Suburban Medical Center v. Olathe Community Hospital

• Decision Date: 14 July 1979
• Docket Number: No. 50678,50678
• Citation: 597 P.2d 654,226 Kan. 320
• Parties: SUBURBAN MEDICAL CENTER, Dodge City Regional Hospital, Humana of Kansas, Inc., and Humana, Inc., Appellants, v. OLATHE COMMUNITY HOSPITAL, Appellee.
• Court: Kansas Supreme Court

Page 654

597 P.2d 654

226 Kan. 320

SUBURBAN MEDICAL CENTER, Dodge City Regional Hospital Humana of Kansas, Inc., and Humana, Inc., Appellants, v. OLATHE COMMUNITY HOSPITAL, Appellee.

No. 50678.

Supreme Court of Kansas.

July 14, 1979.

Syllabus by the Court

1. In determining whether an administrative agency performs legislative or judicial functions, the courts rely on certain tests; one being whether the court could have been charged in the first instance with the responsibility of making the decisions the administrative body must make, and another being whether the function the administrative agency performs is one that courts historically have been accustomed to perform and had performed prior to the creation of the administrative body.

2. A judicial inquiry investigates, declares and enforces liabilities as they stand on present or past facts and under laws supposed already to exist; whereas, legislation looks to the future and changes existing conditions by making a new rule to be applied thereafter to all or some part of those subject to its power.

3. The Statewide Health Coordinating Council, while serving as the review agency for applications for certificate of need for health facilities pursuant to K.S.A.1976 Supp. 65-4801 Et seq., acts in a quasi-judicial capacity.

4. An administrative hearing, particularly where the proceedings are judicial or quasi-judicial, must be fair, or as it is frequently stated, full and fair, fair and adequate, or fair and open. The right to a full hearing includes a reasonable opportunity to know the claims of the opposing party and to meet them. In order that an administrative hearing be fair, there must be adequate notice of the issues, and the issues must be clearly defined. All parties must be apprised of the evidence, so that they may test, explain, or rebut it. They must be given an opportunity to cross-examine witnesses and to present evidence, including rebuttal evidence, and the administrative body must decide on the basis of the evidence.

5. A hearing before an administrative agency exercising quasi-judicial powers must be fair, open, and impartial, and if such a hearing has been denied, the administrative action is void.

6. In an appeal from a district court decision affirming the Statewide Health Coordinating Council's order approving an application for a certificate of need for expansion of a hospital, the record is reviewed and it is Held : (1) The trial court did not err in determining appellant hospital was a proper party in the proceeding; (2) the order of SHCC was void as due process requirements were not met; and (3) the trial court erred in affirming said SHCC order, all as is more fully set forth in the opinion.

J. Eugene Balloun, of Payne & Jones, Chartered, Olathe, argued the cause, and Ron Bodinson and L. Franklin Taylor, Olathe, were with him on brief, for appellants.

George A. Lowe, of Lowe, Terry & Roberts, Olathe, argued the cause, and Christopher B. Bacon, Olathe, was with him on brief, for appellee.

Robert M. Corbett, Topeka, of the Kansas State Department of Health and Environment, was on brief, as amicus curiae.

McFARLAND, Justice:

This is an appeal by the appellant health facilities from the decision of the district court affirming the action of the Statewide Health Coordinating Council granting a certificate of need to Olathe Community Hospital to expand its facilities. All proceedings herein arise from the Health Facilities Act, K.S.A.1976 Supp. 65-4801 Et seq.

Before proceeding to the facts of the case, it would be helpful to identify the various entities involved:

1. Suburban Medical Center, Dodge City Regional Hospital, Humana of Kansas, Inc., and Humama, Inc. (appellants herein). This group is involved, in one way or another, with Suburban Medical Center, a 400-bed hospital facility under construction in Johnson County. The facility is located in Overland Park, 6.5 miles from the site of Olathe Community Hospital. Humama, Inc., was previously named Extendicare, Inc., and bore that name in a previous case, Olathe Hospital Foundation, Inc. v. Extendicare, Inc., 217 Kan. 546, 539 P.2d 1 (1975). This group will be referred to herein as "Suburban."

2. Olathe Community Hospital (appellee). This is a 100-bed hospital facility located in the city of Olathe, Johnson County, which is seeking a certificate of need to construct a 40-bed addition and related ancillary facilities at a projected cost of $7,600,000. This party will be referred to as "Olathe Hospital."

3. St. Joseph Hospital. This is a new 300-bed hospital relocated from another site. It is situated in Jackson County, Missouri, at the junction of I-435 and State Line. The site is 12 miles from Olathe Hospital.

