Mandatory Attorney’s-Fee Awards in Certificate-of-Need Litigation Confined to Chancery-Court Appeals
A Comprehensive Commentary on Mississippi Methodist Hospital & Rehabilitation Center Inc. v. MSDH & Encompass Health Rehabilitation Hospital of Flowood, LLC, 2025 MSSC

1. Introduction

The Supreme Court of Mississippi’s 2025 decision in Mississippi Methodist Hospital & Rehabilitation Center Inc. v. Mississippi State Department of Health marks the latest chapter in a protracted battle over the grant of a certificate of need (CON) to Encompass Health for a new comprehensive medical rehabilitation (CMR) facility in Flowood. The dispute pits three principal actors:

• Mississippi Methodist Hospital & Rehabilitation Center, Inc. (Methodist) – an established CMR provider in Jackson, opposing the new entrant.
• Mississippi State Department of Health (MSDH) – the state agency charged with administering the CON program and the State Health Plan (SHP).
• Encompass Health Rehabilitation Hospital of Flowood, LLC (Encompass) – the applicant for a new 50-bed CMR hospital (4 Level I, 46 Level II beds).

After multiple administrative hearings, a chancery-court remand, and a first trip to the Supreme Court in 2024, the 2025 opinion resolves Methodist’s renewed merits challenge and, crucially, clarifies the proper scope of the statutory fee-shifting provision found in Mississippi Code § 41-7-201(2)(f).

2. Summary of the Judgment

The Court (Chamberlin, J.):

1. Affirmed the Hinds County Chancery Court’s decision upholding MSDH’s issuance of the CON to Encompass.
2. Rejected Methodist’s four substantive assignments of error: indigent-care compliance, unnecessary duplication, failure to consider the Baptist CON, and arbitrary application of SHP/Manual criteria.
3. Clarified that the mandatory fee-shifting language in § 41-7-201(2)(f) applies only when a chancery court affirms MSDH, not when the Supreme Court affirms; appellate-court fees must be sought via Miss. R. App. P. 27.
4. Remanded solely for the chancery court to determine the amount of fees Encompass may recover for the chancery-court phase.

3. Analysis

3.1 Precedents Cited and Their Influence

• King v. Mississippi Military Department, 245 So.3d 404 (Miss. 2018) & Mississippi Methodist Hosp. v. Division of Medicaid, 319 So.3d 1049 (Miss. 2021) – abolished Chevron-style deference to agency legal interpretations. The Court reiterated that while questions of law are reviewed de novo, factual findings of the hearing officer receive “great deference.”
• Encompass Health v. Mississippi Methodist, 383 So.3d 291 (Miss. 2024) – the first trip to the high court; established that the Baptist CON was irrelevant and that the hearing record need not be reopened. The 2025 court treated that holding as law of the case when Methodist tried to re-package the same argument.
• Dialysis Solutions, LLC v. MSDH, 96 So.3d 713 (Miss. 2012) – held MSDH is not a court-like tribunal; used to explain why § 41-7-201(2)(f)’s reference to “the court” means chancery court only.
• City of Cleveland v. Mid-South Associates, LLC, 94 So.3d 1137 (Miss. Ct. App. 2011) (vacated on other grounds) – interpreted § 41-7-201(2)(f) narrowly; the Supreme Court distinguished, yet relied on, its core reasoning.
• Other certificate-of-need cases (e.g., St. Dominic-Jackson Memorial Hosp., 728 So.2d 81 (1998); Baptist Memorial Hosp.–Desoto, 984 So.2d 967 (2008)) – cited for standards of appellate deference.

3.2 Legal Reasoning

The opinion proceeds issue-by-issue, but three overarching themes emerge:

(A) Scope of Judicial Review
While the Court will scrutinize statutory interpretation de novo (per King), it refuses to “re-weigh” evidence assembled by the hearing officer. The agency’s familiarity with health-planning minutiae justifies deference on factual matters.

(B) Law-of-the-Case Doctrine
The earlier 2024 decision that the Baptist CON was irrelevant binds the parties on remand. Methodist’s attempt to revive the argument—by targeting the State Health Officer rather than the hearing officer—fails because the “facts and issues” were identical.

(C) Statutory Fee-Shifting
Section 41-7-201(2)(f) mandates fees only when “the court” (i.e., chancery court) affirms MSDH. Appellate-level fees require a separate Rule 27 motion, reinforcing a bifurcated approach to cost recovery.

3.3 Potential Impact of the Judgment

1. Fee-shifting landscape. Health-care litigants must now factor in that:

• If they lose in chancery court, they will automatically owe the prevailing CON proponent statutory fees.
• If they then appeal to the Supreme Court, additional fees are not automatic; opponents must file a Rule 27 motion and meet proof-of-time-records requirements (Latham v. Latham, 261 So.3d 1110 (Miss. 2019)).
• The decision deters meritless chancery-court appeals but preserves some breathing room for Supreme-Court review.

2. Substantive CON guidance. The Court endorses MSDH’s use of:

• A statewide service area for CMR beds;
• Need calculations embedded in the SHP without obligating each applicant to prove local need afresh;
• Flexible, policy-based evaluation of indigent-care commitments, allowing narrative assurances and policies to supplement raw percentages;
• Exclusion of subsequently granted, non-competing CONs from the evidentiary record.

Collectively, these principles bolster agency discretion and should streamline future CMR or analogous CON filings.

3. Administrative-law clarification. By reconciling King with the deferential standard set forth in § 41-7-201(2)(f), the Court illustrates how post-Chevron Mississippi jurisprudence functions: no deference on law, heavy deference on fact—especially in specialized regulatory fields.

4. Complex Concepts Simplified

• Certificate of Need (CON): A state-issued permission slip required before building or expanding certain health-care facilities. It is meant to curb unnecessary duplication, contain costs, and align projects with public need.
• State Health Plan (SHP): A triennially updated document that quantifies health-care needs (e.g., number of rehab beds) and sets criteria for CON applications. Think of it as the “blueprint” MSDH must follow.
• Comprehensive Medical Rehabilitation (CMR) Beds – Level I vs. Level II: Level I handles complex cases like spinal cord injury; Level II handles less complex rehab needs. Both require intensive therapy (≥3 hours/day).
• Indigent-care Requirement: Applicants must show “reasonable” access for low-income and Medicaid patients, typically by benchmarking against existing providers in the vicinity.
• Standard of Review (CON context): Under § 41-7-201(2)(f), a court may overturn MSDH only for legal error, lack of substantial evidence, manifest error, jurisdictional excess, or constitutional violations. “Substantial evidence” is more than a scintilla but less than preponderance.
• Law of the Case: Once an appellate court decides an issue, that decision governs the same issue in later stages of the same litigation.
• Rule 27 Motion (Attorneys’ Fees on Appeal): The procedural vehicle for asking the Supreme Court or Court of Appeals to award fees incurred during the appellate stage.

5. Conclusion

The 2025 decision simultaneously cements agency discretion in Mississippi’s CON regime and draws a clear, bright line on statutory fee-shifting. By holding that the automatic award under § 41-7-201(2)(f) stops at the chancery-court level, the Court balances deterrence of frivolous administrative appeals with flexibility for higher-court review. On the merits, the opinion reinforces MSDH’s ability to rely on the statewide need determinations in the SHP, vindicates flexible approaches to indigent-care analysis, and reiterates that once an administrative record closes, non-competing developments need not reopen it. Health-care providers, litigators, and policymakers should adjust their strategies accordingly, recognizing both the costs of unsuccessful chancery-court challenges and the procedural niceties required to pursue (or resist) attorney-fee recovery on further appeal.