Prince George's Doctors' Hosp., Inc. v. Health Services Cost Review Com'n

• Decision Date: 01 September 1984
• Docket Number: No. 99,99
• Citation: Prince George's Doctors' Hosp., Inc. v. Health Services Cost Review Com'n, 486 A.2d 744, 302 Md. 193 (Md. 1984)
• Parties: PRINCE GEORGE'S DOCTORS' HOSPITAL, INC. t/a Doctors' Hospital of Prince George's County v. HEALTH SERVICES COST REVIEW COMMISSION and Group Hospitalization, Inc. ,
• Court: Maryland Court of Appeals

Page 193

302 Md. 193

486 A.2d 744

PRINCE GEORGE'S DOCTORS' HOSPITAL, INC. t/a Doctors' Hospital of Prince George's County v.HEALTH SERVICES COST REVIEW COMMISSION and Group Hospitalization, Inc.

No. 99, Sept. Term, 1984.

Court of Appeals of Maryland.

Jan. 16, 1985.

Melvin J. Sykes, Baltimore (William L. Siskind and Siskind, Burch, Grady & Rosen, Baltimore, on the brief), for appellant.

Jay E. Levy and Diana G. Motz, Asst. Attys.Gen., Baltimore (Stephen H. Sachs, Atty. Gen. and Stanley Lustman, Asst. Atty. Gen., Baltimore, on the brief), for Health Services Cost Review Com'n, appellee.

Charles J. Steel, Washington, D.C. (Lisa A. Olson and Whiteford, Hart, Carmody & Wilson, P.C., Washington, D.C., of counsel, on the brief), for Group Hospitalization, Inc., appellee.

Argued before MURPHY, C.J., SMITH, ELDRIDGE, COLE, RODOWSKY and COUCH, JJ., and EDWARD D. HIGINBOTHOM, Associate Judge of the Third Judicial Circuit of Maryland (retired), Specially Assigned.

SMITH, Judge.

AppellantPrince George's Doctors' Hospital, Inc., (the Hospital) is of the view that the Health Services Cost Review Commission(the Commission) was too stingy in its allowance of rates to it.On the other hand, Group Hospitalization, Inc.(Group Hospitalization), Blue Cross for the District of Columbia metropolitan area, believes the Commission was entirely too generous with the Hospital.We think the Commission had it about right.Hence, we shall affirm in both appeals.

I

The Hospital is a proprietary (for-profit) 240-bed acute care medical/surgical hospital owned and operated by physicians.As its name indicates, it is located in Prince George's County.Its principal owners are also principals in Prince George's Doctors' Hospital Joint Venture, which owns the hospital building.

On November 7, 1983, the Commission issued its final order in a rate-making proceeding involving the Hospital.Group Hospitalization, which insures approximately 35% of the patients at the Hospital, intervened as an interested party before the Commission.The Hospital had requested rates that would generate in excess of $41.5 million in gross revenue per year.The Commission's final rate order approved rates for the Hospital that, according to the Commission, would generate $35.1 million in gross revenue.The Commission found that the Hospital had overcharged its patients by some $16.8 million since September 1982 when it placed its requested rates into effect.We shall develop additional facts as we discuss the various points raised.

The Hospital and Group Hospitalization appealed to the Circuit Court for Baltimore City.That court, in a comprehensive and well-reasoned opinion by Judge Ross, from which we shall quote liberally, affirmed the Commission's order with certain modifications.The Hospital and Group Hospitalization each appealed to the Court of Special Appeals.All parties petitioned us to grant a writ of certiorari before the case was heard in the intermediate appellate court.The Hospital asserted that implementation of the Commission's order as approved by the trial court would place it in financial jeopardy, possibly in bankruptcy.Accordingly, the Hospital requested that we stay the circuit court's order.We declined the Hospital's request.We did grant certiorari in an effort to resolve the matter speedily.

II

2 P. Lasky, Hospital Law Manual App. C (1983), lists thirteen states as of December 1983 which have enacted legislation designed to reduce hospital costs by monitoring rates charged.A number of other states have voluntary programs.SeeId. p 3-62;Biles, Schramm, and Atkinson, Hospital Cost Inflation Under State Rate-Setting Programs, 303 NewEng.J.Med. 664, 665(1980);D. Abernethy and D. Pearson, Regulating Hospital Costs: The Development of Public Policy 60 (1983);Schramm, A State-Based Approach to Hospital-Cost Containment, 18 Harv.J. on Leg. 603, 605, n. 12.

The Commission is established, its duties spelled out, and the procedures it is to follow are set forth in Maryland Code(1982)§§ 19-201 to -222, Health-General Article.¹Under our act the Commission is vested with jurisdiction over the costs and rates of hospitals, health care institutions, and related institutions located in Maryland.There seem to be virtually no cases from without the State which are helpful in resolving the issues here.

