Laurel Wood of Henderson, Inc. v. North Carolina Department of Human Resources , 117 N.C. App. 601 ( 1995 )

GREENE, Judge.

Laurel Wood of Henderson, Inc. (petitioner) appeals from an order filed 3 August 1993 in Wake County Superior Court, affirming the declaratory ruling of the North Carolina Department of Human Resources’ Division of Facility Services (the Department) that petitioner is not authorized to treat individuals with eating disorders in its substance abuse/chemical dependency beds.

N.C. Gen. Stat. § 131E-178(a) (1994) requires a person to obtain a Certificate of Need (CON) from the Department before offering or developing “a new institutional health service,” which is defined as the “construction, development, or other establishment of a new health service facility.” N.C.G.S. § 131E-176(16)(a) (1994). On 16 May 1988, petitioner filed an application with the Department for a CON to develop a 66-bed substance abuse/chemical dependency facility for adolescents in Henderson County. Petitioner stated in its application it “will be dedicated to the treatment of adolescents suffering from the addictive diseases of chemical dependency and eating disorders.” In determining whether a CON should be issued for the offering or development of a “new institutional health service,” the service must “be subject to review and evaluation as to need, cost of service, accessibility to services, quality of care, feasibility, and other criteria” so that “only appropriate and needed institutional health services are made available in the area to be served.” N.C.G.S. § 131E-175(7) (1994). The Department relies on the State Medical Facilities Plan (SMFP), the official statement of projected need for health services, to determine whether a new institutional health service is needed. The 1988 SMFP projected a need for chemical dependency beds in Health Service Area I, which includes Henderson County, and a net surplus of psychiatric beds.

On 21 November 1988, the Department denied petitioner’s CON application; however, the Department issued its decision beyond the 150-day time limit imposed by N.C. Gen. Stat. § 131E-185. Petitioner filed a petition for a contested case in the Office of Administrative Hearings on 21 December 1988, and the Administrative Law Judge (AU) issued a decision recommending issuance of a CON to petitioner because the Department, by failing to act within the 150-day time limit, lost jurisdiction to deny petitioner’s CON application. In its final decision, the Department rejected the AU’s recommended decision and affirmed its denial of petitioner’s application. On 1 March 1990, our Supreme Court granted discretionary review, ex mero motu, before a determination by this Court.

Our Supreme Court vacated the Department’s final decision and determined that because the Department failed to act within the 150-day time limit, the Department “is deemed as a matter of law to have decided to approve the certificates of need in question, and that it lost jurisdiction over the subject matter of the applications in question for all purposes except the issuance of the certificates of need.” HCA Crossroads Residential Ctrs., Inc. v. Department of Human Resources, 327 N.C. 573, 579, 398 S.E.2d 466, 470 (1990). The Court, therefore, ordered the Department to issue a CON based on petitioner’s “application to develop a 66-bed adolescent chemical dependency treatment facility.” Id. at 575, 580, 398 S.E.2d at 468, 470-71.

On 11 January 1991, the Department sent petitioner a CON to “[c]onstruct and operate a 66 Bed Substance Abuse/Chemical Dependency Treatment Hospital for Adolescents (ages 12 through 17) with 60 treatment beds and 6 detoxification beds in Henderson County.” Before a facility that has been issued a CON can be operated, it must be licensed by the Department. The Licensure Section of the Department informed petitioner that it could not issue a license allowing treatment of individuals with eating disorders in beds designated substance abuse/chemical dependency because only psychiatric beds could be used to treat eating disorders. Petitioner therefore requested the Director of the Division of Facility Services of the Department (the Director) to issue a declaratory ruling on the scope of services petitioner can provide under the CON issued by the Department. Petitioner sought a ruling that licensing the chemical dependency beds awarded to it included the treatment of eating disorders.

On 8 November 1991, the Director issued a declaratory ruling denying petitioner’s request. Petitioner petitioned for review in the superior court, which affirmed the ruling.

