Opinion
NO. 2014-CA-001722-MR
03-31-2017
SAINT ELIZABETH MEDICAL CENTER, INC. D/B/A ST. ELIZABETH EDGEWOOD, ST. ELIZABETH IMAGING CENTER- EDGEWOOD, AND ST. ELIZABETH COVINGTON APPELLANTS v. COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES, OFFICE OF HEALTH POLICY; SECRETARY AUDREY TAYSE HAYNES, CABINET FOR HEALTH AND FAMILY SERVICES, IN HER OFFICIAL CAPACITY; AND THE CHRIST HOSPITAL CORPORATION APPELLEES
BRIEFS FOR APPELLANTS: Matthew R. Klein Ellen M. Houston Crestview Hills, Kentucky BRIEF FOR APPELLEES: Lisa English Hinkle Molly Nicol Lewis Lexington, Kentucky
NOT TO BE PUBLISHED APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE PHILLIP J. SHEPHERD, JUDGE
ACTION NO. 13-CI-01418 OPINION
AFFIRMING
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BEFORE: ACREE, JONES AND NICKELL, JUDGES. ACREE, JUDGE: Saint Elizabeth Medical Center appeals the opinion and order of the Franklin Circuit Court affirming the Cabinet for Health and Family Services' approval of The Christ Hospital's certificate-of-need application to establish a fixed-site magnetic resonance imaging (MRI) service in Kenton County, Kentucky. For the following reasons, we affirm.
I. Factual and Procedural Background
In May 2013, The Christ Hospital (TCH) Imaging Center Northern Kentucky applied for a Certificate of Need (CON) to establish a freestanding magnetic resonance imaging (MRI) service at its outpatient facility located in Fort Wright, Kenton County, Kentucky. The stated purpose of the application was to make patient care more accessible, in Kentucky, for Kentucky patients who are currently traveling to Ohio for MRI services. A public hearing was held on October 3, 2013 and October 14, 2013. Saint Elizabeth Medical Center (SEMC) appeared at the public hearing as an affected party pursuant to KRS 216B.015(3) in opposition to the application.
Kentucky Revised Statutes.
At the public hearing, both TCH and SEMC presented a great deal of evidence through testimony of numerous witnesses as well as through many documents depicting various relevant data to the application. The Cabinet for Health and Family Services, Office of Health Policy (the Cabinet), ultimately found there was a need for MRI service in the proposed area and concluded that TCH's application was consistent with the State Health Plan and the statutory review criteria. TCH's application was approved in a final order issued by the Cabinet on November 12, 2013.
SEMC appealed the approval to the Franklin Circuit Court arguing that TCH did not produce substantial evidence to support the finding that its application was consistent with the State Health Plan or the criteria in KRS 216B.040. SEMC also alleged that the hearing officer erred as a matter of law by misapplying the State Health Plan.
The Franklin Circuit Court issued an opinion and order affirming the Cabinet's findings and approval of TCH's certificate-of-need application. The court noted that the record disclosed a significant number of Northern Kentucky patients that already choose TCH for medical services, projected population growth in the Northern Kentucky Area Development District (NKADD), and an increase in Medicaid patients and use of the state health insurance exchange. The court determined there was substantial evidence demonstrating consistency with the State Health Plan criteria as well as the other required standards for approval provided in KRS 216B.040(2)(a)(2), and accordingly, affirmed the Cabinet's decision. This appeal followed.
Area Development Districts (ADDs) are the geographic regions for reviewing all certificate-of-need applications. The Northern Kentucky Area Development District includes the counties of Boone, Kenton, Campbell, Carroll, Gallatin, Owen, Grant and Pendleton. KRS 147A.050(7).
More facts will be discussed as necessary.
