Case Name: ST. DOMINIC-JACKSON MEMORIAL HOSPITAL and Mississippi Baptist Medical Center v. MISSISSIPPI STATE DEPARTMENT OF HEALTH and Methodist Medical Center, Inc.
Court: Mississippi Supreme Court
Jurisdiction: Mississippi
Decision Date: 1998-10-08
Citations: 728 So. 2d 81
Docket Number: No. 95-CC-00043-SCT
Parties: ST. DOMINIC-JACKSON MEMORIAL HOSPITAL and Mississippi Baptist Medical Center v. MISSISSIPPI STATE DEPARTMENT OF HEALTH and Methodist Medical Center, Inc.
Judges: SULLIVAN and PITTMAN, P.JJ., McRAE and SMITH, JJ., CONCUR.
Reporter: Southern Reporter, Second Series
Volume: 728
Pages: 81–104

Head Matter:
ST. DOMINIC-JACKSON MEMORIAL HOSPITAL and Mississippi Baptist Medical Center v. MISSISSIPPI STATE DEPARTMENT OF HEALTH and Methodist Medical Center, Inc.
No. 95-CC-00043-SCT
Supreme Court of Mississippi.
Oct. 8, 1998.
Rehearing Denied Feb. 11, 1999.
Edmund L. Brunini, Jr., James D. Koper-nak, James- T. Cox, Jackson, Attorneys for Appellants.
Ricky L. Boggan, Laura H. Tedder, Ellen M. Davis, Jackson, Attorneys for Appellees.

Opinion:
PRATHER, Chief Justice, for the Court:
STATEMENT OF THE CASE
¶ 1. On November 17, 1992, Methodist Medical Center (hereinafter "MMC") filed a Certificate of Need Application (CON) with the Mississippi State Department of Health (hereinafter "the Department") to establish what it called a Primary Care Center (also referred to as the "North Campus") in northeast Jackson. MMC's CON application was followed by public hearings requested by St. Dominic-Jackson Memorial hospital (hereinafter St. Dominic), Mississippi Baptist Medical Center (hereinafter MBMC), and Woman's Hospital, all of which opposed MMC's application.
¶ 2. During the first CON hearing, the Department conducted a review of MMC's application and determined that the CON should be granted. The Staff of the Health Planning Division of the Department subsequently issued a seventeen page report recommending approval. Thereafter, an eight-day hearing was held with regard to MMC's CON application. At the conclusion of the hearing, the hearing officer endorsed the proposal and recommended that the CON application be granted, subject to MMC agreeing to minimum conditions relating to indigent and medicare care. State Health Officer, Dr. F.E. Thompson, then reviewed the entire record and concurred in the Staffs and hearing officer's recommendation by approving MMC's application by Final Order dated December 16, 1993. The Final Order was appealed by the opponents to the Chancery Court of Hinds County.
¶ 3. Chancellor Patricia Wise reviewed the appellate record and concluded that she was uncertain about the Department's determination on two questions. Chancellor Wise was not sure whether the record adequately reflected the Department's determination that the project constituted a relocation rather than a new facility, and whether the proposed MMC north campus project was needed. Therefore, Chancellor Wise remanded the case to the Department for another hearing to determine: (1) "whether the project was a relocation or the establishment of a new entity; (2) once that determination is made, whether or not the project is needed, as need is determined pursuant to the applicable service specific requirements of the State Health Plan and/or the relevant General Review Considerations of the Certificate of Need Manual."
¶ 4. Upon remand to the Department, the State Health Officer conducted a second public hearing on the matter, following which he granted MMC's CON application once again. Aggrieved by the second ruling as well, opponents appealed again to the Hinds County Chancery Court presided over by Chancellor Wise. Chancellor Wise again reviewed the record and the second findings of the Department. Chancellor Wise concluded that the granting of the CON was not an abuse of discretion, and she accordingly affirmed the decision via a thirty-two page Memorandum Opinion and Order.
¶ 5. Aggrieved by the chancellor's affir-mance, opponents perfected their appeal and request review of the following issues:
I. CAN A PROPOSED NEW HOSPITAL BE DESIGNATED A RELOCATION WHEN NOTHING OF SUBSTANCE, i.e., NO BEDS, NO SERVICES, NO EQUIPMENT AND NO STAFF IS BEING RELOCATED?
II. CAN THE DESIGNATION OF A PROJECT AS A "RELOCATION" ELIMINATE THE STATUTORY REQUIREMENT OF PROOF OF NEED FOR THE PROJECT?
III. IS THERE SUBSTANTIAL OBJECTIVE EVIDENCE IN THE RECORD OF NEED FOR A NEW HOSPITAL IN JACKSON?
¶ 6. This Court finds the points of error to be closely related and we will accordingly address them collectively.
