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09/18/78 LAHEY CLINIC FOUNDATION v. HEALTH

September 18, 1978

LAHEY CLINIC FOUNDATION, INC. & ANOTHER
v.
HEALTH FACILITIES APPEALS BOARD & OTHERS



Suffolk. Civil action commenced in the Superior Court on March 23, 1977. The case was heard by Bonin, C.J. The Supreme Judicial Court granted a request for direct appellate review.

Hennessey, C.j., Quirico, Braucher, Liacos, & Abrams, JJ. Quirico, J., Concurring in part and Dissenting in part.

SYLLABUS BY THE COURT

Administrative Matter. Jurisdiction, Civil, Administrative matter. Administrative Law, Exhaustion of remedies. Quasi Judicial Tribunal. Health Facilities Appeals Board. Hospital.

The opinion of the court was delivered by: Braucher

Where a party appealing a decision of the Department of Public Health to the Health Facilities Appeals Board under the provisions of G. L. c. 111, § 25E, withdrew its appeal, and the board ruled that any of the automatic parties under board rule § 3.03 (a) could continue to prosecute the appeal despite the original appellant's withdrawal, the board's decision denying the appellee's motion to dismiss the appeal was not final, and a Superior Court Judge acted prematurely in ruling that the appeal to the board had been withdrawn and that no appeal was pending, and he erred in dismissing the proceedings before the board. [368-370]

A counterclaim by a ten taxpayers' group, pursuant to G. L. c. 111, § 25G, seeking enforcement of the determination of need statute, c. 111, §§ 25B-25G, against an applicant for a license to establish a hospital-clinic complex, should have been dismissed so far as it sought direct review of decisions of the Department of Public Health for which the group never sought departmental review as provided under § 98 of the department's regulations and so far as it sought review of issues that had never been presented to the department for decision [370-371]; however, even though it would have been preferable to defer judicial decision of an issue raised by the counterclaim as to whether a departmental grant of an "extension" to the applicant amounted in substance to a grant of a new determination of need until the Health Facilities Appeals Board had disposed of the issue, it was appropriate to grant declaratory relief where the issue had been fully tried in a proceeding to which the board had been a party and where retrial of the issue before the board would be of doubtful utility, wasteful, and further delay an already lengthy proceeding [371-372]. Quirico, J., Dissenting.

In reviewing action by the Department of Public Health, the Health Facilities Appeals Board is restricted by G. L. c. 111, § 25E, "to consideration of whether the determination appealed from was an abuse of discretion, without observance of procedure required by law or in violation of applicable provisions of law," and the restriction is applicable to the question whether the department has properly classified its action. [372]

There was no error in a 1976 decision by the Public Health Council of the Department of Public Health to issue an "extension of determination of need" to an applicant for a license to establish a hospital-clinic complex which was originally granted a determination of need under the provisions of G. L. c. 111, §§ 25B-25G, in 1972; the fact that the extension permitted an increase in cost, an increase in gross square footage, and changes in planned services did not render the project different from the one originally approved nor necessitate a new determination of need. [372-375]

The role of the Health Facilities Appeals Board in reviewing action by the Department of Public Health under G. L. c. 111, §§ 25B-25H, is limited to initial approval for construction of a health facility and does not extend to review of changes in the project. [376]

In 1972 the Department of Public Health (department) granted a "determination of need" (DoN) to the Lahey Clinic Foundation, Inc. (Lahey), for a 200 bed hospital-clinic complex in Burlington. In December, 1976, the department issued an "extension of determination of need," approving increases in gross square feet and in cost. A ten taxpayer group called the Concerned Committee for Hospital Cost Control (Concerned Committee) and the Health Facilities Appeals Board (board) contend that the "extension" was in substance a grant of a new DoN, subject to review by the board. A Judge of the Superior Court, after seventeen days of trial, ruled against that contention. The Concerned Committee and the board appealed, and we granted the application of all parties for direct appellate review. We hold that the issue should have been determined by the board. In view of the circumstances, however, particularly the public interest in a speedy resolution of the controversy, we review the merits of the dispute, conclude that the "extension" was not in substance a grant of a new DoN, and order the entry of a judgment declaring the rights of the parties.

1. The action. The Public Health Council (Council) of the department voted the "extension" on December 14, 1976, and issued it December 28, 1976. An appeal to the board was taken on January 11, 1977, pursuant to G. L. c. 111, § 25E, and § 3.01(b) of the board's regulations. Lahey and the department moved to dismiss the appeal, and on March 14, 1977, the board denied those motions, ruling that the "extension" was a DoN "for the purposes of our appellate jurisdiction."

