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Endoscopy Associates, Inc. v. Rhode Island Department of Health

Supreme Court of Rhode Island

May 9, 2018

Endoscopy Associates, Inc.
v.
Rhode Island Department of Health

          Providence County Superior Court No. (PC 14-891), Associate Justice Susan E. McGuirl

          For Petitioner: Jeffrey S. Brenner, Esq. Stephen D. Zubiago, Esq. Christopher J. Browning, Esq.

          For Rhode Island Department of Health: Patricia K. Rocha, Esq. Jamie J. Bachant, Esq.

          Present: Suttell, C.J., Goldberg, Flaherty, and Indeglia, JJ.

          OPINION

          GOLDBERG, JUSTICE

         The petitioner, Endoscopy Associates, Inc. (Endoscopy), appeals from a judgment of the Superior Court that reversed a decision by the Rhode Island Department of Health (the DOH) to grant an application for a Health Care Certificate of Need (CON). This Court granted a petition for a writ of certiorari on February 23, 2016. The parties appeared before the Supreme Court on February 7, 2018, pursuant to an order directing the parties to show cause why the issues raised on appeal should not be summarily decided. After hearing the arguments of counsel and examining the memoranda submitted by the parties, we are of the opinion that cause has not been shown and that this case should be decided without further briefing or argument. For the reasons discussed herein, we quash the judgment of the Superior Court.

         Facts and Travel

         Endoscopy is a Rhode Island physician-owned professional corporation that provides gastroenterology services to its patients. Five years ago, on January 10, 2013, Endoscopy applied for a CON with the DOH pursuant to the Health Care Certificate of Need Act of Rhode Island, G.L. 1956 chapter 15 of title 23 (the Act), seeking to change its license from a physician ambulatory surgery center (PASC) to a freestanding ambulatory surgery center (FASC). As a PASC licensee, Endoscopy is limited to a physician-owned and -operated facility, and by converting to a FASC license, Endoscopy would be able to expand its corporate ownership to nonphysicians and have nonowner physicians practicing in the facility. However, under the Act, a CON will not be approved without an

"adequate demonstration of need by the applicant at the time and place and under the circumstances proposed, nor shall the approval be made without a determination that a proposal for which need has been demonstrated is also affordable by the people of the state." Section 23-15-4(b).

         In its CON application, Endoscopy:

"[P]ropose[d] to transition to and obtain a license to operate as a freestanding ambulatory surgery center in order to increase its options with respect to its ownership structure. The Applicant currently does not have any plans to change its ownership structure, however, as a physician ambulatory surgery center the Applicant can only be owned by physicians and allow owners to utilize the facility. Upon approval of this CON application, the Applicant would have the option, if ultimately desired, to (i) allow a non-physician to purchase an ownership interest in the Applicant; and (ii) allow non-owner physicians to utilize the facility."

         Endoscopy also included a report by Harvey Zimmerman (the Zimmerman Report) that had been commissioned by the DOH entitled "Assessment of Need for Ambulatory Surgery Capacity in Rhode Island: 2009[.]" The Zimmerman Report indicated that, in 2013, sixty-one endoscopy rooms would be needed, but only fifty-seven would be available. In reliance on the Zimmerman Report, Endoscopy contended that there will be a future need to expand, and that operating under a FASC would allow them to meet the need at that time. Additionally, Endoscopy relied on a Rhode Island Comprehensive Cancer Control Plan from 2007, which recommended an increase in the rate of endoscopic screenings for colorectal cancer. Endoscopy's application also indicated that it was operating at near capacity and had an expected utilization rate of 92 percent through 2015, and therefore there was an "obvious need" to change its licensure to a FASC. However, Endoscopy also acknowledged that it had no current plan to change its corporate ownership structure, and that, at the time of its application, its facility was satisfying existing patient needs and services.

