Texas Health Facilities Com'n v. Charter Medical-Dallas, Inc.

• Decision Date: 15 February 1984
• Docket Number: MEDICAL-DALLA,INC,No. C-2478,C-2478
• Citation: 665 S.W.2d 446
• Parties: TEXAS HEALTH FACILITIES COMMISSION et al., Petitioner, v. CHARTER, Respondent.
• Court: Texas Supreme Court

Page 446

665 S.W.2d 446

TEXAS HEALTH FACILITIES COMMISSION et al., Petitioner, v. CHARTER MEDICAL-DALLAS, INC., Respondent.

No. C-2478.

Supreme Court of Texas.

Feb. 15, 1984.

Jim Mattox, Atty. Gen., Steven L. Martin, Asst. Atty. Gen., Austin, Law Offices of Earl Luna, Mary Mildord, Dallas, Heath, Davis & McCalla, Dudley D. McCalla, Austin, for petitioner.

Wood, Lucksinger & Epstein, Bruce Bigelow, Austin, Trotter, Bondurant, Miller and Hishon, Glen A. Reed, Atlanta, Ga., for respondent.

BARROW, Justice.

This is an appeal from three consolidated orders of petitioner Texas Health Facilities Commission. The orders of the Commission granted certificates of need to petitioners Healthcare International and Memorial Hospital of Garland and denied a similar request made by respondent Charter Medical-Dallas, Inc. The action of the Commission was upheld by the trial court. The court of appeals, with one justice dissenting, reversed the judgment of the trial court and remanded the cause to the Commission for further proceedings. Charter Medical-Dallas, Ins. v. Texas Health Facilities Com'n, 656 S.W.2d 928. We reverse the judgment of the court of appeals and affirm the judgment of the trial court.

The Texas Health Facilities Commission is the Texas administrative agency charged with governing the availability of health care facilities in this state. See Health Planning and Development Act, Tex.Rev.Civ.Stat.Ann. art. 4418h, §§ 1.01-6.04 (HPDA). The Commission's primary function is to prevent the development of new health care facilities with services that are not needed or that cannot feasibly be developed, staffed, or operated. This function is performed primarily by the Commission's administration of a state certificate of need program. Id., § 2.06. Under this program, a person proposing to establish or modify a health care facility must obtain a certificate of need from the Commission. Id., § 3.01.

In December of 1979 and January of 1980, the parties to this appeal filed applications seeking certificates of need for proposed projects. Memorial sought permission to convert a portion of its general hospital into psychiatric use; Healthcare proposed to construct a new facility, "Green Oaks;" and Charter Medical applied for permission to construct "Dallas Psychiatric Hospital." All three projects were planned for the area encompassing north Dallas County and Collin County. These three applications were consolidated by the Commission, and a hearing was held to determine whether one or more of the applications should be granted. The Commission rendered its orders in October of 1980 granting certificates of need to Healthcare and Memorial and denying the application of Charter Medical.

The trial court rendered judgment sustaining the orders of the Commission as to all three applications. This judgment was reversed by the court of appeals and the cause remanded to the Commission. The stated reason for the court of appeals' decision is that the Commission's orders contain insufficient underlying (basic) facts to support the ultimate findings or conclusions of the Commission on the three applications. The court of appeals held that the absence of underlying facts rendered the Commission's ultimate findings arbitrary and capricious. The court of appeals remanded all three applications to the Commission since the Commission's denial of Charter Medical's request may have been based upon the granting of the other two applications.

In reaching its decision, the court of appeals set forth a lengthy recitation of the facts and Commission rules applicable to this appeal; we refer the reader to that opinion for a more complete statement on these matters. We limit our discussion to the specific points properly before this Court and upon which we base our decision.

This administrative appeal arises under the authority of the HPDA in conjunction with the Texas Administrative Procedure and Texas Register Act. Tex.Rev.Civ.Stat.Ann. art. 6252-13a (APTRA). Under the legislative scheme of the APTRA, the manner of review of agency actions is governed by the enabling statute in the area under adjudication. APTRA, § 19(e); Southwestern Bell Telephone Co. v. Public Utility Commission, 571 S.W.2d 503, 508 (Tex.1978). Section 1.04 of the HPDA incorporates the APTRA "except to the extent inconsistent with" the HPDA. Therefore, the scope of judicial review in this case must be discerned from both the HPDA and the APTRA.

