Queen City Nursing Center, Inc. v. Mississippi State Department of Health

IN THE SUPREME COURT OF MISSISSIPPI
NO. 2010-CC-01077-SCT
QUEEN CITY NURSING CENTER, INC.,
COMMUNITY LIVING CENTERS, LLC d/b/a
MERIDIAN COMMUNITY LIVING CENTER, AND
BEVERLY ENTERPRISES-MISSISSIPPI, INC.
d/b/a GOLDEN LIVING CENTER-MERIDIAN
v.
MISSISSIPPI STATE DEPARTMENT OF
HEALTH AND MEADOWBROOK HEALTH AND
REHAB, LLC
DATE OF JUDGMENT: 06/10/2010
TRIAL JUDGE: HON. J. DEWAYNE THOMAS
COURT FROM WHICH APPEALED: HINDS COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANTS: THOMAS L. KIRKLAND, JR.
ALLISON C. SIMPSON
ANDY LOWRY
ATTORNEYS FOR APPELLEES: BEA M. TOLSDORF
BETTY TOON COLLINS
DOUGLAS E. LEVANWAY
ELIZABETH G. HOOPER
NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES
DISPOSITION: AFFIRMED - 12/01/2011
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE DICKINSON, P.J., LAMAR AND KITCHENS, JJ.
LAMAR, JUSTICE, FOR THE COURT:
¶1. Meadowbrook Health and Rehab, LLC, filed an application for a certificate of need
(“CON”) with the Mississippi Department of Health (“DOH”) to build a nursing home in
Lauderdale County. The DOH staff recommended that the application be approved. Several
surrounding nursing homes contested the application and requested a hearing. After three
days of testimony, the hearing officer recommended that the application be denied. But the
State Health Officer (“SHO”) disagreed and granted the CON. The contestants appealed to
the Hinds County Chancery Court, which affirmed the SHO’s decision. The contestants now
appeal to this Court, arguing that the SHO’s decision is arbitrary and capricious and that the
CON violates the statutory moratorium on new nursing home construction. We affirm the
Hinds County Chancery Court.
FACTS AND PROCEDURAL HISTORY
¶2. In January 2009, Meadowbrook applied to the DOH for a CON 1 to construct a sixty-
bed nursing home facility in Lauderdale County. The facility was to be a “replacement
facility” for a Kemper County nursing home – Kemper Homeplace – which had contained
twenty-one beds before it was closed.2 Bruce Kelly – the owner of Meadowbrook and
1
Mississippi Code Section 41-7-191 states, in pertinent part:
“(1) No person shall engage in any of the following activities without
obtaining the required certificate of need:
... (b) The relocation of a health care facility or portion thereof, or major
medical equipment, unless such relocation of a health care facility or portion
thereof . . . is within five thousand two hundred eighty (5,280) feet from the
main entrance of the health care facility . . . . ”
Miss. Code Ann. § 41-7-191 (Rev. 2009).
2
In November 2005, the DOH Division of Licensure and Certification had determined
that the Kemper Homeplace residents were in “immediate jeopardy.” All of the residents
were relocated, and Kemper Homeplace closed in January 2006. The owner of Kemper
Homeplace sold the beds to Bruce Kelly – the owner of Meadowbrook and Poplar Springs
Nursing Home. In March 2007, Kelly placed the beds in “abeyance.” Kelly subsequently
formed Meadowbrook as the replacement entity for Kemper Homeplace.
2
another Lauderdale County nursing home, Poplar Springs – also planned to relocate thirty-
nine beds from Poplar Springs to Meadowbrook to fulfill the DOH’s requirement that no new
nursing home facility be opened with fewer than sixty beds.3
¶3. The DOH staff conducted a review and in April 2009 recommended that the
application be approved. Specifically, the staff review concluded that:
The project is in substantial compliance with the overall objectives as
contained in the FY 2009 State Health Plan; the Mississippi Certificate of
Need Review Manual, revised 2008; and all adopted rules, procedures, and
plans of the Mississippi State Department of Health. The Division of Health
Planning and Resource Development recommends approval of this application
submitted by Meadowbrook Health and Rehab, LLC for replacement of the
Kemper County Nursing Home and Relocation of 39 Nursing Facility Beds
from [Poplar] Springs Nursing and Rehab to [the] Northpointe Health &
Rehab[4] project in Lauderdale County.
