University Community Hosp. v. Department of Health and Rehabilitative Services

• Decision Date: 29 December 1992
• Docket Number: 91-3292,Nos. 91-3270,s. 91-3270
• Citation: 610 So.2d 1342
• Parties: 18 Fla. L. Week. D178 UNIVERSITY COMMUNITY HOSPITAL, Appellant, v. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES and Winter Haven Hospital, Inc., Appellees. LAKELAND REGIONAL MEDICAL CENTER, INC., Appellant, v. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES and Winter Haven Hospital, Inc., Appellees.
• Court: Florida District Court of Appeals

Page 1342

610 So.2d 1342

18 Fla. L. Week. D178

UNIVERSITY COMMUNITY HOSPITAL, Appellant, v. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES and Winter

Haven Hospital, Inc., Appellees.

LAKELAND REGIONAL MEDICAL CENTER, INC., Appellant, v. DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES and Winter

Haven Hospital, Inc., Appellees.

Nos. 91-3270, 91-3292.

District Court of Appeal of Florida First District.

Dec. 29, 1992.

Cynthia S. Tunnicliff and Loula M. Fuller of Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., Tallahassee, for appellant University Community Hosp.

Robert A. Weiss and John M. Knight of Parker, Hudson, Rainer & Dobbs, Tallahassee, for appellant Lakeland Regional Medical Center, Inc.

Richard A. Patterson, Dept. of Health and Rehabilitative Services, Tallahassee, for Appellee Dept. of Health and Rehabilitative Services.

Patricia A. Renovich of Oertel, Hoffman, Fernandez & Cole, P.A., Tallahassee, for appellee Winter Haven Hosp.

ZEHMER, Judge.

In these consolidated cases, University Community Hospital and Lakeland Regional Medical Center, Inc., two hospitals located in District 6, appeal a final order of the Department of Health and Rehabilitative Services (HRS) ruling that the inventory of neonatal intensive care unit (NICU) beds for District 6 shall include 11 Level II NICU beds for Winter Haven Hospital, Inc. HRS ruled that, under the circumstances, it was estopped to exclude these beds from the inventory. We reverse and remand for further proceedings on the estoppel issue.

I.

This controversy arose after HRS rule 10-5.011(1)(v) [now 10-5.042], Florida Administrative Code, became effective on August 6, 1990. That rule provides that all facilities providing NICU services must obtain a certificate of need (CON) for Level II and III NICU services after the rule's effective date. The rule provides an exception for beds that are included in an initial inventory of such facilities by HRS. The rule sets forth the criteria for obtaining a CON, and states that such beds may be included in the initial inventory of Level II NICU beds provided the hospital is able to satisfy one of three grandfather provisions in rule 10-5.011(1)(v)14.a., 14.b., or 14.f. of the Florida Administrative Code.

In August 1990, HRS published in the Florida Administrative Weekly (16 Fla.Admin.W. 3906) a "Notice of Preliminary Inventory Hospitals Authorized to Provide Neonatal Intensive Care (NICU) Services" that listed the number of beds for each of the major categories within a hospital's total licensed beds. The preliminary inventory included 11 Level II NICU beds for Lakeland Regional, but Winter Haven and University Community were not included in this inventory. Winter Haven advised HRS that it had been improperly excluded from the inventory and submitted documentation to support its contention that it should have been included. That documentation showed that approval had been given by HRS's Office of Licensure and Certification to Winter Haven's plans for construction of an NICU unit, based on a CON exemption letter dated July 9, 1985. In September 1990, HRS published a Notice of Change to the preliminary inventory that included 11 Level II NICU beds for Winter Haven (16 Fla.Admin.W. 4414).

On October 10, 1990, Lakeland Regional filed a petition for a formal administrative hearing to contest the September 1990 Notice of Change to the preliminary inventory indicating 11 NICU beds for Winter Haven, arguing that Winter Haven had no authorized NICU beds and failed to satisfy the criteria stated in rule 10-5.011(1)(v) for authorization to provide Level II NICU services. Winter Haven also filed a petition for administrative hearing to challenge the October 1990 Notice of Change to the preliminary inventory of Level II NICU beds increasing the number of beds awarded to Lakeland Regional, based on the argument that Lakeland Regional failed to satisfy the rule requirements for operation of that number of beds. Winter Haven and Lakeland Regional then filed separate petitions to intervene in each other's case, and the two cases were consolidated. University Community, having a pending CON application to operate an NICU service, filed a petition to intervene in both cases challenging the inclusion of Level II NICU beds at both Lakeland Regional and Winter Haven. Only the Winter Haven beds are involved in this appeal, however.

