Title: In re Application for Certificate of Need by HCA Health Services of Wyoming, Inc.

State: wyoming

Issuer: Wyoming Supreme Court

Document:

In re Application for Certificate of Need by HCA Health Services of Wyoming, Inc.1984 WY 105689 P.2d 108Case Number: 83-212Decided: 10/03/1984IN RE APPLICATION FOR CERTIFICATE OF NEED BY HCA HEALTH SERVICES OF WYOMING, INC. 

LANDER VALLEY REGIONAL MEDICAL CENTER, PETITIONER, 

v. 

WYOMING CERTIFICATE OF NEED REVIEW BOARD, AND HCA HEALTH SERVICES OF WYOMING, INC., RESPONDENTS.

Supreme Court of Wyoming
IN RE APPLICATION FOR 
CERTIFICATE OF NEED BY HCA HEALTH SERVICES OF WYOMING, INC. 

LANDER VALLEYREGIONALMEDICALCENTER, PETITIONER, 

v. 

WYOMING CERTIFICATE OF NEED 
REVIEW BOARD, AND HCA HEALTH SERVICES OF WYOMING, INC., 
RESPONDENTS.

 
 
David R. 
Nicholas and Philip Nicholas of Corthell, King, McFadden, Nicholas, Prehoda 
& Olson, Laramie, John D. Harwell of Memel, Jacobs, Pierno & Gersh, Los 
Angeles, Cal., for 
petitioner.

A.G. McClintock, 
Atty. Gen., Kathleen M. Karpan, Asst. Atty. Gen., G. Paul Hunter, Legal Intern, 
Cheyenne, for respondent Wyoming 
Certificate of Need Review Bd.

Richard I. Leedy 
of Hettinger & Leedy, Riverton, Michael R. Murphy and Gregg I. Alvord of 
Jones, Waldo, Holbrook & McDonough, Salt Lake City, Utah, for respondent HCA Health Services of 
Wyoming, Inc. 

Before ROONEY, C.J., and 
THOMAS, ROSE, BROWN and CARDINE, JJ.

ROSE, 
Justice.

[¶1.]     This case concerns the 
obligation of the State Certificate of Need Review Board (Board), created by The 
New Institutional Health Services Act, §§ 35-2-201 through 35-2-214, W.S. 1977, 
to afford a trial-type hearing to one hospital in connection with authorizing 
the construction of a competing hospital in a neighboring community. We will 
hold that federal and state statutes require the Board to provide an opportunity 
for a hearing to entities affected by its decision to issue or deny a 
certificate of need for a new health-care facility. We will, therefore, remand 
this case to enable the respondent Board to provide such a hearing to petitioner 
LanderValleyRegionalMedicalCenter (LanderValley).

BACKGROUND

Legislation

[¶2.]     The National Health 
Planning and Resources Development Act of 1974, 42 U.S.C. § 300k-300n, 
established a national health-planning program and authorized financial 
assistance to the state and local agencies which were given primary 
responsibility for planning and coordinating health services, manpower, and 
facilities. See 42 U.S.C. § 300k(b). The Act requires states wishing to 
participate in the federal funding program to designate a health planning and 
development agency to administer a state certificate-of-need program, consistent 
with federal standards, for the construction of new health-care institutions and 
the acquisition of major medical equipment. 42 U.S.C. § 300m-2(a)(1)(A), 
(a)(4)(B) and 300m-6. Under the certificate-of-need program, the state agency 
must review and determine the need for any proposed health service or facility 
prior to the commitment of substantial funds for the project. 42 U.S.C. § 
300m-6(a)(1) and (2). In this way, a state can facilitate the rational 
distribution of quality health-care services and the containment of costs to 
consumers for such services.

