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Unitypoint Health Cedar Rapids v. Iowa Department of Public Health

Court of Appeals of Iowa

January 9, 2019

UNITYPOINT HEALTH CEDAR RAPIDS d/b/a ST. LUKE'S HOSPITAL, Plaintiff-Appellant,
v.
IOWA DEPARTMENT OF PUBLIC HEALTH, STATE HEALTH FACILITIES COUNCIL, Defendant-Appellee, and MERCY HOSPITAL CEDAR RAPIDS d/b/a MERCY MEDICAL CENTER, Intervenor/Appellee.

          Appeal from the Iowa District Court for Polk County, Eliza J. Ovrom, Judge.

         A hospital appeals from the district court's decision on judicial review affirming the State Health Facilities Council's decision to grant a certificate of need to another nearby hospital, thereby allowing that hospital to establish its own open-heart surgical program.

          Rebecca A. Brommel and Douglas E. Gross of Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, PLC, Des Moines, for appellant.

          Thomas J. Miller, Attorney General, and Tessa Register and Heather L. Adams, Assistant Attorneys General, for appellee.

          Edwin N. McIntosh and William J. Miller of Dorsey & Whitney LLP, Des Moines, for appellee intervenor.

          Heard by Potterfield, P.J., Doyle, J., and Danilson, S.J. [*]

          POTTERFIELD, PRESIDING JUDGE.

         UnityPoint Health Cedar Rapids, doing business as St. Luke's Hospital, appeals from the district court's ruling on judicial review affirming the State Health Facilities Council's decision to issue a Certificate of Need (CON) to Mercy Hospital Cedar Rapids, [1] which allows Mercy to establish its own open-heart surgical program in its Cedar Rapids hospital.

         On appeal, St. Luke's maintains the Council's decision to grant the CON should be reversed because the Council's interpretation of the minimum utilization rule-found in Iowa Administrative Code rule 641-203.2(3)(a)(1)-as a guideline rather than a mandate is either erroneous, see Iowa Code § 17A.19(10)(c) (2015), or "irrational, illogical, or wholly unjustifiable," see Iowa Code § 17A.19(10)(l). Additionally, St. Luke's challenges whether some of the findings made by the Council are supported by substantial evidence in the record, see Iowa Code § 17A.19(10)(f), including some findings that are required by Iowa Code section 135.64 before a CON can be issued.

         I. Background Proceedings.

         In July 2015, Mercy sent a letter to the Iowa Department of Public Health advising it of the hospital's intention to offer open-heart surgery at its Cedar Rapids hospital. Mercy followed that letter by filing a CON application in August. In support of its application, Mercy asserted that each year, approximately 150 of Mercy's patients have to go outside the Mercy system for their cardiac surgery. In a later response to the department's request for more information, Mercy again asserted that it estimated a volume of 150 patients for cardiac surgical services, with a 2% growth projected each year following the initial year.

         A public hearing on the application was held before the State Health Facilities Council on November 15, 2016. St. Luke's participated in the hearing as an "affected person" and spoke out against the granting of the CON. See Iowa Code § 135.61(1)(c) (including in the definition of "affected persons" "each institutional health facility . . . which is located in the geographic area which would appropriately be served by the new institutional health service proposed in the application").

         At dispute in the hearing was whether the minimum utilization rule was a guideline to be used by the Council in reaching its ultimate decision or a mandatory requirement that the Council must not grant the CON unless Mercy projected at least 200 procedures annually. The rule, Iowa Administrative Code rule 641-203.2(3)(a)(1), states: "Adult cardiovascular surgical programs should project an annual minimum rate of over 200, or no approval shall be granted. Higher case loads over 200 per annum, are encouraged."

         Before the hearing took place, legal counsel to the Council issued an email regarding the application of the rule. Counsel advised it should be considered discretionary, noting that the rule used both the terms "should" and "shall." Additionally counsel stated, "Interpreting the rule as a guideline would be in keeping with the Council's longstanding practice of applying utilization requirements in its administrative rules . . . as guidelines only and not mandatory requirements." Following counsel's email but before the CON hearing, St. Luke's petitioned the Department of Public Health for a declaratory ruling on the proper interpretation of the rule. The department denied St. Luke's request.

         Immediately following the public hearing, the Council voted 3-2 to grant Mercy's request for the CON.

         In the written ruling that followed, the Council ruled that the minimum utilization rule

should be interpreted as a guideline in light of (1) the Council's prior construction of this rule as guideline in approving a CON to an applicant which projected below 200 surgeries per year; (2) the totality of the language of the rule-which states programs should project a certain number of cases and that higher case loads are merely encouraged, not required-providing a discretionary approach to the utilization issue; and (3) the Council's longstanding prior interpretation of the utilization standards in chapter 203 as guidelines.

         The Council found "that patients needing urgent cardiac surgery are waiting an average of four to nine days due to limited access to cardiac surgery in the community. Additionally, patients needing elective open heart surgery found wait times increase from 4.9 weeks in 2014 to 5.3 weeks in 2015." The increase in wait time "increased costs related to additional hospital stays, increased anxieties for the patients and their families, and potential loss of wages due to the inability to work." The Council also recognized that patient stress "is exacerbated by having to leave the Mercy system to receive care in a new health system." In making this finding, the Council noted that when St. Luke's requested a CON in 2014 to begin offering radiation therapy services-a service patients historically had to leave St. Luke's and go to Mercy for-the Council had granted its request, in part, because:

St. Luke's cancer patients in need of radiation therapy must currently leave the facility and provider network, resulting in each patient being treated by a new set of health providers and supporting team members from a different health care system. This movement between systems can result in delays, unnecessary costs, and duplication of testing and other services.

         The Council's written decision included findings as to the necessary four factors contained in Iowa Code section 135.64(2)(a)-(d).

         St. Luke's filed a request for rehearing, which the Council denied. St. Luke's then filed a petition for judicial review. After full briefing on the issues and a reported hearing, the district court affirmed the Council's decision to issue a CON to Mercy for its open-heart surgery program.

         St. Luke's appeals.

         II. Score and ...


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