In Re Central Vermont Medical Center

Skoglund, J.,

¶ 23. dissenting. If this

were a case where evidence offered in support of a certificate of need (CON) application had been evaluated below in light of statutes and regulations and a decision based on established criteria, I would approach such a decision with deference. The ruling in this case by the Commissioner of the Department of Banking, Insurance, Securities, and Health Care Administration is not such a decision. Deference must yield when — as here — it is apparent that the decision is contrary to law and considerations of fundamental fairness and appears to have been influenced by an improper criterion. Accordingly, I must respectfully dissent.

I.

¶ 24. This is not a case about individual rights, but it is nevertheless one that speaks to the heart, because it concerns an institution essential to the lives of so many Vermonters. Central Vermont Medical Center is the sole community hospital serving the residents of Montpelier, Barre, Berlin and many other towns. Residents rely on CVMC for a broad range of health care services, including inpatient hospitalization, same-day surgical procedures, birthing services, emergency-room care, and health-and-hospice services. The current hospital facility was built in 1967, and since then has undergone only two significant improvement projects, a 1979 renovation of in-patient care areas, and a more recent construction of an attached medical office building.

¶25. The current project proposal was driven by changes in health care that *614have occurred in the thirty-five years since CVMC’s initial construction. As explained in the CON application, “[sjince the original facility was constructed, CVMC has experienced a major change in the manner in which health care services are provided, with a significant shift to outpatient care. This shift has necessitated a major portion of the current project.” Finding that current space was inadequate for same-day patient registration, processing, surgery, and recovery, CVMC proposed to create an expanded and “integrated Ambulatory Care Center,” essentially a day hospital, so that registration, processing, surgical procedures, waiting, and recovery would all occur in one area, with attendant projected savings in staffing efficiencies.

¶ 26. Another major change in health care over the last four decades has occurred in the area of birthing services. As explained in the hospital’s CON application, the current facility was designed “around care delivery concepts of the 1960’s, with Labor/Delivery, Nursery, and Post-partum Recovery located in separate areas.” The hospital proposed to modernize the birthing center to address current birthing practices and patient needs by locating labor, delivery, and recovery all in one area, providing the necessary space for mother and family, and simultaneously realizing staffing efficiencies by eliminating the need for nurses in separate areas.

¶ 27. A third component of the project proposal was to upgrade the hospital’s largely original thirty-five year old heating, ventilating, air conditioning, and plumbing systems, and to increase the size of the operating rooms, which had become increasingly cramped because changes in technology over several decades had resulted in more equipment in the surgical area.

¶ 28. In addition to a detailed project description and statement of reasons for each of the three project components, the CON application also addressed each of the relevant review criteria set forth in 18 V.S.A. §§ 9436 and 9437, contained tables breaking-down the project costs, and identified sources of funding, the bullí of which ($8.5 million out of total cost of $12.5 million) would come from a special capital reserve fund. The proposal also contained numerous letters of support from local agencies, including home health and hospice, school districts, towns, and businesses attesting to the community’s need for the project.

¶ 29. Following the submission of its application, CVMC responded to a series of inquiries from Department staff requesting additional information. The Department’s review architect, Susan Davis, conducted a site visit and prepared a report for the Department, and the Public Oversight Commission (POC) conducted two separate public hearings. Davis's report analyzed each component of the proposed project. As to the infrastructure element, the report stated that although CVMC had not adduced “any substantive evidence of breakdowns” or “imminent system failures,” its proposal for core infrastructure replacement reflected the normal aging process for facilities built in the 1960’s and 1970’s, noted that the improvements were intended to bring the facility more in line with today’s standards, and observed that an actual failure of the systems could impose significant hardship, compromise operations, and increase the costs of replacement. The report further concluded that it was reasonable to increase the size of operating rooms to accommodate new equipment, allow staff to move more freely, and meet current industry standards, as required for both patient and worker safety. As to the reorganization of ambulatory-care services, the report found that the plan would enhance patient privacy, ease patient access, and relieve overcrowding. With respect to maternity services, the report further found that the current hospital structure did “not meet the expectations of current *615medical or social practices,” and concluded that the proposed renovation not only remedied this problem, but offered the potential for operational savings through staffing efficiencies. Again, these were the conclusions of the Department’s own architectural consultant.