[¶3.]     In response to this 
federal law, the Wyoming legislature in 1977 enacted The New 
Institutional Health Services Act, §§ 35-2-201 through 35-2-212, supra. Section 
35-2-203 of the Act created a certificate of need review board, composed of five 
members who are health-care providers and seven members who are consumers. 
Section 35-2-204(b) and (c) directs the Board to evaluate certificate-of-need 
applications for compliance with state health plans and specified criteria. The 
evaluation process includes notice to "affected persons" and solicitation of 
comments at a "public meeting." Section 35-2-206(e) and (f). Upon Board 
approval, the Department of Health and Social Services issues certificates of 
need. Section 35-2-204(b). The Act makes no provision for a trial-type hearing 
either prior to the Board's decision or after a certificate of need has been 
granted.

Issuance of Certificate 
of Need to HCA Health Services of Wyoming, Inc.

[¶4.]     On March 14, 1983, 
respondent HCA Health Services of Wyoming, Inc. (HCA) applied for a certificate 
of need to replace its 56-bed hospital in Riverton, Wyoming, with a 70-bed facility. LanderValley, as the operator of another 
hospital in the same county as the proposed facility, received notice of the 
pending certificate of need. At informal public meetings conducted on two 
separate days in June, 1983, the Board heard comments from the applicant, from 
an expert in management systems for LanderValley, and from members of the public. 
These meetings were recorded on tape and transcribed. At the conclusion of the 
second meeting, the Board voted to issue a certificate of need to HCA, 
notwithstanding the fact that the proposed hospital exceeded the number of beds 
recommended for the county in developed health plans.

[¶5.]     Following the Board's 
approval of the certificate of need for HCA, Lander Valley sought an 
administrative appeal in accordance with the Board's rules and regulations which 
afford a hearing to an entity "aggrieved or adversely affected" by a Board 
decision (Chapter XVI, § 1a, Rules and Regulations, New Institutional Health 
Services Act (Revised September, 1982). LanderValley also petitioned the district court 
for judicial review of the issuance of the certificate of need to 
HCA.

[¶6.]     The Board granted 
LanderValley's request for a 
hearing and an independent hearing officer was appointed by the Governor. The 
hearing officer subsequently questioned whether the regulations providing for 
administrative review exceeded the Board's authority under The New Institutional 
Health Services Act, supra. After considering memoranda submitted by the 
parties, the hearing officer ordered a stay of the administrative appeal pending 
judicial resolution of the question. The district court certified the case to 
this court pursuant to Rule 12.09, W.R.A.P., 1984 Cum. 
Supp.

ISSUES

[¶7.]     LanderValley's primary argument before this 
court concerns its right, under constitutional due process, federal and state 
law, and administrative rules, to a trial-type hearing before the Board in 
connection with HCA's application for a certificate of need. Lander Valley 
points out that any decision to issue or deny a certificate of need in the 
county necessarily affects its viability as a health-care provider, since state 
health plans allot the county a finite number of hospital beds. Accordingly, 
LanderValley contends that it is 
entitled to present its position to the Board in a hearing at which the parties 
are represented by counsel and witnesses testify under oath subject to 
cross-examination.

[¶8.]     We agree that federal 
and state laws envision such a hearing for one in petitioner's position. We 
will, therefore, reverse the grant of the certificate of need and remand this 
case for the appropriate administrative proceeding. Accordingly, we need not 
address LanderValley's contention that 
the certificate of need must be set aside as issued in violation of the Board's 
procedural rules for public meetings and as contrary to state health 
plans.

STATUTORY AUTHORITY FOR 
HEARING BEFORE CERTIFICATE OF NEED REVIEW BOARD

Wyoming Administrative Procedure 
Act

[¶9.]     Under the Wyoming 
Administrative Procedure Act, §§ 16-3-101 through 16-3-115, W.S. 1977, "all 
parties" in a "contested case" must be afforded an opportunity for a hearing 
replete with statutory safeguards. Section 16-3-107. Section 16-3-101(b)(ii) 
defines "contested case" as

"* * * a proceeding 
including but not restricted to ratemaking, price fixing and licensing, in which 
legal rights, duties or privileges of a party are required by law to be 
determined by an agency after an opportunity for hearing."

A licensing 
decision constitutes a contested case if the agency must provide notice and an 
opportunity for a hearing:

"(a) When the grant, 
denial, suspension or renewal of a license is required by law to be preceded by 
notice and an opportunity for hearing the provisions of this act [§§ 16-3-101 
through 16-3-115] concerning contested cases apply." Section 16-3-113(a), W.S. 
1977.