The matter went to hearing before a DOAH hearing officer. Winter Haven contended that it qualified under the rule's grandfather provisions as these provisions had previously been interpreted by HRS. It based this contention, in part, on evidence that HRS had previously approved NICU beds for Winter Haven and that, in reliance on this approval, Winter Haven had done a number of things to fund and place the NICU beds so authorized in operation. However, Winter Haven had not employed a full-time neonatologist on its active staff prior to October 1, 1987, as specified in the grandfather provisions of the rule, because its neonatologist did not come on board until April 1988.

The hearing officer's order recommended that HRS exclude all of Winter Haven's beds from the NICU inventory in view of its non-compliance with all relevant provisions in subparagraphs 14.a. through 14.g. of the NICU rule. We quote a portion of the findings and conclusions made in support of this recommendation:

Evidence adduced at the hearing demonstrates Winter Haven is unable to meet the conditions specified in the rule which allow for the grandfathering of its Level II NICU beds. The unit was not developed to the particular service stage required during the time period referenced in the rule. When HRS reviewed the documentation provided by Winter Haven to support its contention that it had been improperly omitted from the preliminary inventory, it became apparent that Winter Haven had relied upon prior authorizations of its Level II unit development from HRS. As the agency had not addressed the possibility that some Level II neonatal intensive care units might have reached considerable development before and after the time period referenced in the rule, these type[s] of situations were not covered by the NICU Rule. Instead, once situations were discovered, HRS created an unpromulgated policy that allowed hospitals with Office of Licensure and Certification-approved construction plans to have NICU beds placed on the preliminary inventory.

The agency's attempted modification of the grandfathering provisions of the NICU Rule by use [sic] an unpromulgated policy that departs from the specific meaning of the rule is a practice specifically forbidden by Section 120.68(12), Florida Statutes. In Boca Raton Artificial Kidney Center, Inc. v. DHRS, 493 So.2d 1055 (Fla. 1st DCA1986), the appellate court ruled that an agency cannot modify its own rules by unpromulgated policy even if it explicates such departure on a case-by-case basis. If a rule is found to be impractical, the agency's recourse is to amend the rule pursuant to rulemaking procedures.

It is clear from the wording of the grandfathering provisions that the NICU Rule was primarily designed to be exclusive as opposed to inclusive. In certain situations such as those experienced by Winter Haven, the rule as written impairs the obligation of contracts and detrimentally affects a hospital's interests. Winter Haven reasonably relied upon earlier authorizations given by HRS under color of law when the hospital made expenditures and established neonatal intensive care service in its district between 1977 and 1990.

In spite of the harms caused by the exclusion of hospitals in Winter Haven's situation by the grandfathering provisions, the NICU Rule cannot be expanded through unpromulgated policy to include providers with approved construction plans. Such a policy would cause the provisions of sub-subparagraph 14.b. to become meaningless. This type of effect on a promulgated rule by an unpromulgated policy constitutes an impermissible deviation from the terms of an existing rule. Hillsborough County Hospital Authority d/b/a Tampa General Hospital v. Department of Health and Rehabilitative Services and Lakeland Regional Medical Center v. Department of Health and Rehabilitative Services, 12 FALR 785 (Final Order 1990). Accordingly, Winter Haven's 11 Level II NICU beds cannot remain on the preliminary inventory published pursuant to Rule 10-5.011(1)(v)(15), Florida Administrative Code, which purports to include all facilities with authorized neonatal intensive care services based upon the provisions of sub-subparagraphs 14.a. through 14.g. of the NICU Rule.

Winter Haven filed exceptions to the recommended order, contending that the recommended order had misconstrued the meaning of the rules. It emphasized that the hearing officer's construction of the rule, as found in the hearing officer's recommended order, was contrary to that previously followed by HRS, on which Winter Haven had relied when establishing the level II NICU beds. Winter Haven further contended that, if HRS were not permitted to adhere to its previous construction of the rule but required to follow the hearing officer's recommended construction, thereby preventing application of the grandfather provisions to Winter Haven, HRS was nevertheless estopped from excluding Winter Haven's beds from the inventory because the facts found in the recommended order satisfied all of the elements of estoppel. Winter Haven cited a number of Florida cases recognizing the application of equitable estoppel in administrative law cases. ¹ This was the first time the matter of estoppel had been mentioned in these proceedings.

HRS entered a final order adopting all of the hearing officer's findings of facts. It also approved the hearing officer's construction of the rule as precluding the inclusion of Winter Haven's 11 level II NICU beds in the inventory pursuant to the grandfather provisions. With respect to Winter Haven's...