II. Standard of Review
Our standard of review of a circuit court's affirmance of an administrative decision is to determine whether the circuit court's findings upholding the Cabinet's decision are clearly erroneous. Johnson v. Galen Health Care, Inc., 39 S.W.3d 828, 833 (Ky. App. 2001). To undertake that review "[a]s an appellate court, we step into the shoes of the circuit court and review the administrative agency's decision for arbitrariness. Baptist Convalescent Ctr., Inc. v. Boonespring Transitional Care Ctr., LLC, 405 S.W.3d 498, 502-03 (Ky. App. 2012) (citations omitted). We must review the administrative decision, not reinterpret or reconsider the merits of the claim, nor to substitute our judgment for that of the agency as to the weight of the evidence. Kentucky State Racing Comm'n v. Fuller, 481 S.W.2d 298, 309 (Ky. 1972). Review requires we determine both "[i]f the findings of fact are supported by substantial evidence of probative value" and "whether or not the administrative agency has applied the correct rule of law to the facts so found." 500 Associates, Inc. v. Nat. Resources and Envtl. Protection Cabinet, 204 S.W.3d 121, 132 (Ky. App. 2006) (citations omitted). "The test of substantiality of evidence is whether . . . it has sufficient probative value to induce conviction in the minds of reasonable [persons]." Fuller, 481 S.W.2d at 308. Further, "'the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence.'" Id. at 307. As long as there is substantial evidence in the record to support the agency's decision, the court must defer to the agency, even if there is conflicting evidence. Kentucky Comm'n on Human Rights v. Fraser, 625 S.W.2d 852, 856 (Ky. 1981).
III. Analysis
SEMC asserts several arguments for our review on appeal. First, it argues the Franklin Circuit Court failed to apply the State Health Plan as it is written, taking specific issue with the application of the Plan's Technical Note 5 and the finding under that note that THC complied with criterion one to the Plan. Second, SEMC contends the hearing officer and the Franklin Circuit Court failed to apply the plain meaning of State Health Plan review criterion five. Third, SEMC claims there is not substantial evidence supporting the determination that TCH's application is consistent with the State Health Plan. Fourth and lastly, SEMC asserts the decision to approve TCH's application is not supported by substantial evidence in the record.
The Cabinet for Health and Family Services is the administrative agency authorized to license health facilities and services in Kentucky through the issuance of certificates of need. KRS 216B.010. The Cabinet is vested with the authority to promulgate administrative regulations establishing application and review procedures for certificates of need. KRS 216B.040(2)(a). To obtain a certificate of need, an applicant must satisfy five criteria, including: (1) consistency with the State Health Plan; (2) need and accessibility; (3) interrelationships and linkages; (4) costs, economic feasibility, and resource availability; and (5) quality of services. KRS 216B.040(2)(a)2 and 900 KAR 6:050 § 7(1). At issue in this case are criterion one and criterion five.
Kentucky Administrative Regulations. --------
The first criterion requires consistency with the State Health Plan. The State Health Plan is a document prepared by the Cabinet containing statistical data relating to health care services illustrating changes in population, utilization of services, and various other factors designed for use in assessing need for a new or expanded service. Comprehensive Home Health Servs., Inc. v. Prof'l Home Health Care Agency, Inc., 434 S.W.3d 433, 435 (Ky. 2013). To demonstrate consistency with the 2013-2015 State Health Plan applicable to this case, an MRI services application must comply with six specific criteria. Criterion one states:
An applicant proposing to provide fixed-site MRI services shall demonstrate that sufficient need exists for that unit to perform a minimum of two thousand, five hundred (2,500) procedures per year by the end of the second year of operation[.]The hearing officer concluded the following:
TCH's [a]pplication is consistent with the State Health Plan because it has sufficiently demonstrated that there will be at least 2,500 procedures performed in the second year of operation due to the following factors: (1) increased demand for MRI services resulting from significant population growth in the NKADD; (2) the redirection of Northern Kentucky residents currently traveling to Ohio for MRI services to a more convenient location in Northern Kentucky; and (3) increased access to MRI services created through Medicaid expansion and
increased availability of healthcare insurance to cover diagnostic services.The Franklin Circuit Court determined the consistency finding for criterion one was entitled to deference because it was reasonable and supported by the totality of the evidence in the record.
