National Healthcare L.P. v. Sparta Medical Investors ( 1998 )

NATIONAL HEALTHCARE, L.P., )
) Davidson Chancery
Plaintiff/Appellant, ) No. 97-469-I
)
VS. )
)
SPARTA MEDICAL INVESTORS
LIMITED PARTNERSHIP and the
)
)
Appeal No.
FILED
01A01-9712-CH-00718
TENNESSEE HEALTH FACILITIES )
COMMISSION, ) May 29, 1998
)
Defendants/Appellees. ) Cecil W. Crowson
Appellate Court Clerk
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
APPEAL FROM THE CHANCERY COURT OF DAVIDSON COUNTY
AT NASHVILLE, TENNESSEE
HONORABLE IRVIN H. KILCREASE, JR., CHANCELLOR
Robert B. Littleton
Kathryn Ladd
TRABUE, STURDIVANT & DeWITT
2500 Nashville City Center
511 Union Street
Nashville, Tennessee 37219
ATTORNEY FOR PLAINTIFF/APPELLANT
John Knox Walkup
Attorney General and Reporter
Michelle Hohnke Joss
Assistant Attorney General
Second Floor, Cordell Hull Building
425 Fifth Avenue, North
Nashville, Tennessee 37243
ATTORNEYS FOR THE TENNESSEE HEALTH FACILITIES
COMMISSION/DEFENDANT/APPELLEE
Jerry W. Taylor
WYATT, TARRANT & COMBS
511 Union Street, Suite 1500
Nashville, Tennessee 37219
ATTORNEY FOR SPARTA MEDICAL INVESTORS LIMITED PARTNERSHIP
AFFIRMED AND REMANDED.
HENRY F. TODD
PRESIDING JUDGE, MIDDLE SECTION
CONCUR:
BEN H. CANTRELL, JUDGE
CONCURS IN SEPARATE OPINION
WILLIAM C. KOCH, JR., JUDGE
NATIONAL HEALTHCARE, L.P., )
) Davidson Chancery
Plaintiff/Appellant, ) No. 97-469-I
)
VS. )
)
SPARTA MEDICAL INVESTORS ) Appeal No.
LIMITED PARTNERSHIP AND THE ) 01A01-9712-CH-00718
TENNESSEE HEALTH FACILITIES )
COMMISSION, )
)
Defendants/Appellees. )
OPINION
This appeal involves an existing health care facility in Sparta, Tennessee and a proposal
to build a second health care facility in the same city. The existing facility opposed the
construction of the new facility, but the Tennessee Health Facilities Commission (hereafter,
Commission) granted a certificate of need (hereafter CON) authorizing the construction of the
new facility. The existing facility petitioned for judicial review. The Trial Court affirmed the
order of the Commission, and the existing facility appealed to this Court.
The identity of the opposing parties and their position in the litigation requires
clarification. The existing facility is called “Sparta Life Care Center” or “SLCC,” but it is owned
by National Healthcare, L.P. which appears in the caption. The application for a CON to build
the new facility in Sparta was filed before the Commission in the name of Sparta Medical
investors, Limited Partnership (SMILP) which was treated as the applicant. The existing facility,
SLCC, petitioned the Commission for a contested hearing, and was treated as the petitioner.
Likewise, when SLCC initiated this judicial review, by petition for review, it became the
petitioner in this proceeding; and SMILP became a respondent along with the Commission.
For purposes of clarity, this opinion will refer to the contesting parties as the existing
facility and the proposed facility.
-2-
The existing facility consists of seventy-nine rooms containing one hundred fifty beds.
The proposed facility was to consist of one hundred twenty beds including twenty “specialized
Alzheimer Units.” The Commission approved only one hundred beds, of which twenty beds
were required to be designated for treatment of Alzheimer’ patients. The Trial Judge affirmed
and the existing facility appealed.
The existing facility was acquired by the appellant National HealthCare in 1978. It is the
only nursing home facility in White County where Sparta is located. It has 150 beds, none of
which are specially designated for treatment of any particular ailment.