The issue presented is whether the CON issued by the Department in accordance with HCA Crossroads permits petitioner to provide treatment for adolescents with eating disorders in substance abuse/chemical dependency beds.

Under N.C. Gen. Stat. § 150B-51(b), this Court may, in reviewing an administrative agency’s decision, reverse or modify the decision if it is:

(1) In violation of constitutional provisions;

(2) In excess of the statutory authority or jurisdiction of the agency;

(3) Made upon unlawful procedure;

(4) Affected by other error of law;

(5) Unsupported by substantial evidence ... in view of the entire record as submitted; or

(6) Arbitrary or capricious.

N.C.G.S. § 150B-51(b) (1991); see Brooks v. Ansco & Assocs., Inc., 114 N.C. App. 711, 715-16, 443 S.E.2d 89, 91-92 (1994). Where a petitioner alleges an agency’s decision is based on an error of law, de novo review is required. Brooks v. Rebarco, Inc., 91 N.C. App. 459, 463, 372 S.E.2d 342, 344 (1988). Where a petitioner alleges the agency’s decision is not supported by substantial evidence, the whole record test applies. Id.

In this case, petitioner argues that the Department lost its jurisdiction to impose the restriction that eating disorders are properly treatable only in beds designated for psychiatric services when it failed to act within the 150-day time limit and our Supreme Court mandated that petitioner’s “application, even with its alleged defects, had to be granted in toto.” Petitioner, in the alternative, argues that the Department’s determination that an eating disorder, as a psychiatric illness, is not allowed to be treated in a substance abuse bed is erroneous and not based on substantial evidence. We disagree with petitioner’s contentions.

In HCA Crossroads, the only action our Supreme Court ordered the Department to do was to issue a CON based on petitioner’s “application to develop a 66-bed adolescent chemical dependency treatment facility.” HCA Crossroads, 327 N.C. at 575, 580, 398 S.E.2d at 468, 470-71. This order by our Supreme Court was exactly fulfilled by the Department on 11 January 1991 when it sent petitioner a CON to “[c]onstruct and operate a 66 Bed Substance Abuse/Chemical Dependency Treatment Hospital for Adolescents (ages 12 through 17) with 60 treatment beds and 6 detoxification beds in Henderson County.” The question, therefore, is whether petitioner can properly treat eating disorders under the CON issued by the Department in accordance with HCA Crossroads.

Eating disorders are subsumed under the definition of mental illness, see N.C.G.S. § 122C-3(21) (1993) (for a minor, a mental condition that so impairs capacity to exercise age adequate self-control or judgment in conduct of activities and social relationships so that he needs treatment), and are not included in the terms “chemical dependency” or “substance abuse.” See 1988 State Medical Facilities Plan at 41 (“chemical dependency” describes the abuse and/or addiction to alcohol or other drugs); N.C.G.S. § 122C-3(36) (1993) (“substance abuse” means pathological use or abuse of alcohol or other drugs in a way or degree that produces impairment in personal, social, or occupational functioning); N.C.G.S. § 90-87(12)(c) (1993)' (defines drugs as “substances (other than food) intended to affect the structure or any function of the body of man or other animals”). Therefore, treating eating disorders in substance abuse/chemical dependency treatment beds would constitute redistributing health service facility bed capacity to a new institutional health service, i.e., psychiatric service, which requires its own CON. See N.C.G.S. § 131E-178(a) (no person may offer or develop “new institutional health service” without obtaining certificate of need); N.C.G.S. § 131E-176(16)(a) (“new institutional health service” means construction, development, or other establishment of new health service facility); N.C.G.S. § 131E-176(9b) (1994) (new psychiatric facility is “health service facility”). For these reasons, the Department’s decision that petitioner cannot treat eating disorders pursuant to its CON for substance abuse/chemical dependency treatment was not based on an error of law and is supported by substantial evidence. The decision of the trial court is therefore

Affirmed.

Judge JOHNSON concurs. Judge LEWIS dissents.