RENDERED: MARCH 1, 2024; 10:00 A.M.

NOT TO BE PUBLISHED

Commonwealth of Kentucky

Court of Appeals

NO. 2022-CA-1471-MR

BAPTIST HEALTHCARE SYSTEM, INC.

D/B/A BAPTIST HEALTH PADUCAH APPELLANT

APPEAL FROM FRANKLIN CIRCUIT COURT

v. HONORABLE THOMAS D. WINGATE, JUDGE

ACTION NO. 21-CI-00613

MERCY HEALTH – LOURDES HOSPITAL, LLC

D/B/A MERCY HEALTH – LOURDES HOSPITAL,

AND COMMONWEALTH OF KENTUCKY,

CABINET FOR HEALTH AND FAMILY SERVICES,

OFFICE OF INSPECTOR GENERAL, DIVISION 

OF CERTIFICATE OF NEED APPELLEES

OPINION

AFFIRMING

**   **  **

BEFORE: EASTON, ECKERLE, AND JONES, JUDGES.

ECKERLE, JUDGE: An administrative agency denied a health care provider its 

application for an additional cancer treatment facility in Paducah. The Franklin 
-2-

Circuit Court reviewed the agency’s decision, found multiple errors, and directed 

the application be approved. The administrative agency did not appeal, but an 

affected party did. We have reviewed the Circuit Court’s order and, for the 

reasons announced below, agree the agency erred and should have approved the 

application. 

BACKGROUND

Appellee, Mercy Health-Lourdes Hospital, L.L.C. (“Lourdes”),

applied to Appellee, the Commonwealth of Kentucky, Cabinet for Health and 

Family Services, Office of Inspector General, Division of Certificate of Need 

(“Cabinet”), for a Certificate of Need (“CON”) to establish a megavoltage

radiation therapy (“MVRT”) service at its acute care hospital in Paducah, 

Kentucky. Appellant, Baptist Healthcare System, Inc. d/b/a Baptist Health 

Paducah (“Baptist”), entered an appearance as an “affected person” and opposed 

the application because it operates a similar MVRT nearly three miles away from 

Lourdes’s proposed site. 

A Hearing Officer for the Cabinet conducted a 10-day public hearing 

via Zoom. The Hearing Officer subsequently issued Findings of Fact, Conclusions 

of Law, and a Final Order (“Final Order”) denying Lourdes a CON. The Hearing 

Officer specifically found the application inconsistent with Review Criteria 1 (the 

State Health Plan), 2 (Need and Accessibility), and 4 (Costs, Economic Feasibility, 
-3-

and Resource Availability) of the CON regulations.

1

 In summary, the Hearing 

Officer concluded that: (1) Lourdes’s application did not demonstrate that it would 

meet the threshold, 6,000-procedure minimum by the second year of operation; (2) 

Lourdes’s application did not demonstrate a sufficient need, as Baptist’s facility 

was meeting the current and anticipated needs of the geographic area; and (3) 

Lourdes’s application did not demonstrate that the more than ten-million-dollar 

expenditure was an economical use of funds given that the status quo was meeting 

the current needs in the geographic area. 

The Hearing Officer also denied Lourdes’s motion for 

reconsideration, which resulted in Lourdes’s filing of a Complaint in Franklin 

Circuit Court seeking review of the Cabinet’s decision. The Complaint raised 

multiple counts, and the Circuit Court dismissed two of the counts before the 

parties ultimately briefed and orally argued the remaining issues. 

The Circuit Court then entered an Order (“Order”) finding and 

holding that the megavoltage radiation standards adopted in the State Health Plan 

violated Section 2 of the Kentucky Constitution. Specifically, the Circuit Court 

determined that the regulatory requirement than an applicant demonstrate that 

6,000-megavoltage radiation procedures will be performed in the second year of 

1 The CON statutory and regulatory scheme is discussed in greater detail infra.
-4-

the program’s operation does not pass constitutional muster as it is an arbitrary 

number unsupported by any rational basis. 

Additionally, the Circuit Court held that the threshold is contrary to 

the purposes of KRS2 216B.010, the enabling statute for the regulation. The goal 

of the CON program, the Circuit Court noted, “is ‘to improve the quality and 

increase access to health-care facilities, services, and providers, and to create a 

cost-efficient health-care delivery system for the citizens of the Commonwealth.’” 

Order at 11 (citing KRS 216B.010). The rational bases proffered by the Cabinet 

and Baptist were: “the ‘Blue Book,’ general discretion awarded to the Cabinet, 

and the fifteen (15) programs that have met this requirement.” Order at 11. In 

contrast, the Circuit Court noted, between 2014 and 2019, more than half of the 

programs throughout the state did not provide 6,000 procedures. The Circuit Court 

noted that those programs are largely located in rural areas and are “providing vital 

services and medical options for cancer patients in Kentucky.” Id. “Given this 

data, the Court must question why the Cabinet has not reevaluated the 6000[-]

procedure threshold.” Id. 

The Circuit Court held that there was no support for finding that the 

6,000-procedure threshold promoted the goal of the CON program. Additionally, 

2 Kentucky Revised Statutes.
-5-

the Circuit Court found that Lourdes’s program “is necessary, is more accessible to 

rural patients, and is cost-effective.” Order at 12. 

Based on its conclusion that the 6,000-procedure threshold violates 

Section 2 of the Kentucky Constitution and is now void, the Circuit Court further 

found that the Cabinet’s findings relating to Criterion 1 were arbitrary and not 

supported by substantial evidence. The Circuit Court further found that two other

findings in the Final Order were arbitrary and not supported by substantial 

evidence. 

Regarding Criterion 2 (Need and Accessibility), the Circuit Court held 

that the findings were arbitrary and not supported by substantial evidence because 

the number of radiation oncologists in the area were fewer than what is 

recommended. The Hearing Officer had found that Drs. Peter Locken and 

Salvador Espinoza, the radiation oncologists who serviced Baptist’s facility in the 

area, were equivalent to 1.85 full-time equivalent (“FTE”) radiation oncologists. 

However, this number appeared inflated, as Dr. Espinoza only worked 12 or 13 

weeks per year at the Baptist facility, and sometimes he worked there while Dr. 

Locken was absent. “[T]he record demonstrates that they are the equivalent of one 

(1) full time employee. The Hearing Officer committed plain error in reaching this 

conclusion as it is wholly unsupported by the record.” Opinion at 17. 

Additionally, the Circuit Court held that the Hearing Officer erred by concluding a 
-6-

single full-time physician can meet the demand in the service area. Notably, the 

Hearing Officer found that the American College of Radiology and American 

Society for Radiation Oncology recommended one radiation oncologist per 200-

300 new patients per year. Baptist, however, had 615 new patients in 2019. 

Additionally, Baptist performed 12,123 radiation oncology procedures in 2019, 

with the cancer incident rate in the region expected to grow by 7.5% over the next 

five years. Thus, the Circuit Court found the Hearing Officer’s conclusions 

regarding Criterion 2 were arbitrary and not supported by substantial evidence 

because the “Hearing Officer plainly disregarded the evidence in the record that 

there is a need for radiation oncology services in the area.” Order at 18.

Finally, the Circuit Court held that the Hearing Officer’s findings 

relating to Criterion 4 (Costs, Economic Feasibility, and Resource Availability) 

were erroneous. Fundamentally, the error identified by the Circuit Court was 

simple: because the status quo is not currently meeting the area’s needs nor the 

anticipated growth in needs, it was error for the Hearing Officer to find that the 

existing program was more cost effective than the proposed program. Secondarily, 

the Circuit Court also held that the Hearing Officer lacked substantial evidence to 

find that the existing program was more cost effective when the data showed that 

Lourdes’s anticipated charges were 8.84 times that of Medicare, while Baptist’s 

charges are 17.4 times that of Medicare. 
-7-

Accordingly, the Circuit Court reversed the Cabinet’s denial of a 

CON and ordered a CON be approved for Lourdes. 