¶ 30. Testimony by hospital officials at the POC hearings underscored the project theme of modernization, noting the fundamental shift in health care to outpatient services and the need to reorient hospital resources accordingly, the need to replace infrastructure that was nearing the end of its projected life cycle, the inadequacy of operating rooms below current standards, and the value of integrating birthing services to respond to contemporary patient needs and expectations. At the conclusion of the second hearing, the POC voted to approve the project, with the understanding that CVMC would provide additional information at a later time on the project’s expected cost savings.

¶ 31. Two months later, the Commissioner issued her decision denying the CON. The Commissioner found that CVMC had failed to show a need for the proposed infrastructure improvements, noting in particular that it had failed — in response to staff inquiries — to demonstrate any “life safety violations” or “specific instances of electrical, ventilation, [or] air conditioning malfunctions.” The Commissioner underscored this conclusion in a separate subsection of her decision entitled “The Lack of Evidence That the Infrastructure Is Worn-Out,” where she reiterated CVMC’s failure to provide specific instances of “life safety violations or accreditation issues that would dictate that renovations or replacements are absolutely necessary,” and cited Davis’s observation that the hospital had not adduced “evidence of breakdowns or major maintenance that would suggest imminent system failures.”

¶ 32. Having determined that the infrastructure element was unsupported, the Commissioner concluded that the balance of the project must fail as well, reasoning that “CVMC supports the rest of the project on the asserted necessity of the infrastructure element.” Nevertheless, the Commissioner briefly addressed the other project components, concluding that the “amenity” improvements for ambulatory care failed to “rise to the level of need,” that the hospital had failed to demonstrate “problems from undersized operating rooms,” and that modernizing the birthing center for the “convenience and comfort” of expectant mothers and their families did not “rise to the level of need.”

II.

¶ 33. What is initially most striking about the Commissioner’s ruling is the “disconnect,” to borrow CVMC’s term, between the record and the decision. The hospital’s CON application did not condition the ambulatory care and birthing center elements on the infrastructure improvements, but merely noted the efficiencies to be derived from performing the proposed renovations simultaneously. The application stated plainly that the project had “three principal objectives” — infrastructure upkeep, an integrated ambulatory care center, and a modem birthing center. Each of these components was addressed on its merits at the hearings, as well.1 The Commis*616sioner apparently seized on statements by the hospital’s general services officer, who testified that “[t]he main driver, from my perspective being a facilities person, for doing this project was the need for infrastructure upgrade,” as well as later testimony by the hospital’s president, Daria Mason, characterizing the infrastructure element as “the driving force.” Viewed fairly and in context, however, it is clear that the statements went to the economic efficiency of accomplishing the birthing center and ambulatory care components at the same time as the infrastructure upgrades, not to their fundamental need. As Mason explained: “We’re tearing down the walls to do that, now is the time to create the efficiency.”

¶ 34. Another disconnect is found in the disparity between the record evidence demonstrating a need for infrastructure replacement based on natural systemic obsolescence, and the Commissioner’s denial based on the absence of evidence of systemic failure. The Commissioner virtually ignored her own expert’s finding that the proposal for “[¡Infrastructure replacement represents equipment nearing its functional lifespan.” The problem is compounded by the Commissioner’s insistence on appeal that she was not evaluating the proposal against a standard of “absolute necessity” to avoid system failure or life safety violations, despite the explicit statements in her decision to the contrary.

V 35. Finally, the decision’s analyses of the hospital’s birthing center and ambulatory care proposals, while admittedly an afterthought, are shockingly brief and dismissive, characterizing as mere “amenities” and “conveniences” the hospital’s well-reasoned arguments for integrated outpatient care and a modern birthing center attuned to patient needs.

