Adventist Health Care Inc. v. Maryland Health Care Commission

BELL, C.J. The Maryland Health Care Commission (“Commission”), one of the appellees herein, is required by Md.Code (1982, 2005 Replacement Volume), § 19-118 of the Health-General Article, 1 “at least every 5 years,” to adopt a State health plan (“SHP”), § (a)(1), that shall include “[t]he methodologies, standards, and criteria for certificate of need review....” § 19-118(a)(2)(i). Moreover, the Commission is charged with developing standards and policies consistent with the SHP that relate to the Certificate of Need (“CON”) process. § 19-118(d)(1). 2 These standards, inter alia, “[s]hall address the availability, accessibility, cost, and quality of health care,” § 19-118(d)(2)(i), 3 and “shall take into account the relevant methodologies of the Health Services Cost Review Commission.” § 19-118(d)(3). 4 The Commission also is authorized to promulgate regulations in order more effectively to manage and implement the duties prescribed under Md.Code § 19-118. Section 19-118(c) provides: ¹⁰⁷ “(c) The Commission shall adopt rules and regulations that ensure broad public input, public hearings, and consideration of local health plans in development of the State health plan.” The issue in this case is whether a request by a merged asset hospital system to relocate a portion of its existing cardiac surgery program from one location to another triggers or engages the comparative review process required upon application for a CON for a new cardiac surgery program, or whether such request is to be resolved by a CON process that is separate and distinct. The problem, and accordingly, the resolution, relates solely to the interpretation of the Code of Maryland Administrative Regulations (“COMAR”) 10.24.17.04F, the section entitled “Merged Hospital Systems,” and, specifically, Policy 6.0 contained therein.

COMAR 10.24.17.04F provides: “The regionalization of cardiac surgery services plays an important role in the strategic planning and placement of these programs to achieve an optimal balance between promoting patient access, containing costs, and maintaining quality of care. By regulating the number of cardiac surgery programs needed by Maryland residents in order to ensure adequate caseloads, the Commission acts to strengthen quality and avoid unnecessary costs to the healthcare system. “In recent years, the Commission has encouraged and overseen several mergers and consolidations of two or more hospitals as part of statewide initiatives to promote efficiencies and contain health costs. This has created an opportunity, under specified conditions, for merged institutions to relocate all or part of an existing service from one hospital to another under that merged system by obtaining an exemption from Certificate of Need. While the General Assembly has created this opportunity for the reconfiguration of existing services, its intention was not to promote the expansion of a service which otherwise would be subject to Certificate of Need coverage.

The potential relocation or dividing of cardiac surgery programs may result in prolifer ¹⁰⁸ ation of programs in the absence of need, and defeat the principles of regional planning. For this reason, the Commission establishes the following policy: “Policy 6.0 A merged hospital system may not relocate any part of its existing cardiac surgery capacity to another hospital within its system without obtaining a Certificate of Need.” The Commission interpreted COMAR 10.24.17.04F to mean that a relocation of a portion of an existing cardiac surgery program is subject to the CON process required for a new program. In so doing, it rejected the interpretation advocated by the appellant, Adventist Health Care, Inc., the parent of the merged hospitals, Washington Adventist Hospital and Shady Grove Hospital. Adventist had urged, and continues in this Court to do so, that its relocation application was entitled to be reviewed in a separate and distinct process from the comparative review required for the establishment of a new program.

Consequently, it maintained on judicial review, and again in this Court, that, by interpreting Policy 6.0 and COMAR 10.24.17.04F the way it did, the Commission exceeded its authority. On judicial review, the Circuit Court for Baltimore City affirmed the Commission’s interpretation. We also shall affirm. A. Adventist is a merged asset hospital system that includes, as indicated, both the Washington Adventist Hospital and Shady Grove Hospital.

The Washington Adventist Hospital has an existing cardiac surgery program. Interested in relocating a portion of that existing cardiac surgery program to Shady Grove Hospital, Adventist submitted to the Commission a Letter of Intent (“LOI”) to do so. The LOI described the proposed project, the quantity and types of health services beds that would be affected, and, under the applicable need methodology in the SHP, the jurisdictions the new service would affect. Explaining that the new joint program would have “common medical staffs for Program services, a single ¹⁰⁹ set of Program policies and procedures,” Adventist concluded that the relocation “would not result in the establishment of a new Program but rather [only in] the relocation of a portion of the existing Program at Washington Adventist.” To be clear as to the latter point, Adventist submitted to the Commission, along with the LOI, a separate letter in which it reaffirmed that it was not seeking a Certificate of Need for a new program, and stated that it was not responding to an earlier notice, issued by the Commission, requesting LOI’s for new cardiac surgery programs. 5 Adventist explained, in that regard: “We wish to avoid a situation wherein the Commission would either reject this letter of intent or any subsequently filed application.

