No. 85-43 IN

### THE SUPREMECOURTOF THE STATEOF MONTANA 1985

WEST-I'IONTCOMMUNITY CARE, INC

# ., Petitioner and Appellant,

BOARD OF HEALTHAND ENVIRONMENTAL SCIERCES;DEPARTPIEUPOF 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, Judgepresiding.

COUNSEL OF RECORD:

ForAppellant: 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

ClerkMr. 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 onby 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 Departmentdenied 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 thedecision 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, theBoard erred in basing its decision to grant the certificate of need on the competition factor. Specifically, West-Mont raises the following issues on appea1: 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 theMontana Administrative ProceduresAct. 

### 3. For purposes of certificate of need review, does "need" include "need for competition" under the Montana statutesalone? 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, quality-equivalent, or more effective methods of providing Independent'sproposed 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 ofneed 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,theparties were asked to brief the following additional issue: "May this Court consider an administrative rule promulgated by the respondent Department of Health and 

### Environments1 Sciences after filing of the notice of appeal wherein there is adopted now existing federal regulations whichmay be material to the cause and may the samebe considered by this Court in the determination of this cause?" Our resolution of this issue renders consideration of West-Mont's issues one through threeunnecessary. 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), 140Mont. 253, 370 P.2d 486. There,after judgment for the Highway Commissionwas 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 judgmentto 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 questionby requiring that the Commission secure rent from the unused right of way. There is nothing left for this court to decide. We donot deem it necessary to rule upon the legality of the administrativeprocedurewhich is no longer in effect, and which no longer controls the rights of 

### theparties. 

# ..

# ." 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 actingpursuant-to

### -legislative authorization." Thorpe, 393U.S. at 282, 89 S.Ct. at 526, 21 L.Ed.2d at 484,quoting Chief Justice Marshall in United States v. SchoonerPeggy (1801)

### , 1Cranch 103, 110, 2 L.Ed. 49, 51. (emphasis supplied) (footnotesomitted) Retroactive application of new rules is impermissible only if it "takes away or impairs vested rights acquired under existing laws or creates new obligationsor 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 iswell established that the rights which may 'vest1through reliance on a governmentpermit 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 applicationwould, in anyway,prejudiceWest-Mont. However, the application of the new rules does not deprive West-Mont of a fair hearing. It is undisputed that the Board thought itwas to consider the competitioncriterion. Each party had

an adequate opportunity to present its case on that issue at the administrativehearing. 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 (pendingthis appeal), the Board considered the competition criterion when determining whether or not to issue the certificate of need. Therewas no harm orprejudice toWest-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 donot 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 considertheneed forcompetition when determiningwhether or not theevidence presented totheBoard supportstheissuance of a certificateof need toIndependent. West-Mont objectstotwo of theBoard's findingsof fact

on the basis thatthey arenot supported by reliable, probative and substantial evidence on the whole record and that they areclearlyerroneous. Those findings are: "10. There are no less costl-y, quality-equivalent or more effective methods of providing theproposed services. [$ 50-5-304 (1)(d)

## ,MCA]

"14. The establishment of Independent willnot have an adverse financial impact on theexistinghealth 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 shallnot disturbthe findings of theBoard with respect tothe 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 trialcourt. "If therecord contains support for the factual determinations made by the agency, the courtsmay notweigh theevidence. They arebound 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 intherecord tosupport the findingsof theBoard. Regarding finding of fact no. 10, West-Mont contends that Independent's planned service isnot of a qualityequivalent to that of West-Mont because Independent does notintend to hire a nursing supervisor. However, Jean Komac testified at the hearing before the Roard that Independent plans on hiring two nursing super~risorsto work alternate shifts. Those supervisors would also provide direct services, but would not be supervising atthe 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 servicetoIndependent's clientele. With respecttofindingof factno. 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 SystemsPlan does not encourage duplicationof 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 tobecome more efficient. If they cannot become more efficient, then they willnot 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 effecton patient services. The auditor quoted previously alsotestifiedthat: 

# ".

.. I would be very leery tosay that institutingtwo home health agencies ina 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 havethis competition. It makes both home health agencies more efficient. It serves the patients better because we have a drive, a real need to perform againsteach other. And that's simplymy opinion. I think the community as well asHCFA

# -- another thing I should mention is HCFA is on a cost drive right now, to reduce costspaid toproviders of services. As for their goal, in reaching this goal, instituting a competition-type situationwould probably be a good thing. It would probably serve their purposes quitewell." Tr. p. 28. Mr. Robert Johnson, Director of the Lewis and Clark County Health Department, testifiedas follows: "Q Bob, doyou have an opinion of whether ornot competition in thehome 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, forme inmy opinion, atleast, is cost, thecharge for that service. "Q You're saying that competition in home health care would advance the purposes of costeffectiveness? "A I think so." Tr. pp. 66-67. There is substantial credible evidence inthe record to support the Board's determination that a certificateof need should be issued toIndependent. Affirmed.We concur: 

### ,/



### ief Justice