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Adams v. Dep't of Health

IN THE COMMONWEALTH COURT OF PENNSYLVANIA


March 20, 2009

DAVID ADAMS AND ROSE FRONTINO, BY JOSEPHINE MEICHUR AND MARIE RICHARDS WITH POWER OF ATTORNEY, PETITIONERS
v.
DEPARTMENT OF HEALTH, RESPONDENT

The opinion of the court was delivered by: Judge Leavitt

Argued: November 11, 2008

BEFORE: HONORABLE DORIS A. SMITH-RIBNER, Judge, HONORABLE MARY HANNAH LEAVITT, Judge, HONORABLE JIM FLAHERTY, Senior Judge.

OPINION

David Adams and Rose Frontino*fn1 (Residents) seek this Court's appellate review of the Department of Health's refusal to allow them to intervene in the Department's consideration of a change in ownership of a chain of nursing homes, some of which are licensed by the Department. Residents lived in two different Pennsylvania nursing homes affected by the change in ownership. In support of their petitions to intervene, Residents asserted that they had an interest in the regulatory issue before the Department by virtue of the fact they were "customers" of two affected nursing homes. The Department's review of a corporate reorganization of a chain of nursing homes is not a "proceeding" amenable to petitions to intervene and the denial of Residents' petitions was an interlocutory order that is not reviewable in this Court's appellate jurisdiction. Accordingly, we quash Residents' appeal.

Manor Care, Inc. is one of the nation's largest providers of nursing home services, with facilities in thirty states that provide skilled nursing services and rehabilitation treatment. In 2007, Manor Care's publicly-traded shares of stock were purchased by the Carlyle Group, a private equity firm. The transaction required numerous regulatory approvals, including one from Pennsylvania. Manor Care's 46 facilities in Pennsylvania are licensed and regulated under the Health Care Facilities Act, Act of July 19, 1979, P.L. 130, as amended, 35 P.S. §§448.101--448.904b, and this Act required a change in ownership application (CHOW Application) for each of Manor Care's Pennsylvania facilities.

On November 19, 2007, Residents each submitted a petition to intervene in the Department's review of Manor Care's CHOW Applications, invoking the intervention provisions of the General Rules of Administrative Practice and Procedure (General Rules), 1 Pa. Code §§35.27-35.32. Residents asserted that as residents of Manor Care long-term care facilities, they had standing to intervene lest the corporate reorganization "impact the quality of care" at those facilities. Reproduced Record at 3a, 9a (R.R. __).*fn2 In their petitions to intervene, Residents asserted the following "disputed issues of fact":

1. Whether the license applicant(s) will be able to fulfill their statutory duties to provide facilities that are adequately constructed, equipped and maintained, and safely and efficiently operated;

2. Whether the license applicant(s) will be able to fulfill their statutory duties to provide facilities that will provide safe and efficient services adequate for the care and treatment of patients or residents;

3. Whether the license applicant(s) will be able to fulfill their statutory duties to provide facilities that meet quality standards;

4. Whether the license applicant(s) will be able to fulfill their statutory duties to provide facilities that afford residents humane, courteous and dignified treatment;

5. Whether the license applicant(s) will be able to fulfill their statutory duties to provide facilities that have sufficient numbers of qualified, trained staff for the residents of the facilities;

6. Whether the license applicant(s) will be able to fulfill their statutory duties to provide facilities that have plans for quality assurance and risk management;

7. Whether the license applicant(s) meet the requirements of the Commonwealth regarding contingency financing and sufficient proof of funding for contingency and working capital requirements to fulfill the legal rights of its residents;

8. Whether the license applicant(s) meet financing requirements of the Commonwealth and, in light of the substantial purchase price paid and the resulting cost of capital required by the purchase, can operate and provide services as required by law.

R.R. 3a-4a, 9a-10a (footnote omitted). Residents asserted that Manor Care did not provide the Department with information sufficient to determine whether their nursing homes would continue to meet Pennsylvania licensing standards after the buyout.*fn3

Manor Care moved to dismiss Residents' petitions to intervene, contending that the Department's review of the CHOW Applications was not a "proceeding" within the meaning of the General Rules. Manor Care also argued that Residents' interests were adequately represented by the Department and that Residents' petitions to intervene did not satisfy the form and content requirements set forth in 1 Pa. Code §35.29.*fn4 In response, Residents reiterated their claim that, as "customers" of Manor Care, they had a direct interest in the Department's regulatory review of Manor Care's corporate reorganization and demanded that the Department stay action on the CHOW Applications until Residents' petitions to intervene were resolved.

