National Health Corp. v. South Carolina Dept. of Health and Environmental Control

• Citation: 380 S.E.2d 841,298 S.C. 373
• Decision Date: 19 January 1989
• Docket Number: No. 1326,1326
• Court: South Carolina Court of Appeals
• Parties: , 26 Soc.Sec.Rep.Ser. 474 NATIONAL HEALTH CORPORATION, d/b/a National Health Care Center of Georgetown, Appellant, v. SOUTH CAROLINA DEPARTMENT OF HEALTH AND ENVIRONMENTAL CONTROL and Waccamaw River Health Care Center, Inc., Respondents. . Heard

Page 841

380 S.E.2d 841

298 S.C. 373, 26 Soc.Sec.Rep.Ser. 474

NATIONAL HEALTH CORPORATION, d/b/a National Health Care Center of Georgetown, Appellant, v. SOUTH CAROLINA DEPARTMENT OF HEALTH AND ENVIRONMENTAL CONTROL and Waccamaw River Health Care Center Inc., Respondents.

No. 1326.

Court of Appeals of South Carolina.

Heard Jan. 19, 1989.

Decided April 24, 1989.

David M. Rogers, Greer, for appellant.

General Counsel Walton J. McLeod, III, Sally M. Rentiers and Susan A. Lake, of South Carolina Dept. of Health & Environmental Control, Columbia; and Charles B. Baxley, of Baxley, Pratt & Wells, Lugoff, for respondents.

PER CURIAM:

National Health Corporation ("NHC") brings this action seeking judicial review of a final administrative decision of the South Carolina Department of Health and Environmental Control ("DHEC"). DHEC denied NHC's application for a certificate of need ("CON") to build a long-term care nursing facility and granted a CON to Waccamaw Health Care Center, Inc.

NHC appealed DHEC's decision to the circuit court. In this appeal NHC made the following arguments; (1) DHEC denied NHC's CON application because of an insufficiency of Mediciad funds to support the number of Medicaid beds NHC proposed in its application, and a denial on this basis alone, violates federal Medicaid statutes; (2) DHEC's finding that NHC's proposed project was not financially feasible is not supported by the record; (3) the DHEC hearing officer and Board applied the wrong standard of review at the administrative hearing; (4) the trial court should consider the effect of the new Medicaid Nursing Home Permits law in its decision; and (5) DHEC's denial of NHC's CON application was inappropriate under the circumstances existing at the time of the administrative hearing. The circuit court addressed each of NHC's arguments and issued an order affirming DHEC's decision.

NHC's appeal to this court raises the identical issues as raised in the trial court. After thoroughly and carefully reviewing the record and the applicable law we find that the circuit court's order correctly sets forth and properly disposes of all the issues which are before the court. We therefore adopt the order of the circuit court (with minor changes) which we quote as follows:

This matter came before the Court pursuant to a Rule to Show Cause and Complaint for Judicial Review of Final Administrative Decision of the South Carolina Board of Health and Environmental Control which governs the Department of Health and Environmental Control. The Plaintiff, National Health Corporation (hereinafter, NHC) was represented by David M. Rogers, Esquire. The Defendant South Carolina Department of Health and Environmental Control (hereinafter, SC DHEC) was represented by Susan A. Lake, Staff Counsel. Defendant Waccamaw River was represented by Charles Baxley, Esquire. This matter is an appellate review of the administrative decision of SC DHEC denying the application of NHC for a Certificate of Need and granting a Certificate of Need for the construction of a forty-four (44) bed nursing care facility to Waccamaw.

NHC and Waccamaw were competing applicants for a Certificate of Need (hereinafter, CON) to construct a nursing home facility in the Georgetown County area. Pursuant to the 1985 State Health Plan, only one of these projects, either Waccamaw's or NHC's could be approved. Waccamaw applied for a CON for forty-four (44) dually licensed private-pay beds which would not participate in the Medicaid program, and NHC applied for a CON for eighty-eight (88) long term care beds which would be partially funded through participation in the Medicaid program. On July 16, 1986, after comparatively reviewing the applications of both competitors, Waccamaw and NHC, on July 16, 1986, SC DHEC notified the parties of its decision to grant a CON to Waccamaw and to deny NHC's application. NHC appealed the Department's decision to deny its application and to grant a Certificate of Need to Waccamaw. Waccamaw thereafter moved to intervene in the appeal in order to protect its interests, and that motion was properly granted.

