Griffin Hosp. v. Commission on Hospitals and Health Care

• Citation: 493 A.2d 229,196 Conn. 451
• Court: Supreme Court of Connecticut
• Decision Date: 11 June 1985
• Parties: The GRIFFIN HOSPITAL v. COMMISSION ON HOSPITALS AND HEALTH CARE.

Page 229

493 A.2d 229

196 Conn. 451

The GRIFFIN HOSPITAL v. COMMISSION ON HOSPITALS AND HEALTH CARE.

Supreme Court of Connecticut.

Argued March 13, 1985.

Decided June 11, 1985.

Thomas J. Ring, Asst. Atty. Gen., with whom were Richard J. Lynch, Asst. Atty. Gen., and, on the brief, Joseph I. Lieberman, Atty. Gen., and Maite Barainca, Asst. Atty. Gen., for appellant (defendant).

A. Searle Pinney, Danbury, with whom, on the brief, were Jeffrey B. Sienkiewicz and Michael S. McKenna, Danbury, for appellee (plaintiff).

Before ARTHUR H. HEALEY, SHEA, DANNEHY, ASPELL and FRANCIS X. HENNESSY, JJ.

SHEA, Associate Justice.

Pursuant to the requirements of General Statutes § 19a-156(a) the plaintiff hospital submitted to the defendant commission on hospitals and health care for its approval a proposed operating and capital expenditures budget for the fiscal year 1985 (October 1, 1984 through September 30, 1985). The commission disapproved the budget as submitted and ordered substantial reductions in operating expenses, revenues and capital expenditures. The hospital appealed the commission's order pursuant to General Statutes §§ 19a-158 and 4-183 to the Superior Court. In conjunction with its appeal the hospital applied for a stay of the commission's order until the appeal should be decided in the trial court. After a hearing the court issued a stay subject to several conditions. From this judgment staying the order until a decision on the merits of the appeal in the trial court, the commission, after obtaining certification under General Statutes § 52-265a on the grounds "that a substantial public interest is involved and that delay may work a substantial injustice," has appealed to this court. ¹

In claiming that the trial court erred in granting the stay, the commission claims (1) that the provision of the Uniform Administrative Procedure Act, General Statutes § 4-183(c), relied upon as authority for the stay, is inapplicable to administrative appeals involving the hospital rate regulation function of the commission; (2) that the trial court in reaching its decision did not employ the appropriate legal standard for staying an order of an administrative agency; and (3) that the stay, even with the conditions imposed, does not adequately protect the interests of patients or uphold the regulatory powers of the commission.

The plaintiff Griffin Hospital is a nonprofit institution that operates a 281 bed acute care general hospital in Derby. Its proposed operating budget for the 1985 fiscal year would provide $42,454,000 of "net patient revenue" and allow $39,210,000 of operating expenses. Its capital expenditures budget was $1,917,000. The defendant commission, after a hearing upon the proposed budget, ordered that net patient revenues be reduced to $31,114,000 and that capital expenditures be limited to $517,000.

Upon the hospital's appeal from this order and its application for a stay thereof, following an evidentiary hearing that occupied two trial days, the court ordered a stay subject to the conditions that 20 percent of the revenues received in excess of those allowed under the commission's order should be held in escrow, that patients' bills contain a notice of possible refunds, and that the hospital report monthly to the commission its revenues and the amount held in escrow.

The hospital had also appealed the commission's order of reductions in its operating and capital expenditures budget for the 1984 fiscal year. The trial court, Curran, J., had ordered a stay pending the outcome of that appeal and also had imposed conditions similar to those contained in the order before us, including a 20 percent escrow provision. A judgment on the merits of that appeal was rendered on June 19, 1984, and the case was remanded to the commission for further proceedings to correct its order concerning the 1984 budget in accordance with the decision.

I

The claim of the commission that § 4-183(c) of the Uniform Administrative Procedure Act (UAPA) is inapplicable when an appeal is taken from orders relating to hospital budgets is based upon the assumption that, absent commission approval, none of the proposed charges or expenditures may be implemented. The commission analogizes its function in approving hospital budgets to the rate-making authority of the public utilities control authority where a stay pursuant to an appeal by a regulated company merely leaves in effect previously approved rates and does not allow the collection of a requested increase that has been denied by the agency. See Connecticut Light & Power Co. v. Public Utilities Control Authority, 34 Conn.Sup. 172, 175, 382 A.2d 1003 (1977). This feature of rate regulation by that agency is based upon a statutory provision that expressly prohibits a public service company from charging rates in excess of those previously approved. General Statutes § 16-19. No comparable provision is found in the statutes defining the powers of the commission on hospitals and health care; General Statutes §§ 19a-145 through 19a-166; though its ultimate authority to control rates and budgets, after an opportunity for judicial review, cannot be disputed. See Hospital of St. Raphael v. Commission on Hospitals & Health Care, 182 Conn. 314, 317, 438 A.2d 103 (1980).