The Department, by Robert Torres, Deputy Secretary for Administration, responded to Residents' petitions to intervene. In Torres' letter of December 14, 2007, the Department noted that the "disputed issues of fact" were so lacking in specifics that they amounted to no more than conclusory recitals. In addition, the petitions did not cite a single statutory or regulatory provision relevant to the CHOW Applications. The Department acknowledged that Residents had not been allowed access to the CHOW Applications; nevertheless, the Department explained that a petition to intervene in the Department's consideration of a license application [must] at least identify a specific statutory or regulatory requirement that an applicant does not satisfy and assert clearly and concisely the facts relied upon to support the assertion.

R.R. 97a. Concluding that Residents failed to meet the form and content requirements of a petition to intervene, the Department gave them until December 17, 2007, to resubmit their petitions to intervene.

On December 17, 2007, Residents filed amended petitions to intervene that were identical to their original petitions except that they contained additional "Factual Allegations." These new factual allegations recited incidents of inadequate care that Residents had experienced during 2006 and 2007 at the Manor Care facilities where they resided.*fn5 Residents also submitted supplemental materials to the Department, which they characterized as "evidence or offers of proof" with respect to the disputed factual issues set forth in the amended petitions. R.R. 104a.*fn6

That same day, the Department issued its "Final Response," again denying Residents' petitions to intervene. The Department explained:

With respect to the supplemental information submitted by [Residents], the documentation attached to your December 17, 2007 letter is already available to the Department and has been considered by it in its review of the license applications. Further, the "Factual Allegations" in the Amended Petitions are at best complaints regarding the current level of care provided at the relevant facilities and have insufficient bearing on whether the applicants for licensure meet the statutory or regulatory requirements for licensure. For those reasons, [the Department finds] that [Residents] have failed to aver sufficient facts to permit intervention as required by 1 Pa. Code §35.29.

R.R. 162a-163a (emphasis added). The Department also denied Residents' request to stay action on the CHOW Applications.

Also on December 17, 2007, the Department approved Manor Care's CHOW Applications for its Pennsylvania facilities. On December 19, 2007, Residents requested that the Department stay its approval pending judicial review of the Department's denial of their petitions to intervene. The Department denied a stay on December 21, 2007, and the transactions for the change in ownership of Manor Care's Pennsylvania facilities closed that same day. Residents now seek this Court's review of the Department's Final Response, which denied their petitions to intervene.

Before this Court, Residents raise one issue: whether the Department abused its discretion in denying their petitions to intervene. Residents ask the Court to reverse the Department's Final Response and remand the matter for a de novo review of the CHOW Applications with Residents' participation. The Department and Intervenor, Manor Care, Inc., raise two preliminary issues. They contend that this Court lacks subject matter jurisdiction to review the Department's Final Response because an order denying intervention is not an appealable order. Second, the Department and Manor Care argue that Residents' petition for review should be dismissed as moot.*fn7

We agree with the Department and Manor Care that this is a case about jurisdiction. Residents have invoked this Court's jurisdiction over "appeals from final orders of government agencies" conferred by the Judicial Code, 42 Pa. C.S. §763(a). The Department and Manor Care counter that the denial of a petition for intervention is not a final order. They further contend that Residents cannot satisfy the strict requirements for allowing an appeal of an interlocutory or collateral order. For these reasons, the Department and Manor Care request this Court to quash Residents' appeal.

Before addressing the threshold jurisdictional issue, however, we consider Residents' theory of "intervention." Residents do not contemplate that upon remand, should one be granted, the Department will conduct a formal administrative hearing on the merits of the CHOW Applications. Rather, they contemplate a renewed staff review of the CHOW Applications. Residents, or their legal representatives, would participate in the Department's staff inspection of all documents related to the applications, such as financial exhibits, memoranda and correspondence, and be included in Department meetings where the applications are discussed among staff and with Manor Care. In effect, by their petitions to intervene, Residents seek to be appointed ad hoc bureaucrats, which is simply not authorized by the General Rules.

