West Mont Com-Care v. Bd. of Health ( 1985 )

No. 85-43
IN THE SUPREME COURT OF THE STATE OF MONTANA
1985
WEST-I'IONT COMMUNITY CARE, INC .,
Petitioner and Appellant,
BOARD OF HEALTH AND ENVIRONMENTAL
SCIERCES; DEPARTPIEUP OF IZEALTH AND
ENVIRONMENTAL SCIENCES; JEAN K.
K o M and MARJORIE ANDERSON,
~ ~
C
Respondents and Respondents.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis & Clark,
The Honorable Henry Loble, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
J. Cort Harrington, Jr. argued, Helena, Montana
For Respondents:
Allen B. Chronister argued, Agency Legal Services,
Dept. of Justice, Helena, Montana
Luxan & Murfitt; Patrick Melby argued for Koma
& Anderson, Helena, Montana
-- -
Submitted: July 2, 1985
Decided: July 30, 1985
Filed: 314. (1 fgos
Clerk
Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of
the Court.
West-Mont Community Care, Inc. , (West-Mont) appeals the
January 3, 1985, order of the First Judicial District Court
affirming an order of the Board of Health and Environmental
Sciences (Board) which granted respondents, Jean Komac and
Marjorie Anderson, a certificate of need for a home health
care agency in Lewis and Clark County. We affirm the order
of the District Court, although for a reason different than
that relied on by the court.
On January 30, 1984, Jean Komac and Marjorie Anderson,
d/b/a Independent Home Health Care (Independent), filed an
application with Montana's Department of Health and Environ-
mental Sciences (Department) for a certificate of need to
establish a home health care agency in Lewis and Clark Coun-
ty. The Department denied Independent's application, stating
that Lewis and Clark County's home health care needs were
already being met by West-Mont Community Care. Independent
would only be duplicating West-Mont ' s services, to
West-Mont's detriment.
Independent appealed the Department's decision to the
Board of Health and Environmental Sciences .
(Board) The
Board overturned the Department's decision, stating that both
state and federal law required the Department to consider the
effect of competition on the provision of home health care
services when reviewing a certificate of need and that the
Department had failed to do so. Then, relying on the compe-
tition criterion, the Board granted the certificate of need.
West-Mont appealed the decision of the Board to District
Court and lost. West-Mont now appeals to this Court, con-
tending that the federal criterion of competition has never
been properly adopted by Montana and that, therefore, the
Board erred in basing its decision to grant the certificate
of need on the competition factor.
Specifically, West-Mont raises the following issues on
appea 1:
1. When the Montana Legislature incorporated b y refer-
ence "Title 42, CFR, Part 123, as amended" in
S; 50-5-304 (1)(n), MCA, it either:
a. Intended to incorporate 42 CFR, Part 123 as it
existed on July 1, 1979, which does not contain competition
as a review criterion; or
b. Intended to include future amendments to 42 CFR,
Part 123, which would be an unconstitutional delegation of
legislative authority to the Secretary of Health and Human
Ser~~ices.
2. If incorporation of the federal rules is discretion-
ary rather than mandatory, the criterion of competition still
may not be considered as it has never been properly adopted
pursuant to the Montana Administrative Procedures Act.
3. For purposes of certificate of need review, does
"need" include "need for competition" under the Montana
statutes alone?
4. Is the Board's finding that Independent's applica-
tion will not have an adverse effect on the existing home
health agency and is consistent with Montana's health systems
plan supported by reliable, probative and substantial evi-
dence on the whole record?
5. Is the Board's finding that there are no less cost-
ly, qua lity-equiva lent, or more effective methods of provid-
ing Independent's proposed services clearly erroneous?
The case was orally argued to this Court on May 16,
1985. At that time Mr. Patrick Melby, attorney for Indepen-
dent, advised this Court that the Department of Health and
Environmental Sciences was considering the adoption of an
administrative rule which would incorporate into the State's
review criteria for a certificate of need the specific feder-
al regulations at issue, including the need for competition.
Those rules were adopted by the Department on May 30, 1985.
In light of this development, the parties were asked to brief
the following additional issue:
"May this Court consider an administra-
tive rule promulgated by the respondent
Department of Health and Environments 1
Sciences after filing of the notice of
appeal wherein there is adopted now
existing federal regulations which may be
material to the cause and may the same be
considered by this Court in the determi-
nation of this cause?"
