Appeal of Banks, 52669

• Decision Date: 17 July 1981
• Docket Number: No. 52669,52669
• Citation: 230 Kan. 169,630 P.2d 1131
• Parties: In the Matter of the Appeal of Dr. Gilbert BANKS. KANSAS DEPARTMENT OF HEALTH AND ENVIRONMENT, Appellant, v. Dr. Gilbert BANKS, Appellee.
• Court: Kansas Supreme Court

Page 1131

630 P.2d 1131

230 Kan. 169

In the Matter of the Appeal of Dr. Gilbert BANKS KANSAS DEPARTMENT OF HEALTH AND ENVIRONMENT, Appellant, v. Dr. Gilbert BANKS, Appellee.

No. 52669.

Supreme Court of Kansas.

July 17, 1981.

Syllabus by the Court

1. On appeal to a district court from an administrative decision of the Kansas Corporation Commission denying a certificate of need for a proposed new health facility, the district court may not try the case de novo and substitute its judgment for that of the administrative tribunal. The district court is restricted to considering whether, as a matter of law, (1) the administrative tribunal acted fraudulently, arbitrarily, or capriciously, (2) the administrative order is supported by substantial evidence, and (3) the tribunal's action was within the scope of its authority.

2. In reviewing the district court's judgment, an appellate court must first determine whether the district court observed the requirements and restrictions placed upon it and then make the same review of the administrative tribunal's action as does the district court.

3. Substantial evidence is evidence which possesses both relevance and substance, and which furnishes a substantial basis of fact from which the issues can reasonably be resolved. Stated in another way, substantial evidence is such legal and relevant evidence as a reasonable person might accept as being sufficient to support a conclusion.

Emily E. Cameron, Topeka, argued the cause and was on the brief for appellant.

Ron Bodinson, of Balloun & Bodinson, Chartered, Olathe, argued the cause and was on the brief for appellee.

Richard J. McDonald, of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, was on the brief amicus curiae for Health Systems Agency of Southeast Kansas, Inc.

PRAGER, Justice:

This case involves an administrative determination by the Kansas Department of Health and Environment (KDHE) and the Kansas Corporation Commission (KCC) denying to Dr. Gilbert Banks a certificate of need for a proposed kidney dialysis center in Coffeyville, Kansas. The chronology of events is important and should be briefly stated: On August 27, 1979, Dr. Banks applied to KDHE for the certificate of need. On September 6, 1979, the Cherokee Plains Health Advisory Council recommended by a vote of 19 to 3 that a certificate of need be granted. On September 25, 1979, the Review and Evaluation Committee of the Health Systems Agency of Southeast Kansas, Inc. (HSASEK) by a vote of 6 to 5 recommended denial of the certificate of need. On October 9, 1979, the board of directors of HSASEK by a vote of 18 to 8 recommended that the certificate of need be denied. It adopted the report and recommendations of its Review and Evaluation Committee. On November 21, 1979, the Secretary of KDHE issued an order denying the certificate of need. On December 20, 1979, Dr. Banks appealed to the Kansas Corporation Commission. Hearings were held, and on May 7, 1980, the Kansas Corporation Commission upheld the order of KDHE, holding that there was substantial evidence to support its findings and order. Dr. Banks then appealed to the district court of Montgomery County. On September 20, 1980, the district court, by a comprehensive memorandum decision, ordered KDHE to grant a certificate of need to Dr. Banks for the kidney dialysis center at Coffeyville. The district court found that KDHE's findings, as approved by the KCC, that the proposed center failed to satisfy certain "review criteria" were not supported by substantial evidence. KDHE then took a timely appeal to the appellate courts. The parties on the appeal are KDHE, the appellant, and Dr. Gilbert Banks, the appellee.

We do not deem it necessary to discuss at length the purpose of health facility planning legislation. That was gone into in some depth in Pratt v. Board of Thomas County Comm'rs, 226 Kan. 333, 597 P.2d 664 (1979); Suburban Medical Center v. Olathe Community Hosp., 226 Kan. 320, 597 P.2d 654 (1979); and more recently in State ex rel. Metzler v. St. Francis Hosp. & Medical Center, 227 Kan. 53, 605 P.2d 100 (1980). Suffice it to say, the goals of such legislation and the required procedures for the granting of a certificate of need include the identification and discontinuance of duplicative or unneeded health services and facilities, and the adoption of policies (1) to contain the rapidly rising costs of health care delivery, (2) to insure more appropriate use of health care services, and (3) to promote greater efficiency in the health care delivery system. In accordance with state and federal legislation, HSASEK was designated to conduct health planning for the area which includes Coffeyville, the site of Dr. Banks proposed kidney dialysis center. KDHE is the state agency entrusted with the administration of the Kansas certificate of need program as established by K.S.A. 65-4701 et seq. and 65-4801 et seq. KDHE, acting through its secretary, is required to consider the evaluation and recommendations of the appropriate health systems agency and to make the initial administrative decision as to the need for a proposed new health facility and service.

In considering the need for a project, KDHE must apply certain "interim review criteria" established by the Statewide Health Coordinating Council under the authority granted by K.S.A. 65-4804. The five review criteria or standards to be considered are community need, quality of care, community support, financial feasibility, and cost containment. The evaluation of any proposed health care project against the review standards requires considerable expertise in the field of health care economics. The state agencies which participate in the process are bound by law to attempt to implement the national planning goals of containing rapidly growing costs and avoiding duplicative services. Each "certificate of need" proceeding is an exercise in the inherently inexact science of determining how society's scarce health care resources might best be allocated.

An adverse administrative decision by KDHE may be appealed by an applicant for a certificate of need to the designated review agency, KCC (K.S.A. 65-4809), which is required to make independent findings of fact and determine the issue presented. It may approve or disapprove the decision of KDHE (K.S.A. 65-4814(a)). An adverse decision by the KCC may be appealed to the district court of the county in which the proposed health facility is to be located (K.S.A. 65-4816). As noted above, in this case the applicant-doctor appealed to the KCC which upheld the findings of KDHE. Dr. Banks then appealed to the district court of Montgomery County which, as noted above, set aside the administrative decision of the KCC and ordered that a certificate of need be granted to Dr. Banks.

On appeal to the district court and also on appeal to this court, the standard of review is well established. Neither the district court nor this court on appeal is permitted to try the case de novo and substitute its judgment for that of the highest administrative tribunal, the Kansas Corporation Commission. The district court is restricted to considering whether as a matter of law (1) the administrative tribunal acted fraudulently, arbitrarily, or capriciously, (2) the administrative order is supported by substantial evidence, and (3) the tribunal's action was within the scope of its authority. Olathe Hospital Foundation, Inc. v. Extendicare, Inc., 217 Kan....