To begin with, an agency's power to exercise regulatory authority, substantively or procedurally, must be expressly conferred by the legislature. Aetna Casualty and Surety Company v. Insurance Department, 536 Pa. 105, 118, 638 A.2d 194, 200 (1994) (holding that an agency may exercise only those powers that have been conferred upon it in clear and unmistakable statutory language). Accordingly, the Department cannot invite private citizens, who are customers of an applicant, to participate in the CHOW Application process without clear authority in the relevant implementing statute, in this case the Health Care Facilities Act. Residents have not offered any statutory authority in support of their request to be appointed ad hoc Department staff.

Residents do point to the General Rules, which expressly authorize intervention in an agency's "proceeding." 1 Pa. Code §35.27. The General Rules also provide an expansive definition of "proceeding." 1 Pa. Code §31.3.*fn8 Further, Residents argue that the Supreme Court's holding in Pennsylvania Dental Association v. Insurance Department, 512 Pa. 217, 516 A.2d 647 (1986), supports their contention that the Department's review of a CHOW Application is a "proceeding" in which they, as Manor Care customers, may participate as intervenors. Residents' reliance upon this precedent is misplaced.

Pennsylvania Dental Association involved the right of dentists, members of the association, to intervene in the Insurance Department's informal hearing on a request by Blue Shield for approval of a rate increase.*fn9 It is true, as Petitioners observe, that the Supreme Court noted that Pennsylvania Dental Association "was clearly eligible to intervene under 1 Pa. Code §35.28(a)(2)." Id. at 228, 516 A.2d at 652. However, in that case, the public informational hearing, in which the Association sought intervention, was expressly required by the Professional Health Services Plan Corporation Act, 40 Pa. C.S. §§6301-6335. As the Court further explained, [o]n January 7, 1984, the Department published a notice of the filing and of opportunity to submit comments in the Pennsylvania Bulletin, pursuant to 40 Pa.C.S. § 6329(b) (relating to procedures for Department approval or refusal of payment applications). [Section] 6329(b), in turn, incorporates procedural requirements set forth at 40 Pa.C.S. § 6102, subsections (c) through (f). Inter alia, subsection (e) requires a "reasonable opportunity for hearing, which shall be public." Subsection (f) generally makes Department orders with respect to such applications subject to judicial review. Under the relevant Insurance Department rules, set forth at 31 Pa. Code, and specifically, 31 Pa. Code § 56.1, the Department hearing scheduled and held in this case was governed by the General Rules of Administrative Practice and Procedure, 1 Pa. Code Part II (with certain exceptions not here relevant).

Id. at 221, 516 A.2d at 649.

The operative statute in the case at bar, the Health Care Facilities Act, is not analogous to the Professional Health Services Plan Corporation Act. Whereas the Professional Health Services Plan Corporation Act mandates public hearings on rate filings, the Health Care Facilities Act does not require a public informational hearing on an application for a license to operate a long-term care nursing facility. The applicant must undergo an intensive review, including on-site inspections by the Department. 28 Pa. Code §201.13(b).*fn10 The standards for licensure are quite stringent. Section 808(a) of the Health Care Facilities Act, 35 P.S. §448.808(a).*fn11 However, this detailed regulatory scheme does not contemplate an informal hearing or review process in which residents or members of the public may participate. The General Rules govern procedures for implementing statutes, but they do not create rights or procedures not contemplated by statute. Accordingly, it is irrelevant that the General Rules define what constitutes a "proceeding" in broad terms. 1 Pa. Code §31.3.*fn12 The General Rules cannot create the type of "proceeding" on a CHOW Application contemplated by Residents if one is not provided for in the Health Care Facilities Act.*fn13

To summarize, Pennsylvania Dental Association is distinguishable. The Department cannot give private citizens a seat at the conference table even if it thought it was a good idea. The Department is bound by the Health Care Facilities Act, and the Act does not give nursing home residents the ability to review regulatory filings that may be replete with confidential, financial information and then consult with the Department on how the Department should act.*fn14 In the absence of express statutory authority, we hold that a "proceeding" as used in 1 Pa. Code §35.28 does not include meetings between Department staff and regulated entities to which interested persons may invite themselves. Such an expansive interpretation of "proceeding" would allow private citizens to become involved in driver licensing applications, budget discussions in the Office of Administration in the Governor's Office, and every manner of state agency business. It would produce chaos.

