Title: Mercy Health Center v. IOWA STATE DEPT.

State: iowa

Issuer: Iowa Supreme Court

Document:

356 N.W.2d 200 (1984) MERCY HEALTH CENTER, A DIVISION OF the SISTERS OF MERCY HEALTH CORPORATION, Appellee, v. IOWA STATE DEPARTMENT OF HEALTH and Tri-State Convalescent Center, Inc., d/b/a Americana Health Care Center of Dubuque, Iowa, Appellants. No. 83-1366. Supreme Court of Iowa. October 17, 1984. Thomas J. Miller, Atty. Gen., and Maureen McGuire, Asst. Atty. Gen., for appellant Department. Edwin N. McIntosh of Davis, Hockenberg, Wine, Brown & Koehn, Des Moines, for appellant Americana. Alfred E. Hughes of Hughes, Trannel & Jacobs, Dubuque, and Margaret A. Shannon of Honigman, Miller, Schwartz & Cohn, Detroit, Mich., for appellee. Considered by UHLENHOPP, P.J., and McGIVERIN, LARSON, SCHULTZ, and WOLLE, JJ. UHLENHOPP, Justice. This appeal involves a statute relating to certificates of need found in sections 135.61 and following of the Iowa Code of 1983. See Iowa State Dep't of Health v. Hertko, 282 N.W.2d 744 (Iowa 1979). Section 135.63(1) of the Code provides in pertinent part: (Emphasis added.) Subject to the Iowa Administrative Procedure Act in chapter 17A of the Code, the Iowa State Department of Health determines whether a given project comes within the statute requiring a certificate of need. I.A.C. 470-202.4. Within the Department of Health, and again subject to the Iowa Administrative Procedure Act, the Iowa State Health Facilities Council makes decisions on applications for certificates of need. Iowa Code §§ 135.62(2)(d)(1), .69. Mercy Health Center is an institutional health facility in Dubuque, Iowa. At the time of the present proceedings, Xavier Hospital, another health facility, had merged with Mercy. Hospitals in Iowa generally provide two levels of care: acute and sub-acute. Sub-acute care includes skilled nursing care and intermediate nursing care. Americana Health Care Center in Dubuque provided skilled nursing care at the times in question. Mercy desired to designate certain beds in Xavier also for skilled nursing care. *201 Departmental rules specify skilled nursing care as one category of beds in an institutional health service. I.A.C. 470-202.2(3)(b). Section 135.61(19)(d) of the Iowa Code provides: . . . . . . Similarly, the departmental rules state in I.A.C. 470-202.2(8): The parties are agreed that the designation of Xavier beds for skilled nursing care required a certificate of need; it was for a permanent change. Accordingly, Mercy applied to the department for a certificate of need allowing it so to designate the beds in Xavier. The president of Mercy testified: On August 12, 1983, the day after the council refused reconsideration, Mercy began providing skilled nursing care at Xavier. *202 Mercy distributed a letter which, without limitation to temporary service, stated in part: As Mercy's reliance in this appeal is on the claim that the Xavier skilled nursing unit was temporary and therefore did not require a certificate of need, we need not develop the circumstances of Mercy's instituting that unit, other than the following correspondence. On August 20, 1983, Mercy's president wrote the Commissioner of Public Health at the Department of Health that Mercy's board of directors had directed an appeal of the council's denial of a certificate, and that: A representative of the department responded on August 23, 1983, in pertinent part: After a telephone conversation between counsel, an assistant attorney general wrote Mercy's attorney that the response of August 23, 1983, constituted final agency action within section 17 A. 19 of the Iowa Code. Mercy sought judicial review of the council's denial of its application for a certificate of need. That case was decided by the district court and is now pending in this court as No. 84-292. We intimate no opinion at this time on the merits of that case. In the present proceeding, Mercy separately sought judicial review of the department's final agency action holding that skilled nursing care could not be provided at Xavier unless and until a final court adjudication is made resulting in the granting a certificate of need in the other judicial review proceeding. Americana intervened. In the present proceeding Mercy's president testified: She also testified: Q. Is it correct to say that Mercy is hoping to receive a favorable determination *203 with respect to that appeal? A. Absolutely. (Emphasis added.) The district court in the present