Vna Hospice v. Dept. of Health, 105, September Term, 2007.

• Citation: 406 Md. 584,961 A.2d 557
• Decision Date: 11 December 2008
• Docket Number: No. 105, September Term, 2007.,105, September Term, 2007.
• Parties: VNA HOSPICE OF MARYLAND v. DEPARTMENT OF HEALTH AND MENTAL HYGIENE.
• Court: Court of Special Appeals of Maryland

961 A.2d 557

406 Md. 584

VNA HOSPICE OF MARYLAND v. DEPARTMENT OF HEALTH AND MENTAL HYGIENE.

No. 105, September Term, 2007.

Court of Appeals of Maryland.

December 11, 2008.

Stephen J. Sfekas, Baltimore, for petitioner.

Kathleen A. Ellis, Asst. Atty. Gen. (Douglas F. Gansler, Atty. Gen. of Maryland, and David Wagner, Staff Attorney, Baltimore), on brief, for respondent.

Argued before BELL, C.J., RAKER,^* HARRELL, BATTAGLIA, GREENE, JOHN C. ELDRIDGE (Retired, specially assigned), and DALE R. CATHELL (Retired, specially assigned), JJ.

John C. ELDRIDGE, J., Retired, Specially Assigned.

This is an action for judicial review of a final adjudicatory administrative decision by the Maryland Department of Health and Mental Hygiene. In that decision, the Department amended the petitioner VNA Hospice of Maryland's hospice care license to exclude VNA from providing home-based hospice services in Carroll and Prince George's Counties. The decision was based upon Maryland Code (2000, 2005 Repl. Vol.), § 19-906(c)(3) of the Health-General Article.¹ In deciding to rescind that part of VNA's license relating to Carroll and Prince George's Counties, the Department rejected VNA's interpretation of § 19-906(c)(3) of the Health-General Article. The Department also rejected VNA's alternative arguments that, if § 19-906(c)(3) precluded VNA from performing home-based hospice services in Carroll and Prince George's Counties, the statute as applied to VNA was unconstitutional on several grounds.

The Circuit Court for Baltimore County reversed the administrative decision on state constitutional grounds. The Court of Special Appeals, however, rejected VNA's constitutional arguments, reversed the Circuit Court's judgment, and directed the Circuit Court to affirm the Department's final decision. Dept. of Health v. VNA, 176 Md.App. 475, 501-502, 933 A.2d 512, 527 (2007).

This Court granted VNA's petition for a writ of certiorari which presented numerous constitutional questions. VNA Hospice v. Department of Health, 402 Md. 355, 936 A.2d 852 (2007). Although we recognize that some of VNA's constitutional arguments are substantial, we shall not decide any of the constitutional issues. Instead, we shall vacate the decision of the Court of Special Appeals and direct an affirmance of the Circuit Court's judgment on the ground that the Department's interpretation of the statutory provisions, and particularly § 19-906(c)(3), was not legally correct.

I.

VNA, before the Department's action complained of here, was licensed to provide and had been providing home-based hospice services, to "dying individuals and their families,"² in Anne Arundel, Baltimore, Carroll, Cecil, Harford, Howard, and Prince George's Counties, as well as Baltimore City. As a result of the Department's final decision in this case, VNA could no longer provide home-based hospice services in Carroll and Prince George's Counties unless it applied for and received a Certificate of Need (hereafter sometimes referred to as a "CON").

Since 1982, hospice care programs have been included in Maryland's health care planning statutory definition of "health care facility." Maryland Code (2000, 2005 Repl. Vol.), § 19-114(d)(1)(vii) of the Health-General Article. Also since 1983, new facility-based hospice care programs have been required to have a Certificate of Need and to meet licensing requirements. Many pre-existing hospice providers, although still having to meet the licensing requirements, were "grandfathered" with respect to the CON requirement because of an uncodified provision, in a 1987 statute, exempting existing programs. Ch. 670 of the Acts of 1987, § 2, stated

"[t]hat those hospice care programs in existence and delivering hospice care services before January 1, 1987, that request licensure between July 1, 1987, and July 1, 1988, shall not be required to obtain a certificate of need prior to licensure. However, those hospice care programs seeking exemption from formal submission of a certificate of need for a hospice care program under this section shall meet the criteria established by the Maryland Health Resources Planning Commission in consultation with interested groups, including the Hospice Network of Maryland, Inc., for determining whether a hospice care program was in existence and delivering hospice care services before January 1, 1987."³

