St. Joseph's Hosp. of Buckhannon, Inc. v. Stonewall Jackson Mem'l Hosp. Co.

903 S.E.2d 247

ST. JOSEPH’S HOSPITAL OF BUCKHANNON, INC. d/b/a St. Joseph’s Hospital, Respondent Below, Petitioner,

v.STONEWALL JACKSON MEMORIAL HOSPITAL COMPANY, Petitioner Below, Respondent,andWest Virginia Health Care Authority, Respondent.

No. 23-ICA-265

West Virginia Intermediate Court of Appeals.

Submitted: March 19, 2024

Filed: May 23, 2024

Appeal from the West Virginia Health Care Authority, Certificate of Need File No. 23-7-12659-X

Alaina N. Crislip, Esq., Neil C. Brown, Esq., Jackson Kelly PLLC, Charleston, West Virginia, Counsel for Petitioner

Thomas G. Casto, Esq., Webster J. Arceneaux, Esq., Hannah Wright, Esq., Lewis Gianola PLLC, Charleston, West Virginia, Counsel for Respondent Stonewall Jackson Memorial Hospital Company

Patrick Morrisey, Esq., Attorney General, Heather Connolly, Esq., Assistant Attorney General, Frankie Dame, Esq., Assistant Solicitor General, Michael R. Williams, Esq., Principal Deputy Solicitor General, Charleston, West Virginia, Counsel for Respondent West Virginia Health Care Authority

SCARR, CHIEF JUDGE:

Petitioner St. Joseph’s Hospital of Buckhannon appeals the Amended Decision on Request for Ruling on Reviewability issued by Respondent West Virginia Health Care Authority on July 12, 2023, holding that a Certificate of Need is not required for Respondent Stonewall Jackson Memorial Hospital’s proposed relocation. Petitioner contends that the Authority’s decision misapplies the statute enumerating what types of proposed health care projects require a Certificate of Need. Petitioner also contends that the Health Care Authority lacks the power to amend their original decision in this matter, and thus the amended decision is ultra vires, and thus invalid.

Having reviewed the parties’ arguments, the administrative record on appeal, and the controlling law, we affirm the Health Care Authority’s July 12, 2023, Amended Decision on Request for Ruling on Reviewability. We affirm for the reasons fully discussed below, on the basis that the Health Care Authority’s decision is a reasonable and permissible interpretation of a statute that is ambiguous when applied to the proposed relocation project at issue here.

I. FACTUAL AND PROCEDURAL BACKGROUND

Stonewall Jackson Memorial Hospital ("Stonewall") is a 70-bed acute care hospital located on the western edge of Weston, located in Lewis County, West Virginia. Stonewall’s current facility was built in 1972, over fifty years ago. Because of the facility’s age, Stonewall sought to replace its current fatality with a new, state of the art, 29-bed facility to be located at the intersection of Interstate 79 and United States Highway 33 E., 4.2 miles to the southeast of its current site.

St. Joseph’s Hospital of Buckhannon ("St. Joseph’s") is a 25-bed critical access hospital ("CAH") located in Buckhannon, Upshur County, West Virginia, where it is the sole community hospital. CAH is a designation by the United States Department of Health and Human Services, Centers for Medicare & Medicaid Services, which enables a qualified rural hospital to be reimbursed on a costbasis for providing services to Medicare and Medicaid patients, as opposed to being reimbursed on a prospective payment basis. Essentially, rather than being paid a pre-determined fixed amount for hospital services, a CAH is paid primarily on the basis of the costs it incurs. St. Joseph’s struggled financially prior to its CAH designation in 2014, but its financial health has improved since its CAH designation.¹ To qualify for CAH status, St. Joseph’s must not be located closer than 15 mountainous terrain miles from another hospital. Although St. Joseph’s is currently more than 15 miles from any hospital, allowing Stonewall to relocate to its proposed relocation site would place it within 15 miles of St. Joseph’s, thereby eliminating St Joseph’s eligibility for CAH designation.

The procedural history of this case is multilayered. On September 13, 2021, Stonewall’s Certificate of Need ("CON") application was received by the West Virginia Health Care Authority ("the Authority"). The cost of the proposed relocation was $55,950,000.00 To meet Stonewall’s current needs and accommodate future growth, Stonewall considered alternatives to relocation, such as large-scale renovations of the existing facility, maintaining the status quo, and construction of a new hospital. Stonewall ultimately determined that construction of new hospital was the best solution. The reasons put forth for moving the site of the hospital were the current site’s poor accessibility, constraints to expansion, and space and layout deficiencies. On October 14, 2021, St. Joseph’s filed its request for affected person status as well as a request for a public hearing. St. Joseph’s asserted that it provided similar services to those proposed in the CON application and that it would be significantly affected by the proposed relocation project.

