Administrative – Certificate of Need – Public Hearing

Failure to conduct a public hearing as required by N.C.G.S. §131E-185(a1)(2), despite constituting improper procedure for purposes of N.C.G.S. §150B-23(a)(3), does not automatically result in substantial prejudice to a petitioner before the Office of Administrative Hearings.

We vacated the final decision and remanded.

Respondents University of North Carolina Hospitals at Chapel Hill, University of North Carolina Health Care System (collectively UNC), and the North Carolina Department of Health and Human Services, Division of Health Service Regulation, Healthcare Planning and Certificate of Need Section (the Agency) appealed from a final decision of the Office of Administrative Hearings. The decision pertained to a contested case between Petitioner Duke University Health System, Inc., and UNC to obtain a certificate of need to develop 68 acute care beds in the Durham/Caswell County service area pursuant to the 2022 State Medical Facilities Plan. The final decision granted summary judgment in favor of Duke and vacated the underlying decision of the Agency conditionally approving UNC’s certificate of need application, reasoning that the Agency erred in failing to conduct a public hearing in accordance with N.C.G.S. §131E-185(a1)(2), notwithstanding any ongoing concerns relating to the COVID-19 pandemic at the time; and the omission of a public hearing caused per se substantial prejudice to Duke within the meaning of N.C.G.S. §150B-23(a).

Where Duke argued before the Office of Administrative Hearings that the Agency failed to use proper procedure, it was also required to show that the Agency “deprived [it] of property, [] ordered [it] to pay a fine or civil penalty, or [] otherwise substantially prejudiced [its] rights” to establish to the Office of Administrative Hearings that reversible error occurred before the Agency. Although the Office of Administrative Hearings correctly held that the Agency failed to use proper procedure in omitting a public hearing despite any pandemic-related concerns, such an omission does not constitute substantial prejudice per se under N.C.G.S. §150B-23(a).

Respondents also argued that waiver and estoppel prevented Duke from arguing before the ALJ that the Agency’s failure to hold a hearing was improper, as Duke had itself utilized Agency proceedings without public hearings during the pandemic. However, our jurisdiction has long held that statutory rights in place for the benefit of the public—as opposed to for the personal benefit of the party—cannot be waived.

Jurists and academics have critiqued agency proceedings on the basis that they suffer from problems of democratic legitimacy, and the public hearing requirement of N.C.G.S. §131E-185(a1)(2) exists, at least in significant part, to legitimize aspects of the agency review process that might otherwise be democratically suspect. Public hearings under N.C.G.S. §131E-185(a1)(2) are not, therefore, private benefits to their participants, but critical aspects of the agency review process that exist for public and systemic benefits. Waiver therefore does not apply—and, for equivalent reasons, estoppel does not, either.

Our holding does not preclude a subsequent ruling that Duke was substantially prejudiced in the event more specific findings supporting such a ruling are found to exist on remand.

Vacated and remanded.

Duke University Health System Inc. v. N.C. Department of Health and Human Services, Division of Health Service Regulation, Healthcare Planning and Certificate of Need Section (Lawyers’ Weekly No. 011-237-24, 6 pp.) (Hunter Murphy, J.) Appealed from the Office of Administrative Hearings (Melissa Owens Lassiter, ALJ) Baker, Donelson, Bearman, Caldwell & Berkowitz, a Professional Corporation, by Iain M. Stauffer and William F. Maddrey, for petitioner-appellee; Attorney General Joshua H. Stein, by Special Deputy Attorney General Derek L. Hunter, for respondent-appellant; Nelson Mullins Riley & Scarborough LLP, by Lorin J. Lapidus, Noah H. Huffstetler, III, Candace S. Friel, and Nathaniel J. Pencook, for respondents-intervenors-appellants. North Carolina Court of Appeals