Benefis Healthcare v. Great Falls Clinic

• Citation: 146 P.3d 714,2006 MT 254,334 Mont. 86
• Decision Date: 04 October 2006
• Docket Number: No. DA 06-0240.,DA 06-0240.
• Court: Montana Supreme Court
• Parties: BENEFIS HEALTHCARE, a Montana not-for-profit corporation, Plaintiff and Appellant, v. GREAT FALLS CLINIC, LLP, a Montana limited liability partnership; Essentia Health, a multistate not-for-profit health care system; Central Montana Surgery Center, Inc., a Montana corporation, d/b/a Central Montana Surgical Hospital; Harold Poulsen, an individual; and Montana Department of Public Health and Human Services, an administrative agency of the State of Montana, Defendants and Respondents.

146 P.3d 714

2006 MT 254

334 Mont. 86

BENEFIS HEALTHCARE, a Montana not-for-profit corporation, Plaintiff and Appellant, v. GREAT FALLS CLINIC, LLP, a Montana limited liability partnership; Essentia Health, a multistate not-for-profit health care system; Central Montana Surgery Center, Inc., a Montana corporation, d/b/a Central Montana Surgical Hospital; Harold Poulsen, an individual; and Montana Department of Public Health and Human Services, an administrative agency of the State of Montana, Defendants and Respondents.

No. DA 06-0240.

Supreme Court of Montana.

Submitted on Briefs June 20, 2006.

Decided October 4, 2006.

For Appellant: James H. Goetz, J. Devlan Geddes and Trent M. Gardner, Goetz, Gallik & Baldwin, P.C., Bozeman, Montana, Keith R. Anderson and Michael E. Barry, Gardner, Carton & Douglas, Chicago, Illinois.

For Respondents: Jon J. Kudrna and Robert B. Pfennigs, Jardine, Stephenson, Blewett & Weaver, Great Falls, Montana (Great Falls Clinic and Central Montana Surgery Center), Gregory G. Smith, Smith, Oblander & Mora, Great Falls, Montana (Essentia), Mark A. Jacobson, Lindquist & Vennum, Minneapolis, Minnesota (Essentia), Richard F. Gallagher, Gregory R. Schwandt and Glenn E. Tremper, Church, Harris, Johnson & Williams, P.C., Great Falls, Montana (Poulsen), Russell E. Cater and Lisa Swanson, Department of Public Health and Human Services, Helena, Montana.

For Amicus Curiae: J. Daniel Hoven, Mark R. Taylor and Daniel J. Auerbach, Browning, Kaleczyc, Berry & Hoven, P.C., Helena, Montana (Montana Hospital Association).

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Benefis Healthcare (Benefis) appeals the order denying its request for a preliminary injunction against the Respondents entered in the Eighth Judicial District Court, Cascade County. We affirm.

¶ 2 We consider the following issue on appeal:

¶ 3 Did the District Court manifestly abuse its discretion by denying Benefis's request for a preliminary injunction?

BACKGROUND

¶ 4 Benefis is a non-profit corporation operating a hospital comprised of two campuses in Great Falls. In total, the hospital has 502 beds, and it serves as the regional referral center for an area of 45,000 square miles. Benefis was formed in 1996 by the merger of Columbus Hospital and the Montana Deaconess Medical Center, and it operates under the terms and conditions of a Certificate of Public Advantage issued by the Montana Department of Justice (DOJ). Benefis may not terminate or reduce any services that were provided by the two constituent hospitals prior to the merger without approval from DOJ. The hospital enjoys designation as the sole community hospital for purposes of Medicare and Medicaid.

¶ 5 Central Montana Surgery Center, Inc. (doing business as Central Montana Surgical Hospital and as Central Montana Hospital) (CMSH), operates a twenty-bed hospital in Great Falls pursuant to hospital licensing originally obtained in October 2002. Harold L. Poulsen, a businessman, owns the facility in which CMSH operates, and he leases it to CMSH. At the time of the District Court's order denying the preliminary injunction, Poulsen also owned 74 percent of the stock of CMSH; the balance of the shares were owned by fourteen other individuals, some of whom are physicians.

¶ 6 Great Falls Clinic, LLP (Clinic), is a multi-specialty medical group in Great Falls that is owned by its physicians. Essentia Health (Essentia) is a non-profit multi-state health care system operating several hospitals, clinics, and long-term care facilities. The Clinic and Essentia have formed a joint venture, Montana Health Partners, LLC (Clinic/Essentia), in which each has a 50 percent stake.

¶ 7 On January 25, 2006, the Clinic announced plans to "acquire the Central Montana Surgical Hospital in partnership with Essentia Health." Benefis filed a complaint in the District Court on January 31, 2006, alleging that the proposed transaction would change the ownership of CMSH or of its hospital license and that such a change is prohibited under § 50-5-201, MCA (prohibiting transfer of hospital licenses), and § 50-5-245, MCA (placing a moratorium on the issuance of hospital licenses to "specialty" hospitals until July 1, 2007). In its complaint Benefis requested preliminary and permanent injunctive relief that would prevent any change in ownership of CMSH unless CMSH surrendered its hospital license. Concurrent with the filing of its complaint, Benefis filed a motion for a temporary restraining order and a preliminary injunction requesting the same relief as in its complaint. Later that day, the District Court granted the temporary restraining order.

