THORNAPPLE MANOR V DEPARTMENT OF COMMUNITY HEALTH
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STATE OF MICHIGAN
COURT OF APPEALS
THORNAPPLE MANOR,
UNPUBLISHED
December 10, 2002
Petitioner-Appellee/CrossAppellant,
v
MICHIGAN DEPARTMENT OF COMMUNITY
HEALTH,
No. 230565
Barry Circuit Court
LC No. 00-000227-AA
Respondent-Appellant/CrossAppellee.
Before: Sawyer, P.J., and Gage and Talbot, JJ.
PER CURIAM.
In this action, respondent appeals by leave granted from a circuit court order reversing
the decision of a Department of Community Health hearing referee. We affirm the circuit court.
Respondent administered a “Continuous Quality Improvement Program” (CQIP), which
was developed as a Medicaid program pursuant to the resolution of a class action lawsuit by
nursing home providers against the state. The program was designed to provide financial
incentives to nursing homes in order to encourage them to develop programs directed at
enhancing their residents’ quality of life. Resident input was required, and the program was
required to exceed minimum licensing requirements.
Petitioner applied for the CQIP incentives upon its development and implementation of a
program aimed at reducing hallway congestion and creating “a more home-like, non-institutional
type dining experience.” While the written report petitioner submitted with its application
primarily outlined a change in dining room procedures, the record indicates that the program also
involved the implementation of various renovations and the addition of activities.
Respondent disqualified the program for the CQIP incentives on the basis that it
addressed a problem that was already required by licensing regulations. Petitioner sought review
of this decision. Following a hearing, the referee affirmed respondent’s decision to deny the
incentive payment. Petitioner then turned to the circuit court for review of this decision. The
circuit court reviewed the administrative record and concluded that the agency’s decision was
arbitrary and capricious and that the referee’s decision was not based upon competent, material
and substantial evidence on the record. It is from this decision that respondent now appeals.
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When reviewing a lower court's examination of administrative action, this Court must
determine whether the lower court applied correct legal principles and whether it
misapprehended or grossly misapplied the substantial evidence test to the factual findings, a
standard of review "indistinguishable from the clearly erroneous standard of review.” Boyd v
Civil Service Comm, 220 Mich App 226, 234; 559 NW2d 342 (1996). As defined in numerous
other contexts, a finding is clearly erroneous when, on review of the whole record, this Court is
left with the definite and firm conviction that a mistake has been made. Id. at 234-235.
On appeal, we have been asked to consider whether the circuit court employed the proper
standard of review in its reversal of the referee’s determination. A circuit court reviewing the
determination of an administrative tribunal should reverse the tribunal's decision only if the
decision or order: (a) violates the constitution or a statute, (b) exceeds the agency's authority or
jurisdiction, (c) is made upon unlawful procedure, (d) is not supported by competent, material, or
substantial evidence, (e) is arbitrary or capricious, or an abuse of discretion, or (f) is affected by
any other substantial or material error of law. General Motors Corp v Bureau of Safety &
Regulation, 133 Mich App 284, 287; 349 NW2d 157 (1984). We agree with the circuit court that
the referee’s decision was not supported by “competent, material or substantial evidence.”
In applying the competent, material, or substantial evidence standard of review to an
administrative decision, the circuit court is required to review the entire record, and not just
portions that support the agency's findings. Great Lakes Sales, Inc v State Tax Comm, 194 Mich
App 271, 280; 486 NW2d 367 (1992). Substantial evidence is less than a preponderance of the
evidence, but is more than a mere scintilla. In re Payne, 444 Mich 679, 692; 514 NW2d 121
(1994). Our Supreme Court has cited the dictionary definitions of "competent," "material," and
"substantial" with regard to a Worker's Compensation Appellate Commission decision:
"Competent, material, and substantial evidence . . . is solid, true, reliable, authoritative, [and]
capable . . . ." Goff v Bil-Mar Foods, Inc (After Remand), 454 Mich 507, 514 n 5; 563 NW2d
214 (1997), overruled in part on other grounds Mudel v Great Atlantic & Pacific Tea Co, 462
Mich 691, 696-697; 614 NW2d 607 (2000).
