vs. ) CASE NO. 78-1390RX
Respondent. )
A hearing was held in the above captioned matter, after due notice, at Tallahassee, Florida, on September 13, 1978, before the undersigned Hearing Officer.
Administrative determination, pursuant to Section 120.56, Florida Statutes, of the validity of alleged rules of Respondent entitled "1977 Florida State Plan for Construction of Hospitals and Medical Facilities" and "Acute Care General Hospital Bed Needs, 1980."
In August, 1977, Petitioners Delray Hospital Corporation of Highland Beach, Florida, and Medfield Corporation of St. Petersburg, Florida, submitted a "Project Review Application" for a Certificate of Need, pursuant to Section 1122, Public Law 92-603, and Chapter 381, Florida Statutes, to Respondent Office of Community Medical Facilities, Department of Health and Rehabilitative Services, and to the Health Planning Council, Inc., West Palm Beach, Florida, the regional "health systems agency." The proposed project is to construct and
equip a 160-bed full service medical/surgical, acute care hospital in Palm Beach County, Florida, involving a $12,660,000.00 capital expenditure.
The application was reviewed and recommended to Respondent for disapproval by the Health Planning Council, Inc. The Council is a non-profit corporation created pursuant to federal law to perform certain federal and state statutory functions regarding health care and facilities planning in a specified geographical area of the state. By letter of November 28, 1977, Respondent advised Petitioners that the proposal was not favorably considered. One of the three reasons stated for disapproval was set forth in the letter as follows:
Lack of demonstrated need as the proposed new hospital is not consistent with either the 1977 Florida State Plan for Construction of Hospitals and Related Medical Facilities or the Health Planning Council, Inc. planning document entitled: Acute Care General Hospital Bed Needs, 1980.
Thereafter, Petitioners filed a petition for an administrative hearing on the proposed denial of the application, pursuant to the review provisions of Chapter 381, Florida Statutes. That case is currently pending between the same parties in the Division of Administrative Hearings, Case No. 78-183. On August 8, 1978, Petitioners filed the instant petition challenging the validity as rules of the 1977 Florida State Plan for Construction of Hospitals and Related Medical Facilities (hereinafter "1977 Construction Plan"), and the document entitled Acute Care General Hospital Bed Needs, 1980 (hereinafter "Acute Care Study").
The petition alleges generally that both documents are rules which were not promulgated in accordance with Section 120.54, Florida Statutes, and that they conflict with statutory requirements in certain respects. (Testimony of Chamlis, Petitioner's Exhibit 3, Petition)
The 1977 Construction Plan states in its introductory page that it is a public document promulgated "to implement a priority system in the planning and administrative processes of the Hill-Burton program in Florida which serves as a basis for the allocation of grants-in-aid to hospitals and related medical facilities." The text of the document elaborates as follows:
The State Plan describes the present system of hospitals and medical facilities in each of the
60 Florida health care service areas. The Plan presents a coordinated comprehensive program for the construction and modernization of the health care facilities in each area. The Plan also presents a priority system, which serves as a basis for the allocation of grants-in-aid to the facilities of each area.
By charts contained in the Plan, there is shown an inventory of existing medical facilities in each Health Care Service Area of the state and a projected seven- year numerical list of the needs for hospital beds in each area. A formula for determining estimated hospital bed needs in each area and to develop a priority ranking system for construction is set forth in the Plan which is based on current and projected population estimates, use rates, daily census and a specific occupancy factor. This formula is derived from federal laws and regulations collectively known as the "Hill-Burton Program." (PL 79-725, PL 88- 443, the Hospital and Medical Facilities Amendments of 1964, Title VI, Public Health Service Act, 42 USC 291, 42 CRF 53). The Florida statutory authorization
to participate in the Hill-Burton Program is set forth in Section 381.492, Florida Statutes. The program required that any state desiring to participate therein submit a "State Plan" containing criteria established by federal regulations as to the need for hospital beds, hospitals, and other facilities for patient care in the state. The federal law also required that the State Plan be approved by The Surgeon General, and his approval was also required for projects under the program.