Baptist appealed to this Court. The Cabinet did not file a brief. 

Lourdes filed a brief defending the Order and raising additional claims to support 

reversing the Final Order. We are affirming the Circuit Court’s Order for the 

reasons announced below and do not address any of the additional claims.

ANALYSIS

“When reviewing the circuit court’s ruling on an agency’s decision, 

an appellate court stands in the shoes of the circuit court and reviews the agency’s 

decision for arbitrariness.” Nurses’ Registry and Home Health Corp. v. Gentiva 

Certified Healthcare Corp., 326 S.W.3d 15, 17 (Ky. App. 2010) (citing Martin 

County Home Health Care v. Cabinet for Health and Family Serv’s, 214 S.W.3d 

324, 326 (Ky. App. 2007)). We review issues of statutory interpretation and other 

issues of law de novo. Id. 

I. Does the 6,000-procedure threshold constitute an arbitrary exercise 

of power?

The first issue to be addressed is a constitutional claim, which we 

review de novo. The Circuit Court held that the 6,000-procedure threshold 

violated Section 2 of the Kentucky Constitution, which prohibits the government 
-8-

from exercising absolute and arbitrary power. See, e.g., Kentucky Milk Marketing 

and Antimonopoly Comm’n v. Kroger Co., 691 S.W.2d 893, 899 (Ky. 1985). 

A. Section 2 standard of review

Both parties proffer that our review of the constitutionality of the 

6,000-procedure threshold is to determine whether there was a rational basis. 

However, it has been opined that the Section 2 “standard may be more toothsome 

than rational-basis review.” Tiwari v. Friedlander, 26 F.4th 355, 370 (6th Cir. 

2022), cert. denied, 143 S. Ct. 444 (2022). Indeed, the Kentucky Supreme Court 

has described Section 2 with stronger verbiage than one would expect from 

rational-basis review: 

Section 2 is a curb on the legislature as well as on any 

other public body or public officer in the assertion or 

attempted exercise of political power. Sanitation Dist. 

No. 1 v. City of Louisville, 308 Ky. 368, 213 S.W.2d 995

(1948). Whatever is contrary to democratic ideals, 

customs and maxims is arbitrary. Likewise, whatever is 

essentially unjust and unequal or exceeds the reasonable 

and legitimate interests of the people is arbitrary, id. No 

board or officer vested with governmental authority may 

exercise it arbitrarily. If the action taken rests upon 

reasons so unsubstantial or the consequences are so 

unjust as to work a hardship, judicial power may be 

interposed to protect the rights of persons adversely 

affected. Wells v. Board of Education of Mercer County, 

Ky., 289 S.W.2d 492, 494 (1956). Our function is to 

decide a test of regularity and legality of a board’s action 

by statutory law and by the constitutional protection 

against the exercise of arbitrary official power. Id. 
-9-

Section 2 is broad enough to embrace the traditional 

concepts of both due process of law and equal protection 

of the law. Pritchett v. Marshall, Ky., 375 S.W.2d 253, 

258 (1963). Unequal enforcement of the law, if it rises to 

the level of conscious violation of the principle of 

uniformity, is prohibited by this Section. City of Ashland 

v. Heck’s Inc., Ky. 407 S.W.2d 421 (1966); Standard Oil 

v. Boone County Bd. Of Sup’rs, Ky., 562 S.W.2d 83 

(1978). The question of reasonableness is one of degree 

and must be based on the facts of a particular case. Boyle 

Cty. Stockyards Co. v. Commonwealth, etc., Ky. App., 

570 S.W.2d 650 (1978). 

Kentucky Milk, 691 S.W.2d at 899. The Kentucky Supreme Court applied these 

Section 2 standards some 20 years later and held unconstitutional a statute and a 

regulation that allowed an agency to assess a penalty without access to a formal 

hearing unless the one penalized could prepay the fine. Commonwealth Natural 

Resources and Environmental Protection Cabinet v. Kentec Coal Co., Inc., 177 

S.W.3d 718 (Ky. 2005). The case is significant because the dissent in that case 

noted “dismay at the majority’s cavalier use of Section 2 of the Constitution[.]” Id. 

at 740 (Roach, J., dissenting). The dissent labeled the majority opinion as lacking

a “standard to guide” the use and application of Section 2 analyses. Id. at 741. 

Since Kentec, our Supreme Court provided additional clarity to the 

Section 2 analysis when the allegations concern arbitrary, administrative actions 

affecting economic or property rights, which are the rights at issue in the instant 

case. Section 2 is satisfied when three requirements are met. First, the alleged 

deprivation of rights must have “a rational basis in furtherance of a legitimate 
-10-

government interest[.]” City of Villa Hills v. Kentucky Retirement Systems, 628 

S.W.3d 94, 109 (Ky. 2021). Second, the affected party must have been “afforded 

adequate procedural due process[.]” Id. Finally, the decision must have been 

“informed by substantial evidence of record.” Id. Accordingly, our initial review 

of the 6,000-procedure threshold is to determine whether there exists a rational 

basis in furtherance of a legitimate government interest. We review the Circuit 

Court’s determination of this constitutional question de novo. See, e.g.,

Commonwealth v. DLX, Inc., 42 S.W.3d 624 (Ky. 2001). 

B. Is the 6,000-procedure threshold rationally related to a 

legitimate government interest?

Without a doubt, the Commonwealth has a legitimate governmental

interest in ensuring that “citizens of this Commonwealth will have safe, adequate, 

and efficient medical care” with no “proliferation of unnecessary health-care 

facilities, health services, and major medical equipment [that] results in costly 

duplication and underuse of such facilities, services, and equipment” and 

“increases the cost of quality health care within the Commonwealth.” KRS 

216B.010. These are the stated legislative findings and purposes underlying the 

CON program, and neither party disputes that they are legitimate interests. 

Our question, then, is whether the 6,000-procedure threshold is 

rationally related to those legitimate interests. To perform this rational-basis 
-11-

analysis, we look for a “rational relationship to a legitimate state end.” Kentec 

Coal, 177 S.W.3d at 725. There must be some “‘reasonable basis’” or 

“‘substantial and justifiable reason’” for the created classification. Vision Mining, 

Inc. v. Gardner, 364 S.W.3d 455, 466 (Ky. 2011) (quoting Cain v. Lodestar 

Energy, Inc., 302 S.W.3d 39, 42 (Ky. 2009)). And though this standard “favors the 

government, it would be incorrect to state that courts always hold that legislativelycreated classifications are rationally related to a legitimate state interest.” Id. 

Rational-basis review is a high bar: 

A statute is presumed constitutional, . . . and “[t]he 

burden is on the one attacking the legislative arrangement 

to negative every conceivable basis which might support 

it,” . . . whether or not the basis has a foundation in the 

record. Finally, courts are compelled under rational-basis 

review to accept a legislature’s generalizations even 

when there is an imperfect fit between means and ends. 

A classification does not fail rational-basis review 

because it “‘is not made with mathematical nicety or 

because in practice it results in some inequality.’” . . . 

“The problems of government are practical ones and may 

justify, if they do not require, rough accommodations –

illogical, it may be, and unscientific.”