Several surrounding Lauderdale County nursing homes – Queen City Nursing Center,
Meridian Community Living Center and Golden Living Center (“contestants”) – opposed
the application and timely requested a hearing, as “affected persons” under the governing
statute. See Miss. Code Ann. § 41-7-197 (Rev. 2009).
¶4. At a three-day hearing in September 2009, the designated hearing officer heard
evidence presented by the DOH, Meadowbrook, and the contestants. After review, the
hearing officer issued her findings, disagreeing with the DOH staff analysis and
recommending that Meadowbrook’s CON application be denied. The hearing officer found
3
Section 106.01 of the Mississippi State Health Plan states, in pertinent part: “The
[DOH] shall not approve construction of a new or replacement nursing home care facility
for less than 60 beds.” Miss. State Health Plan, Ch. 8, § 106.01(6) (2009), available at
http://msdh.ms.gov/msdhsite/index.cfm/19,2945,184,455,pdf/StateHealthPlan2009Compl
ete.pdf (last visited Nov. 10, 2011).
4
Kelly intended to name the new facility “Northpointe Health & Rehab.”
3
that the application was “not in substantial compliance” with the relevant rules, regulations
and statutes, that the DOH staff analysis was “incorrect in its findings,” and that the
application should be disapproved by the SHO. But the SHO disagreed with the hearing
officer and issued a final order approving Meadowbrook’s application.5 The SHO found that
the application was “in substantial compliance with the State Health Plan and General
Review Criteria found in the Certificate of Need Review Manual,” and she stated that she
“concur[red] with and adopt[ed] the [DOH] staff’s findings and recommendation.”
¶5. The contestants timely appealed to the Hinds County Chancery Court, which affirmed
the SHO’s decision. The chancellor found that the SHO’s decision “was supported by
substantial evidence, was not contrary to the manifest weight of the evidence, was not in
excess of the statutory authority or jurisdiction of the [DOH], and did not violate any vested
constitutional rights of any party involved in the appeal.” The contestants now appeal to this
Court, arguing that:
(1) this Court should apply a heightened standard of review because the
SHO merely “adopted a staff analysis” with no explanation and no separate
opinion; and that this Court should grant the DOH no deference in its
5
Section 41-7-197(2) of the Mississippi Code gives the SHO the sole authority to
grant or deny CONs following the hearing and states, in pertinent part:
The completed record shall be certified to the State Health Officer, who shall
consider only the record in making his decision, and shall not consider any
evidence or material which is not included therein. All final decisions
regarding the issuance of a certificate of need shall be made by the State
Health Officer. The State Health Officer shall make his written findings and
issue his order after reviewing said record.
Miss. Code Ann. § 41-7-197 (2) (Rev. 2009) (emphasis added).
4
interpretation of the moratorium on new nursing home construction because
it “farmed out” the interpretation of that law to the Attorney General’s Office;6
(2) it was arbitrary and capricious for the SHO to grant the CON when
there was “no evidence that the [DOH’s] need policy was met”;
(3) it was arbitrary and capricious for the SHO to grant the CON when
there was no evidence that Meadowbrook considered available alternatives,
met the State Health Plan’s objectives, or proved economic viability; and
(4) the application does not fall within one of the exceptions to the
moratorium on new nursing home construction enumerated by the Attorney
General; or, in the alternative, the Attorney General’s interpretation of the
moratorium violates the plain language of the statute.
We disagree with the contestants and find that the chancellor correctly ruled that the SHO’s
decision to grant the CON was supported by substantial evidence and thus was not arbitrary
and capricious. And although neither the staff analysis nor the SHO discussed the statutory
moratorium on new nursing home construction,7 we find that the DOH’s interpretation of the
moratorium is not “repugnant” to the plain meaning of the statute, and we agree with its
interpretation.
ANALYSIS
I. The SHO’s decision that there was a need for the Meadowbrook Project was not
arbitrary and capricious.
A. Standard of Review
¶6. Section 41-7-201(2)(f) of the Mississippi Code sets forth the standard of judicial
review for a final order of the DOH and provides that it shall be vacated only upon an error
6
We address the contestants’ standard-of-review arguments in the relevant sections.