proceeding held that a certificate is not required and reversed the department's agency action. The department and intervenor Americana appealed. I. Mootness. More than a year has now passed since Mercy started providing skilled nursing care at Xavier. The present case may be moot. The issue presented, however, is of public importance, and is likely to recur and elude adjudication unless we entertain it. We thus proceed to decision. Iowa Freedom of Information Council v. Wifvat, 328 N.W.2d 920 (Iowa 1983). II. Sections 135.61(19)(d) and 135.63(1). The parties are agreed that the appeal presents but one issue: whether Mercy's designation of skilled nursing beds comes within sections 135.61(19)(d) and 135.63(1) of the Iowa Code. They also argue the question of whether this issue is one of fact or of law. Mercy contends that the district court did not overturn a fact finding by the administrative agency, and that the question is a legal one. We find no necessity to decide whether a legal or factual question existed. We will assume for purposes of decision that Mercy is correct, a legal question is presented, and we approach the issue on that basis. Mercy's legal position is that under the cited sections it had an absolute right to install skilled nursing care and designate it temporary, and that the pendency of its application for a permanent certificate is irrelevant. Resolution of the controversy turns on construction of "permanent" in section 135.61(19)(d) and "receipt of" in section 135.63(1). Statutory construction is ultimately for the courts. Ellis v. Iowa Dep't of Job Service, 285 N.W.2d 153, 156 (Iowa 1982). We cannot divorce the construction of sections 135.61(19)(d) and 135.63(1) from the circumstances of the case. A typical illustration of a temporary use of beds for skilled nursing purposes would be one in which the Americana skilled nursing facility was damaged by fire or storm and, during a repair period of less than a year, Xavier provided skilled nursing care. That type of use, however, is not at all what we have here. According to Mercy's own president, if Mercy obtains a certificate of need in the main case on appeal, skilled nursing care will be offered at Xavier on a permanent basis. Mercy thus has a dual intent: to discontinue skilled nursing care at Xavier if a certificate is refused, but to provide skilled nursing care permanently if a certificate is granted. Actually, Mercy's operation of the skilled nursing care beds at Xavier is thus a step in its larger effort to obtain a certificate of need. The operation stands or falls on the outcome of the effort to obtain a certificate. We doubt that Mercy would have opened and operated the skilled nursing beds at Xavier if it were not seeking a certificate of need in the other case; why would it go to that effort and expense if it were only going to operate a matter of months? We cannot construe section 135.61(19)(d) in isolation from the proceeding to obtain a certificate to operate permanently. Section 135.61(1) of the Code prohibits changed health service until "receipt of" a certificate of need. If an applicant for a certificate who meets defeat before the council can seek judicial review and offer the service during the pendency of judicial review up to a period of a year, the quoted prohibition in section 135.61(1) on operation until receipt of a certificate would be defeated. If the courts ultimately turned down the application for a certificate, the applicant would, for the year, have caused itself expense of service and its competitor loss of revenue; it would have provided the duplication of service that the certificate of need legislation was intended to obviate. *204 If an applicant can provide the service during the judicial review proceedings and those proceedings are not concluded within a year, what is to prevent the applicant from discontinuing skilled nursing care temporarily and then commencing again for another year? For that matter, what would prevent an applicant from commencing "temporary" service at the time it originally files its application for a certificate of need? The district court should have viewed the certificate of need proceeding, including the present proceeding, as a whole, and held that Mercy cannot operate a skilled nursing unit at Xavier unless and until it "receives" a certificate of need as a result of judicial review in the main case, in conformity with section 135.63(1) of the Iowa Code. REVERSED.