Cleveland Clinic Florida Hosp. v. Agency for Health Care Admin., 95-4368

• Decision Date: 04 September 1996
• Docket Number: No. 95-4368,95-4368
• Citation: 679 So.2d 1237
• Parties: 21 Fla. L. Weekly D2002 CLEVELAND CLINIC FLORIDA HOSPITAL d/b/a Cleveland Clinic Hospital, A Not For Profit Corporation, Petitioner, v. AGENCY FOR HEALTH CARE ADMINISTRATION; South Broward Hospital District d/b/a Memorial Regional Hospital d/b/a Memorial Hospital Pembroke; Columbia Hospital Corporation of South Broward d/b/a Westside Regional Medical Center; Community Hospitals of Galen, Inc. d/b/a Pompano Beach Medical Center; and Eleanor Hunter, Hearing Officer, Respondents.
• Court: Florida District Court of Appeals

Page 1237

679 So.2d 1237

21 Fla. L. Weekly D2002

CLEVELAND CLINIC FLORIDA HOSPITAL d/b/a Cleveland Clinic Hospital, A Not For Profit Corporation, Petitioner, v. AGENCY FOR HEALTH CARE ADMINISTRATION; South Broward Hospital District d/b/a Memorial Regional Hospital d/b/a Memorial Hospital Pembroke; Columbia Hospital Corporation of South Broward d/b/a Westside Regional Medical Center; Community Hospitals of Galen, Inc. d/b/a Pompano Beach Medical Center; and Eleanor Hunter, Hearing Officer, Respondents.

No. 95-4368.

District Court of Appeal of Florida First District.

Sept. 4, 1996.

Rehearing Denied Oct. 16, 1996.

John R. Beranek, C. Gary Williams and Stephen C. Emmanuel of Ausley & McMullen, Tallahassee, Robert A. Weiss of Parker, Hudson, Rainer & Dobbs, Tallahassee, for Petitioner.

Lesley Mendelson, Tallahassee, for Agency for Health Care Administration.

R. Terry Rigsby, Geoffrey D. Smith, Wendy A. Delvecchio of Blank, Rigsby & Meenan, Tallahassee, Clarke Walden, General Counsel, Memorial Hospital, Hollywood, for South Broward Hospital District.

Stephen A. Ecenia, R. Davis Pescott of Rutledge, Ecenia, Underwood, Purnell & Hoffman, Tallahassee, for Columbia Hospital Corporation of South Broward and Community Hospitals of Galen, Inc.

SMITH, Senior Judge.

Cleveland Clinic Hospital (Cleveland) petitions for review of nonfinal orders of the Division of Administrative Hearings (DOAH), and of the Agency for Health Care Administration (AHCA). The ultimate issue we must decide is whether Cleveland's certificate of need (CON) application filed with AHCA, for approval of capital expenditures to relocate and rebuild its 150-bed acute care hospital at a new location within the same health care service district, is subject only to expedited, non-comparative review by AHCA, without participation of intervenors. We find that Cleveland is entitled to expedited, non-comparative review, and therefore reverse AHCA's order requiring Cleveland's application to undergo batched, comparative review.

Prompted by the threat of hurricanes and the age-related deterioration of the physical plant on the Atlantic Coast in Ft. Lauderdale, Cleveland made the decision to relocate the hospital by building a new facility near the City of Weston, in the southwestern quadrant of the inhabited portion of Broward County. Pursuant to agency rules and prior interpretations of the governing statutes found in Chapter 408, Florida Statutes, AHCA determined that Cleveland's application was complete, and issued its state agency action report (SAAR) preliminarily denying the application for reasons not relevant to the issues presented in this appeal. Significantly, AHCA acknowledged in its report that the proposed project involved a replacement facility, with no change in the licensed bed capacity, and no new services subject to CON review; and that the project was "not driven by a fixed need pool." AHCA also admitted in proceedings below that Cleveland's application was not subjected to the requirements of section 408.039(1) and (2), Florida Statutes, and that it was not comparatively reviewed against any other pending applications. Upon being advised of the denial of its application, Cleveland sought a formal administrative hearing, and its petition was referred to a DOAH hearing officer.

Respondents, South Broward Hospital District (South Broward), Columbia Hospital Corporation of South Broward (Columbia Hospital), and Community Hospitals of Galen (Community Hospitals), own and operate hospitals in Service District 10, which encompasses Broward County. Subsequent to the filing of Cleveland's application, South Broward and Community Hospitals filed applications for CONs for additions to or replacement of hospital facilities. South Broward sought the addition of up to 35 acute care beds at its Memorial Hospital West. Community Hospitals applied for a CON to replace its existing Pompano Beach Medical Center with a new facility to be constructed in western Broward County. South Broward and Community Hospitals filed petitions to intervene in Cleveland's DOAH hearing, and sought remand to AHCA for comparative review of Cleveland's application. Columbia Hospital also sought intervention, contending that its Westside Regional Medical Center would be substantially affected by approval of Cleveland's application.