¶ 7. Concerned with the overbuilding of hospitals caused by the federal Hill-Burton Act, Congress in 1974 passed the National Health Care Planning Resource Development Act. The Act required the states to adopt Certificate of Need statutes in order to prevent the unnecessary duplication of health care facilities. Under the CON laws, a new hospital or major capital expenditure cannot commence without filing an application and proving need.
¶ 8. In Mississippi, the Department is charged with reviewing applications for Certificates of Need, in accordance with the health care policies and priorities of this State. In an effort to have uniformity in its decisions, the legislature promulgated by statute that these policies be set forth annually in the State Health Plan. Miss.Code Ann. § 41 — 7—173(s) (Supp.1998). The 1992 State Health Plan at page 1-1-2 lists the following general certificate of need policies:
General Certificate of Need Policies: The general purposes of health planning in Mississippi are to: (l)Improve the health of Mississippi residents; (2)Increase the accessibility, acceptability, continuity, and quality of health services; (3)Prevent unnecessary duplication of health resources; and (4)Provide some cost containment.
In the present case, the opponents appeal the decision of the Department, through the ruling of the Health Officer, approving the CON application of MMC for the 64 bed North Campus project. The Health Officer found the project to constitute a "relocation" rather than the building of a new hospital, and he accordingly applied a much less stringent standard for determining whether the project was needed. Based on this lessened standard, the Health Officer determined that the relocation was "advantageous," and he accordingly granted the CON.
¶ 9. It must first be acknowledged that this Court's standard of review in the present case is quite limited. As stated in Mississippi State Department of Health v. Southwest Mississippi Regional Medical Center, 580 So.2d 1238, 1239 (Miss.1991):
This is a proceeding for judicial review of administrative action, and it is important that we understand and accept what this fact implies. The Legislature has directed that an S[tate] H[earing] 0[fficer]'s CON order be subject to judicial review, but that it .
shall not be vacated or set aside, either in whole or in part, except for errors of law, unless the Court finds that the order . is not supported by substantial evidence, is contrary to the manifest weight of the evidence, is in excess of the statutory authority or jurisdiction of the . Department ., or violates any vested constitutional rights of any part involved in the appeal. Miss.Code Ann. § 41-7-201(4) (Supp.1990).
This is nothing more than a statutory restatement of familiar limitations upon the scope of judicial review of administrative agency decisions. Magnolia Hospital v. Mississippi State Department of Health, 559 So.2d 1042, 1044 (Miss.1990).
See also Mississippi State Dep't of Health v. Mississippi Baptist Med. Ctr., 663 So.2d 563, 573 (Miss.1995). The decision of the hearing officer and State Health Officer is afforded great deference upon judicial review by this Court, even though we review the decision of the chancellor. Mississippi State Dep't of Health v. Southwest Mississippi Reg'l Med. Ctr., 580 So.2d 1238, 1240 (Miss.1991).
¶ 10. In the present case, the Chancellor initially found the ruling of the Health Officer in approving the North Campus project to be arbitrary and capricious. The Chancellor was particularly skeptical of language in the Health Officer's original ruling expressing the view that, in proposing the North Campus project, MMC was primarily interested in entering the lucrative northeast Jackson market. The Chancellor wrote that:
The Court finds that the Methodist Medical Center Application was not reviewed in accordance -with the statutory requirement that there be substantial compliance with the projection of need contained in the State Health Plan in the following comment by the State Health Officer: "We are accepting the argument of the opponents to this Application that MMC is primarily interested in increasing its market share and getting into a market of affluent population in the Northeast Jackson/South Madison County area." The Court finds this statement is antithetical to a conclusion that there is true need for this project. A primary purpose of increasing market share does not rise to the level of substantial evidence of need.
The Court notes the State Health Officer's conclusion that by imposing certain conditions with respect to the provision of care to certain underprivileged groups, that he believed would guarantee compliance with one of the goals of the State Health Plan, namely improvement of health care for the indigent and uninsured. The Court finds, however, that compliance with one of the goals of the State Health Plan does not relieve the Department of Health or the State Health Officer from its duty under the statute to review the project for need pursuant to any applicable service specific requirements of the State Health Plan and the relevant general considerations of the Certificate of Need Review Manual.
The Chancellor concluded that:
With these principles in mind, the Court concludes, in accordance with the arguments advanced in the briefs of the opponents as well as their oral arguments that the decision of the State Health Officer is arbitrary and capricious. The Court specifically finds the proper statutory review procedure was not follow(ed) by the Department in the present case.
