Kadlec Regional Medical Center, App. V Department Of Health Of The State Of Washington, Resp.

• Court: Court of Appeals of Washington
• Decided: October 8, 2013
• Docket: 43193-9
• Status: Published

Opinion

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IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

DIVISION II

KADLEC REGIONAL MEDICAL CENTER, No. 43193 9 II - - a Washington nonprofit corporation,

Appellant, PUBLISHED OPINION V.

DEPARTMENT OF HEALTH, STATE OF WASHINGTON,

BJORGEN, J. — Kadlec Regional Medical Center applied to the State Department of

Health to increase its capacity by up to 114 beds. The Department issued Kadlec a certificate of

need ( CN) authorizing the addition of only 55 beds. Kadlec appeals the dismissal of its

adjudicative challenge to that CN by a health law judge (HLJ). Kadlec argues that the HLJ

wrongly dismissed the adjudicative proceeding because (1)Kadlec's CN application primarily

requested 114 new beds and the denial of that application should receive an adjudicative hearing,

2) s implementing the 55 bed CN did not waive its right to an adjudicative proceeding, Kadlec' - and (3)the Department informed Kadlec that it had the right to an adjudicative proceeding.

Kadlec alternatively argues that if we uphold the HLJ's dismissal, we should still grant judicial

review and reverse based on the Department's use of an improper population projection in its CN No. 43193 9 II - -

decision. We reverse the superior court's decision affirming the HLJ's dismissal, and we remand

for an adjudicative hearing because Kadlec's application clearly focused on a 114 bed request, -

with two other scenarios seeking fewer beds as essentially secondary alternatives. Thus, the

Department's grant of the 55 bed CN functioned as the denial of Kadlec's 114 bed CN request. - -

FACTS

I. CERTIFICATE OF NEED ( N) C

A central purpose of the state Health Planning and Resources Development Act, chapter

70. 8 RCW, is to provide accessible health services, facilities, and other resources while 3

controlling cost increases. RCW 70. 8. 015. 3 The principal tool in accomplishing this is the

requirement of RCW 70. 8. 105( 4 that 3 ) medical care centers obtain a CN from the Department

before opening certain types of facilities or increasing a facility's capacity. The Department

determines whether to grant a CN using the criteria set out in RCW 70. 8. These include, 115. 3

among other elements, 1) ( need for the proposal, 2) ( availability of less costly or more effective

alternative methods of providing the services, 3) ( quality of care, 4) ( financial feasibility, and (5)

cost containment.

In November 2009 Kadlec applied for a CN, requesting to add 114 new hospital beds to

its existing hospital in Richland. It also submitted alternative proposals for 75 new beds and 55

new beds because it did not know whether the Department would use a high -growth or a

medium -growth population forecast. Since Kadlec had an immediate need for additional beds, it

did not want to risk denial of its entire request.

The introduction, title sheet, and project description in Kadlec's CN application all

2 No. 43193 9 II - -

presented the proposal as one for 114 new beds. More specifically,the project description stated,

Kadlec is requesting ... 114 acute care beds" and that, a] part of its due diligence, Kadlec "[ s

has sensitivity- tested other bed configurations" in terms of hospital capacity, financial

performance, efficiency, and operating expenses. Administrative Record (AR) at 651 52. -

Kadlec's application stated further that without an increase in beds, it would face shortages in

several departments starting in 2010. Although Kadlec's application did not state that it would

refuse the 75- or 55 bed scenarios, it referred to them as " not preferred" and "inferior," -

explaining that under those scenarios, bed shortages would begin in 2012, while under the 114 - bed scenario Kadlec would have sufficient beds for at least five years. AR at 703. Kadlec's

application.summarized that the 114 bed option was "the best opportunity to meet projected ... -

had the " demand," and fewest disadvantages," the was " most efficient ... of any option."AR at

710.

Shortly after Kadlec submitted its CN application, Kennewick General Hospital (KGH)

also applied for a CN, requesting to add 25, new hospital beds. Because both applications

involved facilities located in the Benton/ ranklin counties' planning area, the Department F

reviewed them concurrently, conducting a public hearing in April 2010.

Through its review, the Department found a need for 61 new beds in the Benton/ ranklin F

planning area by 2016. Based on this finding, it determined that KGH's proposed 25 new beds

met the " need"criterion for issuance of a CN, but that Kadlec's proposed 114 new beds did not

because it would lead to a surplus of 80 beds. AR at 25, 28 Nonetheless, because Kadlec had

provided details for a 55- bed option, the Department "[ new - was]able to consider a smaller bed

3 No. 43193 9 II - -

request [than that] on the face of the application." AR at 25. The Department determined that

Kadlec's option of providing 55 new beds met the "need" criterion and that it would review

Kadlec's CN application using that option rather than the 114 bed request. AR at 26. -

Although the Department found that KGH met,. " the need" criterion, it determined that

KGH did not meet remaining criteria and denied its request. AR at 14, 35, 39, 44. In contrast,

the Department determined that Kadlec satisfied applicable criteria and issued a CN to it for 55

new beds.