         Endoscopy's CON application was first reviewed by Project Review Committee-I of the Health Services Council (HSC), an advisory board for the DOH. A competing provider, Blackstone Valley Surgicare Acquisition, L.P. (Blackstone Valley), which operates as a FASC in Johnston, Rhode Island, intervened and filed a letter in opposition to Endoscopy's application. Blackstone Valley argued that Endoscopy could not meet its burden of proving need and affordability, and that the CON statute and regulations were not designed as a corporate restructuring tool. Following multiple proceedings before the Project Review Committee-I, the committee voted to recommend that the CON be approved. Subsequently, on July 30, 2013, Endoscopy's CON came under full review by the HSC. Again, Blackstone Valley objected and argued that Endoscopy failed to meet its burden of proving public need for the FASC. The HSC reviewed Endoscopy's CON application and similarly recommended that the CON be granted. The HSC reasoned that the application identified an adequate need and also satisfied the requirement that the proposal be affordable.

         On August 5, 2013, the recommendations from the Project Review Committee-I and the HSC came before the director of the DOH. Blackstone Valley submitted another letter in opposition. The director ultimately accepted the positive recommendations and found:

"The state agency has applied the relevant criteria in the appropriate statute and rules and regulations, and has accorded to them the appropriate weight, and has considered the record and criteria with due deference and balance to those matters which the state agency has deemed to have priority importance."

         The director then granted the CON, subject to seventeen conditions.[1] Blackstone Valley requested administrative review pursuant to the Act.[2] Blackstone Valley argued that the evidence in the record did not support the DOH's decision that the CON identified a public need for another FASC.

         An administrative hearing officer from the Department of Administration (the DOA) conducted this administrative review and issued a decision that reversed the approval granted by the DOH. The hearing officer concluded that the CON was in violation of statutory and regulatory requirements and did not demonstrate a public need. The hearing officer declared that "[a] CON decision needs to weigh those considerations [enumerated in § 23-15-4(e)] in order to find whether there is a substantial and/or obvious community need. Such findings were not made by the [d]ecision." The hearing officer declared that whether Endoscopy had the flexibility to change its corporate structure in the future was not a public need. On February 27, 2014, Endoscopy filed for judicial review in the Superior Court, pursuant to G.L. 1956 § 42-35-15.[3]

         In the Superior Court, the trial justice, in accordance with § 42-35-15, determined that § 42-35-15(g) "makes explicit that the Superior Court reviews 'the decision of the agency[, ]'" and therefore declared that her review would be limited to the decision of the DOH, rather than the decision of the DOA hearing officer. The trial justice concluded that she sat in a similar position as the DOA hearing officer and was to examine the record "to determine whether some or any legally competent evidence exists to support the DOH's decision." (Internal quotation marks omitted.) In doing so, the trial justice opined that it was "apparent * * * that the CON application process is not tailored for an application of this type * * *"; she then remanded the application to the DOH for further proceedings to establish whether the CON application procedure could encompass Endoscopy's application and to "ascertain the proper channel for such a corporate restructuring." However, after a review of the entire record, the trial justice also reversed the DOH's decision, reasoning that Endoscopy's application did not demonstrate a public need.

         This Court granted Endoscopy's petition for a writ of certiorari on February 23, 2016. We note, however, that although the writ was directed to the DOH, the state agency did not participate in these proceedings; Blackstone Valley was the only respondent. At the outset, in accordance with the trial justice's direction, we remanded the papers to the DOH in order to ascertain whether Endoscopy's application was an appropriate avenue for relief under the CON process. In August 2016, the DOH submitted a response entitled "Decision and Response of the Rhode Island Department of Health to Question Ordered by the Court." The DOH stated that "[w]hile the applicable application is not typical or usual or, common to the CON application process, nevertheless the application filed is suitable * * *."

         Before this Court, Endoscopy argues that the trial justice failed to give proper deference to the DOH's determination that a public need was sufficiently demonstrated to warrant issuance of the CON. Additionally, Endoscopy asserts that there was ample evidence produced to support a finding that there was a public need separate and apart from licensing restructure, and that the suggestion that the application was a proposal for corporate restructuring was erroneous. Blackstone Valley responds that the trial justice appropriately upheld the decision of the DOA hearing officer in light of ...


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