. . . .
Use rates presented by witnesses from both TCH and SEMC project over 6,000 additional scans will be performed in the NKADD in TCH's second year of operation. The population growth in the NKADD, coupled with improved access to health care insurance through Medicaid and the Exchange, as well as TCH's existing high utilization by Northern Kentucky residents indicate TCH will capture at least 2,500 of the additional scans performed and is therefore consistent with the State Health Plan review criteria 1.
SEMC now argues that in this finding, the hearing officer and the circuit court violated Technical Note 5 to the State Health Plan. Technical Note 5 provides:
All Magnetic Resonance Imaging Units in operation with the Commonwealth shall be disclosed to the Cabinet for Health and Family Services for publication in the Kentucky Annual Magnetic Resonance Imaging Services Report. Health Services that are provided in private offices and clinics of physicians, dentists, and other practitioners of the healing arts which are exempt from certificate of need requirements pursuant to KRS 216B.020(2)(a) shall not be included in the Cabinet's Inventory of Health Facilities, Health, Services, and Major Medical Equipment. In addition, utilization of these services shall not be considered when determining consistency with this Plan but may be used by the
applicant to address review criteria required by 900 KAR 6:070 , Section 2(2) through (6).(2013-2015 State Health Plan at iv)(emphasis added). SEMC claims the hearing officer, contrary to Technical Note 5, considered utilization of private and exempt MRI services in concluding TCH's application to be consistent with the State Health Plan. SEMC's argument stems from the mention of the 6,000 additional scans projected to be provided by the proposed MRI service. SEMC states that the projection was made based upon a use rate of 8.77%, which was derived from figures including private and exempt MRI services in the NKADD along with estimated population growth. The argument is that consideration of such figures in determining consistency with the State Health Plan is expressly prohibited by Technical Note 5 to the Plan.
However, the amount of projected additional scans was not the sole basis for the determination. The hearing officer and the circuit court found the evidence demonstrated that population growth, redirection of Kentucky residents currently traveling to Ohio for MRI services, expansion of Medicaid, increased access to healthcare insurance, as well as TCH's existing high utilization by Northern Kentucky residents all indicate that it will capture at least 2,500 additional scans per year by the end of the second year, and therefore, is consistent with State Health Plan review criterion one.
Additionally, in concluding this first criterion was met, the hearing officer rejected the assertion of SEMC's expert witness, Dan Sullivan, that a lower use rate of 6.2% should be used. The reason given by the hearing officer is that the estimated rate failed to take into account the out-migration of the Northern Kentucky population. The findings revealed that, as of September 2013, approximately 1,300 Kentucky residents drove to TCH facilities in Ohio for MRI services. Sullivan also testified that in Kenton County, the MRI use rate was 89.20 per 1,000 people in 2011. A different expert witness for SEMC, William Banks, acknowledged that Humana's MRI use rate for the Northern Kentucky area for 2011 and 2012 was 8.9%, which lends further support to the 6,000 additional scan projection and relevancy to total utilization numbers.
The interpretation suggested by SEMC, to consider only the licensed and non-exempt MRI service providers, is contrary to the central concerns of the certificate-of-need statute and regulations: "to insure that the citizens of this Commonwealth will have safe, adequate, and efficient medical care; that the proliferation of unnecessary health-care facilities, health services, and major medical equipment results in costly duplication and underuse of such facilities, services, and equipment; and that such proliferation increases the cost of quality health care within the Commonwealth." KRS 216B.010. Consideration of total utilization of MRI services, licensed and exempt, by the NKADD population by the Cabinet serves the legislative intent to accurately determine current need in order to avoid costly and unnecessary duplication of health care services. The State Health Plan and its technical notes must be read consistently with governing statutes and regulations. Comprehensive Home Health, 434 S.W.3d at 442 (citing Hagan v. Farris, 807 S.W.2d 488, 490 (Ky. 1991)). To accept SEMC's interpretation would undermine the very purpose the certificate-of-need law is meant to serve. One of the principles of statutory construction provides that "it is the duty of the court to ascertain the purpose of the General Assembly, and to give effect to the legislative purpose if it can be ascertained." Abul-Ela v. Kentucky Bd. of Medical Licensure, 217 S.W.3d 246, 250 (Ky. App. 2006).
