Huron Valley Hospital, Inc. v. Michigan State Health Facilities Commission
| Citation | 312 N.W.2d 422,110 Mich.App. 236 |
| Decision Date | 07 October 1981 |
| Docket Number | Docket No. 57144 |
| Parties | HURON VALLEY HOSPITAL, INC., a Michigan nonprofit corporation, Petitioner-Appellee, v. MICHIGAN STATE HEALTH FACILITIES COMMISSION, an agency of the executive branchof the government of the State of Michigan, Respondent-Appellant. 110 Mich.App. 236, 312 N.W.2d 422 |
| Court | Court of Appeal of Michigan (US) |
[110 MICHAPP 238] Schlussel, Lifton, Simon, Rands, Kaufman, Lesinski & Jackson by T. John Lesinski
and James C. Foresman, Southfield, for petitioner.
Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., and Walter V. Kron and Marvin L. Bromley, Asst. Attys. Gen., for respondent.
Zweig, Harkness & Kaser, P. C. by David L. Kaser and Gale Shiener, Southfield, for Intern. Union, United Auto., Areospace and Agr. Workers of America, Michigan Ass'n of [110 MICHAPP 239] Health Systems Agencies, Chrysler Corp., Ford Motor Co., General Motors Corp., and Blue Cross, Blue Shield of Michigan, for amici curiae.
Before V. J. BRENNAN, P. J., and KAUFMAN and BORRADAILE, * JJ.
Respondent (hereinafter defendant) appeals by right the decision of the circuit court reversing defendant's denial of petitioner's (hereinafter plaintiff) application for a certificate of need to build a hospital and directing the Department of Public Health (hereinafter "department") to issue the requested certificate of need.
Plaintiff, Huron Valley Hospital, Inc., is a Michigan nonprofit corporation organized for the purpose of constructing a hospital in western Oakland County. To do so, it is required by law to have a certificate of need "which documents a demonstrated need and grants permission for the proposed project". 1972 P.A. 256 (hereinafter "act 256"), § 4.
Plaintiff filed an application for a certificate of need with the Department of Public Health on February 10, 1977. Plaintiff sought to build a 153-bed, acute-care facility in Commerce Township, Oakland County. Of the 153 beds, plaintiff proposed to build 13 obstetrical beds, 12 pediatric beds, 3 intensive-care beds, and 3 cardiac-care beds. Plaintiff proposed to offer medical-surgical, [110 MICHAPP 240] obstetric, pediatric, intensive and cardiac care, laboratory, radiology, emergency, and pharmacy services. In its application, plaintiff proposed a cost of $14.789 million; plaintiff's expert at the administrative hearing testified that the cost would be $18.8 million.
Plaintiff was required, at the same time, to file its application with the local health facilities planning agency by § 6 of Act 256. This agency was the Comprehensive Health Planning Council for Southeastern Michigan (hereinafter "CHPC-SEM"). CHPC-SEM was also required by Federal law, P.L. 93-641, 42 CFR 122.301, to review the application. Recommendations adverse to plaintiff's application were made by the CHPC-SEM's Oakland County Subarea Advisory Council and Plan Implementation Committee. The council's executive committee recommended that the Department of Public Health deny the application.
Having received this recommendation, which in no way was binding upon him, the Director of the Department denied the application. Pursuant to § 8 of Act 256, plaintiff appealed the denial to the defendant, Michigan State Health Facilities Commission (hereinafter "commission"). This appeal was heard de novo and was subject to the contested case provisions of the Michigan Administrative Procedures Act of 1969. M.C.L. § 24.201 et seq.; M.S.A. § 3.560(101) et seq. Decisions of the Commission are binding upon the Department. Decisions adverse to an applicant can be appealed to the circuit court.
The Commission appointed an independent hearing examiner to take evidence and to make proposed findings of fact and conclusions of law. The hearing examiner, Don P. LeDuc, recommended denying the application. Both parties filed exceptions[110 MICHAPP 241] to his findings. After allowing written and oral argument, the Commission denied the appeal. Plaintiff appealed the denial to the circuit court, which reversed the decision of the Commission and ordered the Department to grant the requested certificate of need.