The State of Florida commenced participation in the program in 1947 and submitted annual State Plans thereunder in successive years. Such plans were termed the "State Medical Facility Plan" and were used not only for purposes of the Hill-Burton Program, but also as criteria for the State Certificate of Need Program under Chapter 381, Florida Statutes, as implemented in 1974 by Rule 10I- 2.06, Florida Administrative Code, and for state review of capital expenditure proposals under Section 1122 of the Social Security Act (42 USC 1320a-1), as implemented in 1974 by Rule 10I-1.03C, Florida Administrative Code. In both state regulations, the plan was termed "Florida State Plan for Construction of Hospitals and Related Medical Facilities." On January 1, 1977, HRS combined the two sets of rules into one, which were promulgated as Chapter10-5, Florida Administrative Code. Rule 10-5.11, in prescribing criteria against which application proposals are judged, referred in paragraph (1) to the "State Medical Facilities Plan adopted pursuant to Section 1513(b))2), 1513(b)(3) and 1603, respectively, of the Act." (Testimony of Chamlis, Mosely, Petitioner's Exhibits 1, 5-7)
The National Health Planning and Resources Development Act of 1974 (PL93-641) added Title XV (42USC 300k-n) and Title XVI (42 USC 300o-t) to the Public Health Service Act. Title XV dealt with health planning program structure and established the concept of health systems agencies and state health planning agencies, together with a Statewide Health Coordinating Council. Title XVI, in effect, replaced the Hill-Burton Program concerning grant-in-aid for the construction and modernization of health care facilities. This statute provided for the implementation and administration of a program of certificates of need within a particular state. It further required the establishment of certain plans by those agencies. Under this federal law, a Health System Plan and an Annual Implementation Plan are prepared by each health systems agency and reviewed by the state agency (Respondent) and the Statewide Health Coordinating Council. These in turn are coordinated with necessary revisions into an annual State Health Plan which is prepared by the state agency and approved by the Statewide Health Coordinating Council. The state agency is required to prepare the State Medical Facilities Plan which is reviewed by the Statewide Health Coordinating Council and must be approved by the Secretary of Health, Education and Welfare. This plan must include undertakings by the state agency to supervise its administration and show that such agency has the authority to carry it out. It must be approved by the Statewide Health Coordinating Council as consistent with the State Health Plan, and set forth, in accordance with criteria to be established in federal regulations and based on a state inventory of existing medical facilities, a survey of need for such facilities within the state, among other requirements.
The basic difference between the program established by PL 93-641 and the prior Hill-Burton Program, is that the former is a more comprehensive locally-developed health-oriented program while the latter was "architecturally" oriented by a mechanical formula. The federal regulations required to be promulgated in implementation of PL 93-641 have not yet been issued even though the act became effective in January 1975. Only preliminary guidelines have been issued which are not binding upon the states. Such guidelines, however, were
not submitted in evidence at the hearing. It is acknowledged by the parties herein that the 1977 Construction Plan is consistent with the Hill-Burton formula and does not address the basic issues specified and required by Title
XVI. This failure, however, is based upon the fact that definitive federal regulations have not yet been promulgated. (Testimony of Chamlis, Moseley, Petitioner's Exhibit 1)
The 1977 Construction Plan was submitted by Respondent to the Regional Office of the Department of Health, education, and Welfare on June 28, 1977. On July 19, 1977, the Regional Health Administrator of that Department advised Respondent that the plan was accepted, but noted that it should be used as an interim guide for the review of capital expenditure applications in the state until Title XVI went into effect. It further stated that since the Plan had been developed during the transition period of the ending of the Hill-Burton Program under Title VI and before implementation of Title XVI of PL 93-641, the statistical data and establishment of priorities received only "nominal review." The Plan was reviewed and approved by the Statewide Health Coordinating Council on June 4, 1977. It differed from prior state medical facility plans only in changing figures concerning bed needs and was primarily an annual update of the previous plan. The State Health Plan was not in effect at that time and, although now prepared, was scheduled for public hearings to be conducted by the Statewide Health Coordinating Council in September, 1978. (Testimony of Chamlis, Respondent's Exhibit 2, Petitioner's Exhibit 4)
