Opinion ID: 1594490
Heading Depth: 1
Heading Rank: 3

Heading: Whether the Department's decision was arbitrary and capricious.

Text: Heritage contends that Department's actions were Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion, under SDCL 1-26-36, because its decision was based solely upon the formulas for determining need and not upon any of the evidence submitted by Heritage, or the other evidence in the record. SDCL 34-7A-38 provides, the department of health shall consider at least the following items when reviewing an application for a CON. Generally, these factors include need, conformance with health plans, cost, availability of alternative services, impact on affected persons and services, possible economies and improvement of service (if joint), financing, financial resources, the time required to implement the plan, effect on other area health services, availability of personnel, management capabilities, and special circumstances, if any. These factors are similar to those in ARSD 44:01:10. It is evident that the Department must consider all these factors. Heritage relies on Oak Park Manor v. State Certificate of Need Review Bd., 27 Ohio App.3d 216, 500 N.E.2d 895 (1985). The court in Oak Park found that the administrative review board placed too much emphasis on the formula for calculating need. The court noted that under Ohio law, the formula is to be used as a guideline and not as a determinative factor in the CON process. The Oak Park court stated that: Although the consultant found in favor of appellant on many factors, albeit vaguely at times, the report clearly suggests that the formula, indicating a surplus of beds, was the primary and overriding factor. Thus, the consultant balanced each and every other factor against the sole criterion of an excess in beds, rather than balancing all the factors. Id. 500 N.E.2d at 898. ARSD 44:01:10:01 provides that Failure to comply with one or more [of the considerations in ARSD 44:01:10] is grounds for rejection of the application for a CON. One of these considerations is bed need. Thus, unlike the situation in Oak Park, under South Dakota CON law, bed need may be a determinative factor and it may be proper for the Department to balance it against the other factors. This would not eliminate the obligation of the Department to consider all the factors. Heritage claims the Department acted arbitrarily by solely relying on the bed need formulas and failing to consider other evidence of bed need. The administrative rules require the Department's use of the bed need formulas to determine actual need. However, the Department must consider other evidence of bed need. Finding of Fact IV of the Department decision sets out the occupancy and vacancy rates of area nursing homes over a three year period. Further, Finding of Fact V states that bed need formulas indicate a need for additional beds in Yankton County, but that the service area indicates a surplus of beds, indicating that area facilities ... have been meeting the needs of Yankton County residents. These findings indicate that the Department did consider the evidence of high demand and shortage of beds in Yankton County in addition to the bed need formulas. The arbitrary and capricious standard of review: [C]onveys the sense that the decision is totally intolerable; it rejects only those decisions which are outside any conceivable rational alternative.... Arbitrariness allows a decision to pass despite a much lower probability that the administrative judgment is correct than either reasonableness or agreement review.... [6] Evidence that the agency might have ignored facts, or had not made a good faith effort to gather or consider significant information, may lead to a finding of arbitrariness. C. Koch, Administrative Law and Practice § 9.6 at 100-01 (1985). We cannot say the Department acted arbitrarily and capriciously in its decision.