In re Parkland Med. Ctr.
| Decision Date | 07 November 2008 |
| Docket Number | No. 2007–800.,2007–800. |
| Citation | 158 N.H. 67,960 A.2d 352 |
| Court | New Hampshire Supreme Court |
| Parties | APPEAL OF PARKLAND MEDICAL CENTER, Derry Medical Center and Catholic Medical Center (New Hampshire Health Services Planning and Review Board). |
Orr & Reno, P.A., of Concord (John A. Malmberg and Jessica E. Storey on the brief, and Mr. Malmberg orally), for the petitioners.
Shaheen & Gordon, P.A., of Concord (Steven M. Gordon and Arpiar G. Saunders, Jr. on the brief, and Mr. Gordon orally), for the respondent.
The petitioners, Parkland Medical Center, Derry Medical Center and Catholic Medical Center, appeal the decision of the New Hampshire Health Services Planning and Review Board (board) that the Elliot Health System (Elliot) is not required to obtain certificate of need (CON) review for the Elliot Medical Center at Londonderry project. See RSA ch. 151–C (2005 & Supp.2008). We affirm.
The record reveals the following. In 2005, Elliot began construction of the Elliot Medical Center at Londonderry. The subject property and building are owned by 40 Buttrick Road, LLC, a wholly-owned affiliate of Elliot. On August 19, 2005, Elliot notified the board of its intent to build a Medical Office Building exempt from CON review pursuant to RSA 151–C: 13 (Supp.2008). The board discussed Elliot's letter, but voted not to take action.
In a petition dated October 4, 2006, Elliot requested a determination that the installation of a third fixed magnetic resonance imaging
(MRI) scanner would not require a CON. At the October 19, 2006 meeting on the petition, Elliot "suggested the facility would be more than a physicians' office building and would include services of a hospital outpatient department." After investigating the use of the Elliot Medical Center, the petitioners requested the board to determine whether the Elliot Medical Center is subject to CON review. The board initiated an informal investigation, and requested an interpretation of RSA 151–C: 13 from the Attorney General. After a hearing on March 15, 2007, the board decided that, with the exception of the "costs associated with Primary Care, Senior Care and Behavioral Health," Elliot Medical Center is subject to CON review. Elliot did not appeal this decision.
The Elliot Medical Center was to be developed in three phases. On July 19, 2007, Elliot filed a petition for determination that Phase I of the project is not subject to CON review (NSR petition). At that time, Phase I had already been completed. Elliot had spent $11,692,411 in construction costs associated with Phase I. Elliot told the board that it intended to sell Phase I to a nonaffiliated third party developer, Anagnost Investments, Inc., at fair market value and then lease it back under an operating lease at fair market value. Elliot maintained that after the lease agreement, Phase I would not be subject to CON review because the applicable costs would be below the statutory threshold amount, here $1,537,744. Elliot stated that the entire facility had been declared a condominium, and Elliot intended to sell Phase I from the condominium to a third-party buyer. The petitioners, who were granted intervenor status, argued that the board had already determined that the building required CON review. The board approved the NSR petition on condition that Elliot submit the condominium declaration, bylaws, appraisal and lease agreement to the board for review. Elliot created the Buttrick Road Medical Condominium and submitted the documents to the board. Elliot and the developer later entered into a purchase and sale agreement transferring the Phase I building (unit 1) for $11.8 million. The petitioners requested reconsideration and rehearing. The requests were denied. This appeal followed.
On appeal, the petitioners argue that the board erred in applying the CON statute for three reasons: (1) the board ignored its unanimous decision on March 15, 2007, that the Elliot Medical Center requires CON review; (2) the board failed to include the operating lease payments in determining whether the costs exceeded the statutory threshold; and (3) the board failed to require a CON for the transfer of ownership.
Appeals from a decision of the board are brought pursuant to RSA 151–C:10 (2005), and are governed by RSA chapter 541 (2007 & Supp.2008). We will affirm the decision of the board unless we find it to be "arbitrary or capricious or not made in compliance with applicable law." RSA 151–C: 10, III; see also RSA 541:13 (2007).