II. PROCEDURE

When the Department informed Kadlec and KGH of its determinations, it also advised

each of the right to request reconsideration or an adjudicative proceeding. Kadlec requested an

adjudicative proceeding, contesting the Department's decision to approve only 55 new beds,

rather than 75 or 114 new beds. KGH requested reconsideration, which the Department denied.

KGH then requested an adjudicative proceeding, contesting both the CN denial to KGH and the

CN grant to Kadlec. With the parties' agreement, the Department consolidated the two

adjudicative proceedings. At the same time, Kadlec added the 55 new beds authorized by its

CN.

At the adjudicative proceeding the HLJ dismissed Kadlec's claim on summary judgment.

The HLJ found that Kadlec submitted three alternative plans for expansion in its CN request:

one for 114 beds, one for 75, and one for 55. The HLJ then found that the Department approved

the 55 bed alternative and that Kadlec did not appeal that award.' -

Findings of fact are superfluous in review of an order for summary judgment. Hubbard v. Spokane County, 146 Wn. d 699, 706 n.4, 50 P. d 602 (2002). 2 1 3 4 No. 43193 9 II - -

In its conclusions of law, the HLJ concluded that Kadlec's offering three separate

alternatives within an application was not the same as offering three separate CN applications.

Thus, the HLJ concluded that Kadlec did not have a right to appeal, because the Department did

not deny Kadlec a CN; rather, it awarded Kadlec one of its requested options. The HLJ further

concluded that even if Kadlec had a right to an adjudicative proceeding, it waived that right by

adding the 55 new beds, thereby implementing the CN. Additionally, the HLJ concluded that the

Department should not grant Kadlec a hearing under RCW 34. 5. 413( 1 because to do so would 0 )

ignore the plain language of other statutory provisions.

Kadlec sought superior court review of the HLJ's dismissal order on summary judgment

and, in the alternative, the Department's underlying decision regarding Kadlec's larger bed

request. The superior court affirmed the HLJ's dismissal order, determining that the

Department's approval of 55 new beds was not a denial of Kadlec's CN and that Kadlec was not

entitled to an adjudicative proceeding. The superior court further determined that because the

Department approved Kadlec's 55 bed request, Kadlec did not have standing to seek judicial -

review of the Department's denial of its larger bed request. Kadlec appeals.

ANALYSIS

Kadlec argues that the HLJ wrongly dismissed its adjudicative proceeding because (1) the

alternative requests in Kadlec's CN did not strip Kadlec of the right to an adjudicative hearing on

its primary request, 2)Kadlec's implementing the granted CN did not waive an adjudicative (

hearing, and (3) Department informed Kadlec that it had the right to an adjudicative hearing. the

The Department responds that Kadlec has no right to contest a granted CN and that when the

5 No. 43193 9 II - -

Department informed Kadlec about an adjudicative proceeding, it was referring to the conditions

on the CN. We agree with Kadlec that it is entitled to an adjudicative hearing on its request for

114 new beds.

I. STANDARD OF REVIEW

On appeal, we review the HLJ's decision,. the superior court's decision. See King not

County v. Cent. Puget Sound Growth Mgmt. Hearings, 142 Wn. d 543, 553, 14 P. d 133 (2000) 2 3

we review the agency decision rather than the superior court decision).In reviewing an order of

summary judgment, we ask, in the absence of material issues of fact, whether a party is entitled

to judgment as a matter of law. CR 56.

We substantial weight ... generally give "` to the agency's view of the law if it falls

within the agency's expertise in that special field of law. "' Children's Hosp. & Med. Ctr. v.

Dep't of Health, 95 Wn. App. 858, 864, 975 P. d 567 (1999) quoting Purse Seine Vessel 2 (

OwnersAss'n v. Dep't of Fish & Wildlife, 92 Wn. App. 381, 389, 966 P. d 928 (1998)). 2

The agency decision is presumed correct.... error of law standard permits The this court to substitute its interpretation of the law for that of the agency, but we accord substantial deference to the agency's interpretation, particularly in regard to the law involving the agency's special knowledge and expertise.

Univ. of Wash. Med. Ctr. v. Dep't of Health, 164 Wn. d 95, 102, 187 P. d 243 (2008) 2 3

quoting Providence Hosp. of Everett v. Dep't of Soc. & Health Servs.,112 Wn. d 353, 2

355 56,770 P. d 1040 (1989)). - 2

2 Kadlec alternatively argues that if we uphold the HLJ's dismissal, we should still proceed with judicial review and reverse the Department's determination of need because it was based on an improper population projection. The Department responds that Kadlec does not have standing for judicial other agency action "' because this decision was an agency review reserved for "` order in an adjudicative proceeding. Br. of Resp't at 11 (quoting RCW 34. 5.Because 570( 4 0 )). we hold that Kadlec should receive an adjudicative hearing, we do not reach Kadlec's alternative argument on the merits. 6. No. 43193 9 II - -

II. ADJUDICATIVE PROCEEDING UNDER RCW 70. 8. a) 115( 0)( 1 3

A. Right To Hearing After A Denial

Kadlec first argues that it has a statutory right to an adjudicative hearing because the

Department denied its CN application for 114 or 75 new beds. Based on the same statutory

authority, the Department responds that Kadlec has no right to a hearing because the. Department

granted Kadlec's CN request for 55 new beds.

