In re AssureCare of Vermont, Inc.

In re AssureCare of Vermont, Inc.  (96-320); 165 Vt 535; 686 A.2d 959

[Opinion Filed 01-Nov-1996]            
          
       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any errors in order that corrections may be made before this opinion goes
  to press.
          
          
                                 No. 96-320
          
          
  In re Application of AssureCare                   Supreme Court
  of Vermont, Inc.
                                                    On Appeal from
                                                    Health Care Authority
          
                                                    September Term, 1996
          
          
          
  Theresa Alberghini, Chair
          
  Leslie C. Pratt, Montpelier, for plaintiff-appellant
          
  Margaret H. O'Donnell, Montpelier, for amicus curiae Department of
  Banking, Insurance, Securities and Health Care Administration
          
          
  PRESENT:  Allen, C.J., Gibson, Dooley, Morse and Johnson, JJ.
          
          
       ALLEN, C.J.   AssureCare of Vermont, Inc. (AssureCare) sought to
  operate in Vermont as a health maintenance organization (HMO) and applied
  for a certificate of need (CON) under 18 V.S.A. § 9434.  The Vermont Health
  Care Authority (the Authority) denied the application.  AssureCare appeals,
  claiming that the Authority: (1) invented a new criterion for CON
  qualification, contrary to statutory limitations; (2) erred by requiring
  that the proposed service be the "least costly and most effective" service
  provider in Vermont; (3) unfairly imposed several criteria late in the
  application process; (4) acted beyond its authority by considering the
  likelihood of AssureCare's success or failure; (5) reviewed criteria that
  only the Office of Vermont Health Access (OVHA) should examine after a CON
  has issued; and (6) failed to act within the statutory deadline.  We
  affirm.

       AssureCare planned to operate statewide in the commercial health
  insurance market and become a provider under the state Medicaid program,
  known as the Vermont Health Access Plan (VHAP).  Established by the
  Legislature in 1995, VHAP is designed to extend health benefits

 

  coverage to uninsured Vermonters who were not previously eligible for
  assistance under the Medicaid program and bring Medicaid beneficiaries into
  managed care plans.       

       AssureCare filed a mandatory letter of intent with the Authority, and
  then filed its formal application.  The application was subject to review
  by the Health Policy Council (Council).  The Council's duty was to make a
  recommendation to the Authority, which was charged with making CON
  decisions.  See 18 V.S.A. § 9440 (prior to 1995 amendment).(FN1)

       The Council and its Finance Committee reviewed AssureCare's proposal,
  and the Finance Committee voted to recommend approval of the application. 
  The full Council, however, split evenly on a motion to recommend approval. 
  The Authority extended its deadline for making a decision and decided to
  hold a public hearing on March 18, 1996.  Assurecare's representatives
  attended the meeting and offered the only testimony.        

       On May 24, 1996, the Authority issued a decision denying AssureCare a
  CON for its proposed HMO.  The Authority found that neither AssureCare's
  "parent company nor any of its other subsidiaries is authorized to operate
  an HMO in any jurisdiction.  As a result, it has no corporate background,
  experience, or track record to support its application."  Referring to
  "non-binding" letters of intent, the Authority found that "AssureCare
  presented no evidence of any kind of commitment from any Vermont or other
  hospital signaling its willingness to participate in AssureCare's proposed
  network of providers."  It made similar findings as to arrangements with
  support services and ancillary providers.       

       The Authority's conclusions addressed six "permissive criteria"
  included among eighteen criteria set forth under 18 V.S.A. § 9436 for
  determining whether a CON shall issue: the Council's recommendation (§
  9436(a)(1)); the relationship of the proposed health service to the 



  long-range development plan of the health care facility proposing such
  service (§ 9436(a)(3)); the availability of less costly or more effective
  alternatives (§ 9436(a)(5)); the relationship of the proposed health
  service to the existing health care system, including ancillary or support
  services (§ 9436(a)(7),(9)); and the availability of resources, including
  health care providers and management personnel (§ 9436(a)(8)).  The
  Authority expressed "concern" about the Council's deadlock over the
  application, and made negative findings with respect to the other
  permissive criteria identified as relevant to the application.  

       In addition to the permissive criteria, the Authority considered five
  "required findings" under § 9437 with respect to CON applicants.  It
  concluded that three of the findings applied to the instant application:  

     [T]he board shall not grant a certificate of need .  .  .  unless it 
     finds: 
     

          (1) superior alternatives to such services, in terms of cost,
     efficiency, and appropriateness, do not exist, and the development of
     such alternatives is not practicable . . .   

          . . .                        

          (3) in the absence of the proposed new service, patients would
     experience serious problems in terms of costs, availability, or
     accessibility, or such other difficulties as may be identified by the
     board, in obtaining care of the type proposed . . .   

          . . . 

          (5) the proposed new institutional health service is consistent
     with the health resource management plan . . . .   

