Perini Services, Inc. v. Maryland Health Resources Planning Com'n

• Decision Date: 01 September 1985
• Docket Number: No. 932,932
• Citation: 506 A.2d 1207,67 Md.App. 189
• Parties: PERINI SERVICES, INC. v. MARYLAND HEALTH RESOURCES PLANNING COMMISSION, et al. ,
• Court: Court of Special Appeals of Maryland

Page 189

67 Md.App. 189

506 A.2d 1207

PERINI SERVICES, INC. v. MARYLAND HEALTH RESOURCES PLANNING COMMISSION, et al.

No. 932, Sept. Term, 1985.

Court of Special Appeals of Maryland.

April 7, 1986.

Certiorari Denied August 22, 1986.

Charles Moran (Melanie D. Anson and Semmes, Bowen & Semmes, on brief), Baltimore, for appellant.

James A. Forsyth, Towson, for appellee, Reeders Memorial Home. (Stephen H. Sachs, Atty. Gen., Varda N. Fink and Roberta M. Ward, Asst. Attys. Gen. on brief, for appellee, Maryland Health Resources Planning Com'n), Baltimore, for appellees.

Argued before GILBERT, C.J., and BLOOM, and ROSALYN B. BELL, JJ.

ROSALYN B. BELL, Judge.

Appellant Perini Services, Inc. applied to appellee Maryland Health Resources Planning Commission ¹ for a certificate of need (CON) to construct a 144 bed comprehensive care nursing home and a twenty person adult day care center in Hagerstown, Washington County. The Commission denied the application and the Circuit Court for Washington County affirmed. Perini appeals that order alleging:

A. "The Decision of the Maryland Health Resources Planning Commission ... was erroneous as a matter of law because it was not consistent with the effective State Health Plan.

B. "The Commission exceeded its statutory authority and abused its discretion by basing its Decision on a proposed regulation which had not yet become effective under Maryland law.

a. "The Commission's characterization of its proposed regulation as 'important and relevant information' in order to incorporate the proposed regulation for decision making purposes was erroneous as a matter of law.

b. "Proposed policy changes which alter the bed need methodology, in contrast to mere statistical updating, must have become effective as rules or regulations before being used for adjudicative purposes by the Commission.

C. "The Commission's failure to interpret and apply its regulatory review criteria in a manner consistent with established Commission precedent in similar cases was an arbitrary and capricious action denying Appellant due process and equal protection of the law.

D. "The Commission erred in denying Appellant a Certificate of Need when Appellant was consistent with review criteria, often in a superior way, and when, under the legally binding regulation, there remained significant unmet need for nursing home beds in Washington County.

a. "Because the questions presented are legal rather than factual in nature, this Court should apply the substituted judgment standard.

b. "Because the decisions below are based on errors of law, this Court should reverse the Commission's Decision as to Appellant and grant Appellant a Certificate of Need for its project."

In March 1983, Perini Services, Reeders Memorial Home and Hagerstown Medical Services filed with the Commission letters of intent stating that each desired to construct or expand nursing home projects in Washington County. A staff report was issued. The Commission conducted an evidentiary hearing and rendered a decision, albeit late, ² on the CON applications.

After hearings on three separate days, the Commission concluded that Perini's proposal was not consistent with the applicable standards and awarded a CON for fifty beds to the Reeders project on the condition that it make 31% of its beds available to Frederick County residents. The State Health Plan (SHP) in force at the time said 233 comprehensive care nursing beds were needed in Washington County while none were needed in Frederick County.

Perini concluded that the Commission ignored the current SHP's bed need projections and instead illegally applied the bed need projections contained in the proposed SHP that had been adopted by the Commission but was not yet an effective regulation. ³ That new plan projected a zero need for beds in Washington County and a 148 bed need for the entire health systems area of Western Maryland. All parties agreed the proposed SHP was not a binding regulation at the time the Commission denied Perini's application.

Asserting the Commission erred as a matter of law in applying the proposed SHP, Perini appealed to the circuit court which affirmed.

I. REGULATORY CONTEXT

We need not discuss the history behind the Commission and instead invite the reader to this Court's explanation of its regulatory origin in Doctors' Hospital of Prince George's County v. Maryland Health Resources Planning Commission, et al., 65 Md.App. 656, 501 A.2d 1324 (1986). We will, however, set out the regulatory framework as it relates to the instant appeal.

