No. 85-43 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1985 

WEST-I'IONT COMMUNITY CARE, INC . , 

Petitioner and Appellant, 

BOARD OF HEALTH AND ENVIRONMENTAL 

SCIERCES; DEPARTPIEUP OF IZEALTH AND 

ENVIRONMENTAL SCIENCES; JEAN K. 

KoM~~ and MARJORIE ANDERSON, 

C 

Respondents and Respondents. 

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis & Clark, 

The Honorable Henry Loble, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

J. Cort Harrington, Jr. argued, Helena, Montana 

For Respondents: 

Allen B. Chronister argued, Agency Legal Services, 

Dept. of Justice, Helena, Montana 

Luxan & Murfitt; Patrick Melby argued for Koma 

& Anderson, Helena, Montana 

-- - 

Submitted: July 2, 1985 

Decided: July 30, 1985 

Filed: 314. (1 fgos 

Clerk 
Mr. Justice Frank B. Morrison, Jr., delivered the Opinion of 

the Court. 

West-Mont Community Care, Inc. , (West-Mont) appeals the 

January 3, 1985, order of the First Judicial District Court 

affirming an order of the Board of Health and Environmental 

Sciences (Board) which granted respondents, Jean Komac and 

Marjorie Anderson, a certificate of need for a home health 

care agency in Lewis and Clark County. We affirm the order 

of the District Court, although for a reason different than 

that relied on by the court. 

On January 30, 1984, Jean Komac and Marjorie Anderson, 

d/b/a Independent Home Health Care (Independent) , filed an 

application with Montana's Department of Health and Environmental Sciences (Department) for a certificate of need to 

establish a home health care agency in Lewis and Clark County. The Department denied Independent's application, stating 

that Lewis and Clark County's home health care needs were 

already being met by West-Mont Community Care. Independent 

would only be duplicating West-Mont ' s services, to 

West-Mont's detriment. 

Independent appealed the Department's decision to the 

Board of Health and Environmental Sciences (Board) . The 

Board overturned the Department's decision, stating that both 

state and federal law required the Department to consider the 

effect of competition on the provision of home health care 

services when reviewing a certificate of need and that the 

Department had failed to do so. Then, relying on the competition criterion, the Board granted the certificate of need. 

West-Mont appealed the decision of the Board to District 

Court and lost. West-Mont now appeals to this Court, contending that the federal criterion of competition has never 

been properly adopted by Montana and that, therefore, the 
Board erred in basing its decision to grant the certificate 

of need on the competition factor. 

Specifically, West-Mont raises the following issues on 

appea 1 : 

1. When the Montana Legislature incorporated by reference "Title 42, CFR, Part 123, as amended" in 

S; 50-5-304 (1) (n) , MCA, it either: 

a. Intended to incorporate 42 CFR, Part 123 as it 

existed on July 1, 1979, which does not contain competition 

as a review criterion; or 

b. Intended to include future amendments to 42 CFR, 

Part 123, which would be an unconstitutional delegation of 

legislative authority to the Secretary of Health and Human 

Ser~~ices. 

2. If incorporation of the federal rules is discretionary rather than mandatory, the criterion of competition still 

may not be considered as it has never been properly adopted 

pursuant to the Montana Administrative Procedures Act. 

3. For purposes of certificate of need review, does 

"need" include "need for competition" under the Montana 

statutes alone? 

4. Is the Board's finding that Independent's application will not have an adverse effect on the existing home 

health agency and is consistent with Montana's health systems 

plan supported by reliable, probative and substantial evidence on the whole record? 

5. Is the Board's finding that there are no less costly, qua lity-equiva lent, or more effective methods of providing Independent's proposed services clearly erroneous? 

The case was orally argued to this Court on May 16, 

1985. At that time Mr. Patrick Melby, attorney for Independent, advised this Court that the Department of Health and 
Environmental Sciences was considering the adoption of an 

administrative rule which would incorporate into the State's 

review criteria for a certificate of need the specific federal regulations at issue, including the need for competition. 

Those rules were adopted by the Department on May 30, 1985. 

In light of this development, the parties were asked to brief 

the following additional issue: 

"May this Court consider an administrative rule promulgated by the respondent 

Department of Health and Environments 1 

Sciences after filing of the notice of 

appeal wherein there is adopted now 

existing federal regulations which may be 

material to the cause and may the same be 

considered by this Court in the determination of this cause?" 

Our resolution of this issue renders consideration of 

West-Mont's issues one through three unnecessary. 