A key element in the circuit court's decision was the treatment of the application for a certificate of need by Pontiac General Hospital. Both Pontiac General and plaintiff's proposed hospital were located within health facilities service area 76, as defined by the Michigan State Plan for Health and Medical Facilities Construction, 1975-1976. Plaintiff filed its notice of intent to apply for a certificate of need for its proposed 153-bed facility on or about April 5, 1976. On July 30, 1976, the Department issued Pontiac General Hospital a provisional license pursuant to § 6 of 1968 P.A. 17, then M.C.L. § 331.416; M.S.A. § 14.1179(6). A provisional license may be issued under the act "to an applicant whose services are needed in the community but who is temporarily unable to comply with all the rules and regulations relating to the physical plant". Plaintiff's application was completed and ready for review on February 10, 1977. On June 20, 1977, the Director of the Department denied plaintiff's application; the reasons for the decision were issued July 5, 1977. On June 27, 1977, Pontiac General had filed a notice of intent to request a certificate of need for a new hospital building. Pontiac General proposed to abandon its old inpatient facility and construct an entirely new one, for which a certificate of need was required. On September 6, 1977, plaintiff requested a contested case hearing before the Commission, seeking to reverse the denial by the Director of the Department. On December 8, 1977, the Pontiac General [110 MICHAPP 242] application was completed and filed. On January 12, 1978, CHPC-SEM recommended approval of the Pontiac General application. On February 1, 1978, plaintiff filed suit against the Department seeking to enjoin it from issuing a certificate of need to Pontiac General Hospital. On March 22, 1978, the circuit court enjoined the Department from issuing the certificate to Pontiac General. This injunction was dissolved August 25, 1978, and the dissolution was appealed to this Court, which affirmed. Huron Valley Hospital, Inc. v. Dep't of Public Health, 92 Mich.App. 175, 284 N.W.2d 758 (1979). On August 25, 1978, the date the preliminary injunction was dissolved, the Department approved Pontiac General's application for a certificate of need.
On appeal, defendant contends that the circuit court erred in its dual finding that the utilization by the Department of unpromulgated criteria which gave specific preference to existing facilities was both an abuse of discretion and exceeded the agency's statutory authority.
In the instant case, the Commission found and justified the application of the following unpublished criteria which led to the disparate treatment of plaintiff's and Pontiac General Hospital's certificate of need.
The Commission found:
"In conjunction with the discharge of their duty to administer Acts 256 and 299, the Director and the Department have been continuously guided by three specific criteria in the evaluation of certificate of need applications: (1) no new beds will be constructed in a service area which is classified as overbedded by the State Plan; (2) the highest priority will be granted to existing facilities seeking a certificate of need to modernize or correct licensing deficiencies; and (3) the statute[110 MICHAPP 243] would be utilized to remove existing beds from line only in the most extreme circumstances."
The Commission acknowledged that the criteria never had been set forth in any written rule, regulation, guideline, or publication nor had the Department taken any action to notify prospective applicants of the criteria. Nevertheless, the Commission justified the criteria on the basis that it was inherent to the statute.
The circuit court, however, disagreed. Rather, it held that the utilization by the Department of criteria which give preference to existing facilities was both an abuse of discretion and exceeded statutory authority. The pertinent section of the statute M.C.L. § 331.454; M.S.A. § 14.1179(54) mandates that "(t)he director shall promulgate rules, after prior consultation with local and regional health planning agencies and the concurrence of the state comprehensive health planning advisory council, subject to the approval of the commission, in accordance with and subject to Act No. 306 of the Public Acts of 1969, as amended, (Administrative Procedures Act of 1969) being sections 24.201 to 24.315 of the Compiled Laws of 1948, to provide for the issuance of certificates of need". Under the Administrative Procedures Act of 1969, the Department, a state agency, is required to promulgate, process, and publish all its rules and regulations so as to limit its exercise of absolute, uncontrolled discretion in its issuance of certificates of need. M.C.L. § 331.454; M.S.A. § 14.1179(54); M.C.L. § 24.201 et seq.; M.S.A. § 3.560(101) et seq. Allos v. Liquor Control Comm., 97 Mich.App. 44, 294 N.W.2d 241 (1980), Mallchok v. Liquor Control Comm., 72 Mich.App. 341, 249 N.W.2d 415 (1976).
We therefore find that the Department's use of unpromulgated criteria and the Commission's affirmance[110 MICHAPP 244] of the use of the criteria in evaluating the issuance of certificates of need is in violation of the statutory procedural limitations in applying their discretion, i. e., promulgating policies into agency rules and regulations. Hence, the denial of the certificate of need was invalid.
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