Steven Lee Enterprises v. Varney, 36 S.W.3d 391, 395 (Ky. 2000) (quoting Heller 

v. Doe by Doe, 509 U.S. 312, 113 S. Ct. 2637, 125 L. Ed. 2d 257 (1993) (citations 

omitted) (alterations and emphasis added in original)) (discussing rational-basis 

review of equal protection claim). 
-12-

The regulation at issue here requires a CON applicant to demonstrate 

the proposed MVRT program will, at minimum, perform 6,000 annual procedures 

by the end of the second year of operation. 900 KAR3 5:020, Section IV.B.1. The 

Cabinet filed no brief in the instant appeal, but below it proffered as its rational 

basis that 15 of the current MVRT programs met the threshold in 2019, and the 

threshold was lower than a few other states’ thresholds.4 

The Circuit Court rejected the finding that a rational basis existed

between the stated rationale and the legitimate state end. Principally, it found no 

3 Kentucky Administrative Regulations.

4 We additionally note that at oral argument the parties argued about whether the Cabinet had 

evidence or data to support the threshold. Lourdes believed none existed, noting that it had made 

an open records request to the Cabinet during the proceedings below, specifically requesting:

Information considered by the Cabinet regarding the metric, 

simulation, projection, data, or data compilation that supports the 

requirement that 6000 Megavoltage Radiation Oncology 

Procedures are reasonable and necessary to maintain a financially 

viable Megavoltage Radiation Oncology Program from 2011 

through present.

The Cabinet’s written response to this open records request stated that it “does not collect this 

data.” At oral argument, this Court requested the Cabinet to explain its open records request 

response. The attorney for the Cabinet stated that it had not seen the open records request 

because its Office of the Inspector General handles those requests. Additionally, the Cabinet 

noted that Lourdes did not take any additional steps regarding the response, such as asking the 

Attorney General to review the response. While not an issue before us, we note that per KRS 

61.880(2)(a), the Attorney General can be notified to review a “denial of a request to inspect a 

public record[.]” Here there was no denial; the Cabinet affirmatively stated it “does not collect 

this data.” Moreover, discovery on this issue was unlikely, as the constitutional claim could not 

be decided by the hearing officer, and the claim was first before the Trial Court on a declaration 

of rights action, which is by nature a summary action. See KRS Chapter 418. Thus, we accept 

as true the record evidence showing the Cabinet “does not collect this data.” 
-13-

rational relation existed because most programs did not meet this threshold. 

Between 2014 and 2019, 18 of the 34 programs that conducted MVRT performed 

fewer than 6,000 procedures. One even provided fewer than 2,000 procedures. 

We agree with the Circuit Court that establishing the threshold at 6,000 procedures 

when existing usage rates run the gamut constitutes a shot-in-the-dark, arbitrary 

classification that is not rationally related to legitimate interests. All of the

programs in operation are providing critical cancer care, not “unnecessary” health 

services, KRS 216B.010, and yet over half do not meet the threshold set by the 

Cabinet. In this circumstance, creating a standard that over half of the MVRT 

programs cannot meet is not rationally related to the legitimate governmental 

interests announced in KRS 216B.010.

The Circuit Court also found it significant that many of the sub-6,000-

procedure programs are located in rural areas of Kentucky, and the proposed 

program would also be located in a rural area of Kentucky. We agree. Equally 

significant, though, is the fact that some of the programs not meeting the threshold 

were located in Louisville, the most populous city in the Commonwealth. This 

evidence demonstrates that there is no rational relation between a 6,000-procedure 

threshold and the population needs throughout the Commonwealth. Thus, 

establishing a threshold at 6,000-procedures is wholly arbitrary and not rationally 
-14-

related to actual, operational levels of the then-functioning, cancer treatment 

centers throughout the entire Commonwealth. 

Additionally, other states’ utilization of similar or more stringent 

thresholds proves arbitrariness, not rationality. First, there is no uniform 

agreement; each state has a different threshold. Indeed, to establish rational 

restrictions, each state must consider its own particularized geographic and 

population concerns. Or, to irrationally establish restrictions, each state would 

choose a random number. Cf. Vision Mining, 364 S.W.3d at 473 (footnote 

omitted) (“Simply put, one type of disparate treatment does not constitute a 

rational basis or substantial and justifiable reason for another form of disparate 

treatment.”). Either way, the lack of a uniform agreement among states supports 

an arbitrariness finding.

Second, the bare fact that other states have thresholds only proves that 

other states have thresholds. That fact neither proves that each of those states has a 

legitimate interest, nor that the thresholds are rationally related to those interests. 

Quite possibly those thresholds are also arbitrarily chosen. Alternatively, those 

thresholds may have a rational basis but be based on significantly different criteria. 

The establishment of a threshold is not inherently arbitrary, but there must be clear 

criteria for the threshold, and those criteria must have a rational relationship to a 

legitimate state interest. Simply picking a number is arbitrary. But so is picking a 
-15-

number based on criteria that lack sound factual bases. At minimum, the existence 

of other thresholds does not establish that the threshold chosen here is rationally 

related to the legitimate, governmental interest. Having negated the bases for the 

regulation, Lourdes has proven a Section 2 violation. See Varney, 36 S.W.3d at 

395.

Baptist counters that the 6,000-procedure threshold advances multiple,

legitimate, governmental interests, any one of which provides a rational basis for 

the regulation.5 First, because the equipment for one program can provide at least 

9,500 procedures annually, the threshold ensures that any singular program will not 

be underutilized. We find this argument unavailing. The existing programs show 

that much lower thresholds are viable and provide needed healthcare. The 6,000-

procedure threshold here amounts to nothing more than a guess about the 

economies of scale, and an unsupported guess at that, which demonstrates arbitrary 

action by the Cabinet.

Second, Baptist proffers that the threshold might serve an ancillary 

purpose of condensing patient volumes that lead to downstream benefits of scale, 

expertise, and specialization. While it is possible that limiting the number of 

5 Again, the Cabinet, which promulgated the regulation, did not file a brief and, thus, it does not 

raise these additional reasons. We nonetheless address them as they do not pass rational basis 

review.
-16-

providers could result in an increase in patients for each provider,6that bare 

supply/demand logic could support any economic regulation and wholly nullify 

judicial scrutiny under rational basis review. We will not carve out an exception 

that renders rational basis meaningless. And the current utilization pattern does not 

even provide a reasonable, factual basis for a conclusion that limiting the supply to 

greater-than-6,000-procedure programs is rationally related to ensuring the 

programs are profitable and capable of operating. Most of the programs are well 

below this threshold and continue to operate.

Third, Baptist proffers that the Cabinet’s engaging in the process of 

drawing a line to advance the goals of the CON program is evidence that the line it 

drew is rationally related to the legitimate state interests. As with its second 

argument, Baptist’s argument creates a feedback loop that nullifies the test. Drawn 

lines can be arbitrary and irrational. Notably, by not filing a brief on appeal the 

Cabinet ostensibly abandoned support for the line it drew.

Fourth, Baptist argued at oral arguments before this Court, and also in 

the briefs in the Circuit Court below, that the 6,000-procedure threshold is 

rationally related to the “Blue Book” guidelines for equipment utilization. The text

is hardly current, as it was last published in 1991, and its conclusions are 

6 That “logic” begs the question: will patients undergoing challenging cancer treatments endure 

additional burdens imposed by artificial scarcity creation? Or will cancer-ridden patients fatigue 

out of the demand chain? 
-17-

questionable at best given the copious evidence the parties presented below 

regarding changing usage rates and changing populations. Furthermore, the Blue 

Book guidelines at best demonstrate that there is no one-size-fits-all approach to 

how many procedures a program should perform in a year, as the guidelines

demonstrate scenarios in which sub-6,000-procedure levels would be considered 

realistic annual loads. In sum, if the Cabinet had based its 6,000-procedure 

threshold on the Blue Book guidelines, the text both on its face and in modern 

application does not provide rational basis support.

Additionally, though both parties cite us to numerous cases to support 

their arguments, “No case can be completely dispositive of another when 

conducting a rational basis analysis unless it involves the same statute, same facts 

and same arguments for what ‘rational basis’ exists to uphold the statute.” 

Teco/Perry County Coal v. Feltner, 582 S.W.3d 42, 46 n. 2 (Ky. 2019). This 

maxim is especially true of Christ Hospital Corporation, Inc. v. Saint Elizabeth 

Medical Center, Inc., No. 2018-CA-001096-MR, 2019 WL 3990994 (Ky. App. 

