Opinion ID: 203942
Heading Depth: 2
Heading Rank: 2

Heading: Ad Hoc Analysis

Text: Because the challenged government action does not fall under either category of regulatory taking invoking a per se rule, we apply an ad hoc analysis. Our analysis is guided by the three Penn Central factors: (1) [t]he economic impact of the regulation on the claimant; (2) the extent to which the regulation has interfered with distinct investment-backed expectations; and (3) the character of the government action. [5] 438 U.S. at 124, 98 S.Ct. 2646. [T]he Penn Central inquiry turns in large part, albeit not exclusively, upon the magnitude of a regulation's economic impact and the degree to which it interferes with legitimate property interests. Lingle, 544 U.S. at 540, 125 S.Ct. 2074. Ultimately, this inquiry aims to identify regulatory actions that are functionally equivalent to the classic taking in which the government directly appropriates private property or ousts the owner from his domain. Id. at 539, 125 S.Ct. 2074.
In response to those three factors, FMH argues that the economic impact of the regulations is severe because [t]he amount of goods and services being confiscated by the State under the Free Care Laws [is] significant and potentially unlimited. And the cost of providing medical care is undisputably high. According to FMH, each inpatient on average requires approximately $1,200 in medical goods, such as medical and surgical supplies, pharmacy drugs, anesthesia gases, and intravenous therapy supplies, about $1,700 in room and board services, and ... about $1,800 for doctors, nurses, and other staff to provide care to the client. Moreover, the financial burden on FMH under Maine's free care laws has increased nearly five fold since 2006 under the new regulations. Yet the potentially harsh economic consequences to hospitals of Maine's free care laws are ameliorated somewhat by the statutory defense to enforcement of the free care requirements against hospitals whose economic viability ... would be jeopardized by compliance. Me.Rev.Stat. Ann. tit. 22, § 1715(2)(D). And there is no allegation that FMH is presently facing any threat to its economic viability on account of the free care laws. [6] We do not suggest that there can never be a taking based upon an adverse economic effect short of jeopardizing the economic viability of a plaintiff; we only note that this case is not at that end of the spectrum. We do agree with one of FMH's arguments regarding how to assess the economic impact of the regulation. The magistrate judge's recommended decision speculated that [i]t is not difficult to imagine, for example, that Franklin Memorial's revenue from other public programs, or better yet, the profits from such programs, exceeds the financial burden imposed by Maine's Free Care Laws. This factor is not relevant to the question of whether Maine's free care laws constitute a taking and plays no part in our analysis.
As for FMH's investment-backed expectations, we first reject an argument made by the defendant. Harvey argues the hospital's non-profit status eliminates any influence this factor has in FMH's favor. [7] We disagree very much with Harvey's proposed categorical approach. While there may be differences in degree between expectations for for-profit institutions and non-profit institutions, there is no categorical exclusion of non-profit institutions from this prong of the analysis. Like a for-profit institution, FMH acquires property with the expectation that it may use it for a particular purpose. Indeed, Maine law expressly recognizes the right of non-profit corporations to acquire, own, use, improve, and convey property like any other property owner. [8] See Me.Rev.Stat. Ann. tit. 13-B, § 202(1)(I). To the extent that Maine's free care laws may force FMH to use its property in ways that it would not otherwise, they may interfere with FMH's investment-backed expectations. It is true that FMH's investment-backed expectations are tempered by the fact that it operates in the highly regulated hospital industry. [9] See United Wire, Metal & Mach. Health & Welfare Fund v. Morristown Mem'l Hosp., 995 F.2d 1179, 1191 (3d Cir.1993) (rejecting a takings challenge to New Jersey's system of setting hospital billing rates, in part, because the plaintiffs' investment-backed expectations were reduced by the historically heavy and constant regulation of health care in the state). And the Supreme Court has recognized that heavy government regulation may diminish a property owner's expectations. See Lucas, 505 U.S. at 1027-28, 112 S.Ct. 2886 (It seems to us that the property owner necessarily expects the uses of his property to be restricted, from time to time, by various measures newly enacted by the State in legitimate exercise of its police powers.... And in the case of personal property, by reason of the State's traditionally high degree of control over commercial dealings, he ought to be aware of the possibility that new regulations might even render his property economically worthless....).
The third Penn Central factorthe character of the government action strongly favors finding no taking here. Under Penn Central, [a] `taking' may more readily be found when the interference with property can be characterized as a physical invasion by government than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good. 438 U.S. at 124, 98 S.Ct. 2646 (citation omitted). Thus, in Hodel v. Irving, 481 U.S. 704, 716, 107 S.Ct. 2076, 95 L.Ed.2d 668 (1987), the Supreme Court found a taking where the character of the government regulation was extraordinary in that it completely extinguished the property owner's right to pass on the property to his heirs. By contrast, the free care laws adjust the benefits and burdens of economic life but leave the core rights of property ownership intact. Maine's free care laws merely require that hospitals not refuse to treat patients based on their ability to pay and that they provide those services freely to those with incomes at or below 150% of the federal poverty level. FMH may otherwise set the terms on which it provides access to its facilities and services. Thus, on these facts, we hold that Maine's free care laws do not effect a taking.