Section 
16-3-101(b)(vi) defines a party for purposes of a contested-case 
proceeding:

"(vi) `Party' means each 
person or agency named or admitted as a party or properly seeking and entitled 
as of right to be admitted as a party."

[¶10.]  We have reviewed these provisions of the 
Wyoming Administrative Procedure Act in the past and said that an administrative 
matter qualifies as a contested case where the law, independent of the Wyoming 
Administrative Procedure Act, requires legal rights to be determined after an 
opportunity for a trial-type hearing. Diefenderfer v. Budd, Wyo., 563 P.2d 1355, 1359 (1977); Thornley v. Wyoming 
Highway Department, Motor Vehicle Division, Wyo., 478 P.2d 600, 603 (1971). We turn, then, 
to the federal and state legislation pertaining to procedural requirements for 
administrative review of certificate-of-need applications to determine (1) 
whether the agency must provide notice and opportunity for hearing and, if so, 
(2) which entities are entitled to assert these 
protections.

National Health Planning 
and Resources Development Act

[¶11.]  The federal Act, as amended in 1979, 
establishes minimum certificate-of-need procedures which participating states 
must furnish to qualify for financial assistance. These procedures include 
notification and a hearing at which affected persons may participate as 
parties:

"(b) Each health systems 
agency, State Agency, and Statewide Health Coordinating Council shall include in 
the [review] procedures * * * at least the following:

"(1) Timely written 
notification to affected persons of the beginning of a review and, if a person 
has asked the entity conducting the review to place the person's name on a 
mailing list maintained by the entity, such notification shall be sent to such 
person.

* * * * * 
*

"(12) The following 
procedural requirements with respect to proceedings under a certificate of need 
program:

"(A) Hearings under a 
certificate of need program shall be held before a State Agency or a health 
systems agency to which the State Agency has delegated the authority to hold 
such a hearing. In a hearing under the program, any person shall have the right 
to be represented by counsel and to present oral or written arguments and 
evidence relevant to the matter which is the subject of the hearing, any person 
directly affected by the matter which is the subject of the hearing may conduct 
reasonable questioning of persons who make factual allegations relevant to such 
matter, and a record of the hearing shall be maintained. * * *" 42 U.S.C. § 
300n-1(b)(1) and (12)(A).

The pertinent 
federal regulations define "affected persons" and mandate a public hearing upon 
their request, even if the state agency would not deem such persons 
"affected":

"The term `affected 
persons' includes, at a minimum, the applicant; * * * health care facilities and 
health maintenance organizations (HMOs) located in the health service area in 
which the project is proposed to be located which provide services similar to 
the services of the facility under review * * *." 42 C.F.R. § 
123.401.

"(a) The procedures 
adopted and used by a State Agency for conducting the reviews covered by this 
subpart [certificate-of-need reviews] must include at least the 
following:

* * * * * 
*

"(8) Public hearing in 
the course of review. Provision for a public hearing in the course of agency 
review (and before the State Agency makes its decision) if requested by any 
affected person.

* * * * * 
*

"(ii) In a hearing, any 
person shall have the right to be represented by counsel and to present oral or 
written arguments and evidence relevant to the matter which is the subject of 
the hearing. Any person affected by the matter may conduct reasonable 
questioning of persons who make relevant factual 
allegations.

"(iii) The agency shall 
maintain a verbatim record of the hearing.

* * * * * 
*

"(v) * * * In the event 
that a person qualifying under the State Agency definition of `affected person' 
is not provided an opportunity for a public hearing by the health systems 
agency, due to a difference in that agency's definition of `affected persons,' 
the State Agency must provide that person an opportunity for a public hearing." 
42 C.F.R. § 123.410(a)(8).

In addition to 
the public hearing, the federal Act requires participating states to provide 
administrative and judicial review of agency decisions concerning certificates 
of need. 42 U.S.C. § 300n-1(b)(12)(D) and (E). 