Respondent asserts the trial court erroneously applied a de novo standard of review in
overturning the referee’s finding. However, we find that rather than substituting its judgment for
that of the referee, the circuit court correctly found that his decision was not supported by
substantial evidence on the record.
Respondent’s primary reason for disqualifying petitioner’s request for incentives was that
petitioner’s program addressed licensing compliance issues, and failed to exceed licensing
minimums. The referee agreed with respondent’s determination that petitioner’s program did not
exceed licensing minimums, thereby upholding the agency’s determination. However, the record
supports the circuit court’s conclusion that the referee’s decision was not supported by
competent, material or substantial evidence. For example, the record established that petitioner
had never been cited for licensing violations related to congestion or safety in the hallways, nor
were any licensing violations cited upon respondent’s denial of petitioner’s incentive. Moreover,
the evaluators admitted to having little, if any, knowledge with respect to licensing regulations.
Further, it was clearly established that pursuant to CQIP policy, a program qualified if it
exceeded minimum licensing requirements. In this case, the report submitted to respondent,
while referencing congestion, expressly indicated that the program’s purpose was to create “a
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more pleasant dining experience.” Although not fully documented in petitioner’s written report,
the program at issue was clearly aimed beyond reducing hallway congestion. For example,
dining room and day room renovations and redecorations, the implementation of additional
activities, the serving of hor d’oeurves and the addition of a television were all clearly in excess
of the minimum licensing requirements. Moreover, there is no evidence, let alone substantial
evidence, on the record to the contrary.
Ultimately, the evidence shows that respondent’s decision to deny petitioner CQIP
incentives was based on the quality of petitioner’s written report, rather than whether the
program requirements were actually met. However, even though the extent of the improvements
was not fully documented in petitioner’s report, petitioner was reasonable in its expectation that
respondent’s evaluation would extend beyond the written report. As noted, the CQIP bulletin
expressly stated that the “audit will essentially consist of the surveyor’s review of appropriate
documents enhanced by interview with facility staff member(s), resident(s), or other
designee(s).” However, the record is clear that the review of petitioner’s report was not
enhanced by any of these steps outlined in the CQIP policy bulletin. Specifically, evidence
indicates that the evaluators’ neglected to visit the facility, or interview staff members, residents
or other designees. Also in support of petitioner’s expectations of an extended review was the
five-page limit on the written reports submitted to respondent in request of incentive payments
pursuant to CQIP, making it arguable that there was not enough room to document the details of
the project with such specificity.
Further, there is evidence on the record with regard to the active involvement of the
residents in the formulation and implementation of petitioner’s program. Also, when presented a
hypothetical program mirroring petitioner’s program, respondent’s program specialist involved
in the formation of the CQIP policy agreed that the program at issue did indeed qualify for CQIP
financial incentives.
We conclude that the circuit court did not apply the wrong legal standard, or commit
clear error in failing to find competent, material or substantial evidence in support of the
referee’s findings. The facts on the record clearly contradict the referee’s findings that the
program at issue did not exceed minimum licensing requirements as proscribed by CQIP policy.
Accordingly, it is clear the circuit court reviewed the entire record and it cannot be found, with a
definite and firm conviction, that it erred in its determination that the referee’s decision was not
supported by competent, material and substantial evidence.
Petitioner raised issues on cross appeal pursuant to MCR 7.207. However, because we
agree with the circuit court’s findings in favor of petitioner, we refrain from addressing
petitioner’s alternative arguments.
Affirmed.
/s/ David H. Sawyer
/s/ Hilda R. Gage
/s/ Michael J. Talbot
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