7
See Miss. Code Ann. § 41-7-191(2) (Rev. 2009): “The State Department of Health
shall not grant approval for or issue a certificate of need to any person proposing the new
construction of, addition to, or expansion of any health care facility . . . . ”
5
of law, or if the order “is not supported by substantial evidence, is contrary to the manifest
weight of the evidence, is in excess of the statutory authority or jurisdiction . . . or violates
any vested constitutional rights of any party involved in the appeal.” 8
¶7. “If an administrative agency’s decision is not based on substantial evidence, it
necessarily follows that the decision is arbitrary and capricious.” Miss. State Dep’t of
Health v. Natchez Cmty. Hosp., 743 So. 2d 973, 977 (Miss. 1999). “An administrative
agency’s decision is arbitrary when it is not done according to reason and judgment, but
depending on the will alone.” Id. “An action is capricious if done without reason, in a
whimsical manner, implying either a lack of understanding of or disregard for the
surrounding facts and settled controlling principles.” Id.
¶8. As administrative agencies are given much deference, “the burden of proof rests on
the challenging party to prove that the department erred.” Greenwood Leflore Hosp. v. Miss.
State Dep’t of Health, 980 So. 2d 931, 934 (Miss. 2008). And “the same deference due the
8
The contestants urge this Court to apply a heightened standard of review, because
the SHO “rejected” the hearing officer’s recommendation “without making any independent
findings or explanation of her own.” But we find that their argument is contradicted by the
plain language of Section 41-7-197(2), which states, in pertinent part:
The completed record shall be certified to the State Health Officer, who shall
consider only the record in making his decision, and shall not consider any
evidence or material which is not included therein. All final decisions
regarding the issuance of a certificate of need shall be made by the State
Health Officer. The State Health Officer shall make his written findings and
issue his order after reviewing said record.
Miss. Code Ann. § 41-7-197(2) (Rev. 2009). Nowhere in the statute is the SHO required to
defer to the findings of the hearing officer, nor is she required to “explain” her reasons for
disagreeing with the hearing officer. She is required only to review the entire record, issue
an order, and make her written findings, all of which she did in this case.
6
department’s finding must also be given to the chancellor who, on appeal, affirms and adopts
the department’s finding.” Id.
¶9. In sum, we will neither reweigh the evidence nor conduct a de novo review of
contested facts. Rather, our review is limited to whether substantial evidence existed to
support the SHO’s decision.
B. Analysis
¶10. Kelly’s proposal would establish a sixty-bed facility in Lauderdale County by
relocating thirty-nine beds from Poplar Springs (a Lauderdale County facility) and replacing
the twenty-one beds from the closed Kemper County facility. In other words, no new beds
would be established, but the twenty-one beds that had been held in abeyance for two years
would be reestablished. The contestants argue that the SHO’s decision to grant the CON was
arbitrary and capricious because there was no substantial evidence of General Review
Criterion 5 – Need for the Project.9 We therefore examine the record to determine whether
substantial evidence exists to support the SHO’s conclusion that there was a need for the
Meadowbrook project.
9
One of the general criteria used to evaluate a CON application is “Need for the
Project.” Under that criterion, several items “may be considered” to determine whether a
need for the project exists. Pertinent here is item (a), which states:
The need that the population served or to be served has for the services
proposed to be offered or expanded and the extent to which all residents of the
area – in particular low income persons, racial and ethnic minorities, women,
handicapped persons and other underserved groups, and the elderly – are
likely to have access to those services.
15-991-8 Miss. Code R. § 100.01(5)(a) (Weil 2011), available at
http://msdh.ms.gov/msdhsite/_static/resources/3346.pdf (Last visited Nov. 30, 2011).
7
¶11. Don Eicher, the Director of the Office of Health Policy and Planning at the DOH,
testified that there was a need for 738 beds in Long-Term Planning District IV, which
includes both Lauderdale and Kemper Counties.10 He testified that Lauderdale County
contained 572 licensed beds, but had a need for 591, for a total of nineteen needed beds.
Eicher testified that:
The other part and principle is that there’s a greater bed need in the county
where it’s being moved to . . . Kemper County, the 2009 State Health Plan
shows a need for two beds, as opposed to Lauderdale having a need of 19.