We are therefore seeking your guidance whether there is any reason why this letter of intent cannot be accepted. We further request a determination that the project proposed in the letter of intent is considered a partial relocation of an existing program and not the establishment of a new program.” Responding, the Commission advised that it considered Adventist’s LOI to relocate a portion of its cardiac surgery program to be a request for a new program. It explained that “[i]t is the Commission’s view that Policy 6.0 ... considers the relocation of a cardiac surgery program by a merged asset system as the establishment of a new program, and, therefore, subject to all of the policies and standards under COMAR 10.24.17.” This prompted Adventist to file its “Petition for Acceptance of Letter of Intent for Partial Relocation of an Existing Cardiac Surgery and Percutaneous Coronary Intervention Program” (“Adventist Petition”). In a supporting memoran ¹¹⁰ dum accompanying the Petition, Adventist described what had already transpired, and argued that the LOI complied with Policy 6.0, that Policy 6.0’s plain language required an independent, non-comparative review of its LOI, and that the health care resources that Adventist already possessed most efficiently would be utilized by allowing the relocation.

The Petition relied on three examples which, it maintained, demonstrated that the Commission’s regulations allowed for the relocation of all, or part, of existing services between hospitals within a merged asset system: the Health Resources Planning Commission’s granting of an exemption, pursuant to which Greater Laurel Beltsville Hospital (now Laurel Regional Hospital) was permitted to establish an obstetrics program under its merged asset system, the Commission’s approval of the partial relocation from Sinai Hospital of Baltimore to Northwest Hospital Center, of inpatient psychiatric services, without the need for establishing a need for a new health care service, and the Commission’s Proposed Decision granting the University of Maryland Medical System an exemption to relocate an obstetrics program. As to this third example, Adventist pointed out that the Commission noted that an allowable change in patient services among the components of a merged organization included the establishment of a service at a facility within the merged organization. Adventist acknowledged that all of these examples involved a merger exemption, but insisted that they nevertheless reflected a distinction being drawn between the treatment of “new” and “existing” services. Furthermore, it asserted: “[t]he Commission, in fact, has adopted other regulations permitting CON exemptions for merged asset systems for projects which otherwise would require CON coverage.

It would be illogical and inconsistent for the Commission to, on the one hand, apply the ‘merger and consolidation’ exemption process to permit the establishment of a service that was not previously available at a hospital within a merged asset system while, on the other hand[,] treating a partial relocation of another service as a ‘new 5 service.” ¹¹¹ Pursuant to this, Adventist argued that treating its proposal as a “new program” would be inconsistent with these and other examples, and with the Commission’s enabling statute. The petition further asserted that the language of Policy 6.0 did not equate a partially relocated program to a “new” program. Over Adventist’s objection, the Commission submitted Adventist’s LOI and Petition to the hospitals participating in the comparative review for a new cardiac surgery program for their review and comment, pursuant to § 19-126. 6 Suburban Hospital, the other appellee in this case, and Holy Cross Hospital, responded as interested parties 7 and opposed the Adventist Petition. Following the comparative review proceedings and as a part of the CON review process, 8 the Commission issued its deci ¹¹² sion with respect to the proper forum for deciding Adventist’s relocation petition. 9 It confirmed its preliminary determination, that the 2004 SHP required Adventist’s petition for partial relocation of its cardiac surgery program to be considered within the ongoing comparative review process normally engaged to evaluate CON’s for new programs.

The Commission reasoned: “if every hospital that is a member of a merged asset system were able to establish an open heart surgery program ... the number of open heart surgery programs would more than double, none of which would be considered ‘new’ capacity, ... undermining] the intent of the policy ¹¹³ and the principles of regional planning for specialized services.” Addressing directly the examples Adventist proffered as demonstrating that a relocation CON is subject to a different review process than is a new health care service CON, the Commission determined that there was “no inconsistency between these cases and the Commission’s rejection of Adventist HealthCare’s request for a separate CON review,” pointing out that they “involved the applicability of the merger exemption to the CON process,” and “are focused on the General Assembly’s intent in creating the merger exemption for certain projects.” It concluded that the merger exemption was not at issue in this case and, in any event, “the reconfiguration of obstetrics and psychiatric services in the way proposed by the hospital systems in those cases were the kind of service reconfiguration the General Assembly intended to permit via the CON exemption process.” In addition, the Commission mentioned that the disposition of the cases relied on by Adventist was supported by the applicable SHP Chapter. It then observed: “[B]y contrast, Policy 6 of the OHS Chapter is predicated on the Commission’s determination that ‘partial relocations’ of regionally-planned-for services like open heart surgery services should be treated like new programs. As a practical matter, any ‘partial relocation’ of these specialized services operates more like the establishment of a new program than does a relocation of obstetrics or psychiatric beds. For example, because of volume/quality concerns present in planning for open heart surgery services and because the quality of an open heart surgery service is highly dependent on a team of health care practitioners working together on a high volume of surgeries, it is not possible, nor is Adventist Healthcare proposing, to simply relocate the [Washington Adventist Hospital’s] staff to [Shady Grove Adventist Hospital] or to divide Staff time between the two hospitals.

