Michigan Affiliated Healthcare System, Inc v. Department of Public Health , 209 Mich. App. 699 ( 1995 )

209 Mich. App. 699 (1994) 531 N.W.2d 722

MICHIGAN AFFILIATED HEALTHCARE SYSTEM, INC
v.
DEPARTMENT OF PUBLIC HEALTH

Docket No. 171103.

Michigan Court of Appeals.

Submitted November 16, 1994, at Lansing. Decided December 27, 1994. Approved for publication April 19, 1995, at 9:05 A.M.

Fraser Trebilcock Davis & Foster, P.C. (by Robert W. Stocker, II, and Michael E. Cavanaugh), for the plaintiffs.

Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, and R. Philip Brown, Assistant Attorney General, for the Department of Public Health.

Foster, Swift, Collins & Smith, P.C. (by Brian A. Kaser), for Edward W. Sparrow Hospital.

Before: WEAVER, P.J., and CORRIGAN and C.D. CORWIN,^[*] JJ.

PER CURIAM.

In this action contesting a decision of the Department of Public Health (DPH) in favor of intervening defendant Edward W. Sparrow Hospital (Sparrow), plaintiffs appeal as of right the dismissal of their complaint for lack of standing. We affirm.

In July 1992, Sparrow applied to the DPH for a certificate of need to begin providing cardiac catheterization and open-heart surgical services to its patients. Thereafter, a public-comment period and hearing were held. Plaintiffs did not participate in either administrative procedure. Initially, the DPH denied the application because Sparrow could not establish sufficient need for the certificate.^[1] Sparrow appealed the decision in the circuit court. During the appellate proceedings, the DPH granted Sparrow's application pursuant to a settlement agreement.

Plaintiff Michigan Affiliated Healthcare System, Inc., (MAHSI) owns and operates Ingham Medical Center (IMC), a competitor of Sparrow Hospital. Before Sparrow received its certificate of need for open-heart surgical procedures, IMC was the only health care facility in the Lansing area that performed such services. MAHSI and six individual plaintiffs, all residents of Ingham County, brought suit challenging the decision of the DPH to issue a certificate of need to Sparrow. The trial court dismissed plaintiffs' multicount complaint because only certificate applicants may appeal DPH final decisions concerning certificates of need.

Plaintiffs contend that the trial court erred in dismissing their complaint for lack of standing. We disagree. The Public Health Code, 1978 PA 368, originally conferred standing to appeal a decision of the DPH regarding the grant or denial of a certificate of need to the applicant or a health systems agency.^[2] MCL 333.22165; MSA 14.15(22165). Under that version of the health code, this Court held that competitors of a hospital applying for a certificate of need do not have standing to challenge a decision of the DPH. Rehabilitation Institute, Inc v Dep't of Public Health, 173 Mich. App. 68, 70-71; 433 NW2d 818 (1988); Pontiac Osteopathic Hosp v Dep't of Public Health, 157 Mich. App. 583; 403 NW2d 82 (1986).

In 1988 PA 322, the Legislature repealed § 22165 of the code and added § 22231. MCL 333.22231(9); MSA 14.15(22231)(9) provides as follows:

The final decision of the director may be appealed only by the applicant and only on the record directly to the circuit court for the county where the applicant has its principal place of business in this state or the circuit court for Ingham County. [Emphasis added.]

The new section differs from the original version only because health systems agencies no longer enjoy standing in certificate-of-need cases. The statute continues to exclude all others, including competing hospitals, from appealing DPH final decisions. The addition of § 22231, which excludes health systems agencies from having standing, does not mitigate the precedential value of Rehabilitation Institute, supra, or Pontiac Osteopathic, supra. Competitor hospitals, such as MAHSI, do not have standing to challenge a DPH decision in certificate cases. Moreover, individual plaintiffs and MAHSI cannot establish standing under a taxpayer's suit or Const 1963, art 6, § 28. Plaintiffs have not challenged a direct expenditure of state funds. Shavers v Attorney General, 402 Mich. 554; 267 NW2d 72 (1978). Further, Const 1963, art 6, § 28 allows appeals from administrative decisions "as provided by law." Because the Legislature explicitly limited appellate rights to the applicants, plaintiffs' arguments necessarily fail.

In light of our resolution of the standing issue, we do not decide the balance of plaintiffs' claims.

Affirmed.

NOTES

[*] Circuit judge, sitting on the Court of Appeals by assignment.

[1] Sparrow was required to show, through its own data and data pledged from other hospitals, that it would perform two hundred procedures if given the certificate of need. After it submitted data demonstrating a need for two hundred procedures, several hospitals rescinded their pledges.

[2] Health systems agencies were federally funded agencies that apparently no longer exist in Michigan.