Marlboro Park Hospital v. DHEC

THIS OPINION HAS NO PRECEDENTIAL VALUE. IT SHOULD NOT BE CITED OR RELIED
ON IN ANY PROCEEDING EXCEPT AS PROVIDED BY RULE 239(d)(2), SCACR.

THE STATE OF SOUTH CAROLINA

In The Court of Appeals

Marlboro Park Hospital and Chesterfield General Hospital,       
Appellants,

v.

South Carolina Department of Health and Environmental Control and Doctor’s
Outpatient Surgical Clinic, LLC,       
Respondents.

Appeal From Richland County

Kenneth G. Goode, Circuit Court Judge

Unpublished Opinion No. 2004-UP-228

Heard January 14, 2004 – Filed March 30, 2004

REVERSED AND REMANDED

David B. Summer, Jr., Faye A. Flowers, both of Columbia.
for Appellants.

E. Katherine Wells, of Columbia; Michael A. Molony and Stephen
L. Brown, both of Charleston; Douglas Jennings, Jr., of Bennettsville, for Respondents.

PER CURIAM:  Marlboro Park Hospital and
Chesterfield General Hospital (Hospitals) appeal the circuit court’s decision
affirming the South Carolina Department of Health and Environmental Control
Board’s (the DHEC Board) grant of a certificate of need to Doctor’s Outpatient
Surgical Clinic (DOSC), which reversed the decision of a South Carolina Administrative
Law Judge (ALJ) denying the certificate.  On appeal, the Hospitals argue the
circuit court erred in (1) affirming the DHEC Board’s de novo review
of the ALJ’s decision; and (2) finding that the ALJ improperly considered evidence
not presented at a preceding Staff Review Hearing conducted by the South Carolina
Department of Health and Environmental Control (DHEC).  We agree and reverse,
finding the DHEC Board erred in using a de novo standard of review rather
than one requiring substantial evidence.  Additionally, we find that substantial
evidence supports the decision of the ALJ. We further find that the ALJ properly
considered evidence not presented to DHEC in a preceding Staff Review Hearing
because the evidence was related to issues presented during that hearing.  Accordingly,
we reverse and remand to the circuit court to reinstate the decision of the
ALJ.

FACTS/PROCEDURAL HISTORY

DOSC filed its application for a certificate of
need with DHEC in 1988, seeking to construct an ambulatory surgery center in
Bennettsville.  The Hospitals opposed the application. 

DHEC conducted a Staff Review Hearing on the application
during which both parties presented information supporting their respective
positions.  In particular, the Hospitals argued that the proposed outpatient
surgery center would adversely impact the Hospitals and need for the center
was insufficient.  DHEC recommended approval of the application for the certificate
of need.

The Hospitals requested a contested case hearing
before the ALJ.  The ALJ conducted a hearing over a seven-day period, during
which both sides presented evidence and testimony from eighteen witnesses. 
After making findings of fact, the ALJ concluded the application did not meet
the legal criteria for approval of the certificate of need.  The ALJ’s decision
was based in part on the lack of need of a facility and in part on the negative
impact the facility would have on the Hospitals.

DOSC appealed this decision to the Board. 
In a hearing lasting a little over one hour, the DHEC Board heard oral arguments
from both parties.  It subsequently issued its order reversing the order of
the ALJ and granting the certificate of need.  The Board set forth its own findings
of fact that contradicted many of the ALJ’s findings.

The Hospitals appealed to the circuit
court, which affirmed the Board’s decision.  The Hospitals subsequently filed
a motion for reconsideration, which the circuit court denied.  This appeal follows.

LAW/ANALYSIS

I.      
The Board’s Standard of Review

The Hospitals argue the Board improperly
found facts according to its own view of the evidence utilizing a de novo
standard.  We agree.