The administrative record does not contain the original application for a CON for the
proposed facility, but it does contain a copy of a CON, bearing the signature of the Chairman and
Secretary of the Commission, dated August 2, 1993, and authorizing Sparta Medical Investors,
L.P. to construct a new 100-bed, non-skilled nursing home facility with 20 of those beds
designated for treatment of Alzheimer’s patients.
The record does not contain a copy of the minutes or order of the Commission granting
the CON, but it may reasonably be inferred that such action preceded July 23, 1993, for the
administrative record begins with a “Petition for Contested Case Hearing” filed by “Life Care
Center of Sparta,” filed on July 23, 1993.
After extensive preliminary proceedings and an extended hearing, an administrative judge
signed (and presumably filed), a 20-page order in which she “granted” to Sparta HealthCare
Investors, L.P. “the previously issued” CON “for the establishment of a 100-bed nursing home
facility.” The administrative judge further ordered that the CON “is hereby modified to include
that 20 of the beds be dually certified for participation in the Medicare skilled nursing program.”
-3-
On September 9, 1996, the existing facility filed a “Petition for Appeal from Initial
Order.”
On December 3, 1996, the Commission filed its “Final Order” containing the following:
After consideration of the record in this matter, and
the briefs and arguments of counsel, it is determined that the
CON application submitted on behalf of Sparta Medical
Investors, Limited Partnership, should be GRANTED for a
100-bed nursing home, with 20 of those beds skilled beds,
and including a specialized Alzheimer’s unit. This decision
is based upon the following Findings of Fact and Conclusions
of Law:
FINDINGS OF FACT
1-36. The Commission adopts and incorporates by express
reference Findings of Fact Numbers 1 through 36 of the Initial
Order. The Commission finds and concludes that these
Findings of Fact accurately reflect and interpret the proof in
the record.
CONCLUSIONS OF LAW
1-25. The Commission adopts and incorporates by express
reference Conclusions of Law Numbers 1 through 25 of the
initial Order. These Conclusions of law accurately interpret
and apply the legal authorities reflected therein.
26. In addition, the Commission makes the following
Conclusion of Law, which was not included in the Initial
Order. Pursuant to T.C.A. § 68-11-109, the Commission
must assess the costs of this proceeding against either of the
parties, based upon the consideration of who prevailed on the
merits, and the parties’ abilities to pay.
In this case, the Petitioner, Sparta HC, filed the
petition for contested case hearing. As set forth in the above
Findings of Fact and Conclusions of Law, the evidence
clearly establishes that the CON was properly granted, and
Sparta Medical Investors, Limited Partnership is the
prevailing party. There was no proof submitted indicating
that Sparta HC or its owner, National HealthCare, L.P., does
not have the ability to pay these costs. Therefore, the
Commission concludes and ORDERS that the costs of this
proceeding be assessed to the Petitioner, Sparta HC, pursuant
to T.C.A. § 68-11-109.
----
In addition to the policy reasons reflected in the
Findings of Fact and Conclusions of Law, the Commission
finds that it is sound public policy to apply the CON statutes
and Commission Rules in a fair and equitable manner, and to
grant a certificate of need when the applicable criteria are met.
-4-
Since, as set forth in the Findings of Fact and Conclusions of
Law, those criteria are met by the Life Care Center of Sparta
CON application, it is in the public interest, and it is sound
public policy, to grant the CON to Sparta Medical Investors,
Limited Partnership.
If an amended CON was issued pursuant to this order, it does not appear in the record.
It must be assumed that the original August 2, 1993, CON, as amended by the September 9,
1996, order of the Commission, remains in effect.
As previously stated, the existing facility filed a petition for judicial review, the Trial
Judge affirmed, and the existing facility appealed.
The appellant presents the following issues for review:
I. Whether the Health Facilities Commission erred in
modifying the original certificate of need granted to Sparta
Medical Investors to includes 20 dually certified beds.
II. Whether the Health Facilities Commission’s finds
and conclusions that the proposed facility is needed are
supported by evidence which is both substantial and
material.
III. Whether the Health Facilities Commission’s findings
and conclusions that the proposed facility is economically
feasible are supported by evidence which is both substantial
and material.
