CARRIAGE HILLS v. MD HEALTH RESOURCE

Decision Date25 February 1999
Docket NumberNo. 388,388
Citation125 Md. App. 183,724 A.2d 745
PartiesCARRIAGE HILL CABIN JOHN, INC. v. MARYLAND HEALTH RESOURCES PLANNING COMMISSION, et al.
CourtCourt of Special Appeals of Maryland

Joseph L. Bianculli of Arlington, VA (David Abse of Edgewater, on the brief), for appellant.

C. Frederick Ryland, Assistant Attorney General (J. Joseph Curran, Jr., Attorney General, on the brief), Baltimore, for appellee, Maryland Health Resources.

Jack Tranter (Thomas C. Dame and Gallagher, Evelius & Jones, LLP, on the brief), Baltimore, for appellee, HMC Retirement Properties, Inc.

Argued before MURPHY, C.J., and HOLLANDER and KENNEY, JJ. HOLLANDER, Judge.

This appeal arises from a fierce competition that began in 1991, pitting three health care providers in a battle to obtain the requisite Certificate of Need from the Maryland Health Resources Planning Commission (the "Commission"), appellee, for the development of new nursing home beds in Montgomery County (the "County"). The competitors, Carriage Hill-Cabin John, Inc.1 ("Carriage Hill" or "CHCJ"), appellant, Marriott Retirement Communities, Inc. ("MRCI" or "Marriott"),2 appellee, and Montgomery InterCare Associates ("InterCare"), all sought the right to develop a maximum of 84 comprehensive care beds,3 allocated to the County under the State Health Plan.

Ultimately, on November 13, 1995, the Commission issued a Final Decision approving Marriott's proposals and denying the competing applications submitted by Carriage Hill and InterCare. Thereafter, Carriage Hill and InterCare sought review of the Commission's decision in the Circuit Court for Montgomery County. In April 1997, following a stipulated remand to the Commission, the Commission issued a lengthy "Final Decision Revised on Remand" (hereinafter, the "Revised Decision"), again approving Marriott's applications. In a written opinion dated November 17, 1997, the circuit court affirmed. Only Carriage Hill has challenged that decision;4 InterCare is not a party to the appeal. Appellant presents the following questions for our review, which we have reformulated slightly:

I. Did the circuit court adequately address and resolve all of the potentially dispositive legal issues raised below by Carriage Hill and, if not, should this Court remand the matter to the circuit court to do so?

II. Did the circuit court err in concluding that the Commission complied with the procedural requirements of the Administrative Procedure Act and the Commission's own procedural regulations?

III. Did the circuit court err in concluding that the Commission's denial of Carriage Hill's application was based on the Commission's valid interpretation and application of its regulations?

IV. Did the circuit court err in concluding that, in approving Marriott's applications, the Commission complied with its regulations?

For the reasons set forth below, we shall affirm.

I. Statutory and Regulatory Framework

The Maryland Health Planning and Development statute (the "Act"), Md.Code (1982, 1996 Repl.Vol., 1998 Cum.Supp.),5 §§ 19-101 through 19-123 of the Health-General Article ("H.G."), was enacted "to promote the development of a health care system that provides, for all citizens, financial and geographic access to quality health care at a reasonable cost." H.G. § 19-102(a); see Adventist Healthcare Midatlantic, Inc. v. Suburban Hosp., Inc., 350 Md. 104, 106, 711 A.2d 158 (1998); Catonsville Nursing Home, Inc. v. Loveman, 349 Md. 560, 573-74, 709 A.2d 749 (1998); Sinai Hosp. v. Maryland Health Resources Planning Comm'n, 306 Md. 472, 473, 509 A.2d 1202 (1986). To effectuate its goal, the Legislature created the Commission, a State administrative agency, "and charged it, among other things, with (1) developing, adopting, and periodically updating a comprehensive State Health Plan, and (2) assisting in the implementation of that plan, in part through the legislatively—established CON program." Adventist, 350 Md. at 106, 711 A.2d 158.

The purpose of the State Health Plan ("SHP"), in turn, "is to establish an integrated system of care that `assures geographic and financial access to a range of quality health care services at a reasonable cost for all citizens.'" Changing Point, Inc. v. Maryland Health Resources Planning Comm'n, 87 Md.App. 150, 155, 589 A.2d 502 (1991) (citation omitted). The SHP identifies "unmet needs ... [and] excess services...." Adventist, 350 Md. at 107, 711 A.2d 158, and includes projections of need for long term care services, "to guide the Commission's actions and to foster specific action in the private sector." Changing Point, 87 Md. App. at 155, 589 A.2d 502; see H.G. §§ 19-114, 19-115, and 19-118; COMAR §§ 10.24.01.07H and 10.24.08 (1992).6 At least every five years, pursuant to H.G. § 19-114(a), the Commission must adopt a SHP, which takes the form of regulations. Adventist, 350 Md. at 107, 711 A.2d 158.

