GRIFFIN HOSP. v. COMM'N ON HOSPITALS & HEALTH CARE

12593

200 Conn. 489 (1986) | Cited 72 times | Supreme Court of Connecticut | July 15, 1986

On September 15, 1983, the defendantcommission on hospitals and health care (commission),pursuant to its authority under General Statutes19a-156 (a), ordered the plaintiff, Griffin Hospital(hospital), to adopt a budget for the 1984 fiscal year.The budget ordered by the commission authorizedrevenues, operating expenses and capital expendituresin amounts substantially lower than those proposed bythe hospital in a budget submitted to the commissionon July 5, 1983. On September 29, 1983, the hospitalappealed from the commission's September 15,1983 budget order, and the matter was referred toHon. Thomas J. O'Sullivan, state trial referee, who,exercising the powers of the Superior Court, renderedjudgment on June 19, 1984. The referee, in a detailedmemorandum of decision, upheld for the most part thebudget reductions ordered by the commission, butmodified the commission's order in several importantrespects. Neither party is satisfied with the judgmentof the referee. The plaintiff has appealed from thatjudgment, and the defendant has cross appealed.

We begin with a brief outline of the facts. The hospitalfiled its proposed operating and capital expendituresbudget with the commission on July 5, 1983. The hospital'sbudget proposed net patient revenues of$39,755,000, net operating expenses of $37,272,000,and capital expenditures of $1,483,668. On July 15,1983, the commission notified the hospital that it hadrejected the proposed budget, and that it would conducta public hearing "to allow the hospital the opportunityto present evidence in support of the proposed

[200 Conn. 492]

     fiscal 1984 operating and capital budget." The noticealso stated that the hospital should present its evidenceat the public hearing "in a manner . . . consistentwith the provisions of the commission's regulations."On August 8, 19 and 29, 1983, the commission conductedpublic hearings on the hospital's budget for the1984 fiscal year. On September 15, 1983, it issued itsdecision and order requiring the hospital to adopt thebudget as modified by the commission.

The budget ordered by the commission for the 1984fiscal year authorized net patient revenues of$34,197,000, net operating expenses of $33,131,000,and capital expenditures of $411,800. The authorizedfigures represented reductions of $5,558,000, $4,141,000and $1,071,868 respectively, in the amounts originallyrequested by the hospital in its proposed budget submittedon July 5, 1983. In its appeal to the SuperiorCourt, the hospital challenged the reductions in itsbudget ordered by the commission on various statutoryand constitutional grounds. The trial referee acceptedsome of the hospital's claims and rejected others. Wenow turn to the specific claims raised in the appealbefore us.

I

GRIFFIN HOSPITAL APPEAL

A

PREEMPTION

The first of the hospital's contentions is that the commission'sbudget order conflicts with federal law andis therefore preempted under the supremacy clause.The hospital claims that the September 15, 1983 budgetorder required it to use federal medicare reimbursementsto subsidize the health care costs of nonmedicarepatients. Under the medicare program, the federalgovernment reimburses participating hospitals for

[200 Conn. 493]

     services provided to medicare patients according to a setof preestablished rates, regardless of the actual costto the hospital of the particular service provided.42 U.S.C. § 1395ww (d). If the cost to the hospital ofproviding a particular service is less than the amountof reimbursement, the hospital, in effect, earns a"profit" from that service. Conversely, should theactual cost of a service exceed the preestablished rateof reimbursement, the hospital may be said to haveincurred a "loss" on that particular service. Accordingto the hospital's calculations, it would have earnedunder the budget ordered by the commission anaggregate "profit" of $1,754,000 solely from the careand treatment of medicare patients during the 1984fiscal year. The commission's budget, however, providedfor a gain of only $99,000 from total operationsthe combined gain arising from the care and treatmentof both medicare and nonmedicare patients. Thus,according to the hospital, under the commission'sbudget, it was forced to incur an operating loss of$1,655,000 from the care and treatment of nonmedicarepatients, which loss was to be subsidized byits operating gain of $1,754,000 from its "medicarebusiness," resulting in a net operating gain of $99,000.The hospital claims that the commission's action in thiscase conflicts with the federal medicare reimbursementsystem "because the ordered budget deprives theHospital of the choice to use its Medicare [profits] inthe manner which it deems most appropriate."

Preemption analysis has two prongs. In order to concludethat state regulatory action has been preempted,it must be determined that (1) Congress has evidencedan intent to occupy the field or (2) the state regulationactually conflicts with federal law. Silkwood v. Kerr-McGeeCorporation, 464 U.S. 238, 248, 104 S.Ct. 615,78 L.Ed.2d 443 (1984); Times Mirror Co. v. Divisionof Public Utility Control, 192 Conn. 506, 510-11,

[200 Conn. 494]

     473 A.2d 768 (1984). The hospital does not claim that anactual conflict exists between the commission's budgetorder and the federal medicare reimbursement system.Rather, it contends that "Congress intended to preemptthe state from regulating the field of Medicarecost containment and reimbursement." We do notagree. We fail to see how the federal method of medicarereimbursement can be said to preempt the statefrom regulating overall costs at individual medical facilities.The commission's budget order does not purportto restrict the number of medicare patients actuallytreated by the hospital, or the federal level of reimbursementfor any of the services provided. The"profits" anticipated by the hospital from its medicareoperations under the commission's budget are attributable,in part, to the level of overall operating expensesset by the commission. If the hospital were allowed tooperate at the expense level originally proposed in itsJuly 5, 1983 budget, then its medicare "profits" wouldquickly disappear. Since any adjustment by the commissionof overall expenses would necessarily affect thelevel of medicare "profits," we believe that it has theauthority to regulate such "profits" to the extent thatthey exist.

The preeminent purpose of the medicare reimbursementsystem is to control the cost to the federal governmentof the medicare program. Prior to October 1,1983, the federal government reimbursed participatinghospitals based on the reasonable costs actually incurredby the hospital in providing health care services tomedicare patients. 42 U.S.C. § 1395e, 1395f (b),1395ww (b). Congress recognized that a reimbursementsystem based on actual costs provided hospitals withlittle or no incentive to increase efficiency in the provisionof medical services. See H.R. Rep. No. 25, 98thCong., 1st Sess., 132, reprinted in 1983 U.S. CodeCong. & Ad. News 219, 351. The medicare "prospective

[200 Conn. 495]

     payment" system, effective October 1, 1983; Pub. L.No. 98-21, 601 et seq., 97 Stat. 149 (1983); establishesreimbursement rates for medical services regardless ofthe actual cost to the hospital. 42 U.S.C. § 1395ww (d).As a necessary corollary of the prospective paymentsystem, hospitals are encouraged to contain costsassociated with the treatment of medicare patients, andthereby to turn a "profit, "in a manner of speaking,on medicare operations. We simply cannot accept,however, the hospital's contention that the purpose ofCongress in enacting the prospective medicare reimbursementsystem was to allow participating hospitalsto earn "profits" from their treatment of medicarepatients, and then to insulate these "profits" from allstate regulation. This is not a case where Congresshas explicitly provided that the recipient of federalfinds" `may' use the monies for `any' . . . purpose."Lawrence County v. Lead-Deadwood School District,469 U.S. 256, 259, 105 S.Ct. 695, 83 L.Ed.2d 635(1985). Rather, Congress has simply established uniformreimbursement rates for specified medicare services.The commission's primary purpose and concernis to control the rapidly increasing cost of health care.We believe that the work of the commission is fully compatiblewith the intent of Congress to control the costof the federal medicare program. We therefore rejectthe hospital's claim that the commission's September15, 1983 budget order unconstitutionally conflictswith the federal medicare reimbursement system.

B

SCOPE OF REVIEW

We next address the hospital's claims of error relatingto specific items cut from its proposed budget bythe commission in its September 15, 1983 decision.Before turning to those claims, we reiterate for thebenefit of all concerned that the scope of our review

[200 Conn. 496]

     is extremely limited. Judicial review of the commission'sbudget decision is governed by the UniformAdministrative Procedure Act. General Statutes4-166 et seq. With regard to questions of fact, it isneither the function of the trial court nor of this court"to retry the case or to substitute its judgment for thatof the administrative agency." Madow v. Muzio,176 Conn. 374, 376, 407 A.2d 997 (1978); Hospital of St.Raphael v. Commission on Hospitals & Health Care,182 Conn. 314, 318, 438 A.2d 103 (1980); see GeneralStatutes 4-183 (g). "Judicial review of the conclusionsof law reached administratively is also limited.The court's ultimate duty is only to decide whether,in light of the evidence, the [agency] has acted unreasonably,arbitrarily, illegally, or in abuse of its discretion.Robinson v. Unemployment Security Board ofReview, 181 Conn. 1, 5, 434 A.2d 293 (1980); Cervantesv. Administrator, 177 Conn. 132, 134, 411 A.2d 921(1979)." Burnham v. Administrator, 184 Conn. 317,322, 439 A.2d 1008 (1981). The present appeal is fromthe decision of the trial court. We review that decisiononly to determine whether it was rendered in accordancewith the Uniform Administrative Procedure Act.General Statutes 4-183 (g).

Much of this appeal concerns the hospital's claimsthat it was denied due process by the alleged failureof the commission to observe its governing statutes andregulations. In this regard a final point deserves specialemphasis. Although the interpretation of statutesis ultimately a question of law; Connecticut HospitalAssn., Inc. v. Commission on Hospitals & Health Care,200 Conn. 133, 140, 509 A.2d 1050 (1986); it is the wellestablished practice of this court to "accord great deferenceto the construction given [a] statute by the agencycharged with its enforcement." Corey v. Avco-LycomingDivision, 163 Conn. 309, 326, 307 A.2d 155 (1972)(Loiselle, J., concurring), cert. denied, 409 U.S. 1116,

[200 Conn. 497]

     93 S.Ct. 903, 34 L.Ed.2d 699 (1973); accord, Fellinv. Administrator, 196 Conn. 440, 447, 493 A.2d 174(1985); Board of Education v. Connecticut State Boardof Labor Relations, 190 Conn. 235, 241, 460 A.2d 1255(1983); Chamber of Commerce of Greater Waterbury,Inc. v. Lanese, 184 Conn. 326, 331, 439 A.2d 1043(1981); Connecticut State Board of Labor Relations v.Board of Education, 177 Conn. 68, 74, 411 A.2d 28(1979); Connecticut Light & Power Co. v. Public UtilitiesControl Authority, 176 Conn. 191, 198,405 A.2d 638 (1978); Anderson v. Ludgin, 175 Conn. 545, 555,400 A.2d 712 (1978). This principle applies with evengreater force to an agency's interpretation of its ownduly adopted regulations. The commission's September15, 1983 budget decision consumes ninety-fivepages of the record on this appeal. The commission'sdecision reflects an in-depth analysis of the hospital'sprograms, facilities and personnel requirements asmeasured against standardized cost and utilization profilescontained in the commission's regulations. Thelegislature has expressly directed the commission toadopt such regulations; General Statutes 19a-160;and the validly enacted regulations of an administrativeagency carry the force of statutory law. SalmonBrook Convalescent Home v. Commission on Hospitals& Health Care, 177 Conn. 356, 363, 417 A.2d 358(1979); Roy v. Centennial Ins. Co., 171 Conn. 463, 473,370 A.2d 1011 (1976). The commission is specially constitutedby the legislature to coordinate, throughoutthe state, the efficient utilization of hospital resourcesin an effort to contain the burgeoning cost of healthcare. The courts> cannot hope to duplicate the work ofthe commission, or to make hospital budget determinationswith the same level of expertise as that possessedby the commission staff. We therefore approachthe issues raised in this appeal both with an awarenessof the limitations inherent in the review process itself,

[200 Conn. 498]

     and with due deference to the broad grant of regulatoryauthority which has been delegated to the commissionby our legislature. See General Statutes 19a-150,19a-151, 19a-153 (a), 19a-154 (a), 19a-156 (a).

C

NONVOLUME EXPENSE REDUCTIONS

The single largest reduction in the hospital's budgetordered by the commission occurred in the area of nonvolumeexpense increases, i.e., proposed new programs,new services, and additional sag. In its July 5, 1983budget submission, the hospital had proposed toincrease its nonvolume expenses for the 1984 fiscal yearby $4,244,000. On July 15, 1983, the commission issuedits preliminary decision ruling that the $4,244,000proposed increase in nonvolume expenses was presumptivelyunreasonable and would be disallowed. Thecommission further notified the hospital that it wouldconduct a public hearing during which the hospitalwould be afforded an opportunity to justify its budget"in a manner consistent with the provisions of the Commission'sregulations."

