An appeals court upheld regulations that effectively allowed for the construction of Patients First’s three-bed hospital in Washington.

The Missouri Health Facilities Review Committee is in charge of the state’s Certificate of Need program, which approves applications for hospitals and equipment that is over $1 million. In September 2010, that committee voted 4-3 to exempt Patients First from going through with the CON process to build a three-bed hospital in Washington.

The committee decided that since the facility was under $1 million, it didn’t need to go through with the CON process. That provision is known as the “New Hospital Rule.” St. John’s strenuously opposed the project and the ruling, questioning whether the proposal actually cost under $1 million. If it did go over that amount, then they argued a CON review would show there wasn’t a need to build the facility.

St. John’s ultimately sued in St. Louis County Circuit Court before the MHFRC made a decision. St. Louis County Circuit Court Judge Richard Bresnahan dismissed the case without prejudice because it was “not ripe for judicial determination.”

In a decision handed out in late July by the Missouri Court of Appeals, Eastern District, Judge Kurt Odenwald wrote that St. John’s had presented “a ripe and justiciable controversy for review.”

“At the time of the trial court’s ruling, the MHFRC had not decided whether it would apply the New Hospital Rule or whether it would require Patients First to obtain a certificate of need,” Odenwald wrote. “The trial court held that St. John’s claim was not ripe because the MHFRC had not applied the New Hospital Rule. However, after the trial court’s ruling, the MHFRC applied the New Hospital Rule and rendered a decision of non-applicability of the certificate of need requirement to Patients First.

“Accordingly, the trial court’s rationale no longer exists and we hold this action is ripe for our review.” But instead of sending the case back to the lower court, Odenwald wrote that it was “distinctly appropriate” to decline that course of action and “instead exercise our power to now address the merits of the underlying claims.”

Odenwald held that the MHFRC rule regarding new hospitals “is valid.” “St. John’s further posits that all new hospitals qualify as new institutional health services because a new hospital necessitates the statutory increases in bed capacity and health services under [state statute],” Odenwald wrote. “Therefore, St. John’s argues, the New Hospital Rule conflicts with the statute because the rule allows the MHFRC to exempt certain new hospitals from the statutory certificate of need requirement whereas the CON Law requires all new hospitals obtain a certificate of need, and provides no exemption. We are not persuaded by St. John’s argument.

“Under this construction, the New Hospital Rule implements the legislative intent of [state statute] without conflicting with the CON Law,” Odenwald wrote. “Accordingly, we hold that the New Hospital Rule is consistent with the CON Law and the MHFRC was within its authority to promulgate the rule.”

Jeanne Cantalin, who serves as vice president and regional general counsel for St. John’s Mercy Health System, said the company is “proceeding with the next steps of the appeals process.”

“We just continue to believe that there’s conflict between state regulations and Missouri’s CON statute,” Cantalin said. Attorney General Chris Koster’s office defended the MHFRC in the case. Nanci Gonder, a spokeswoman for the attorney general, said in an e-mail that St. John’s can either seek rehearing with the Eastern District or request transfer to the Supreme Court of Missouri. She added her office hasn’t heard anything yet. Gonder also said Koster’s office had no comment on the case.

Patients First intervened in the case. Several attorneys working on the case did not respond to requests for comment.

In March, St. John’s sued the committee in Cole County Circuit Court. A brief stated that St. John’s seeks “a judgment that two administrative rules are invalid and seeks judicial review of a MHFRC decision that deprived St. John’s of its personal rights under Missouri’s Certificate of Need Law.”

An attorney for Patients First told The Missourian in June that “the case amounted to a legal do over.”

That case is still pending, according to