  Id.  Based in part on issues raised by the permissive criteria, the
  Authority ruled that the AssureCare proposal did not meet required findings
  (1) and (3), and denied the application.  The present appeal followed.

       Our standard of review in appeals from the Authority is very narrow. 
  As we stated in In re Professional Nurses Serv., Inc., 7 Vt. L.W. 33, 34
  (1996), "The Legislature has given the [Health Care Authority] Board
  express authority for the administration of `[c]omprehensive 

 

  health planning' in Vermont.  18 V.S.A. §§ 9401(a), 9404(a).  Therefore, we
  will not disturb the Board's statutory interpretations absent a compelling
  indication of error."

       Addressing the permissive criteria, AssureCare argues that the
  Authority failed to adhere to criterion three (the relationship of the
  proposed health service to the long-range development plan (§ 9436(a)(3)),
  thereby inventing a new "readiness" criterion for CON qualification.  It
  contends that this is contrary to the statutory requirement that new
  criteria be limited to those that are "duly adopted and published 90 days
  prior to the submission of the original application for certificate of
  need."  Id. § 9436(a).

       AssureCare argues that this is evidenced by the disparate treatment
  given to its application compared to that of a similar applicant, the
  Capital District Physicians' Health Plan (CDPHP), which received a CON from
  the Authority.  According to AssureCare, both applicants had yet to develop
  provider networks by contracting with physicians or other health care
  providers.  The Authority, however, gave CDPHP both approval and a year in
  which to implement its proposal. 

       The Division of Health Care Administration, Department of Banking,
  Insurance, Securities and Health Care Administration (DHCA), as amicus
  curiae, disagrees with AssureCare's analysis.  It points out that when
  CDPHP applied for a CON, it was already an HMO licensed to do business in
  New York, with a total enrollment of 155,000 subscribers and 1,800
  physicians and physician support providers.  Its application sought to
  expand its services into Rutland and Bennington counties, which were
  adjacent to its existing service area.  CDPHP also demonstrated that it had
  signed up twenty Vermont-based specialists by the time its application was
  reviewed by the Council, although it had not yet recruited additional
  primary care physicians.      

       AssureCare, on the other hand, was a start-up company with no track
  record or history of providing HMO services in any other state or
  jurisdiction.  It also planned to operate statewide, rather than in a
  limited service area.  It projected a subscriber base of  22,000 people 



  within several months of receiving its CON, and a base of 32,000 by the end
  of 1998.  AssureCare, however, presented no evidence that it could
  implement this ambitious undertaking.

       We agree with DHCA that the Authority's decision to reject
  AssureCare's application is distinguishable from its decision to issue a
  CON to CDPHP.  Contrary to AssureCare's assertion, the Authority did not
  establish a new criterion but merely explained the connection between
  AssureCare's long-term goals -- the subject matter of criterion three --
  and the establishment of a provider network:  

     This application is very different from previous CON applications, in
     that it proposes to immediately begin operations on a statewide basis,
     serving a relatively large subscriber base.  In these circumstances, and
     in light of the lack of any track record for this company, its parent, or
     its sister companies in other states, it is especially important that the
     applicant demonstrate during the CON review process true network
     capabilities to serve the population it intends to cover, which
     AssureCare has not done.  
          
       AssureCare next contends that the Authority erred in reading criterion
  five ("availability of less costly or more effective" alternatives (§
  9436(a)(5)) literally, rejecting any CON applicant that cannot demonstrate
  that it is the least costly and most effective competitor in the
  marketplace.  The Authority's decision did use the phrases "least costly"
  and "most effective" as criterion guidelines, but it used both phrases in
  describing the kinds of evidence it expected an HMO applicant for a CON to
  present.  It did not suggest that an applicant must have lower costs and
  higher effectiveness than all competitors to be entitled to a CON.  

       Section 9436 presents an array of criteria and does not direct the
  Authority in their relative weighting.  We may assume, though we need not
  decide, that an otherwise qualified applicant may receive a CON even if it
  is does not have the lowest costs of all HMOs in the state.  Moreover, the
  Authority's decision on criterion five states that "the fact that
  [AssureCare] has not been able to form any kind of a provider network to
  date indicated that it will not be able to operate effectively as an HMO in
  the state."  The phrase "operate effectively" does not suggest that it need
  operate "most effectively," that is, be the most effective HMO in Vermont.
       
 

       AssureCare also contends that the Authority in effect imposed criteria
  seven, eight, and nine at the eleventh hour, having indicated at earlier
  stages of the application process and at the public hearing that these
  criteria would not be considered.  It is true that the Council and the
  Council's Finance Committee indicated that criteria seven through fourteen
  were "not applicable."  Yet AssureCare concedes that there were relevant,
  if cursory questions about these criteria at the hearing.  In addition,
  AssureCare's requests for findings specifically addressed criterion seven
  (relationship to the existing health care system) and included materials
  relevant to criteria eight and nine. 

