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Kadlec Reg'l Med. Ctr. v. Department of Health

Court of Appeals of Washington, Division 2

October 8, 2013

Kadlec Regional Medical Center, Appellant,
The Department of Health, Respondent

Appeal from Thurston Superior Court. Docket No: 11-2-01523-5. Date filed: 02/28/2012. Judge signing: Honorable Christine a Pomeroy.

Brian W. Grimm (of Perkins Coie LLP ), for appellant.

Robert W. Ferguson, Attorney General, and Richard A. McCartan, Assistant, for respondent.

AUTHOR: Thomas R Bjorgen, J. We concur: J. Robin Hunt, P.J., Joel Penoyar, J.


Page 877

Bjorgen, J.

[177 Wn.App. 172] ¶ 1 Kadlec Regional Medical Center applied to the state Department of Health (Department) to increase its capacity by up to 114 beds. The Department issued Kadlec a certificate of need (CN) authorizing the addition of only 55 beds. Kadlec appeals the dismissal of its adjudicative challenge to that CN by a health law judge (HLJ). Kadlec argues that the HLJ wrongly dismissed the adjudicative proceeding because (1) Kadlec's CN application primarily requested 114 new beds and the denial of that application should receive an adjudicative hearing, (2) Kadlec's implementing the 55-bed CN did not waive its right to an adjudicative proceeding, and (3) the Department informed Kadlec that it had the right to an adjudicative proceeding. Kadlec alternatively argues that if we uphold [177 Wn.App. 173] the HLJ's dismissal, we should still grant judicial review and reverse based on the Department's use of an improper population projection in its CN decision. We reverse the superior court's decision affirming the HLJ's dismissal, and we remand for an adjudicative hearing because Kadlec's application clearly focused on a 114-bed request, with two other scenarios seeking fewer beds as essentially secondary alternatives. Thus, the Department's grant of the 55-bed CN functioned as the denial of Kadlec's 114-bed CN request.


I. Certificate of Need

¶ 2 A central purpose of the state Health Planning and Resources Development Act, chapter 70.38 RCW, is to provide accessible health services, facilities, and other resources while controlling cost increases. RCW 70.38.015.

Page 878

The principal tool in accomplishing this is the requirement of RCW 70.38.105(4) that medical care centers obtain a CN from the Department before opening certain types of facilities or increasing a facility's capacity. The Department determines whether to grant a CN using the criteria set out in RCW 70.38.115. These include, among other elements, (1) need for the proposal, (2) availability of less costly or more effective alternative methods of providing the services, (3) quality of care, (4) financial feasibility, and (5) cost containment.

¶ 3 In November 2009 Kadlec applied for a CN, requesting to add 114 new hospital beds to its existing hospital in Richland. It also submitted alternative proposals for 75 new beds and 55 new beds because it did not know whether the Department would use a high-growth or a medium-growth population forecast. Since Kadlec had an immediate need for additional beds, it did not want to risk denial of its entire request.

[177 Wn.App. 174] ¶ 4 The introduction, title sheet, and project description in Kadlec's CN application all presented the proposal as one for 114 new beds. More specifically, the project description stated, " Kadlec is requesting ... 114 acute care beds" and that " [a]s part of its due diligence, Kadlec has sensitivity-tested other bed configurations" in terms of hospital capacity, financial performance, efficiency, and operating expenses. Administrative Record (AR) at 651-52. Kadlec's application stated further that without an increase in beds, it would face shortages in several departments starting in 2010. Although Kadlec's application did not state that it would refuse the 75- or 55-bed scenarios, it referred to them as " not preferred" and " inferior," explaining that under those scenarios, bed shortages would begin in 2012, while under the 114-bed scenario Kadlec would have sufficient beds for at least five years. AR at 703. Kadlec's application summarized that the 114-bed option was " the best opportunity to meet projected ... demand," had the " fewest disadvantages," and was " the most efficient ... of any option." AR at 710.

¶ 5 Shortly after Kadlec submitted its CN application, Kennewick General Hospital (KGH) also applied for a CN, requesting to add 25 new hospital beds. Because both applications involved facilities located in the Benton/Franklin counties' planning area, the Department reviewed ...

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