The Commission's powers relative to the controversy here before us are found in § 19-216, which provides:²

"(a) Rate reviewing power.--The Commission may review costs and rates and make any investigation that the Commission considers necessary to assure each purchaser of health care facility services that:

"(1) The total costs of the facility are related reasonably to the total services that the facility offers;

"(2) The aggregate rates of the facility are related reasonably to the aggregate costs of the facility; and

"(3) The rates are set equitably among all purchasers or classes of purchasers without undue discrimination or preference.

"(b) Rate approval power.--(1) To carry out its powers under subsection (a) of this section, the Commission may review and approve or disapprove the reasonableness of any rate that a facility sets or requests.

"(2) A facility shall charge for services only at a rate set in accordance with this subtitle.

"(3) ...

"(c) Alternate ratesetting methods.--To promote the most efficient and effective use of health care facility services and, if it is in the public interest and consistent with this subtitle, the Commission may promote and approve alternate methods of rate determination and payment that are of an experimental nature."

Appeals from the Commission, and hence this case, are governed by the Administrative Procedure Act.The pertinent portion of it is now found in Code (1984)§ 10- 215(g), State GovernmentArticle, from whence it was moved without substantive change from Code(1957, 1982 Repl.Vol.) Art. 41, § 255(f). Sec. 10-215(g) provides:

"(g) Decision.--In a proceeding under this section, the court may:

"(1) remand the case for further proceedings;

"(2) affirm the decision of the agency; or

"(3) reverse or modify the decision if any substantial right of the petitioner may have been prejudiced because a finding, conclusion, or decision of the agency:

"(i) is unconstitutional;

"(ii) exceeds the statutory authority or jurisdiction of the agency;

"(iii) results from an unlawful procedure;

"(iv) is affected by any other error of law;

"(v) is unsupported by competent, material, and substantial evidence in light of the entire record as submitted; or

"(vi) is arbitrary or capricious."

In Bulluck v. Pelham Wood Apts., 283 Md. 505, 390 A.2d 1119(1978), Judge Eldridge said for the Court, after having quoted the Administrative Procedure Act as it then stood:

" 'Substantial evidence,' as the test for reviewing factual findings of administrative agencies, has been defined as 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,'Snowden v. Mayor & C.C. of Balto., 224 Md. 443, 448, 168 A.2d 390(1961).The scope of review 'is limited "to whether a reasoning mind reasonably could have reached the factual conclusion the agency reached," '[citing cases within and without the State, treatises, and law journals].

"In applying the substantial evidence test, we have emphasized that a 'court should [not] substitute its judgment for the expertise of those persons who constitute the administrative agency from which the appeal is taken.'Bernstein v. Real Estate Comm., 221 Md. 221, 230, 156 A.2d 657(1959), appeal dismissed, 363 U.S. 419, 80 S.Ct. 1257, 4 L.Ed.2d 1515(1960).We also must review the agency's decision in the light most favorable to the agency, since 'decisions of administrative agencies are prima facie correct,'Hoyt v. Police Comm'r, 279 Md. 74, 88-89, 367 A.2d 924(1977), and 'carry with them the presumption of validity,'Dickinson-Tidewater, Inc. v. Supervisor, 273 Md. [245,] 246[, 329 A.2d 18(1974) ];Heaps v. Cobb, 185 Md. 372, 378, 45 A.2d 73(1945).Furthermore, not only is it the province of the agency to resolve conflicting evidence, but where inconsistent inferences from the same evidence can be drawn, it is for the agency to draw the inferences.Labor Board v. Nevada Consolidated Copper Corp., 316 U.S. 105, 106-107, 62 S.Ct. 960 , 86 L.Ed. 1305(1942);Board v. Levitt & Sons, 235 Md. 151, 159-160, 200 A.2d 670(1964);Snowden v. Mayor & C.C. of Balto., supra, 224 Md. at 448[168 A.2d 390]."283 Md. at 512-13, 390 A.2d at 1123-24.(Emphasis in original.)

The matter of judicial review of an agency decision was put a slightly different way, but to similar effect, by Chief Judge Hammond for the Court in Insurance Comm'r v. Nat'l Bureau, 248 Md. 292, 236 A.2d 282(1967), a case that has been cited and quoted by this Court in a host of cases since then:

"Whichever of the recognized tests the court uses--substantiality of the evidence on the record as a whole, clearly erroneous, fairly debatable or against the weight or preponderance of the evidence on the entire record--its appraisal or evaluation must be of the agency's fact-finding results and not an independent original estimate of or decision on the evidence.The required process is difficult to precisely articulate but it is plain that it requires restrained and disciplined judicial judgment so as not to interfere with the agency's factual conclusions under any of the tests, all of which are similar.There are differences but they are slight and under any of the standards the judicial review essentially should be limited to whether a reasoning mind reasonably could have reached the factual conclusion the agency reached.This need not and must not be either judicial fact-finding or a substitution of judicial judgment for agency judgment.See4 Davis, op cit.§§ 29.01, 29.02, 29.03, 29.06, 29.07, 29.10; 2 Cooper, op cit.Ch. XIX, § 7;2 Am.Jur.2dAdministrative Law...