Title: Arkansas Health Servs. Agency v. Desiderata, Inc.

State: arkansas

Issuer: Arkansas Supreme Court

Document:

ARKANSAS HEALTH SERVICES AGENCY and Arkansas
Health Services Commission; Arkansas Health
Care Association v. DESIDERATA, INC.

97-259                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered January 22, 1998


1.   Administrative law & procedure -- constitutional issues should
     first be raised at commission level -- exhaustive analysis
     best accomplished by advisory proceeding. -- Even though an
     administrative commission may not have the authority to
     declare statutes unconstitutional, such constitutional issues
     should first be raised at the administrative law judge or
     commission level because they often require an exhaustive
     analysis that is best accomplished by an adversary proceeding
     that can be done only at the hearing level; requiring
     constitutional issues to be considered by a commission can
     assure that such issues will be thoroughly developed before an
     appellate court is asked to rule on a statute's validity.

2.   Administrative law & procedure -- equal protection argument
     not raised until appeal to circuit court -- issue barred. --
     Where appellee did not raise its equal protection argument
     until its appeal to circuit court, it was barred from arguing
     that issue on appeal to the supreme court.

3.   Administrative law & procedure -- treating different nursing-
     home applicants differently does not prove denial of equal
     protection. -- Establishing that different nursing-home
     applicants are treated differently does not prove the denial
     of equal protection.  

4.   Administrative law & procedure -- review directed to agency
     and commission decisions -- administrative agencies better
     able to determine and analyze decisions affecting their
     agencies. -- Supreme court review is not directed toward the
     circuit court but toward the agency and commission decisions,
     based on the recognition that administrative agencies are
     better equipped by specialization, insight through experience,
     and more flexible procedures than courts to determine and
     analyze legal issues affecting their agencies. 

5.   Administrative law & procedure -- nursing home application --
     appellee argued occupancy-rate determinations erroneous --
     occupancy rate remained below that required. -- At the
     Commission hearing, appellee suggested that the appellant's
     need and occupancy-rate determinations were erroneous;
     however, even with appellee's suggested corrections in the
     counting of beds, the occupancy rate remained 9.46% below the
     required occupancy rate.
 
6.   Administrative law & procedure -- appellee argued occupancy-
     rate determinations erroneous -- calculation used for county
     occupancy rate -- inclusion of private-pay homes proper. --
     Where appellee argued that the 85.04% county occupancy rate
     should not have included private-pay homes because of their
     historically low occupancy rates and their ability to
     manipulate the rate, the supreme court found that the argument
     ignored testimony that Medicaid and private-pay beds are
     licensed by the same authority and have to meet the same
     standards, that private-pay beds have always been counted in
     health planning, and that counting private-pay homes would not
     prevent the county from reaching the agency's methodology
     occupancy rate of 94.5%. 

7.   Administrative law & procedure -- administrative hearings --
     telephone-survey information can constitute substantial
     evidence -- objective means to obtain data from private-pay
     facilities. -- Telephone-survey information, and other similar
     data, can constitute substantial evidence in an administrative
     hearing; while such occupancy-rate data might be obtained in
     another manner, the use of a telephone survey is the only
     objective way for the agency to obtain such data from private-
     pay facilities.

8.   Administrative law & procedure -- nursing-home application --
     occupancy-rate calculations found reliable -- appellee and
     trial court in error. -- Appellee's argument that appellant
     agency's occupancy-rate calculation of 85.04% was erroneously
     reached by using unreliable data that appellant obtained from
     a telephone survey of private-pay homes was without merit;
     this telephone data was considered reliable and therefore
     supported the agency's rate calculations. 