As more requirements were subsequently added in order to obtain a CON for a hospice program, existing programs continued to benefit from grandfathering provisions. This history was described by the Maryland Health Care Commission, Division of Health Resources, in a report entitled An Analysis and Evaluation of Certificate of Need Regulation in Maryland, Working Paper: Hospice Services, at 23-24 (2000), as follows (footnotes omitted):

"Since the enactment of the statute creating the former Maryland Health Resources Planning Commission in 1982, hospice care programs (as well as home health agencies) have been included in the definition of `health care facility' for purposes of coverage by CON review requirements. However, since most home health agencies and virtually all hospice programs existing at that time had been created by hospitals or nursing homes as a facility-based medical service, statutory language was added at several junctures over the next several years to clarify that any geographic expansion (beyond their current jurisdictions) by an existing hospice or home health agency required an additional CON. Existing programs of both kinds rushed to be `grandfathered' as these successive additions to Commission and licensing law established additional requirements.

"Since Medicare did not include hospice care as a covered service until the 1983 effective date of the Tax Equity and Fiscal Responsibility Act (TEFRA) of 1982, followed by Medicaid's adding the benefit in 1985, relatively few freestanding hospices existed at the time of the 1984 amendments to statute. The imposition of a separate State licensure requirement for hospice programs in 1987 was an indicator of the program's growth, and the increasing interest of freestanding providers. This new law explicitly stated that, except for a program with a limited license, a person seeking licensure `shall have a certificate of need ... for the hospice program to be operated.'

"Uncodified language in the 1987 licensure statute provided that hospice care programs established without CON approval, `in existence and delivering hospice care services before January 1, 1987' that sought State licensure between July 1, 1987 and July 1, 1988 would `not be required to obtain a Certificate of Need prior to licensure.'"

The report continued (id. at 24):

"Since hospice programs that existed before either the CON or the licensure requirement had no geographic limitation on their service area, once grandfathered, this service area was determined to be statewide. This was reinforced by the argument that since nearly all of these pre-existing hospice programs had been established as medical services within hospitals or nursing homes, which may serve a resident of any Maryland jurisdiction (and in the case of facilities with specialized services, often draw patients from across the state), the determination that their hospice programs had similar geographic scope. Even when, beginning in the early 1990s, corporate tax advantages, changed reimbursement rules, or mergers with other facilities provided incentive to `spin off' facility-based hospice services into a freestanding, though usually still affiliated program, this determination of `statewide authority' to serve patients was found still to apply."

As explained above, licensed hospice programs that qualified under grandfathering provisions were authorized to provide services throughout the State of Maryland. Moreover, because hospice care programs were, and are, freely transferable, a provider seeking to serve the entire State of Maryland could simply acquire one of the grandfathered, CON-exempted licenses, and thereby acquire a license allowing it to serve the entire State without meeting the CON requirements.

Consequently, CON-exempt licenses allowing providers to serve the entire State became a highly valued commodity. In one transaction, described in the Department of Legislative Services' Bill File on Senate Bill 732 of the 2003 General Assembly's legislative session, a program licensed to provide state-wide services without a CON was transferred to a large out-of-state organization, which then announced its intention to expand the program's capacity to serve more people in more areas of Maryland than any of the previous owners of that program. To address the competition felt by smaller local hospices competing with these larger providers, Senate Bill 732 was introduced at the 2003 Session of the General Assembly. One member of the Senate supporting the Bill, in testimony before the Senate Finance Committee on March 6, 2003, testified that it was "these little hospices around the State that we are trying to protect."⁴

Senate Bill 732 was enacted, and signed by the Governor on May 22, 2003, as Ch. 404 of the Acts of 2003. The effective date of Ch. 404 was July 1, 2003. The Act added several new provisions to Title 19 of the Health-General Article, which were designed to address some of the previously discussed matters. For example, new § 19-120(k)(5)(ii) provided that

"the purchaser of the general hospice may only acquire the authority to provide home-based hospice services in jurisdictions in which the seller of the general hospice is licensed to provide home-based hospice services."

New § 19-120(o) also stated:

"The Commission may not issue a certificate of need or a determination with respect to an acquisition that authorizes a general hospice to provide home-based hospice services on a statewide basis."

With regard to the dispute in the present case, the key provision added by Ch. 404 of the Acts of 2003 w...