Jun. 13, 2019), a not-to-be-published opinion of this Court cited by both parties. 

This case offers no “binding precedent,” RAP7 40(D)(1). It largely centered on a 

violation of Section 59 of the Kentucky Constitution (impermissible special 

7 Kentucky Rules of Appellate Procedure.
-18-

legislation). And it had nothing to do with the 6,000-procedure threshold for 

MVRT volumes. 

Finally, we respectfully disagree with our esteemed colleague in her 

well-written dissent that we have “placed the burden of proving a rational basis 

squarely on the shoulders of Baptist and the Cabinet.” Slip Op. at 39. Though the 

burden is great on one attacking the constitutionality of a regulation, Lourdes has 

met that burden by providing arguments and evidence “to negative every 

conceivable basis which might support” the rational basis for the regulation. 

Varney, 36 S.W.3d at 395. Most notably, as it relates to the dissent’s concerns 

regarding increased cost of quality health care in Kentucky, KRS 216B.010, and 

“overinvestment in and maldistribution of health care facilities in the 

Commonwealth[,]” Slip Op. at 42, Lourdes demonstrated that at whatever capacity 

it would operate by year two, it anticipated the fees to cancer patients would be 

considerably lower than those charged to Baptist patients. Because Lourdes has 

met its burden of proving that the 6,000-procedure threshold for MVRT volumes is 

not rationally related to a legitimate, state interest, we affirm the Circuit Court’s 

Order inasmuch as it found a Section 2 violation.
-19-

C. Is the 6,000-procedure threshold consistent with KRS 

216B.010?

As a related issue, Baptist further argues that the Circuit Court erred 

by finding the 6,000-procedure threshold was invalid under KRS 216B.010

because it does not promote the goals of the CON program. But the same 

reasoning that makes the threshold arbitrary under Section 2 holds true to the 

statutory claim. The threshold is an arbitrarily-drawn line that is not consistent 

with the purposes of KRS 216B.010.

Baptist also argues that Lourdes’s MVRT “proposal is the epitome of 

unnecessary costly duplication.” Appellant’s Brief at 16. Baptist notes that there 

is no evidence that any patient in the Paducah area, an area that includes a higher 

MVRT use rate than other areas of the Commonwealth, has been unable to access 

MVRT on a timely basis. 

This argument goes to Review Criteria 2 and 4, not to the instant 

constitutional and statutory argument. In sum, we affirm the Circuit Court’s Order 

inasmuch as it found the 6,000-procedure threshold as violative of Section 2 of the 

Kentucky Constitution and not consistent with KRS 216B.010.
-20-

II. Was the Final Order arbitrary and not supported by substantial 

evidence?

Our analysis does not end with the constitutional claim, though, as 

that holding only applies to the Final Order’s analysis of Review Criterion 1 –

Consistency with the State Health Plan. The Final Order also found Lourdes’s 

application failed to satisfy Review Criteria 2 and 4. The Circuit Court’s review of 

the Final Order determined that the Hearing Officer erred in her findings and 

conclusions on all three of these Review Criteria. Baptist argues the Circuit Court 

erred when reversing the Hearing Officer’s Final Order on these issues. Our 

standard of review of the Final Order’s factual findings and conclusions is different 

than our de novo review of the constitutional claim. Following a recitation of the 

applicable standard of review, we analyze the Final Order’s findings and holdings 

of the three Review Criteria seriatim.

A. Standard of Review

The Cabinet reviewed the CON application pursuant to: KRS 

216B.040(2)(a)2.a.-e.; the formal review criteria in 900 KAR 6:070; and the State 

Health Plan (in place at the time of the application), 900 KAR 5:020. Judicial 

review of a decision of an administrative agency is ultimately a review for 

arbitrariness. American Beauty Homes Corp. v. Louisville and Jefferson County 

Planning and Zoning Commission, 379 S.W.2d 450, 456-57 (Ky. 1964). 
-21-

Arbitrariness may be found in three circumstances: “(1) action in excess of 

granted powers, (2) lack of procedural due process, and (3) lack of substantial 

evidentiary support[.]” Id. at 456. 

The third circumstance is implicated here, and our review is for 

substantial evidence. See, e.g., Starks v. Kentucky Health Facilities, 684 S.W.2d 5, 

6-7 (Ky. App. 1984) (citing KRS 216B.120(2) (since repealed)) (holding the 

proper standard of a CON decision is “whether the findings of fact in issue are 

supported by substantial evidence and are not clearly erroneous based upon a 

review of the record as a whole”). Substantial evidence “is defined as evidence of 

substance and consequence when taken alone or in light of all the evidence that is 

sufficient to induce conviction in the minds of reasonable people.” McManus v. 

Kentucky Retirement Systems, 124 S.W.3d 454, 458 (Ky. App. 2003) (citing 

Bourbon County Bd. of Adjustment v. Currans, 873 S.W.2d 836, 838 (Ky. App. 

1994); Transportation Cabinet v. Poe, 69 S.W.3d 60, 62 (Ky. 2001); and Special 

Fund v. Francis, 708 S.W.2d 641, 643 (Ky. 1986)). Under this standard, the

reviewing court does not review the evidence de novo, but, instead, the “reviewing 

court must hold fast to the guiding principle that the trier of facts is afforded great 

latitude in its evaluation of the evidence heard and the credibility of witnesses 

appearing before it.” Bowling v. Natural Resources and Environmental Protection 
-22-

Cabinet, 891 S.W.2d 406, 409-10 (Ky. App. 1994) (citing Kentucky State Racing 

Commission v. Fuller, 481 S.W.2d 298, 308 (Ky. 1972)). 

Furthermore, pursuant to McManus, supra, when the administrative 

body finds the party with the burden of persuasion has failed to meet that burden, 

“the issue on appeal is whether the evidence in that party’s favor is so compelling 

that no reasonable person could have failed to be persuaded by it.” 124 S.W.3d at 

458 (citations omitted). The dissent disagrees with our application of substantial 

evidence to the McManus standard. See Slip Op. at 31 (“While substantial 

evidence plays a role in a second-level McManus review, the review is more 

nuanced than simply searching for substantial evidence or the lack thereof.”) 

(emphasis added). 

Respectfully, we believe substantial evidence review is the first step 

even under McManus. As noted by our Supreme Court, a “two-step approach by 

first considering whether the . . . final order [is] properly supported by substantial 

evidence” is “appropriate because it hews to the language of KRS 13B.150, which 

identifies seven potential grounds for reversal including that the . . . order is 

‘[w]ithout support of substantial evidence on the whole record.’” Kentucky 

Retirement Systems v. Ashcraft, 559 S.W.3d 812, 819 (Ky. 2018) (emphasis 

added). See also Bradley v. Kentucky Retirement Systems, 567 S.W.3d 114, 119 

(Ky. 2018) (emphasis added) (“As explained more fully in Ashcraft, even where 
-23-

the applicant loses before the Board, it is appropriate on judicial review for the 

courts, at every level, to first consider whether the denial is supported by 

substantial evidence. If it is not so supported, the court is required to 

reverse . . . .”). Where the record contains substantial evidence for both sides, i.e., 

the evidence is in “equipoise,” the McManus “compelling evidence” standard 

“properly breaks the tie.” Bradley, 567 S.W.3d at 120. As we analyze infra, no 

such tie existed as substantial evidence did not support the Hearing Officer’s 

findings. Notably, neither side cited to nor argued McManus in their briefs; they 

both focused on substantial evidence. As there was not substantial evidence 

supporting both sides in the instant case, we may, and do, conclude under 

McManus that Lourdes’s evidence was so compelling that no reasonable person 

could have failed to be persuaded by it. 