And, therefore, you’re moving from having less need to a county that has
greater need. So that’s our other principle that we wouldn’t allow you to move
the other direction. If you were moving from Lauderdale to Kemper, you
would not be recommended for approval because you are moving from a
county with a higher need to one that has a lesser need.
¶12. Meadowbrook also presented testimony from Dan Sullivan, who was accepted as an
expert in “healthcare planning, healthcare financial projections and CON preparations.”
Sullivan testified that if the twenty-one Kemper County beds held in abeyance were not used
within five years, they would be “lost to the system” 11 because of the moratorium, and that
10
Eicher’s figures were based on the 2009 State Health Plan, which was the plan in
effect at the time Meadowbrook’s CON application was filed.
11
Sullivan was referring to Mississippi Code Section 41-7-191 which states, in
pertinent part:
(1) No person shall engage in any of the following activities without obtaining
the required certificate of need:
(a) The construction, development or other establishment of a new
health care facility, which establishment shall include the reopening of a
health care facility that has ceased to operate for a period of sixty (60) months
or more . . . .
Miss. Code Ann. § 41-7-191(1)(a) (Rev. 2009).
8
“from a health planning perspective,” that “would be something we don’t want to see
happen.” And, based on his calculations, “there ought to be significantly more demand over
the next five years for nursing home beds in Lauderdale County and having that additional
twenty-one bed capacity available should be beneficial,” and that “it would take us almost
20 years to generate enough incremental need to support 39 additional beds12 in Kemper
County.”
¶13. Sullivan also gave his opinion about whether the twenty-one beds should stay in
Kemper County or be relocated to Lauderdale County:
So clearly, then, looking at this, in terms of where you’d end up, from a
county-by-county perspective, you would create a more disproportionate need
in Lauderdale County if you moved 39 beds to Kemper than you would – in
Kemper County, if you moved 21 beds to Lauderdale . . . . If the project is not
approved, we’re still going to have a need for 23 beds in Kemper County
because those beds are going to go out of existence. So it’s almost a given that
we’re going to end up with a bed need of 23 in Kemper County. And then the
question is: Do we try to solve that by moving 39 beds over, or do we move
those beds into Lauderdale County? . . . So, whether you are using 572 beds
or 602 beds, you’re still better off from a net bed need standpoint in moving
the beds to Lauderdale County.
(Emphasis added.) Sullivan testified that the need criteria is based on district-wide planning,
not county-wide planning, and that the district encompassing Lauderdale and Kemper
Counties needed more than 700 beds. Additionally, the administrators of the three contesting
nursing homes testified that, during the last couple of years, their occupancy rates had been
at ninety-five percent or above. And finally, as discussed above, while the staff analysis
conceded that moving the twenty-one beds into Lauderdale County would leave Kemper
12
Sullivan was referring to the thirty-nine Poplar Springs beds that Kelly planned to
relocate.
9
County underbedded by twenty-three and Lauderdale County overbedded by two, it also
noted that the alternative – leaving the twenty-one in Kemper County and relocating the
thirty-nine Poplar Springs beds there – would leave Lauderdale County underbedded by fifty-
eight.
¶14. After reviewing the record, and without further belaboring this opinion, we find that
substantial evidence exists to support the SHO’s finding that there is a need for the
Meadowbrook project. So it cannot be said that her decision was arbitrary and capricious,
as it was not reached on “will alone,” or through “a lack of understanding of or disregard for
the surrounding facts.” Natchez Cmty. Hosp., 743 So. 2d at 977.
II. The SHO’s decision that the Meadowbrook Project met other relevant criteria was
not arbitrary and capricious.
¶15. The contestants next argue that Meadowbrook also failed to satisfy other criteria –
specifically, that it failed to consider available alternatives, failed to conform to the State
Health Plan’s goals, and failed to prove financial feasability.
A. Availability of Alternatives
¶16. The contestants argue that Meadowbrook did not provide evidence of General
Criterion 3– Availability of Alternatives.13 They point out that Bruce Kelly, the owner of
Meadowbrook and Poplar Springs, testified that he bought the Kemper County beds without
ever considering placing them at Poplar Springs. Kelly also testified that he did not obtain
13
General Criterion 3 is the “Availability of Alternatives: The availability of less
costly or more effective alternative methods of providing the service to be offered, expanded
or relocated.” 15-991-8 Miss. Code R. § 100.01(3) (2011), available at
http://msdh.ms.gov/msdhsite/_static/resources/3346.pdf (last visited Nov. 30, 2011).
