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Anne Gamble Ten Taxpayer Group v. Health Facilities Appeals Board

Superior Court of Massachusetts, Suffolk, Business Litigation Session

October 16, 2017



          Janet L. Sanders, Justice

         This is one of several lawsuits filed by a group of plaintiffs unhappy with a decision by the defendant Boston Children’s Hospital (BCH) to eliminate the Prouty Garden as part of a modernization and expansion project. In the instant case, plaintiffs challenge the October 27, 2016 determination by the Commissioner of the Department of Public Health and the Public Health Council (collectively, the Department) to issue a Determination of Need in connection with that project. The Department’s decision is subject to judicial review pursuant to G.L.c. 30A, § 14 and G.L.c. 111, § 25E. With the Administrative Record having been filed, this case is before this Court on Cross Motions for Judgment on the Pleadings, as required by Superior Court Standing Order 1-96. Plaintiffs also seek leave to amend their Complaint. This Court concludes that the plaintiffs’ motions must be DENIED and the defendants’ Cross Motion must be ALLOWED, for reasons set forth herein.


         Section 25C of Chapter 111 of the Massachusetts General Laws states that a health care institution contemplating a construction project that requires a " substantial capital expenditure" must first obtain a determination of need or " DoN" from the Department of Public Health (DPH). The purpose of the statute is to " control unnecessary expansion by health care institutions of their patient care facilities, " Howe v. Health Facilities Appeals Bd., 20 Mass.App.Ct. 531, 532 (1985), and to encourage the appropriate allocation of resources for health care purposes. Shoolman v. Health Facilities Appeals Bd., 404 Mass. 33, 36 (1989). In order to obtain a DoN, the health care institution must file an Application, which is reviewed for completeness and then forwarded to the Public Health Council (PHC) and the Commissioner of DPH for their consideration. 105 C.M.R. § 510-100.530.[1] The Application is also subject to comments and a public hearing. G.L.c. 111, § 25C, 105 C.M.R. § § 100.400-100.410. The DoN Program Director prepares a staff report (the Staff Summary). 105 C.M.R. § § 100.420-100.421. Upon consideration of the Application, the Staff Summary and comments by " parties of record" and the general public, the Department makes a final Determination of Need approving or disapproving the Application, in whole or in part. 105 C.M.R. § 100.530(A). Under G.L.c. 111, § 25E, any person aggrieved by the determination may, within fourteen days, file an appeal with the Health Facilities Appeals Board. G.L.c. 111, § 25E. Within sixty days of that filing, the Board is to issue a final decision either denying the appeal or remanding it for further action.

         In the instant case, all these procedural steps were followed. On December 7, 2016, BCH filed an Application for a DoN in connection with a project to create new clinical space, including a neonatal intensive care unit and improved Heart Center at the hospital’s Longwood Avenue location (the Project). If approved, the Project would require the destruction of the Prouty Garden. The plaintiffs are a group of taxpayers who oppose destruction of the garden. They are duly registered with the Department as a " party of record" to the DoN proceedings and may file comments to the Application, which they did.

         As required by statute, the DPH staff held a public hearing on the Project and the plaintiffs were among those who provided their views. After a ten-month review process, DPH issued a 37-page Staff Summary that recommended approval of the Application, with conditions. That Summary was later supplemented with an Addendum that addressed certain comments, including those submitted by the Health Policy Commission (HPC). On October 20, 2016, the PHC, chaired by DPH Commissioner Monica Bharel, held a hearing to determine whether to grant BCH’s DoN Application. Among those presenting testimony at the hearing were various individuals who opposed the destruction of Prouty Garden. The PHC ultimately voted to approve BCH’s Application, and the Commissioner and the PHC, acting together as the Department, issued a Notice of Final Action on October 27, 2016. That Notice states that the issuance of the DoN was based upon BCH’s " clear and convincing demonstration that the Project meets each of the governing factors, set forth in 105 C.M.R. 100.000 and Department guidelines." The approval expressly included certain conditions. Although the statute is ordinarily reviewable by the Health Facilities Appeals Board, the Board had not yet been constituted so that the determination by the Department was considered final. 105 C.M.R. § 100.970(B); 105 C.M.R. § 100.551(A). This lawsuit ensued.


         The Legislature has determined what standard that this Court applies in reviewing a Department decision to issue a DoN. That standard is set forth in G.L.c. 111, § 25E, which states that the Department’s determination may be set aside only where there has been an " abuse of discretion" or where it is in violation of the procedural or substantive law. Contrary to the plaintiffs’ position, this Court does not apply the more rigorous " substantial evidence" standard. Howe v. Health Facilities Board, 20 Mass.App.Ct. 531, 534-37 (1985); see also Shoolman v. Health Facilities Appeals Board, 404 Mass. 33 (1989). Rather, the review is even more deferential. As explained by the SJC, the decision to issue the DoN can be overturned only if it was " arbitrary and capricious." Shoolman, 404 Mass. at 36. If there is a rational basis for the decision and it is not otherwise unlawful, then it must be affirmed. Applying this standard, this Court concludes that the plaintiffs have not met their burden of demonstrating that the Department’s decision to issue a DoN to BCH should be overturned.