       More important, AssureCare cannot, and does not, distinguish the
  subject matter of criteria seven, eight, and nine from the balance of the
  Authority's considerations.  It also does not suggest any significant way
  in which it was prejudiced by the earlier indications that these criteria
  would not be considered.  On the contrary, the essence of the Authority's
  decision was that the applicant had not demonstrated its capacity to
  fulfill its extensive plans for statewide service -- a theme that is
  repeated in considering each of the relevant permissive criteria, not just
  criteria seven, eight, and nine.  In short, AssureCare was not harmed, even
  if notice about the relevancy of criteria seven, eight, and nine was late
  in coming. 

       AssureCare next argues that the Authority was not authorized to delve
  into "its own predictions as to the ultimate probabilities for the success
  or failure of such ventures."  We disagree.  This statement flies in the
  face of the basic rationale for CON review of new institutional health
  services, the future success or failure of which is of great public
  concern.  As stated in § 9431: 

     It is declared to be the public policy of this state that the
     general welfare and protection of the lives, health and property of the
     people of this state require that all new institutional health services be
     offered or developed in a manner which avoids unnecessary
     duplication, contains or reduces increases in the cost of delivering
     services, while at the same time maintain and improve the quality of
     and access to health care services, and promotes rational allocation of
     health care resources in the state; and that the need, cost, type, level,
     quality, and feasibility of 

 

     providing any new institutional health
     services be subject to review and assessment prior to any offering or
     development.  
          
  (Emphasis added.)

       The burden of proof was on AssureCare to provide evidence on the
  permissive criteria, including those that implicated the feasibility of the
  applicant's plan.  The fact that the proceeding was not contested did not
  bar the Authority from considering evidence, or the lack thereof, bearing
  on the criteria.  Cf.  In re Denio, 158 Vt. 230, 237, 608 A.2d 1166, 1170
  (1992) (even where applicant does not bear risk of nonpersuasion and matter
  is uncontested, hearing body may consider evidence before it from any
  source and rule appropriately).   

       AssureCare also maintains that it is the function of the Authority to
  authorize development of health services and not thwart that development by
  examining the availability of resources, which should be examined during a
  "readiness review" by OVHA.(FN2)  There is nothing in the governing statute to
  indicate that a readiness review may serve as an alternative to CON review,
  either generally or as to any specific issues.  It is reasonably clear from
  the statutory and administrative framework for licensing HMOs that
  readiness reviews are a final check on an applicant's capacity to act in
  accordance with a CON and the underlying plan, and not a substitute for CON
  review.  Finally, AssureCare argues that the Authority's failure to act
  within ninety days of the completion date of AssureCare's application
  complicated and hindered its ability to comply with the requirements of the
  process.  It claims that the Authority's delays were "the  single biggest 

 

  contributor to the delayed creation of a provider network and the staffing
  shortcomings which the Authority seized upon as grounds for its denial."  

       We reject this argument for two reasons.  First, AssureCare does not
  adequately explain its contention and we find nothing in the record to
  support it.  Second, we have noted that "`"[a] statutory time period is not
  mandatory unless it both expressly requires an agency or public official to
  act within a particular time period and specifies a consequence for failure
  to comply with the provision."' . . . Where the Legislature has intended a
  time limit to be mandatory, it has clearly expressed that intent."  In re
  Mullestein, 148 Vt. 170, 173-74, 531 A.2d 890, 892 (1987) (quoting Thomas
  v. Barry, 729 F.2d 1469, 1470 n.5 (D.C. Cir. 1984) (quoting Fort Worth
  Nat'l Corp. v. Federal Sav. & Loan Ins. Corp., 469 F.2d 47, 58 (5th Cir.
  1972))).  Not only is the ninety-day time period a target date and not a
  mandatory deadline, but it also appears that AssureCare was well aware that
  the target date would not be met.       

       In sum, AssureCare has not demonstrated "a compelling indication of
  error."  Professional Nurses Serv., Inc., 7 Vt. L.W. at 34.   

       Affirmed.



    FOR THE COURT:



    _______________________________________
    Chief Justice







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                                  Footnotes



FN1.   The Legislature amended the CON statutes, effective July 1,
  1996, to create a new division of the Department of Banking, Insurance,
  Securities and Health Care Administration.  We adhere in this opinion to
  the nomenclature of the parties, whose briefs refer only to the Health Care
  Authority and not to the new Division of Health Care Administration, which
  was created following the events here at issue.

FN2.   A November 17, 1995, Authority memorandum to AssureCare
  included an OVHA statement explaining that 

    [r]eadiness reviews will be conducted by the State of Vermont as part
    of the finalization of health plan contracts for participants in the
    Vermont Health Access Plan.  The purpose of the readiness reviews
    is to ensure that each health plan has the necessary provider network
    capacity, staffing, and policies and procedures in order to enroll and
    provide services to members of the managed care program.