In any case, even reading "proceeding" in the way suggested by Residents does not resolve the jurisdictional issue because an order denying a petition to intervene is not an appealable order. Pennsylvania Rule of Appellate Procedure 341 provides that "an appeal may be taken as of right from any final order of an administrative agency." PA. R.A.P. 341(a). The official Note to PA. R.A.P. 341 explains that an order denying a petitioner the right to intervene no longer may be deemed a final order within the meaning of Rule 341 following the 1992 amendments to the Rule.*fn15 See also Jefferson County v. Department of Environmental Protection, 703 A.2d 1063 (Pa. Cmwlth. 1997); Cogan v. County of Beaver, 690 A.2d 763 (Pa. Cmwlth. 1997) (both cases acknowledging that an order denying intervention is not an appealable "final order" under Rule 341). The official Note also states that, in an appropriate case, an order denying intervention might be appealable under PA. R.A.P. 312, relating to interlocutory appeals by permission, or PA. R.A.P. 313, relating to collateral orders. PA. R.A.P. 312 is not applicable in this case,*fn16 therefore, we must determine whether the Department's Final Response denying intervention is a collateral order under PA. R.A.P. 313.

Rule 313 states that "[a]n appeal may be taken as of right from a collateral order of an administrative agency." PA. R.A.P. 313(a). A collateral order is appealable if all three of the following requirements are met:

(1) the order is separable from, and collateral to, the main cause of action;

(2) the right involved is too important to be denied review; and

(3) the question presented is such that, if review were postponed until final judgment in the case, the claim would be irreparably lost.

H.R. v. Department of Public Welfare, 676 A.2d 755, 759 (Pa. Cmwlth. 1996).*fn17

Additionally, the requirements for appealing a collateral order "are stringent and must be narrowly construed." Jefferson County, 703 A.2d at 1065 (quoting Strain v. Simpson House, 690 A.2d 785, 787 (Pa. Cmwlth. 1997)).

Here, the Department's order denying Residents' petitions for intervention is separable from, and collateral to, the Department's review of Manor Care's CHOW Applications. However, we cannot say that Residents' asserted right to intervene in the licensure proceedings is a question "too important to be denied review." H.R., 676 A.2d at 759.

In explaining the "important question" criterion, this Court has noted that the merits of the petition to intervene necessarily are considered as part of the analysis to determine whether the claim asserted is "too important to be denied review," but that "the mere assertion of a right to intervene is not per se too important to be denied review."

Jefferson County, 703 A.2d at 1065 (quoting Cogan, 690 A.2d at 765). Here, the Department denied Residents' petition to intervene because their petition did not conform with the form and content requirements of Section 35.29 of the General Rules.*fn18 Residents' "Factual Allegations" were complaints regarding the current level of care provided at two of Manor Care's facilities, and really had no bearing on whether the prospective owner of the facilities could meet the statutory or regulatory requirements for licensure.*fn19 Further, they lacked the specificity required in 1 Pa. Code §35.29. The Department was correct that Residents failed to satisfy 1 Pa. Code §35.29 by putting forth relevant factual allegations, and we cannot say that Residents' argument to the contrary is "too important to be denied review" for purposes of the collateral order doctrine.

In summary, Petitioners have attempted to appeal the Department's order denying their petitions to intervene in the Department's review of Manor Care's CHOW Applications. This was not a final order, nor have Petitioners satisfied the requirements for an appealable interlocutory or collateral order. Lacking jurisdiction, we quash the petition for review.*fn20

Petition for review quashed.

ORDER

AND NOW, this 20th day of March, 2009, the Petition for Review filed by David Adams and Rose Frontino (by Josephine Miechur and Marie Richards with Power of Attorney) in the above-captioned matter is hereby QUASHED.

MARY HANNAH LEAVITT, Judge


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