The Chancellor accordingly reversed the Health Officer's first ruling and remanded for additional hearings and findings of fact and law. On remand, the Health Officer heard testimony from two additional witnesses and submitted a written ruling approving the North Campus project once again. The opponents once again appealed. The Chancellor's ruling affirming the Department's second ruling concludes that:
When this case first came to this Court, the conclusions of the State Health Officer were too tainted to pass muster. After all, judicial deference has some limits. The case was remanded for another hearing. The Court has again read the record in the case, which now includes a record of the proceedings in the remand hearing. The question whether on the evidence we would have arrived at the same conclusion is not at issue. Rather, the cardinal question is: does the conclusion of the State Health Officer issued on August 12, 1994 have a "warrant in the record' and a 'reasonable basis in law" ? The answer is yes.
This Court agrees with the Chancellor that the Health Officer's initial ruling was arbitrary and capricious but, unlike the Chancellor, we find no basis for reaching a differing conclusion with regard to the second ruling. In the view of this Court, the Health Officer's second ruling, from which the present appeal is taken, contains serious errors which render the opinion erroneous as a matter of law.
¶ 11. In his second ruling, the Health Officer concluded that the proposed North Campus project constituted a "relocation" rather than the building of a new facility, and he applied a much less stringent standard of review based on this distinction. The Health Officer ruled that the project constituted a relocation mainly because of the fact that MMC, like many other area hospitals, is licensed to utilize more beds than it actually puts into operation. Specifically, MMC had a licensed capacity of 474 beds at the time of the CON application, but, due to lack of demand, only operated 280 beds. MMC thus proposed to "relocate" 64 of the 196 beds which it was licensed to utilize but did not have in actual operation. In his ruling, the Health Officer defined the term "relocation" as "the moving of authority to provide a service from one location to another," thus granting MMC's proposal the status of a relocation in spite of the fact that there was no corresponding reduction of services at MMC's main south Jackson campus.
¶ 12. The term "relocation" is not defined in the Health Plan nor in statute, and the Health Officer was within his authority in making his own interpretation of this term. This Court should not disturb this interpretation of the term absent a finding that this interpretation is arbitrary and capricious. This Court has held that the Department has the authority to define terms in a manner inconsistent with their generally accepted definition. Mississippi State Dep't of Health v. Golden Triangle Reg'l Med. Ctr., 603 So.2d 854, 857 (Miss.1992).
¶ 13. This Court finds the Health Officer's interpretation of the term "relocation" to be highly suspect legally. The North Campus project does not constitute a "relocation" in any ordinary sense of the word. The record is clear that a completely new building was constructed in northeast Jackson, and this building has been staffed with new medical workers and new equipment. There was no corresponding decrease in services at the main hospital in south Jackson, and, although the North Campus facility lacks an emergency room, the facility is, for all practical purposes, a new hospital.
¶ 14. While this Court finds the Health Officer's definition of "relocation" to be suspect, we consider it unnecessary to determine whether this definition is arbitrary and capricious. This Court concludes that the most serious error committed by the Health Officer, and the error requiring reversal, was not' in defining "relocation," but rather in electing to apply a severely lessened standard of need to the North Campus project based upon a conclusion that a relocation was taking place. Regardless of the interpretation of the term "relocation," there is nothing in statute or case law which indicates that a lessened standard of need applies to determine if a "relocation" should be approved. To the contrary, Miss.Code Ann. § 41-7-191 requires CON approval for "the relocation of a health care facility or portion thereof, or major medical equipment" as well as for capital expenditures of over one million dollars. Under the Health Officer's definition of "relocation," the North Campus project should have qualified on both grounds.
¶ 15. The Health Officer not only failed to apply a full scale CON review of the North Campus project; he also elected to promulgate a new standard applicable to relocations: the "any specific advantage" test. The Health Officer wrote in his ruling that:
Since this is a relocation of already licensed bed authority within the same Hospital Service Area, the issue of need doesn't revolve around whether or not there is a need for additional beds in this Hospital Service Area, because the proposed relocation won't increase the number of licensed beds. The true issue is whether or not there is any specific advantage in having the beds at a North Campus, as opposed to leaving that authority where it is. The overwhelming weight of the substantial, credible evidence in the records and exhibits of both hearings indicates that there is such an advantage.
The MMC, like many other hospitals, has a large surplus in licensed bed capacity. Under the precedent set by the Health Officer, the MMC, or any other hospital with surplus bed capacity, would be able to build a new hospital wherever it desired under the guise of a "relocation," as long as there is "any specific advantage" to their doing so. It is difficult to conceive of a more permissive standard for the building of a major new facility such as the North Campus than the "any specific advantage" standard formulated by the Health Officer.
