Appeals Court reverses lower court, gives Duke win in Wake County CON fight

A unanimous three-judge panel has reversed a lower court’s ruling and ruled that Duke University Health System should get a certificate of need to add an MRI machine in Wake County.

The ruling strikes a blow against Raleigh Radiology, which had lost the initial CON competition to Duke but had convinced an administrative law judge to favor its bid over Duke’s.

Writing for the unanimous panel, Judge Chris Dillon notes that the administrative law judge made a mistake. The judge was required to grant deference to the government agency that decided how to grant the CON.

The Agency, in its discretion,used seven comparative factors in reviewing the CON applications:(1) geographic distribution, (2) demonstration of need, (3) access by underserved groups, (4) ownership of fixed MRI scanners in Wake County, (5) projected average gross revenue per procedure, (6) projected average net revenue per procedure, and (7) projected average operating expense per procedure.This comparative analysis led the Agency to approve and award the CON to Duke.

However, on appeal to the OAH, the ALJ deviated from the above factors by considering two additional factors:(1) the types of scanners proposed by each applicant, and (2) the timeline of each proposed project. Admittedly, there was evidence that Raleigh’s proposed MRI machine was superior to the machine which Duke would use. It is this deviation and the reliance on additional comparative factors by the ALJ which we must conclude was error.

Indeed, adding two additional comparative factors is not affording deference to the Agency, but rather constitutes an impermissible de novo review of this part of the Agency’s decision. Such a substitute of judgment by the ALJ is not allowed.

Mitch Kokai / Senior Political Analyst

Mitch Kokai is senior political analyst for the John Locke Foundation. He joined JLF in December 2005 as director of communications. That followed more than four years as chie...

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