On November 1, 1977, Respondent amended a number of rules contained in Chapter 10-5, Florida Administrative Code. These amendments were considered necessary by Respondent to comply with Chapter 77-400, Laws of Florida, which amended the State Health Facilities Planning Act (Chapter 381.493 et seq., Florida Statutes) to incorporate therein certain requirements imposed on the state certificate of need program as a result of Titles XV and XVI of the Public Health Service Act. Section 381.494(5)(c)1 was thereby amended to require that a health systems agency consider the need for health care facilities and services being proposed in relation to the various health plans including the "state medical facilities plan adopted pursuant to Titles XV and XVI of the Public Health Service Act." That statutory section was further amended in subsection (6)(c) to require Respondent to review applications for certificates of need based on their relationships between the various plans, including the "state medical facilities plan." As a result of these statutory amendments, the amendments to Chapter 10-5 included a change to Rule 10-5.11(1) concerning criteria against which application proposals are judged to change the term "State Medical Facilities Plan" to "1977 State Medical Facilities Plan." (Testimony of Chamlis, Petitioner's Exhibit 8)
The proposed amendments to Chapter 10-5 were preceded by the statutory notice and publication in the Florida Administrative Weekly, as required by subsection 120.54(1), Florida Statutes. An economic impact statement, as required by subsection 120.54(2), was not prepared by Respondent. Public hearings on the proposed rule amendments were held in various cities of Florida in September, 1977. Although insufficient evidence was presented at the hearing as to whether or not Respondent had made the necessary timely filings with the Administrative Procedures Committee as required by Section 120.54(11)(a), Florida Statutes, no objections from the Committee are on file with the Department of State. The amended rules were filed with the Department of State on October 7, 1977. By letter of June 2, 1978, Respondent transmitted a copy of the 1977 Construction Plan to the Office of the Secretary of State and stated in the letter that the Plan had been adopted by reference in Rule 10-5.11(1),
F.A.C. (Testimony of Chamlis, Cloud, Behling, Petitioners' Exhibits 8-9, 15-16)
The Acute Care Study, dated March 1975, which was issued by the Health Planning Council. Inc., is based on a 1974 hospital service area study. It states that it was developed to "aid the health planning council and the community in making proper determination regarding the number and location of acute care general hospital beds needed to meet the area's hospital health care needs by 1980." It utilizes a number of factors including population projections, average lengths of hospital stays and occupancy rates and patient utilization trends to determine that there will be a need for an additional 71 new acute care general hospital beds in the area by 1980. The document states that the study is general in nature and is designed to aid in overall planning efforts. It was used by the Health Planning Council, Inc. in formulating its recommendation of denial to Respondent on Petitioners' application. Respondent based its denial of Petitioners' application in part on its failure to conform to the Acute Care Study. No steps have ever been taken by Respondent to adopt the document as a rule under Chapter 120, F.S. (Testimony of Chamlis, Petitioners' Exhibit 2)
CONCLUSIONS OF LAW
Petitioners seek to invalidate Respondent's 1977 Construction Plan and Acute Care Study, pursuant to Section 120.56, Florida Statutes, on the grounds that they are rules which were not properly adopted under Chapter 120, Florida Statutes, and that they are inconsistent with legislative requirements in that they contain errors and omissions concerning factors necessary for an accurate and objective determination of whether certificates of need should be granted. Further, Petitioners allege that the 1977 Construction Plan does not conform to various federal and state statutory requirements so as to be acceptable as the "state medical facilities plan."
Petitioners have shown that they are substantially affected by the purported rules in that their application for a certificate of need has been denied by Respondent based in part on the documents in question.
