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Georgia Department of Community Health v. Emory University

Court of Appeals of Georgia, Third Division

June 28, 2019

GEORGIA DEPARTMENT OF COMMUNITY HEALTH
v.
EMORY UNIVERSITY, et al.

          DILLARD, C. J., GOBEIL and HODGES, JJ.

          Gobeil, Judge.

         The Commissioner of the Georgia Department of Community Health ("the Commissioner") ruled that Emory University Hospital ("EUH") could not sever its certificate of need ("CON") for a 16-bed, in-patient rehabilitation program from its hospital license[1] and thereafter transfer both the program and the CON to another, separately-licensed facility located on the Emory University campus. Instead, the Commissioner determined that the separately licensed facility, Emory Rehabilitation Hospital ("Emory Rehab"), would be required to obtain its own CON for the 16 additional beds it sought to acquire from EUH. EUH and Emory Rehab (collectively, "Emory") appealed the Commissioner's decision to the Superior Court of DeKalb County, which reversed the Commissioner and held that EUH could transfer the CON for its in-patient rehabilitation program and the 16 beds associated with that program to Emory Rehab, without Emory Rehab having to obtain its prior CON approval.

         The Department of Community Health ("DCH") now appeals the superior court's ruling, arguing that the court committed legal error in finding: (1) that a CON issued to a specific party for a specific program could be transferred (together with the program) to a different healthcare facility not named on the original CON; and (2) that Emory Rehab's addition of 16 beds to its existing in-patient rehabilitation program did not constitute an expansion of that program requiring CON review and approval.[2] For reasons explained more fully below, we agree that the superior court's order conflicts with the plain language of Georgia's CON statute (OCGA § 31-6-40, et seq.) and the administrative regulations promulgated thereunder. Accordingly, we reverse that order.

         The Underlying Facts

         The facts underlying this appeal are undisputed and show that EUH is owned by Emory University and is located at 1364 Clifton Rd., NE on the University's campus. From 1977 until July 1, 2014, EUH operated an in-patient rehabilitation facility known as the Center for Rehabilitation Medicine (the "CRM"). The CRM was located at 1441 Clifton Rd. NE, in a freestanding building on the Emory University campus. The CRM operated under EUH's license, and EUH had a CON that allowed the CRM to operate a 56-bed comprehensive in-patient rehabilitation program ("CIPR program"). In 2013, EUH sought to "decouple" the CRM from its license, obtain a separate license for the CRM, and then transfer the CON for the CRM (which had been held under EUH's license) to the now independently licensed CRM. Thus, in November 2013, EUH requested a letter of determination from DCH confirming that it did not need to obtain prior CON review and approval to decouple both the CRM and the CRM's CON from EUH's license. DCH issued the requested letter of determination, confirming that EUH could proceed with its plan without obtaining a new CON for the CRM. DCH determined that a new and separate CON was not required because "[t]he proposed decoupling of the health care facility license does not involve any defined new institutional health service because there will be no bed increase, no new services offered at EUH or the CRM, and no capital expenditure above the [statutory] threshold." Additionally, DCH noted that even after the decoupling "[t]here will still be only one CIPR service at the CRM location within the scope of the [existing CON]."

         After the DCH letter of determination issued, EUH decoupled the CRM from its license, obtained a separate license for the facility, and transferred the CON to the new license. On July 1, 2014, the CRM was acquired by ES Rehabilitation, LLC, [3]which now operates the facility and its CIPR program under the name Emory Rehabilitation Hospital. Independent of the CRM/Emory Rehab, however, EUH continued to maintain a CON for its own 16-bed CIPR program.[4] That program is housed inside the hospital, is administered by EUH for its patients, and operates under EUH's hospital license.

         Administrative Proceedings

         In 2016, EUH and Emory Rehab agreed that EUH would decouple its CIPR program and the associated CON from its hospital license and transfer both the 16 beds associated with the program and the CON to Emory Rehab. On December 16, 2016, EUH and Emory Rehab submitted a joint request for determination to DCH seeking confirmation that such a decoupling and transfer would not require prior CON review and approval.