On June 13, 2022, the Authority issued the first decision regarding Stonewall’s CON, which was appealed to this Court. See Stonewall Jackson Mem’l Hosp. Co. v. St. Joseph’s Hosp. of Buckhannon, Inc., No. 22-ICA-147, 2023 WL 4197305 at *1 (W. Va. Ct. App. June 27, 2023) (memorandum decision). Relevant to that appeal, the Authority held that although the proposed relocation may be the superior alternative in terms of cost, efficiency, and appropriateness for Stonewall, the Authority must also determine whether the proposed project is the superior alternative for an affected person (like St. Joseph’s) and the citizens of West Virginia. The Authority found that Stonewall’s proposed relocation would cause St. Joseph’s to lose its CAH status, which would have a significant financial impact upon St. Joseph’s. Further, the Authority found that Stonewall did not prove the impracticability of developing alternative site locations, noting that Stonewall had not explored any other sites for the project other than the proposed location. The Authority concluded that Stonewall’s application should be denied because Stonewall failed to demonstrate that superior alternatives to the services proposed did not exist within the state and that the development of alternatives was not practicable as required by West Virginia Code § 16-2D-12(b)(1) (2016). On June 27, 2023, this Court issued a memorandum decision affirming the Authority’s order, holding, among other things, that "[b]ased upon a review of the record and the deference given to the Authority because of its institutional expertise, we find no error in the Authority’s determination that Stonewall did not provide sufficient evidence to show that superior alternatives do not exist and that the development of alternatives is not practicable." Id. at *4.

However, between the time the CON application was decided by the Authority and its subsequent appeal to this Court, the West Virginia Legislature enacted Senate Bill 613, which significantly raised the CON expenditure minimum: Specifically, West Virginia Code § 16-2D-2(15) (effective March 10, 2023) (amended January 22, 2024), titled "Definitions," changed the definition of "Expenditure minimum" to mean "the cost of acquisition, improvement, expansion of any facility, equipment, or services including the cost of any studies, surveys, designs, plans, working drawings, specifications and other activities, including staff effort and consulting at and above" from $5 million to $100 million.²

Despite the pending litigation, on March 29, 2023, Stonewall filed with the Authority a request for a determination of reviewability ("RDOR"), pursuant to West Virginia Code § 16-2D-7 (2016), because of the increase to the CON expenditure minimum. Stonewall, argued that the proposed construction of its new hospital no longer requires a CON because the capital expenditure associated with the project is less than the new expenditure minimum. On April 5, 2023, St. Joseph’s intervened to oppose Stonewall’s RDOR, arguing that despite the increase in the expenditure minimum, Stonewall’s application is subject to CON review because the relocation project contemplates a substantial change in bed capacity under West Virginia Code § 16-2D-8(a)(5) (2023) and further because the project involves the construction and/or development of a health care facility, under West Virginia Code § 16-2D-8(a)(1) (2023).

The Authority entered its initial decision on Stonewall’s RDOR on June 15, 2023, before it entered its July 12, 2023, Amended Decision on Request for Ruling on Reviewability ("Amended Decision"). The two decisions are largely the same, with the Amended Decision removing one footnote, adding more detail in findings of fact two and seven, and eliminating conclusion of law four in the original decision which stated: "The Authority has not generally taken up the issue of a change in bed capacity when making determinations of reviewability when the project is the complete relocation of a healthcare facility if the facility is in the same service area and the minimum capital expenditure is not exceeded.", Both the initial and Amended Decision found that in the previous CON matter, Stonewall proposed to reduce the number of beds from 70 to 29. However, in the RDOR there is no such reduction in bed capacity identified. Further, since the cost of the project was under the minimum expenditure, the Authority found that CON review was not required. It is from the July 12, 2023, Amended Decision that St. Joseph’s now appeals.³

II. STANDARD OF REVIEW

[1–3] This Court has jurisdiction over this appeal pursuant to West Virginia Code § 51-11-4 (2022).⁴ Pursuant to West Virginia Code §§ 16-2D-16a (2021) and 29A-5-4(g) (2021), our standard of review for certificate of need decisions issued by the Authority is set forth as follows:

The court may affirm the order or decision of the agency or remand the case for further proceedings. It shall reverse, vacate, or modify the order or decision of the agency if the substantial rights of the petitioner or pe...