The ALJ presides over all hearings of contested
DHEC permitting cases.  See S.C. Code Ann. § 1-23-600(B) (Supp. 2002). 
In such cases, the ALJ serves as the finder of fact.  Brown v. S.C. Dep’t
of Health & Envtl. Control, 348 S.C. 507, 512, 560 S.E.2d 410, 413 (2002). 
On appeal of such a contested case, a reviewing tribunal “must affirm the ALJ
if the findings are supported by substantial evidence, not based on the [Board’s]
on view of the evidence.”  Dorman v. Dep’t of Health & Envtl. Control,
350 S.C. 159, 166, 565 S.E.2d 119, 123 (Ct. App. 2002).  Here, DHEC’s Board
undisputedly sat in an appellate capacity when reviewing the ALJ’s decision. 
We find that the DHEC board erred by applying a de novo standard of review
rather than a “substantial evidence” standard.
[1]

II.      ALJ’s Consideration of New Evidence

The Hospitals further assign error to
the DHEC Board’s determination, with which the circuit court concurred, that
S.C. Code Ann. § 44-7-210(E) (Supp. 2000) confines contested hearings before
the ALJ to the exact evidence considered during the preceding Staff Review Hearing. 
We agree with this assignment of error.

The DHEC Board held that the ALJ erred
in considering evidence not presented during the Staff Review Hearing, all of
which undisputedly related to core issues addressed during that hearing. [2]   Relying on S.C. Code Ann. § 44-7-210(E), the
Board stated that “parties are not allowed to submit new or additional facts
for consideration at the contested case hearing which were not part of the administrative
record at the time of the [DHEC Staff Review Hearing.]”
[3]   We find the DHEC Board’s interpretation of Section 44-7-210(E) erroneous.

“The cardinal rule of statutory construction is
to ascertain and effectuate the legislative intent whenever possible.”  Strother
v. Lexington County Recreation Comm’n, 332 S.C. 54, 62, 504 S.E.2d 117,
121 (1998).  “All rules of statutory construction are subservient to the one
that the legislative intent must prevail if it can be reasonably discovered
in the language used, and that language must be construed in the light of the
intended purpose of the statute.”  Kiriakides v. United Artists Communications,
Inc., 312 S.C. 271, 275, 440 S.E.2d 364, 366 (1994).  The words of the statute
must be given their plain and ordinary meaning without resorting to subtle or
forced construction to limit or expand the statute’s operation.  Hitatchi
Data Sys. Corp. v. Leatherman, 309 S.C. 174, 178, 420 S.E.2d 843, 846 (1992). 

Here, S.C. Code Ann. § 44-7-210(E) states “[t]he
issues considered at the contested case hearings are limited to those
presented or considered during the staff review and decision process.”  (emphasis
added).  However, DHEC’s Board expansively interpreted the statute to preclude
the ALJ in contested hearings from receiving any evidence not presented
to DHEC during a Staff Review Hearing.  We reject this interpretation, finding
it conflicts with the plain language of the statute and the ordinary meaning
of the word “issues” as used in this context.

Additionally, the interpretation advanced
by the DHEC Board and circuit court is inconsistent with applicable case law
providing a de novo review for ALJ hearings conducted in a posture similar
to that in the case at bar.   See Brown, 348 S.C. at 512, 560
S.E.2d at 413 (noting that when reviewing a contested case on appeal, the ALJ
conducts a de novo hearing with the presentation of evidence and testimony.). 
A trial de novo is one in which “the whole case is tried as if no trial
whatsoever had been had in the first instance.”  Blizzard v. Miller,
306 S.C. 373, 375, 412 S.E.2d 406, 407 (1991).   Moreover, when reviewing a
contested case on appeal, “[t]he ALJ, as the fact-finder, must make sufficiently
detailed findings supporting the denial [or grant] of a permit application.” 
Converse Power Corp. v. S.C. Dep’t of Health & Envtl. Control, 350
S.C. 39, 46, 564 S.E.2d 341, 345 (Ct. App. 2002).  “Detailed findings enable
[an appellate court] to determine whether such findings are supported by the
evidence . . . .”  Id.  Here, because the ALJ was conducting a de
novo hearing, we find that he properly considered the evidence presented
in his pursuit to make “sufficiently detailed findings” of fact for subsequent
review. 

Based on our interpretation of the unambiguous
language in S.C. Code Ann. § 44-7-210(E) (Supp. 2000) and case law providing
the ALJ a de novo review in contested hearings arising from a DHEC’s
Staff Review Hearing, we conclude that the DHEC Board erred in expanding the
term “issues” to include “evidence.”  In light of the DHEC Board error, we consequently
find that the circuit court erred in its acquiescence to the DHEC’s Board position.