¶ 16. Apparently recognizing the lack of legal foundation for the "any specific advantage" standard, the MMC appears to assert that this language was not the standard which the Health. Officer actually used in the present case:
Opponents latch onto one phrase in the opinion— 'any specific advantage'— and assert this as the 'new subjective standard' utilized by the Department. Such myopic analysis of the State Health Officer's opinion is telling and constitutes a gross distortion of the opinion.
The "any specific advantage" standard is not, as the MMC-would seem to suggest, merely surplus language in the Health Officer's ruling. This language is, to the contrary, the standard which the Health Officer expressly set forth and applied in his ruling approving the North Campus project. After setting forth the "any specific advantage" test in his ruling, the Health Officer immediately proceeded to apply the newly-created standard:
The most persuasive information to indicate that there are advantages to relocating comes from the testimony of Dr. Robert Smith and Dr. Geraldine Chaney during the course of the second hearing. Dr. Smith and Dr. Chaney, both primary care physicians currently practicing in the area in question, and both with substantial experience practicing medicine in the population to be served by Methodist at its current location and at its proposed North Campus, were the only two physicians to testify for any party on any matter at the remand hearing. When asked if the project had the effect of increasing access to primary care and access for low income and minority populations, both physicians testified that the relocation would have a beneficial effect.
While there is no apparent basis in law for the application of the "any specific advantage" standard set forth by the Health Officer at all, this Court finds it particularly ironic that the most "persuasive" advantage mentioned by the Health Officer was the increase in services which the hospital would provide to the "low income and minority population." The record demonstrates the demographics of the northeast Jackson area in which the North Campus was'built, and this Court finds it difficult to accept that increasing services to the "low income and minority population" was a significant motivating factor in the hospital's construction.
¶ 17. A more likely motivation for the building of the new hospital in the affluent northeast Jackson area was mentioned by the Health Officer in his first ruling:
We are accepting the argument of the opponents to this Application that Methodist Medical Center is primarily interested in increasing its market share and getting into a market of affluent population in the northeast Jackson/south Madison County area.
This Court agrees with the Health Officer that the construction of the new hospital in northeast Jackson was motivated by a desire to expand into this affluent area of Jackson, but this conclusion does not lend itself to confidence in the Health Officer's finding that the primary "advantage" of the new hospital is the benefits which it will provide to indigent patients.
¶ 18. In addition to promulgating the erroneous "any specific advantage" standard, the Health Officer made other erroneous conclusions of law in his second ruling. The Health Officer wrote in this ruling that:
Mississippi has recognized that cost containment is not one of its primary objectives in health planning. It is illogical to disapprove this application on the basis that it may not achieve the goal of cost containment, when it does go far in achieving the other stated goals within the State Health Plan.
In stating that "cost containment is not one of [the] primary objectives in health planning" in this State, the Health Officer is clearly in error. This Court specifically held in Mississippi State Department of Health and River Oaks Hospital, Inc. v. Mississippi Baptist Medical Center, 663 So.2d 563, 575 (Miss.1995) that "[c]ost containment has thus been recognized by this Court as a primary purpose supporting the CON laws." This Court reversed in River Oaks, based in large part upon the negative effect which the proposed project in that case would have on cost containment. In the instant case, the Health Officer seriously misinterpreted the law in this area when he concluded that cost containment was not a primary objective in health care planning.
¶ 19. MMC argues that, in spite of any errors in the "any specific advantage" standard employed by the Health Officer, the fact remains that the Health Officer made detailed findings of need in a proper legal context. The language of the ruling indicates otherwise. Prior to selectively addressing 8 of the 20 CON general considerations, the Health Officer made it clear that his analysis of these factors was in the context of a relocation rather than the building of a new hospital. The Health Officer stated in his ruling that:
The second issue which the Court directed further exploration of was the issue of whether or not there is a need for the proposed relocation. The criteria under which the need for this project must be evaluated are different for the relocation of existing capacity than it would be for the establishment of new hospital beds.
After making the above qualification, the Health Officer went on to discuss 8 of the 20 CON factors. However, after discussing these factors, the Health Officer emphasizes once again in his ruling that:
Since this is a relocation of already licensed bed authority within the same Hospital Service Area, the issue of need doesn't revolve around whether or not there is a need for additional beds in the Hospital Service Area, because the proposed relocation won't increase the number of licensed beds.
It is thus apparent that the Health Officer's selective discussion of some of the CON factors was, like the rest of his ruling, tainted by his erroneous conclusion that the "issue of need does not revolve around whether or not there is a need for additional beds in the Hospital Service Area." This conclusion by the Health Officer is the central error of the present appeal, and this Court would be doing a disservice to the citizens of this State by ignoring this error based on notions of deference to administrative agencies.