On March 23, 1977, Lahey sued the board in the Superior Court for declaratory and injunctive relief. The Judge issued a temporary restraining order against the board, allowed a motion of the Concerned Committee to intervene, and held three days of evidentiary hearings. On April 1, 1977, the Judge announced his decision orally. In a written decision dated April 20, 1977, he ruled that there was a reasonable likelihood that Lahey would prevail on its contention that the board lacked subject matter jurisdiction; he also ruled that no appeal was pending before the board after the original appellant withdrew its appeal on March 7, 1977; he ordered that the proceedings before the board be dismissed. Judgment was entered on May 13, 1977, dismissing those proceedings.

Meanwhile, the Concerned Committee had filed a counterclaim against Lahey under G. L. c. 111, § 25G, to enforce the provisions of the DoN statute, §§ 25C-25G, seeking declaratory and injunctive relief. The board was permitted to intervene as a plaintiff in counterclaim, and the town of Burlington to intervene in opposition to the counterclaim. Extensive hearings were held in May and June, 1977. On his own motion the Judge notified the department to appear and show cause why it should not be joined as a defendant in counterclaim; after hearing, the proposed joinder was denied. On September 16, 1977, the Judge filed a memorandum of decision of ninety-four pages, and pursuant to that memorandum judgment was entered on October 11, 1977, dismissing the counterclaim and denying all relief sought by the plaintiffs in counterclaim. The Concerned Committee and the board appealed from both the decision on the action brought by Lahey and the decision on the counterclaim.

2. The history. a. The 1972 DoN. Before November, 1971, there was no DoN statute like the present G. L. c. 111, §§ 25B-25G, but G. L. c. 111, § 51, as appearing in St. 1967, c. 891, § 1, provided, as it does today, that an original license to establish or maintain a hospital or clinic should not be issued "unless there is determination by the department that there is need for such a facility at the designated location." In November, 1970, the department approved "in principle" Lahey's plan to construct a medical facility in Burlington. The town of Burlington approved necessary zoning changes and issued a special permit; Lahey purchased the site and began planning. On October 22, 1971, Lahey submitted a letter of intent (LoI) to the department projecting a 250-bed hospital, a clinic and a research center, occupying 400,000 gross square feet and costing $43.1 million. It was clear that the size and cost figures were estimates based on rules of thumb rather than on architects' plans.

On November 15, 1971, an emergency DoN statute, St. 1971, c. 1080, was adopted, effective immediately; regulations under that statute were published December 22, 1971. The statute required consideration of "present and projected future needs," but did not mention costs or square footage. The regulations required an "estimated cost" and "simple line drawing plans showing proposed structures," and approximate gross square footage could have been determined from such plans. On December 30, 1971, Lahey filed an application for a DoN, incorporating the LoI and requesting a waiver of the "simple line drawing plans." On May 9, 1972, the Council granted a DoN to Lahey for a 200-bed hospital rather than the proposed 250-bed hospital, but at the same "estimated cost" of $43.1 million. No square footage was stated. There was no appeal.

b. The 1972 DoN statute. The 1971 emergency DoN statute expired on May 31, 1972. On July 18, 1972, G. L. c. 111, §§ 25B-25G, was inserted by St. 1972, c. 776, § 3, retroactive to June 1, 1972. § 6. Under § 25C no one may make "substantial capital expenditures" for construction of a health care facility or "substantially change the services" of such a facility without a DoN. For the first time, § 25C directed the department to consider costs. "Substantial capital expenditure" meant an expenditure in excess of $100,000 until St. 1977, c. 945, § 2, amended § 25B by raising the amount to $150,000. Lahey's DoN was covered by St. 1972, c. 776, § 4: "All determinations of need granted and actions taken by said department under the provisions of said chapter one thousand and eighty shall remain in full force and effect and be deemed to be granted or taken under the provisions of said sections twenty-five B to twenty-five G, inclusive." The 1971 DoN regulations, except in so far as they were in conflict with the 1972 statute, were continued in effect until new DoN regulations were issued, effective September 1, 1973. On January 23, 1975, the department passed a resolution on cost overruns; 1975 DoN regulations became effective May 1, 1975; and 1976 DoN regulations became effective November 26, 1976. The effect of these regulations will be discussed hereafter.

c. Progress 1972-1976. After Lahey obtained its DoN in May, 1972, it went forward with planning and architectural work, consulting frequently with the department's Bureau of Planning and Construction, later renamed the Bureau of Engineering and Construction (Bureau). Pursuant to an extension of time, Lahey submitted preliminary plans on March 1, 1973, and revised preliminary plans on December 7, 1973; in each case the Bureau wrote that the plans were "approvable." In January, 1974, Lahey began preliminary site work; site excavation work was done between August, 1974, and April, 1975.

As the plans developed, the estimated cost and gross square footage increased. After a general review of cost overruns, to be discussed hereafter, the Council approved Lahey's cost overruns and on March 4, 1975, Lahey was notified that $67,208,000 was "the upper ceiling approved" by the department for DoN purposes. On March 31, 1975, the Bureau approved Lahey's revised preliminary plans showing 674,000 gross square feet and cost of $67,273,000. The ...


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