III.    Substantial Evidence

The Hospitals contend there was substantial
evidence to support the ALJ’s finding that the certificate of need should be
denied.  In particular, they maintain substantial evidence was presented to
show the proposed facility would adversely impact the two existing facilities
and the need for a new facility was insufficient.  Consequently, based upon
the credible evidence as determined by the ALJ, the application
would not comply with the State Health Plan, thus requiring a denial of the
permit by DHEC.  We agree.

Under S.C. Code Ann. § 44-7-210(C) (2002), DHEC must
deny a Certificate of Need if an application does not comply with the State
Health Plan.  Under the applicable State Health Plan, approval of an ambulatory
surgical facility requires that six certain criteria must be met.  These criteria
include proof of a documented need for the facility and a discussion on the
impact on existing facilities.  The State Health Plan also ranked nine criteria
to be considered while reviewing DOSC’s application.  The nine criteria in order
of importance to DHEC are need, community need documentation, distribution (accessibility),
acceptability, efficiency, adverse effect on other facilities, record of the
Applicant, ability to complete the project, and financial feasibility. [4]

As previously discussed, review of the ALJ’s factual
determinations is measured by the substantial evidence standard.  Substantial
evidence is not merely a scintilla of evidence, nor is it evidence viewed blindly
from one side.  Leventis v. S.C. Dep’t of Health & Envtl. Control,
340 S.C. 118, 130, 530 S.E.2d 643, 650 (2000)   Instead, substantial evidence
is evidence that, in light of the whole record, allows reasonable minds to reach
the reviewing tribunal’s conclusion.  Id.  Here, the Hospitals, as the
moving parties, bore the burden of proving that DOSC’s requested certificate
of need should be denied.  See S.C. Code Ann. § 44-7-210(E) (Supp. 2000)
(“The burden of proof in a reconsideration or contested case hearing must be
upon the moving party.”). 

The ALJ found the Hospitals adequately demonstrated
that the proposed facility would have a significant adverse impact on the two
Hospitals and that there was not sufficient need demonstrated to justify the
new facility.  Given evidence presented at the ALJ hearing regarding the lack
of full utilization of the Hospitals’ current facilities, the probability that
the new facility will not be able to recapture enough patients to meet its projections,
and the result that patients would be taken from the Hospitals, we find substantial
evidence existed in the record before the ALJ to support the ALJ’s decision
denying the certificate of need.  We do recognize the evidence to the contrary. 
But, as noted, the appropriate standard of review precludes a de novo
review on appeal.  Where, as here, reasonable minds could reach the same decision
as the ALJ, that decision is supported by substantial evidence. 

CONCLUSION

For the forgoing reasons, the decision
of the circuit court is reversed, and the matter is remanded to the circuit
court to reinstate the decision of the ALJ.

REVERSED AND REMANDED.

HEARN, C.J., KITTREDGE, J., and CURETON, A.J.,
concur.

[1]           We are well aware that the DHEC Board’s brazen attitude
and utter disregard for the proper standard of review created the procedural
chaos that followed.  The parties, in their respective filings with the Board,
conceded that the substantial evidence standard governed the review of the
ALJ’s factual determinations.  In defiance of the parties’ concession and
applicable law, the DHEC Board made its own findings of fact, and unapologetically
refused to consider the entire record developed in the contested hearing before
the ALJ.

[2]            Two core issues addressed in DHEC’s Staff Review Hearing
addressed (1) whether there was sufficient need for the proposed facility,
and (2) the extent to which, if any, the proposed facility would have an adverse
impact on the Hospitals.   The ALJ considered evidence related to these issues,
including the following evidence not presented during the preceding Staff
Review Hearing:  (1) expert testimony regarding need and adverse impact of
the center because the experts were hired subsequent to the hearing; (2) the
Hospitals’ Joint Annual Reports;  (3) 1997 outmigration data compiled by the
Budget and Control Board; and (4) information on the impact of the federal
1997 Balanced Budget Act’s reduction in payments to health care providers. 
This evidence dealt squarely with the issues before the ALJ.

[3] The circuit court did not specifically address this issue in oral
arguments, its subsequent written order, or in response to the Hospitals’
motion for reconsideration.

[4]
          The State Health Plan also adds:  “[DHEC] will continue to evaluate
applications for ambulatory surgery centers on their individual merit.  However,
it is the determination of [DHEC] that the benefits of improved accessibility
will not outweigh the adverse affects caused by the duplication of existing
services or equipment.”