dissenting.
I respectfully dissent. The Texas Health Facilities Commission was created by the 64th Legislature. The Legislature, responding to the federal mandate of Public Law 93-641, passed Article 4418h known as the Texas Health Planning and Development Act. The stated purpose of the Act is to insure that health care services and facilities are made available to all citizens in an orderly and economical manner, and further to assure that appropriate health planning activities be undertaken and implemented and that health care services and facilities be provided in a manner that is cost effective and is compatible with the health care needs of the various areas of population of the state. The general duties of the Commission have heretofore been set forth in the majority opinion and will not be restated here. In addition to such general duties, the Commission has promulgated de*584tailed rules expanding on the criteria mandated by the statute.
Generally, in order for a Certificate of Need to establish “need,” the applicant must present sufficient evidence to justify an affirmative finding as to each of the applicable criteria designated in sec. 3.10 of Article 4418h, Y.T.C.S., and the Commission’s Rule 801. However, the application of the Hospital, because of its peculiar characteristics, created a case of first impression in which the Commission was requested for the first time to consider an application for the expansion of an existing facility in which the Applicant refused to designate the use to which the additional five story shell space was to be utilized. Although the Hospital had originally specified in its application that the shelled-in space was intended to be used to house 200 additional hospital beds, at the hearing on the application counsel for the Applicant informed the hearing officer that the Applicant no longer intended to designate that the shelled-in space would be used to house hospital beds. Rather, the Hospital desired only to apply for the shelled-in space with no intended use designated in the present application. Such use would be designated in subsequent applications for Certificates of Need regarding the shelled-in space when the Hospital made the determination of what function the space would be used for.
The Commission, in concluding that the Applicant had failed to establish “need” interpreted Article 4418h, sec. 3.10, supra, and Rule 801 as implicitly requiring each applicant for a Certificate of Need to designate the use expected to be made of the proposed facility. It is clear from the Hearing Officer’s recommendation and the order of the Commission, that both the Hearing Officer and the Commissioners concluded that it would be impossible for them to determine whether the evidence presented by the Applicant had met each of the requisite criteria since there was nothing before the Commission showing the designated use of the shelled-in space. Since under the Commission’s interpretation of the statute and the rules this determination could not be made, the Commission concluded that it could not determine whether “need” had been established and therefore denied the application on this ground. However the trial court, as well as the majority of this court, in reversing the order of the Commission concluded that it was not necessary for the Hospital in its application to build the five story shelled-in space to designate a particular use to which the space was to be devoted in order to establish need. Accordingly, the trial court, as well as the majority of this court, held that the Commission erred in interpreting sec. 3.10 of Article 4418h and Commission Rule 801 as requiring an applicant for a Certificate of Need for shelled-in space to designate the proposed use of such space. I cannot agree with this holding.
In the absence of any showing as to the use of the proposed facility, it would be absolutely impossible for the Commission to apply the criteria for review as outlined by sec. 3.10 of Article 4418h. According to Webster “need” refers to an urgent requirement of something essential or desirable that is lacking. Therefore “need” must have an object. Need implies use. In the absence of being apprised of the proposed use, how could the Commission determine whether the five floors of shelled-in space would be necessary to meet some specific health care need of the community or population, whether it could be adequately staffed when completed, and whether the cost is reasonably justified considering the anticipated revenue?
The Commission’s interpretation of its own statutes and rules may be overturned only where the court finds the ruling to be contrary to one of the categories designated in sec. 19(e) of the Administrative Procedure and Texas Register Act. Article 6252-13(a), V.T.C.S. In reversing the Commission’s ruling the trial court apparently determined that the Commission’s interpretation of its own statute and rules as requiring a designated use for shelled-in space was (1) affected by an error of law, or (2) that the ruling was arbitrary, capricious or characterized by an abuse of discretion or by a clearly unwarranted exercise of discretion. I cannot agree with either conclusion.
*585Where an administrative board is faced with the problem of construing and interpreting a statute, the board may exercise its administrative judgment or discretion in interpreting an applicable law. Pension Board of Police Officers Pension System of City of Houston v. Colson, 492 S.W.2d 307 (Tex.Civ.App.-Beaumont 1973, writ ref’d n. r. e.). Where an administrative agency is called on to make an initial interpretation of a statute, the criteria to be used by the courts in determining the validity of the ruling is whether the agency’s construction has a reasonable basis in law. Kelso Marine, Inc. v. Hollis, 316 F.Supp. 1271, 1272 (S.D.Tex.1970), affirmed 449 F.2d 342 (5th Cir. 1971). Upon applying the foregoing rules of law I am of the opinion that the Commission’s interpretation of its statute and rules construing them to mean that the applicant for a Certificate of Need is required to designate the intended use was neither arbitrary or capricious nor affected by any error of law. It appears to me that the Commission’s interpretation was grounded upon a reasonable basis in law and that the requirement of a designation of use for shelled-in space is in harmony with the general objectives of the Texas Health Planning and Development Act. See Jefco, Inc. v. Lewis, 520 S.W.2d 915 (Tex.Civ.App.-Austin 1975, writ ref’d n. r. e.). Some showing of how the proposed medical facility was to be used must be made. Otherwise there would be no way for the Commission to accurately determine what type of medical facility the shelled-in structure would be needed for in the future. To hold that the Commission is required to consider and pass on applications of Certificates of Need even though no use of the facility is designated would not only thwart the legislative intent expressed in the Act, but would also result in an administrative nightmare.
