Queen City Nursing Ctr., Inc., et al. v. Miss. State Dep't of Health, et al.
| Docket Number: | 2010-CC-01077-SCT Linked Case(s): 2010-CC-01077-SCT |
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| Supreme Court: | Opinion Link Opinion Date: 12-01-2011 Opinion Author: Lamar, J. Holding: Affirmed |
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| Additional Case Information: |
Topic: Certificate of need - Arbitrary and capricious decision - Section 41-7-201(2)(f) - Availability of alternatives - Financial feasibility - Violation of section 41-7-191(2) - Moratorium on new construction - Replacement of existing healthcare facility Judge(s) Concurring: Waller, C.J., Carlson and Dickinson, P.JJ., Randolph, Kitchens, Chandler, Pierce and King, JJ. Procedural History: Admin or Agency Judgment Nature of the Case: CIVIL - STATE BOARDS AND AGENCIES |
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| Trial Court: |
Date of Trial Judgment: 06-10-2010 Appealed from: Hinds County Chancery Court Judge: J. Dewayne Thomas Disposition: Affirmed the State Health Officer's grant of a Certificate of Need. Case Number: G2009-299 T/1 |
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| Party Name: | Attorney Name: | Brief(s) Available: | ||
| Appellant: | Queen City Nursing Center, Inc., Community Living Centers, LLC d/b/a Meridian Community Living Center, and Beverly Enterprises-Mississippi, Inc. d/b/a Golden Living Center-Meridian |
THOMAS L. KIRKLAND, JR.
ALLISON C. SIMPSON
ANDY LOWRY |
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| Appellee: | Mississippi State Department of Health and Meadowbrook Health and Rehab, LLC | BEA M. TOLSDORF BETTY TOON COLLINS DOUGLAS E. LEVANWAY ELIZABETH G. HOOPER | ||
| Appellee #2: | ||||
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| Topic: | Certificate of need - Arbitrary and capricious decision - Section 41-7-201(2)(f) - Availability of alternatives - Financial feasibility - Violation of section 41-7-191(2) - Moratorium on new construction - Replacement of existing healthcare facility |
| Summary of the Facts: | Meadowbrook Health and Rehab, LLC, filed an application for a certificate of need with the Mississippi Department of Health to build a nursing home in Lauderdale County. The DOH staff recommended that the application be approved. Several surrounding nursing homes contested the application and requested a hearing. After three days of testimony, the hearing officer recommended that the application be denied. But the State Health Officer disagreed and granted the CON. The contestants appealed to chancery court, which affirmed the SHO’s decision. The contestants appeal. |
| Summary of Opinion Analysis: | Issue 1: Arbitrary and capricious decision Section 41-7-201(2)(f) sets forth the standard of judicial review for a final order of the DOH and provides that it shall be vacated only upon an error of law, or if the order is not supported by substantial evidence, is contrary to the manifest weight of the evidence, is in excess of the statutory authority or jurisdiction or violates any vested constitutional rights of any party involved in the appeal. The contestants argue that the SHO’s decision to grant the CON was arbitrary and capricious because there was no substantial evidence of General Review Criterion 5 – Need for the Project. The Director of the Office of Health Policy and Planning at the DOH testified that there was a need for 738 beds in Long-Term Planning District IV, which includes both Lauderdale and Kemper Counties. He testified that Lauderdale County contained 572 licensed beds, but had a need for 591, for a total of nineteen needed beds. Meadowbrook also presented testimony from an expert in “healthcare planning, healthcare financial projections and CON preparations.” He testified that if the twenty-one Kemper County beds held in abeyance were not used within five years, they would be “lost to the system” because of the moratorium, and that “from a health planning perspective,” that “would be something we don’t want to see happen.” He testified that the need criteria is based on district-wide planning, not county-wide planning, and that the district encompassing Lauderdale and Kemper Counties needed more than 700 beds. Additionally, the administrators of the three contesting nursing homes testified that, during the last couple of years, their occupancy rates had been at ninety-five percent or above. And finally, while the staff analysis conceded that moving the twenty-one beds into Lauderdale County would leave Kemper County underbedded by twenty-three and Lauderdale County overbedded by two, it also noted that the alternative – leaving the twenty-one in Kemper County and relocating the thirty-nine Poplar Springs beds there – would leave Lauderdale County underbedded by fifty-eight. Thus, substantial evidence exists to support the SHO’s finding that there is a need for the Meadowbrook project. Issue 2: Availability of alternatives The contestants argue that Meadowbrook also failed to satisfy other criteria – specifically, that it failed to consider available alternatives, failed to conform to the State Health Plan’s goals, and failed to prove financial feasability. Substantial evidence exists to support a finding that no better alternatives were available. Although adding the beds to Poplar Springs might ultimately have been “less costly,” testimony was presented that this option was not a “more effective alternative method.” The contestants argue that the new facility was an unnecessary duplication, the Division of Medicaid opposed the project, and moving beds out of underbedded Kemper County does not improve access for Kemper County citizens. There was testimony that relocating Kemper Homeplace to Lauderdale County would greatly improve the residents’ access to acute-care hospitals. Medicaid did oppose the project, claiming that the new facility would cost it $1,157,850 annually. But Meadowbrook presented evidence at the hearing that the actual cost to Medicaid would be much lower. Substantial evidence exists in the record from which the SHO could find that Meadowbrook’s application substantially complied with the State Health Plan’s goals. Issue 3: Financial feasibility The contestants argue that Meadowbrook provided no evidence of General Criterion 4 – Economic Viability. They argue that Meadowbrook never produced a cash-flow statement, did not include the cost of the twenty-one beds or the land on which the facility would be built in its capital-expenditure calculation, and that its debt-service ratio was less than one. The contestants’ expert testified that the new facility would not be financially feasible, while two of Meadowbrook’s experts testified that it would be. Thus, substantial evidence exists in the record from which the SHO could find that Meadowbrook’s project demonstrated financial feasibility. Issue 4: Violation of section 41-7-191(2) The contestants argue alternatively that the SHO’s decision to grant a CON to Meadowbrook violates section 41-7-191(2). The parties refer to this statute as the “moratorium,” and the DOH has, since its passage in 1990, interpreted it to preclude only “new authorized beds and new facilities where none had previously existed.” Meadowbrook notes that, since 1990, the Legislature has passed numerous exceptions to the moratorium, each dealing with either the “creation of new never-before-authorized nursing home beds or the creation of new never-before authorized nursing homes.” The DOH agrees with Meadowbrook and argues that its project is not the “new construction” that the moratorium statute is designed to prohibit. The contestants argue that Meadowbrook is not a “replacement” of an “existing” facility, because Kemper Homeplace does not “exist.” They also argue that the project is not a “relocation” of an existing facility, as again, Kemper Homeplace does not exist, and Poplar Springs “means to continue doing business right where it is.” Kemper Homeplace is still an “existing” facility for purposes of the CON process. The CON statute does not require a CON if a facility attempts to reopen within sixty months of ceasing to operate. Moving the twenty-one Kemper Homeplace beds to Meadowbrook’s proposed facility is a “replacement” of an “existing healthcare facility,” a project not prohibited by the moratorium under the DOH’s interpretation. Also, moving the thirty-nine beds from Poplar Springs to Meadowbrook’s proposed facility is a “relocation,” as defined by the DOH, as it clearly states that it has “always viewed the relocation of existing beds” as “outside the parameters of the moratorium.” |
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