We do not believe the hearing officer's rationale for determining which expert testimony was more persuasive was arbitrary; we do not believe the ruling on this criterion lacked substantial evidentiary support; nor do we believe the decision ran contrary to the legislative intent of the statutes and regulations applied to those facts.
It is clear, based upon the technical notes, that disclosure and use of all MRI services in operation in the applicable geographic location are relevant to the certificate-of-need approval process. We construe the last sentence of Technical Note 5 to apply to the adverse impact analysis outlined in State Health Plan review criterion five, in which utilization of only licensed and non-exempt MRI services are to be considered. Specifically, criterion five provides in relevant part:
The applicant demonstrates that its ability to provide at least two thousand, five hundred (2,500) procedures per year from a fixed-site MRI . . . does not result in unnecessary duplication of services. Specifically, the applicant must demonstrate that the procedures it proposes to perform would be in addition to the lesser of:
a. The procedures performed by each existing licensed provider in the proposed county as reported in the most recent edition of the Kentucky Annual Magnetic Resonance Imaging Services Report;
b. Two thousand, five hundred (2,500) procedures per year by each existing certificate of need approved or licensed fixed-site MRI provider in the proposed county[.]
SEMC contends that the Franklin Circuit Court failed to apply the plain meaning of State Health Plan review criterion five in deferring to the hearing officer's erroneous conclusion that TCH's proposed MRI service will not adversely impact existing licensed providers. Specifically, SEMC claims the hearing officer erred by simply allocating 2,500 to each existing provider based upon the number of projected scans. SEMC argues that because its facility in Covington, Kentucky, currently operates below 2,500 scans annually, approving another MRI provider in the midst of declining utilization of such services will adversely impact the Covington facility causing it to fall even further below the 2,500 mark. The Cabinet's order stated:
The Application is also consistent with the State Health Plan review criterion 5, which evaluates the adverse impact a new provider may have on existing MRI facilities in the county. A majority of the scans that will
be provided will be from population growth and a redirection of patients currently migrating to Ohio to receive outpatient MRI services. The projections of Mr. Wabler, Dr. Miller, and Mr. Banks indicate that the TCH facility will not adversely impact the existing facilities in Kenton County, as all will perform more than 2,500 scans in 2015, and in fact, experience an increase in utilization.
The hearing officer found the testimony of Mr. Wabler, the Executive Director of Strategic Development for TCH, persuasive. Mr. Wabler testified that based upon his accepted health planning methods there will be a need for at least 5,000 additional scans at Kenton County providers over and above those already provided at every existing licensed provider presumptively performing at least 2,500 scans. Mr. Wabler explained that many of the 5,000 additional scans will be performed by licensed providers, and therefore, he projected an increase in volume for all the licensed providers in the proposed county, including SEMC.
Dr. Miller was qualified as an expert in health planning, healthcare economics, and health analytics practice. Dr. Miller testified that in the five-year period measured by TCH, 2007 through 2011, there was a reduction in scans at exempt facilities only, and no reduction in scans at licensed facilities. Dr. Miller testified that many factors go into MRI utilization, and he testified to TCH's growth rates, general population growth, Medicaid's expansion in Kenton County, and additional insurance coverage. Dr. Miller concluded that TCH's method of projecting MRI utilization was reasonable and appropriate.
The hearing officer also found that testimony from SEMC disclosed that its imaging centers in Edgewood and Covington, both in Kenton County, currently exceed capacity. Furthermore, SEMC is able to assign patients to each of its imaging centers, and thus can control the number of scans performed at each, as long as patients are willing to cooperate.