4. Shawnee Mission Medical Center. This is another Johnson County health facility in the process of constructing 112 additional beds to augment its existing 261 beds. This facility is 11 miles from Olathe Hospital.

5. Mid-America Health Systems Agency. This is the agency defined by K.S.A.1976 Supp. 65-4801(D ) and authorized by K.S.A.1976 Supp. 65-4807 to review applications for certificates of need and report thereon to the secretary of health and environment. This agency will be referred to as "MAHSA."

6. Kansas Department of Health and Environment (Amicus curiae ). The secretary of this agency is the "state agency" pursuant to K.S.A.1976 Supp. 65-4801(C ) who reviews the report and recommendations of MAHSA with regard to applications for certificates of need and may approve, approve subject to modification or deny such application (K.S.A.1976 Supp. 65-4808). This agency shall be referred to as "KDHE."

7. Statewide Health Coordinating Council. This was the "review agency" pursuant to K.S.A.1976 Supp. 65-4801(F ) designated to review decisions of KDHE relative to certificates of need during the period of time involved herein. The review procedures are set forth in K.S.A.1976 Supp. 65-4809 Et seq. The Statewide Health Coordinating Council shall be referred to herein as "SHCC."

8. Mid-America Comprehensive Health Planning Agency. This was an agency whose authorized existence was July 1, 1972, to July 1, 1976, under the Regional Health Program Act, K.S.A.1975 Supp. 65-2a01(D ), and was superseded by MAHSA as a part of the statutory shift from regional to statewide health care planning. The old agency is involved herein to the extent that its adopted plan relative to the Johnson County area was admitted into evidence. The plan found no additional beds were needed. The successor agency, MAHSA, had adopted no plan and relied, in part, on the MACHPA plan in its recommendation for denial of the application. This agency will be referred to as "MACHPA."

Having identified the major entities involved, we turn now to a chronological summary of events leading up to this appeal.

February 8, 1977 Olathe Hospital filed its application with MAHSA for a certificate of need for its proposed expansion project which included construction of 40 additional beds. MAHSA Resources Development Committee formed an ad hoc task force which held meetings, and a hearing, on the application.

March 31, 1977 The task force voted 2 to 1 (with one abstention) to recommend to the MAHSA Resource Development Committee that the application be granted.

April 14, 1977 MAHSA Resource Development Committee voted 7 to 3 to recommend that the MAHSA Board of Directors deny the application.

April 28, 1977 MAHSA Board of Directors voted 13 to 9 to recommend KDHE deny the application.

May 23, 1977 KDHE Certificate of Need Review Committee recommended denial of the application.

May 24, 1977 KDHE denied the application on the following three grounds:

"1. The full impact of the additional beds at Shawnee Mission Medical Center as well as the new Suburban Medical Center has not yet been determined. However, due to the close proximity of these projects to Olathe Community Hospital, it appears that the hospital needs of Olathe residents will be fulfilled.

"2. The impact of hospitalization needs of citizens in Miami and Franklin Counties is minimal. Statistics show that less than 10% Of Olathe Community Hospital's patient caseload are from these two counties. Statistics also show that the occupancy rates of the hospitals in Franklin and Miami Counties are only 67.48% And 62.87% Respectively.

"3. The total number of acute care hospital beds in Johnson County will rise to 904 upon completion of the 400 bed Suburban Medical Center. The draft Medical Facilities Plan of the Kansas Department of Health and Environment indicates a need for only 414 beds. The bed need was also calculated with the assumption that all residents of the Johnson-Wyandotte County service area who go to Missouri for hospitalization would remain in Kansas. Again, the projected bed need was 414 for Johnson County."

Olathe Hospital appealed the denial of its application to SHCC.

June 22, 1977 Suburban requested to be a party to all relevant proceedings before the SHCC stating it believed the granting of the application would adversely affect it. Over Olathe Hospital's objection Suburban's request was granted by the SHCC chairman. Pursuant to K.S.A.1976 Supp. 65-4812 a hearing officer was appointed to conduct the hearing.

July 20, 1977 Hearing held by SHCC hearing officer. The hearing officer subsequently prepared detailed proposed findings of fact and conclusions of law.

August 18, 1977 Olathe Hospital sent to each SHCC member a copy of its own proposed findings of fact and conclusions of law, an 88-page memorandum, a brief, and a position letter. This procedure was apparently over the objection of the SHCC chairman.

August 22, 1977 The hearing officer sent his proposed findings of fact and conclusions of law to each SHCC member. On the same date Suburban and KDHE sent each SHCC member their position summary and proposed findings of fact and conclusions of law.

August 31, 1977 In a short meeting, SHCC conferred, granted the...