Title: Mercy Hosps. E. Cmtys. v. Mo. Health Facilities Review Comm.
Citation: N/A
Docket Number: SC92015
State: Missouri
Issuer: Missouri Supreme Court
Date: April 17, 2012

SUPREME COURT OF MISSOURI 
en banc 
 
 
Mercy Hospitals East Communities, f/k/a 
 
) 
St. John’s Mercy Health System,  
 
) 
 
 
 
 
 
 
 
 
 
 
 
 
) 
Appellant, 
 
 
) 
 
 
 
 
 
 
 
) 
 
 
vs. 
 
 
 
 
 
 
) 
No. SC92015 
 
 
 
 
 
 
 
) 
Missouri Health Facilities Review Committee  ) 
and James K. Tellatin, 
 
 
 
) 
 
 
 
 
 
 
 
) 
 
 
 
Respondents,  
 
) 
 
 
 
 
 
 
 
 
 
 
 
 
) 
Patients First Community Hospital, 
 
) 
 
 
 
 
 
 
 
) 
 
 
 
Respondent.  
 
) 
 
 
 
 
 
 
 
  
 
Appeal from the Circuit Court of St. Louis County 
Honorable Richard C. Bresnahan, Judge  
 
Opinion issued April 17, 2012 
 
 St. John’s Mercy Health System appeals the trial court’s dismissal of its claim 
challenging a rule promulgated by the Missouri Health Facilities Review Committee 
(MHFRC) and applied to intervenor Patients First Community Hospital.  St. John’s 
challenges the validity of the MHFRC rule that exempts new hospitals costing less than 
$1 million from the statutory requirement of obtaining a certificate of need.  St. John’s 
has presented a ripe and justiciable controversy for review.  The MHFRC rule regarding 
new hospitals is valid.  The judgment is affirmed as modified.  
FACTS 
The certificate of need law, (CON Law), sections 197.300 to 197.366, RSMo 
Supp. 2006, conditions the construction of a new health care facility or expansion of an 
existing health care facility on the issuance of a certificate of need by the MHFRC.  The 
certificate of need requires a showing that the new or expanded facility serves a health 
care need in the community.  Section 197.315.  
The MHFRC grants certificates of need and has authority to promulgate 
reasonable rules and regulations.  Section 197.310.   The rule at issue is 19 CSR 60-
50.400(6)(F)(1)(New Hospital Rule), which exempts new hospitals costing less than $1 
million from the requirement of obtaining a certificate of need. 
In April 2010, Patients First filed a letter of intent with the MHFRC requesting a 
non-applicability certificate of need letter to construct a new three-bed facility at an 
estimated cost of $953,750.  St. John’s filed suit against the MHFRC seeking a 
declaratory judgment that the New Hospital Rule was invalid.  St. John’s further sought 
to enjoin the MHFRC from applying the rule and granting Patients First an exemption 
from the certificate of need requirement.  The trial court held St. John’s had not presented 
a ripe and justiciable controversy because the MHFRC had not applied the rules 
challenged by St. John’s and had not decided yet whether Patients First would be exempt 
from obtaining a certificate of need.  Although the trial court held that the case was not 
justiciable and dismissed the action without prejudice, the court addressed the merits of 
St. John’s claim and found that the MHFRC had not exceeded its authority in 
promulgating the New Hospital Rule.   
St. John’s raises two points on appeal. First, St. John’s alleges that the trial court 
erred in dismissing the action because its claim was both ripe and justiciable.  
Alternatively, St. John’s contends the trial court erred in upholding the validity of the 
New Hospital Rule because the rule exempts new hospitals costing less than $1 million 
from that requirement while the CON Law requires all new hospitals to obtain a 
certificate of need. 
ANALYSIS 
I.  Standard of Review 
A trial court’s dismissal of a case for lack of justiciability is subject to de novo 
review.  See Comm. for Educ. Equality v. State, 294 S.W.3d 477, 484 (Mo. banc 
2009)(dismissal for lack of standing subject to de novo review).  Administrative rules and 
regulations are valid unless they are unreasonable and plainly inconsistent with the 
authorizing statute.  Foremost-McKesson, Inc. v. Davis, 488 S.W.2d 193, 197 (Mo. banc 
1997) (internal citations omitted).  This standard of review is informed by the fact that 
“[t]he interpretation and construction of a statute by an agency charged with its 
administration is entitled to great weight.” Id. (quoting Federal Trade Comm’n v. Mandel 
Bros., Inc., 359 U.S. 385, 391 (1959)). 
II.  St. John’s challenge to the New Hospital Rule is justiciable. 
In the context of a declaratory judgment action, “[a] justiciable controversy exists 
where the plaintiff has a legally protectible interest at stake, a substantial controversy 
exists between parties with genuinely adverse interests, and that controversy is ripe for 
judicial determination.”  Barron v. Shelter Mut. Ins. Co., 220 S.W.3d 746, 748 (Mo. banc 
 
