Holy Cross Hospital of Silver Spring, Inc. v. Health Services Cost Review Commission

• Decision Date: 06 November 1978
• Docket Number: No. 8,8
• Citation: Holy Cross Hospital of Silver Spring, Inc. v. Health Services Cost Review Commission, 393 A.2d 181, 283 Md. 677 (Md. 1978)
• Parties: HOLY CROSS HOSPITAL OF SILVER SPRING, INCORPORATED, et al. v. HEALTH SERVICES COST REVIEW COMMISSION.
• Court: Maryland Court of Appeals

Page 677

283 Md. 677

393 A.2d 181

HOLY CROSS HOSPITAL OF SILVER SPRING, INCORPORATED, et al. v.HEALTH SERVICES COST REVIEW COMMISSION.

No. 8.

Court of Appeals of Maryland.

Nov. 6, 1978.

Richard C. Shadyac, Fairfax, Va.(Metzger, Shadyac & Schwarz, Fairfax, Va., on the brief), for Edward D. Soma.

C. Michael Loftus, Washington, D. C.(Slover & Loftus, Washington, D. C., on the brief), for Robert E. McCullough.

Stanley J. Nadonley and John Burgess Walsh, Jr., Rockville, on the brief for Holy Cross Hospital of Silver Spring, Inc.Melvin J. Sykes, M. Peter Moser and Jeffrey A. Wyand, Baltimore, on the amicus curiae brief filed by Maryland Radiological Society, Inc.

John F. King, Richard Bloch, Frederick G. Savage and Anderson, Coe & King, Baltimore, on the amicus curiae brief filed by Medical and Chirurgical Faculty of Maryland.

Glenn M. Cooper and Shefferman, Paley & Rothman, Chartered, Chevy Chase, on the amicus curiae brief filed by Harold W. Draper et al.

William M. Canby, Joseph V. Truhe, Jr., and Miller, Miller & Canby, Rockville, on the amicus curiae brief filed by Members of the Medical Staff of Holy Cross Hospital of Silver Spring, Inc.

George T. Tyler, Baltimore, on the amicus curiae brief filed by The Maryland Society of Pathologists, Inc.

Jay E. Levy, Asst. Atty. Gen., Baltimore (Francis B. Burch, Atty. Gen., and Stanley Lustman, Asst. Atty. Gen., Baltimore, on the brief), for appellee.

Argued before MURPHY, C. J., SMITH, DIGGES, ELDRIDGE, ORTH and COLE, JJ., and H. KEMP MacDANIEL, Associate Judge of the Court of Appeals, specially assigned.

SMITH, Judge.

We are here involved as a matter of statutory construction with the question of whether fees charged by physicians in certain medical specialities to hospital patients, which fees are placed on hospital accounts and billed by the hospitals in such amounts to the patients, constitute a part of "the total costs of the hospital" so as to be considered as "reasonably related to the total services offered by the hospital" and thus whether the Maryland Health Services Cost Review Commission(the Commission) is empowered to review and set charges by these physicians in the specialities of cardiology, pathology, and radiology.

The Commission was created by Chapter 627 of the Acts of 1971.Certain revisions have been made since that date.SeeMaryland Code(1957, 1971 Repl.Vol., 1978 Cum.Supp.) Art 43, §§ 568H-568Z.Matters involving the Commission were before us previously in Health Serv. Cost v. Franklin Sq., 280 Md. 233, 372 A.2d 1051(1977), andBlue Cross v. Franklin Sq. Hosp., 277 Md. 93, 352 A.2d 798(1976).Neither case involved the issue presented here.

The Commission held public hearings relative to Holy Cross Hospital of Silver Spring, Incorporated(the Hospital), one of the appellants.On December 1, 1976, it issued a proposed opinion and order which stated in pertinent part:

"Section 568M(2), Article 43 of the Annotated Code of Maryland indicates that the Commission has the authority to 'hold public hearings, conduct investigations, and require the filing of information relating to any matter affecting the cost of services in all institutions subject to provisions of this subtitle.. . .'¹It is clear that the provision of radiology and pathology is a service of Holy Cross Hospital.Based on this observation it is the Commission's belief that the legislative intent of the Commission's Enabling Act was that the Commission concern itself with all costs associated with the services rendered to patients in the hospital.²The Commission, therefore, finds that the salaries of the radiologists, pathologists and cardiologists are subject to their review as a part of their legislative charge to assure the public that total costs are reasonably related to total services provided."

