversing DHHS’s decision to award a CON, we need not
address AdventHealth’s remaining argument that DHHS erred in approving
Mission’s CON application. See id.; Surgical Care Affiliates, LLC, 235 N.C. App. at
621. Additionally, because AdventHealth did not provide sufficient evidence to show
substantial prejudice, there is no genuine issue of material fact and Mission and
DHHS are entitled to judgment as a matter of law. Accordingly, we affirm the ALJ’s
final decision awarding summary judgment in favor of Mission and DHHS.
III. Conclusion
For the foregoing reasons, we affirm ALJ Sutton’s final decision on remand
granting summary judgment in favor of Mission and DHHS.
AFFIRMED.
Judges CARPENTER and GORE concur.
Report per Rule 30(e).
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