Our resolution of this issue renders consideration of
West-Mont's issues one through three unnecessary.
Generally, an appellate court must apply the law in
effect at the time it renders its decision. Thorpe v. Hous-
ing Authority of the City of Durham (1969), 393 U.S. 268, 89
S. Ct. 518, 21 L. Ed. 2d 474. Montana followed this principle
in Wilson v. State Highway Commission (1962), 140 Mont. 253,
370 P.2d 486. There, after judgment for the Highway Commis-
sion was entered in the trial court, the legislature enacted
a statute granting the Highway Commission the authority to
perform the act at issue. This Court held the appeal of the
trial court judgment to be moot, stating:
"We are of the opinion that this case
does not present any justiciable issues.
The above-cited statute resolved the
question of whether the Commission had
power to rent the use of the unused right
of way by expressly granting such power.
Likewise, the statute disposed of the
constitutional question by requiring that
the Commission secure rent from the
unused right of way. There is nothing
left for this court to decide. We do not
deem it necessary to rule upon the legal-
ity of the administrative procedure which
is no longer in effect, and which no
longer controls the rights of the
parties. . .
. " Wilson, 140 Mont.
257, 370 P.2d at 488.
at
This principle applies to administrative regulations as
well as statutes.
" ' [I]f subsequent to the judgment and
before the decision of the appellate
court, a law intervenes and positively
changes the rule which governs, the law
must be obeyed, or its obligation denied.
If the law be constitutional, * * * I
know of no court which can contest its
obligation. .. .'
"This same reasoning has been applied
where the change was constitutional,
statutory, or judicial. Surely it 9-
plies with equal force where the change
is made
- - pursuant-to- administrative agency
% an
acting legislative authoriza-
tion." Thorpe, 393 U.S. at 282, 89 S.Ct.
at 526, 21 L.Ed.2d at 484, quoting Chief
Justice Marshall in United States v.
Schooner Peggy (1801), 1 Cranch 103, 110,
2 L. Ed. 49, 51. (emphasis supplied)
(footnotes omitted)
Retroactive application of new rules is impermissible
only if it "takes away or impairs vested rights acquired
under existing laws or creates new obligations or imposes new
duties in respect to transactions already past." Castles v.
State ex rel. Montana Department of Highways (1980), 187
Mont. 356, 360, 609 P.2d 1223, 1225, citing City of Harlem v.
State Highway Commission (1967), 149 Mont. 281, 284, 425 P.2d
718, 720. There is no retroactive application problem here
as no vested rights are involved. "[Ilt is well established
that the rights which may 'vest1 through reliance on a gov-
ernment permit are no greater than those specifically granted
by the permit itself." Santa Monica Pines, Ltd. v. Rent
Control Board of the City of Santa Monica (Cal. 1984) , 679
P.2d 27, 32. West-Mont's permit to operate a home health
care agency certainly does not guarantee West-Mont that it
will always operate as a monopoly, free of competition.
Rather, the operation of a home health care agency is a
privilege subject to conditions imposed by the State of
Montana through its certificate of need program. See Peti-
tion of Morris (1978), 175 Mont. 456, 575 P.2d 37, where we
held the practice of law to be a privilege burdened with
conditions.
We would not apply the new rules to this case if such
application would, in any way, prejudice West-Mont. However,
the application of the new rules does not deprive West-Mont
of a fair hearing. It is undisputed that the Board thought
it was to consider the competition criterion. Each party had
an adequate opportunity to present its case on that issue at
the administrative hearing. In fact, nearly all the testimo-
ny and evidence offered by each party centered around the
criteria of cost and competition.
In Wilson, supra, a permit had not yet been issued.
This Court ordered that the new rule be considered when
determining whether or not to issue the permit. Here, al-
though the certificate of need has been issued (pending this
appeal), the Board considered the competition criterion when
determining whether or not to issue the certificate of need.
There was no harm or prejudice to West-Mont.
