Howe v. Health Facilities Appeals Bd.

• Decision Date: 08 August 1985
• Citation: 481 N.E.2d 510,20 Mass.App.Ct. 531
• Parties: June HOWE et al. 1 v. HEALTH FACILITIES APPEALS BOARD et al. 2
• Court: Appeals Court of Massachusetts

Page 510

481 N.E.2d 510

20 Mass.App.Ct. 531

June HOWE et al. ¹ v. HEALTH FACILITIES APPEALS BOARD et al. ²

Appeals Court of Massachusetts Suffolk.

Argued June 7, 1985.

Decided Aug. 8, 1985.

Paul R. Collier, III, Boston, for plaintiffs.

Ellen Janos, Asst. Atty. Gen., (Madeline Mirabito Becker, Asst. Atty. Gen., with her), for Health Facilities Appeals Board.

Harvey W. Freishtat, Boston (Peter R. Leone, Boston, with him), for New England Baptist Hospital.

Before KASS, CUTTER and FINE, JJ.

FINE, Justice.

This case arises under G.L. c. 111, §§ 25B-25G, inserted by St.1972, c. 776, § 3, the statute popularly known as the determination of need law. The statute requires that any substantial capital expenditure for construction or renovation, or any substantial change in services, by a health care facility be preceded by a determination of need for such by the Department of Public Health (department). The purpose of the statute (to control the unnecessary expansion by health care institutions of their patient care facilities), its relevant legislative history, and some helpful guidance in its interpretation are set forth in Brookline v. Medical Area Serv. Corp., 8 Mass.App. 243, 249-259, 392 N.E.2d 1070 (1979). Specifically, with some significance for the instant case, health care facilities are to be allowed "some degree of flexibility in determining their operational necessities--albeit under the department's watchful eye," "the department's role" is "a major one ... in defining the contours of the statute," and the department's conclusion as to which projects require determinations of need are entitled to "particular deference." Id. at 253, 254, 259, 392 N.E.2d 1070. See also Lahey Clinic Foundation, Inc. v. Health Facilities Appeals Bd., 376 Mass. 359, 380 N.E.2d 675 (1978); Wing Memorial Hosp. v. Department of Pub. Health, 10 Mass.App. 593, 410 N.E.2d 729 (1980); Shoolman v. Health Facilities Appeals Bd., 10 Mass.App. 799, 802-803, 806, 413 N.E.2d 742 (1980); Adam v. Department of Pub. Health, 15 Mass.App. 906, 443 N.E.2d 414 (1982); Gerte v. Department of Pub. Health, 18 Mass.App. 901, 462 N.E.2d 1112 (1984). Not discussed in the Brookline case, and not discussed at length elsewhere, is the standard of judicial review applicable to an administrative decision on a determination of need application.

On September 9, 1981, the New England Baptist Hospital filed an application with the department for a determination of need for a project involving renovation and new construction. In accordance with G.L. c. 111, § 25C, and 105 Code Mass.Regs. §§ 100.500 et seq. (1980), a review process was undertaken by the department and several other agencies. Pursuant to § 25C, various separate groups of ten taxpayers, including the plaintiffs, Back of the Hill Ten Taxpayer Group (Back of the Hill), participated in the administrative proceedings before the department. On August 18, 1982, the department ³ held a public hearing, and on December 21, 1982, the department voted its partial approval of the application. On March 10, 1983, the department issued a decision in writing, with reasons.

Back of the Hill filed an appeal under G.L. c. 111, § 25E, with the Health Facilities Appeals Board (board). ⁴ The board considered the record compiled by the department and written and oral arguments from the parties, including Back of the Hill, but declined to hold an evidentiary hearing. On June 24, 1983, the board issued a decision finding "no abuse of discretion or failure to follow required procedures," thereby upholding the department's determination of need.

In this action against the board, Back of the Hill sought judicial review of the board's decision. The hospital intervened as a defendant. A Superior Court judge affirmed the decision of the board, ruling that the court was required under the statute to determine only whether the board's decision was arbitrary or capricious, not whether it was based upon substantial evidence. The judge ruled, however, that even if a substantial evidence standard applied, the decision satisfied that test.

On appeal, Back of the Hill argues, first, that a substantial evidence test for judicial review applied and that the board's decision was not supported by substantial evidence in the record, and, second, that, as a matter of law, the board erroneously excluded from its consideration the cost of establishing an arthritis center and a heart center and the cost of renovating the Brigham East Wing to relocate the heart center.

