Opinion
No. 5-332 / 04-1401
Filed June 29, 2005
Appeal from the Iowa District Court for Boone County, Timothy J. Finn, Judge.
The State Health Facilities Council appeals from the district court's order on further review of the Council's grant of a certificate of need, remanding the matter to the Council with directions. AFFIRMED.
Thomas J. Miller, Attorney General, and Heather L. Adams, Assistant Attorney General, for respondent-appellant.
Edwin McIntosh and Christina Kuhn of Dorsey Whitney, L.L.P., Des Moines, for intervenor-appellant.
Kirke C. Quinn and C. Ann Jordan of Jordan Quinn, P.C., Boone for appellee.
Heard by Sackett, C.J., and Huitink and Vaitheswaran, but decided by Sackett, C.J., and Huitink and Mahan, JJ.
Respondent-appellant, the State Health Facilities Council of the Iowa Department of Public Health (Council), issued a certificate of need, granting Intervenor-appellant, Eastern Star Masonic Home (Eastern Star) permission to construct a chronic confusion and dementing illness (CCDI) unit with eighteen beds in Boone, Iowa. On judicial review, the district court remanded to the Council to consider CCDI beds available in Madrid and to expand its findings. The Council contends its decision to grant it a certificate of need was not unreasonable, arbitrary, or capricious. Petitioner-appellee, the Evangelical Free Church Home of the Evangelical Free Church of America d/b/a the Evangelical Free Church Home (E. Free Home), also located in Boone, contends the Council's decision was unreasonable, arbitrary, or capricious because the Council failed to comply with Iowa Code section 135.64(2)(b) and (d) (2003) and only considered the wants of the intervenor, not all the services available in the area. On review pursuant to Iowa Code chapter 17A, we affirm.
Background facts and proceedings.
After Eastern Star applied for the certificate of need a public hearing was held. The E. Free Home appeared as an affected party and objected to the application. The Council granted the certificate. The E. Free Home requested a rehearing before the Council. Following the Council's denial of rehearing, the E. Free Home petitioned for judicial review. The district court, following a hearing, identified two "significant" problems in the Council's decision. It first found the Council did not appear to have considered a facility in Madrid, which regularly has vacancies in its CCDI beds. Second, the Council seemed to focus only on the needs of the Eastern Star facility without regard to existing services in the area. See Iowa Code §§ 235.64(1)(e), (g), (h). The court concluded the Council did not make sufficient findings to satisfy the requirements of section 235.64(2). The district court remanded to the Council with directions to consider the facility in Madrid, approximately eleven miles from Boone, that has thirty-four CCDI beds, and to make expanded findings "so as to comply fully with Section 135.64(2)," in an effort to avoid "a time-consuming appeal" from a simple affirmance or reversal. Both the Council and Eastern Star appeal.
Claims on appeal.
The Council objects to the remand, contending it followed the statutory mandates and its decision is not unreasonable, arbitrary, or capricious. E. Free Home contends the Council only considered the needs of the applicant, not all the facilities in the county, and the Council did not make adequate written findings of fact to support its decision. Eastern Star contends E. Free Home's manipulation of the statistical data is misleading.
Scope of review.
Our review of the district court's review of the Council's action is governed by Iowa Code section 17A.19. Section 17A.19(10) provides, in pertinent part:
The court may affirm the agency action or remandto the agency for further proceedings. The court shall reverse, modify, or grant other appropriate relief from agency action, equitable or legal and including declaratory relief, if it determines that substantial rights of the person seeking judicial relief have been prejudiced [by agency action based on several enumerated grounds].
(Emphasis added). We review the district court decision on judicial review for errors at law. Bernau v. Iowa Dep't of Transp., 580 N.W.2d 757, 763 (Iowa 1998). We apply the standards of section 17A.19 to the agency action and will affirm the district court if we reach the same conclusions as the district court. Dickinson County v. City Dev. Comm'n, 521 N.W.2d 466, 468 (Iowa 1994). When, as here, the agency's action is not a contested case, "we only look to whether the agency committed an error of law or acted unreasonably, capriciously, or arbitrarily." Greenwood Manor v. Iowa Dep't of Public Health, 641 N.W.2d 823, 831 (Iowa 2002); see also Iowa Code § 17A.19(10)(n).
When determining whether "other agency action" was arbitrary or capricious, we consider whether the decision "was without regard to the law or facts." We will deem agency action to be unreasonable if the agency acted "`in the face of evidence as to which there is no room for difference of opinion among reasonable minds . . . or not based on substantial evidence.'" Thus, the unreasonableness standard of reviewing "other agency action" may still require us to consider whether the decision was based on substantial evidence.
Greenwood Manor, 641 N.W.2d at 831 (citations omitted). "The agency of course cannot act unconstitutionally, in violation of a statutory mandate, or without substantial support in the record." Stephenson v. Furnas Elec. Co., 522 N.W.2d 828, 831 (Iowa 1994) (citing Churchill Truck Lines, Inc. v. Transportation Regulation Bd., 274 N.W.2d 295, 299 (Iowa 1979)).