RSA chapter 151–C governs CON review of proposed new institutional health services, a process overseen by the board. RSA 151–C:4 (Supp.2008) states the basic principles:
RSA 151–C:5, II provides a list of "new institutional health services" that require the board to develop standards for the proposed facilities or services, and thus require CON review. See RSA 151–C:2, XXXVI (2005) (a "standard" is "a health policy guideline"). Included within that list are the transfer of ownership of an existing health care facility, see RSA 151–C:5, II(b), and the development of a health care facility requiring a capital expenditure in excess of a set amount, see RSA 151–C:5, II(f)(1). There are, however, facilities and services that are exempt from CON review pursuant to RSA 151–C: 13. In Appeal of Portsmouth Regional Hospital, we stated:
Once the board determines that a project is exempt under one of the provisions of RSA 151–C: 13, the project is not subject to review under the other provisions of RSA chapter 151–C and it becomes unnecessary to determine whether the board would normally be required to develop standards for the institution under RSA 151–C:5, II.
Appeal of Portsmouth Regional Hosp., 148 N.H. 55, 58, 802 A.2d 1175 (2002).
RSA 151–C: 13, I(f) provides that such exemptions include: "Facilities and services which are intended to serve only outpatients and which do not require construction of greater than the appropriate threshold level, as determined under RSA 151–C:5, II(a) or RSA 151–C:5, II(f) or new equipment costing more than $400,000." In determining whether a project is exempt under RSA 151–C:13, I(f), we stated: "It is clear from the statute's plain language that the only consideration in determining whether a facility is excluded from RSA chapter 151–C is whether the construction costs exceed the statutory threshold level." Appeal of Portsmouth Regional Hosp., 148 N.H. at 58, 802 A.2d 1175 (emphasis added). The statutory threshold level is the monetary amount stated in RSA 151–C:5, II, not a calculation of the capital expenditure. Id.
The relevant inflation-adjusted statutory threshold for this project is $1,537,744. Thus, for the project to be exempt from review pursuant to RSA 151–C:5, II(f), the construction costs of the project must be less than $1,537,744. Because the construction costs here are approximately $11,600,000, and exceed the statutory threshold, Elliot is not exempt; therefore, it becomes necessary to determine whether the board would be required to develop standards for this institution under RSA 151–C:5, II.
We first turn to the petitioners' argument that the board erred in ignoring its prior decision. The petitioners argue that the Elliot Medical Center was already constructed and the costs exceeded the statutory threshold. The petitioners argue that the Elliot Medical Center's very existence violated the CON statute. The petitioners further argue that Elliot did not appeal the board's prior decision that a CON was required, and thus that decision became final. The petitioners point out that the only change in the NSR petition was the ownership structure.
The petitioners' argument requests application of the doctrine of administrative finality. See Johnston Ambulatory Surg. Assoc. v. Nolan, 755 A.2d 799, 808 (R.I.2000) (). We have not adopted the doctrine of administrative finality. We have, however, applied a similar test for zoning board of adjustment review in Fisher v. City of Dover, 120 N.H. 187, 412 A.2d 1024 (1980), and its progeny. Fisher, 120 N.H. at 190, 412 A.2d 1024 ().
Assuming without deciding that the reasoning articulated in Fisher would be applied to the Health Services Planning and Review Board, Elliot's NSR petition had a material change in circumstances in restructuring the ownership of Phase I. The board, in its decision to require CON review, determined that "a CON was required for Elliot's project as structured." Elliot restructured the ownership of the Elliot Medical Center, forming a condominium and leasing Phase I back from the developer. Elliot then submitted its NSR petition. At the hearing on the NSR petition, when this issue arose, one member stated: "We allow changes all the time and consider[ ] it as a new proposal...." Elliot thus restructured the ownership consistent with the statutory language and submitted a new petition. Cf. Morgenstern v. Town of Rye, 147 N.H. 558, 566, 794 A.2d 782 (2002) (...
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