         As stated in the October 27, 2016 Notice of Final Action, the Department reviewed BCH’s Application to determine whether it complied with certain mandatory terms and conditions of the applicable regulations. Specifically, it sought to determine whether the Project met each of nine factors set forth in 105 C.M.R. § 100.533(B). In support of their Motion, plaintiffs focus on a couple of these factors and argue that the evidence does not support the Department’s decision. One of those factors (Factor One) requires BCH to demonstrate that the Project " will not duplicate existing resources in the applicable service area." 105 C.M.R. § 100.533(B)(1). A second factor (Factor Two) requires that the project must " satisfy in whole or in part health care requirements of the project population of the applicable services area, without any duplication of services and other adverse service consequences ..." 105 C.M.R. § 100.533(B)(2). Plaintiffs argue that the Project does not satisfy these requirements because it is based not on present needs but on BCH projections regarding future patient volume. Moreover, these projections (they argue) are not based on increased demand from Massachusetts patients but from international and out of state patients. Citing comments by the HPC, plaintiffs express concern that shifting patients from competing local pediatric care providers to BCH could have a destabilizing effect that would translate into higher health care costs overall. Plaintiffs argue that the Department ignored these concerns and that the Department’s decision that the regulatory factors were satisfied is wholly unsupported by the facts presented to it.

         In fact, a review of the Administrative Record shows that the Department did consider the same arguments and criticisms plaintiffs now make to this Court. The HPC’s comments, for example, were specifically addressed both in the Staff Summary and the Addendum. The plaintiffs may disagree with how the Department resolved those concerns, but that is not a basis to overturn its decision. Moreover, the reasons offered in support of the decision are neither arbitrary nor capricious. Regarding the danger of duplication of services, the Staff Summary concluded that the " applicable services area" referenced in the regulations can- and, in the instant case, did- extend to an area beyond Massachusetts so that it was permissible to consider patients projected to come from out of state and internationally. The Department further determined that higher acuity patients from all regions, including the Boston area, are already coming to BCH for more complex procedures than are available at other local hospitals, decreasing the danger that services would be duplicated. As to the validity of BCH’s projections, the DPH Staff required from BCH an Independent Cost Analysis which (among other things) reviewed population projections, historical trends, and two patient projection scenarios. That analysis concluded that the success of the Project would not require taking patients away from other local providers and was also " consistent with the Commonwealth’s effort to meet the health care cost containment goals." In short, in making the findings that it did, the Department did not abuse its discretion or exceed its legal authority. Indeed, even under the less deferential " substantial evidence" standard, the DoN determination passes muster.

         Significantly, the Department did not simply determine that BCH’s Application satisfied the nine mandatory factors imposed by the regulations. Additionally, it imposed eight conditions on BCH, among them " Condition 8." That condition imposed three requirements on BCH that directly addressed the concerns expressed above. First, BCH was prevented from passing on its incremental operating costs to government and nongovernment Massachusetts payors or patients " in excess of the Commonwealth’s costs containment goals." Second, BCH had to maintain its commitment to serving Medicaid patients. Third, it is required to make an annual report to the Department that includes among other things information concerning the degree to which the out-of-state demand it anticipated was actually being realized. Plaintiffs argue that this condition is somehow invalid or at the very least unworkable. This Court disagrees.

         The DoN regulations expressly permit the Department to impose conditions. See 105 C.M.R. § 100.552(A) (Department " may prescribe ... any other conditions reasonably related to the scope of the project ... and consistent with the objective of making adequate health care services reasonably available to every person within Massachusetts"). Indeed, the regulations specifically contemplate the imposition of a condition in the event that the Project falls short of satisfying any of the nine regulatory factors. See 105 CM.R. § 100.533(C). Plaintiffs argue that Condition 8 is not in accordance with 105 C.M.R. 100, § 552, which requires that the condition be " within the control of the applicant." But each of the three requirements that Condition 8 imposes are within BCH’s control and are matters for which the Department can hold BCH accountable. That Condition 8 by its terms gives to BCH an opportunity to argue that it is noncompliant with any of the requirements because of unexpected circumstances or events does not change the fact that the condition itself (including the submission of an annual report) concerns matters within BCH’s control. Nor does this so called " escape clause" render the Condition meaningless: a finding by the Department that BCH is not in compliance with Condition 8 permits the Department to require BCH to remove beds from service and to extract other payments. In short, this Court sees no legal grounds for overturning the Department’s decision.

         At the same time that the plaintiffs filed their Cross Motion for Judgment on the Pleadings, they also filed a Motion to Amend the Complaint. This Motion seeks to add a count (Count 4) which alleges that since the issuance of the DoN, BCH is in violation of the conditions that the Department imposed and has otherwise not complied with applicable regulations. BCH argues that plaintiffs’ allegations are demonstrably false and that further amendment of the Complaint would be futile. Although this Court must accept plaintiffs’ allegations as true, this Court does have some discretion to deny a request to amend a complaint, and does so here. See Rule 15(a), Mass.R.Civ.P. Count 4 alleges among other things that the report that Condition 8 requires BCH to submit to the Department is inadequate; it also alleges that BCH has not complied with Condition 7 of the DoN that requires it to implement a plan to effectively communicate with community groups. Whether BCH is in violation of those conditions, however, is a matter that should first be addressed to the Department, which has both the expertise and the primary responsibility for enforcing its own regulations and orders. See Athol Mem’l Hospital v. Comm ’r of Div. of Med. Assistance, 437 Mass. 417, 421-22 (2002). Other parts of Count 4 do not appear to belong in this case at all. For example, plaintiffs allege public records violations, but have already filed a separate public records action which this Court has already refused to consolidate with the instant one. See Murby v. Marylou Sudders, Civ. No., 17-1036H (Suffolk Superior Court).[2] A motion to amend may also be properly denied based on " undue delay, bad faith, or dilatory motive on the part of the movant." Vakil v. Vakil, 450 Mass. 411, 417 (2008), ...

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