In a two-page order, issued following a non-evidentiary hearing, the DOAH hearing officer summarily granted the respondent hospitals' petitions to intervene and remanded the cause to AHCA for comparative review, citing as authority Sarasota County Public Hospital Board v. Department of Health and Rehabilitative Services, 553 So.2d 189 (Fla. 2d DCA 1989).

Cleveland timely filed in this court its petition for review of nonfinal agency action, and, alternatively, for issuance of a writ of mandamus directed to the hearing officer's order. This Court issued its order to show cause, to which AHCA responded, requesting that the agency be afforded an opportunity to act on the hearing officer's order. Acceding to this request, this Court entered an order relinquishing jurisdiction to AHCA for a period of 30 days.

On remand, AHCA invited the parties to submit proposed orders, then entered the order under review, announcing its intention to review Cleveland's application on a comparative basis along with the applications of South Broward and Community Hospitals. After a case management conference, Cleveland Clinic was ordered by this Court to file its consolidated and amended petition addressing all issues raised by the orders of the hearing officer and AHCA.

Cleveland first contends that the hearing officer's order granting intervention and remanding to AHCA for comparative review was beyond the hearing officer's jurisdiction and in violation of section 408.039(5)(b), Florida Statutes, as well as established agency rules and judicial precedent. As to this issue, we agree with Cleveland's suggestion that it has largely been mooted by this Court's action in relinquishing jurisdiction to AHCA for entry of an order regarding Cleveland's entitlement to expedited review. We find it unnecessary, therefore, to dwell on this procedural aspect of the case, and will proceed to address AHCA's order on its merits.

We begin by observing that AHCA's interpretation of the statutes governing its actions in this proceeding, as reflected in the order under review, represents a radical turnabout from its prior interpretations and practices. AHCA's order itself acknowledges that "the issues raised in the instant case prompted re-examination of the agency's prior interpretation of its governing statutes with regard to replacement hospitals...." During oral argument before this Court counsel for the agency candidly stated that AHCA had "changed its mind."

In the order under review AHCA proceeds in an orderly fashion to recite and interpret the key statutory provisions. Under section 408.032(1), Florida Statutes, the term "capital expenditure" is defined to include the "replacement" of the plant and equipment of a health care facility. The order states, in substance, that because of the broad wording of the statute, "merely defining a proposed project as a capital expenditure does not set it apart from those projects which are subject to batched, comparative review." ¹

The order then turns to section 408.036(1)(c), which provides, in part, for CON review of "[a] capital expenditure of $1 million or more by or on behalf of a health care facility ... for a purpose directly related to the furnishing of health services at such facility...." (Emphasis added.) However, the order declares that in order to be reviewable solely on the basis of this subsection, the capital expenditure must relate to an expenditure "at the existing health care facility." (Emphasis added.) AHCA's order concludes that a proposal to construct a replacement hospital at a new location is subject to comparative review because it does not fall within the express condition of section 408.036(1) that the proposed project be accomplished at the location of the existing hospital. AHCA's order further finds this interpretation consistent with the limitation on standing found in section 408.039(5)(b), which denies standing to health care providers to intervene in an administrative proceeding which is subject to CON review "solely on the basis of section 408.036(1)(c)."

The primary focus of Cleveland's attack on the agency's interpretation--an interpretation vigorously defended by all respondents in this proceeding--is that it is totally at odds with that interpretation previously adopted by the agency in prior proceedings, as most notably evidenced by the decisions in Venice Hospital, Inc. v. Department of Health and Rehabilitative Services, 414 F.A.L.R. 1220 (DOAH October 31, 1990), and in HCA Health Services of Florida, Inc. v. Department of Health and Rehabilitative Services, 599 So.2d 211 (Fla. 1st DCA 1992), rev. denied, 613 So.2d 5 (Fla.1992). In Venice Hospital, a DOAH hearing officer found valid proposed rule 10-5.004(2)(g) (now rule 59C-1.004(2)(f)) making capital expenditure projects subject to expedited review. In so ruling, the hearing officer adopted proposed findings submitted by HRS including, in substance, a finding that an application to relocate a hospital is considered a capital expenditure and held that pursuant to section 381.709(5)(b) [now 408.036(5)(b) ], competitors do not have standing to challenge a proposed capital expenditure; that only when a replacement facility would involve no new beds or changed bed use, involve no substantial change in services, and involve no substantial change in service area would HRS consider such an application to be solely reviewable as a capital expenditure and thus entitled to expedited review; and that replacement facility applications typically involve a determination not of whether...