Appeal from the Order of the Commonwealth of Pennsylvania, State Health Facility Hearing Board in the case of In Re: Brownsville Golden Age Nursing Home, Inc., Docket No. L 84-00.
Stephen D. Tompkins, Assistant Counsel, with him, David H. Ward and Carol Brayshaw Longwell, Assistant Counsels, and Ruth M. Siegel, Chief Counsel, for petitioner.
Robert L. Webster, Webster & Webster, for respondent.
Judges Craig and Colins, and Senior Judge Barbieri, sitting as a panel of three. Opinion by Senior Judge Barbieri.
[ 103 Pa. Commw. Page 451]
Following is the opinion of this Court upon reconsideration, in light of Estate of McGovern v. State Employees' Retirement Board, 512 Pa. 377, 517 A.2d 523 (1986), of our opinion filed October 15, 1986.
The Department of Health (Department) appealed to this Court the adjudication and order of the State Health Facility Hearing Board (Board) lifting the suspension imposed by the Department on new admissions to Brownsville Golden Age Nursing Home, Inc. (Brownsville) and refusing to revoke Brownsville's license to operate a skilled nursing facility.*fn1
[ 103 Pa. Commw. Page 452]
The Department, on July 17, 1984, subsequent to state and federal surveys conducted at Brownsville June 18-20, 1984 and May 30-31 to June 1, 1984, respectively, to determine compliance with state and federal licensing standards, issued an order suspending indefinitely further admission of nursing patients to Brownsville and an order directing Brownsville to show cause why its license should not be revoked.*fn2 Both orders issued upon the Department's determination that Brownsville was guilty of (1) a serious violation of the provisions of the Health Care Facilities Act*fn3 (Act), and the regulations for licensure, (2) a cyclical pattern of deficiencies over a period of two or more years, and (3) serious violation of the laws relating to medical assistance and medicare reimbursement. Sections 811(1), (2) and (9) of the Act, 35 P.S. §§ 448.811(1), (2) and (9). The orders indicated that Brownsville was entitled to request an administrative hearing before the Board; Brownsville was further advised that the orders would
[ 103 Pa. Commw. Page 453]
become final should Brownsville fail to request a hearing. Brownsville thereafter filed Notices of Appeal with the Board, and on November 8, 9, 26, 27 and December 18, 1984, the Board heard testimony on Brownsville's appeal.
In its adjudication issued March 27, 1985 prior to addressing the substantive issues raised, the Board addressed its role generally in licensure appeals reaching the Board pursuant to Section 805(a) of the Act, 35 P.S. § 448.805(a). The Board decided, based upon its analysis of key portions of the Act plus the regulations governing procedure in appeals brought before the Board, that, even though it had in two prior cases evaluated the evidence submitted pursuant to the substantiality of the evidence test, its proper role was that of fact-finder rather than reviewing authority, and, therefore, the proper standard by which to evaluate the evidence presented was preponderance of the evidence. Thus, the Board concluded that the Department had not met its burden of proving by a preponderance of the evidence that Brownsville was guilty of serious violations of the Act and accompanying regulations, of serious violations of the laws relating to medical assistance or medicare reimbursement, or of a cyclical pattern of deficiencies. This appeal followed.
I. Contentions of Department
On appeal, the Department argued that because the Board's only two prior decisions regarding licensure appeals indicated that the Department's decision would be affirmed if supported by substantial evidence, when the Board failed to notify the Department in advance of the hearing that the Department would be required to establish its essential allegations by a preponderance of the evidence, it violated the Department's right to due process. The Department also argued that the Board
[ 103 Pa. Commw. Page 454]
erred as a matter of law when, during the hearing, the Board refused to designate Dr. DiLeo, Brownsville's Medical Director at the time of the surveys, subpoenaed to testify by the Department, a hostile witness, and when the Board ruled that the Department's witnesses could not expand on their testimony regarding the violations they observed during the relicensure survey of Brownsville by giving their opinions as to the seriousness of the observed violation. Finally, the Department argued that the Board's findings of fact, including the findings that Brownsville had committed no serious violations and that the Department had not established a pattern of deficiencies, are not supported by substantial evidence of record and that those findings are inconsistent with the Board's contingent conclusion, expressed in its discussion following its findings of fact, that, had the Department issued Brownsville a provisional license, the Board would have affirmed.
II. Board's Dual Role Under the Act
Before we reach the Department's due process argument, we first discuss the Board's fact-finding role in licensure appeals, as distinguished from its reviewing role in Certificate of Need*fn4 (CON) appeals. The Health Care Facilities Act establishes both the CON program and the licensure program, and places both under the aegis of the Department. Appeals in both kinds of cases proceed to the Board.
[ 103 Pa. Commw. Page 455]
In CON appeals, the appellant is prohibited under the Act from raising any issue before the Board which was not raised before the health systems agency, which makes the preliminary decision regarding CONs, or the Department. Section 506 of the Act, 35 P.S. § 448.506. The statute specifically provides that "the [B]oard shall entertain no evidence that the [H]earing [B]oard is satisfied the appellant was able, by the exercise of reasonable diligence, to have submitted before the health systems agency and the [D]department." The reviewing role of the Board with regard to CON appeals is explained by reference to Sections 703 and 704 of the Act, 35 P.S. §§ 448.703 and 448.704, which provide opportunity for a hearing in connection with a CON application either before the health systems agency or the Department prior to the hearing before the Board. At that hearing, any person is permitted to present oral or written arguments and relevant evidence. While responsibility for holding the hearing is delegated under Section 704 to the health systems agency, if no provision is made for the hearing by the health systems agency, the Department must hold the hearing. Thus, 35 Pa. Code § 197.45, a procedural rule specifically applicable to CON appeals, entitled "Scope of Review," instructs that the Board will limit its review of Departmental CON decisions to three issues, one of which is whether the Department's decision is supported by substantial evidence. See Rehab Hospital Services Corporation v. Health Systems Agency of Southwestern Pennsylvania, 82 Pa. Commonwealth Ct. 147, 475 A.2d 883 (1984).
No such restrictions are placed on the Board with regard to licensure appeals, however. Section 805, 35 P.S. § 448.805, provides that the Board has the power and the duty to hold evidentiary hearings and issue adjudications in accordance with the Administrative Agency Law, 2 Pa. C.S. §§ 501-508, 701-704, and the
[ 103 Pa. Commw. Page 456]
Board's procedural rules upon appeal from an order of the Department relating to licensure. Board procedural rules describing the procedure at licensure hearings provide that the Department shall have the burden of proof in licensure appeals and that parties to the proceeding shall have the right of presentation of evidence and cross-examination. 37 Pa. Code § 197.90.
Thus, the Board has two distinct roles under the Act, depending upon the subject matter of the appeal before it. In CON appeals, on the one hand, it is a reviewing body restrained in its decision-making by its scope of review. In licensure appeals, on the other hand, the Board acts as a trial adjudicatory body; it hears all competent testimony, accepts relevant documentary evidence into the record, and, after hearing, weighs the evidence, makes findings of fact and conclusions of law according to the preponderance of the evidence and issues an order consistent with those findings and conclusions.
The Board's eleventh hour recognition of its alternative roles in its adjudication does constitute a violation of the Department's due process rights, however. The Department presented its evidence on each of five days of hearings in reliance upon assertions in the Board's only two prior licensure decisions that the Department's burden was to establish the validity of its orders by substantial evidence. When the Board informed the Department otherwise subsequent to the hearing, the Department was deprived of a vital right. The constitutional guarantee of due process of law is as equally applicable to administrative proceedings as it is to judicial proceedings, Begis v. Industrial Board of the Department of Labor and Industry, 9 Pa. Commonwealth Ct. 558, 308 A.2d 643 (1973), and a right to due process means a right to know how the proceedings shall be conducted, in addition to knowing when the proceedings shall be conducted. While we would ordinarily remand
[ 103 Pa. Commw. Page 457]
the case to the Board for a new hearing to cure the due process violation, because upon review we find error on the part of the Board with regard to its findings, we will vacate the Board's order and, in this case, direct the Board to enter an order revoking Brownsville's license,*fn5 thereby eliminating the need for a remand.
III. This Court's Scope of Review of Board Decisions
Our scope of review in agency appeals has been statutorily defined. Section 704 of the Administrative Agency Law, 2 Pa. C.S. § 704, requires that we affirm the adjudication of a Commonwealth agency unless we find that it is not in accordance with law or that any finding of fact made by the agency and necessary to support its adjudication is not supported by substantial evidence. See Estate of McGovern v. State Employees' Retirement Board, 512 Pa. 377, 517 A.2d 523 (1986).
We have interpreted Section 704 to require that all necessary findings sufficient to resolve the issues raised by the evidence be supported by substantial evidence. As our Supreme Court stated in Page's Department Store v. Velardi, 464 Pa. 276, 346 A.2d 556 (1975):
When the fact finder in an administrative proceeding is required to set forth his findings in an adjudication, that adjudication must include all findings necessary to resolve the issues raised by the evidence and which are relevant to a decision. An appellate court or other reviewing
[ 103 Pa. Commw. Page 458]
body should not infer from the absence of a finding on a given point that the question was resolved in favor of the party who prevailed below for the point may have been overlooked or the law misunderstood at the trial or hearing level.
464 Pa. at 287, 346 A.2d at 561.
Likewise, all necessary facts found by the Board must be supported by substantial evidence of record. "Substantial evidence" has been defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Murphy v. Department of Public Welfare, 85 Pa. Commonwealth Ct. 23, 480 A.2d 382 (1984).
'. . . [S]ubstantial evidence should be construed to confer finality upon an administrative decision on the facts when, upon an examination of the entire record, the evidence, including the inferences therefrom, is found to be such that a reasonable man, acting reasonably, might have reached the decision; but, on the other hand, if a reasonable man, acting reasonably, could not have reached the decision from the evidence and its inferences then the decision is not supported by substantial evidence and it should be set aside.'
A.P. Weaver & Sons v. Sanitary Water Board, 3 Pa. Commonwealth Ct. 499, 505, 284 A.2d 515, 518 (1971) quoting B. Stason, " Substantial Evidence" in Administrative Law, 89 U. Pa. L. Rev. 1026, 1038 (1941).
We find, upon review, that the facts found by the Board fail to properly resolve all the issues raised by the surveys and are not supported by substantial evidence. Prior to listing those facts, however, we undertake a general discussion of the regulations governing skilled nursing facilities and the deficiencies observed as testified to ...