Huron Valley Hospital v. City of Pontiac

• Decision Date: 02 March 1979
• Docket Number: Civ. No. 78-72970.
• Citation: 466 F. Supp. 1301
• Parties: HURON VALLEY HOSPITAL, INC., a Michigan non-profit corporation, Plaintiff, v. CITY OF PONTIAC, a Michigan municipal corporation, City of Pontiac Hospital Building Authority, a municipal corporate entity, Comprehensive Health Planning Council of Southeastern Michigan, a regional health planning agency, North Oakland County Planning Steering Committee, a planning group under the auspices of Greater Detroit Area Hospital Council, Inc., a Michigan corporation, Michigan Department of Public Health, an executive agency of the State of Michigan, Department of Health, Education and Welfare, an executive agency of the federal government, Defendants.
• Court: U.S. District Court — Western District of Michigan

466 F. Supp. 1301

HURON VALLEY HOSPITAL, INC., a Michigan non-profit corporation, Plaintiff, v. CITY OF PONTIAC, a Michigan municipal corporation, City of Pontiac Hospital Building Authority, a municipal corporate entity, Comprehensive Health Planning Council of Southeastern Michigan, a regional health planning agency, North Oakland County Planning Steering Committee, a planning group under the auspices of Greater Detroit Area Hospital Council, Inc., a Michigan corporation, Michigan Department of Public Health, an executive agency of the State of Michigan, Department of Health, Education and Welfare, an executive agency of the federal government, Defendants.

Civ. No. 78-72970.

United States District Court, E. D. Michigan, S. D.

March 2, 1979.

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Donald J. Gasiorek, Lawrence S. Jackier, Southfield, Mich., for plaintiff.

Larry J. Saylor, Detroit, Mich., Samuel Mostkoff, Southfield, Mich., Grady Avant, Jr., Detroit, Mich., William Perrone, Asst. Atty. Gen., Lansing, Mich., Nancy M. Floreen, U. S. Dept. of Justice, Washington, D. C., for defendants.

OPINION AND ORDER GRANTING DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

CORNELIA G. KENNEDY, Chief Judge.

Plaintiff Huron Valley Hospital, Inc. (Huron Valley or plaintiff) is a non-profit organization formed for the purpose of building a new hospital in northwest Oakland County, Michigan. It has filed this action alleging that all defendants with the exception of the Department of Health, Education and Welfare (HEW) have conspired to exclude it from the market of providing hospital facilities and services, in violation of the federal antitrust laws. It seeks treble damages and injunctive relief against all defendants except HEW and declaratory relief against HEW and the Michigan Department of Public Health (MDPH). All defendants have moved to dismiss and in the alternative for summary judgment.

In September, 1976, plaintiff made a combined application to the MDPH for a Certificate of Need under M.C.L.A. § 331.451 et seq., M.S.A. § 14.1179(51) et seq. (the Certificate of Need Act), and for Capital Expenditure Review under 42 U.S.C. § 1320a-1 requesting approval for the construction of a new 153-bed hospital in the western part of Service Area 76 (an administrative area within Oakland County). The Michigan Legislature has established a hospital and medical facilities division within the Michigan Department of Public Health and vested it with various health facilities planning responsibilities.

The Congress has established a "Capital Expenditure Review" program to assure that federal funds appropriated for medicare, medicaid and other federal programs are not used to support unnecessary capital expenditures for health care facilities. This program requires the Secretary of Health, Education and Welfare to enter into an agreement with the governor of a state whereby a state health planning agency is established within the state. MDPH has been designated in accordance with this procedure as the state health planning agency in Michigan. Among other duties it is to review applications from health care providers for proposed capital expenditures to determine whether the proposals are consistent with plans developed pursuant to the Hill-Burton Act (42 U.S.C. § 291 et seq.). The state planning agency is to consider the findings and regulations of the appropriate regional planning agency (42 U.S.C. § 1320a-1(d)(1)(B)(ii)). The regulations of the state planning agency are forwarded to the Secretary of HEW. An applicant receiving an adverse recommendation has the right to an appellate administrative hearing. The governor of each state, subject to the approval of the Secretary of HEW, designates health service areas within a state (42 U.S.C. § 300l(a), § 300l(b)). A Health Systems Agency corresponding to each health service area is to be established pursuant to 42 U.S.C. § 300l-1 and § 300l-4. Defendant Comprehensive Health Planning Counsel of Southeastern Michigan (CHPC-SEM) has been conditionally designated as the health systems agency for a seven-county area which includes Oakland County. It is charged with assembling and analyzing data regarding the health care delivery system in the area, developing a plan outlining regional goals and reviewing and making recommendations to the state planning agency with respect to proposed new institutional health services in its planning area (42 U.S.C. § 300l-2(f)). Only states complying with these requirements may receive federal funding for a wide variety of purposes relating to health care.