On appeal, the hospital claims that the commission'sSeptember 15, 1983 decision disallowing the proposedincrease in nonvolume expenses was made uponimproper procedure which denied the hospital dueprocess, and that the decision was not supported byreliable, probative and substantial evidence. The commissionadvanced several reasons in support of its September15, 1983 decision to disallow the proposedincrease in nonvolume expenses. We must uphold thecommission's decision if any of those reasons are sufficientto justify the action taken. See General Statutes4-183 (g)(5); Lawrence v. Kozlowski, 171 Conn. 705,713-14, 372 A.2d 110 (1976), cert. denied, 431 U.S. 969,97 S.Ct. 2930, 53 L.Ed.2d 1066 (1977). One reasongiven by the commission was the failure of the

[200 Conn. 499]

     hospital to justify, on an individual basis, each budgetitem of its proposed increase in nonvolume expenses.Because we find that reason sufficient to sustain thecommission's action in this case, we need not addressthe hospital's related claims of error challenging theadditional reasons given by the commission.

The hospital does not claim to have justified individuallythe need for its proposed new programs, facilitiesand additional staffing. Rather, the hospital claims thatunder the commission's regulations, it was not requiredto do so. Since the commission's July 15, 1983 noticeof hearing directed the hospital only to justify its proposedbudget increases "in a manner consistent with. . . the Commission's regulations," the hospitalclaims that the commission did not give it "propernotice of its concern for evidence dealing with the`merits' of the non-volume expense increases." Thehospital also contends that "this lack of noticeprevented it from preparing and presenting meaningfultestimony on such matters."

The hospital's claim that it was not required to justifyindividually its proposed nonvolume expense increasesis based on its peculiar construction of 19a-160-111 (c)of the commission's regulations.1 Section 19a-160-111describes the methodology used by the commission toevaluate a hospital's proposed increases in nonvolumeexpenses. The commission applies certain mathematicalformulae to the proposed area of expansion, and computesa "presumptively reasonable" level of expense.Regs., Conn. State Agencies 19a-160-111 (b). Theexpense of a proposed item is evaluated in terms of astandard "cost center screen." Id. When a hospital'sproposed nonvolume expense increase fails to satisfy

[200 Conn. 500]

     the test of presumptive reasonableness as determinedagainst the cost center screen, 19a-160-111 (c)requires the hospital "to justify all its non-volumerequests in the cost center. A Hospital shall be requiredto justify why increases up to the amount by which itfailed the cost center screen cannot be financed throughimprovements in internal efficiencies."

The hospital contends that under 19a-160-111 (c)it was required only to "justify why increases up to theamount by which it failed the cost center screen [could]not be financed through improvements in internal efficiencies."The hospital's proffered construction plainlyignores the first sentence of 19a-160-111 (c), whichrequired it "to justify all its non-volume requests in thecost center." (Emphasis added.) As noted, the hospitalin this case failed the test of presumptive reasonablenessas to its entire $4,244,000 proposal, andtherefore, it was required under 19a-160-111 (c) tojustify "all its non-volume requests" at the budgethearing.

We find nothing contradictory or abstruse in the languageof 19a-160-111 (c). That section merely requiresa hospital whose budget proposal has failed the test ofpresumptive reasonableness first to justify all requestsin the particular cost center, and then, to the extentthat it has done so, to further justify why the proposalscannot be financed through improvements in internalefficiencies. We therefore reject the hospital's claimthat it was not given adequate notice that it would berequired at the hearing to justify specifically its proposedincreases in nonvolume expenses. The commission'sJuly 15, 1983 notice of hearing clearly informedthe hospital that it would be required to justify itsbudget in a manner consistent with the commission'sregulations. The hospital is expected to know whatthose regulations provide. Section 19a-160-111 (c)clearly required the hospital to justify individually all

[200 Conn. 501]

     of its nonvolume requests in the cost center. The hospital'sfailure to do so provided the commission an adequatereason to disallow the proposed increases innonvolume expenses. The trial court properly sustainedthe commission's decision in this respect.

D

1982 COMPLIANCE ADJUSTMENT

On May 31, 1983, the commission decided to imposea $261,000 compliance adjustment2 against the hospitalduring its 1984 fiscal year based upon its 1982 fiscalyear operations. The hospital received notice of thecommission's decision on June 1, 1983. The notice alsoinstructed the hospital to request a hearing if it wishedto contest the commission's decision. By letter datedJune 16, 1983, the hospital requested a hearing on thecommission's 1982 compliance adjustment, and suggestedthat, in the interest of efficiency, the hearingbe held as part of the upcoming 1984 budget reviewprocess. The commission agreed and responded to thehospital by letter dated June 30, 1983, that "we willplan on conducting said hearing as part of the 1984 fiscalbudget process as you suggest." The hearings onthe hospital's 1984 proposed budget took place inAugust, 1983, with neither party bringing up the matterof the commission's May 31, 1983 compliance decision.Thereafter, the commission, in its September 15,1983 final decision on the hospital's proposed 1984 fiscalyear budget, enforced its earlier compliance decision,

[200 Conn. 502]

     and included the full $261,000 as a source of funds forthe 1984 fiscal year.

The hospital claims that it was denied due processbecause the commission never scheduled a special hearingon its May 31, 1983 compliance decision during theAugust, 1983 budget hearings for the 1984 fiscal year.We find this claim to be without merit. Due processrequires that a party adversely affected by governmentaction be afforded an opportunity to be heard. Murphyv. Berlin Board of Education, 167 Conn. 368, 374,355 A.2d 265 (1974); Hart Twin Volvo Corporation v. Commissionerof Motor Vehicles, 165 Conn. 42, 44-46,327 A.2d 588 (1973). The hospital in this case was affordedsuch an opportunity. That it elected not to take advantageof it is not the fault of the commission. The commissionis responsible for regulating the budgets of allhospitals in this state. It makes its budget decisionsaccording to standard formulas and procedures setforth in its regulations. The commission's budget determinations,to the extent made in accordance with itsduly enacted regulations, are presumptively legal. Anychallenge to those determinations must be initiated bythe aggrieved hospital. The hospital in this case wasfully aware of how the commission had arrived at a figureof $261,000 as a compliance adjustment for fiscalyear 1982. If that figure was incorrect, or if the impositionof a compliance adjustment for fiscal year 1982was otherwise improper, then the burden was on thehospital to expose the error or identify the impropriety.

Pursuant to the understanding reached between thecommission and the hospital, the hospital was affordedthe opportunity to challenge the 1982 complianceadjustment during the August, 1983 budget hearings.The hospital itself suggested that its challenge to the1982 compliance adjustment be considered in conjunctionwith the main hearings on its proposed 1984budget. Since the hospital had the burden of

[200 Conn. 503]

     identifying the alleged errors in the commission's May 31, 1983decision, the commission could reasonably haveexpected the hospital to initiate the discussion. The trialcourt properly sustained the action of the commissionin imposing the $261,000 compliance adjustment forthe 1982 fiscal year.

E

1983 COMPLIANCE ADJUSTMENT

In addition to imposing a compliance adjustment forfiscal year 1982, the commission also imposed a complianceadjustment of $509,000 for fiscal year 1983 inits September 15, 1983 budget decision. The hospitalclaims that the 1983 compliance adjustment was notauthorized by the commission's regulations, or in thealternative, that the adjustment, if authorized, wasimposed without adequate notice. We find that the 1983compliance adjustment was properly imposed.

We first address the hospital's claim that a complianceadjustment for fiscal year 1983 was not authorized bythe commission's regulations. Section 19a-160-116 (a)(1)prescribes the circumstances under which a currentyear compliance adjustment may be imposed. That sectionprovides, in pertinent part, that where a "hospital'scurrent year net revenues are in excess of theauthorized budget, the net revenue amount in excessof such authorized budget, after recognition of volumeand inflation variations, is to be considered as a sourceof finds in the ensuing fiscal year . . . ." It isundisputed that the hospital's actual net revenues forfiscal year 1983, unadjusted for inflation, were notin excess of the amount authorized by the commission.The commission determined, however, that theserevenues, when adjusted for inflation, exceeded theauthorized budget for fiscal year 1983 by $509,000, andhence, ordered that that amount be included as a sourceof funds in the hospital's 1984 fiscal year budget.

[200 Conn. 504]

The hospital's argument is based on its particular constructionof 19a-160-116 (a)(1). The hospital contendsthat under 19a-160-116 (a)(1) its current yearrevenues, unadjusted for inflation, must exceed authorizedrevenues before the excess may be considered asource of funds in the ensuing year. We disagree withthe hospital's interpretation. The plain language of19a-160-116 (a)(1) requires the commission to calculatethe effect of inflation in determining the amountof actual revenue received by a hospital in a given fiscalyear. Moreover, 19a-160-107 sets out the procedureto be followed by the commission in determiningthe effect of inflation on a hospital's budget. An initial"inflation factor" is predicted. Regs., Conn. StateAgencies 19a-160-107 (b). The predicted inflation factoris then adjusted twice during the fiscal year basedupon the actual rate of inflation. Regs., Conn. StateAgencies 19a-160-107 (f). Finally, the hospital's actualrevenues and expenses are recomputed at the end ofthe fiscal year in accordance with a revised inflation-factor. We believe that the commission correctly interpreted19a-160-116 (a)(1) to require an adjustmentfor inflation in the hospital's fiscal year 1983 netrevenues. Accordingly, a compliance adjustment wasauthorized by the commission's regulations.

We next address the hospital's claim that it did notreceive notice that a compliance adjustment for fiscalyear 1983 would be enforced against it. The hospitalconcedes that it, and not the commission, computed the1983 compliance adjustment of $509,000. The hospitalargues, however, that it computed this figureaccording to a formula contained on forms supplied bythe commission that the hospital was required to completeas part of the 1984 budget process. The hospitalnever agreed that the 1983 compliance adjustment wasfair or accurate, and in effect, filed the relevant formsunder protest. Nonetheless, the hospital included the

[200 Conn. 505]

     $509,000 as a source of funds in its July 5, 1983 budgetsubmission as it was required to do. In order to balanceits budget, however, the hospital offset the$509,000 source of funds against a corresponding$509,000 application of funds. In its July 15, 1983 preliminarydecision, the commission did not modify eitherthe entry of the $509,000 source of funds, or the correspondingentry of the $509,000 application of fundsas allocated in the hospital's budget. The commission,however, eliminated the $509,000 application of fundsfrom the hospital's budget in its September 15, 1983decision, and entered a corresponding reduction in thehospital's budget base.3

In its July 15, 1983 preliminary decision, the commissionincluded a staff workpaper, form Y (b), whichalong with the $509,000 compliance adjustment,reflected the hospital's proposed $509,000 applicationof those funds. As to both the compliance adjustmentand the application of funds entries, the workpapernoted that the "Hospital will detail explanation as tothe $509,000 at the time of the public hearing." Thereafter,on August 1, 1983, the commission filed a revisedform Y (b) in which certain entries differed from thoseon the original version. The revisions on the latter formY (b) concerned entries entirely unrelated to the$509,000 compliance adjustment and proposed applicationof funds. The revised form Y (b), however, didnot repeat the handwritten notation contained on theearlier form concerning the hospital's need to explainwhat it intended to do with $509,000 application offunds. The hospital contends that the revised form Y (b)entirely superceded the original, and thus, that the commission's

[200 Conn. 506]

     failure to include the notation on the revisedform "indicated its unqualified approval of the $509,000application of funds. . . ." We reject the hospital'sclaims for the two following reasons.

The hospital had no legitimate reason to believe thatthe revised form Y (b) filed by the commission had anyeffect on the handwritten notation contained on theoriginal form. Form Y (b) is a worksheet matrix containingbudget items across its top and down thelefthand side. Various columns of subordinate figuresare added to reach aggregate sums in each column. Anychanges in any of the subordinate figures in any columnwould require changes in the aggregates. The revisedform Y (b) was obviously filed to call attention tochanges made in unrelated subordinate figures, and tothe resulting changes in the aggregate sums. Thatunrelated entries included on form Y (b) requiredmodification was no reason for the hospital to concludethat unmodified entries had, by implication, beenunqualifiedly approved. We do not believe that therevised form Y (b) can be read to accomplish anythingother than what it purported, which was to enter certainchanges in subordinate figures in columns entirelyunrelated to the 1983 compliance adjustment.