At the outset, it is determined that petitioners failed to present evidence supporting the alleged inconsistency of the putative rules with statutory mandates by reason by "errors and omissions regarding population, bed need, medical staff availability and other criteria."
The basic questions for determination are whether or not the two documents are "rules" as defined in Section 120.52(14), F.S., and, if so, whether they were properly promulgated under Section 120.54.
The Acute Care Study was not issued by a state agency. It is a document that was developed to assist the non-profit corporation, Health Planning Council, Inc., in determining a projection of the number of acute care general hospital beds needed to serve its local area by 1980. It is not the Council's Health Services Plan or its Annual Implementation Plan, as identified in federal and state statutes. Neither is it a policy statement of general applicability, i.e., "those statements which are intended by their own effect to create rights, or to require compliance, or otherwise to have the direct rights, or to require compliance, or otherwise to have the direct and consistent effect of law." McDonald v. Dept. of Banking and Finance, 346 So. 2d 569 (Fla. 1st DCA 1977). Respondent cited the document as a partial basis for its denial of Petitioners' application. However, it did so in adopting the unfavorable recommendation of the Health Planning Council, Inc., thereby referring to and adopting what might be termed "emerging policy" in an adjudicative setting. It
may well be that such policy can be challenged as inaccurate or improper by Petitioners in the pending Section 120.57 proceeding. The testimony presented at the hearing shows that the Acute Care Study is not intended by Respondent to operate of its own effect, but can only be a factor in the adjudication of individual cases, depending upon the part it plays in the formulation of recommendations by the Health Planning Council, Inc. (See McDonald v. Dept. of Banking and Finance, supra, at 581, 582.) Accordingly, it is concluded that the Acute Care Study is not a rule of Respondent that requires adoption under the Administrative Procedure Act.
It is evident that the 1977 Construction Plan is a "rule" because it is a policy statement of general applicability that is intended by its own effect to create rights and otherwise to have the direct and consistent effect of law. It establishes, inter alia, a formula to compute hospital bed needs for each health care service area and to develop a priority ranking system for hospital construction. It sets forth extenuating and mitigating circumstances that may be considered in certificate of need cases, and other standards for medical facilities based on federal requirements. However, the fact that its content may be predicated on such federal criteria is immaterial. Its use is the determinative factor. It was acknowledged at the hearing by Respondent's representatives that the document is used uniformly throughout the state in making state certificate of need determinations. Further, it is listed in Rule 10-5.11(1) as one of the criteria against which an application is to be judged by Respondent.
The Plan is referred to in subsection 381.494(5)(c)1 as a document to be used by Health Systems Agencies in determining need for health care facilities and services. It is there described as the "state medical facilities plan adopted pursuant to Titles XV and XVI of the Public Health Service Act." (Emphasis added) Similarly, subsection 381.494(6)(c) mentions the "state medical facilities plan" as a criterion for determining action on an application for a certificate of need. The evidence establishes that the 1977 Construction Plan is the "state medical facilities plan" contemplated under these references. The question arises as to whether the acceptance of the Plan by the Department of Health, education and Welfare satisfies the requirement of adoption under the state statutory provision. In considering this problem, recourse must be had to the language of subsection 381.494(6)(b) which states that promulgation of rules, regulations and "minimum standards" for the issuance of certificates of need "shall be in accordance with the Administrative Procedure Act." The 1977 Construction Plan sets forth "minimum standards" that are required to be met in the issuance of certificates of need and therefore it is concluded that the Plan must be adopted as a rule in accordance with Chapter 120. (See North Miami General Hospital v. Office of Community Medical Facilities, 355 So. 2d 1272 (Fla. 1st DCA 1978)) Respondent's contention that the mere statutory reference to the Plan in subsection 381.494(5)(c)1 eliminates any need for rulemaking is without merit in view of the additional requirement for rulemaking under subsection 381.494(6)(b).