¶ 20. An analysis of the Health Officer's findings with regard to the 8 factors which he chose to address casts further doubt on his decision to approve MMC's application. In the view of this Court, many of the Health Officer's findings are very vague and of questionable validity. For example, the Health Officer found that:
GRC 2 — Long Range Plan. The North Campus is certainly a part of Methodist Medical Center's long range plan. It is a natural extension of MMC's tradition of serving underserved populations such as indigents and minorities.
GRC 6 — Accessibility. The staffs analysis and the testimony indicates that the relocation of these 64 beds will increase equal access to health services of members of traditionally medically underserved groups.
GRC 19 — Quality of Care. Methodist's provision of quality care is undisputed. Its record of providing that care to under-served populations is better, according to the testimony, than its competitors. Clearly GRC 19 is met.
This Court has previously noted our skepticism regarding the North Campus project's alleged primary advantage of benefitting indigents and minorities.
¶ 21. Other conclusions by the Health Officer are of questionable validity as well. The Health Officer found that:
GRC 3 — The Availability of Less Costly/More Effective Alternatives. Hospital care is costly to deliver, however, Methodist's proposal is a less-costly method of delivering hospital care. Testimony in the record indicates that money would be saved at the North Campus because of the physical layout, job sharing among staff members, and because of the type patients the facility will serve. For this reason, the cost of delivering the same service at Methodist's existing facility or at other facilities is greater. There is no existing less costly, more effective way to deliver the service at present.
The record indicates that the North Campus project cost close to 30 million dollars and that daily patient charges at MMC would increase by more than 200 dollars as a result of the project. This Court finds the Health Officer's finding that there were no less costly alternatives to the North Campus project to be suspect.
¶ 22. The Health Officer also concluded that:
GRC 7 — Relation to Existing Health Care System. The testimony in the record indicates that the proposed relocation will complement the existing health care system, not detract from it. As an example, the proposed facility's nearest neighbor, St. Dominic, doesn't provide obstetrical services. A significant portion of the proposed facility will be devoted to obstetrics. Additionally, the proposed facility constitutes an "access point" for primary care services not generally provided by the tertiary care hospitals in the area. Although these are two examples, there are other in the record.
This Court considers these findings to be, at best, incomplete. The Health Officer's ruling fails to mention that testimony clearly established that the Jackson area was overbedded even prior to the North Campus project. There was testimony that, far from "complementing" the existing health care providers, the MMC would threaten the financial well-being of other Jackson hospitals. The opponents note that hospitals seldom go out of business, and that a hospital's costs are, inevitably, passed on to patients. The Health Officer's failure to even mention the overbed-ding of the Jackson area raises serious doubts about the comprehensiveness of the ruling, particularly as it relates to factors militating against the approval of the proposal.
¶ 28. The Health Officer also found that the North Campus project was financially viable from the perspective of MMC:
GRC 4 — Economic Viability of the Project. Although Methodist projects a first year loss of $600,000.00, it projects a gain of $1,400,000.00 the first year and $3,500,-000.00 the second year, indicating economic viability. In addition, a feasibility study conducted by Methodist substantiates the economic viability of the project.
GRC 8 — Availability of Resources. Methodist has demonstrated that adequate resources to provide the proposed services are available. Indeed, there was testimony that the relocated service would enhance the ability to recruit primary care providers to the area. Clearly GRC 8 is met.
This Court does not doubt that the North Campus project, located in an affluent part of Jackson, is viable from the point of view of the MMC.
¶ 24. In the view of this Court, the most important factor in the present context is whether or not the North Campus project is actually needed. In this regard, the Health Officer found that:
GRC 5 — Need for the Project. This review criterion relates to the need that the population served or to be served has for the services proposed to be offered or expanded and the extent to which all residents of the area, and in particular low income persons, racial and ethnic minorities, women, handicapped persons, and other under-served groups and the elderly, are likely to have access to those services.
Methodist has demonstrated that the needs of all area residents, including low income, racial and ethnic minorities, women, handicapped persons and other under-served groups and the elderly are met by this project. The facility will provide low acuity care such as gynecological surgery, general surgery and primary care. Physician testimony indicated that the facility will likely increase access to care for low income and minority patients.
In the view of this Court, the nominal finding of "need" which the Health Officer did make in GRC 5 appears to be nothing more than a general assurance that the "needs" of all segments of the community will be met by the project, and this finding is expressly noted (twice) as having been made under a reduced standard of need supposedly applicable to "relocations." The ruling makes no mention of the testimony that Jackson was overbedded, nor does it mention the testimony that a new hospital providing similar obstetrical or surgical services was not needed and would likely have been rejected.