More important, however, is our second reason,namely, that even if the revised form Y (b) were heldto completely supersede the original form, and therebyto cast into oblivion the handwritten notation on theoriginal form, the hospital's claim to a lack of noticeabout the 1983 compliance adjustment would still bewithout merit. In this regard it is necessary to refinethe hospital's claim. The hospital does not contend thatit was completely unaware of the 1983 complianceadjustment. The hospital itself had computed theadjustment and filed the required forms under protest.The hospital's complaint is more precisely directed atthe manner in which the compliance adjustment was

[200 Conn. 507]

     ultimately enforced. The commission might haveenforced the compliance adjustment in either of twoways. It might simply have allowed the $509,000 in revenue,which the compliance adjustment represented,to supplement the hospital's proposed revenue authorizationfor the 1984 fiscal year. Under this approach,the compliance adjustment would merely constitute$509,000 in additional revenue - at least on paper and$509,000 in additional authorized expense, allocatedsomewhere in the budget, to be used or not as the hospitaldesired during the 1984 fiscal year. This is what thehospital believed the commission had decided when itfiled its revised form Y (b) in which, according to thehospital, the commission "indicated its unqualifiedapproval of the $509,000 application of funds. . . ."Thus, the hospital, due to its misreading of the commission'sJuly 15, 1983 preliminary decision, can statein its brief that "the commission in effect Rad] imposedno compliance adjustment." (Emphasis added.)

The commission, however, did not enforce the 1983compliance adjustment as outlined above. Instead, itacted in accordance with its published regulations andenforced the 1983 compliance adjustment in a mannerless agreeable to the hospital. In its September 15, 1983final decision, the commission reduced the hospital'srevenue authorization for the 1984 fiscal year by$509,000, the amount of the 1983 compliance adjustment.This action, of course, necessitated a correspondingreduction in the hospital's authorized budget baseduring the 1984 fiscal year. Section 19a-160-116 setsforth the procedure to be followed by a hospital in orderto avoid a loss in authorized revenue due to the impositionof a current year compliance adjustment. Section19a-160-116 (a)(1) provides that any excess incurrent year net revenues over the authorized budget"is to be considered as a source of funds in the ensuingfiscal year, thus reducing net patient revenues in

[200 Conn. 508]

     the ensuing fiscal year unless an alternate use of thefunds is approved by the commission as a part of thebudget process. Rests for such alternate use mustbe made to the commission in writing as part of thebudget submission." (Emphasis added.) In its July 15,1983 notice of hearing, the commission expresslyinformed the hospital that it would be required to justifyits budget "in a manner consistent with . . . thecommission's regulations." In view of the plain languageof 19a-160-116 (a)(1), we do not see how thehospital could legitimately have concluded that the revenuerepresented by the 1983 compliance adjustmenthad been preserved merely by the hospital's submission,on form Y (b), of an unexplicated figure of $509,000as an application of funds. The commission, under itsregulations, was not required to approve or disapproveof the proposed $509,000 application of funds in its preliminarybudget decision, and accordingly, the hospitalshould not have drawn significance from the failureof the commission to renew its handwritten notationon the revised form Y (b). The hospital's reliance onthe commission's supposed approval of the $509,000application of funds was particularly unjustified in lightof the express caveat contained in the commission'sJuly 15, 1983 notice of hearing. That caveat stated: "[I]tshould be noted that pursuant to Section 19-73o-4 (d)of the Commission's regulations the determination bythe Commission in this preliminary decision that a proposedfinancial requirement, or a portion thereof, ispresumptively reasonable, will neither be binding onthe Commission in any further review of the hospital'sbudget nor excuse the hospital from the requirementthat it justify said financial requirements as necessaryin any such further review."4

[200 Conn. 509]

We think that the hospital was adequately notifiedthat it would be required to justify an alternate use ofthe funds represented by the 1983 compliance adjustmentor have those funds deducted from its revenueauthorization for the 1984 fiscal year. The commissioninformed the hospital that it would be required to justifyits budget in a manner consistent with its regulations,and the hospital must be charged with knowledgeof what those regulations say. The commissionwas not required to remind the hospital on form Y (b)that it would be expected to justify its proposed applicationof the 1983 compliance adjustment. That burdenwas already placed squarely on the hospital by19a-160-116 (a)(1) of the commission's regulations.The hospital therefore had no reason to believe thatthe proposed application of funds had been "unqualifiedlyapproved" when the commission failed to repeatthe notation on the revised form Y (b). If the hospitalneeded more information concerning what items hadbeen approved or disapproved in the commission'sJuly 15, 1983 preliminary decision, it could have askedthe commission for "a more definite and detailed statement"as provided in the Uniform Administrative ProcedureAct. General Statutes 4-177 (b)(4). We findno merit in the hospital's claim to a lack of notice thatthe 1983 compliance adjustment might be enforced.5

F

PHILANTHROPIC FUNDS

In fiscal year 1983, the hospital exceeded its authorizedbudget for capital expenditures by $81,000.

[200 Conn. 510]

     Accordingly, the commission imposed a complianceadjustment in that amount in the hospital's 1984 capitalbudget. The hospital claims that the $81,000 representedphilanthropic funds, and that such funds areexpressly exempted from commission regulation byGeneral Statutes 19a-153 (c). General Statutes19a-153 (c) provides, in pertinent part, that "the commission . . .shall not direct or control the use of the. . . principal and all income from restricted and unrestrictedgrants, gifts, contributions, bequests andendowments." We think the language of this subsectionis plain and unambiguous: the commission may notregulate the use of philanthropic funds.

The commission argues that since money is fungible,it is impossible to know whether funds spent on a particularitem are actually philanthropic in origin. Whilewe tend to agree with the commission's observation,we believe that its argument proves too much. If thehospital were required to segregate its philanthropicbequests and include the total as a source of funds ina budget submission, the commission would clearly bedirecting and controlling the use of those funds in thehospital's authorized budget. On the other hand, if thehospital were to spend the philanthropic funds as theywere received, it would exceed its authorized level ofexpense in the fiscal year. The commission's argument,if accepted, would prevent the hospital from spendingphilanthropic funds at all unless regulated by the commission.Such regulation, of course, would directly contraveneGeneral Statutes 19a-153 (c).

The commission also notes that the expenditure offunds for capital acquisitions often entails incidentalexpenses, e.g., a machine requires electricity, maintenance,and someone to operate it. There is nothing in

[200 Conn. 511]

     the language of General Statutes 19a-153 (c) to preventthe commission from identifying and regulatingincidental expenses which may be associated with theexpenditure of philanthropic funds. The philanthropicexpenditure itself, however, may not be regulated.

If General Statutes 19a-153 (c) is to be given anyeffect, the hospital must be allowed to designate howit has spent its philanthropic funds. We need not resolveon this appeal the myriad problems which may ariserelating to verification of funds received, and the applicationof those funds. We do note in passing that thecommission may adopt regulations relating to the issueof verification. For purposes of this appeal, we hold thatthe commission may not impose a compliance adjustmentbased on a hospital's expenditure of adequatelyverified philanthropic funds. The commission does notcontend that the funds expended in this case were notphilanthropic and thus, verification is not an issue onthis appeal. We therefore conclude that the commission improperlyimposed the $81,000 compliance adjustmentbased upon the hospital's exceeding its authorizedcapital budget for the 1983 fiscal year.

II

CROSS APPEAL BY THE COMMISSION

A

REDUCTION IN BUDGET BASE

The commission has appealed from various aspectsof the trial court's decision in this case. We first addressits claim that the trial court erred in concluding thatthe commission improperly cut $497,000 from thehospital's budget. The $497,000 cut under considerationrepresents the $509,000 fiscal year 1983 complianceadjustment which we have previously determinedwas properly imposed, offset however, by $12,000 inprojected losses in anticipated expense recoveries as

[200 Conn. 512]

     determined by the commission. The trial court held thatthe $497,000 cut was improper because it found thatthe hospital had "no notice . . . that the cut mightbe made." We disagree.

The $497,000 reduction in the hospital's proposedbudget was derived from the $509,000 complianceadjustment for the 1983 fiscal year. Although the trialcourt found that the hospital had adequate notice ofthe 1983 compliance adjustment, it held, somewhatincongruously, that the hospital did not have adequatenotice that enforcement of the compliance adjustmentwould result in a corresponding reduction inthe hospital's budget base. As our previous discussionwould suggest, we think the hospital should havebeen aware that its net patient revenues in the 1984fiscal year would be reduced "unless an alternate useof the funds [was] approved by the commission as apart of the budget process." Regs., Conn. State Agencies19a-160-116 (a)(1). The commission in its September15, 1983 decision specifically noted the failureof the hospital to "provide any testimony with respectto the $497,000 base adjustment." The hospital claimsconsistently with its argument relating to the 1983'compliance adjustment, that it offered no testimony onthe $497,000 budget modification because it had noprior notice that the compliance adjustment might beimposed. The hospital, however, should have known,and therefore, should have presented evidence at thehearing relating to an alternate use of the funds representedby the 1983 compliance adjustment. The trialcourt erred in its determination that the hospital didnot have adequate notice of the $497,000 modificationto its budget base.

B

REPAIR AND MAINTENANCE EXPENSE

As has previously been discussed in our considerationof the hospital's appeal, the trial court in large part

[200 Conn. 513]

     sustained the action of the commission in the area ofnonvolume expense reductions. In three instances,however, the trial court found that the commission'snonvolume expense reductions were improper. Thefirst of these was a $593,000 proposed expenditure forrepair and maintenance. In its September 15, 1983 decision,the commission cut the $593,000 from the budgetbecause the hospital "did not give a dollar breakdownfor the items [it] identified as necessary and thereforethe commission was not able to evaluate and authorizedollars for each item individually." The trial court heldthat the commission's action was improper because ithad not given the hospital "notice that an individualcost breakdown was required." We disagree.

As with the other nonvolume expense proposals eliminatedby the commission and approved by the trialcourt, the burden was on the hospital to justify whythe expenses were necessary. Section 19a-160-111 (c)clearly provides that "[s]hould a hospital not pass thecost center screen, it will be required to justify all itsnon-volume requests in the cost center." (Emphasisadded.) The hospital in this case did not pass the costcenter screen with respect to its nonvolume requests.The hospital provided no details to the commission asto the dollar amount associated with individual projectswithin the cost center. It was therefore impossible forthe commission to determine whether any given proposalwas justified in terms of its cost. As has beenpreviously discussed, the hospital has chosen to disregardthe first sentence of 19a-160-111 (c) quotedabove. We believe that that sentence provided thehospital with adequate notice that it would be requiredto provide the commission with the cost of individualproposals within the cost center. We conclude that thetrial court erred in its determination that the commissionhad not given the hospital adequate notice thatsuch individual cost breakdowns would be required.

[200 Conn. 514]

C

SALARY ADJUSTMENT

As part of its nonvolume expense, the hospital budgeted$1,000,000 to provide a one-time salary adjustmentfor its nonphysician employees. In its September 15,1983 decision, the commission authorized $150,000 ofthe request, but cut the remaining $850,000 from thehospital's budget. The primary reason relied upon bythe commission to justify its cut of the $850,000 wasthat the hospital, after repeated requests, had failedto produce evidence in justification of its full $1,000,000salary adjustment. The evidence sought by the commissionwas a ten volume report prepared by a privateconsultant for the hospital containing data concerning119 nonexecutive positions and 37 managerial positionswithin the hospital. The conclusions contained in thisreport formed the basis of the hospital's $1,000,000 salaryrequest.

The trial court held that the commission had improperlydenied the hospital's salary request. The trial courtfound that "[t]he record indicates that the study wasin the hearing room . . . the [hospital's] attorneystated that the study contained sensitive informationwhich should not be put in evidence because it wouldthen be a public document anyone might read. He suggestedthat it could be made available for the staff and,after review, those parts of it necessary for findingsof fact and decision making could be made part of thepublic record." The trial court concluded that the hospitalhad in fact made the study available to the commission,and that the commission's finding to the contrarywas unsupported by the record.

The trial court's findings and conclusions on this matterare supported by the record. The study preparedfor the hospital contained personal information which

[200 Conn. 515]

     was not necessary to the commission's decision on thehospital's salary request. The hospital's suggestion thatthe commission review the study in its entirety andintroduce into evidence only those portions necessaryto support its decision was not unreasonable. The commission'srefusal to consider the study as submitted bythe hospital was an abuse of its discretion. General Statutes4-183 (g)(6). Therefore, the asserted failure ofthe hospital to produce the report cannot sustain thecommission's decision to deny the $1,000,000 salaryrequest. As that was the primary reason offered by thecommission in support of its decision, the decisioncannot stand. The trial court did not err in its determinationthat the commission had improperly cut$850,000 from the hospital's salary request.