Wyoming's New Institutional 
Health Services Act

[¶12.]  The state law, enacted in 1977 and 
amended in 1981, provides for notice to persons affected by a 
certificate-of-need decision and directs the Board to conduct a "public 
meeting":

"(e) At the beginning of 
a review, the department will provide written notification to affected persons, 
including the public who are to be served by the new institutional health 
service. This notice will be published in one (1) newspaper of general 
circulation in the area of the proposed location of the new institutional health 
service and will provide the proposed review schedule and the procedure for 
interested parties to submit written comments." Section 35-2-206(e), W.S. 
1977.

"(f) For an application 
requiring board review a public meeting shall be held concerning each 
certificate of need application and will be conducted by the board. The 
department will publish the time and place of the public meeting and the 
procedure for participation by the public in one (1) newspaper of general 
circulation in the area affected. If deemed necessary by the board, the public 
meeting shall be held in the area affected." Section 35-2-206(f), W.S. 1977, 
1984 Cum.Supp.

The agency rules 
broadly define "affected person":

"`Affected Person' means, 
at a minimum, the applicant, health care facilities, the public affected by a 
proposed project and organizations, political subdivisions and state agencies 
designated by the Board and Department to conduct reviews." Chapter I, § 3a(3), 
Rules and Regulations, supra.

The rules 
describe the public meeting as an opportunity for the applicant and other 
interested parties to speak, followed by questioning from the Board. No 
provision is made for sworn testimony, cross-examination or representation by 
counsel at public meetings, although such meetings are to be recorded. Chapter 
IX, Rules and Regulations, supra.

[¶13.]  Section 35-2-208(a), W.S. 1977, 1984 Cum. 
Supp., of the state Act provides for a "fair hearing" following the denial of a 
certificate of need, if requested by "the applicant or affected 
party":

"(a) The board is 
authorized to deny a certificate of need in any case in which the board has 
determined that the applicant has not demonstrated sufficient justification for 
the new institutional health services, or has not met the requirements 
established by this act [§§ 35-2-201 through 35-2-214] and the rules and 
regulations adopted. Notice shall be sent by certified mail to the applicant 
setting forth the reasons for the denial. The decision denying the application shall 
become final thirty (30) days after it is mailed unless the applicant or 
affected party, within the thirty (30) day period, appeals in writing the 
decision by requesting a fair hearing. Subject to an appeal to the district 
court pursuant to W.S. 35-2-214, the denial shall be in effect for one (1) year. 
Following the one (1) year denial period the applicant may resubmit the 
application for review. All resubmitted applications shall be treated by the 
department as a new application." (Emphasis added.)

The considerably 
broader administrative rules provide for a fair hearing following any Board 
decision:

"Any person, partnership, 
association, corporation, or any state, county or local governmental entities or 
any division, department, board or agency who is aggrieved or adversely affected 
by the decision of the Board or Department shall be given opportunity for a 
hearing as prescribed by the Wyoming Administrative Procedure Act and the New 
Institutional Health Service Act." Chapter XVI, § 1a, Rules and Regulations, 
supra.

Section 35-2-214 
of the state Act authorizes judicial review of a Board decision concerning a 
certificate of need.

Respondents in the 
instant case assert that the Board, by conducting the public meeting, afforded 
LanderValley all of the 
procedural safeguards to which it was entitled under state law. Respondents 
contend that the Board rules and regulations, which envision a fair hearing for 
one in LanderValley's position, 
impermissibly exceed statutory authority and are invalid.1 The hearing officer, appointed at 
the request of LanderValley, found this reasoning sound and 
stayed further administrative proceedings pending judicial resolution of the 
matter.

Contested-Case 
Proceedings Apply to Certificate-of-Need Public 
Meetings

[¶14.]  States choosing to participate in the 
federal funding program authorized by the National Health Planning and Resources 
Development Act must abide by the procedural due-process requirements of the 
Act. The federal district court of New York, in Park East Corporation v. Califano, 435 F. Supp. 46 (D.C.N Y 1977), enjoined state officials from terminating a 
hospital's participation in the medicare/medicaid program prior to a hearing 
required by the Act. Noting that congress, in passing the Act, "intended federal 
preemption in the field of health planning," the court ruled that the state must 
adhere to the Act's mandatory review process. 435 F. Supp.  at 
50.