Discussion.
A. Did the court apply the wrong standard for remand?
Eastern Star argues the district court "used an erroneous standard for remanding this decision that is applicable only to contested case hearings." See Iowa Code § 17A.19(7). The district court quoted at length from Reiter v. Iowa Dep't of Job Service, 327 N.W.2d 763, 766-67 (Iowa 1982), in considering the possibility of a remand. Reiter distinguishes between the limited remand provided for in section 17A.19(7) and the remand in section 17A.19(10):
Formerly Iowa Code § 17A.19(8).
The limited remand contemplated in section 17A.19(7) is unlike the remand envisioned in section 17A.19([10]), in that the district court need not consider the merits of the appeal prior to ordering the taking of additional evidence. The purpose of the limited remand is to expand the record available to the district court for judicial review and permit the agency to modify its decisions on the basis of the additional evidence. Iowa Code § 17A.19(7). The remand under section 17A.19([10]) contemplates the review on the merits and has been held to be appropriate where an erroneous rule of law is applied by the agency or where the record is inadequate for the court to determine effectively the merits of the appeal.
Reiter, 327 N.W.2d at 766-67. The limited remand in paragraph (7) applies to contested case proceedings and is made upon application to the court, before the date of the judicial review hearing, to present additional evidence to the agency. Iowa Code § 17A.19(7). If the court approves the application, the matter is remanded for additional evidence and possible modification of findings based on the new evidence. Id. The district court retains jurisdiction. Id.
In contrast, the remand in paragraph (10) comes from judicial review on the merits. We conclude the district court properly exercised its discretion to remand for further proceedings after its review on the merits. Id. § 17A.19(10). It did not apply an incorrect standard in its review or decision to remand.
B. Was the Council's decision unreasonable, arbitrary, or capricious?
The Council's action could be deemed "unreasonable" if it acted "in the face of evidence as to which there is no room for difference of opinion among reasonable minds . . . or not based on substantial evidence." Citizens' Aide/Ombudsman v. Rolfes, 454 N.W.2d 815, 819 (Iowa 1990). "Arbitrary or capricious" means the action complained of was "without regard to the law or facts." Bernau v. Iowa Dep't of Transp., 580 N.W.2d 757, 764 (Iowa 1998); see Burgess v. Great Plains Bag Corp., 409 N.W.2d 676, 678 (Iowa 1987).
In a thorough review of certificate of need proceedings, the supreme court noted,
the primary purpose of Iowa's certificate of need statute is to ensurethat the citizens of this state will receive necessary and adequate institutional health services in an economical manner. To accomplish this purpose, the legislature explicitly instructed the Council to avoid unnecessary duplication of institutional services as well as to control the costs of administering these services. To aid the Council, the legislature prescribed detailed procedures governing the application process and delineated specific criteria for the Council to consider in evaluating applications. Today, the provisions governing applications for certificates of need are found in Iowa Code sections 135.61 through 135.83.
. . . .
In making its determination, the Council must consider eighteen factors delineated in section 135.64(1) and those additional, but nearly identical, considerations listed in administrative rule 641-203.5(3)(c) (1987). In addition, the Council can grant an application only if it makes four statutorily mandated findings listed in Iowa Code section 135.64(2).
Greenwood Manor v. Iowa Dep't of Pub. Health, 641 N.W.2d 823, 831-33 (Iowa 2002). In addition to the eighteen criteria in subsection one,
the council shall grant a certificate of need for a new institutional health service or changed institutional health service only if it finds in writing, on the basis of data submitted to it by the department, that:
a. Less costly, more efficient, or more appropriate alternatives to the proposed institutional health service are not available and the development of such alternatives is not practicable;
b. Any existing facilities providing institutional health services similar to those proposed are being used in an appropriate and efficient manner;
c. In the case of new construction, alternatives including but not limited to modernization or sharing arrangements have been considered and have been implemented to the maximum extent practicable;
d. Patients will experience serious problems in obtaining care of the type which will be furnished by the proposed new institutional health service or changed institutional health service, in the absence of that proposed new service.
Iowa Code § 135.64(2) (emphasis added).
The evidence before the Council shows there are 390 nursing facility beds in Boone County. According to the bed-needed formula, Boone County needs only 297 beds, so there are ninety-three more existing nursing facility beds than needed. A telephone survey of Boone County facilities in July 2003 showed seventy-five vacant beds. Considering only CCDI beds, Boone County has thirty-eight. In Boone County and the surrounding counties, there are 326 CCDI beds in fourteen facilities. It appears there are at least twenty-six CCDI bed vacancies in three nearby facilities. Testimony at the judicial review hearing indicates Eastern Star has a waiting list for beds in its facility while other facilities, including E. Free Home, experience vacancies.
One exhibit shows 38 CCDI beds in Boone County. Another shows 34 CCDI beds in Boone County.
The Madrid Home in Boone County had 6 vacancies in its 34 CCDI beds. Ames Northwest Healthcare Center in Story County had 5 vacancies in its 14 CCDI beds. Stratford Care Center in Hamilton County had 15 vacancies in its 15 CCDI beds.
