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Heritage Grove v. Department of Health

Court of Appeals of Washington, Division 2

December 10, 2019

HERITAGE GROVE, a Washington not-for-profit corporation; PRESTIGE CARE, INC., a Washington corporation; CARE CENTER (YAKIMA), INC., a Washington corporation; and YAKIMA VALLEY VENTURES, LLC, a Washington limited liability company. Appellants,

          Melnick, J.

         Heritage Grove submitted a certificate of need (CN) application to the Department of Health (DOH). DOH initially approved the application, but a group of nursing homes in Yakima (collectively Respondent Nursing Homes[1]) administratively challenged the CN. At the conclusion of the administrative proceedings, DOH issued findings of fact, conclusions of law, and final order (Final Order) denying it. Heritage Grove and others[2] petitioned for judicial review of the Final Order. The superior court affirmed the Final Order and also dismissed the petition for judicial review on mootness grounds.

         Concluding that the case is moot, we affirm.


         I. Overview of the CN Application Process

         Washington created the CN program (the Program) to "promote, maintain, and assure the health of all citizens in the state, provide accessible health services, health manpower, health facilities, and other resources while controlling increases in costs, and recognize prevention as a high priority in health programs." RCW 70.38.015(1). DOH administers the Program. RCW 70.38.105(1). Health care providers may open certain health care facilities, including nursing homes, only after receiving a CN from DOH. RCW 70.38.025(6), .105(4)(a).

         In determining whether to issue a CN for a new health care facility, DOH usually considers the following four criteria: (1) need, (2) financial feasibility, (3) structure and process of care, and (4) cost containment. WAC 246-310-200(1); see WAC 246-310-210 to -240. However, RCW 70.38.115(13)(b) provides that "[w]hen an entire nursing home ceases operation, the licensee or any other party who has secured an interest in the beds may reserve his or her interest in the beds for eight years or until a [CN] to replace them is issued, whichever occurs first." This procedure is referred to as "banking" beds. The statute and regulations then allow the party who has banked their beds to "unbank" them in a new facility. For providers filing a CN application seeking to unbank beds, assuming certain conditions are met including that the new beds are located in the same planning area where they were before they were banked, the applicant does not need to prove the "need" criterion, WAC 246-310-210, in their CN application. RCW 70.38.115(13)(b); WAC 246-310-396.

         II. Heritage Grove's Application

         Until October 15, 2009, Heritage Grove operated a 97-bed nursing home facility in Yakima County. The facility closed, and Heritage Grove sent a letter to DOH requesting to bank its beds. DOH granted Heritage Grove's request and stated that Heritage Grove's reservation of the beds would expire on October 15, 2017, unless it issued a CN before then.

         In December 2014, Heritage Grove submitted an application for a CN. Heritage Grove sought to build a facility focused on post-acute care and sought to unbank its 97 beds. The application stated that the facility would open as Heritage Grove but would be managed by Prestige Care, Inc. It also stated that Prestige had "a Purchase and Sale Agreement with the current owners of the property . . . [which] allow[ed] for the purchase to be finalized once certain contingencies [were] met, including the approval of the [CN] application." Admin. Record (AR) at 2494.

         After one round of screening questions, the Program began its review of Heritage Grove's application. It received public comments, including those by Respondent Nursing Homes, and rebuttal comments. The Program also held a public hearing.

         On July 15, 2015, the Program completed review of the proposed facility. The Program conditionally approved Heritage Grove's CN application, provided that Heritage Grove agreed to five conditions. Heritage Grove accepted all five conditions, and shortly thereafter, in August, the Program approved Heritage Grove's CN application. The document it sent stated: "ISSUANCE OF THIS CERTIFICATE OF NEED IS BASED ON THE DEPARTMENT'S RECORD AND EVALUATION." AR at 3153. The Director of the Office of Community Health Systems authored the approval.

         Respondent Nursing Homes then requested an adjudicative proceeding to contest the CN approval. After a hearing, a health law judge affirmed the Program's approval of the CN. Respondent Nursing Homes then administratively appealed the decision.

         On August 25, 2017, at the end of the administrative appeal process, the Secretary of DOH, via a designee, issued the Final Order denying the CN because the application failed both the financial feasibility and cost containment criteria. Heritage Grove did not petition the secretary's designee to stay the Final Order.

         On September 21, 2017, Heritage Grove sought judicial review of the Final Order in superior court. Heritage Grove did not file a petition to stay the Final Order before October 15, 2017, which was ...

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