D

LONG RANGE PLANNING

The hospital budgeted $210,000 in nonvolumeexpense for long range planning. Of this amount,$50,000 was budgeted for legal costs in connection witha review of the hospital's corporate structure, the medicalstaff bylaws, and the physician compensation plan;$75,000 for architectural services in connection withthe preparation of a plan of development and generalrenovation; $35,000 for computer research on thedemographic and market characteristics of the hospital'sservice area; $10,000 for computer costs associatedwith the research; and other such expenses. In its September15, 1983 decision, the commission cut $160,000from the hospital's request on the ground that thehospital had adequate "in-house expertise, the expenseof which is already in the hospital's budget, to developthe majority of the plan." The trial court held that thecommission's finding of adequate expertise within thehospital to develop the long range plan was unsupportedby the evidence.

[200 Conn. 516]

We cannot say that the trial court's finding that thecommission improperly cut the $160,000 from thehospital's planning budget was clearly erroneous. Thecommission has not pointed to any evidence in the recordto support its finding that the hospital possessedadequate in-house expertise to develop the proposedplan. Rather, the commission claims that the trial courterred because the burden was on the hospital to showthat its management personnel did not possess the requisiteexpertise. In this instance we must disagree withthe commission. The hospital could not reasonably havebeen expected to prove the negative, i.e., that itsmanagement personnel were inadequate to perform theproposed functions. The record established that thehospital administration consisted of seven individuals,none of whom appeared, either by training or job function,qualified to perform the legal, architectural orcomputer services proposed by the hospital. We concludethat the trial court did not err in its determinationthat the commission had improperly cut $160,000from the hospital's budgeted expenses for long rangeplanning.

E

CAPITAL CARRYOVER

In its July 5, 1983 budget submission, the hospitalrequested authorization for capital expenditures in theamount of $1,484,000 for the 1984 fiscal year. The commissionin its July 15, 1983 preliminary decision determinedthat $412,000 of the hospital's capital requestwas presumptively reasonable, and disallowed theremainder. In its proposed capital budget, the hospitalhad included $689,000 which the commission hadapproved for capital expenditures in fiscal years 1981and 1982, but which the hospital had not expended inthose years due to a lack of available funds. In its September15, 1983 final decision, the commission ruled

[200 Conn. 517]

     that the hospital had not justified its proposed capitalexpenditures budget beyond the presumptively reasonableamount of $412,000, and expressly disallowed theproposed capital carryover. The hospital contends thatthe commission has no authority to regulate the useof unexpended capital authorizations from past fiscalyears, and thus claims that the commission improperlydisallowed the $689,000 in unexpended authorizedfunds from fiscal years 1981 and 1982. We disagree.

The hospital's claim that the commission improperlydisallowed the $689,000 capital carryover is based onthe particular wording of the commission's September15, 1983 final decision. In that decision the commissionhad stated: "The commission's posture on thecarryover of capital requires the hospital to make arequest to carry over capital and address each itemindividually. The carry over of $689,000 from prioryears was not addressed specifically in testimony andwas not considered as [an] item to be approved by thecommission." (Emphasis added.) The hospital contendedin the trial court, and contends on appeal, thatthe commission's so-called "posture" on carryovers is,in effect, a regulation which has not been promulgatedin accordance with the Uniform Administrative ProcedureAct. General Statutes 4-166(7), 4-167 (b),4-168; see Salmon Brook Convalescent Home v. Commissionon Hospitals & Health Care, 177 Conn. 356,362, 417 A.2d 358 (1979). The trial court accepted thehospital's contention, for it could not "find any suchauthority in the regulations for such `posture' andtherefore [held] that the defendant commission's ruling[was] illegal." While the commission's choice ofwords may have been regrettable, we do not think thatits "posture" on carryovers can sensibly be viewed asanything other than a necessary application of its publishedregulations. See Eagle Hill Corporation v. Commissionon Hospitals & Health Care, 2 Conn. App. 68,76, 477 A.2d 660 (1984).

[200 Conn. 518]

The commission's authority for its so-called "posture"derives from the regulatory procedure by which itreviews a hospital's proposed capital budget. The commissioninitially applies an "overall test of reasonableness"to the net patient revenues as proposed by ahospital in its budget submission. Regs., Conn. StateAgencies 19a-160-103 (a). A hospital's budget whichdoes not meet the overall test of reasonableness is subjectto a series of specified analyses; Regs., Conn. StateAgencies 19a-160-103 (c); including an analysis ofcapital expenditures." Regs., Conn. State Agencies19a-160-103 (e)(3). The regulations provide that"[c]apital budgets will be reviewed for the hospitals asdescribed in section 19a-160-115." Regs., Conn. StateAgencies 19a-160-104 (b). Section 19a-160-115 (a)allows the commission to "determine the relationshipof applications of funds such as authorized capitalexpenditures . . . to sources of finds such as depreciation,transfers from board designated funds, and commitmentto long term debt." Where the commissiondetermines that "funding requirements exceed thesources identified, the commission may modify thehospital's request." Thereafter, "any hospital objectingto the modification will be required to justify theproposed use of current patient revenue" for capitalimprovements. Id.

Section 19a-160-115 (a) clearly grants the commissionthe authority to regulate, i.e., to approve or disapprove,a hospital's proposed sources and uses of capital finds.Applying its regulations, the commission initially determinedthat the hospital's proposed net revenues did notmeet the overall test of reasonableness. Therefore, thehospital's budget was subjected to the analyses specifiedin 19a-160-103. The hospital's proposed capitalbudget was not found to be "presumptively reasonable"as provided in 19a-160-103 (b), and the commission"modified" the hospital's request. Regs., Conn. State

[200 Conn. 519]

     Agencies 19a-160-103 (a). The hospital was informedof this modification in the commission's July 15, 1983preliminary decision. It therefore became the hospital'sburden, under 19a-160-115 (a) of the commission'sregulations, to justify its proposed sources of capitalfunds. There is nothing in the commission's regulationsto suggest that capital funds consisting of unexpendedauthorizations from past budgets should be treateddifferently from capital funds arising from any othersource. The regulations merely require a hospital tojustify its proposed sources and uses of capital funds.The commission's September 15, 1983 decision clearlystates that the hospital, during the August budget hearings,did not "specifically address" the need for therequested capital items. Its failure to do so providedthe commission an adequate reason to disallow theportion of the hospital's proposed capital budget notfound to be presumptively reasonable under the commission'sregulations. Regs., Conn. State Agencies19a-160-115 (b).

The hospital effectively claims that unexpended capitalauthorizations from years past should provide a"safe harbor" of accumulated future authorization,insulated from regulation by the commission much thesame as philanthropic funds. It is the hospital's positionfor which there is no authority, and not the commission's"posture." Philanthropic funds are beyondthe power of the commission to regulate because thelegislature has clearly and expressly said so. GeneralStatutes 19a-153 (c). The legislature, however, hasnot made similar provision for unexpended past capitalauthorizations. On the contrary, the legislature hasdelegated to the commission a near plenary power toregulate the budgets of hospitals in this state. Thehospital's dissatisfaction with that delegation ispresently addressed to the wrong branch ofgovernment.

[200 Conn. 520]

F

CONDITIONS IMPOSED BY THE COMMISSION

The commission also claims error in the trial court'sconclusion that two conditions imposed on the hospitalby the commission in its final decision were unreasonable.The commission's September 15, 1983 budgetdecision contained nine terms and conditions, in numberedparagraphs, with which the hospital was orderedto comply. Paragraph 7 ordered the hospital to file withits 1985 budget a long range financial plan encompassingfiscal years 1985, 1986 and 1987. Paragraph 8ordered the hospital board of trustees to file bi-monthlyreports detailing the hospital's compliance with the September15, 1983 budget order. The trial court held thatthese conditions were unreasonable because the hospitaland its board of trustees would be unable to complywith their terms.

Although the commission has the right to impose reasonableconditions as a necessary incident of its regulatoryauthority; Eagle Hill Corporation v. Commissionon Hospitals & Health Care, supra, 80; it does not havethe authority to impose conditions with which a hospitalis unable to comply. The trial court's determinationthat the hospital would be unable to comply with theconditions imposed in paragraphs 7 and 8 is intrinsicallyfactual. The commission has presented us with noreasons why or how the trial court's determination waserroneous. The burden is on the appellant, in this case,the cross appellant, to present an adequate record forreview on appeal. Practice Book 3060D. The trialcourt did not err in disallowing the conditions imposedin paragraphs 7 and 8 of the commission's September15, 1983 budget decision.

[200 Conn. 521]

G

STAY AND MODIFICATION OF STAY

We finally address the commission's related claimsthat the trial court erred in granting a stay of the commission'sbudget decision, and in later modifying thatstay. On September 15, 1983, the commission renderedits final decision on the hospital's budget for the 1984fiscal year. The hospital filed its appeal from that decisionon September 29, 1983, and at the same time filedan application for a stay. After a hearing, the trialcourt, Curran, J., on November 2, 1983, granted thestay of the commission's budget decision. Under theterms of the stay, the hospital was permitted to collectpatient revenue in accordance with its proposedbudget. The hospital was also permitted to incurexpenses in excess of those authorized by the commission.With regard to capital expenditures, however, thetrial court expressly limited the hospital to the amountauthorized by the commission.

The trial court, O'Sullivan, J., rendered its decisionon the merits of the hospital's appeal on June 19, 1984.On July 9, 1984, the hospital filed its appeal from thetrial court's decision. Thereafter, the hospital filed inthe trial court a motion to modify the stay order whichhad been entered by Judge Curran on November 2,1983. It appears that the hospital had gone ahead withcapital improvements during the 1984 fiscal year whichhad not been authorized by the commission. The capitalexpenditures undertaken by the hospital were alsomade in direct violation of the November 2, 1983 stayorder, in which Judge Curran had ordered that capitalexpenditures be limited to the amount ordered by thecommission. The hospital in its motion to modify thestay sought an increase in its authorized capital budget,essentially to comport with the unauthorized capital

[200 Conn. 522]

     expenditures it had already made. The trial court,O'Sullivan, J., on September 25, 1984, granted themotion "reluctantly only because doing so may in somesmall way help to solve the controversy between theparties." The trial court also noted that its ruling was"not to be interpreted as the [c]ourt's [having] approvedthe expenditures made.

The issues raised under the present claim are essentiallythe same as those which we have previously considered,at great length, in an earlier phase of theunending controversy which appears to exist betweenthese parties. In Griffin Hospital v. Commission onHospitals & Health Care, 196 Conn. 451, 455,493 A.2d 229 (1985), we stated that General Statutes 4-183 (c),providing for "a stay upon appropriate terms," givesthe trial court "broad authority to fashion appropriaterelief to protect the interest of all those involvedduring the pendency of an administrative appeal." Wealso noted that in "granting a stay upon `appropriateterms' [the trial court] could modify [the budget] oreffectuate its own budgetary plan as a modus vivendi."Id. With regard to the November 2, 1983 order, thetrial court did not err in staying the commission decisionwhich might have been "found after judicial reviewto have been unwarranted." Id., 463. With regard tothe November 25, 1984 modification order, we notethat the finds for which modification of the stay orderwas sought had already been spent. The trial court wasnot required to enter a futile order which it had nopower to enforce. While we agree with the trial courtthat the hospital's violation of Judge Curran's orderis not to be condoned, we believe that the commissionis the proper body to enforce compliance with its September15, 1983 budget decision as modified on appeal.The trial court did not err in its November 25, 1984order granting the hospital's motion to modify theNovember 2, 1983 stay.

[200 Conn. 523]

There is error in part and the case is remanded tothe trial court for further proceedings not inconsistentwith this opinion.

In this opinion the other justices concurred.

1. Regs., Conn. State Agencies 19a-160-111 (c) (formerly 19-73o-11[c]). The commission has redesignated the provisions of its regulationssince it issued its September 15, 1983 budget decision. Throughout thisopinion we refer to the regulations by their present designations.

2. A compliance adjustment is imposed by the commission when ahospital exceeds in a given year its authorized level of revenues. Theexcess revenues are carried forward as a source of funds in a future budget.Regs., Conn. State Agencies; 19a-160-116. In this case the commissiondetermined that the hospital had exceeded its authorized revenues for fiscalyear 1952 by $261,000. The commission therefore included that amount as asource of revenue for the 1984 fiscal year. The effect of the commission'sdecision, of course, was to reduce the actual revenues collectible by thehospital in fiscal year 1984 by $261,000.

3. Although the trial court found no error in the commission'simposition of the 1983 compliance adjustment, it held that the correspondingreduction ordered by the commission in the hospital's budget base wasimproper. The commission has cross appealed from the latter ruling. Weconsider the commission's claim of error at part II, A, infra.

4. Regs., Conn. State Agencies 19a-160-103 (d) (formerly 19-73o-4[d]). The caveat contained in the commission's July 15, 1983 notice ofhearing is a verbatim recital of the language used in the regulation cited.