The Council contends the proposed CCDI addition to Eastern Star would provide the only CCDI beds in the city of Boone. Currently, any Eastern Star resident needing a CCDI bed must be transferred to a facility at least ten miles away. Several residents had been transferred to the facility in Madrid or the Stratford Care Center in Hamilton County. The Council also argues it made specific, affirmative findings as to each paragraph in section 135.64(2).
The E. Free Home points particularly to paragraphs (b) and (d) in its claim the district court was correct in remanding for additional findings. Concerning paragraph (b) the Council concluded "that existing facilities providing health services similar to those proposed will continue to be used in an appropriate and efficient manor and will not be impacted by this project." Concerning paragraph (d) the Council concluded
that patients will experience problems in obtaining care of the type which will be furnished by the proposed changed health service, in the absence of that proposed service. The Council concludes that at any one time in the past three years, 11-15 residents of the applicant's nursing facility could benefit from the care provided in a specialized CCDI unity. The Council concludes that in the past three years, five patients residing at the applicant's nursing facility have been transferred to other facilities when they need this type of care.
The Council primarily focuses its argument on the "appropriate deference" to be given to decisions of the Council. See Greenwood Manor, 641 N.W.2d at 839; Mercy Health Ctr. v. State Health Facilities Council, 360 N.W.2d 808, 811-12 (Iowa 1985); see also Iowa Code § 17A.19(11)(c). It argues courts should give it the freedom to "exercise its expertise within a reasonable range of informed discretion." Equal Access Corp. v. Utilities Bd., 510 N.W.2d 147, 151 (Iowa 1993). It also notes that no Council decisions to grant a certificate of need have ever been reversed by a reviewing court.
The district court identified two significant problems with the Council's decision to grant the certificate of need:
(1) The fact that the Council appears not to have taken into its consideration the fact that the Madrid Home, only 11 miles away, contains approximately 34 CCDI beds, as well as other residential facility beds. It appears that the Madrid unit has had vacancies on a regular basis in the past. Obviously, in order to make an informed decision on the four statutory criteria of Section 135.64(2) which contemplates a comparison of the "institutional health services" available, the "alternative," and "any existing facilities providing institutional health service similar to those proposed . . ." the Council would have to consider the Madrid facility. It appears to the Court that this failure to thoroughly consider the Madrid facility might be fatal to the decision of the Respondent. The Council is required by law to consider all of these factors and its failure to do so appears to the Court sufficient to reverse the decision.
(2) The second area of concern with the decision of the Respondent is the fact that the ruling of the State Health Facilities Council makes repeated references primarily to the needs and shortfalls of Eastern Star Masonic Home and its patients. Under the statutes and rules, the State Health Facilities Council is directed to not look just at one facilities but the "existing services in the area" and the needs of all the patients and not simply the patients who are residents of Eastern Star. The Court determines that this might not be as critical as the first problem set forth above because it is possible that the Council's repeated references to Eastern Star's needs and the needs of its patients, might simply be an inarticulate or unartfully-drawn statement. The Council's decision may in fact have considered the needs of all of the services and all of the potential consumers in the area, but it does not state that. If that were the Council's intent, a remand will also allow them to more articulately enunciate that basis for their rulings.
. . . .
Because it appears that the Respondent did not adequately consider the impact of the Madrid Home and its 34 CCDI beds, which is only 11 miles from Boone, and also because it is unclear from its decision whether the Respondent incorrectly looked primarily at the needs of the Eastern Star Masonic Home, rather than "the existing services in the area," the Court determines the most effective manner to correct these issues it to remand this case to Respondent for further proceedings.
Although the court determined it probably had sufficient grounds to reverse the grant of the certificate of need, it gave the Council the benefit of the doubt and sought to avoid a lengthy appeal process by choosing to remand to allow the Council to consider the evidence more adequately, to articulate the factual basis for its decision more clearly, and to modify its decision if warranted rather than simply reversing the Council's decision. Because it was not reversing, modifying, or granting other relief from the Council's decision, the district court did not reach the question whether the Council's action was "otherwise unreasonable, arbitrary, capricious, or an abuse of discretion." We conclude the district court's exercise of discretion to remand for further proceedings was reasonable, well-considered, and an attempt to allow the Council to fulfill the requirements of the statute.
Eastern Star also challenges E. Free Home's inclusion of twelve CCDI vacancies at Ogden Manor in a chart of CCDI vacancies because there is no evidence in the record that the "current project" at Ogden Manor had created any CCDI beds at the time of the hearing or now. Eastern Star argues the only CCDI vacancies in all of Boone County are the six at the Madrid facility. Eastern Star contends the existence of only six vacant beds in Boone County does not negate the Council's findings there is a need for the Eastern Star CCDI addition or that the additional eighteen beds proposed would not duplicate existing services.
It does not appear from its decision to remand this matter that the district court placed any weight on the challenged evidence. In affirming the decision to remand, we did not consider the challenged evidence. Because we are affirming the court's decision to remand for further proceedings, we need not address this claim.