¶ 25. This Court's confidence in the Health Officer's assurance that the project is needed is further reduced by the fact that this finding of need was made on remand from the Chancellor with an explicit request that this determination be made. Given the Health Officer's conclusions regarding MMC's primary motivations expressed in his first ruling, his assurances on remand that the project is needed loses much of its persuasiveness. The most revealing aspect of the Health Officer's opinion as it relates to need, however, is his repeated statement that the issue of need does not revolve around the issue of whether additional services are needed by the Jackson community, given that a "relocation" is taking place. By expressly declining to make a finding that the new services provided by the project were needed, except under a highly permissive standard supposedly applicable to relo-cations, the ruling speaks volumes.
¶ 26. This Court concludes that the findings of law and fact in the Health Officer's ruling are either erroneous as a matter of law or tainted by their application under a lessened standard of review allegedly appli cable to "relocations." This Court limits our conclusion that the Department acted arbitrarily and capriciously to the facts of the present case, however, and this opinion should not be interpreted otherwise. There may be other projects approved by the Department under a standard supposedly applicable to "relocations" which are distinguishable from the facts of the present case and/or which do not contain a sufficiently compelling basis in the record for reversal. This Court is mindful of the highly deferential standard of review which we must employ in appeals from rulings of the Department, but the record in "the present case presents us with a sufficiently compelling basis for reversal that we cannot allow the Health Officer's ruling to stand.
¶ 27. While this Court would be justified in reversing based solely on the errors of law contained in the ruling, considerations of fairness dictate that we make an inquiry into the facts of the case ourselves, considered in their proper legal context. This Court deems it improper to remand for a third round of hearings before the Department unless there is substantial evidence of need for the North Campus project in the record. The starting point for our consideration of the North Campus project is our conclusion that the showing of need must be commensurate to what the project actually is and the impact which it actually has on the Jackson health care market. No lesser showing of need will be required by this Court based on the notion that a "relocation" has taken place. In considering the issue of whether the project is needed, it is also helpful to provide some legal and historical context for the consideration of this issue.
¶ 28. The opponents note that, for the most part, the CON laws stopped construction of unneeded hospitals. Since the passage of the CON statutes in 1979, only one new hospital had been built in this state, and no hospitals had even been proposed in Jackson until the North Campus project. This does not mean, however, that the problems caused during the era of hospital over-construction disappeared. According to the Department of Health's hospital bed need formula, Hinds County was over-bedded by 637 beds, and Hospital Service Area III, composed of 17 counties, was overbedded by 1,256 beds at the time of the review of the North Campus project.
¶ 29. MMC does not contest that the Jackson and Hospital Service Area III was and is overbedded, and this Court considers this factor to be a very significant one in determining whether a new hospital is needed. This Court also considers it significant that no new hospitals had even been proposed in Jackson in the period between the passage of the CON statutes and the proposal of the North Campus project. The opponents argue in their brief that "the Jackson hospital community was shocked when Methodist Medical Center, on November 17, 1992, filed an Application to construct a sixty-four bed hospital in affluent northeast Jackson."
¶ 30. This Court would harbor very serious reservations about the validity of the North Campus project and the factors which motivated it, based on the nature of the proposal and its legal and factual context alone. The issue arises as to why MMC felt it necessary to designate the project a "relocation" if the project were justifiable under the standards applicable to new hospitals. MMC argues that the Department had used a similar interpretation of "relocation" in the past, but the opponents submit that the Department had never classified a project on the scale of the North Campus project as a "relocation." At any rate, as noted earlier, the Department's most serious error was not in defining "relocation" but rather in applying a severely lessened standard of need to the project in the present ease.
¶ 31. This Court is faced with evidence in the record that new hospitals were not needed and were not even being proposed in Jackson. In this context, we would question a proposal which sought to build what is, for all practical purposes, a new hospital in an affluent part of Jackson under the guise of a "relocation." This Court also harbors reservations about a project which purports to be concerned largely with benefitting indigent patients, but which is located in a part of Jackson where few indigent citizens actually live.
¶32. In addition to the factors discussed swpra, this Court also has in the record the rulings and testimony of officials of the Department which strengthen our conclusion that the North Campus project was not approved because a new hospital was actually needed, but rather based on the notion that a "relocation" was taking place. Given his position an officer of the Mississippi Department of Health, and in light of his experience in dealing with CON issues, this Court considers the testimony of Harold Armstrong to be particularly enlightening in this regard. Armstrong had testified in the hearings concerned with the River Oaks matter, which came before this Court in 1995. Harold Armstrong was asked about his testimony in that case in the case at bar:
Q: As I appreciated your testimony in the River Oaks matter, it was your judgement that but for the fact that River Oaks agreed to offer 25 percent Medicaid care that— other than that fact, you didn't believe there was need for additional obstetrical capacity in the Jackson area ? Is that a fair statement of what you said ? A: That's true.