B. Review Criterion 1 – the State Health Plan

As we held above, the 6,000-procedure threshold requirement of the 

State Health Plan is unconstitutional and void. The Final Order found and 

concluded that Lourdes’s application was not consistent with Review Criterion 1 

solely because it did not meet this 6,000-procedure threshold. As this threshold is 

now void, the Hearing Officer’s conclusion that Lourdes’s application did not 

comport with the State Health Plan under Review Criterion 1 is arbitrary and not 

supported by substantial evidence. 
-24-

C. Review Criterion 2 – Need and Accessibility

The Hearing Officer concluded that Lourdes’s application was not 

consistent with Criterion 2 – Need and Accessibility, which requires that:

The proposal shall meet an identified need in a defined 

geographic area and be accessible to all residents in the 

area. A defined geographic area shall be defined as the 

area the proposal seeks to serve, including its 

demographics, and shall not be limited to geographical 

boundaries[.]

KRS 215B.040(2)(a)2.b.

The Circuit Court held the Hearing Officer’s findings were not 

supported by substantial evidence and led to an arbitrary conclusion:

First, the Hearing Officer plainly erred by finding that 

Dr. Locken and Dr. Espinoza combined are equivalent to 

1.85 full time employees. Presently, Dr. Locken is the 

only radiation oncologist in the service area. Dr. 

Espinoza is based in Michigan and provides locum tenes

coverage for Dr. Locken thirteen (13) weeks per year. 

Further, when Dr. Espinoza is present, Dr. Locken is not. 

Thus, the Court agrees with Mercy that the record does 

not support that Dr. Locken and Dr. Espinoza combined 

are equivalent to 1.85 full time employees. In fact, 

combined, the record demonstrates that they are the 

equivalent of one (1) full time employee. The Hearing 

Officer committed plain error in reaching this conclusion 

as it is wholly unsupported by the record.

Second, the Court agrees with [Lourdes] that the Hearing 

Officer erred by concluding that a single full-time 

physician can meet the demand in the service area. The 

Hearing Officer found that the American College of 

Radiology and American Society for Radiation Oncology 

recommended a radiation oncologist to see between 200 
-25-

and 300 new patients per year. The record demonstrates 

that Baptist saw 615 new patients in 2019. It is 

inconceivable how the Hearing Officer concluded that 

single full-time physician can meet the demand in the 

service area based on the number of new patients per 

year when compared to the recommended number of new 

patients that a single radiation oncologist should see per 

year. The Hearing Officer also found that Baptist 

performed 12,123 radiation oncology procedures in 2019 

and that the cancer incidence rate in the region is 

expected to grow by 7.5% over the next five (5) years. 

The Hearing Officer plainly disregarded the evidence in 

the record that there is a need for radiation oncology 

services in the service area. Professional standards 

clearly support that the service area’s needs are not being 

met. Accordingly, Hearing Officer’s conclusion 

regarding Criterion 2 (Need and Accessibility) is plainly 

arbitrary because it is not supported by substantial 

evidence.

Order, pp. 17-18 (footnote omitted). 

We do not agree with the Circuit Court’s reasoning, but we do agree 

with its conclusion. The Hearing Officer’s arbitrary action occurred in her 

conclusions of law, not in her factual findings. 

As the Hearing Officer correctly found in her findings of fact,

substantial evidence in the form of multiple, professional standards and testifying 

experts showed that radiation oncologists are recommended to see at most 200 to 

300 new patients a year. Final Order, pp. 31-32. Substantial evidence also showed 

that Baptist had over 600 new patients per year. Final Order, p. 31. That evidence 

alone would require a conclusion that more than 2.0 FTE radiation oncologists are 
-26-

necessary to service the area. Yet, the Hearing Officer concluded that Drs. Locken 

and Espinoza are sufficient to meet the demand despite combining to, at best, 1.85 

FTE radiation oncologists. Final Order, pp. 31, 46-47. Even though there was 

testimony that Dr. Locken worked substantial hours, loved his job, and provided 

Baptist’s patients a high level of service, it is unreasonable to conclude that 1.85 

FTE radiation oncologists is sufficient to meet the need. Additionally, merely 

because Baptist has extra capacity and could hire more radiation oncologists does 

not change the situation as it existed when the CON application was filed – 1.85 

FTE radiation oncologists is not sufficient to meet the need.

That Dr. Locken must provide an extraordinary level of service to 

meet the radiation oncology needs of the area shows just how needy this region is 

for an additional, radiation oncologist and/or MVRT program. The record shows 

that Dr. Locken is a unique individual who is irreplaceable in the service area. The 

service area would likely be looking for more than one radiation oncologist to 

replace Dr. Locken if and when he is unable to service the community at his 

current level. Lourdes has thus demonstrated a need in the geographic area. Any 

other conclusion from the factual findings is not reasonable, not supported by 

substantial evidence, and constitutes an arbitrary conclusion. Thus, we affirm the 

Circuit Court inasmuch as it held the Hearing Officer’s conclusion on Review 

Criteria 2 was arbitrary and unsupported by substantial evidence. 
-27-

D. Review Criterion 4 – Costs, Economic Feasibility, and 

Resource Availability

The Hearing Officer likewise concluded that Lourdes’s application 

was not consistent with Review Criteria 4 – Costs, Economic Feasibility, and 

Resource Availability, which requires that:

The proposal, when measured against the cost of 

alternatives for meeting needs, shall be judged to be an 

effective and economical use of resources, not only of 

capital investment, but also ongoing requirements for 

health manpower and operational financing[.]

KRS 216B.040(2)(a)2.d. Additionally, pursuant to the regulations:

(5) . . . The cabinet shall determine:

(a) If it is economically feasible for the 

applicant to implement and operate the 

proposal; and

(b) If applicable, if the cost of alternative 

ways of meeting the need identified in the 

geographic area defined in the application 

would be a more effective and economical 

use of resources.

900 KAR 6:070, Section 2(5). 

Having concluded that Lourdes demonstrated need under Review 

Criterion 2, the Circuit Court correctly determined that the Final Order must be 

reversed on Review Criterion 4 as the Hearing Officer’s conclusion on this point 

was based on her erroneous conclusion in Review Criterion 2. The Final Order on 
-28-

this point reviewed the costs of Lourdes’s proposal and rejected it as not effective 

and economical “when measured against the cost of the alternative, which is to 

maintain the status quo[.]” Final Order at 50. Baptist’s arguments on appeal 

mirror this same, arbitrary conclusion. Notably, the Hearing Officer also 

concluded that “[h]ad need been demonstrated, the alternative posed by [Baptist], 

that [Lourdes] hire a radiation oncologist without developing its own radiation 

oncology program, is not reasonable.” 

We agree with the Circuit Court that Lourdes’s application proved a 

need. Given that the proposed program is cost effective when measured against 

the alternatives, the Hearing Officer should have found Lourdes’s application met 

Review Criterion 4. KRS 216B.040(2)(a)2.d. Accordingly, we affirm the Circuit

Court on this claim. 

CONCLUSION

For the foregoing reasons we AFFIRM the Circuit Court’s Order 

reversing the Hearing Officer’s Final Order and ordering the Hearing Officer to 

approve Lourdes’s application for a CON.

EASTON, JUDGE, CONCURS.

JONES, JUDGE, DISSENTS AND FILES SEPARATE OPINION.

JONES, JUDGE, DISSENTING: Most respectfully, I dissent. As set forth below, 

I disagree with affirming the Franklin Circuit Court on both the Hearing Officer’s 
-29-

Findings of Fact and Conclusions of Law and the constitutionality of the State 

Health Plan. 

A. The Hearing Officer’s Findings of Fact & Conclusions of Law

Mercy sought a Certificate of Need (“CON”)8from the Cabinet of 

Health and Family Services (“Cabinet”) to establish a radiation therapy center in 

Paducah. During the administrative proceedings, Baptist, an interested person, 

entered an appearance and objected to issuance of the certificate. Before the 

Cabinet, Mercy, the party seeking the CON, bore the burden of proof.