In its conclusions of law, the HLJ concluded that Kadlec's offering three separate

alternatives within the application was not the same as offering three separate CN applications.

The HLJ noted,

There are sound policy reasons to deny Kadlec's approach. The applicant bears the burden of establishing that it meets all applicable criteria. WAC 246 10 606. - - By implication, this includes clearly stating what the applicant is applying for what number of beds is being requested). Doing so avoids unnecessary adjudicative proceedings. Additionally, an applicant should not be permitted to circumvent the language in RCW 70. 8. WAC 246 310- 1) a) 115( 0( 1 3 and - 610( by including several alternative approaches in the application process rather than making a clear declaration of its intent.

AR at 619 n. . 2 We review the HLJ's legal conclusions de novo; we defer to the agency's

interpretation of the statute it administers, but we may substitute our interpretation of the law for

the agency's interpretation under the error of law standard. Univ. of Wash. Med. Or., 164

Wn. d at 102. 2

The parties agree that.under the statute an applicant denied a CN has the right to an

adjudicative hearing. RCW 70. 8. a) a] y applicant denied a certificate of 115( 0)( 1 3 provides, "[ n

need or whose certificate of need has been suspended or revoked has the right to an adjudicative

proceeding. The proceeding is governed by chapter 34. 5 RCW, the Administrative Procedure 0

7 No. 43193 9 II - -

Act." Similarly, WAC 246 -310 -610( ) 1 provides, a] applicant denied a certificate of need or a "[ n

certificate holder whose certificate was suspended or revoked has the right to an adjudicative

proceeding."

The parties disagree, however, whether the Department denied Kadlec's CN by granting

the smallest new bed alternative. The undisputed facts leave no doubt that Kadlec applied for a

CN for 114 beds, with alternative options for 75- and 55 bed increases. The application itself -

repeatedly characterized the proposal as one for 114 new beds, describing that as "the best

opportunity to meet projected ... demand," having " ewest disadvantages," as f and as "the most

efficient ... of any option."AR at 710. In contrast, the application characterized the smaller

increases as "not preferred" and "inferior."AR at 703. The undisputed facts also show that

Kadlec presented its request in this way because it had an immediate need for additional beds, ' but did not know what population forecast the Department would use. Since it could not risk

denial of its entire.equest, it presented two smaller options to its preferred course of action. r

Chapter 70. 8 RCW is focused on providing sufficient, quality health services and 3

facilities, while controlling increases in costs. See RCW 70. 8.105. Kadlec's application 015, . 3

avoided an "all or nothing approach that risked inadequate services if a single large request

were denied. It also avoided the opposite extreme of a series of small requests that would need

to be approved at short intervals to keep up with need. The flexibility of Kadlec's approach

directly served the purposes of the statute and was consistent with the recognition in

RCW 34. 5. an adjudicative application may be approved or denied in whole or in a) 419( 1 that 0 )(

part. The HLFs spurning of Kadlec's approach overlooked the terms of the application and the

purposes of the statute. Consideration of those terms and purposes leads to the conclusion that No. 43193 9 II - -

the Department denied Kadlec's application to add 114 new beds and that Kadlec is entitled to an

adjudicative proceeding to challenge that denial.

B. Implementation

Kadlec further argues that it did not waive the right to an adjudicative hearing by

implementing the 55 bed - CN. The Department responds that Kadlec's implementation

demonstrates acceptance of the 55 bed CN,thus waiving any right to appeal. -

As just noted, under RCW 34. 5.an adjudicative application may be approved or 419, 0

denied in whole or in part. The Department denied Kadlec's request for 114 beds, but approved

an increase of 55. Kadlec's implementation of what was approved in no way deprives it of the

right to challenge what was denied. A decision to the contrary would again jeopardize the

statute's purposes by delaying needed capacity.

C. Written Notice

Kadlec also argues that the Department expressly informed it that it had the right to an

adjudicative hearing, which right would logically refer to the Department's denial of the larger

bed requests. Because we hold that Kadlec had the right to an adjudicative proceeding under the

statute, it is unnecessary to resolve this issue.

III. CONCLUSION

We conclude that the Department denied Kadlec's application for a CN authorizing the

addition of 114 beds and that Kadlec consequently had the right to an adjudicative proceeding

before the HLJ. Therefore, we reverse the superior court decision affirming the HLJ's dismissal

0 No. 43193- 11- 9

order and remand,to the HLJ for an adjudicative proceeding on Kadlec's 114 bed request. -

BJORGE ; J. We concur: 9'*

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