¶ 8 After the issuance of the temporary restraining order, CMSH relinquished its old license and applied for a new hospital license to be used by CMSH after Clinic/Essentia purchased CMSH's stock. In its application process, CMSH informed Roy Kemp (Kemp), the Licensing Bureau Chief for Health Care Facilities at the Department of Public Health and Human Services (DPHHS), that after the transaction it would be operating the hospital as a "general" hospital, not as a "specialty" hospital. Kemp testified at a March 9, 2006, hearing on the motion for the preliminary injunction that he had not received a request for a hospital application since before the state moratorium on specialty hospitals had come into effect in 2005, so he altered the application form to reflect the new requirements. DPHHS issued a provisional license to CMSH under the assumed business name Central Montana Hospital on February 10, 2006.

¶ 9 Benefis subsequently amended its complaint, requesting that the District Court void the new license and require DPHHS to institute a process for determining whether a license applicant is a specialty hospital. In addition, Benefis prayed that the District Court direct that the public be allowed to participate in licensing decisions that are of significant interest to the public. In an order dated March 23, 2006, the District Court denied the motion for a preliminary injunction and dissolved the temporary restraining order.

¶ 10 Shortly after the District Court issued its order denying the preliminary injunction, Clinic/Essentia purchased all of the outstanding shares of CMSH from Poulsen and the other shareholders. Benefis appeals the District Court's order denying its motion for a preliminary injunction.

STANDARD OF REVIEW

¶ 11 Valley Christian School v. High School, 2004 MT 41, ¶ 5, 320 Mont. 81, ¶ 5, 86 P.3d 554, ¶ 5, described the relevant standard of review:

In reviewing an order granting or denying a preliminary injunction we determine whether the district court committed a manifest abuse of its discretion. Shammel v. Canyon Resources Corp., 2003 MT 372, ¶ 12, 319 Mont. 132, ¶ 12, 82 P.3d 912, ¶ 12. A manifest abuse of discretion is one that is obvious, evident or unmistakable. Shammel, ¶ 12. However, where the district court denies injunctive relief based on conclusions of law, no discretion is involved, and we review the conclusions of the law to determine whether they are correct. Hagener v. Wallace, 2002 MT 109, ¶ 12, 309 Mont. 473, ¶ 12, 47 P.3d 847, ¶ 12.

DISCUSSION

¶ 12 Did the District Court manifestly abuse its discretion by denying Benefis's request for a preliminary injunction?

¶ 13 A district court's refusal to grant an injunction is an appealable order. M.R.App. P. 1(b)(2). Section 27-19-201, MCA, governs when a preliminary injunction may be granted:

An injunction order may be granted in the following cases:

(1) when it appears that the applicant is entitled to the relief demanded and the relief or any part of the relief consists in restraining the commission or continuance of the act complained of, either for a limited period or perpetually;

(2) when it appears that the commission or continuance of some act during the litigation would produce a great or irreparable injury to the applicant;

(3) when it appears during the litigation that the adverse party is doing or threatens or is about to do or is procuring or suffering to be done some act in violation of the applicant's rights, respecting the subject of the action, and tending to render the judgment ineffectual;. . . .

¶ 14 In Porter v. K & S Partnership, 192 Mont. 175, 181, 627 P.2d 836, 839 (1981), this Court elaborated that:

An applicant for a preliminary injunction must establish a prima facie case, or show that it is at least doubtful whether or not he will suffer irreparable injury before his rights can be fully litigated. If either showing is made, then courts are inclined to issue the preliminary injunction to preserve the status quo pending trial. Rea Bros. Sheep Co. v. Rudi (1912), 46 Mont. 149, 160, 127 P. 85, 87.

"Status quo" has been defined as follows:

"`. . . the last actual, peaceable, noncontested condition which preceded the pending controversy ...'" State v. Sutton (1946) [(1940)], 2 Wash.2d 523, 98 P.2d 680, 684; State v. Oldham (1978), 283 Or. 511, 584 P.2d 741, 743. See also 40 Words and Phrases, "Status Quo".

In addition, "it is the court's duty to minimize the injury or damage to all parties to the controversy." Porter, 192 Mont. at 182, 627 P.2d at 840.

¶ 15 Benefis makes a threefold argument, which we have reordered here for convenience. First, Benefis asserts that CMSH historically has been a specialty hospital as that term is defined in § 50-5-245, MCA, which incorporates the definition from 42 U.S.C. § 1395nn (the Stark Act). According to Benefis, CMSH was a "grandfathered" specialty hospital, but CMSH would have lost its grandfathered status at the time physician ownership of CMSH increased as a result of the purchase of shares by the physician-owned Clinic (via its joint venture with Essentia).¹ Because there is a moratorium on the issuance of licenses to specialty hospitals, and Benefis asserts that CMSH is such, Benefis thus claims that the new license is invalid.

¶ 16 Second, Benefis argues that, absent a...