5. We also note that General Statutes 4-183(e) allows the court onguest of a party to order that "additional evidence be taken before theagency upon conditions imposed by the

On September 15, 1983, the defendantcommission on hospitals and health care (commission),pursuant to its authority under General Statutes19a-156 (a), ordered the plaintiff, Griffin Hospital(hospital), to adopt a budget for the 1984 fiscal year.The budget ordered by the commission authorizedrevenues, operating expenses and capital expendituresin amounts substantially lower than those proposed bythe hospital in a budget submitted to the commissionon July 5, 1983. On September 29, 1983, the hospitalappealed from the commission's September 15,1983 budget order, and the matter was referred toHon. Thomas J. O'Sullivan, state trial referee, who,exercising the powers of the Superior Court, renderedjudgment on June 19, 1984. The referee, in a detailedmemorandum of decision, upheld for the most part thebudget reductions ordered by the commission, butmodified the commission's order in several importantrespects. Neither party is satisfied with the judgmentof the referee. The plaintiff has appealed from thatjudgment, and the defendant has cross appealed.

We begin with a brief outline of the facts. The hospitalfiled its proposed operating and capital expendituresbudget with the commission on July 5, 1983. The hospital'sbudget proposed net patient revenues of$39,755,000, net operating expenses of $37,272,000,and capital expenditures of $1,483,668. On July 15,1983, the commission notified the hospital that it hadrejected the proposed budget, and that it would conducta public hearing "to allow the hospital the opportunityto present evidence in support of the proposed

[200 Conn. 492]

     fiscal 1984 operating and capital budget." The noticealso stated that the hospital should present its evidenceat the public hearing "in a manner . . . consistentwith the provisions of the commission's regulations."On August 8, 19 and 29, 1983, the commission conductedpublic hearings on the hospital's budget for the1984 fiscal year. On September 15, 1983, it issued itsdecision and order requiring the hospital to adopt thebudget as modified by the commission.

The budget ordered by the commission for the 1984fiscal year authorized net patient revenues of$34,197,000, net operating expenses of $33,131,000,and capital expenditures of $411,800. The authorizedfigures represented reductions of $5,558,000, $4,141,000and $1,071,868 respectively, in the amounts originallyrequested by the hospital in its proposed budget submittedon July 5, 1983. In its appeal to the SuperiorCourt, the hospital challenged the reductions in itsbudget ordered by the commission on various statutoryand constitutional grounds. The trial referee acceptedsome of the hospital's claims and rejected others. Wenow turn to the specific claims raised in the appealbefore us.

I

GRIFFIN HOSPITAL APPEAL

A

PREEMPTION

The first of the hospital's contentions is that the commission'sbudget order conflicts with federal law andis therefore preempted under the supremacy clause.The hospital claims that the September 15, 1983 budgetorder required it to use federal medicare reimbursementsto subsidize the health care costs of nonmedicarepatients. Under the medicare program, the federalgovernment reimburses participating hospitals for

[200 Conn. 493]

     services provided to medicare patients according to a setof preestablished rates, regardless of the actual costto the hospital of the particular service provided.42 U.S.C. § 1395ww (d). If the cost to the hospital ofproviding a particular service is less than the amountof reimbursement, the hospital, in effect, earns a"profit" from that service. Conversely, should theactual cost of a service exceed the preestablished rateof reimbursement, the hospital may be said to haveincurred a "loss" on that particular service. Accordingto the hospital's calculations, it would have earnedunder the budget ordered by the commission anaggregate "profit" of $1,754,000 solely from the careand treatment of medicare patients during the 1984fiscal year. The commission's budget, however, providedfor a gain of only $99,000 from total operationsthe combined gain arising from the care and treatmentof both medicare and nonmedicare patients. Thus,according to the hospital, under the commission'sbudget, it was forced to incur an operating loss of$1,655,000 from the care and treatment of nonmedicarepatients, which loss was to be subsidized byits operating gain of $1,754,000 from its "medicarebusiness," resulting in a net operating gain of $99,000.The hospital claims that the commission's action in thiscase conflicts with the federal medicare reimbursementsystem "because the ordered budget deprives theHospital of the choice to use its Medicare [profits] inthe manner which it deems most appropriate."

Preemption analysis has two prongs. In order to concludethat state regulatory action has been preempted,it must be determined that (1) Congress has evidencedan intent to occupy the field or (2) the state regulationactually conflicts with federal law. Silkwood v. Kerr-McGeeCorporation, 464 U.S. 238, 248, 104 S.Ct. 615,78 L.Ed.2d 443 (1984); Times Mirror Co. v. Divisionof Public Utility Control, 192 Conn. 506, 510-11,

[200 Conn. 494]

     473 A.2d 768 (1984). The hospital does not claim that anactual conflict exists between the commission's budgetorder and the federal medicare reimbursement system.Rather, it contends that "Congress intended to preemptthe state from regulating the field of Medicarecost containment and reimbursement." We do notagree. We fail to see how the federal method of medicarereimbursement can be said to preempt the statefrom regulating overall costs at individual medical facilities.The commission's budget order does not purportto restrict the number of medicare patients actuallytreated by the hospital, or the federal level of reimbursementfor any of the services provided. The"profits" anticipated by the hospital from its medicareoperations under the commission's budget are attributable,in part, to the level of overall operating expensesset by the commission. If the hospital were allowed tooperate at the expense level originally proposed in itsJuly 5, 1983 budget, then its medicare "profits" wouldquickly disappear. Since any adjustment by the commissionof overall expenses would necessarily affect thelevel of medicare "profits," we believe that it has theauthority to regulate such "profits" to the extent thatthey exist.

The preeminent purpose of the medicare reimbursementsystem is to control the cost to the federal governmentof the medicare program. Prior to October 1,1983, the federal government reimbursed participatinghospitals based on the reasonable costs actually incurredby the hospital in providing health care services tomedicare patients. 42 U.S.C. § 1395e, 1395f (b),1395ww (b). Congress recognized that a reimbursementsystem based on actual costs provided hospitals withlittle or no incentive to increase efficiency in the provisionof medical services. See H.R. Rep. No. 25, 98thCong., 1st Sess., 132, reprinted in 1983 U.S. CodeCong. & Ad. News 219, 351. The medicare "prospective

[200 Conn. 495]

     payment" system, effective October 1, 1983; Pub. L.No. 98-21, 601 et seq., 97 Stat. 149 (1983); establishesreimbursement rates for medical services regardless ofthe actual cost to the hospital. 42 U.S.C. § 1395ww (d).As a necessary corollary of the prospective paymentsystem, hospitals are encouraged to contain costsassociated with the treatment of medicare patients, andthereby to turn a "profit, "in a manner of speaking,on medicare operations. We simply cannot accept,however, the hospital's contention that the purpose ofCongress in enacting the prospective medicare reimbursementsystem was to allow participating hospitalsto earn "profits" from their treatment of medicarepatients, and then to insulate these "profits" from allstate regulation. This is not a case where Congresshas explicitly provided that the recipient of federalfinds" `may' use the monies for `any' . . . purpose."Lawrence County v. Lead-Deadwood School District,469 U.S. 256, 259, 105 S.Ct. 695, 83 L.Ed.2d 635(1985). Rather, Congress has simply established uniformreimbursement rates for specified medicare services.The commission's primary purpose and concernis to control the rapidly increasing cost of health care.We believe that the work of the commission is fully compatiblewith the intent of Congress to control the costof the federal medicare program. We therefore rejectthe hospital's claim that the commission's September15, 1983 budget order unconstitutionally conflictswith the federal medicare reimbursement system.

B

SCOPE OF REVIEW

We next address the hospital's claims of error relatingto specific items cut from its proposed budget bythe commission in its September 15, 1983 decision.Before turning to those claims, we reiterate for thebenefit of all concerned that the scope of our review

[200 Conn. 496]

     is extremely limited. Judicial review of the commission'sbudget decision is governed by the UniformAdministrative Procedure Act. General Statutes4-166 et seq. With regard to questions of fact, it isneither the function of the trial court nor of this court"to retry the case or to substitute its judgment for thatof the administrative agency." Madow v. Muzio,176 Conn. 374, 376, 407 A.2d 997 (1978); Hospital of St.Raphael v. Commission on Hospitals & Health Care,182 Conn. 314, 318, 438 A.2d 103 (1980); see GeneralStatutes 4-183 (g). "Judicial review of the conclusionsof law reached administratively is also limited.The court's ultimate duty is only to decide whether,in light of the evidence, the [agency] has acted unreasonably,arbitrarily, illegally, or in abuse of its discretion.Robinson v. Unemployment Security Board ofReview, 181 Conn. 1, 5, 434 A.2d 293 (1980); Cervantesv. Administrator, 177 Conn. 132, 134, 411 A.2d 921(1979)." Burnham v. Administrator, 184 Conn. 317,322, 439 A.2d 1008 (1981). The present appeal is fromthe decision of the trial court. We review that decisiononly to determine whether it was rendered in accordancewith the Uniform Administrative Procedure Act.General Statutes 4-183 (g).

Much of this appeal concerns the hospital's claimsthat it was denied due process by the alleged failureof the commission to observe its governing statutes andregulations. In this regard a final point deserves specialemphasis. Although the interpretation of statutesis ultimately a question of law; Connecticut HospitalAssn., Inc. v. Commission on Hospitals & Health Care,200 Conn. 133, 140, 509 A.2d 1050 (1986); it is the wellestablished practice of this court to "accord great deferenceto the construction given [a] statute by the agencycharged with its enforcement." Corey v. Avco-LycomingDivision, 163 Conn. 309, 326, 307 A.2d 155 (1972)(Loiselle, J., concurring), cert. denied, 409 U.S. 1116,

[200 Conn. 497]

     93 S.Ct. 903, 34 L.Ed.2d 699 (1973); accord, Fellinv. Administrator, 196 Conn. 440, 447, 493 A.2d 174(1985); Board of Education v. Connecticut State Boardof Labor Relations, 190 Conn. 235, 241, 460 A.2d 1255(1983); Chamber of Commerce of Greater Waterbury,Inc. v. Lanese, 184 Conn. 326, 331, 439 A.2d 1043(1981); Connecticut State Board of Labor Relations v.Board of Education, 177 Conn. 68, 74, 411 A.2d 28(1979); Connecticut Light & Power Co. v. Public UtilitiesControl Authority, 176 Conn. 191, 198,405 A.2d 638 (1978); Anderson v. Ludgin, 175 Conn. 545, 555,400 A.2d 712 (1978). This principle applies with evengreater force to an agency's interpretation of its ownduly adopted regulations. The commission's September15, 1983 budget decision consumes ninety-fivepages of the record on this appeal. The commission'sdecision reflects an in-depth analysis of the hospital'sprograms, facilities and personnel requirements asmeasured against standardized cost and utilization profilescontained in the commission's regulations. Thelegislature has expressly directed the commission toadopt such regulations; General Statutes 19a-160;and the validly enacted regulations of an administrativeagency carry the force of statutory law. SalmonBrook Convalescent Home v. Commission on Hospitals& Health Care, 177 Conn. 356, 363, 417 A.2d 358(1979); Roy v. Centennial Ins. Co., 171 Conn. 463, 473,370 A.2d 1011 (1976). The commission is specially constitutedby the legislature to coordinate, throughoutthe state, the efficient utilization of hospital resourcesin an effort to contain the burgeoning cost of healthcare. The courts> cannot hope to duplicate the work ofthe commission, or to make hospital budget determinationswith the same level of expertise as that possessedby the commission staff. We therefore approachthe issues raised in this appeal both with an awarenessof the limitations inherent in the review process itself,

[200 Conn. 498]

     and with due deference to the broad grant of regulatoryauthority which has been delegated to the commissionby our legislature. See General Statutes 19a-150,19a-151, 19a-153 (a), 19a-154 (a), 19a-156 (a).

C

NONVOLUME EXPENSE REDUCTIONS

The single largest reduction in the hospital's budgetordered by the commission occurred in the area of nonvolumeexpense increases, i.e., proposed new programs,new services, and additional sag. In its July 5, 1983budget submission, the hospital had proposed toincrease its nonvolume expenses for the 1984 fiscal yearby $4,244,000. On July 15, 1983, the commission issuedits preliminary decision ruling that the $4,244,000proposed increase in nonvolume expenses was presumptivelyunreasonable and would be disallowed. Thecommission further notified the hospital that it wouldconduct a public hearing during which the hospitalwould be afforded an opportunity to justify its budget"in a manner consistent with the provisions of the Commission'sregulations."