8 CON laws date back to the 1960s. https://www.ncsl.org/health/certificate-of-need-state-laws 

(last visited Dec. 20, 2023). “At that time, there was a view that high health care costs were 

driven largely by wasteful, over-investment in duplicative health care facilities.” Maureen K. 

Ohlhausen, CERTIFICATE OF NEED LAWS: A PRESCRIPTION FOR HIGHER COSTS, ANTITRUST, Vol. 

30, No. 1, 50 (Fall 2015). CON laws attempted to curb healthcare costs by preventing 

overinvestment in and maldistribution of health care facilities by requiring new healthcare 

entities receive state approval before entering the market or making capital investments. Over 

the next decade, the United States Congress became convinced that CON laws were necessary to 

curb rising healthcare costs across the nation. Eventually, Congress decided to incentivize 

adoption of CON laws by the states through passage of the National Health Planning and 

Resources Development Act of 1974. Id. The 1974 Act made certain federal funding available 

only to states that had CON laws similar to the federal model in place. Id. As a result, all states, 

except Louisiana, eventually adopted CON laws. Kentucky adopted its CON laws in 1980. 

CON laws have been criticized as overly restrictive and a driver of higher health care 

costs and lower quality care, and the federal mandate was repealed in 1987. In response, several 

states have modified or entirely repealed their CON laws. At present, only thirty-five states and 

the District of Columbia still maintain some form of CON program. While Kentucky has revised 

its CON laws numerous times throughout the years, most recently in 2022, the Kentucky General 

Assembly has not repealed the statutes. 
-30-

The Cabinet’s Hearing Officer, Maria Mier, conducted a lengthy 

hearing on Mercy’s CON application.9 Thereafter, the Hearing Officer issued a 

fifty-two-page Findings of Fact, Conclusions of Law, and Final Order (“Final 

Order”) in which she denied Mercy’s CON application because it failed to carry its 

burden of showing consistency with three of the five statutory review factors.10 

Mercy appealed to the Franklin Circuit Court. Since the Cabinet denied the CON 

to Mercy, the party who bore the burden of proof, the McManus standard governed 

the Franklin Circuit Court’s review below. “Where the fact-finder’s decision is to 

deny relief to the party with the burden of proof or persuasion, the issue on appeal 

is whether the evidence in that party’s favor is so compelling that no reasonable 

person could have failed to be persuaded by it.” McManus v. Kentucky Retirement 

Systems, 124 S.W.3d 454, 458 (Ky. App. 2003) (emphasis added).11 

9 The Hearing Officer heard proof from January 11-15, 2021, and again from January 19-21, 

2021. 

10 By statute, the Cabinet must consider several factors when reviewing a CON application: (1) 

“interrelationships and linkages” to existing care; (2) “costs, economic feasibility, and resources 

availability”; (3) “quality of services”; (4) “need and accessibility” in the desired geographic 

area; and (5) “consistency with” the State Health Plan as determined by the Health Services 

agency. KRS 216B.040(2)(a)2.; 900 KAR 5:020. 

11 McManus, a decision from this Court, has been adopted by the Kentucky Supreme Court as 

correctly setting forth the level of deference due an administrative fact-finding agency when that 

agency decided against the party who bore the burden of proof. Kentucky Retirement Systems v. 

Ashcraft, 559 S.W.3d 812, 819-20 (Ky. 2018).

We reaffirm the wisdom and applicability of the McManus statement because it 

properly reflects the deference to be given to the fact-finder. See KRS 

13B.150(2) (“The court shall not substitute its judgment for that of the agency as 
-31-

However, citing Starks v. Kentucky Health Facilities, 684 S.W.2d 5, 

6-7 (Ky. App. 1984), the majority indicates that it applied the lower, substantial 

evidence standard. While Starks correctly set forth the standard applicable to its 

review, that standard does not apply here. In Starks, a CON was issued to Hospital 

Corporation of America (“HCA”) to construct a new hospital facility in Logan 

County. The appellant, Ronald Starks, a resident of Logan County, Kentucky, 

filed an appeal challenging the issuance of the CON. Since the party who bore the 

burden of proof before the administrative agency, HCA, prevailed at the 

administrative level, the standard of review to be applied by circuit court and this 

Court was simply one of substantial evidence. As noted above, this was not the 

case here. Mercy did not prevail at the administrative level, and therefore, the 

standard of review is one of compelling, not simply substantial, evidence. 

to the weight of the evidence on questions of fact.” (emphasis supplied)). 

Realistically, there are cases where the record can fairly be read as containing 

substantial evidence in favor of both sides. However, Kentucky law is clear that 

the fact-finding agency is charged with making the “call” in those difficult cases 

and outlining the grounds for the result reached. Simply put, the agency is the 

decider on issues of fact. Thus, under the McManus standard, a court cannot 

substitute its judgment on those contested issues of fact but if the appealing party 

has not met his burden of proof with the fact-finder, the court can properly, indeed 

must, consider whether that party’s proof was so compelling that no reasonable 

person could have failed to be persuaded. If this high standard is met, so is KRS 

13B.150(2)(d), which allows for reversal when a final order is “[a]rbitrary, 

capricious, or characterized by an abuse of discretion.”

Id.
-32-

While substantial evidence plays a role in a second-level McManus 

review, the review is more nuanced than simply searching for substantial evidence 

or the lack thereof. “In cases such as this where the evidence may, at least at first 

blush, be perceived to be in equipoise, the McManus ‘compelling evidence’

standard properly breaks the tie.” Bradley v. Kentucky Retirement Systems, 567 

S.W.3d 114, 120 (Ky. 2018). “It does so by implementing the legislative 

command that the courts ‘not substitute [their] judgment for that of the agency as 

to the weight of the evidence on questions of fact,’ KRS 13B.150(2), while 

outlining an understandable test for determining if the fact-finder was ‘arbitrary, 

capricious or . . . abuse[d] [its] discretion’ in violation of KRS 13B.150(2)(d) when 

assessing the evidence.” Id.

While the majority’s analysis is thoughtful, I believe this is case 

where the record can fairly be read as containing substantial evidence in favor of 

both sides, and therefore one where the circuit court should have only reversed if 

the evidence so overwhelmingly favored Mercy that it compelled a contrary 

conclusion. City of Villa Hills v. Kentucky Retirement Systems, 628 S.W.3d 94, 

106 (Ky. 2021). Here, I do not believe that the evidence compelled a contrary 

conclusion with respect to the three statutory factors at issue. In fact, I believe the 

evidence overwhelmingly supported Baptist’s position, and I am at a loss to see 
-33-

how the majority concludes that there was no substantial evidence to support the 

Hearing Officer’s findings of fact and conclusions of law. 

The first factor, whether the CON application is consistent with the 

State Health Plan, is inextricably interwoven with the Franklin Circuit Court’s 

holding that the State Health Plan’s 6,000-procedure threshold violates Section 2 

of the Kentucky Constitution. Assuming the State Health Plan is constitutional, 

Mercy failed to present compelling evidence that it would perform at least 6,000 

procedures by the second year as the State Health Plan requires. 