Q: Okay. So if that's the case, how is it that you see a need for additional obstetrical capacity to be located on Ridgewood Road near County Line Road as proposed in this application ?
A: This is a relocation. It's not an expansion or addition to capacity.
When asked to reconcile his testimony regarding lack of need in River Oaks with his support of the North Campus project (which is largely concerned with providing obstetrical care), Armstrong did not cite any change in the need for obstetrical services in the Jackson area. Instead, Armstrong based his differing conclusion on the notion that a relocation was taking place.
If 33. Armstrong was even more direct when asked whether the Department would have approved a new hospital providing surgical services similar to that offered by the North Campus project:
Q: Let me try to ask you this way, Mr. Armstrong. Let's just assume for a moment that an applicant comes along and wants to do, let's say 50 outpatient surgery beds. We don't have any regulations that are in the way of it. The only thing that applicant's got to show is that there is need for an additional— let's make it a little more consistent with our application here. Let's say 30 outpatient surgical beds. No regulatory requirements in the way, except they've got to show need. Would there be need for an additional, let's say 30 outpatient surgery beds in the area proposed by Methodist, in your opinion ?
A: Probably not.
Q: Probably not ?
A: Probably not.
Q: Okay. That tells me, Mr. Armstrong, and you can correct me, that the real consideration here is that this is a relocation ?
A: That's true.
Armstrong thus considered the fact that a relocation was taking place to be the "real consideration" which justified the approval of the North Campus project even though a "new" hospital project which proposed to add the very same services to the Jackson market would have been unneeded and "probably" rejected.
¶ 34. Armstrong's testimony was very clear with regard to the nature of the "relocation" in the present case:
Q: Okay. All right. Now, right now, as we look at that CON application, as I appreciate it, there's nothing in the CON application nor is there anything in your Staff Analysis to suggest that when they move these beds, and I'm using move in quotes here, when they move and relocate these beds to this North Campus out here that they're going to reduce their nursing staff and Methodist South to accommodate that move ? As a matter of fact, the CON says they're going to hire more nurses. Is that correct ?
A: Yes.
Q: Okay. Now there's nothing that suggests that the equipment that they're talking about utilizing in that circumstance up there is equipment that is going to be packed up in a box from down there and taken up to this circumstance; is that correct ?
A: Yes.
Q: And in answer to the question as to whether or not they were going to reduce .any of their services or facilities at the other location, they said "We're not. All we're going to do is move these ethereal beds that we have on this license up there." Is that correct ?
A:That's right.
¶ 35. In the testimony of Harold Armstrong, and in the rulings of the Health Officer, this Court is presented with a consistent, and, it must be stated, commendably frank appraisal of the Department's rationale in approving the North Campus project. Both of these Department officials repeatedly state that their support for the project is based not upon any need for the new hospital or its services under standards applicable to new hospital proposals, but rather upon the fact that a relocation is supposedly taking place. This Court does not doubt the good faith of these Department officials, but we must conclude that their interpretation of the law in this area is arbitrary and capricious as applied to the facts of the present case.
¶ 36. It should be readily apparent that the Department's conclusion that new hospitals may be constructed under the guise of "relo-cations," even absent any need for the new hospitals, has the potential to cause serious damage to this State's health care system. Given the abundance of surplus licensed capacity possessed by hospitals throughout the State, this interpretation of the law has the potential to render the CON requirements a nullity. Implicit in the Department's rationale is the assumption that, merely because a hospital is licensed to provide a certain number of beds, it necessarily follows that there is a need for these beds. The fact remains, however, that the excess licensed capacity enjoyed by many hospitals has never had to withstand CON scrutiny, and any implied presumption of need in this regard is erroneous.
¶ 37. This paramount importance given by the Department to licensed bed capacity also serves to grant a monopoly of sorts on new hospital construction to those hospitals with excess licensed capacity. If the ruling of the Department were allowed to stand, then hospitals with excess capacity could expand, virtually at will, into affluent areas merely by "relocating" their unused licensed capacity to these areas. In the meantime, new providers who were not fortunate enough to have been over-licensed during an era of hospital over-construction would be shut out of this segment of the health care market. It is clear that the health-care consumers would be the biggest losers in this situation: MMC's own proposal concedes a rise in its patients' daily costs by over 200 dollars per day as a direct result of the North Campus project.