¶ 36. Analyzed solely on the record below, this case would test severely the deferential standard traditionally accorded the Commissioner’s CON rulings. See In re Prof'l Nurses Serv., Inc., 164 Vt. 529, 532, 671 A.2d 1289, 1291 (1996) (agency decisions are presumed correct absent clear and convincing showing to the contrary). The decision is unresponsive to the weight of the evidence and offers rationalizations for its conclusions rather than persuasive reasons. Absent other considerations, I would hold that the decision is clearly erroneous. The majority has obviously found otherwise based solely on the very forgiving standard of appellate review.

¶ 37. Deference aside, while the matter was pending on appeal before this Court, an event occurred that provided, to me at least, an explanation for the curious dissonance between the record and the ruling in this case. In January 2002, the Governor of Vermont appeared on a radio talk show and was asked directly by the interviewer to explain why the Commissioner had denied CVMC’s $12 million project while approving a much larger project for Fletcher Allen Health Center in Burlington.2 The Gov*617emor responded that “[t]he difference is that the Fletcher Allen’s [application] was put in before the budget figures and the Central Vermont [application] came after.” As he explained:

GOVERNOR DEAN: When we saw what the budget figures were again all going far above their exceeded task, we made the decision that we would link CONs with budgets which — which [Commissioner] Betsy [Costle] has the power to do well it’s not — it’s not as direct as the — as what we’re seeking in the Legislature.3 But we’ve — we’ve really had it with these cost increases and we’ve had it with everybody pointing the finger at everybody else. As I said before, somebody has to take accountability and we. made the decision after we saw the budget round in August that we just couldn’t go on this way and that we were just going to have to put a stop to the incredible cost escalations and people’s insurance premiums and this is something that hasn’t been tried before both speaker [F]ree[d] and Secretary and President Pro Temp Peter Shumlin had a press conference last year at this time saying we ought to have a moratorium on CONs until rates go down. That did figure into our thinking.
*618RADIO HOST: So Central Vermont had bad timing more than anything else?
GOVERNOR DEAN: Well and also they exceeded their budget targets as they have every year for the last five years by a substantial amount.
RADIO HOST: And Fletcher Allen hasn’t?
GOVERNOR DEAN: They have but we had hoped that that wasn’t going to happen and they had their CON application in a long time before the budget figures were — were done and they got their CON permission before the budget figures were announced.

¶ 38. The interviewer returned to the subject later in the program, asking whether there was “a double standard here that’s happened with these two hospitals?” The Governor replied: ‘Well, that’s what you asked me earlier in the show and I will give you the same answer I gave you earlier which is that this is related to budget performance and the budget performances were available after the Fletcher Allen got their CON.”

¶ 39. From the remarks of the Chief Executive, I conclude that the decision to deny CVMC’s application was based on nothing in the record or the enumerated statutory criteria. It was based, rather, on a decision to penalize CVMC for what was viewed as a poor record of budgetary performance.' CVMC’s budget performance during the preceding year, however, is not among the express statutory criteria that its CON application was required to address; it is not among the criteria for which Department staff had sought additional information; and it is most assuredly not among the criteria cited by the Commissioner in denying CVMC’s application.4

¶ 40. Such decision-making is plainly improper. The governing statute specifically provides that “[i]n making its determination as to whether a certificate of need shall be issued, the commissioner shall consider only the criteria which have been duly adopted and published 90 days prior to the submission of the original application for certificate of need.” 18 V.S.A. § 9436(a) (emphasis added). In addition, considerations of due process and fundamental fairness require that an applicant for agency approval be accorded adequate notice of the standards to be applied, and an adequate opportunity to respond to those standards. See In re Vt. Health Serv. Corp., 155 Vt. 457, 461, 586 A.2d 1145, 1147-48 (1990) (“The • fairness of the whole procedure must be in accord with due process principles. Crucial to the determination ‘is whether or not the parties were given an adequate opportunity to prepare and respond to the issues raised in the proceeding.’”) (quoting In re Green Mountain Power Corp., 131 Vt. 284, 293, 305 A.2d 571, 577 (1973)).