West-Mont alleges in its supplemental brief that the
Department failed to properly incorporate 42 CFR 123.412 into
A.R.M. § 16.32.110. We do not agree. The federal regulation
is properly cited. The administrative rule indicates that
the criteria in the federal regulation are to be adopted in
Montana. To require a listing of the criteria would defeat
the rationale for allowing the incorporation of other materi-
al in the Administrative Rules of Montana, the saving of
space and money. The cite in and of itself provides the
public with the needed information on where the material is
located.
W e h o l d t h a t A.R.M. 5 16.32.110, a d o p t e d May 3 0 , 1985,
is t h e proper rule t o be considered by t h i s Court in the
determination of this cause. Therefore, this Court will
c o n s i d e r t h e need f o r c o m p e t i t i o n when d e t e r m i n i n g w h e t h e r o r
n o t t h e e v i d e n c e p r e s e n t e d t o t h e Board s u p p o r t s t h e i s s u a n c e
o f a c e r t i f i c a t e o f need t o I n d e p e n d e n t .
West-Mont o b j e c t s t o two o f t h e B o a r d ' s f i n d i n g s o f f a c t
on t h e b a s i s t h a t t h e y a r e n o t s u p p o r t e d by r e l i a b l e , p r o b a -
t i v e and s u b s t a n t i a l e v i d e n c e on t h e whole r e c o r d and t h a t
they a r e c l e a r l y erroneous. Those f i n d i n g s a r e :
"10. There are no less costl-y,
quality-equivalent or more effective
methods o f p r o v i d i n g t h e p r o p o s e d servic-
es. [ $ 50-5-304 (1) ( d ) , MCA]
"14. The e s t a b l i s h m e n t o f I n d e p e n d e n t
w i l l n o t have an adverse f i n a n c i a l impact
o n t h e e x i s t i n g h e a l t h c a r e s y s t e m and i s
not inconsistent with joint planning
e f f o r t s by h e a l t h c a r e p r o v i d e r s i n t h e
area. [ § 50-5-304 (1) ( f ) , MCA] "
The t r i a l c o u r t judge a f f i r m e d t h o s e f i n d i n g s , stating
simply t h a t :
"The C o u r t s h a l l n o t d i s t u r b t h e f i n d i n g s
o f t h e Board w i t h r e s p e c t t o t h e c r i t e r i a
found i n S e c t i o n 50-5-304 (1) ( a ) , ( c ) ,
( a ) , and (f). There i s s u b s t a n t i a l
evidence t o support t h e i r findings."
W e agree with the t r i a l court. " I f t h e record contains
support for the factual d e t e r m i n a t i o n s made by t h e a g e n c y ,
t h e c o u r t s may n o t weigh t h e e v i d e n c e . They a r e bound by t h e
findings of the agency." City of Billings v. Billings
F i r e f i g h t e r s L o c a l No. 521 (Mont. 1 9 8 2 ) , 651 P.2d 627, 632,
3 9 St.Rep. 1844, 1849. T h e r e i s ample e v i d e n c e i n t h e r e c o r d
t o s u p p o r t t h e f i n d i n g s o f t h e Board.
Regarding finding of fact no. 10, West-Mont contends
t h a t I n d e p e n d e n t ' s p l a n n e d service i s n o t o f a q u a l i t y e q u i v -
alent to that of West-Mont because Independent does not
intend t o hire a nursing supervisor. However, Jean Komac
testified a t t h e h e a r i n g b e f o r e t h e Roard t h a t I n d e p e n d e n t
plans on hiring two n u r s i n g s u p e r ~ r i s o r s t o work alternate
shifts. Those s u p e r v i s o r s would a l s o p r o v i d e d i r e c t s e r v i -
ces, b u t would n o t be s u p e r v i s i n g a t t h e same t i m e . (See
transcript, pp. 117-118. ) There i s s u f f i c i e n t evidence f o r
t h i s C o u r t t o a f f i r m t h e d e c i s i o n o f a Board w i t h e x p e r t i s e
in the area that such an arrangement w i l l provide quality
s e r v i c e t o Independent's clientele.
With r e s p e c t t o f i n d i n g o f f a c t no. 1 4 , West-Mont a l l e g -
es t h a t t h e Board f a i l e d t o c o n s i d e r t h a t I n d e p e n d e n t would
be duplicating services offered by West-P4ont , contrary t o
M o n t a n a ' s H e a l t h Systems P l a n . While M o n t a n a ' s H e a l t h Sys-
t e m s P l a n d o e s n o t e n c o u r a g e d u p l i c a t i o n o f s e r v i c e s , it d o e s
allow for duplicating where it is deemed appropriate.