¶ 38. There was, without doubt, testimony at the hearings as to benefits which would enure to the community from the construction of the new hospital. There was testimony, for example, that the facility would increase the number of primary care physicians in the area, that the addition of the facility would improve the quality of obstetrics care in northeast Jackson (including for medicaid patients), and that the presence of a hospital in northeast Jackson would increase the general quality of care in that area. This fact is hardly surprising and is, indeed, an inevitable result of the building of a new hospital by a quality provider such as MMC. A hospital provides valuable and necessary services to the residents in its area, and virtually any proposed hospital will have some "specific advantage" which supports its construction. The fact that a hospital will have some positive advantages by no means indicates, however, that its construction is necessary and beneficial in the scheme of the area health care network as a whole.
¶ 39. This Court's conclusion that the ruling of the Health Officer must be reversed is strengthened by the remarkably similar Alabama case of Ex Parte Shelby Medical Center, Inc., 564 So.2d 63 (Ala.1990). In the Shelby case, Lloyd Nolan filed a CON application seeking to construct a $26,000,000 hospital in order to relocate licensed but un-staffed beds within an over bedded area. Shelby, 564 So.2d at 69. Nolan contended that this was proper as the "facility [would have been] consistent with the [State Health Plan] because it involves relocating beds rather than adding beds to the area." Id.
¶ 40. The Alabama Supreme Court ultimately vacated the CON granted to Nolan because it held that the record did not contain sufficient evidence. Shelby, 564 So.2d at 71. There was insufficient evidence because: 1) the project would have been "duplicative," and contrary to the cost containment goal of CON criteria; 2) evidence was present that "less costly, more efficient, and appropriate alternatives" were available; 3) "existing inpatient facilities with services similar to those proposed are not being used in an appropriate and efficient manner consistent with community demands"; 4) "alternatives to new construction have not been considered or implemented to the maximum extent practicable"; 5) "patients will not experience serious problems in obtaining inpatient care of the type proposed in the absence of the proposed new service . the services offered would duplicate those offered by existing facilities in the area." Shelby, 564 So.2d at 69-70.
¶ 41. The similarities between Shelby and the present ease are obvious and compelling. These factual similarities are offered by the opponents as being precisely supportive of their position: 1) both have "some cost containment" as a CON criteria; 2) both projects are expected to cost $26,000,000; 3) a relocation of licensed unused beds is involved; 4) allegedly the services to be provided by MMC are duplicative as they were found to be in the Shelby case; and finally 5) the Alabama State Health Department and the MSDH approved the project because it was considered to not add new beds because it was a relocation of previously licensed beds.
¶ 42. This Court agrees with the opponents that, while not binding authority, the Shelby decision is very relevant persuasive authority in favor of their position. MMC argues that cost containment is a greater concern in Alabama than in this State, but, this Court noted in River Oaks that cost containment was a "primary" concern in Mississippi health care planning. This Court considers Shelby to be a well-reasoned decision and very helpful persuasive authority in this regard.
CONCLUSION
¶ 43. This Court must reverse the ruling of the Health Officer and render judgment denying the CON application for the North Campus project. We are not unaware of the fact that MMC elected to build the North Campus facility prior to receiving this Court's ruling on the validity of the project. It must be considered unwise for any litigant to take costly steps in anticipation of a favorable ruling by this Court. In the case of the appeal of a ruling which was reversed once by the Chancellor, and which only narrowly avoided reversal a second time, this action must be considered a risk assumed solely by MMC. The fact that a litigant has taken such costly steps in anticipation of a ruling by this Court should not, of course, affect the course of this Court's deliberations. To do otherwise would be to abdicate our role ás highest court of this State. It is our hope that MMC's motivation in building the North Campus project prior to our decision was not to present this Court with a fait accompli which we would be unwilling to disturb.
¶ 44. It is the view of this Court that the North Campus project was not supported by substantial evidence of need, and it is at this point that our inquiry must cease. We must reverse the ruling of the Health Officer and render judgment denying CON approval for the North Campus project. This Court does determine, however, that this matter should be remanded to the Chancellor for an enforcement of the ruling. This Court's ruling does not dictate that operations at the North Campus facility cease immediately. Instead, we direct that the Chancellor be given full discretion to enforce this Court's ruling in a manner consistent with the best interests of MMC's patients and the citizens of Jackson.
¶ 45. REVERSED, RENDERED AND REMANDED.
SULLIVAN and PITTMAN, P.JJ., McRAE and SMITH, JJ., CONCUR.
JAMES L. ROBERTS, Jr., J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY BANKS, J.
MILLS and WALLER, JJ., NOT PARTICIPATING.
. Hereinafter, MBMC and St. Dominic will be collectively referred to as "opponents" unless party distinction is necessary.