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2007).  In other words, justiciability requires that the plaintiff’s claim is ripe and that the 
plaintiff has standing to bring the underlying claim.  See Missouri Health Care Ass’n v. 
Attorney Gen. of the State of Missouri, 953 S.W.2d 617, 620 (Mo. banc 1997).  
This case is ripe for judicial review.  When St. John’s filed its petition for 
declaratory judgment, the case was not ripe because MHFRC had not yet determined 
whether Patients First would be exempt from obtaining a certificate of need letter.  
However, after the trial court dismissed the case for lack of justiciability, the MHFRC 
applied the New Hospital Rule and determined that no certificate of need was required.  
Application of the rule is no longer a hypothetical probability; it is an action that has 
occurred.  Therefore, the case is ripe for judicial review.   
 
St. John’s also has established that it has standing to contest the rule.  Any person 
who is or may be aggrieved by any rule promulgated by a state agency has standing to 
challenge that rule in a declaratory judgment action. Section 536.053.   Section 536.053 
grants standing to economic competitors to challenge the validity of agency rules. 
Missouri Bankers Ass’n v. Dir. of the Missouri Div. of Credit Unions, 126 S.W.3d 360, 
365 (Mo. banc 2003).   
In Missouri Bankers, this Court held that a banking association had standing under 
section 536.053 to challenge the validity of a rule governing the geographic expansion of 
credit unions in Missouri because the association was an economic competitor to credit 
unions.  Id.  Like the association in Missouri Bankers, St. John’s is an economic 
competitor with any party within its market that is exempt from obtaining a certificate of 
need.  St. John’s revenues are affected directly by the number of patients.  The number of 
 
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patients that St. John’s serves is affected by the number of health care facilities with 
which it competes.  St. John’s is adversely affected because the New Hospital Rule 
allows competitors to enter the marketplace without demonstrating the community’s need 
for additional health care services.  Therefore, St. John’s is aggrieved by the New 
Hospital Rule within the meaning of section 536.053 and has standing to challenge the 
validity of the rule.1 
Although the trial court dismissed this case on justiciability grounds, it nonetheless 
analyzed the merits of the claim.   When, as in this case, the trial court’s factual and legal 
conclusions are clear, remand is futile.  Clifford Hindman Real Estate, Inc. v. City of 
Jennings, 283 S.W.3d 804, 808 (Mo. App. 2009).    In this case, the trial court included in 
its judgment a detailed analysis explaining why the New Hospital Rule did not conflict 
with the CON Law.   Based on this analysis, the court concluded that St. John’s was 
unlikely to succeed on the merits of its claim.  Under these circumstances, remand would 
be a nothing but an unnecessary formality.  Therefore, this Court will exercise its 
discretion to address the merits of the underlying claims. Rule 84.14.   
III. The New Hospital Rule is valid. 
                                                 
1 The MHFRC and Patients First argue that St. John’s lacks standing because section 
197.335 provides standing only to applicants, not economic competitors.  Section 
197.335 does not apply because that statute governs standing for parties challenging 
MHFRC decisions. St. John’s does not appeal the MHFRC’s decision to grant Patients 
First an exemption.  Instead, St. John’s challenges the validity of the New Hospital Rule 
itself.  As established above, therefore, St. John’s has standing pursuant to section 
536.053, which governs standing for parties challenging the validity of a rule as opposed 
to an MHFRC decision.  
 
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The New Hospital Rule provides that new hospitals costing less than $1 million 
are exempt from the requirement to obtain a certificate of need.   St. Johns asserts that the 
rule is invalid because sections 197.305(9) and 197.366 require every new hospital to 
obtain a certificate of need regardless of the cost of the facility.   St. John’s argument is 
without merit. 
The CON Law requires that new institutional health services obtain a certificate of 
need.  Section 197.315.1. Section 197.305(9) defines “new institutional health service” 
as:  
(a) The development of a new health care facility costing in excess of 
the applicable expenditure minimum;  
 
(b) The acquisition, including acquisition by lease, of any health care 
facility, or major medical equipment costing in excess of the 
expenditure minimum;  
 
(c) Any capital expenditure by or on behalf of a health care facility in 
excess of the expenditure minimum;  
 
(d) Predevelopment activities as defined in subdivision (12) hereof 
costing in excess of one hundred fifty thousand dollars;  
 
(e) Any change in licensed bed capacity of a health care facility which 
increases the total number of beds by more than ten or more than ten 
percent of total bed capacity, whichever is less, over a two-year 
period;  
 
(f) Health services, excluding home health services, which are offered 
in a health care facility and which were not offered on a regular basis 
in such health care facility within the twelve-month period prior to the 
time such services would be offered;  
 
(g) A reallocation by an existing health care facility of licensed beds 
among major types of service or reallocation of licensed beds from 
one physical facility or site to another by more than ten beds or more 
 
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than ten percent of total licensed bed capacity, whichever is less, over 
a two-year period.  
 