The Act and the Code of Maryland Regulations ("COMAR"), § 10.24.01.01 et seq. (1990), require a person or entity to obtain a Certificate of Need ("CON") from the Commission in order to develop or operate a CCF. See H.G. §§ 19-115 through 19-118. COMAR § 10.24.01.01(A) provides, in part: "A person or health care facility shall have a Certificate of Need issued by the Commission before development, operation, or participation in a health care project...." (Emphasis added). COMAR 10.24.01.07K(1) requires the Commission to act on a CON application "not later than 150 days after the application has been docketed."7

The CON is a vital part of the health care regulatory process, because it functions as the "principal mechanism" for implementing the SHP. Maryland Gen. Hosp. v. Maryland Health Resources Planning Comm'n, 103 Md.App. 525, 528, 653 A.2d 1029, cert. denied, 339 Md. 355, 663 A.2d 72 (1995). Indeed, the Loveman Court described the CON requirement as the "teeth" of the Act. Loveman, 349 Md. at 575, 709 A.2d 749. Like the SHP, it is meant "to assure an efficient and effective health care system for Maryland...." Maryland Gen. Hosp., 103 Md.App. at 528, 653 A.2d 1029; see United States ex rel. Joslin v. Community Home Health of Maryland, Inc., 984 F.Supp. 374, 381 (D.Md.1997).

Pursuant to H.G. § 19-118(c)(1), the decision of the Commission concerning a CON application "shall be consistent with the [SHP] and the standards for review established by the Commission," unless a public health threat exists. See Adventist, 350 Md. at 107, 711 A.2d 158. The burden to demonstrate such compliance rests on the applicant. COMAR § 10.24.01.07H(1).

Unlike the development of the SHP, which is a "quasi-legislative function," Adventist, 350 Md. at 122, 711 A.2d 158, the CON process is "quasi-judicial." Id. at 123, 711 A.2d 158. This is because "individual rights, duties, entitlements, or privileges are at issue." Id. Accordingly, CON proceedings constitute "a contested case, subject to the procedural protections afforded by title 10, subtitle 2 of the State Government Article...." Id. Therefore, an evidentiary hearing must conform to the contested case procedures of the Administrative Procedure Act. Adventist, 350 Md. at 108, 711 A.2d 158.

When, as here, several applicants seek to develop more nursing home beds than are projected as needed by the SHP, the Commission must conduct a comparative review of the competing applications. See COMAR § 10.24.01.07B(2). The comparative review process applies to "two or more applications for similar projects serving the same or overlapping service areas." Maryland Gen. Hosp., 103 Md.App. at 529, 653 A.2d 1029. It is intended to determine "not simply whether a particular applicant satisfied the basic criteria for a CON, but which of the applicants best satisfied the criteria." Id.

H.G. § 19-118 is titled "Action on applications." Under the version of the Act in effect at the outset of this matter, Md.Code (1990 Repl.Vol.), H.G. §§ 19-101 et seq., the Commission was authorized to delegate to a committee "the responsibility for review of [a CON] application, including the holding of an evidentiary hearing." H.G. § 19-118(d)(2). The Committee would then make a recommendation to the full Commission. H.G. § 19-118(d)(3). Thereafter, under H.G. § 19-118(d)(4), the Commission was required to "vote to approve, approve with conditions, or deny the [CON] application on the basis of the committee's recommendation and the whole record before the committee."

Effective June 1, 1995, H.G. § 19-118(d) was substantially revised. H.G. § 19-118(d)(3) now permits the Commission to delegate to a "reviewer" the responsibility to evaluate a CON application. The reviewer may hold evidentiary hearings and prepare a "recommended decision for consideration by the full Commission." H.G. § 19-118(d)(3)(ii); see H.G. § 19-118(d)(8). Further, the Commission is authorized to designate a "single Commissioner to act as a reviewer" for competing CON applications. H.G. § 19-118(d)(4). In addition, under H.G. § 19-118(d)(7)(i), the staff of the Commission is specifically deemed an interested party. Pursuant to H.G. § 19-118(d)(11), the Commission is required to "vote to approve, approve with conditions, or deny the [CON] application on the basis of the recommended decision, the record before the staff or the reviewer, and exceptions and arguments, if any, before the Commission." See Adventist, 350 Md. at 107,711 A.2d 158. In considering CON applications, the Commission is obligated to consider, inter alia, eight criteria set forth in COMAR 10.24.01.07H(2)(a)-(h). The criteria include, in summary, the following: (a) compatibility with the SHP, including the Long Term Care Services provisions of COMAR 10.24.08.05F and 10.24.08.06A (1992); (b) the "need of the population" served or to be served; (c) the "less costly or more effective alternatives"; (d) the "financial viability of the proposal"; (e) the extent of a "positive impact on the health care system of the area"; (f) the "availability of...

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