On appeal, the hospital claims that the commission'sSeptember 15, 1983 decision disallowing the proposedincrease in nonvolume expenses was made uponimproper procedure which denied the hospital dueprocess, and that the decision was not supported byreliable, probative and substantial evidence. The commissionadvanced several reasons in support of its September15, 1983 decision to disallow the proposedincrease in nonvolume expenses. We must uphold thecommission's decision if any of those reasons are sufficientto justify the action taken. See General Statutes4-183 (g)(5); Lawrence v. Kozlowski, 171 Conn. 705,713-14, 372 A.2d 110 (1976), cert. denied, 431 U.S. 969,97 S.Ct. 2930, 53 L.Ed.2d 1066 (1977). One reasongiven by the commission was the failure of the

[200 Conn. 499]

     hospital to justify, on an individual basis, each budgetitem of its proposed increase in nonvolume expenses.Because we find that reason sufficient to sustain thecommission's action in this case, we need not addressthe hospital's related claims of error challenging theadditional reasons given by the commission.

The hospital does not claim to have justified individuallythe need for its proposed new programs, facilitiesand additional staffing. Rather, the hospital claims thatunder the commission's regulations, it was not requiredto do so. Since the commission's July 15, 1983 noticeof hearing directed the hospital only to justify its proposedbudget increases "in a manner consistent with. . . the Commission's regulations," the hospitalclaims that the commission did not give it "propernotice of its concern for evidence dealing with the`merits' of the non-volume expense increases." Thehospital also contends that "this lack of noticeprevented it from preparing and presenting meaningfultestimony on such matters."

The hospital's claim that it was not required to justifyindividually its proposed nonvolume expense increasesis based on its peculiar construction of 19a-160-111 (c)of the commission's regulations.1 Section 19a-160-111describes the methodology used by the commission toevaluate a hospital's proposed increases in nonvolumeexpenses. The commission applies certain mathematicalformulae to the proposed area of expansion, and computesa "presumptively reasonable" level of expense.Regs., Conn. State Agencies 19a-160-111 (b). Theexpense of a proposed item is evaluated in terms of astandard "cost center screen." Id. When a hospital'sproposed nonvolume expense increase fails to satisfy

[200 Conn. 500]

     the test of presumptive reasonableness as determinedagainst the cost center screen, 19a-160-111 (c)requires the hospital "to justify all its non-volumerequests in the cost center. A Hospital shall be requiredto justify why increases up to the amount by which itfailed the cost center screen cannot be financed throughimprovements in internal efficiencies."

The hospital contends that under 19a-160-111 (c)it was required only to "justify why increases up to theamount by which it failed the cost center screen [could]not be financed through improvements in internal efficiencies."The hospital's proffered construction plainlyignores the first sentence of 19a-160-111 (c), whichrequired it "to justify all its non-volume requests in thecost center." (Emphasis added.) As noted, the hospitalin this case failed the test of presumptive reasonablenessas to its entire $4,244,000 proposal, andtherefore, it was required under 19a-160-111 (c) tojustify "all its non-volume requests" at the budgethearing.

We find nothing contradictory or abstruse in the languageof 19a-160-111 (c). That section merely requiresa hospital whose budget proposal has failed the test ofpresumptive reasonableness first to justify all requestsin the particular cost center, and then, to the extentthat it has done so, to further justify why the proposalscannot be financed through improvements in internalefficiencies. We therefore reject the hospital's claimthat it was not given adequate notice that it would berequired at the hearing to justify specifically its proposedincreases in nonvolume expenses. The commission'sJuly 15, 1983 notice of hearing clearly informedthe hospital that it would be required to justify itsbudget in a manner consistent with the commission'sregulations. The hospital is expected to know whatthose regulations provide. Section 19a-160-111 (c)clearly required the hospital to justify individually all

[200 Conn. 501]

     of its nonvolume requests in the cost center. The hospital'sfailure to do so provided the commission an adequatereason to disallow the proposed increases innonvolume expenses. The trial court properly sustainedthe commission's decision in this respect.

D

1982 COMPLIANCE ADJUSTMENT

On May 31, 1983, the commission decided to imposea $261,000 compliance adjustment2 against the hospitalduring its 1984 fiscal year based upon its 1982 fiscalyear operations. The hospital received notice of thecommission's decision on June 1, 1983. The notice alsoinstructed the hospital to request a hearing if it wishedto contest the commission's decision. By letter datedJune 16, 1983, the hospital requested a hearing on thecommission's 1982 compliance adjustment, and suggestedthat, in the interest of efficiency, the hearingbe held as part of the upcoming 1984 budget reviewprocess. The commission agreed and responded to thehospital by letter dated June 30, 1983, that "we willplan on conducting said hearing as part of the 1984 fiscalbudget process as you suggest." The hearings onthe hospital's 1984 proposed budget took place inAugust, 1983, with neither party bringing up the matterof the commission's May 31, 1983 compliance decision.Thereafter, the commission, in its September 15,1983 final decision on the hospital's proposed 1984 fiscalyear budget, enforced its earlier compliance decision,

[200 Conn. 502]

     and included the full $261,000 as a source of funds forthe 1984 fiscal year.

The hospital claims that it was denied due processbecause the commission never scheduled a special hearingon its May 31, 1983 compliance decision during theAugust, 1983 budget hearings for the 1984 fiscal year.We find this claim to be without merit. Due processrequires that a party adversely affected by governmentaction be afforded an opportunity to be heard. Murphyv. Berlin Board of Education, 167 Conn. 368, 374,355 A.2d 265 (1974); Hart Twin Volvo Corporation v. Commissionerof Motor Vehicles, 165 Conn. 42, 44-46,327 A.2d 588 (1973). The hospital in this case was affordedsuch an opportunity. That it elected not to take advantageof it is not the fault of the commission. The commissionis responsible for regulating the budgets of allhospitals in this state. It makes its budget decisionsaccording to standard formulas and procedures setforth in its regulations. The commission's budget determinations,to the extent made in accordance with itsduly enacted regulations, are presumptively legal. Anychallenge to those determinations must be initiated bythe aggrieved hospital. The hospital in this case wasfully aware of how the commission had arrived at a figureof $261,000 as a compliance adjustment for fiscalyear 1982. If that figure was incorrect, or if the impositionof a compliance adjustment for fiscal year 1982was otherwise improper, then the burden was on thehospital to expose the error or identify the impropriety.

Pursuant to the understanding reached between thecommission and the hospital, the hospital was affordedthe opportunity to challenge the 1982 complianceadjustment during the August, 1983 budget hearings.The hospital itself suggested that its challenge to the1982 compliance adjustment be considered in conjunctionwith the main hearings on its proposed 1984budget. Since the hospital had the burden of

[200 Conn. 503]

     identifying the alleged errors in the commission's May 31, 1983decision, the commission could reasonably haveexpected the hospital to initiate the discussion. The trialcourt properly sustained the action of the commissionin imposing the $261,000 compliance adjustment forthe 1982 fiscal year.

E

1983 COMPLIANCE ADJUSTMENT

In addition to imposing a compliance adjustment forfiscal year 1982, the commission also imposed a complianceadjustment of $509,000 for fiscal year 1983 inits September 15, 1983 budget decision. The hospitalclaims that the 1983 compliance adjustment was notauthorized by the commission's regulations, or in thealternative, that the adjustment, if authorized, wasimposed without adequate notice. We find that the 1983compliance adjustment was properly imposed.

We first address the hospital's claim that a complianceadjustment for fiscal year 1983 was not authorized bythe commission's regulations. Section 19a-160-116 (a)(1)prescribes the circumstances under which a currentyear compliance adjustment may be imposed. That sectionprovides, in pertinent part, that where a "hospital'scurrent year net revenues are in excess of theauthorized budget, the net revenue amount in excessof such authorized budget, after recognition of volumeand inflation variations, is to be considered as a sourceof finds in the ensuing fiscal year . . . ." It isundisputed that the hospital's actual net revenues forfiscal year 1983, unadjusted for inflation, were notin excess of the amount authorized by the commission.The commission determined, however, that theserevenues, when adjusted for inflation, exceeded theauthorized budget for fiscal year 1983 by $509,000, andhence, ordered that that amount be included as a sourceof funds in the hospital's 1984 fiscal year budget.

[200 Conn. 504]

The hospital's argument is based on its particular constructionof 19a-160-116 (a)(1). The hospital contendsthat under 19a-160-116 (a)(1) its current yearrevenues, unadjusted for inflation, must exceed authorizedrevenues before the excess may be considered asource of funds in the ensuing year. We disagree withthe hospital's interpretation. The plain language of19a-160-116 (a)(1) requires the commission to calculatethe effect of inflation in determining the amountof actual revenue received by a hospital in a given fiscalyear. Moreover, 19a-160-107 sets out the procedureto be followed by the commission in determiningthe effect of inflation on a hospital's budget. An initial"inflation factor" is predicted. Regs., Conn. StateAgencies 19a-160-107 (b). The predicted inflation factoris then adjusted twice during the fiscal year basedupon the actual rate of inflation. Regs., Conn. StateAgencies 19a-160-107 (f). Finally, the hospital's actualrevenues and expenses are recomputed at the end ofthe fiscal year in accordance with a revised inflation-factor. We believe that the commission correctly interpreted19a-160-116 (a)(1) to require an adjustmentfor inflation in the hospital's fiscal year 1983 netrevenues. Accordingly, a compliance adjustment wasauthorized by the commission's regulations.

We next address the hospital's claim that it did notreceive notice that a compliance adjustment for fiscalyear 1983 would be enforced against it. The hospitalconcedes that it, and not the commission, computed the1983 compliance adjustment of $509,000. The hospitalargues, however, that it computed this figureaccording to a formula contained on forms supplied bythe commission that the hospital was required to completeas part of the 1984 budget process. The hospitalnever agreed that the 1983 compliance adjustment wasfair or accurate, and in effect, filed the relevant formsunder protest. Nonetheless, the hospital included the

[200 Conn. 505]

     $509,000 as a source of funds in its July 5, 1983 budgetsubmission as it was required to do. In order to balanceits budget, however, the hospital offset the$509,000 source of funds against a corresponding$509,000 application of funds. In its July 15, 1983 preliminarydecision, the commission did not modify eitherthe entry of the $509,000 source of funds, or the correspondingentry of the $509,000 application of fundsas allocated in the hospital's budget. The commission,however, eliminated the $509,000 application of fundsfrom the hospital's budget in its September 15, 1983decision, and entered a corresponding reduction in thehospital's budget base.3

In its July 15, 1983 preliminary decision, the commissionincluded a staff workpaper, form Y (b), whichalong with the $509,000 compliance adjustment,reflected the hospital's proposed $509,000 applicationof those funds. As to both the compliance adjustmentand the application of funds entries, the workpapernoted that the "Hospital will detail explanation as tothe $509,000 at the time of the public hearing." Thereafter,on August 1, 1983, the commission filed a revisedform Y (b) in which certain entries differed from thoseon the original version. The revisions on the latter formY (b) concerned entries entirely unrelated to the$509,000 compliance adjustment and proposed applicationof funds. The revised form Y (b), however, didnot repeat the handwritten notation contained on theearlier form concerning the hospital's need to explainwhat it intended to do with $509,000 application offunds. The hospital contends that the revised form Y (b)entirely superceded the original, and thus, that the commission's

[200 Conn. 506]

     failure to include the notation on the revisedform "indicated its unqualified approval of the $509,000application of funds. . . ." We reject the hospital'sclaims for the two following reasons.

The hospital had no legitimate reason to believe thatthe revised form Y (b) filed by the commission had anyeffect on the handwritten notation contained on theoriginal form. Form Y (b) is a worksheet matrix containingbudget items across its top and down thelefthand side. Various columns of subordinate figuresare added to reach aggregate sums in each column. Anychanges in any of the subordinate figures in any columnwould require changes in the aggregates. The revisedform Y (b) was obviously filed to call attention tochanges made in unrelated subordinate figures, and tothe resulting changes in the aggregate sums. Thatunrelated entries included on form Y (b) requiredmodification was no reason for the hospital to concludethat unmodified entries had, by implication, beenunqualifiedly approved. We do not believe that therevised form Y (b) can be read to accomplish anythingother than what it purported, which was to enter certainchanges in subordinate figures in columns entirelyunrelated to the 1983 compliance adjustment.