10
any architectural estimates for adding the twenty-one beds to his existing Poplar Springs
facility. So, the contestants argue, there was “no substantial evidence that adding the twenty-
one beds at Poplar Springs would not be ‘less costly.’”
¶17. Although Kelly did state at one point that he did not consider placing the beds at
Poplar Springs, his testimony as a whole shows that he did consider that option, but then
rejected it:
And the thought never really entered my mind to put them at Poplar Springs.
At the time, I did not own the property adjacent to [Poplar Springs]. Since
then, I’ve acquired about 34 acres around the facility. But, initially, I did not
own that land . . . . I really don’t like to do things halfway, and it’s been a
passion of mine as an owner to provide private rooms[14] for our patients . . .
. So, with that in mind, my whole intent was to never really put them at [the]
Poplar Springs location because we have a huge facility now, and it might
would [sic] have accommodated, you know these people with some building,
you know, alterations. We really didn’t spend a lot of time looking at that due
to the fact that I believe our patient[s], Medicare, the poor, are entitled to a
private room, just like the ones that can pay their way. So that’s just been a
passion of mine . . . I have done renovations, and we have a renovation now.
And, you now, it’s very traumatic for the patients . . . It’s just traumatic on the
residents if their routine is upsetted [sic] . . . .
Kelly also testified that he decided not to simply replace Kemper Homeplace in Kemper
County because “[a]fter talking to the state agency people, it was not a doable project
because you have to build 60 beds or replace twenty-one, which is not viable . . . [y]ou know,
twenty-one beds is not, you now, going to survive economically.” The CON application also
reflects that these options were considered and rejected.
14
Kelly plans for his new facility to have sixty private rooms. And after the thirty-
nine beds are relocated from Poplar Springs, Poplar Springs will have sixty-nine private
rooms and eleven semi-private rooms.
11
¶18. Dan Sullivan testified that he also had considered alternatives in his review of
Meadowbrook’s application. The first option was simply to do nothing – Sullivan dismissed
that idea, stating “[w]ith the demographic changes that are occurring in the population,
there’s going to be more demand for nursing home beds in the future,” and “[i]t would be a
shame to lose any bed capacity when there’s no ability to recapture that bed capacity down
the road.” Sullivan also considered adding the twenty-one beds to Poplar Springs, but
dismissed that option as well, stating:
[I]t doesn’t accomplish some of the other goals that the project could do in a
freestanding building . . . . What you would be doing is decreasing the number
of private rooms because you would have to basically shoehorn these beds into
an existing 130-bed facility and create a 151-bed facility. And so what you’d
be doing is diminishing the quality of life at the existing facility . . . .
We find that substantial evidence exists to support a finding that no better alternatives were
available. Although adding the beds to Poplar Springs might ultimately have been “less
costly,” testimony was presented that this option was not a “more effective alternative
method.”
B. Conformity to the State Health Plan Goals
¶19. General Criterion 1 considers “the relationship of the health services being reviewed
to the applicable State Health Plan.” The Health Plan states that Mississippi’s planning and
health regulatory activities have four purposes:
1. To improve the health of Mississippi residents;
2. To increase the accessibility, acceptability, continuity and quality of health
services;
3. To prevent unnecessary duplication of health resources; and
4. To provide some cost containment.
12
M iss. State H ealth Plan, Ch. 1, § 102 (2009), available at
http://msdh.ms.gov/msdhsite/index.cfm/19,2945,184,455,pdf/StateHealthPlan2009Compl
ete.pdf (last visited Nov. 30, 2011). The contestants argue that Meadowbrook has failed to
demonstrate how its application advances these goals, because the new facility was an
unnecessary duplication, the Division of Medicaid opposed the project, and moving beds out
of underbedded Kemper County does not improve access for Kemper County citizens.