The existing facility presents the issues in the following form:
I. Whether the Health Facilities Commission erred in
modifying the original certificate of need granted to Sparta
Medical Investors to include 20 dually certified beds.
II. Whether the Health Facilities Commission’s findings
and conclusions that the proposed facility is needed are
supported by evidence that is both substantial and material.
III. Whether the Health Facilities Commission’s findings
and conclusions that the proposed facility is economically
feasible are supported by evidence that is both substantial and
material.
The Commission presents the following issues:
-5-
I. Whether the Administrative Law Judge complied with
statutory procedures and properly granted a certificate of need
to Sparta Medical Investors for a 100-bed nursing facility,
including 20 dually certified beds.
II. Whether there is substantial and material evidence in
the record to support the Commission’s final order.
The Uniform Administrative Procedure Act, T.C.A. § 4-5-322(h) provides:
Judicial review. - (a)(1) A person who is aggrieved
by a final decision in a contested case is entitled to judicial
review under this chapter which shall be the only available
method of judicial review.
----
(b)(1) Proceedings for review are instituted by filing
a petition for review in the chancery court of Davidson
County, unless another court is specified by statute. Such
petition shall be filed within sixty (60) days after the entry of
the agency’s final order thereon.
----
(h) the court may affirm the decision of the agency or
remand the case for further proceedings. The court may
reverse or modify the decision if the rights of the petitioner
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) Arbitrary or capricious or characterized by abuse
of discretion or clearly unwarranted exercise of discretion; or
(5) Unsupported by evidence which is both substantial
and material in the light of the entire record.
In determing the substantiality of evidence, the court shall
take into account whatever in the record fairly detracts from
its weight, but the court shall not substitute its judgment for
that of the agency as to the weight of the evidence on question
of fact.
Judicial review of factual findings of an administrative agency is not de novo, but the
inquiry is whether the administrative decision is supported by substantial and material evidence.
Sanifill of Tennessee, Inc. v. Tennessee Solid Waste Disposal Control Board, Tenn. 1995, 907
-6-
S.W.2d 807. Southern Ry. Co. v. State Board of Equalization, Tenn. 1984, 682 S.W.2d 196.
Estate of Street v. State Board of Equalization, Tenn. App. 1990, 812 S.W.2d 583.
The Administrative Record contains 579 pages of testimony and 40 voluminous exhibits
which furnish adequate substantial and material evidence to support the findings and conclusion
of the Commission that the proposed facility is needed. There is competent and material
evidence of the following facts:
The existing facility has no skilled nursing beds and 80% of patients being discharged
from the local general hospital need skilled nursing.
Medicare does not pay for post-hospitalization care unless it is “skilled care.”
The proposed facility would provide “dually certified skilled care” compensable by
Medicare.
The existing facility has been unable to accept all applications from White County
residents for admission due to lack of beds and/or services, and such applicants have been
obliged to seek admission to facilities outside the county.
The counties surrounding White County are inadequately equipped to furnish skilled
nursing care, and the area is in need of at least one adequate facility.
The projected needs of the area support the approval of the proposed facility.
The appellant’s first issue complains to this Court that the Commission modified its
original certificate of need to require 20 dually certified beds. Appellant’s argument does not
discuss the issue, but discusses the approval of 100 beds instead of 120 as originally requested.
-7-
This ruling was not prejudicial to appellant.
In response to appellant’s two remaining issues, this Court finds that the final action of
the Commission is supported by competent and substantial evidence and is neither arbitreary nor
capricious nor unlawful. The issue presented by appellees involve the same questions as those
presented by appellant, and therefore requires no further discussion.
The judgment of the Trial Court and the action of the Commission are affirmed. Costs
of this appeal are taxed to the appellant and its surety. The cause is remanded to the Trial Court
for necessary further procedure.
AFFIRMED AND REMANDED.
_________________________________
HENRY F. TODD
PRESIDING JUDGE, MIDDLE SECTION
CONCUR:
_____________________________
BEN H. CANTRELL, JUDGE
CONCURS IN SEPARATE OPINION:
WILLIAM C. KOCH, JR., JUDGE
-8-