         On February 24, 2017 DCH provided the requested letter of determination, informing Emory that it could relocate the EUH CIPR program beds to the Emory Rehab facility, but that it could not transfer either the CON for that program or the program itself to Emory Rehab. DCH explained that statutory law did not allow one licensed healthcare facility to transfer a CON to another licensed healthcare facility, unless the transfer occurs as part of a transaction whereby the transferee is acquiring the transferor. DCH further noted that the transfer in this case would result in an expansion of Emory Rehab's existing CIPR program from 56 beds to 72 beds. Thus, under applicable regulations, before acquiring the EUH CIPR program, Emory Rehab would need to obtain prior CON review and approval allowing it to expand its existing program.

         Emory filed a request for an administrative hearing on DCH's determination, and that hearing occurred in June 2017. The hearing officer thereafter issued a written order in which he reversed DCH's initial determination and granted summary adjudication in favor of Emory. In doing so, the hearing officer relied on prior DCH determinations to conclude that EUH could decouple the CON for its CIPR program from its hospital license, as such decoupling would not result in any new services, new beds, or capital expenditures above the statutory threshold set forth in the CON statute. The hearing officer further concluded that Emory Rehab could acquire EUH's CIPR program without prior CON review and approval. In support of this conclusion, the hearing officer found that EUH's CIPR program, standing alone, met the statutory definition of a "healthcare facility." Thus, because Emory Rehab was acquiring a healthcare facility, it could also acquire the CON belonging to that facility. Additionally, the officer found that Emory Rehab's addition of 16 beds to its CIPR program did not constitute an expansion of its existing program requiring prior CON review and approval. The officer again reasoned that the acquisition of EUH's CIPR beds was the equivalent of a merger of two healthcare facilities, who were combining their CONs under a single license, and therefore no additional beds were "actually being created or constructed."

         DCH appealed the hearing officer's order to the Commissioner. Relying on the rationale set forth in DCH's original letter of determination, the Commissioner reversed the order of the hearing officer and found that EUH could not transfer the CON for its CIPR program and that Emory Rehab could not acquire that program without first obtaining CON review and approval.

         The Superior Court Order

         Emory challenged the Commissioner's decision, filing a petition for judicial review in DeKalb County Superior Court. Following a hearing, the superior court granted Emory's petition and reversed the decision of the Commissioner. With respect to its reversal of the Commissioner's conclusion that EUH could not decouple a CON from its license and then transfer the CON to another licensed healthcare facility, the superior court's rationale is unclear. It appears, however, that the court found, at least implicitly, that EUH's CIPR program constituted a "health care facility" being acquired by Emory Rehab. Based on this finding, the court concluded that DCH violated the CON statute and exceeded its authority thereunder because transfer of the CIPR program did "not involve the establishment of a new healthcare facility or other new institutional health service."[5] Additionally, the court concluded that DCH's determination with respect to the decoupling and transfer of the CON was "arbitrary and capricious" because DCH had mischaracterized EUH's request as involving the severing and transferring of "portions of an existing CON" rather than a decoupling of a program-specific CON from EUH's hospital license. Put another way, the court found that DCH had attempted to treat the CON for the CIPR program as part of EUH's CON for an acute care hospital. The court also relied on prior determinations by DCH addressing when a hospital may decouple a CON from its license and transfer it to the license of another facility to find that DCH's decision was arbitrary and capricious.

         With respect to the Commissioner's ruling that Emory Rehab was required to obtain CON review and approval before expanding its CIPR program from 56 to 72 beds, the superior court found that Emory Rehab's acquisition of EUH's CIPR program was the equivalent of Emory Rehab acquiring a health care facility. Thus, the court concluded that Emory Rehab could combine both CONs under its license. The court also found that the Commissioner's ruling on this issue was arbitrary and capricious because it violated the CON statute and exceeded DCH's authority thereunder. The court further concluded that in making his ruling, the Commissioner had mischaracterized the facts underlying Emory's request for a determination. According to the superior court, this mischaracterization resulted from DCH's "insistence" that EUH was seeking to transfer only hospital beds, as opposed to EUH's entire CIPR program.

         Questions on Appeal

         DCH filed an application for discretionary appeal from the superior court's order. We granted that application, and this appeal followed.

         A court called upon to review a final agency decision "shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact." OCGA § 50-13-19 (h). Thus, the reviewing court may reverse an agency decision only if:

substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are: (1) In violation of constitutional or statutory provisions; (2) In excess of the statutory authority of the agency; (3) Made upon unlawful procedure; (4) Affected by other error of law; (5) Clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or (6) ...

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