This case presents a simple, but very serious, issue involving the limits of governmental control over private independent enterprise. It is conceded that petitioner is fully qualified by character, competence *974and financial ability to operate and maintain a skilled nursing home facility and that he has operated this facility since 1953; that he was licensed as a 30-bed facility, but as a result of modifications and improvements made in 1965 to comply with respondent’s Life Safety Code, his capacity was reduced to 28 beds; and that he has never participated in the Medicaid program, nor has he ever received any public funds either as reimbursement for operating expenses or for construction costs. As a matter of fact, his recently completed modernization project, accomplished with prior approval by the State, was paid for through private financing. And petitioner only seeks authorization for two additional beds, which would restore his facility to its authorized capacity. Yet respondent, in his decision of November 1, 1982, found that petitioner could not obtain approval because the availability of beds he requested would be limited to private-pay patients, who represented only 25% of the existing backlog of patients requiring nursing home care. Unlike the circumstances described in our recent decision in Matter of Chambery v Axelrod (101 AD2d 610), this record demonstrates a determined effort to enforce or impose a mandatory Medicaid admissions policy on petitioner and presumably upon all similarly situated facilities. In my view, such a policy is not only arbitrary and capricious and an abuse of discretion, but beyond the powers of respondent (see Matter of Levine v Whalen, 39 NY2d 510). 11 Nor is his determination supported by the record. Subsequent to the report of the administrative law judge, dated July 14, 1982, which recommended approval, the local Health Systems Agency, by memorandum dated August 19, 1982, certified a need for additional long-term care beds in Monroe County because of the cancellation of a prior approval for 46 health-related facility beds and 16 skilled nursing home beds by the New York State Office of Health Systems Management. This memorandum and the significance of its contents were made known to respondent by written communication dated August 30, 1982. His final order did not refer to it in his computation of need, and it must be assumed it was not considered. Thus, respondent’s assessment of the question of need is clearly erroneous, and the determination irrational as not founded upon substantial evidence (see Matter of Fairfield Nursing Home v Whalen, 64 AD2d 802). H The petition should be granted and the determination annulled.