Generally, an appellate court must apply the law in 

effect at the time it renders its decision. Thorpe v. Housing Authority of the City of Durham (1969), 393 U.S. 268, 89 

S.Ct. 518, 21 L.Ed.2d 474. Montana followed this principle 

in Wilson v. State Highway Commission (1962), 140 Mont. 253, 

370 P.2d 486. There, after judgment for the Highway Commission was entered in the trial court, the legislature enacted 

a statute granting the Highway Commission the authority to 

perform the act at issue. This Court held the appeal of the 

trial court judgment to be moot, stating: 

"We are of the opinion that this case 

does not present any justiciable issues. 

The above-cited statute resolved the 

question of whether the Commission had 

power to rent the use of the unused right 

of way by expressly granting such power. 

Likewise, the statute disposed of the 

constitutional question by requiring that 

the Commission secure rent from the 

unused right of way. There is nothing 

left for this court to decide. We do not 

deem it necessary to rule upon the legality of the administrative procedure which 

is no longer in effect, and which no 

longer controls the rights of the 
parties. . . . " Wilson, 140 Mont. at 

257, 370 P.2d at 488. 

This principle applies to administrative regulations as 

well as statutes. 

" ' [I] f subsequent to the judgment and 

before the decision of the appellate 

court, a law intervenes and positively 

changes the rule which governs, the law 

must be obeyed, or its obligation denied. 

If the law be constitutional, * * * I 

know of no court which can contest its 

obligation. . . .' 

"This same reasoning has been applied 

where the change was constitutional, 

statutory, or judicial. Surely it 9- 

plies with equal force where the change 

--% is made an administrative agency acting pursuant-to - legislative authorization." Thorpe, 393 U.S. at 282, 89 S.Ct. 

at 526, 21 L.Ed.2d at 484, quoting Chief 

Justice Marshall in United States v. 

Schooner Peggy (1801) , 1 Cranch 103, 110, 

2 L.Ed. 49, 51. (emphasis supplied) 

(footnotes omitted) 

Retroactive application of new rules is impermissible 

only if it "takes away or impairs vested rights acquired 

under existing laws or creates new obligations or imposes new 

duties in respect to transactions already past." Castles v. 

State ex rel. Montana Department of Highways (1980), 187 

Mont. 356, 360, 609 P.2d 1223, 1225, citing City of Harlem v. 

State Highway Commission (1967), 149 Mont. 281, 284, 425 P.2d 

718, 720. There is no retroactive application problem here 

as no vested rights are involved. "[Ilt is well established 

that the rights which may 'vest1 through reliance on a government permit are no greater than those specifically granted 

by the permit itself." Santa Monica Pines, Ltd. v. Rent 

Control Board of the City of Santa Monica (Cal. 1984) , 679 

P.2d 27, 32. West-Mont's permit to operate a home health 

care agency certainly does not guarantee West-Mont that it 

will always operate as a monopoly, free of competition. 

Rather, the operation of a home health care agency is a 
privilege subject to conditions imposed by the State of 

Montana through its certificate of need program. See Petition of Morris (1978), 175 Mont. 456, 575 P.2d 37, where we 

held the practice of law to be a privilege burdened with 

conditions. 

We would not apply the new rules to this case if such 

application would, in any way, prejudice West-Mont. However, 

the application of the new rules does not deprive West-Mont 

of a fair hearing. It is undisputed that the Board thought 

it was to consider the competition criterion. Each party had 

an adequate opportunity to present its case on that issue at 

the administrative hearing. In fact, nearly all the testimony and evidence offered by each party centered around the 

criteria of cost and competition. 

In Wilson, supra, a permit had not yet been issued. 

This Court ordered that the new rule be considered when 

determining whether or not to issue the permit. Here, although the certificate of need has been issued (pending this 

appeal), the Board considered the competition criterion when 

determining whether or not to issue the certificate of need. 

There was no harm or prejudice to West-Mont. 

West-Mont alleges in its supplemental brief that the 

Department failed to properly incorporate 42 CFR 123.412 into 

A.R.M. § 16.32.110. We do not agree. The federal regulation 

is properly cited. The administrative rule indicates that 

the criteria in the federal regulation are to be adopted in 

Montana. To require a listing of the criteria would defeat 

the rationale for allowing the incorporation of other material in the Administrative Rules of Montana, the saving of 

space and money. The cite in and of itself provides the 

public with the needed information on where the material is 

located. 
We hold that A.R.M. 5 16.32.110, adopted May 30, 1985, 

is the proper rule to be considered by this Court in the 

determination of this cause. Therefore, this Court will 

consider the need for competition when determining whether or 

not the evidence presented to the Board supports the issuance 

of a certificate of need to Independent. 