The Commission's final opinion and order, reaffirming its proposed opinion and order, was filed on February 2, 1977.It established new rates effective March 1, 1977, which included that which might be charged for radiology, pathology, and cardiology.That opinion stated in pertinent part:

"The Hospital argued that the Commission was wrong in referring to the present compensation of the hospital based physicians as a salary.Since a salary refers to a fixed payment and the physician's compensation varies with the number and variety of tests performed, the Commission did indeed err in its choice of word.Further, the Commission's proposed Order also based the aggregate charges to the public for those services upon the relative value units of service provided.We, therefore, modify the proposed Opinion to read 'compensation' rather than 'salary' and otherwise confirm that as our Opinion supplemented by this document."

The Hospital sought judicial review in the Circuit Court for Montgomery County pursuant to Code(1957, 1978 Repl.Vol.) Art. 41, § 255, a part of the Administrative Procedure Act.Drs. Robert E. McCullough and Edward D. Soma(the doctors or the physicians), who appear as appellants here, were each granted leave to intervene in the circuit court.Their specialities are pathology and radiology, respectively.The circuit court reversed the order of the Commission and remanded the matter to it for further proceedings.However, the Hospital and the physicians appealed to the Court of Special Appeals since on the issue here under consideration the opinion and order were adverse to them.We granted the writ of certiorari prior to consideration of the case by that court.

The doctors are members of the medical staff of the Hospital, just as numerous other physicians are members of such staff being assigned to the appropriate clinical department such as general medicine, surgery and the like, according to their respective specialities.For a number of years physicians in their categories conducted their own billing and collection operations, completely independent of the Hospital.This procedure was changed in 1972.At the times pertinent to this proceeding each of the physicians had a contract with the Hospital by which it was to supply him with suitable space and certain equipment and supplies.Each of them was to act as the director of his respective department in the Hospital and to provide services to patients within those specialities.The Hospital director testified that the prior separate billing system resulted in numerous complaints from patients who, after paying the Hospital's bill, were chagrined to receive yet another bill from a physician who had performed a special service.As a result, the system was changed so that the Hospital billed for those specialities.³Each month the Hospital remits to the respective physicians an amount equal to the gross billings on their behalf for the previous month, less 15% "retain(ed) to compensate it for bad debts and as reimbursement for the cost of administering" the contracts with the physicians.Each of the physicians is obligated to provide services without charge to any individual "determine(d) to be medically indigent, non-pay or part-pay . . . ."

The Commission's powers relative to the controversy here before us are found in § 568U which provides in pertinent part:

"(a) From and after July 1, 1974, the Commission shall have the power to initiate such reviews or investigations as may be necessary to assure all purchasers of health care hospital services that the total costs of the hospital are reasonably related to the total services offered by the hospital, (and) that the hospital's aggregate rates are reasonably related to the hospital's aggregate costs . . . .

"(b) In order to properly discharge these obligations, the Commission shall have full power to review and approve the reasonableness of rates established or requested by any hospital subject to the provisions of this subtitle.No hospital shall charge for services at a rate other than those established in accordance with the procedures established hereunder."

A number of contentions are made to us by the Hospital and the physicians as to why the Commission may not do that which it here seeks to do.We shall focus, however, only on the question of whether the charges by these specialists are a part of "the total costs of the hospital," since if they are not there is no need to consider the other objections.

The bases for review of a proceeding such as this are set forth in Code(1957, 1978 Repl.Vol.) Art. 41, § 255(f) and were discussed for the Court by Judge Horney in Bernstein v. Real Estate Comm., 221 Md. 221, 230-31, 156 A.2d 657(1959), Appeal dismissed, 363 U.S. 419, 80 S.Ct. 1257, 4 L.Ed.2d 1515(1960).As was pointed out in that case, courts are not permitted to substitute their judgment for the expertise of those persons who constitute the administrative agency from which the appeal was taken.See also Chief Judge Murphy's opinion for the Court in Zeitschel v. Board of Education, 274 Md. 69, 82, 332 A.2d 906(1975).As Judge Singley observed for the Court in Oxon Hill Rec. Club v. Water Res. Adm., 281 Md. 110, 113, 375 A.2d 567, 569(1977), our review of the action of an administrative agency "is almost always limited to whether there was illegality, arbitrariness or unreasonableness in the action which was taken (citing cases)."

It is elementary that since an administrative agency, such as the Commission, is a creature of statute, it has no inherent powers and its authority thus does not reach beyond the warrant provided it by statute.Gutwein v. Easton Publishing Co., 272 Md. 563, 575-77, 325 A.2d 740(1974), holding that the statute creating the Maryland Human Relations Commission did not grant the Commission power to make monetary awards for compensatory or other damages;Albert v. Pub. Serv. Comm., 209 Md. 27, 34, 120 A.2d 346(1956), andUtilities Co. v. Public Service Co., 154 Md. 445, 453, 140 A. 840(1928).

The rules for statutory construction were set forth by Judge Levine for the Court in Mazor v. State,...