[¶15.]  Similarly, in Greater St. Louis Health Systems Agency v. 
Teasdale, 506 F. Supp. 23 (D.C.Mo. 1980), the federal district court of 
Missouri, adopting a supremacy-clause argument, declared invalid portions of 
that state's certificate-of-need law which conflicted with the federal act. The 
court determined that the restrictive statutory method for selecting board 
members thwarted the federal objective of encouraging broad participation in the 
selection process.

[¶16.]  In examining Wyoming's 
certificate-of-need statute, we find that we can uphold the review procedures by 
looking to the federal law for the nature and format of the "public meeting" to 
be held prior to the Board's decision. Section 35-2-206(f), supra. The federal 
law contemplates a trial-type hearing in line with that prescribed by the 
contested-case provisions of our Administrative Procedure Act. Such a hearing is 
mandatory, under the federal act, if requested by either the applicant or other 
affected entities following notification of the review process. If no request is 
made, an informal meeting would satisfy federal procedural 
requirements.

[¶17.]  The overall statutory scheme of the 
certificate-of-need review process supports a reading in which "public meeting" 
is consistent with trial-type hearing. The notice requirement of § 35-2-206(e) 
goes hand-in-hand with the notion of a formal hearing upon request. See Board of County Commissioners of Teton 
County v. Teton County Youth Services, Inc., Wyo., 652 P.2d 400, 413 (1982). 
The availability of judicial review under § 35-2-214 contemplates the 
development of a record for review - appropriately accomplished in these types 
of situations under trial-type conditions. Board of CountyCommissioners of TetonCounty 
v. TetonCounty Youth Services, 
supra, 652 P.2d  at 410. Contested-case proceedings are particularly appropriate 
for ruling upon controversial, often complex, certificate-of-need applications 
which are likely to be finally determined in court.

[¶18.]  We hold, then, that the public-meeting 
requirement of § 35-2-206(f) derives meaning and substance from the 
corresponding federal enactment. We hold further that the notice and 
public-meeting requirements of our certificate-of-need review process comprise a 
contested case within the Wyoming Administrative Procedure Act. Any affected 
person, as defined by pertinent federal and state certificate-of-need 
regulations, is entitled, upon request, to participate as a party in such 
contested-case proceedings. This reading of § 35-2-206 effectuates the purpose 
of the legislature to adopt a certificate-of-need review process that complies 
with federal requirements and qualifies the state for financial assistance. When 
we can affirm the validity of a statute and further the legislative intent in 
enacting the measure, we are bound to do so. McGuire v. McGuire, Wyo., 
608 P.2d 1278, 1285 (1980).

[¶19.]  Respondent HCA contends that even if our 
statutes require a trial-type hearing in this case, LanderValley waived its right to such a hearing 
by failing to raise the issue at the public meeting. No waiver occurred by 
reason of petitioner's silence at the public meeting. LanderValley was entitled to rely on the duly 
promulgated Board rules which provided a fair hearing to any person adversely 
affected by a Board decision. Therefore, LanderValley did not need to object to the 
public-meeting proceedings in order to preserve its right to a 
hearing.

[¶20.]  We reverse the grant of the certificate 
of need and remand this matter so that, prior to rendering its decision, the 
Board may afford petitioner a trial-type hearing as prescribed by the Wyoming 
Administrative Procedure Act.

1 Section 16-3-103(d), 
W.S. 1977, of the Wyoming Administrative Procedure Act 
provides:

"(d) No state agency rule 
or any amendment, repeal, modification or revision of the rule may be filed with 
the registrar of rules unless the rule has been submitted to the governor for 
review and the governor has approved and signed the rule. The governor shall not 
approve any rule or any amendment, repeal, modification or revision of the rule 
unless it:

"(i) Is within the scope 
of the statutory authority delegated to the adopting 
agency;

"(ii) Appears to be 
within the scope of the legislative purpose of the statutory authority; * * *."