West-Mont objects to two of the Board's findings of fact 

on the basis that they are not supported by reliable, probative and substantial evidence on the whole record and that 

they are clearly erroneous. Those findings are: 

"10. There are no less costl-y, 

quality-equivalent or more effective 

methods of providing the proposed services. [$ 50-5-304 (1) (d) , MCA] 

"14. The establishment of Independent 

will not have an adverse financial impact 

on the existing health care system and is 

not inconsistent with joint planning 

efforts by health care providers in the 

area. [§ 50-5-304 (1) (f) , MCA] " 

The trial court judge affirmed those findings, stating 

simply that: 

"The Court shall not disturb the findings 

of the Board with respect to the criteria 

found in Section 50-5-304 (1) (a) , (c) , (a), and (f). There is substantial 

evidence to support their findings." 

We agree with the trial court. "If the record contains 

support for the factual determinations made by the agency, 

the courts may not weigh the evidence. They are bound by the 

findings of the agency." City of Billings v. Billings 

Firefighters Local No. 521 (Mont. 1982), 651 P.2d 627, 632, 

39 St.Rep. 1844, 1849. There is ample evidence in the record 

to support the findings of the Board. 

Regarding finding of fact no. 10, West-Mont contends 

that Independent's planned service is not of a quality equivalent to that of West-Mont because Independent does not 
intend to hire a nursing supervisor. However, Jean Komac 

testified at the hearing before the Roard that Independent 

plans on hiring two nursing super~risors to work alternate 

shifts. Those supervisors would also provide direct services, but would not be supervising at the same time. (See 

transcript, pp. 117-118. ) There is sufficient evidence for 

this Court to affirm the decision of a Board with expertise 

in the area that such an arrangement will provide quality 

service to Independent's clientele. 

With respect to finding of fact no. 14, West-Mont alleges that the Board failed to consider that Independent would 

be duplicating services offered by West-P4ont , contrary to 

Montana's Health Systems Plan. While Montana's Health Systems Plan does not encourage duplication of services, it does 

allow for duplicating where it is deemed appropriate. 

Polson, Missoula and Great Falls all have competing home 

health care agencies. An auditor from Blue Cross testified 

that the competition has little adverse effect on those 

agencies. 

"It depends basically on a couple of 

factors. It depends on their financial 

acumen. If they can handle it, if they 

can handle the competition, then they're 

going to become more efficient. If they 

cannot become more efficient, then they 

will not survive." Tr. p. 22. 

In addition, there was substantial testimony indicating 

that competition in the home health care field in Lewis and 

Clark County would reduce the cost of the service, with no 

adverse effect on patient services. 

The auditor quoted previously also testified that: 

". . . I would be very leery to say that 

instituting two home health agencies in a 

community would have a detrimental effect 

on patient services. In my own personal 

opinion, I cannot in any conscience say 

that this would not be a good thing. I 

think it would be a good thing to have 
this competition. It makes both home 

health agencies more efficient. It 

serves the patients better because we 

have a drive, a real need to perform 

against each other. And that's simply my 

opinion. I think the community as well 

as HCFA -- another thing I should mention 

is HCFA is on a cost drive right now, to 

reduce costs paid to providers of services. As for their goal, in reaching this 

goal, instituting a competition-type 

situation would probably be a good thing. 

It would probably serve their purposes 

quite well." Tr. p. 28. 

Mr. Robert Johnson, Director of the Lewis and Clark 

County Health Department, testified as follows: 

"Q Bob, do you have an opinion of whether or not competition in the home health 

care area would advance the purposes of 

quality assurance in those services? 

"A No, I don't think that it would 

affect the quality much. I have no 

question right now that West llont Home 

Health Care is providing high quality 

services and I think that those agencies 

are regulated to the extent by various 

federal and state agencies that their 

quality of service is relatively guaranteed. I think, however, that the real 

issue, for me in my opinion, at least, is 

cost, the charge for that service. 

"Q You're saying that competition in 

home health care would advance the purposes of cost effectiveness? 

"A I think so." Tr. pp. 66-67. 

There is substantial credible evidence in the record to 

support the Board's determination that a certificate of need 

should be issued to Independent. 

Affirmed. 
We concur: ,/ 

ief Justice