Polson, Missoula and Great Falls all have competing home
health care agencies. An a u d i t o r from B l u e C r o s s t e s t i f i e d
that the competition has little adverse effect on those
agencies.
" I t d e p e n d s b a s i c a l l y on a c o u p l e o f
factors. I t d e p e n d s on t h e i r f i n a n c i a l
acumen. I f t h e y can handle it, i f they
can handle t h e competition, then t h e y ' r e
g o i n g t o become more e f f i c i e n t . I f they
c a n n o t become more e f f i c i e n t , t h e n t h e y
w i l l not survive." T r . p. 2 2 .
I n a d d i t i o n , t h e r e was s u b s t a n t i a l t e s t i m o n y i n d i c a t i n g
t h a t c o m p e t i t i o n i n t h e home h e a l t h c a r e f i e l d i n Lewis and
C l a r k County would r e d u c e t h e c o s t o f t h e s e r v i c e , w i t h no
a d v e r s e e f f e c t on p a t i e n t s e r v i c e s .
The a u d i t o r q u o t e d p r e v i o u s l y a l s o t e s t i f i e d t h a t :
". . . I would b e v e r y l e e r y t o s a y t h a t
i n s t i t u t i n g two home h e a l t h a g e n c i e s i n a
community would have a d e t r i m e n t a l e f f e c t
on p a t i e n t services. I n my own p e r s o n a l
o p i n i o n , I cannot i n any conscience say
t h a t t h i s would n o t b e a good t h i n g . I
t h i n k it would b e a good t h i n g t o have
t h i s competition. I t makes b o t h home
health a g e n c i e s more e f f i c i e n t . It
serves t h e p a t i e n t s b e t t e r b e c a u s e w e
have a d r i v e , a r e a l need t o p e r f o r m
a g a i n s t each other. And t h a t ' s s i m p l y my
opinion. I t h i n k t h e community a s w e l l
a s HCFA -- a n o t h e r t h i n g I should mention
i s HCFA i s on a c o s t d r i v e r i g h t now, t o
r e d u c e c o s t s p a i d t o p r o v i d e r s o f servic-
es. A s f o r t h e i r goal, i n reaching t h i s
goal, instituting a competition-type
s i t u a t i o n would p r o b a b l y b e a good t h i n g .
I t would p r o b a b l y serve t h e i r p u r p o s e s
quite well." T r . p. 28.
Mr. Robert Johnson, Director of the Lewis and Clark
County H e a l t h D e p a r t m e n t , t e s t i f i e d a s f o l l o w s :
"Q Bob, d o you h a v e an o p i n i o n o f wheth-
e r o r n o t c o m p e t i t i o n i n t h e home h e a l t h
c a r e a r e a would a d v a n c e t h e p u r p o s e s o f
quality assurance in those services?
"A No, I don't t h i n k t h a t it would
a f f e c t t h e q u a l i t y much. I h a v e no
q u e s t i o n r i g h t now t h a t West l l o n t Home
Health Care i s providing high q u a l i t y
s e r v i c e s and I t h i n k t h a t t h o s e a g e n c i e s
a r e r e g u l a t e d t o t h e e x t e n t by v a r i o u s
f e d e r a l and s t a t e a g e n c i e s t h a t t h e i r
q u a l i t y o f service i s r e l a t i v e l y g u a r a n -
teed. I t h i n k , however, t h a t t h e r e a l
i s s u e , f o r m e i n my o p i n i o n , a t l e a s t , i s
c o s t , t h e charge f o r t h a t service.
"Q Y o u ' r e saying t h a t competition i n
home h e a l t h c a r e would a d v a n c e t h e p u r -
poses of c o s t e f f e c t i v e n e s s ?
"A I think so." Tr. pp. 66-67.
There i s s u b s t a n t i a l c r e d i b l e evidence i n t h e r e c o r d t o
s u p p o r t t h e B o a r d ' s d e t e r m i n a t i o n t h a t a c e r t i f i c a t e o f need
should be i s s u e d t o Independent.
Affirmed.
We concur: ,/
ief Justice