Based upon the hearing officer's findings, we find no error in the conclusion that State Health Plan review criterion five was satisfied, and accordingly, the circuit court's deference to that decision was appropriate. We disagree with SEMC that the hearing officer simply allocated 2,500 to each provider. SEMC asserts that because its facility in Covington does not perform 2,500 scans per year, TCH cannot meet criterion five. We also disagree with that assertion. Criterion five requires the applicant to show that the existing licensed providers will not fall below their current service levels or below 2,500 scans annually. The function of criterion five is to evaluate whether there is enough demand for services for all existing licensed providers as well as the applicant. TCH demonstrated, through the testimony of several experts, based upon several factors, that adding a new MRI provider will not have an adverse impact on existing licensed providers. The hearing officer's analysis of criterion five is supported by the evidence of record and is consistent with the State Health Plan as well as the objectives of the certificate-of-need statutory and regulatory scheme.
SEMC further claims that the totality of the evidence presented does not support TCH's compliance with the State Health Plan. SEMC claims it presented overwhelming, undisputed evidence that MRI utilization was declining within the counties TCH proposed to serve. SEMC attributes the decline to: (1) an increasing number of high deductible health insurance plans that shift the cost of an MRI to the patient; (2) movement toward integrated health delivery systems that limit unnecessary use of healthcare services; and (3) a decrease in reimbursement rates for MRI services. SEMC claims the population growth will have a minimal effect on declining utilization, and further claims TCH presented no evidence of the impact of Medicaid changes or actual data to support what amounts to no more than its hope of a redirection of patients from its Ohio facilities. For these reasons, SEMC claims the hearing officer's approval of the TCH's certificate of need was arbitrary and unreasonable and should have been reversed by the circuit court.
SEMC contends, of course, that the circuit court likewise erroneously concluded that substantial evidence supported the need for another MRI service provider in the NKADD. Nevertheless, we have examined the record closely and considered the decisions of the hearing officer and circuit court. We have not been convinced a different result is compelled.
So long as an agency's decision is supported by substantial evidence of probative value, it is not arbitrary and must be accepted as binding by the appellate court. Starks v. Kentucky Health Facilities, 684 S.W.2d 5, 6 (Ky. App. 1984). Substantial evidence is that of substance and relevant consequence. Id. at 7 (citation omitted). "[I]f the record compels a contrary decision in light of substantial evidence therein[,]" the decision is arbitrary and cannot withstand judicial review. Bourbon County Bd. of Adjustments v. Currans, 873 S.W.3d 836, 838 (Ky. App. 1994). That is not the case before us.
TCH's application may be approved, notwithstanding countervailing evidence in the record. Sec'y, Labor Cabinet v. Boston Gear, Inc., a Div. of IMO Industries, Inc., 25 S.W.3d 130, 134 (Ky. 2000) ("[I]f there is substantial evidence in the record to support an agency's findings, the findings will be upheld, even though there may be conflicting evidence in the record."). The hearing officer was persuaded by TCH's evidence, particularly the expert testimony of Mr. Wabler and Dr. Miller. The hearing officer detailed numerous findings describing each of the parties' evidence, including justifications supporting its approval of the application as well as weak points in SEMC's evidence. It is undoubtedly within the province of the trier of fact to weigh the evidence and assess the credibility of the witnesses presented. Bowling v. Natural Res. And Env't Prot. Cabinet, 891 S.W.2d 406, 409-10 (Ky. App. 1994). While there is certainly evidence conflicting with that presented by TCH, SEMC has not identified any evidence so compelling or overwhelming to demonstrate arbitrariness by the hearing officer and Franklin Circuit Court. Accordingly, the opinion and order sustaining the final order of the Cabinet in its decision to approve TCH's application for a certificate of need is affirmed.
ALL CONCUR. BRIEFS FOR APPELLANTS: Matthew R. Klein
Ellen M. Houston
Crestview Hills, Kentucky BRIEF FOR APPELLEES: Lisa English Hinkle
Molly Nicol Lewis
Lexington, Kentucky