1. Improve Health and Increase Accessibility to Health Services15
¶20. Meadowbrook’s application states that its new facility would “allow those in need of
nursing home care to reside in as pleasant and homelike a setting as possible with private
rooms and large spacious areas for daytime activities.” Both Bruce Kelly and Dan Sullivan
testified that the trend in the nursing home industry was to provide nursing home residents
with privacy and dignity. There also was testimony that relocating Kemper Homeplace to
Lauderdale County would greatly improve the residents’ access to acute-care hospitals.
2. Prevent Unnecessary Duplication
¶21. Meadowbrook noted in its application that its project furthers this goal because “there
are no new nursing home beds that are being added to the State.” And when asked whether
the project would unnecessarily duplicate existing services, Dan Sullivan testified:
It does not. First of all, it’s not increasing the bed capacity. And you’re
probably tired of me [sic] hearing me say that . . . . You know, we know we
have to replace the twenty-one beds or lose them. And we know we have to
build a 60-bed facility in order to accommodate those beds or, as I said before,
put them in another facility and make a larger institution-type facility. So I
don’t believe it’s unnecessary duplication when you create a facility that’s
15
We discuss these two considerations together because they are so closely
intertwined.
13
more desirable from a patient care standpoint, from a quality of life standpoint,
and doesn’t result in any increase in beds.
3. Provide Some Cost-Containment
¶22. Meadowbrook noted in its application that the relocation of the twenty-one beds
furthers this goal because “such replacement of a twenty-one-bed facility with a 60-bed
facility allows economies of scale in operation.” And the staff analysis noted that
Meadowbrook’s projected construction costs were within the median range for construction
of a nursing home. Don Eicher testified that the alternative chosen by the applicant does not
have to be the cheapest. And Dan Sullivan testified that the project provided some cost
containment, noting that “cost containment doesn’t mean choosing the cheapest alternative,”
and that cost containment “means providing an expenditure that achieves stated goals, and
it’s still in the most economical manner.”
¶23. Medicaid did oppose the project, claiming that the new facility would cost it
$1,157,850 annually. But Meadowbrook presented evidence at the hearing that the actual
cost to Medicaid would be much lower. Shane Hariel, who was accepted as an expert in
healthcare and nursing home finance, testified that the “lion’s share of that amount is simply
due to the twenty-one beds re-entering service.” Hariel also testified that, if all factors were
taken into account, such as patient responsibility payments, bed taxes, and matching federal
funds, the actual cost to Medicaid would be $189,877.
¶24. We find that substantial evidence exists in the record from which the SHO could find
that Meadowbrook’s application substantially complied with the State Health Plan’s goals.
14
C. Financial Feasability
¶25. The contestants claim lastly that Meadowbrook provided no evidence of General
Criterion 4 – Economic Viability.16 The contestants argue that Meadowbrook never
produced a cash-flow statement, did not include the cost of the twenty-one beds or the land
on which the facility would be built in its capital-expenditure calculation,17 and that its debt-
service ratio was less than one.18
¶26. The contestants’ expert, Dr. John Hyde, testified that the new facility would not be
financially feasible, while two of Meadowbrook’s experts testified that it would be. When
asked his opinion about whether the new facility would be financially viable, Shane Hariel
stated, “[b]ased on the assumptions that we utilized and that I’m comfortable with, I have no
reason to believe that it would not be feasible.” And when asked if the facility would be
profitable, Hariel testified:
Yes . . . I go back to these are assumptions made. Nobody can predict what’s
actually going to happen in the future, but they are reasonable assumptions,
based on my work with other facilities. And assuming that these assumptions
do come to fruition, there’s no reason that they can’t be quite profitable.
16
“Economic Viability: The immediate and long-term financial feasability of the
proposal, as well as the probable effect of the proposal on the costs and charges for providing
health services by the institution or service.” 15-991-8 Miss. Code R. § 100.01(4) (Weil
2011), available at http://msdh.ms.gov/msdhsite/_static/resources/3346.pdf (last visited Nov.
30, 2011).
17
Shane Hariel testified that both the Certificate of Need Review Manual and the staff
analysis state that the cost of land is to be excluded when calculating the construction cost.
18
Dr. John Hyde, the contestants’ expert, testified that a debt-ratio of less than one
means that “you’re not making enough income to pay your debt.”
15
Sullivan also testified that the project would be financially feasible, and that nothing he had
heard from the contestants’ expert, Dr. Hyde, “changed [his] opinion about that.” We find
that substantial evidence exists in the record from which the SHO could find that
Meadowbrook’s project demonstrated financial feasibility.