¶ 41. CMVC was not afforded notice of, or an opportunity to respond to, the budget issue that — I believe — apparently determined the fate, of its application. A more egregious denial of due process is difficult to imagine. Plainly, such a decision “was in excess of statutory authority,” 8 V.S.A. §16(2), and cannot be allowed to stand.

¶ 42. The only question remaining is that of remedy. A remand for further hearings under these circumstances *619would be pointless. The administrative process was tainted by considerations extraneous to the issues. The record evidence amply supported approval of the CON application. Therefore, I would reverse the Commissioner’s decision, and order that the CON be granted.

For example, Daria Mason, the hospital’s president and CEO, summarized her testimony as follows: “In conclusion, we are talking about a very nuts and bolts community hospital project. This is not extravagance. This is basically a project that has no new programs, it’s meeting basic core mission, it recognizes the transformation of our services to outpatient care, which has already occurred, that transformation. It also will adjust *616the infrastructure that has to be upgraded at this point in time.”

CVMC appended a transcript of the Governor’s radio interview to its reply brief. The State, in response, moved unsuccessfully to file a surreply brief, arguing that the interview could not be considered because it was outside the record and raised a new issue for the first time in a reply brief. The State also argued that, contrary to CVMC’s claim, the Governor’s remarks did not purport to explain the basis of the Commissioner’s decision, but merely expressed support for legislation linking CON approval to budget performance. The statements speak for themselves and thus the latter argument fails. As for the propriety of considering the interview in this appeal, our rules provide that this Court may *617take judicial notice of facts “not subject to reasonable dispute” and “generally-known” within the jurisdiction, “whether requested or not,” and “at any stage of the proceeding.” V.R.E. 201. Although this Court has not had occasion to consider an issue of this nature, an analogous problem was presented in In re Pioneer Mill Co., 497 P.2d 549 (Haw. 1972), where the state’s high court took judicial notice of newspaper articles stating that the trial judge in the case had announced his candidacy for public office prior to his ruling. See id. at 551 n.l (noting that Hawaii’s evidence code — similar to our own — authorized judicial notice of “propositions of generalized knowledge which are capable of immediate and accurate demonstration,” and that reviewing courts could take judicial notice whether or not the trial court did so). Based on this evidence, the court concluded that the judge had become a candidate for public office at the time of his ruling, and that under the state’s constitution he had thereby forfeited his judicial office, requiring reversal of the judgment. Id. at 551-52; see also Ieradi v. Mylan Labs., Inc., 230 F.3d 594, 598 n.2 (3d Cir. 2000) (appeals court took judicial notice under Federal Rule of Evidence 201(f) of newspaper article despite fact that article was not before district court); Mahoney v. Lensink, 569 A.2d 518, 525 n.20 (Conn. 1990) (state high court took judicial notice of newspaper article containing announcement by state’s commissioner of mental health that his department was in the process of drafting a patients’ bill of rights); Tilghman v. Commonwealth, 366 A.2d 966, 967 (Pa. Commw. Ct. 1976) (court took judicial notice of newspaper articles and news broadcasts that publicized commonwealth’s role in urban renewal project).

Earlier in the interview, Governor Dean had expressed his support for legislation introduced by Senator Chard, chair of the Senate Health and Welfare Committee, designed to add criteria to the CON review process linking approval of the CON to the hospital’s record of performance within its budget as established by the Commissioner.

As Governor Dean noted in his interview, legislation has been introduced to amend the statutory scheme to provide that the Commissioner may consider an applicant’s budgetary performance in determining whether to issue a CON. See 2001, S. 286 (Adj. Sess.),§3.