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Dubuque Retirement v. Iowa Department of Inspections and Appeals

February 13, 2013


Appeal from the Iowa District Court for Polk County, Arthur E. Gamble, Judge.

The opinion of the court was delivered by: Mullins, J.

Dubuque Retirement Community appeals the district court's decision to uphold the agency's findings of regulatory insufficiencies related to its assisted living program. AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

Heard by Doyle, P.J., and Mullins and Bower, JJ.

Dubuque Retirement Community (DRC), an assisted living program, appeals the district court's decision to uphold the imposition of regulatory insufficiencies. DRC contends (1) the agency failed to present substantial evidence to support regulatory insufficiencies; (2) the agency's conclusions of law and application of law to the facts were irrational, illogical, or wholly unjustifiable; (3) all of the agency's findings of regulatory insufficiencies were unreasonable, arbitrary, capricious, or an abuse of discretion; and (4) the Iowa Administrative Code rule requiring sufficiently trained staff and the Iowa Code section governing procedures involving a significant change in a tenant's health status were unconstitutionally vague. For the reasons set forth below, we affirm in part, reverse in part, and remand.

I. Background Facts & Proceedings

The Department of Inspections and Appeals (DIA) is the state regulatory agency charged with licensing nursing facilities in Iowa and with enforcing regulatory standards imposed upon those licensed facilities. At all times material to this case, DRC was a licensed assisted living program operating in Dubuque under DIA's jurisdiction. DIA received and investigated several complaints about DRC's assisted living program.

On March 12, 2009, DIA issued DRC a conditional certificate to allow DRC to operate as an assisted living program pursuant to Iowa Code section 231C.10(2) (2007). The conditional certificate contained restrictions on DRC's assisted living program. Under the terms of the conditional certificate, DRC was required to have no new tenant admissions, have a delegating RN readily available to staff and tenants at all times, submit thirty-day nursing and medication reviews to DIA, and submit staff and management training documentation to DIA.

Between April 2009 and September 2009, DIA made numerous monitoring visits and complaint revisits to DRC. During eight of those visits, DIA found regulatory insufficiencies and assessed fines. DIA issued regulatory insufficiencies on each of the following dates in 2009: April 20, May 19--20, July 15--17, July 30, August 11, August 19, August 26, and September 2.

In June 2009, DRC notified DIA of its intent to discontinue its participation in DIA's assisted living certification program. DIA refused DRC's request to unilaterally withdraw from state regulation. The parties agreed DRC would no longer operate as an assisted living program effective October 1, 2009.

DIA issued three final monitoring or complaint evaluation reports. The reports confirmed the regulatory insufficiencies in each of the eight visits from April through September 2009. Based on those regulatory insufficiencies, DIA issued fines totaling $65,500. DRC appealed all adverse findings in the each of the agency's decisions.

An administrative law judge (ALJ) consolidated proceedings on the eight separate appeals. The ALJ upheld the regulatory insufficiencies and fines. DRC timely appealed the ALJ's decision to the director of DIA. The director affirmed the ALJ's decision to uphold the regulatory insufficiencies and fines.

DRC then filed a petition for judicial review with the district court in Polk County. The district court held a hearing on the petition, and issued a ruling affirming in part, reversing in part, and remanding the matter to DIA. The district court ruled that substantial evidence supported DIA's findings of fact; DIA's conclusion of law about the regulatory insufficiencies were not irrational, illogical, or wholly unjustifiable; and DIA's regulatory requirements did not violate due process. However, the court found DIA's civil penalties were an abuse of discretion and unconstitutional. As a result, the court reversed the penalty assessments and remanded to DIA for reconsideration of appropriate penalties based on identified regulatory insufficiencies.

DRC appeals all adverse findings from the district court. Additional relevant facts and circumstances will be developed as necessary below.

II. Standards of Review

Iowa Code section 17A.19(10) (2011) governs our review of agency decision-making. Renda v. Iowa Civil Rights Comm'n, 784 N.W.2d 8, 10 (Iowa 2010). When the district court exercises its judicial review power, it acts in an appellate capacity. Mycogen Seeds v. Sands, 686 N.W.2d 457, 463 (Iowa 2004).Our review applies "the standards of chapter 17A to determine whether the conclusions we reach are the same as those of the district court." Id. "If they are the same, we affirm; otherwise, we reverse." Id. at 464.