More important, however, is our second reason,namely, that even if the revised form Y (b) were heldto completely supersede the original form, and therebyto cast into oblivion the handwritten notation on theoriginal form, the hospital's claim to a lack of noticeabout the 1983 compliance adjustment would still bewithout merit. In this regard it is necessary to refinethe hospital's claim. The hospital does not contend thatit was completely unaware of the 1983 complianceadjustment. The hospital itself had computed theadjustment and filed the required forms under protest.The hospital's complaint is more precisely directed atthe manner in which the compliance adjustment was

[200 Conn. 507]

     ultimately enforced. The commission might haveenforced the compliance adjustment in either of twoways. It might simply have allowed the $509,000 in revenue,which the compliance adjustment represented,to supplement the hospital's proposed revenue authorizationfor the 1984 fiscal year. Under this approach,the compliance adjustment would merely constitute$509,000 in additional revenue - at least on paper and$509,000 in additional authorized expense, allocatedsomewhere in the budget, to be used or not as the hospitaldesired during the 1984 fiscal year. This is what thehospital believed the commission had decided when itfiled its revised form Y (b) in which, according to thehospital, the commission "indicated its unqualifiedapproval of the $509,000 application of funds. . . ."Thus, the hospital, due to its misreading of the commission'sJuly 15, 1983 preliminary decision, can statein its brief that "the commission in effect Rad] imposedno compliance adjustment." (Emphasis added.)

The commission, however, did not enforce the 1983compliance adjustment as outlined above. Instead, itacted in accordance with its published regulations andenforced the 1983 compliance adjustment in a mannerless agreeable to the hospital. In its September 15, 1983final decision, the commission reduced the hospital'srevenue authorization for the 1984 fiscal year by$509,000, the amount of the 1983 compliance adjustment.This action, of course, necessitated a correspondingreduction in the hospital's authorized budget baseduring the 1984 fiscal year. Section 19a-160-116 setsforth the procedure to be followed by a hospital in orderto avoid a loss in authorized revenue due to the impositionof a current year compliance adjustment. Section19a-160-116 (a)(1) provides that any excess incurrent year net revenues over the authorized budget"is to be considered as a source of funds in the ensuingfiscal year, thus reducing net patient revenues in

[200 Conn. 508]

     the ensuing fiscal year unless an alternate use of thefunds is approved by the commission as a part of thebudget process. Rests for such alternate use mustbe made to the commission in writing as part of thebudget submission." (Emphasis added.) In its July 15,1983 notice of hearing, the commission expresslyinformed the hospital that it would be required to justifyits budget "in a manner consistent with . . . thecommission's regulations." In view of the plain languageof 19a-160-116 (a)(1), we do not see how thehospital could legitimately have concluded that the revenuerepresented by the 1983 compliance adjustmenthad been preserved merely by the hospital's submission,on form Y (b), of an unexplicated figure of $509,000as an application of funds. The commission, under itsregulations, was not required to approve or disapproveof the proposed $509,000 application of funds in its preliminarybudget decision, and accordingly, the hospitalshould not have drawn significance from the failureof the commission to renew its handwritten notationon the revised form Y (b). The hospital's reliance onthe commission's supposed approval of the $509,000application of funds was particularly unjustified in lightof the express caveat contained in the commission'sJuly 15, 1983 notice of hearing. That caveat stated: "[I]tshould be noted that pursuant to Section 19-73o-4 (d)of the Commission's regulations the determination bythe Commission in this preliminary decision that a proposedfinancial requirement, or a portion thereof, ispresumptively reasonable, will neither be binding onthe Commission in any further review of the hospital'sbudget nor excuse the hospital from the requirementthat it justify said financial requirements as necessaryin any such further review."4

[200 Conn. 509]

We think that the hospital was adequately notifiedthat it would be required to justify an alternate use ofthe funds represented by the 1983 compliance adjustmentor have those funds deducted from its revenueauthorization for the 1984 fiscal year. The commissioninformed the hospital that it would be required to justifyits budget in a manner consistent with its regulations,and the hospital must be charged with knowledgeof what those regulations say. The commissionwas not required to remind the hospital on form Y (b)that it would be expected to justify its proposed applicationof the 1983 compliance adjustment. That burdenwas already placed squarely on the hospital by19a-160-116 (a)(1) of the commission's regulations.The hospital therefore had no reason to believe thatthe proposed application of funds had been "unqualifiedlyapproved" when the commission failed to repeatthe notation on the revised form Y (b). If the hospitalneeded more information concerning what items hadbeen approved or disapproved in the commission'sJuly 15, 1983 preliminary decision, it could have askedthe commission for "a more definite and detailed statement"as provided in the Uniform Administrative ProcedureAct. General Statutes 4-177 (b)(4). We findno merit in the hospital's claim to a lack of notice thatthe 1983 compliance adjustment might be enforced.5

F

PHILANTHROPIC FUNDS

In fiscal year 1983, the hospital exceeded its authorizedbudget for capital expenditures by $81,000.

[200 Conn. 510]

     Accordingly, the commission imposed a complianceadjustment in that amount in the hospital's 1984 capitalbudget. The hospital claims that the $81,000 representedphilanthropic funds, and that such funds areexpressly exempted from commission regulation byGeneral Statutes 19a-153 (c). General Statutes19a-153 (c) provides, in pertinent part, that "the commission . . .shall not direct or control the use of the. . . principal and all income from restricted and unrestrictedgrants, gifts, contributions, bequests andendowments." We think the language of this subsectionis plain and unambiguous: the commission may notregulate the use of philanthropic funds.

The commission argues that since money is fungible,it is impossible to know whether funds spent on a particularitem are actually philanthropic in origin. Whilewe tend to agree with the commission's observation,we believe that its argument proves too much. If thehospital were required to segregate its philanthropicbequests and include the total as a source of funds ina budget submission, the commission would clearly bedirecting and controlling the use of those funds in thehospital's authorized budget. On the other hand, if thehospital were to spend the philanthropic funds as theywere received, it would exceed its authorized level ofexpense in the fiscal year. The commission's argument,if accepted, would prevent the hospital from spendingphilanthropic funds at all unless regulated by the commission.Such regulation, of course, would directly contraveneGeneral Statutes 19a-153 (c).

The commission also notes that the expenditure offunds for capital acquisitions often entails incidentalexpenses, e.g., a machine requires electricity, maintenance,and someone to operate it. There is nothing in

[200 Conn. 511]

     the language of General Statutes 19a-153 (c) to preventthe commission from identifying and regulatingincidental expenses which may be associated with theexpenditure of philanthropic funds. The philanthropicexpenditure itself, however, may not be regulated.

If General Statutes 19a-153 (c) is to be given anyeffect, the hospital must be allowed to designate howit has spent its philanthropic funds. We need not resolveon this appeal the myriad problems which may ariserelating to verification of funds received, and the applicationof those funds. We do note in passing that thecommission may adopt regulations relating to the issueof verification. For purposes of this appeal, we hold thatthe commission may not impose a compliance adjustmentbased on a hospital's expenditure of adequatelyverified philanthropic funds. The commission does notcontend that the funds expended in this case were notphilanthropic and thus, verification is not an issue onthis appeal. We therefore conclude that the commission improperlyimposed the $81,000 compliance adjustmentbased upon the hospital's exceeding its authorizedcapital budget for the 1983 fiscal year.

II

CROSS APPEAL BY THE COMMISSION

A

REDUCTION IN BUDGET BASE

The commission has appealed from various aspectsof the trial court's decision in this case. We first addressits claim that the trial court erred in concluding thatthe commission improperly cut $497,000 from thehospital's budget. The $497,000 cut under considerationrepresents the $509,000 fiscal year 1983 complianceadjustment which we have previously determinedwas properly imposed, offset however, by $12,000 inprojected losses in anticipated expense recoveries as

[200 Conn. 512]

     determined by the commission. The trial court held thatthe $497,000 cut was improper because it found thatthe hospital had "no notice . . . that the cut mightbe made." We disagree.

The $497,000 reduction in the hospital's proposedbudget was derived from the $509,000 complianceadjustment for the 1983 fiscal year. Although the trialcourt found that the hospital had adequate notice ofthe 1983 compliance adjustment, it held, somewhatincongruously, that the hospital did not have adequatenotice that enforcement of the compliance adjustmentwould result in a corresponding reduction inthe hospital's budget base. As our previous discussionwould suggest, we think the hospital should havebeen aware that its net patient revenues in the 1984fiscal year would be reduced "unless an alternate useof the funds [was] approved by the commission as apart of the budget process." Regs., Conn. State Agencies19a-160-116 (a)(1). The commission in its September15, 1983 decision specifically noted the failureof the hospital to "provide any testimony with respectto the $497,000 base adjustment." The hospital claimsconsistently with its argument relating to the 1983'compliance adjustment, that it offered no testimony onthe $497,000 budget modification because it had noprior notice that the compliance adjustment might beimposed. The hospital, however, should have known,and therefore, should have presented evidence at thehearing relating to an alternate use of the funds representedby the 1983 compliance adjustment. The trialcourt erred in its determination that the hospital didnot have adequate notice of the $497,000 modificationto its budget base.

B

REPAIR AND MAINTENANCE EXPENSE

As has previously been discussed in our considerationof the hospital's appeal, the trial court in large part

[200 Conn. 513]

     sustained the action of the commission in the area ofnonvolume expense reductions. In three instances,however, the trial court found that the commission'snonvolume expense reductions were improper. Thefirst of these was a $593,000 proposed expenditure forrepair and maintenance. In its September 15, 1983 decision,the commission cut the $593,000 from the budgetbecause the hospital "did not give a dollar breakdownfor the items [it] identified as necessary and thereforethe commission was not able to evaluate and authorizedollars for each item individually." The trial court heldthat the commission's action was improper because ithad not given the hospital "notice that an individualcost breakdown was required." We disagree.

As with the other nonvolume expense proposals eliminatedby the commission and approved by the trialcourt, the burden was on the hospital to justify whythe expenses were necessary. Section 19a-160-111 (c)clearly provides that "[s]hould a hospital not pass thecost center screen, it will be required to justify all itsnon-volume requests in the cost center." (Emphasisadded.) The hospital in this case did not pass the costcenter screen with respect to its nonvolume requests.The hospital provided no details to the commission asto the dollar amount associated with individual projectswithin the cost center. It was therefore impossible forthe commission to determine whether any given proposalwas justified in terms of its cost. As has beenpreviously discussed, the hospital has chosen to disregardthe first sentence of 19a-160-111 (c) quotedabove. We believe that that sentence provided thehospital with adequate notice that it would be requiredto provide the commission with the cost of individualproposals within the cost center. We conclude that thetrial court erred in its determination that the commissionhad not given the hospital adequate notice thatsuch individual cost breakdowns would be required.

[200 Conn. 514]

C

SALARY ADJUSTMENT

As part of its nonvolume expense, the hospital budgeted$1,000,000 to provide a one-time salary adjustmentfor its nonphysician employees. In its September 15,1983 decision, the commission authorized $150,000 ofthe request, but cut the remaining $850,000 from thehospital's budget. The primary reason relied upon bythe commission to justify its cut of the $850,000 wasthat the hospital, after repeated requests, had failedto produce evidence in justification of its full $1,000,000salary adjustment. The evidence sought by the commissionwas a ten volume report prepared by a privateconsultant for the hospital containing data concerning119 nonexecutive positions and 37 managerial positionswithin the hospital. The conclusions contained in thisreport formed the basis of the hospital's $1,000,000 salaryrequest.

The trial court held that the commission had improperlydenied the hospital's salary request. The trial courtfound that "[t]he record indicates that the study wasin the hearing room . . . the [hospital's] attorneystated that the study contained sensitive informationwhich should not be put in evidence because it wouldthen be a public document anyone might read. He suggestedthat it could be made available for the staff and,after review, those parts of it necessary for findingsof fact and decision making could be made part of thepublic record." The trial court concluded that the hospitalhad in fact made the study available to the commission,and that the commission's finding to the contrarywas unsupported by the record.

The trial court's findings and conclusions on this matterare supported by the record. The study preparedfor the hospital contained personal information which

[200 Conn. 515]

     was not necessary to the commission's decision on thehospital's salary request. The hospital's suggestion thatthe commission review the study in its entirety andintroduce into evidence only those portions necessaryto support its decision was not unreasonable. The commission'srefusal to consider the study as submitted bythe hospital was an abuse of its discretion. General Statutes4-183 (g)(6). Therefore, the asserted failure ofthe hospital to produce the report cannot sustain thecommission's decision to deny the $1,000,000 salaryrequest. As that was the primary reason offered by thecommission in support of its decision, the decisioncannot stand. The trial court did not err in its determinationthat the commission had improperly cut$850,000 from the hospital's salary request.

D

LONG RANGE PLANNING

The hospital budgeted $210,000 in nonvolumeexpense for long range planning. Of this amount,$50,000 was budgeted for legal costs in connection witha review of the hospital's corporate structure, the medicalstaff bylaws, and the physician compensation plan;$75,000 for architectural services in connection withthe preparation of a plan of development and generalrenovation; $35,000 for computer research on thedemographic and market characteristics of the hospital'sservice area; $10,000 for computer costs associatedwith the research; and other such expenses. In its September15, 1983 decision, the commission cut $160,000from the hospital's request on the ground that thehospital had adequate "in-house expertise, the expenseof which is already in the hospital's budget, to developthe majority of the plan." The trial court held that thecommission's finding of adequate expertise within thehospital to develop the long range plan was unsupportedby the evidence.