Even if the training protocols and the surgeons remain the same across the system, the [Shady Grove Adventist Hospital’s] program will inevitably ¹¹⁴ have a different support team of nurses and technicians who, through an integral part of the program, may not have the same experience working with each other or with the cardiac surgeons in [Washington Adventist Hospital’s] high volume program. In this respect, the ‘partial relocation’ of the [Washington Adventist Hospital] program resembles a new program.” It concluded, more explicitly, “[a] partial relocation within a system can be expected to have some impact on volumes of other service providers just as a new program would.... Reviewing these proposals separately, based simply on a distinction in nomenclature, makes no sense.” Finally, the Commission rejected the argument that if Adventist’s proposal was not a “new” program, it was obliged to treat it as Adventist maintains, and review it as a separate and distinct matter. That, the Commission asserted, does not follow.

Finding no legal requirement that it do so, the Commission found it acceptable to treat Adventist’s proposal and a typical CON application as similar types of proposals in a single comparative review because both involved open heart services and both required a CON. The Commission concluded that “administrative efficiency and fairness, as well as the public interest in the Commission making a reasoned decision in light of all material evidence, compel the conclusion that a separate CON review of the Adventist’s proposal is unwarranted.” Adventist filed in the Circuit Court for Baltimore City a petition for judicial review, pursuant to Maryland Rule 7-202. 10 Following a hearing, the Circuit Court issued its Memorandum and Order affirming the Commission’s decision. Perceiving the issue to be “the interpretation of state regulations ¹¹⁵ promulgated by [the Commission]” the court noted, preliminary to proceeding with its analysis, that “[w]hen faced with a problem of statutory construction, this Court shows great deference to the interpretation given the statute by the officers or agency charged with its administration... .When the construction of an administrative regulation rather than a statute is at issue, deference is even more clearly in order.” Udall v. Tallman, 380 U.S. 1, 16 , 85 S.Ct. 792, 801 , 13 L.Ed.2d 616, 625 (1965). See also Maryland Transp.

Authority v. King, 369 Md. 274, 288 , 799 A.2d 1246, 1254 (2002); Maryland Comm’n on Human Relations v. Bethlehem Steel, 295 Md. 586, 593 , 457 A.2d 1146, 1150 (1983). Then, finding the language of Policy 6.0 to be “ambiguous as to the manner in which the Commission should address applications from ‘new’ programs in relation to application for ‘relocated’ programs,” the court reviewed the Policy’s history and the Commission’s intent in promulgating Policy 6.0, concluding: “ [i]t is clear from examining this history that insofar as cardiac programs were concerned, the Commission intended that ‘new’ and ‘relocated’ programs were to be treated the same and would be reviewed in the same manner.” Significant to that conclusion was an exchange between Adventist and the Commission staff, during the thirty-day informal comment period, pursuant to COMAR 10.24.01.08D (2)(b), 11 prior to the adoption of Rule 6.0, concerning its meaning. Adventist sought an interpretation consistent with the one it now advocates. Believing that the Policy, as proposed, could not be so interpreted, it wrote the Commission, urging: “The Draft Revision would continue to prohibit merged asset systems from operating a [cardiac surgery] program at more than one of its hospitals.

We submit that where it ¹¹⁶ can be demonstrated that two hospitals in the same region are part of a merged asset system and can put in place credentialing, staff training, and clinical support so that teams can function effectively at either institution, this should not be considered the establishment of a new [cardiac surgery] program.... The [State Health Plan] should permit the opportunity to demonstrate effective use of merged asset system resources without this being considered a ‘new’ program.’" Letter from William G. Robertson, President and Chief Executive Officer of Adventist Healthcare, Inc., to the Maryland Health Care Commission 8-9 (Aug. 20, 2003). The Staff responded, taking much the same position as the Commission takes on this appeal: “Adventist Healthcare believes that reconfiguration of existing capacity is not, and should not be, defined as the establishment of a ‘new’ program. According to Adventist Healthcare, reconfiguration of open heart surgery capacity would not have an impact on the ability of other hospitals to apply for [Certificate of Need] approval to meet new identified need, and would not diminish the amount of newly identified need.

Staff would point out that if every hospital that is a member of a merged asset system were able to establish an open heart surgery program based on this principle, the number of open heart surgery programs in Maryland would more than double, none of which would be considered ‘new’ capacity. The argument that reconfiguration of existing program capacity to another hospital within a merged asset system should not be considered a ‘new 5 program would clearly undermine the intent of the policy and the principles of regional planning for highly specialized services.” Analysis of Informal Public Comments and Staff Recommendations, