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LAUREL MOBILE HEALTH SERVICES v. COMMONWEALTH PENNSYLVANIA (11/25/88)

COMMONWEALTH COURT OF PENNSYLVANIA


decided: November 25, 1988.

LAUREL MOBILE HEALTH SERVICES, LTD., PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF HEALTH, RESPONDENT. ALIQUIPPA HOSPITAL, PETITIONER V. COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF HEALTH, RESPONDENT

Appeals from the Order of the Department of Health, in the case of In Re: Aliquippa CT Associates/Aliquippa Hospital, Project No.: CON-86-H-6072-B, No. NR-86-016.

COUNSEL

Reed Hamilton, with him, Kathleen Herzog Larkin and Jan L. Weinstock, Blank, Rome, Comisky & McCauley, for petitioner, Laurel Mobile Health Services, Ltd.

Edward F. Shay, with him, Claire C. Obade and Stanley J. Milavec, Jr., for petitioner, Aliquippa Hospital et al.

Darius G. C. Moss, Assistant Counsel, for respondent.

Judges Craig, McGinley and Smith, sitting as a panel of three. Opinion by Judge McGinley. Judge Smith concurs in the result only. Judge MacPhail did not participate in the decision in this case.

Author: Mcginley

[ 121 Pa. Commw. Page 293]

Laurel Mobile Health Services, Ltd., (Laurel) appeals from an Opinion and Order of the Pennsylvania Department of Health (Department) dated June 9, 1987, dismissing Laurel's appeal from a determination of the Division of Need Review (DNR) of the Department which held that Aliquippa Hospital did not require a Certificate of Need (CON) to acquire a computerized tomography scanner (CT scanner). On July 21, 1987, Aliquippa Hospital (Aliquippa) filed a Cross-petition for Review from the same order. Aliquippa and Aliquippa CT Associates (Associates) intervened in Laurel's appeal on July 29, 1987, and on August 21, 1987, Laurel intervened in Aliquippa's Cross-petition. On August 21, 1987, Laurel also filed a Motion to Quash Aliquippa's Cross-petition. On September 8,

[ 121 Pa. Commw. Page 2941987]

, this Court denied Laurel's Motion to Quash and on October 27, 1987, sua sponte, consolidated both cases.

Incidents giving rise to this appeal commenced on September 2, 1983, when the Department simultaneously issued a CON to Aliquippa, Ohio Valley Hospital and Mobile Imaging based upon a joint application. The CON authorized Mobile Imaging to acquire a mobile CT scanner and to provide CT scanning services on a shared basis to the two hospitals pursuant to a contract between Aliquippa, Ohio Valley Hospital and Mobile Imaging. Shortly after the CON for the shared arrangement was approved, Mobile Imaging assigned its contract to Laurel. The contract with the hospitals was effective through January 31, 1987. (R. at 124.)

On July 17, 1986, Aliquippa wrote to the Department stating its intent to acquire a CT scanner of its own for its sole use. (Original Record (R.) at 1.) Laurel objected to that request by letter dated August 14, 1986.*fn1 On October 3, 1986, Aliquippa wrote to the DNR of the Department informing it that at the conclusion of its present contract with Laurel, Aliquippa together with Associates would provide the CT scanner service.*fn2 The Department concluded that Aliquippa

[ 121 Pa. Commw. Page 295]

    could acquire the CT scanner without first obtaining a CON for the new arrangement. Such a decision of the Department is termed a "Determination of Non-Reviewability." The Department approved the proposal on October 8, 1986.*fn3 On October 16, 1986, Laurel requested that a hearing be held to contest the Department's determination.*fn4 The request was supplemented by a second letter from Laurel dated November 3, 1986. (R. at 12-15.) On December 2, 1986, Aliquippa was formally advised by the Department's legal counsel of Laurel's appeal pursuant to 1 Pa. Code § 35.20 and of its opportunity to file an answer pursuant to 1 Pa. Code §§ 31-35. (R. at 16-17.) Aliquippa did not. On January 5, 1987, the Department notified Aliquippa that pursuant to Section 603(e) of the Health Care Facilities Act (Act), Act of July 19, 1979, P.L. 130, as amended, 35 P.S. §§ 448.101-448.904, no further activity related to the scanning equipment should be undertaken until a final determination was made by the Secretary of the Department. (R. at 20-21.) On January 13, 1987, the Department notified Laurel and Aliquippa of an evidentiary

[ 121 Pa. Commw. Page 296]

    hearing to be held on February 10, 1987, pursuant to the provisions of the Code and the Administrative Agency Law (Law), 2 Pa. C.S. §§ 501-508, 501-704 (R. at 30-37.)

On January 28, 1987, Aliquippa and Associates filed a Motion to Quash (R. at 81-91) and a Motion to Strike (R. at 58-79) alleging that Laurel lacked standing to contest the Department's determination. The hearing was postponed and Laurel filed an answer to the Motions on February 16, 1987. (R. at 81-91.) On June 9, 1987, the Secretary of the Department dismissed Laurel's appeal without hearing based upon the following Findings of Fact and Conclusions of Law:

1. Laurel Mobile Health Services is not a person whose application is being reviewed, is not a health care facility or a health maintenance organization, and is not a member of the public to be served by a new institutional health service.

2. Laurel Mobile Health Services did not appear before the Department during the Department's review, and did not file a petition to intervene.

3. Laurel Mobile Health Services did not participate as a party or an applicant before the Department.

4. Laurel Mobile Health Services is not a directly affected person.

5. Only directly affected persons may be a party to a proceeding under the Health Care Facilities Act.

6. The determination by the Department which is in question is a proceeding under the Health Care Facilities Act.

7. Only persons who have appeared before an agency in a proceeding may have standing as a party under the Administrative Agency Law.

[ 121 Pa. Commw. Page 2978]

. Laurel Mobile Health Services did not appear before the Department; therefore, Laurel is not a party under the Administrative Agency Law.

Memorandum Opinion and Order, R. at 100-104. Laurel thereafter filed this appeal.

Several arguments are set forth.*fn5 We address only one, that the Department's decision violates the Act in that Aliquippa should have proceeded via an amendment to the CON.

Our scope of review is limited to a determination of whether an error of law was committed, constitutional rights were violated, or whether necessary findings of fact are supported by substantial evidence. Estate of McGovern v. State Employees' Retirement Board, 512 Pa. 377, 517 A.2d 523 (1986).

The Department's grant of a "determination of non-reviewability" violates the Act. A CON can be granted only if the Department finds that the proposed activity is needed. Section 603(a)(1) of the Act, 35 P.S. § 448.603(a)(1). In reaching its decision the Department is statutorily mandated to examine the twenty criteria for need delineated by the Legislature in the Act at Section 707(a)(1)-(20), 35 P.S. § 448.707(a)(1)-(20). Among those criteria which the Department must examine

[ 121 Pa. Commw. Page 298]

    is the need of the population to be served by the health care service, Section 707(a)(3), 35 P.S. § 448.707(a)(3); whether there is an appropriate, less costly or more effective alternative method of providing the service, Section 707(a)(4), 35 P.S. § 448.707(a)(4); whether the service is economically feasible, considering the anticipated volume of care, Section 707(a)(5), 35 P.S. § 448.707(a)(5); whether the proposed service is compatible with the existing health care system in the area, Section 707(a)(7), 35 P.S. § 448.707(a)(7); the appropriateness of using existing services and facilities similar to those proposed by the hospital, Section 707(a)(17), 35 P.S. § 448.707(a)(17).

The Act also provides that: "An application for a certificate of need shall be recommended, approved and issued when the application substantially meets the requirements listed below: provided that each decision . . . shall be consistent with the State health plan. . . ." Section 448.707(a) of the Act.

The record evinces that none of these criteria were reviewed by the Department. Under the State Health Plan conversion from a shared mobile CT system constitutes a change or amendment to the original approval requiring additional CON review which required the Department to make specific findings regarding the remaining systems.*fn6

[ 121 Pa. Commw. Page 299]

The Act further provides that any "person" desiring to amend a CON "shall apply to the local Health Systems Agency (HSA) and to the Department simultaneously." Section 702(b) of the Act, 35 P.S. § 448.702(b). Notice of applications for amending CONs are to be published by the HSA and by the Department. By ignoring the Amendment procedure Aliquippa made intervention virtually impossible until it received a copy of the Department's October 8, 1986, letter to Aliquippa. (R. at 9.) By treating Aliquippa's letter as an independent project, unrelated to the CON issued in 1983 authorizing a shared scanner, the Department allowed Aliquippa to bypass the statutory requirements. As noted Aliquippa failed to give notice to HSA, thus depriving HSA of an opportunity to evaluate the need for a changeover from one scanner to two independent scanners. Although the record reflects the Department reviewed the material submitted to it by Laurel,*fn7 the record is devoid of any findings on the utilization of the independent scanner and also devoid of any challenges to Aliquippa's assertion that its capital expenditures would be so minimal as to entitle it to a "determination of non-reviewability." We find that Aliquippa should have proceeded via an amendment to the original CON according to the Act.

[ 121 Pa. Commw. Page 300]

The record contains the CON issued on September 2, 1983, pursuant to the sharing arrangement between Aliquippa and Ohio Valley Hospital. It states therein that the Department's decision to issue the CON was based on four findings, the fourth being: "The project is a culmination of joint planning to provide CT scanning to both hospitals, neither of which could justify the service on its own." (R. at 111.) Aliquippa attempts now to do what the Department disapproved in 1983, through a "determination of non-reviewability" based only upon the allegation that costs would be under the threshold limit.

The September 2, 1983 CON stated no termination date and the record before us contains only the termination date of the contract between Mobile Imaging, Aliquippa and Ohio Valley Hospital, January 31, 1987. (R. at 124.) The CON however does state that the Department should be notified of any changes in cost or conditions in the original proposal " before proceeding since our approval is limited to the cost and conditions specified in your proposal . . . Changes in cost or conditions may require a new review." Aliquippa did not notify the Department of this change in cost or condition but instead sought a "determination of non-reviewability," for its proposed independent unit, yet in its Cross-petition it asks this Court to ignore the assignment of Mobile Imaging to Laurel on the same grounds.

Finally, because the Department did not rule on Aliquippa's argument that Laurel was not a proper successor to the CON issued to Mobile Imaging and therefore lacked standing to contest the determination that Aliquippa could acquire its own CT scanner without additional CON approval Aliquippa has filed a cross-petition. Laurel intervened. Aliquippa argues that Laurel has no CON because the Act does not permit an

[ 121 Pa. Commw. Page 301]

    assignment of a CON without the Department's written approval.*fn8

On September 2, 1983, the Department granted Mobile Imaging a CON to contract for the acquisition of a mobile CT scanner to provide CT services to the Aliquippa and Ohio Valley hospitals pursuant to separate contracts entered into by the parties. 28 Pa. Code § 401.5(1) sets forth requirements for changes to CONs and the CON approval letter stated also that "any change in cost or conditions in the original proposal will require written notification to the Department before proceeding since an approval is limited to cost and conditions in your proposal." (Emphasis added.) (R. at 73.) There were no changes in cost under 28 Pa. Code § 401.5(k) and the transfer of the rights established by the CON from Mobile Imaging to Laurel did not constitute a change in conditions pursuant to 28 Pa. Code § 401.5(1).*fn9

Even if Laurel were required to obtain approval from the Department for the transfer of the CON Aliquippa did not object at the time of the transfer and should not be permitted to challenge its legality after it has reaped the benefits of the arrangement. Aliquippa never asserted the illegality or impropriety of the assignment of contracts, but instead accepted and paid for the CT services provided by Laurel without objection. Having accepted the benefits Aliquippa is now estopped

[ 121 Pa. Commw. Page 302]

    from asserting that the arrangement was prohibited. Blackwood Coal Co. v. Deister Concentrator Co., 626 F. Supp. 7272 (E.D. Pa. 1985).*fn10 Aliquippa's Cross-Petition for Review is hereby dismissed.

Accordingly, we reverse the decision of the Department and order Aliquippa to proceed via an amendment to the original CON.

Order

And Now, November 25, 1988, the appeal at No. 1577 C.D. 1987, is sustained and the order of the Pennsylvania Department of Health dated June 9, 1987, Docket No. NR-86-016, is hereby reversed. The parties are hereby ordered to proceed in accordance with the accompanying opinion. The Cross-Petition at No. 1738 C.D. 1987 is hereby dismissed.

Jurisdiction relinquished.

Judge Smith concurs in the result only.

Judge MacPhail did not participate in the decision in this case.

Disposition

Appeal of intervenor sustained. Order of Department reversed. Cross-petition of hospital dismissed.


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