In 1972 the Michigan Legislature established the requirement that persons wishing to engage in certain health care facility construction must first obtain a state "Certificate of Need." 1972 P.A. 256 as amended, M.C.L.A. § 331.451-462, M.S.A. § 14.1179(51)-.1179(62). Such a certificate is required for construction where no facility previously existed as well as for replacement of existing health care facilities. In determining whether to issue such certificate the Director of MDPH is to consider the recommendations of the relevant regional planning agency, and both planning agencies are directed to consider a variety of factors set out in the statute. M.C.L.A. § 331.455a, M.S.A. § 14.1179(55a). The Act further provides that:

A Certificate of Need shall be consistent with but need not follow exactly the state plan for hospital and medical facilities construction and the policies and procedures governing the issuance of Certificates of Need required under federal grant-in-aid programs or federal loan guarantee programs. M.C.L.A. § 331.454, M.S.A. § 14.1179(54).

Act 256 further establishes a State Health Facilities Commission within the MDPH, M.C.L.A. § 331.452, M.S.A. § 14.1179(52), and charges that body with advising the Director, M.C.L.A. § 331.453(1), M.S.A. § 14.1179(53)(1). An applicant or the local Health Systems Agency "aggrieved" by a decision of the Director with respect to a Certificate of Need application may request a hearing by the Commission and may appeal a final order of the Commission to the appropriate county circuit court, M.C.L.A. §§ 331.453(2), 331.458, M.S.A. §§ 14.1179(53)(2), 14.1179(58).

The Plan Implementation Committee of the Comprehensive Health Planning Council of Southeastern Michigan, the regional health planning agency under 42 U.S.C. § 300l-1 et seq., reviewed plaintiff's application and recommended denial; the Health Facilities Commission of the MDPH endorsed this recommendation. The MDPH Director then reviewed the application for Certificate of Need and denied it on July 5, 1977. The Director also recommended that the Secretary of HEW deny the application for Capital Expenditure Review, and the Secretary acted in accord with this recommendation. Plaintiff then filed notices of administrative appeals of both denials which contained, inter alia, allegations that the actions of the MDPH were in restraint of trade.

Defendant Pontiac General Hospital (Pontiac or PGH) filed an application for a Certificate of Need and Capital Expenditure Review with MDPH on December 1, 1977. MDPH has identified many deficiencies in the existing physical plant of Pontiac General and if these deficiencies are not remedied it cannot continue to be licensed to operate under 1968 P.A. 17, M.C.L.A. § 331.411 et seq., M.S.A. § 14.1179(1) et seq. The application for Certificate of Need and Capital Expenditure Review submitted by Pontiac General Hospital seeks the necessary state and federal approval for a replacement-renovation of the existing hospital. This replacement-renovation would reduce the number of medical-surgical beds from 383 to 350 and would correct existing defects in the physical plant in order to insure continued full licensing under Act 17. It is proposed that the construction program be financed through a combination of general obligation bonds of the City of Pontiac and revenue bonds of the State of Michigan Hospital Building Authority.

Pontiac's application was submitted to CHPC-SEM for review; the CHPC-SEM Plan Implementation Committee recommended approval and CHPC-SEM endorsed this recommendation on January 12, 1978. MDPH in turn recommended that the Secretary of HEW approve Pontiac's Capital Expenditure Review, and the Secretary issued his approval.

On February 4, 1978, plaintiff filed a complaint in the Oakland County Michigan Circuit Court seeking immediate judicial relief and alleging, inter alia, that its administrative appeal was futile and that the imminent approval by MDPH of Pontiac's Certificate of Need application would moot the issues raised in its appeal. Plaintiff also alleged that the administrative actions were in restraint of trade and tended to create a monopoly. The Oakland County Circuit Court entered a preliminary injunction restraining the grant of Pontiac's application for a Certificate of Need. However, that court dismissed the remaining counts of plaintiff's complaint, including those alleging monopoly and restraint of trade, holding that plaintiff had failed to exhaust its administrative remedies and that all of these claims "can be heard and determined in said administrative proceedings." The Circuit Court initially retained jurisdiction of the action to preserve its preliminary injunction and to permit plaintiff to appeal (pursuant to Michigan's Certificate of Need Act) any final adverse administrative decision. The Oakland Circuit Court concluded on August 25, 1978 that since Pontiac's financial capability to construct the proposed replacement-renovation would be jeopardized if the Certificate of Need were not issued it would suffer immediate and irreparable harm if the preliminary injunction were allowed to remain in effect. The court therefore dissolved the preliminary injunction and certified its decision as final. Pontiac's Certificate of Need was then approved by MDPH. Plaintiff filed a timely notice of appeal to the Michigan...