[200 Conn. 516]

We cannot say that the trial court's finding that thecommission improperly cut the $160,000 from thehospital's planning budget was clearly erroneous. Thecommission has not pointed to any evidence in the recordto support its finding that the hospital possessedadequate in-house expertise to develop the proposedplan. Rather, the commission claims that the trial courterred because the burden was on the hospital to showthat its management personnel did not possess the requisiteexpertise. In this instance we must disagree withthe commission. The hospital could not reasonably havebeen expected to prove the negative, i.e., that itsmanagement personnel were inadequate to perform theproposed functions. The record established that thehospital administration consisted of seven individuals,none of whom appeared, either by training or job function,qualified to perform the legal, architectural orcomputer services proposed by the hospital. We concludethat the trial court did not err in its determinationthat the commission had improperly cut $160,000from the hospital's budgeted expenses for long rangeplanning.

E

CAPITAL CARRYOVER

In its July 5, 1983 budget submission, the hospitalrequested authorization for capital expenditures in theamount of $1,484,000 for the 1984 fiscal year. The commissionin its July 15, 1983 preliminary decision determinedthat $412,000 of the hospital's capital requestwas presumptively reasonable, and disallowed theremainder. In its proposed capital budget, the hospitalhad included $689,000 which the commission hadapproved for capital expenditures in fiscal years 1981and 1982, but which the hospital had not expended inthose years due to a lack of available funds. In its September15, 1983 final decision, the commission ruled

[200 Conn. 517]

     that the hospital had not justified its proposed capitalexpenditures budget beyond the presumptively reasonableamount of $412,000, and expressly disallowed theproposed capital carryover. The hospital contends thatthe commission has no authority to regulate the useof unexpended capital authorizations from past fiscalyears, and thus claims that the commission improperlydisallowed the $689,000 in unexpended authorizedfunds from fiscal years 1981 and 1982. We disagree.

The hospital's claim that the commission improperlydisallowed the $689,000 capital carryover is based onthe particular wording of the commission's September15, 1983 final decision. In that decision the commissionhad stated: "The commission's posture on thecarryover of capital requires the hospital to make arequest to carry over capital and address each itemindividually. The carry over of $689,000 from prioryears was not addressed specifically in testimony andwas not considered as [an] item to be approved by thecommission." (Emphasis added.) The hospital contendedin the trial court, and contends on appeal, thatthe commission's so-called "posture" on carryovers is,in effect, a regulation which has not been promulgatedin accordance with the Uniform Administrative ProcedureAct. General Statutes 4-166(7), 4-167 (b),4-168; see Salmon Brook Convalescent Home v. Commissionon Hospitals & Health Care, 177 Conn. 356,362, 417 A.2d 358 (1979). The trial court accepted thehospital's contention, for it could not "find any suchauthority in the regulations for such `posture' andtherefore [held] that the defendant commission's ruling[was] illegal." While the commission's choice ofwords may have been regrettable, we do not think thatits "posture" on carryovers can sensibly be viewed asanything other than a necessary application of its publishedregulations. See Eagle Hill Corporation v. Commissionon Hospitals & Health Care, 2 Conn. App. 68,76, 477 A.2d 660 (1984).

[200 Conn. 518]

The commission's authority for its so-called "posture"derives from the regulatory procedure by which itreviews a hospital's proposed capital budget. The commissioninitially applies an "overall test of reasonableness"to the net patient revenues as proposed by ahospital in its budget submission. Regs., Conn. StateAgencies 19a-160-103 (a). A hospital's budget whichdoes not meet the overall test of reasonableness is subjectto a series of specified analyses; Regs., Conn. StateAgencies 19a-160-103 (c); including an analysis ofcapital expenditures." Regs., Conn. State Agencies19a-160-103 (e)(3). The regulations provide that"[c]apital budgets will be reviewed for the hospitals asdescribed in section 19a-160-115." Regs., Conn. StateAgencies 19a-160-104 (b). Section 19a-160-115 (a)allows the commission to "determine the relationshipof applications of funds such as authorized capitalexpenditures . . . to sources of finds such as depreciation,transfers from board designated funds, and commitmentto long term debt." Where the commissiondetermines that "funding requirements exceed thesources identified, the commission may modify thehospital's request." Thereafter, "any hospital objectingto the modification will be required to justify theproposed use of current patient revenue" for capitalimprovements. Id.

Section 19a-160-115 (a) clearly grants the commissionthe authority to regulate, i.e., to approve or disapprove,a hospital's proposed sources and uses of capital finds.Applying its regulations, the commission initially determinedthat the hospital's proposed net revenues did notmeet the overall test of reasonableness. Therefore, thehospital's budget was subjected to the analyses specifiedin 19a-160-103. The hospital's proposed capitalbudget was not found to be "presumptively reasonable"as provided in 19a-160-103 (b), and the commission"modified" the hospital's request. Regs., Conn. State

[200 Conn. 519]

     Agencies 19a-160-103 (a). The hospital was informedof this modification in the commission's July 15, 1983preliminary decision. It therefore became the hospital'sburden, under 19a-160-115 (a) of the commission'sregulations, to justify its proposed sources of capitalfunds. There is nothing in the commission's regulationsto suggest that capital funds consisting of unexpendedauthorizations from past budgets should be treateddifferently from capital funds arising from any othersource. The regulations merely require a hospital tojustify its proposed sources and uses of capital funds.The commission's September 15, 1983 decision clearlystates that the hospital, during the August budget hearings,did not "specifically address" the need for therequested capital items. Its failure to do so providedthe commission an adequate reason to disallow theportion of the hospital's proposed capital budget notfound to be presumptively reasonable under the commission'sregulations. Regs., Conn. State Agencies19a-160-115 (b).

The hospital effectively claims that unexpended capitalauthorizations from years past should provide a"safe harbor" of accumulated future authorization,insulated from regulation by the commission much thesame as philanthropic funds. It is the hospital's positionfor which there is no authority, and not the commission's"posture." Philanthropic funds are beyondthe power of the commission to regulate because thelegislature has clearly and expressly said so. GeneralStatutes 19a-153 (c). The legislature, however, hasnot made similar provision for unexpended past capitalauthorizations. On the contrary, the legislature hasdelegated to the commission a near plenary power toregulate the budgets of hospitals in this state. Thehospital's dissatisfaction with that delegation ispresently addressed to the wrong branch ofgovernment.

[200 Conn. 520]

F

CONDITIONS IMPOSED BY THE COMMISSION

The commission also claims error in the trial court'sconclusion that two conditions imposed on the hospitalby the commission in its final decision were unreasonable.The commission's September 15, 1983 budgetdecision contained nine terms and conditions, in numberedparagraphs, with which the hospital was orderedto comply. Paragraph 7 ordered the hospital to file withits 1985 budget a long range financial plan encompassingfiscal years 1985, 1986 and 1987. Paragraph 8ordered the hospital board of trustees to file bi-monthlyreports detailing the hospital's compliance with the September15, 1983 budget order. The trial court held thatthese conditions were unreasonable because the hospitaland its board of trustees would be unable to complywith their terms.

Although the commission has the right to impose reasonableconditions as a necessary incident of its regulatoryauthority; Eagle Hill Corporation v. Commissionon Hospitals & Health Care, supra, 80; it does not havethe authority to impose conditions with which a hospitalis unable to comply. The trial court's determinationthat the hospital would be unable to comply with theconditions imposed in paragraphs 7 and 8 is intrinsicallyfactual. The commission has presented us with noreasons why or how the trial court's determination waserroneous. The burden is on the appellant, in this case,the cross appellant, to present an adequate record forreview on appeal. Practice Book 3060D. The trialcourt did not err in disallowing the conditions imposedin paragraphs 7 and 8 of the commission's September15, 1983 budget decision.

[200 Conn. 521]

G

STAY AND MODIFICATION OF STAY

We finally address the commission's related claimsthat the trial court erred in granting a stay of the commission'sbudget decision, and in later modifying thatstay. On September 15, 1983, the commission renderedits final decision on the hospital's budget for the 1984fiscal year. The hospital filed its appeal from that decisionon September 29, 1983, and at the same time filedan application for a stay. After a hearing, the trialcourt, Curran, J., on November 2, 1983, granted thestay of the commission's budget decision. Under theterms of the stay, the hospital was permitted to collectpatient revenue in accordance with its proposedbudget. The hospital was also permitted to incurexpenses in excess of those authorized by the commission.With regard to capital expenditures, however, thetrial court expressly limited the hospital to the amountauthorized by the commission.

The trial court, O'Sullivan, J., rendered its decisionon the merits of the hospital's appeal on June 19, 1984.On July 9, 1984, the hospital filed its appeal from thetrial court's decision. Thereafter, the hospital filed inthe trial court a motion to modify the stay order whichhad been entered by Judge Curran on November 2,1983. It appears that the hospital had gone ahead withcapital improvements during the 1984 fiscal year whichhad not been authorized by the commission. The capitalexpenditures undertaken by the hospital were alsomade in direct violation of the November 2, 1983 stayorder, in which Judge Curran had ordered that capitalexpenditures be limited to the amount ordered by thecommission. The hospital in its motion to modify thestay sought an increase in its authorized capital budget,essentially to comport with the unauthorized capital

[200 Conn. 522]

     expenditures it had already made. The trial court,O'Sullivan, J., on September 25, 1984, granted themotion "reluctantly only because doing so may in somesmall way help to solve the controversy between theparties." The trial court also noted that its ruling was"not to be interpreted as the [c]ourt's [having] approvedthe expenditures made.

The issues raised under the present claim are essentiallythe same as those which we have previously considered,at great length, in an earlier phase of theunending controversy which appears to exist betweenthese parties. In Griffin Hospital v. Commission onHospitals & Health Care, 196 Conn. 451, 455,493 A.2d 229 (1985), we stated that General Statutes 4-183 (c),providing for "a stay upon appropriate terms," givesthe trial court "broad authority to fashion appropriaterelief to protect the interest of all those involvedduring the pendency of an administrative appeal." Wealso noted that in "granting a stay upon `appropriateterms' [the trial court] could modify [the budget] oreffectuate its own budgetary plan as a modus vivendi."Id. With regard to the November 2, 1983 order, thetrial court did not err in staying the commission decisionwhich might have been "found after judicial reviewto have been unwarranted." Id., 463. With regard tothe November 25, 1984 modification order, we notethat the finds for which modification of the stay orderwas sought had already been spent. The trial court wasnot required to enter a futile order which it had nopower to enforce. While we agree with the trial courtthat the hospital's violation of Judge Curran's orderis not to be condoned, we believe that the commissionis the proper body to enforce compliance with its September15, 1983 budget decision as modified on appeal.The trial court did not err in its November 25, 1984order granting the hospital's motion to modify theNovember 2, 1983 stay.

[200 Conn. 523]

There is error in part and the case is remanded tothe trial court for further proceedings not inconsistentwith this opinion.

In this opinion the other justices concurred.

1. Regs., Conn. State Agencies 19a-160-111 (c) (formerly 19-73o-11[c]). The commission has redesignated the provisions of its regulationssince it issued its September 15, 1983 budget decision. Throughout thisopinion we refer to the regulations by their present designations.

2. A compliance adjustment is imposed by the commission when ahospital exceeds in a given year its authorized level of revenues. Theexcess revenues are carried forward as a source of funds in a future budget.Regs., Conn. State Agencies; 19a-160-116. In this case the commissiondetermined that the hospital had exceeded its authorized revenues for fiscalyear 1952 by $261,000. The commission therefore included that amount as asource of revenue for the 1984 fiscal year. The effect of the commission'sdecision, of course, was to reduce the actual revenues collectible by thehospital in fiscal year 1984 by $261,000.

3. Although the trial court found no error in the commission'simposition of the 1983 compliance adjustment, it held that the correspondingreduction ordered by the commission in the hospital's budget base wasimproper. The commission has cross appealed from the latter ruling. Weconsider the commission's claim of error at part II, A, infra.

4. Regs., Conn. State Agencies 19a-160-103 (d) (formerly 19-73o-4[d]). The caveat contained in the commission's July 15, 1983 notice ofhearing is a verbatim recital of the language used in the regulation cited.

5. We also note that General Statutes 4-183(e) allows the court onguest of a party to order that "additional evidence be taken before theagency upon conditions imposed by the

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