Each paragraph of section 197.305(9) uses the phrase “health care facility,” which 
is defined in section 197.366 as:  
(1) Facilities licensed under chapter 198, RSMo;  
 
(2) Long-term care beds in a hospital as described in subdivision (3) 
of subsection 1 of section 198.012, RSMo;  
 
(3) Long-term care hospitals or beds in a long-term care hospital 
meeting the requirements described in 42 CFR, section 412.23(e); and  
 
(4) Construction of a new hospital as defined in chapter 197.  
  
Section 197.366 (emphasis added). 
 
St. John’s argues that new hospitals are subject to each of the seven paragraphs of 
section 197.305(9) because each of the seven paragraphs applies apply to “health care 
facilities” and, under section 197.366(4), every “new hospital” is a “health care facility.”  
The net result of this interpretation is that a new hospital triggers the certificate of need 
requirement even if the new hospital does not meet the “applicable expenditure 
minimum” referred to in section 197.305(9)(a). Therefore, St. John’s concludes that the 
New Hospital Rule conflicts with the statute because the rule allows the MHFRC to 
exempt certain new hospitals even though the CON Law does not provide a cost 
exemption and, instead, requires all new hospitals obtain a certificate of need.  
 
Section 197.366(4) defines “health care facility” to include the construction of 
new hospitals.  This supports St. John’s argument that all new hospitals are required to 
obtain a certificate of need.  However, statutes are not read in isolation.  If possible, a 
 
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statute will not be interpreted so as to directly conflict with another applicable statute or 
otherwise lead to an absurd result.  United Pharmacal Co. of Missouri, Inc. v. Missouri 
Bd. of Pharmacy, 208 S.W.3d 907, 912 (Mo. banc 2006).   
   
St. John’s interpretation creates a conflict with the plain language of paragraphs 
(e), (f) and (g) of section 197.305(9).  These paragraphs trigger the certificate of need 
requirement under circumstances that cannot apply to a new hospital. Section 
197.305(9)(e) requires a health care facility to obtain a certificate of need when it 
“changes” its number of beds.  Section 197.305(9)(f) requires a health care facility to 
obtain a certificate of need when it adds services not provided the “previous” year.  
Section 197.305(9)(g) requires a certificate of need on the reallocation of beds by an 
“existing” health care facility to a new location.  New hospitals cannot “change” their 
number of beds, add new services relative to those provided the “previous” year or 
reallocate beds from an “existing” facility.”   Therefore, contrary to St. John’s 
interpretation, new hospitals are not necessarily subject to each of the seven paragraphs 
of section 197.305(9).  The New Hospital Rule is not invalidated by the plain language of 
sections 197.305(9) and 197.366. 
This conclusion is confirmed by the legislative history of sections 197.305 and 
197.366.   In 1996, the legislature amended section 197.366 by adding new hospitals to 
the types of facilities that qualified as “health care facilities.”  At that time, what is now 
section 197.305(9)(a) defined new institutional health services as “[t]he development of a 
new health care facility.”  Section 197.305(11)(a), RSMo 1994.  In 1997, the legislature 
amended section 197.305(9)(a) to change the definition of a “new institutional health 
 
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service” to “[t]he development of a new health care facility costing in excess of the 
applicable expenditure minimum.” Section 197.305(9)(a) (emphasis added).   
Adopting St. John’s position would require this Court to conclude that the 1997 
amendment to section 197.305(9)(a) was unnecessary.   There is a presumption that a 
statute is not meaningless.  E&B Granite, Inc., v. Dir. Of Revenue, 331 S.W.3d 314, 317 
(Mo. banc 2011).  To give the 1997 amendment effect, the legislature must have intended 
for new hospitals to qualify as new institutional health services only under section 
197.305(a) and for paragraphs (b) through (g) to apply only to existing health care 
facilities.  Therefore, the New Hospital Rule implements the legislative intent of section 
197.305(9) without conflicting with the CON Law.  The New Hospital Rule is consistent 
with the CON Law and the MHFRC was within its authority to promulgate the rule.  
CONCLUSION 
The judgment is affirmed as modified to deny relief to St. Johns. 
 
 
 
 
 
 
 
 
______________________________________  
 
 
 
 
 
 
Richard B. Teitelman, Chief Justice  
 
 
Russell, Breckenridge, Fischer, Stith 
and Price, JJ., and Manners, Sp.J., concur. 
Draper, J., not participating.