In its application, Mercy asserted that by year two it would perform 

6,603 procedures per year. Before the Hearing Officer, Mercy supported its 

estimates with expert testimony from Brian Leigh, Engagement Manager, The 

Chartis Group – Oncology Solutions. Baptist relied on Joseph Spallina, Director, 

Arvina Croup, LLC. Using a Volume Projection Methodology, Mr. Spallina ran 

three different models, and he estimated that in all likelihood Mercy’s proposed 

facility would only perform only slightly more than 4,700 procedures by the 

second year. Given Mr. Spallina’s projections, it is impossible to say that the 

evidence compelled a determination in Mercy’s favor with respect to this factor.12

12 In Paragraph 14 of her conclusions of law, the Hearing Officer determined that Mr. Spallina’s 

Model III, which estimated that by the second year Mercy would provide 4,796 treatments to 275 

patients, was “the most accurate and reliable way to estimate radiation treatment volumes.” It 

was the Hearing Officer’s prerogative to choose which expert witness was the most credible. 
-34-

The second factor is one of need and accessibility. Both the circuit 

court and the majority focused heavily on number of physicians currently working 

at Baptist and on rising cancer rates. First, rising cancer rates do not automatically 

mean that radiological procedures are rising at the same rate. While Mercy may 

have submitted evidence that cancer rates are on the rise, Baptist presented 

countervailing evidence that per patient radiological procedures are trending 

downwards. 

Second, while one can question whether Baptist’s physician(s) are 

overworked, one cannot question the lack of evidence that any patient in the area 

has been denied care. Additionally, the Baptist facility has the capacity to employ 

more of its own physicians.13 Presumably, if Baptist were not able to meet the 

demand of the patient population with its current physician load, it would simply 

add a physician. The facility itself, however, appears able to meet the needs of the 

community in terms of number of procedures needed. And Mercy is seeking the 

13 In Paragraph 22 of her conclusions of law, the Hearing Officer explained, “There was ample 

evidence of record that Dr. Locken is competently handling his case load, that he employs a 

locums radiation oncologist who works 12 weeks per year, that he has a strong support team in 

place to efficiently manage the practice, and that Baptist has the resources and experience to seek 

additional physician support if Dr. Locken is unable to continue his duties. The radiation 

oncology program maintains qualifications with the Commission on Cancer and the American 

College of Radiology. There was no evidence presented that there are any barriers or delays to 

patients seeking radiation therapy and, in fact, the Baptist program is able to and does see 

patients the same day they are referred, if medically-indicated. The Applicant did not 

demonstrate that Dr. Locken’s high caseload translates to a need for an additional linear 

accelerator in Paducah.” 
-35-

CON to build an additional facility, not simply to add more physicians. In fact, the 

Hearing Officer determined that “when taking into account Baptist’s hours of 

operation, the number of days the service operates, and its current volume, [the two 

linear accelerators at] Baptist [are] [only] operating at approximately 60% 

capacity.” 

It is illogical to approve construction of an entire cancer facility –

complete with machines and medical and support staff – to address a theoretical 

concern that the current physicians in the area might be carrying too high of a 

patient load. This appeal is not about whether Baptist should employ an additional 

physician to staff its existing radiological center. It is about whether the Paducah 

area needs an entirely new multi-million-dollar cancer facility. I cannot see how or 

where that evidence was presented, especially considering that Baptist’s current 

radiological facility is only running at 60% capacity.

The final factor the Hearing Officer concluded Mercy failed to meet 

concerns costs, economic feasibility, and resource availability. As noted above, 

the Hearing Officer determined that Baptist’s current facility was running at only 

60% capacity and did not have a backlog. Mercy projected a total capital 

expenditure of $11,697,141 to implement its proposed facility. Considering that 

the radiological needs of the area’s patient population are currently being met, and 
-36-

that Baptist had the capacity to meet any slight increase, the proposed project was 

not necessary.

The proposal, when measured against the cost of the 

alternative, which is to maintain the status quo, is not an 

effective and economical use of resources. The existing 

program, which is 2.3 miles away from the proposed 

program, is currently meeting the area’s radiation therapy 

needs and has the capacity to address the modest patient 

volume increases projected for the region. An $11.6 

million expenditure is not a cost-effective use of 

resources when there is no identified need for the project.

Final Opinion at p. 50. 

I fail to see how the Hearing Officer erred in this regard. Perhaps to 

run at 100% capacity (if the need to do so ever arises), Baptist would have to hire 

more staff, including another physician. However, doing so would certainly be 

more cost effective than spending $11.6 million to construct an entirely new 

facility.

The majority points out that by year two Mercy anticipates that its 

facility would charge patients significantly lower fees than Baptist charges its 

patients for the same cancer-related care. While this may be true, the affordability 

factor requires a broader view of healthcare. Instead of simply focusing on a 

specific type of care, the CON’s objective is to spread healthcare dollars out 

making overall care more affordable across the Commonwealth. Given that 

Baptist is currently meeting the community’s needs in terms of cancer-related care, 
-37-

it was reasonable for the Hearing Officer to conclude that the nearly twelve million 

dollars Mercy proposed spending on the new center would not positively impact 

the overall healthcare picture in the Commonwealth enough to justify the expense. 

The evidence pointed out by the Franklin Circuit Court and the 

majority is not without any weight. However, in my opinion, this is a case where 

there was substantial evidence presented by both sides, and the Hearing Officer 

decided against the party who bore the burden of proof, Mercy. In such a case, we 

cannot substitute our judgment for that of the Hearing Officer unless we are able to 

conclude that the evidence in favor of Mercy was so compelling that reasonable 

people could not fail to be persuaded by it. Since I cannot say that the evidence 

compelled a decision in Mercy’s favor, I cannot agree with the majority to affirm 

the Franklin Circuit Court on its review of the three factors at issue. As such, I 

would reverse and remand this matter to the Franklin Circuit Court for 

reinstatement of the Cabinet’s decision denying Mercy’s CON application. 

Bradley, 567 S.W.3d at 125 (“The Board’s final decision is plainly supported by 

substantial evidence and Bradley has failed to meet the McManus standard for 

reversal of the fact-finder’s decision. Accordingly, the Court of Appeals was 

correct in its reversal of the circuit court and remand to that court for reinstatement 

of the Board’s final decision.”).
-38-

B. Constitutionality of State Health Plan

The procedural posture of this case is somewhat unique in that Mercy 

filed both an administrative appeal challenging the Cabinet’s denial of the CON 

(discussed above) and a declaratory judgment action challenging the 

constitutionality of the State Health Plan as part of a single complaint before the 

Franklin Circuit Court.14 Specifically, Mercy challenged Section IV.B of the Plan, 

which addresses Megavoltage Radiation Equipment and states, in relevant part, 

“[a]n application for megavoltage radiation therapy services shall be consistent 

with this Plan if the following criteria are met: . . . 1.b. the applicant shall 

demonstrate that sufficient need exists for that program to perform a minimum of 

6,000 annual procedures by the end of the second year of operation.” 900 KAR 

5:020, Section IV.B.1. 

The administrative regulation at issue is contained within the State 

Health Care Plan. “The State Health Plan is a critical element of the certificate of 

need process for which the cabinet is given responsibility in KRS Chapter 216B.” 

900 KAR 5:020E. “Under Kentucky law, administrative regulations have the full 

14 Since the Cabinet, an administrative agency, has no authority to decide constitutional 

questions, the constitutional issue was not raised before at the administrative level. “Exhaustion 

of administrative remedies is not necessary when attacking the constitutionality of a statute or a 

regulation as void on its face. This is because an administrative agency cannot decide 

constitutional issues. Thus, to raise the facial constitutional validity of a statute or regulation at 

the administrative level would be an exercise in futility.” Commonwealth v. DLX, Inc., 42 

S.W.3d 624, 626 (Ky. 2001).
-39-

force and effect of law when duly enacted and consistent with enabling 

legislation.” Hughes v. UPS Supply Chain Sols., Inc., 677 S.W.3d 273, 280 (Ky. 

2023). 

“[A] party seeking to have a statute declared unconstitutional is faced 

with the burden of demonstrating that there is no conceivable basis to justify the 

legislation.” Holbrook v. Lexmark Int’l Group, Inc., 65 S.W.3d 908, 915 (Ky. 

2001) (citing Buford v. Commonwealth, 942 S.W.2d 909, 911 (Ky. App. 1997)). 