Although not conceding that the 1977 Construction Plan is a rule requiring APA adoption, Respondent contended at the hearing that it was incorporated by reference in the amendment to Rule 10-5.11(1) on November 1, 1977. Petitioners did not specifically challenge that particular rule amendment in their petition, but they did so at the hearing. contrary to Respondent's claim that the validity of Rule 10-5.11(1) cannot now be considered because it was not embraced specifically within the petition, it is considered that the posture of Respondent's defense places its validity in issue in this proceeding.
Section 120.52(14) defines "rule" to include the amendment of a rule. Section 120.54(8) states that no rule shall be amended by reference only, and Section 120.54(12)(b) provides that a rule may be amended "only through regular rulemaking procedures." The Model Rules of Procedure, in Rule 28-3.35, provides:
Any rule, standard, specification or similar material which is generally available to affected persons may be incorporated in a rule, by reference, in the manner adopted by rule by the Department of State.
Department of State Rule 1-1.04 provides that any "ordinances, standard, specification or similar material" may be incorporated by reference in a rule "adopted in accordance with Chapter 120, Florida Statutes." (Emphasis added) That rule requires the agency concerned to file the material desired to be incorporated with the Department of State, along with a summary and statement of matters justifying its adoption by reference. Respondent belatedly complied partially with this requirement in submitting the 1977 Construction Plan to the Department of State in 1978. It did not, however, accompany this submission with a statement of justification.
Subsection 120.54(2)(a) requires every agency, prior to the amendment of any rule, to prepare an economic impact statement containing specified information. It is acknowledged by Respondent that no economic impact statement was prepared prior to purported adoption of the amendments to Chapter 10-5,
F.A.C. This fact alone is sufficient to invalidate that portion of Rule 10- 5.11(1) which refers to the challenged State Medical Facilities Plan (1977 Construction Plan). Department of Environmental Regulation v. Leon County, 344 So. 2d 297, 299 (Fla. 1st DCA 1977) Respondent's reliance in its brief on the addition of Section 120.54(2)(c) by Chapter 78-425, Laws of Florida, to insulate its failure to prepare an economic impact statement cannot be sustained.
Chapter 78-425 provides that beginning October 1, 978, a rule may be held invalid for lack of an adequate economic impact statement unless the issue is raised within one year of the effective date of the rule to which the statement applies. The issue was raised in this proceeding on August 8, 1978, the date of the petition. Respondent claims that Rule 10-5.11(1) was effective January 1, 1977, and that that date controls for the one year period rather than the date of the amendments to the rule on November 1, 1977. This reasoning is fallacious in that Rule 10-5.11(1), as amended in November 1977, obviously constitutes the "rule to which the statement applies." Respondent's further claim that there was no actual economic impact by reason of the mere addition of numbers "1977" to the wording of the former rule cannot constitute a legal excuse for its failure to prepare the required statement. In fact, Section 120.54(2)(c) now specifically provides that "failure to provide an adequate statement of economic impact is grounds for holding the rule invalid."
It is therefore unnecessary to discuss the further allegations that Respondent likewise failed to provide the Administrative Procedures Committee with the information specified in subsection 120.54(11)(a), F.S. Neither is it required to address any infirmities of the 1977 Construction Plan as not being in complete accord with 42 USC Section 300 o-2 as alleged by Petitioners. Such matters have no bearing on whether the Respondent followed state rulemaking procedures, but deal with whether the agency obeyed the state statutory mandate that the Plan be in accordance with federal law. In any event, such an attack is rendered moot by the acceptance of the Plan by the federal authorities.
Petitioners' challenge goes only to that portion of Rule 10-5.11(1) dealing with the 1977 State Medical Facilities Plan. Accordingly, only the reference to such Plan in the rule and the Plan itself are hereby determined to be an invalid exercise of delegated legislative authority.
DONE and ORDERED this 10th day of October, 1987, in Tallahassee, Florida.
THOMAS C. OLDHAM
Carroll Webb, Executive Director Administrative Procedure Committee Room 120 Holland Building Tallahassee, Florida 32304