9.   Administrative law & procedure -- nursing-home application --
     occupancy-rate calculation -- finding that required county
     occupancy rate not shown -- supported by substantial evidence.
     -- The supreme court held that the evidence was more than
     substantial to uphold the Commission's occupancy-rate
     calculation of 85.04%, used to establish compliance with Ark.
     Code Ann.  20-8-106(b)(1), and its finding that the required
     94.5% county occupancy rate was not shown; the supreme court
     held that the record also sufficiently supported the agency's
     findings that appellee's proposed project was not economically
     feasible and did not foster cost containment as required under
     Ark. Code Ann.  20-8-106(b)(3) and (4).
10.  Administrative law & procedure -- nursing-home application --
     economically feasible consideration -- appellee's profit
     estimates unrealistically optimistic. -- In addressing the
     "economically feasible" consideration of Ark. Code Ann.  20-
     8-106(b), the agency's finding that appellee's profit
     estimates appeared unrealistically optimistic was supported by
     substantial evidence.

11.  Administrative law & procedure -- nursing-home application --
     appellee's proposed facility failed to promote cost
     containment or improve efficiency or productivity. -- The
     agency's finding that appellee's proposed facility failed to
     promote cost containment or improve efficiency or productivity
     was found by the supreme court to have merit where appellee
     offered no evidence showing cost containment would result from
     its proposed project, there was testimony that appellee's land
     site was in an unincorporated area located three miles from
     the closest incorporated area, and municipal services such as
     for water, sanitation, fire protection, and ambulance needs
     were not readily available.

12.  Administrative law & procedure -- nursing-home licensure --
     appellant's methodology not arbitrary -- valid reasons exist
     for giving preference to established nursing homes. --
     Appellee's charge that appellant agency's methodology was
     arbitrary and appellee's charge that the agency's methodology
     arbitrarily favored established nursing homes by ranking
     nursing-home applicants was without merit; both the agency and
     Commission stated and gave valid reasons for providing a
     preference to established nursing homes, particularly those
     that offer excellent service.

13.  Administrative law & procedure -- agency's decision must be
     affirmed if supported by substantial evidence. -- The supreme
     court must affirm an agency's decision if there is substantial
     evidence to support it, and in reviewing the record, the
     evidence is given its strongest probative force in favor of
     the agency's ruling.

14.  Administrative law & procedure -- substantial evidence
     supported Commission's decision -- trial court reversed and
     remanded. -- Where the supreme court was unable to say the
     evidence presented was not substantial or failed to support
     the Commission's decision, the court found that the trial
     court wrongly discounted and at times altogether dismissed the
     consideration of proper evidence presented to the Commission
     and erred in substituting its own judgment for that of the
     agency and Commission; the trial court's decision was reversed
     and remanded.
  

     Appeal from Pulaski Circuit Court; Morris W. Thompson, Judge;
reversed and remanded.
     Winston Bryant, Att'y Gen., by:  Vicki M. Pickering, Asst.
Att'y Gen., and Glen Hooks, Asst. Att'y Gen., for appellants.
     Friday, Eldredge & Clark, by:  Bill S. Clark, for appellee.
     Meeks & Jernigan, P.A., by:  George O. Jernigan, Jr., for
intervenor-appellant.

     Tom Glaze, Justice.
     In 1994, Desiderata filed an application with the Arkansas
Health Services Agency, requesting a permit of approval for a new
70-bed nursing home to be constructed near Maumelle.  Desiderata's
application provided that the proposed home is intended to serve
developmentally disabled and mentally retarded elderly persons, as
well as those diagnosed with Alzheimers and HIV.  Its application
also proposed to serve members of what is referred to as the normal
segment of the elderly community needing long-term care.
     The Agency denied Desiderata's application, stating that the
application failed to meet all of the required criteria under Ark.
Code Ann.  20-8-106(b) (Repl. 1991).  Desiderata appealed the
Agency decision to the Arkansas Health Services Commission, and
after a public hearing on November 28, 1994, the Commission voted
to affirm the Agency.  Upon petitioning for judicial review, the
trial court reversed the Commission's decision, and in doing so,
held the methodology employed by the Agency and Commission was
arbitrary and capricious and violated the Equal Protection Clause. 
The trial court further ruled the Commission's decision was not
supported by substantial evidence.  We hold the trial court erred.
     We first mention our inability to reach, at least directly,
the trial court's Equal Protection Clause ruling, because that
constitutional issue was never raised before the Commission.  In
this respect, we cite the settled law in Hamilton v. Jeffrey Stone
Co., 6 Ark. App. 333,