In this case, Mercy bore the burden of proving that no conceivable basis justifies 

the 6,000-procedure threshold. Commonwealth v. Howard, 969 S.W.2d 700, 706 

(Ky. 1998) (“[T]he Commonwealth does not have the burden to prove that a statute 

is constitutional, but rather the one challenging it has such a burden.”). Yet, it 

appears that both the Franklin Circuit Court and the majority placed the burden of 

proving a rational basis squarely on the shoulders of Baptist and the Cabinet. 

For example, the majority states that “notably, by not filing a brief on 

appeal the Cabinet ostensibly abandoned support of the line it drew.” In other 

words, the majority, like the Franklin Circuit Court, appears to believe that the 

Cabinet has some affirmative obligation to come forward with evidence to support 

rationality. This upending of the burden is not supported by our case law. “[T]he 

Commonwealth has no burden to produce evidence supporting the rationality of 

any statutory classifications.” Bloyer v. Commonwealth, 647 S.W.3d 219, 226 
-40-

(Ky. 2022); Teco/Perry Cnty. Coal v. Feltner, 582 S.W.3d 42, 47 (Ky. 2019)

(internal quotation marks and citations omitted) (“Furthermore, the General 

Assembly need not articulate its reasons for enacting the statute, and this is 

particularly true where the legislature must necessarily engage in a process of line 

drawing.”). 

The debate about the efficacy and necessity of CON laws is not one 

for this, or any, Court to resolve. “The legislature has broad discretion to 

determine what is harmful to the public health and welfare.” Commonwealth v. 

Harrelson, 14 S.W.3d 541, 548 (Ky. 2000). So long as the government exercises 

its police powers in a constitutional manner, we must apply the law as written, 

regardless of whether we agree with it philosophically. Posey v. Commonwealth, 

185 S.W.3d 170, 175 (Ky. 2006). And, to be certain, “[a]mong the police powers 

of government, the authority to promote and safeguard public health is a high 

priority.” Lexington Fayette Cnty. Food and Beverage Ass’n v. Lexington-Fayette 

Urban Cnty. Government, 131 S.W.3d 745, 749 (Ky. 2004). 

“Pertinent to this case, ‘[w]hen economic and business rights are 

involved, rather than fundamental rights, substantive due process requires that a 

statute be rationally related to a legitimate state objective.’” Beshear v. Acree, 615 

S.W.3d 780, 816 (Ky. 2020) (quoting Stephens v. State Farm Mut. Auto. Ins. Co., 

894 S.W.2d 624, 627 (Ky. 1995)). The challenger, in this case, Mercy, has the 
-41-

burden of proving that the law is not rationally related to a legitimate government 

purpose. Id. “Kentucky courts have always upheld restrictions on property rights 

that are reasonable, particularly in the all-important area of public health.” Id. at 

816-17. Reasonability is determined not by what any given court believes is fair. 

Rather, under rationale basis review, a court cannot declare a law unreasonable 

unless it “imposes burdens without any rational basis for doing so.” Sheffield v. 

City of Fort Thomas, 620 F.3d 596, 613 (6th Cir. 2010). 

Indeed,

Courts in this Commonwealth have recognized for half a 

century that when a “legislative body acts in a purported 

policy-making or law-making function . . . the concept of 

what is ‘arbitrary’ is much more narrowly 

constricted. . . .” City of Louisville v. McDonald, 470 

S.W.2d 173, 178 (Ky. 1971). Such an action is only 

“arbitrary if there is no rational connection between that 

action and the purpose for which the body’s power to act 

exists. Where the existence of such rational connection 

is ‘fairly debatable’ the action will not be disturbed by a 

court.” 

O’Bryan v. Zip Express, 636 S.W.3d 457, 462-63 (Ky. 2021). 

Our General Assembly has explicitly determined that the CON 

statutes are necessary to make all types of healthcare available throughout the 

Commonwealth. To this end, KRS 216B.010, provides:

The General Assembly finds that the licensure of health 

facilities and health services is a means to insure that the 

citizens of this Commonwealth will have safe, adequate, 

and efficient medical care; that the proliferation of 
-42-

unnecessary health-care facilities, health services, and 

major medical equipment results in costly duplication 

and underuse of such facilities, services, and 

equipment; and that such proliferation increases the 

cost of quality health care within the Commonwealth. 

Therefore, it is the purpose of this chapter to fully 

authorize and empower the Cabinet for Health and 

Family Services to perform any certificate-of-need 

function and other statutory functions necessary to 

improve the quality and increase access to health-care 

facilities, services, and providers, and to create a costefficient health-care delivery system for the citizens of 

the Commonwealth.

Id. (emphasis added).

The record reveals that the equipment at issue can provide at least 

9,500 procedures annually. Thus, it is a mathematical fact that the 6,000-

procedure threshold requires that any newly proposed piece of equipment will be 

utilized to at least 63% of its capacity by its second year. Certainly, then, the 

6,000-procedure threshold is rationally related to the General Assembly’s 

objectives of preventing the overinvestment in and maldistribution of health care 

facilities in the Commonwealth. 

The fact that there are several existing facilities operating under this 

threshold does not undermine the need for the threshold as the Franklin Circuit 

Court and the majority suggest. Rather, it does precisely the opposite. If the 

current facilities are not performing anywhere near their capacity, why would we 

want to approve the expenditure of millions of limited healthcare dollars on an 
-43-

already saturated market? Those same healthcare dollars could be spent on other 

healthcare needs throughout the state. Baptist Convalescent Center, Inc. v. 

Boonespring Transitional Care Center, LLC, 405 S.W.3d 498, 506 (Ky. App. 

2012). 

In sum, it is apparent to me that the 6,000-threshold, while possibly 

not perfect, is rationally related to a legitimate government interest. Thus, no 

matter how this Court may feel about the requirement, we must uphold it. “So 

long as the statute’s generalization is rationally related to the achievement of a 

legitimate purpose[,] the statute is constitutional.” Hunter v. Commonwealth, 587 

S.W.3d 298, 304 (Ky. 2019). 

For the reasons set forth above, I cannot agree with the majority that 

900 KAR 5:020, Section IV.B.I is unconstitutional. Therefore, I would reverse the 

Franklin Circuit Court on this issue. 
-44-

BRIEFS FOR APPELLANT:

Mathew R. Klein, Jr.

Mark D. Guilfoyle

David M. Dirr

Covington, Kentucky

ORAL ARGUMENT FOR 

APPELLANT:

David M. Dirr

Covington, Kentucky

ORAL ARGUMENT FOR 

APPELLEE15 COMMONWEALTH 

OF KENTUCKY, CABINET FOR 

HEALTH AND FAMILY 

SERVICES, OFFICE OF 

INSPECTOR GENERAL, DIVISION 

OF CERTIFICATE OF NEED:

Olivia M. Peterson

Frankfort, Kentucky

BRIEF FOR APPELLEE,

MERCY HEALTH – LOURDES 

HOSPITAL LLC :

Lisa English Hinkle

Christopher J. Shaughnessy

Jonas S. Bastien

Lexington, Kentucky

Edward Monarch

William G. Carroll

Louisville, Kentucky

ORAL ARGUMENT FOR 

APPELLEE MERCY HEALTH –

LOURDES HOSPITAL LLC:

Lisa English Hinkle

Lexington Kentucky

Edward Monarch

Louisville, Kentucky

NO BRIEF FILED FOR APPELLEE

COMMONWEALTH OF 

KENTUCKY, CABINET FOR 

HEALTH AND FAMILY 

SERVICES, OFFICE OF 

INSPECTOR GENERAL, DIVISION 

OF CERTIFICATE OF NEED.

15 Though labeled an “Appellee,” counsel for the Cabinet sat with the Appellant during oral 

argument. The Cabinet neither filed a brief nor presented an argument during oral arguments. 

The Cabinet was present for oral arguments, though, and responded to questions from the Court.