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Genesis Healthcare v. Delaware Health Resources Board

Superior Court of Delaware, New Castle

March 31, 2015


Submitted: December 3, 2014

Thomas P. McGonigle, Lindsay B. Orr, Drinker Biddle & Reath, LLP, Attorneys for Appellant.

Rae Meredith Mims, Deputy Attorney General, Delaware Department of Justice, Attorney for Appellee.


M. Jane Brady, Superior Court Judge

I. Introduction

This action is an appeal of a decision made by the Delaware Health Resources Board to approve the construction of a new skilled care facility, the Center at Eden Hill ("Eden Hill"). Appellant Genesis Healthcare ("Genesis") is an operator of skilled nursing facilities with which the proposed facility may compete. Because Genesis' interests may be adversely affected by the new facility, Genesis is an interested party and is permitted to appeal the approval to Superior Court.[1]

Genesis argues that the Health Resources Board committed reversible error in approving Eden Hill's application. Genesis contends that the Board misunderstood and misapplied the statutory framework that the Board is obligated to use in evaluating such proposals. Specifically, Genesis argues that (a) the Board failed to recognize that meeting the "bed need" criterion is a necessary prerequisite to any approval; (b) the Board's decision was not in keeping with its statutory obligation to protect the interests of the medically indigent; and (c) the Board did not properly consider the financial feasibility of the project. Genesis also argues that the Board's failure to follow the proper procedure is tantamount to the Board's impermissibly rewriting the rules of review without following the strict procedural guidelines for revising those rules.

The Court finds that the Board did not misinterpret or misapply the statutory or regulatory guidelines. The Board's decision is supported by substantial evidence and is free from legal error. For these reasons, this Court AFFIRMS the decision of the Delaware Health Resources Board.

II. Facts

A. The Delaware Health Resources Board and the Certificate of Public Review Process

Under 16 Del. C. §9301 et seq., certain proposed changes to the state's medical facilities must first be approved by the Delaware Health Resources Board (the "Board"). The purpose of this supervision is "to assure that there is continuing public scrutiny of certain health care developments which could negatively affect the quality of health care or threaten the ability of health care facilities to provide services to the medically indigent."[2] The premise is that the construction of new healthcare facilities or fundamental changes to existing healthcare facilities is a matter of state and public concern. The primary mechanism of oversight provided by the statute is the requirement that certain healthcare related projects receive a Certificate of Public Review ("CPR") from the Board before they can proceed.[3] Among the projects requiring a CPR is the construction of a healthcare facility, which includes skilled nursing facilities ("nursing homes").[4] During the review period, any person may request a public hearing.[5] After an approval, any person may "for good cause shown" request that the Board reconsider the approval.[6]

There are two primary sources of guidance for the Board in making the determination whether to issue a CPR. The first source is the statute itself, 16 Del. C. §9306, which itemizes seven factors for consideration. As the interpretation of the statute is at issue in the instant case, it is helpful to consider its precise language. Specifically, 16 Del. C. §9306, entitled "Review Considerations, " reads:

In conducting reviews under this chapter, the Board shall consider as appropriate at least the following:

(1) The relationship of the proposal to the Health Resources Management Plan adopted pursuant to §9303 of this title. Prior to adoption of a Health Resources Management Plan by the Board, the State health plan last in use by the Health Resources Management Council shall comprise such plan;
(2) The need of the population for the proposed project;
(3) The availability of less costly and/or more effective alternatives to the proposal, including alternatives involving the use of resources located outside the State;
(4) The relationship of the proposal to the existing health care delivery system;
(5) The immediate and long-term viability of the proposal in terms of the applicant's access to financial, management and other necessary resources;
(6) The anticipated effect of the proposal on the costs of and charges ...

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