The Commission has final authority to act upon CON applications. Md. Health--Gen'l. Code Ann. § 19-118(d), (1982, 1984 Cum.Supp.). The Code requires that the Commission make certain that its decisions in this regard are consistent with the SHP under § 19-114, supra and with the COMAR regulations outlining the Commission's own review criteria. ⁴

Health Plan

Under § 19-114(a), supra the Commission is charged with adopting an SHP at least every five years. The SHP is an officially promulgated regulation of the Commission. It represents a broad policy document outlining Maryland's current and future health care system. The SHP must include standards and policies for evaluating CON applications which assess the availability, accessibility, cost and quality of health care. Included in these standards are methodologies developed by state and local planning personnel which quantify the number and types of health care services needed for an area.

The Long Term Care portion of the SHP addresses issues pertinent to the development of nursing homes. This section also incorporates local health systems plans (HSP) which address specific local or regional issues. While the Commission is a State agency, Maryland established five local health systems agencies (HSA) ⁵ which not only develop their own HSPs, but review CON applications for projects in their HSA locale. Since each HSA faces concerns unique to it, each HSP's formula and standards have been tailored to solve perceived area-specific problems.

This appeal concerns only the HSA for Western Maryland and its HSP (WMHSP). The 1980 WMHSP contains a bed need methodology as well as general policies, criteria and standards for nursing home services in the four counties of Western Maryland: Allegany, Frederick, Garrett, and Washington.

As stated, the SHP applicable to the projects involved in the case sub judice was the 1981 Revised SHP. The proposed SHP, which embodied health planning through 1988, was adopted as a final regulation by the Commission on August 14, 1984 and was published in the Maryland Register on the same date. The proposed SHP became effective approximately three weeks later. This new plan, inter alia, revised the blueprint for determining bed need under the SHP. Under this new formula, zero bed need was projected for Washington County and only 148 beds were projected as needed for the entire Western Maryland area with priority given to Frederick County.

Thus, since the proposed SHP was not the governing document, all parties concede that Perini's application had to be evaluated for consistency with both the 1981 SHP and the 1980 WMHSP.

Regulations

A CON application must also be evaluated for compliance with the review criteria codified in COMAR. § 19-118(c)(1), supra. The regulations embody thirteen criteria and standards against which all certificate requests must be reviewed including, inter alia, need for the project, contribution to reducing out-migration, and proximity to a patient's support group. COMAR 10.24.01.07D(2)(a)-(m).

II. COMMISSION DECISION

The Commission's decision denying Perini's CON rested on two grounds: 1) inconsistency with the 1981 SHP and 1980 WMHSP and 2) inconsistency with the COMAR regulatory criteria.

1981 State Plan/1980 Local Plan

The Commission found Perini violated five standards identified under the State and local health care plans.

--Availability--

WMHSP criterion 1, standard 1 provides:

"The number of comprehensive long-term care beds should be based on the long-term care bed need methodology." ⁶

The discussion in the WMHSP following this standard outlined a historic pattern of maldistribution of nursing home beds in Western Maryland.

The Commission determined Perini's project was not consistent with the intent of the standard. In so doing, the agency concluded that the Hagerstown location of its proposed facility would not further the WMHSP goal of retarding out-migration of Frederick County residents to Washington County for nursing home care.

Further, the Commission stated that under this standard, it "peered over the wall" at the information contained in the proposed SHP. Noting that under the new plan Frederick County was allocated beds on a priority basis, the Commission determined that approval of the Perini project would have preempted the awarding of beds to applicants in Frederick County, thus exacerbating the maldistribution problem identified in the 1980 WMHSP and reaffirmed in the proposed SHP. ⁷

The Commission also found Perini violated SHP standard LT 2b mandating that

"[p]roposals involving [nursing home] beds which reduce the need for patients to migrate out of their area of residence shall be preferred over those which do not."

Since the Commission defined "area of residence" as the county wherein the patient resides, it concluded that approval of additional beds in Hagerstown would increase the need for Frederick countians to migrate for care. The Commission acknowledged that the Reeders facility was located in Washington County, but recognized that it was situated only two miles from the Frederick County border and approval of its project would make additional resources available to rural Southern Washington and Frederick Counties.

-- Accessibility--

The Perini application was also deemed inconsistent with WMHSP criterion 4, standard 1, "Access to long-term care facilities for all residents." Standard...