In determining the role of the reviewing court, we must first ascertain the legislative standards to which the Commission must adhere in making its decisions, i.e., what findings and conclusions the Commission must make before it properly may grant a certificate of need. Subsection 3.10(a) of the HPDA requires the Commission to promulgate rules establishing criteria to determine whether an applicant is to be issued a certificate of need for a proposed project. Subsection 3.10(b) sets forth five specific factors that must be included among the Commission's criteria:

Criteria established by the commission must include at least the following:

(1) whether a proposed project is necessary to meet the healthcare needs of the community or population to be served;

(2) whether a proposed project can be adequately staffed and operated when completed;

(3) whether the cost of a proposed project is economically feasible;

(4) if applicable, whether a proposed project meets the special needs and circumstances for rural or sparsely populated areas; and

(5) if applicable, whether the proposed project meets special needs for special services or special facilities.

Thereafter, subsection 3.10(c) contains six factors that the Commission "shall consider" in developing its criteria.

The Commission has promulgated "General Criteria for Use in Certificate of NeedReviews" that incorporate both the factors required by subsection 3.10(b) and the factors that the legislature has directed the Commission to "consider." ¹ These criteria include thirteen broad categories addressing such matters as "Community Health Care Requirements," "Service Area Population," and "Relationship to Existing Services and Existing Facilities."

Under these broad, general categories are approximately fifty-four subcategories or factors that the Commission considers relevant to its decision on the ultimate factors. These subcategories are referred to by the court of appeals as "intermediate facts." The findings of the Commission on the totality of these criteria form the basis of the Commission's decision to grant or deny a certificate of need. "An applicant or party who is aggrieved by an order of the commission ... is entitled to judicial review under the substantial evidence rule." HPDA, § 3.15.

Having determined the prerequisites to agency action under the HPDA, we look to the APTRA to determine its guidelines for judicial review. Section 16(b) of the APTRA states: "A final decision must include findings of fact and conclusions of law, separately stated. Findings of fact, if set forth in statutory language, must be accompanied by a concise and explicit statement of the underlying facts supporting the findings." The exact manner of judicial review is stated in section 19(e):

The scope of judicial review of agency decisions is as provided by the law under which review is sought.... Where the law authorizes review under the substantial evidence rule, ... the court may not substitute its judgment for that of the agency as to the weight of the evidence on questions committed to agency discretion but may affirm the decision of the agency in whole or in part and shall reverse or remand the case for further proceedings if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:

(1) in violation of constitutional or statutory provisions;

(2) in excess of the statutory authority of the agency;

(3) made upon unlawful procedure;

(4) affected by other error of law;

(5) not reasonably supported by substantial evidence in view of the reliable and probative evidence in the record as a whole; or

(6) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

The above-quoted portions of the APTRA are the primary guidelines to be used by a court in reviewing the actions of administrative agencies.

In this case, there are allegations challenging the adequacy of the Commission's findings of fact, contending that the Commission's action is not supported by substantial evidence, and asserting that the Commission's orders are arbitrary and capricious. The court of appeals purported to base its decision solely on the conclusion that the Commission's findings of fact are arbitrary and capricious. In its opinion, however, the intermediate court touched upon each of the above three contentions. Hence, we shall address each of these matters.

Findings of Fact

The logical first step in evaluating the Commission's order is to examine the agency's fact findings to determine whether they meet the statutory requirements. See Auto Convoy Co. v. Railroad Commission, 507 S.W.2d 718, 719 (Tex.1974). Section 16(b) of the APTRA requires that all findings of fact, "if set forth in statutory language," must be accompanied by a supporting statement of underlying facts. We must determine the meaning of these words in the present context.

In Lewis v. Gonzales County Savings and Loan Association, 474 S.W.2d 453 (Tex.1971), we were asked to construe an analogous fact-finding requirement in the Savings and Loan Act. Tex.Rev.Civ.Stat.Ann. art. 852a, § 11.11(4). Therein, we held:

We are of the view this requirement applies only to findings of fact in the commissioner's orders which are "set forth in statutory language." [footnote omitted]. When findings are made in the language of the Rules and Regulations that do not embody statutory language, they need not be...