III. The project does not violate Section 41-7-191(2) of the Mississippi Code.
¶27. The contestants argue alternatively that the SHO’s decision to grant a CON to
Meadowbrook violates Mississippi Code Section 41-7-191(2), which states, in pertinent part:
The State Department of Health shall not grant approval for or issue a
certificate of need to any person proposing the new construction of, addition
to, or expansion of any health care facility defined in subparagraphs (iv)
(skilled nursing facility)[19 ] . . . except as hereinafter authorized[20 ] . . .
Miss. Code Ann § 41-7-191 (2) (Rev. 2009) (emphasis added). The parties refer to this
statute as the “moratorium,” and the DOH has, since its passage in 1990, interpreted it to
preclude only “new authorized beds and new facilities where none had previously existed.”
The DOH has “always viewed the relocation of existing beds or facilities and/or the
replacement of such existing facilities with more modern amenities as outside the parameters
of the moratorium.” The DOH “does not interpret the moratorium to prohibit any and all
construction when such construction is related to a skilled nursing facility.”
¶28. This Court has:
19
Section 41-7-173(h)(iv) defines “skilled nursing facility” as “an institution or a
distinct part of an institution which is primarily engaged in providing to inpatients skilled
nursing care and related services for patients who require medical or nursing care or
rehabilitation services for the rehabilitation of injured, disabled or sick persons.”
20
The Legislature has since authorized many exceptions to the moratorium, but none
is at issue in this case. See Miss. Code Ann. § 41-7-191(2)(a)-(t) (Rev. 2009).
16
generally accorded great deference to an administrative agency’s construction
of its own rules and regulations and the statutes under which it operates . . . .
“an agency’s interpretation of a regulation it has been authorized to promulgate
is entitled to great deference and must be upheld unless it is so plainly
erroneous or so inconsistent with either the underlying regulation or statute as
to be arbitrary, capricious, an abuse of discretion or otherwise not in
accordance with law.
Miss. State Dep’t of Health v. Baptist Mem’l Hosp., 984 So. 2d 967, 981 (Miss. 2008)
(citations omitted) (emphasis added). And “unless the Department’s interpretation [of a
statute] is repugnant to the plain meaning thereof, the court is to defer to the agency’s
interpretation.” Ricks v. Miss. State Dep’t of Health, 719 So. 2d 173, 179 (Miss. 1998)
(citations omitted) (emphasis added). We also have ruled that “where an administrative
agency’s interpretation is contrary to the unambiguous terms or best reading of a statutory
provision, the agency is not entitled to deference.” Sierra Club v. Miss. Envtl. Quality
Permit Bd., 943 So. 2d 673, 679 (Miss. 2006) (citations omitted) (emphasis added).21
However, we think it important to clarify what we mean by “deference” and “defer” as used
in these cases, and in numerous other cases, discussing an agency’s interpretation of its
governing statutes. The ultimate authority and responsibility to interpret the law, including
statutes, rests with this Court. But in determining the most reasonable and appropriate
21
The DOH previously requested an opinion from the Attorney General, asking him
to opine on its interpretation of the moratorium. The contestants urge this Court to grant no
deference to that interpretation, because the DOH “punted the decision to the Attorney
General’s Office.” First, we disagree that the DOH has “punted” the interpretation to the
AG’s Office, as the DOH states clearly in its brief that it had been interpreting the statute the
same way that the AG ultimately interpreted it before it requested the opinion, and the
contestants do not dispute that assertion. Second, and more importantly, this point is
meritless in light of our discussion clarifying the consideration we give an agency’s
interpretation.
17
interpretation of a statute, the agency’s interpretation is an important factor that usually
warrants strong consideration. However, we do not defer to the agency’s interpretation in
the sense that we yield judgment or opinion.
¶29. Meadowbrook argues that, if the Legislature had “intended to apply the moratorium
to the construction of replacement nursing homes and the relocation of existing nursing home
beds, it would have included such language in the statute.” Meadowbrook notes that, since
1990, the Legislature has passed numerous exceptions to the moratorium, each dealing with
either the “creation of new never-before-authorized nursing home beds or the creation of new
never-before authorized nursing homes.”