This case involves the agency's interpretation of "consultative process" under Iowa Code section 231C.1(3), "significant change" under section 231C.2(11), and "substantial compliance" under section 231C.2(12). Our review of the agency's statutory interpretation depends on whether such interpretation has "clearly been vested by a provision of law in the discretion of the agency." Iowa Code § 17A.19(10)(c). If the legislature has not clearly vested the agency with such discretion, we must reverse the board's decision if it is based on "an erroneous interpretation" of the law. Id. However, if such discretion has been clearly vested in the agency, we will only reverse if the board's interpretation of the statutory language is "irrational, illogical, or wholly unjustifiable." Id. § 17A.19(10)(l); see also Arthur E. Bonfield, Amendments to Iowa Administrative Procedure Act, Report on Selected Provisions to Iowa State Bar Association and Iowa State Government 62 (1998) [hereinafter Bonfield].

We will reverse, modify, or grant other appropriate relief if the agency action was "[b]ased upon a determination of fact clearly vested by a provision of law in the discretion of the agency that is not supported by substantial evidence in the record before the court when that record is viewed as a whole." Iowa Code § 17A.19(10)(f). Our review of the district court's substantial evidence finding is for correction of errors at law. Henry v. Iowa Dep't of Transp., 426 N.W.2d 383, 385 (Iowa 1988). "Substantial evidence" is defined as "the quantity and quality of evidence that would be deemed sufficient by a neutral, detached, and reasonable person, to establish the fact at issue when the consequences resulting from the establishment of that fact are understood to be serious and of great importance." Iowa Code § 17A.19(10)(f)(1). At issue is whether substantial evidence supports findings actually made, not whether the evidence supports a contrary finding. Reed v. Iowa Dep't of Transp., 478 N.W.2d 844, 846 (Iowa 1991).

We review constitutional issues in an appeal of an agency action de novo. Insituform Techs., Inc. v. Emp't Appeal Bd., 728 N.W.2d 781, 788 (Iowa 2007). We need not give deference to the agency's determination of whether a statute or administrative rule is constitutional, "because it is exclusively up to the judiciary to determine the constitutionality of legislation and rules enacted by other branches of government." ABC Disposal Sys., Inc. v. Dep't of Natural Res., 681 N.W.2d 596, 606 (Iowa 2004).

III. Substantial Evidence of Regulatory Insufficiencies

DRC contends DIA failed to present substantial evidence of alleged regulatory insufficiencies. More specifically, DRC argues DIA did not present substantial evidence of the following: (1) significant changes warranting evaluation of tenants, updated service plans, or nurse reviews; (2) failure to provide appropriate documentation; (3) failure to substantially comply with medication administration requirements; (4) violation of certain staffing requirements; (5) failure to encourage tenants to self-direct care; (6) violation of the conditional certificate's prohibition of new tenant admission; and (7) repeated falls resulting in regulatory insufficiencies.

A. Significant Changes

DRC asserts DIA issued regulatory insufficiencies for failure to complete a tenant evaluation, service plan, and nurse review each time DRC failed to respond to a significant change in a tenant condition. Section 231C.2(11) defines a significant changes as a major decline or improvement in the tenant's status which does not normally resolve itself without further interventions by staff or by implementing standard disease-related clinical interventions that have an impact on the tenant's mental, physical or functional health status.

Iowa Administrative Code rule 321-25.23(2) (2008) provides that "[a] program shall evaluate each tenant's functional, cognitive and health status within 30 days of occupancy and as needed . . . to determine any modification to services needed."*fn1 Assisted living programs must also develop a service plan "for each tenant based on the evaluations conducted in accordance with 25.23(1) and

25.23(2), and shall be designed to meet the specific needs of the individual tenant." Iowa Admin. Code r. 321-25.28. An assisted living program must also provide a registered nurse to "[a]ssess and document the health status of each tenant, make recommendations and referrals as appropriate, and monitor progress on previous recommendations at least every 90 days or if there are changes in health status." Id. r. 321-25.30. DIA may issue a regulatory insufficiency for a violation of a statutory or rule provision within the Iowa Code or Iowa Administrative Code governing assisted living programs. Iowa Code § 231C.14.

DRC identifies three separate occasions in which DIA issued regulatory insufficiencies for failure to complete tenant evaluations, service plans, and nurse review after three tenants had been admitted to the hospital. DRC argues DIA failed to present substantial evidence of a significant change in the tenant's ...

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