On August 12 and August 22, 1986, an administrative adjudicatory hearing was held before an independent Hearing Officer. In his Report and Recommendations, the Hearing Officer determined that the decision of the SC DHEC staff should be upheld. Pursuant to NHC's request, the Board of Health and Environmental Control (hereinafter, Board) reviewed the Hearing Officer's Report and Recommendations. On July 29, 1987, the Board issued its Order adopting the Hearing Officer's Report and Recommendation upholding the SC DHEC staff decision. NHC now seeks judicial review of the SC DHEC decision.

On September 10, 1987, this Court heard arguments in this matter and determined that more than substantial evidence exists in the record to uphold the SC DHEC decision. The SC DHEC decision is neither arbitrary, capricious, nor contrary to applicable laws. Rather, the SC DHEC decision is reasonable and in full compliance with regulatory and statutory requirements.

It is well-established that the "substantial evidence" rule set forth in the Administrative Procedures Act provides for judicial intervention "only in those cases where a manifest or gross error of law has been committed by the administrative agency." Lark v. Bi-Lo, Inc., 276 S.C. 130, 276 S.E.2d 304, 307 (1981). The Court must not substitute its judgment for that of the agency, and a judgment upon which reasonable men might differ will not be set aside. Lark v. Bi-Lo, Inc., 276 S.C. 130 276 S.E.2d 304, 307 (1981); Bilton v. Best Western Royal Motor Lodge, 282 S.C. 634, 321 S.E.2d 63 (App., 1984). In this case, the judgment of the agency was reasonable and proper. The record contains more than sufficient evidence to support the conclusions of the Board.

NHC complains that the Board's decision was in error because the Board applied the "arbitrary and capricious" standard of review, rather than a "de novo" standard of review. While the Plaintiff couches its argument in terms of whether NHC was entitled to a "de novo" review, the real issue raised in argument addresses the appropriate burden of proof. Plaintiff acknowledges that he was generally given the benefits associated with "de novo" review, such as the full opportunity to present evidence and cross-examine witnesses. ¹ The Plaintiff argues, however, on the basis of some general, introductory language in the Order under review, that the Board did not base its decision on the "merits." The Report of the Hearing Officer, which was adopted as the Board's Order, states at page 2 "that the issues presented in this administrative appellate review are whether this Department's decision to deny NHC's application and grant Waccamaw a Certificate of Need was arbitrary, capricious, or contrary to appellate law, and whether the applicable state law is unconstitutional or in conflict with Federal law." Plaintiff contends that this statement of the issue indicates that the Board was applying the "substantial evidence" standard of review or burden of proof. However, the Hearing Officer's Report goes on to state:

"the evidence presented at the hearing before the hearing officer amply showed that the application of Waccamaw was superior to that of NHC both in terms of documentation and in terms of the finances and efficiency of the proposed facility."

(Hearing Officer's Report and Recommendations, p. 10.)

It is clear from the Board's Order read as a whole that the Board fully exercised its authority to weigh the evidence, and make a decision on the merits based upon the preponderance of evidence. This is in accord with the review process provided for in DHEC Regulation 61-15 Section 402, S.C.Code Ann., Vol 24A (1976, as amended). The agency regulation requires that the decision on review be made by the Board on the basis of the evidence presented in the hearing before it or its designee. Since the State Administrative Procedures Act is silent on the standard of review or burden of proof at the agency level contested case hearing, the Department regulations are controlling. I find that there has been compliance with DHEC R. 61-15 and that the proper standard of review was applied. Plaintiff's argument has no merit whatsoever.

NHC complains that SC DHEC did not consider all of the grounds or reasons for which NHC challenged the SC DHEC decision. This argument is without merit. The Hearing Officer in his Report and Recommendations, which the Board adopted, clearly considered all of the issues raised by NHC. Review of the Hearing Officer's Report and Recommendations and the Transcript of Record in this case leaves no doubt that all of the issues raised by NHC were thoroughly addressed throughout the administrative process.

The SC DHEC decision was based on the state law and regulations applicable to the SC DHEC Certificate of Need program. One of the legal requirements to obtain a CON is SC DHEC R. 61-15, Section 503 which provides:

In the case of any proposed new institutional health service for the provision of health services to inpatients, the Department shall not grant a Certificate of Need under its Certificate of Need program, or otherwise make a finding that such proposed new institutional health service is needed, unless:

* * * * * *

(b) the Department makes each of the following findings in writing:

* * * * * *

(4) That in the case of a proposal for the addition of beds for the provision of skilled nursing or intermediate care services, the addition will be consistent with the plans of other agencies of the State responsible for provision and financing of long-term care (including home health) services.

The SHHSFC is the agency responsible for the funding of the Medicaid beds in South Carolina. The record in this case is replete with evidence that NHC's CON application was not consistent with the funding plans of SHHSFC. (Transcript of Adjudicatory...