¶30. The DOH agrees with Meadowbrook and argues that its project is not the “new
construction” that the moratorium statute is designed to prohibit:
Although the bricks and mortar Meadowbrook will use to construct the
building will be new, the actual nursing home itself will not be considered new
for health planning purposes in the State. It will replace a previously
operating but still existing nursing home – Kemper. The beds which will be
used for the provision of skilled nursing care at Meadowbrook will not be new,
they will be currently existing beds – twenty-one previously authorized
Kemper beds and 39 previously authorized Poplar Springs beds. This CON
application does not involve the creation of new beds or the creation of any
additional skilled nursing facility and thus the moratorium does not apply.
¶31. And we note the chancellor’s order, in which he stated that the “Meadowbrook
Application did not propose the ‘new construction of, addition to or expansion of’ a skilled
nursing facility; instead, the Application requested to replace the old, dilapidated building
that formerly housed twenty-one existing beds comprising Kemper Homeplace and to
relocate the Kemper beds and 39 Poplar Springs’ beds to a new building . . . .”
18
¶32. After review, we find that the DOH’s interpretation is not “repugnant” to the plain
meaning of the statute, nor is it “contrary” to its unambiguous terms, so we therefore find it
to be a reasonable and appropriate interpretation. We now turn to whether Meadowbrook’s
project properly falls within the DOH’s interpretation.
¶33. As mentioned above, the DOH has “always interpreted the moratorium to be expressly
prohibiting the increase of two things, new authorized beds and new facilities where none
had previously existed,” and it has “always viewed the relocation of existing beds or facilities
and/or the replacement of such existing facilities with more modern amenities as outside the
parameters of the moratorium.”
¶34. The contestants argue that Meadowbrook’s project does not fall within this
interpretation. They argue that Meadowbrook is not a “replacement” of an “existing”
facility, because Kemper Homeplace does not “exist.” They also argue that the project is not
a “relocation” of an existing facility, as again, Kemper Homeplace does not exist, and Poplar
Springs “means to continue doing business right where it is.” We disagree.
¶35. First, we find that Kemper Homeplace is still an “existing” facility for purposes of the
CON process. The CON statute does not require a CON if a facility attempts to reopen
within sixty months of ceasing to operate. See Miss. Code § 41-7-191(1)(a) (Rev. 2009).22
22
“(1) No person shall engage in any of the following activities without obtaining the
required certificate of need:
(a) The construction, development or other establishment of a new health care
facility, which establishment shall include the reopening of a health care
facility that has ceased to operate for a period of sixty (60) months or more[.]”
Miss. Code Ann. § 41-7-191 (1) (a) (Rev. 2009).
19
And Don Eicher, the Director of the DOH’s Office of Health Policy and Planning, clearly
testified that:
The Legislature amended the Certificate of Need law several years ago, and
they required that any healthcare facility that’s been closed or not provided
service in 60 months or more be analyzed as a new facility. And so this
facility will lose its – after 60 months of being closed and not providing any
service, it would not be considered an existing facility. So, despite this facility
being closed for three-and-a-half years, it’s still in existence under the
Certificate of Need law until that 60-month threshold gets crossed.
So we find that moving the twenty-one Kemper Homeplace beds to Meadowbrook’s
proposed facility is a “replacement” of an “existing healthcare facility,” a project not
prohibited by the moratorium under the DOH’s interpretation. Second, we find that moving
the thirty-nine beds from Poplar Springs to Meadowbrook’s proposed facility is a
“relocation,” as defined by the DOH, as it clearly states that it has “always viewed the
relocation of existing beds” as “outside the parameters of the moratorium.”
CONCLUSION
¶36. We find that the SHO’s decision to grant Meadowbrook a CON was not arbitrary and
capricious, as her decision was supported by substantial evidence. We find that the DOH’s
interpretation of the statutory moratorium is not “repugnant” to the plain meaning of the
statute, and we agree with its interpretation. We also find that Meadowbrook’s project falls
within that interpretation. We therefore affirm the decisions of the SHO and the Hinds
County Chancery Court.
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¶37. AFFIRMED.
WALLER, C.J., CARLSON AND DICKINSON, P.JJ., RANDOLPH,
KITCHENS, CHANDLER, PIERCE AND KING, JJ., CONCUR.
21