General Statutes § 19a-158 provides expressly that health care institutions aggrieved by a decision of the commission may appeal in accordance with § 4-183 of [196 Conn. 455] the UAPA. Under subsection (c) of § 4-183 such an appeal does not automatically stay enforcement of an agency decision, but either the court or the agency may grant "a stay upon appropriate terms." See Laurel Park, Inc. v. Pac, 194 Conn. 677, 686, 485 A.2d 1272 (1984). The commission, while recognizing that § 4-183(c) literally empowers a court to stay a commission order when an appeal is taken, contends that such a stay cannot affirmatively authorize a budget that has been disapproved by that agency. We perceive no such limitation on the broad authority given to a court by § 4-183(c) to order "a stay upon appropriate terms." Stays of enforcement of the orders of an administrative agency frequently have the effect of permitting the continuation of activities that normally require a license or other authority from an agency to be conducted legally. When a person appeals from the revocation of or refusal to renew his license or from orders affecting the operation of a business, a stay necessarily sanctions for its duration conduct that has been disapproved by the controlling agency.

The provision for "a stay upon appropriate terms" gives the court broad authority to fashion appropriate relief to protect the interests of all those involved during the pendency of an administrative appeal. The court, therefore, was not confronted with a Hobson's choice of adopting wholly the budgets favored by either the hospital or the commission. In granting a stay upon "appropriate terms" it could modify those proposals or effectuate its own budgetary plan as a modus vivendi.

II

The commission claims next that the trial court used an erroneous standard in deciding to grant a stay. The court did not file a memorandum of decision but, in announcing the judgment at the conclusion of the testimony and arguments, indicated that a "balancing of the equities" test had been followed. This test was defined as "a test which weighs the equities and balances the harm that may be suffered by the Appellant as the result of the enforcement of the Agency order or the decision, pending the appeal, against the public harm that may result from delaying the effectiveness of the Order or Decision." The court appears to have followed the language contained in a trial court decision; Connecticut Life & Health Ins. Guaranty Assn. v. Daly, 35 Conn.Sup. 13, 16-17, 391 A.2d 735 (1977); which adopted the balancing test suggested in 2 Cooper, State Administrative Law, p. 629. See McCarthy v. Freedom of Information Commission, 35 Conn.Sup. 186, 188-89, 402 A.2d 1197 (1979).

The state argues for a more demanding test in granting a stay, such as that developed by the federal courts in appeals arising under the federal administrative procedure act. Hamlin Testing Laboratories, Inc. v. United States Atomic Energy Commission, 337 F.2d 221, 222 (6th Cir.1964); Virginia Petroleum Jobbers Assn. v. FPC, 259 F.2d 921, 925 (D.C.Cir.1958). This standard for a stay was applied in another trial court decision, Waterbury Hospital v. Commission on Hospitals & Health Care, 30 Conn.Sup. 352, 354-55, 316 A.2d 787 (1974). The federal standard focuses upon (1) the likelihood that the appellant will prevail; (2) the irreparability of the injury to be suffered from immediate implementation of the agency order; (3) the effect of a stay upon other parties to the proceeding; and (4) the public interest involved. ² These concerns are not incompatible with the "balancing of the equities" test used by the trial court. The particular factors specified in the federal standard undoubtedly warrant consideration by the trial court in the balancing process.

In the analogous situation of a temporary injunction to preserve the status quo until the rights of the parties can be determined after a full hearing on the merits, we have said that "the court is called upon to balance the results which may be caused to one party or the other, and if it appears that to deny or dissolve it may result in great harm to the plaintiff and little to the defendant, the court may well exercise its discretion in favor of granting or continuing it, unless indeed, it is very clear that the plaintiff is without legal right." (Emphasis added.) Olcott v. Pendleton, 128 Conn. 292, 295, 22 A.2d 633 (1941). This criterion necessarily requires consideration of the probable outcome of the litigation. Decisions of our trial courts have frequently referred to the burden of an applicant to show a reasonable degree of probability of success before a...