1. Scope of judicial review. The hospital and the board contend that the board's decision should be judicially reviewed only to determine if it is arbitrary or capricious or an abuse of discretion. Back of the Hill argues that the test is more rigorous, namely, whether the decision is based upon substantial evidence. "The substantial evidence test is commonly understood to require that agency findings must rest upon 'such evidence as a reasonable mind might accept as adequate to support a conclusion.' See, e.g., Bunte v. Mayor of Boston, 361 Mass. 71, 74, 278 N.E.2d 709 (1972). Review under the standard entails scrutiny of the whole record to determine whether substantial evidence exists. See, e.g., Cohen v. Board of Registration in Pharmacy, 350 Mass. 246, 253, 214 N.E.2d 63 (1966)." Boston Edison Co. v. Boston Redevelopment Authy., 374 Mass. 37, 54, 371 N.E.2d 728 (1977). The more deferential "arbitrary or capricious (or the equivalent abuse of discretion) standard" requires only that there be a rational basis for the decision. Attorney General v. Sheriff of Worcester County, 382 Mass 57, 62, 413 N.E.2d 722 (1980). Our reading of the statute convinces us that the Legislature intended to require a court reviewing a decision of the board on a determination of need issue to determine only whether the agency decision was legally infirm because arrived at arbitrarily or capriciously, without observance of procedure required by law, or in violation of applicable provisions of substantive law. We read the decision of the Supreme Judicial Court in Lahey Clinic Foundation, Inc. v. Health Facilities Appeals Board, 376 Mass. at 372, 380 N.E.2d 675, as requiring this conclusion. Compare Shoolman v. Health Facilities Appeals Board, 10 Mass.App. at 803, & 806 n. 17, 413 N.E.2d 742.

Section 25C provides for the first level of administrative review of an application for a determination of need, which takes place before the department. After the filing of an application by the health provider, notice to various agencies, and the opportunity for comment on the proposal, the department must hold a public hearing if requested to do so by the applicant, the State, the appropriate regional comprehensive planning agency, or any group of ten taxpayers. The hearing is not an adjudicatory proceeding (105 Code Mass.Regs. § 100.410 [1983]; see Gerte v. Department of Pub. Health, 18 Mass.App. 901, 903, 462 N.E.2d 1112 [1984] ), and there is no requirement that the agency make findings of fact. Under the eighth paragraph of G.L. c. 111, § 25C (inserted by St.1977, c. 945, § 4), the department's determination must be made "on the written record compiled by the department during its review of the application," as well as applicable criteria, and it must be in writing and set forth reasons.

Section 25E (and regulations 113 Code Mass.Regs. §§ 1.00 et seq. [1978] ) sets forth the procedure for the second level of administrative review and also for judicial review. The second level of review takes place before the board. In its review, the board is restricted to the materials on file with the department. It must decide "whether the determination appealed from was an abuse of discretion, without observance of procedure required by law or in violation of applicable provisions of law." G.L. c. 111, § 25E ⁵, inserted by St.1972, c. 776, § 3. The board may order a hearing on the appeal if it determines that the available written materials are inadequate for the consideration required of it.

The final decision of the board is subject to judicial review under the provisions of G.L. c. 30A, § 14, "to the extent they are not inconsistent with the provisions of [§ 25E]." G.L. c. 111, § 25E. General Laws c. 30A, § 14(7), as appearing in St.1973, c. 1114, § 3, sets forth the basis on which a court may set aside an agency decision. It may do so if the decision is "(a) [i]n violation of constitutional provisions; ... (b) [i]n excess of the statutory authority or jurisdiction of the agency; ... (c) [b]ased upon an error of law; ... (d) [m]ade upon unlawful procedure; ... (e) [u]nsupported by substantial evidence; ... (f) [u]nwarranted by facts found by the court on the record as submitted or as amplified [hereunder] ... in those instances where the court is constitutionally required to make independent findings of fact; or (g) [a]rbitrary or capricious, an abuse of discretion, or otherwise not in accordance with law."

To protect health care provider applicants and the consuming public, whichever in a particular case happens to be the party aggrieved by the board's determination of need decision, the Legislature, rejecting the extremes of both the absence of any judicial review and the award of a trial de novo, sought to impose some intermediate level of judicial scrutiny of the board's decision. The precise issue before us is whether the inclusion of the somewhat more rigorous substantial evidence test in G.L. c. 30A, § 14(7), is "inconsistent with the provisions of [§ 25E]."

The board and the hospital point to a number of factors on the basis of which they urge a finding of inconsistency between the substantial evidence test and § 25E. First, they point to the fact that the agency hearing is not adjudicatory. That alone is not conclusive, however. See Massachusetts Bonding & Ins. Co. v. Commissioner of Ins., 329 Mass. 265, 273, 107 N.E.2d 807 (1952). Second, they point out that determiantion of...