Further, I am unable to agree with the holding that the Commission erred in failing to promulgate specific rules governing the issuance of Certificates of Need on projects involving “shelled-in” space. As I view the record, the decision as to whether to promulgate a rule dealing with applications for shelled-in space is a matter lying within the sound discretion of the Commission. As the Supreme Court said in the Securities & Exchange Commission v. Chenery Corporation, 332 U.S. 194, 202-03, 67 S.Ct. 1575, 1580, 91 L.Ed. 1995 (1947), in addressing the issue of the Security & Exchange Commission’s authority to initiate a new rule through the adjudicative rather than a rule making process, the Court stated:
“Not every principle essential to the effective administration of a statute can or should be cast immediately into the mold of a general rule. Some principles must await their own development, while others must be adjusted to meet particular, unforeseeable situations. In performing its important functions in these respects, therefore, an administrative agency must be equipped to act either by general rule or by individual order. To insist upon one form of action to the exclusion of the other is to exalt form over necessity.
“. . . [T]he agency must retain power to deal with the problems on a case-to-case basis if the administrative process is to be effective. There is thus a very definite place for the case-by-case evolution of statutory standards. And the choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency.”
Although the Board has statutory authority to prescribe rules and regulations, the choice between proceeding by a general rule or by individual ad hoc litigation is one that lies primarily within its informed discretion. Hicks v. Physical Therapists Examining Board, 221 A.2d 712, 715 (D.C.App.1966), affirmed, 129 U.S.App.D.C. 347, 394 F.2d 972 (1967) cert. denied, 390 U.S. 987, 88 S.Ct. 1181, 19 L.Ed.2d 1289 (1968). In regard to the Hospital’s application for a Certificate of Need without designating use, the Commission chose to deal with the issue of shelled-in space by applying the Commission’s interpretation through an adjudica*586tive proceeding. In so doing, the Commission acted well within the bounds of its “informed discretion.” Essentially, it is the Hospital’s contention that the Commission was obligated to promulgate specific rules for applications of Certificates of Need for shelled-in space with no designated use. I do not believe the Commission was obligated to promulgate rules dealing with applications for Certificate of Need for shelled-in space with no designated use. To promulgate rules dealing with non-designated use applications for shelled-in space would be totally inconsistent with the legislative intent set forth in the Health Planning & Development Act.
Finally, I cannot agree with the holding that the Commission’s ruling was not supported by any substantial evidence. As I view the record, the substantial evidence rule is not the point in this case. Assuming arguendo, however, that the Commission was obligated to determine need even though the application for the shelled-in space contained no designated use, I am of the opinion that there is substantial evidence to support the Commission’s finding. Specifically, the Commission found that the Applicant failed to establish that the demand for inpatient services is such that the proposed five story shelled-in space was necessary to meet the reasonable health care needs of the community to be served. Commission’s Order AH76-0601-024, R.P. Yol. 1, D, 2. The test of substantial evidence, as correctly stated by the majority, is whether the evidence as a whole is such that reasonable minds could not have reached the conclusion that the agency reached in order to justify its action. In refusing the application, the Commission relied upon four factors in its finding that the Applicant failed to establish need for the shelled-in space. These four factors showed the following: (1) that in 1980 the population of the council of governments area served by the Hospital is projected to decline from 280,000 persons to approximately 271,000 persons in 1980; (2) that during the first eleven months of fiscal 1976 the Hospital had an average daily census of approximately 318 patients, resulting in an average occupancy rate of approximately 77.8 percent of 409 beds; (3) that in 1975 the total number of patient days declined 1.98 percent from 1974; and (4) that in 1976 the total admissions is projected to decline by 7.42 percent. This combination of facts showing a decline in hospital admissions from 1975 to 1976, plus an overall decline in total number of patient days from 1974 to 1976 indicates that both admissions and patient days have peaked barring some unforeseen increase in the length of patient stays or unforeseen population increase or disaster. Therefore the Commission could have reasonably concluded that as to the need/demand criteria Appellant Hospital had not carried its burden of showing that the future demand for inpatient services would be so great that the five story shell would be necessary to meet the reasonable health needs of the community to be served.
While the record shows that the proposed shelled-in space, costing approximately two million dollars, is to be financed by a combination of private contributions and loans, the monies to pay off the loans on non-income producing space must come from other revenues. Appellee offered no evidence demonstrating how the revenues were to be derived from the proposed project. Such a prospect raises the specter of increased hospital cost generally and was a proper matter for consideration in determining whether the project was economically feasible. Further, the Appellee failed to put on any evidence of the availability of future manpower to staff future needs of the facility. The type of staff necessarily depends on the ultimate use of the proposed facility, and availability of staff cannot be determined unless the use of the facility is known. Adequate available manpower is a statutorily mandated prerequisite to the granting of a Certificate of Need. The Commission would not be authorized to grant a Certificate of Need unless there is some reasonable certainty that adequate manpower to staff the facility will be available in the future. Viewing the record as a whole, I am of the opinion that there was substantial evidence to sustain the ruling of the Commission denying the Certificate.
*587Accordingly, I would reverse the judgment of the trial court and render judgment sustaining the ruling made by the Commission.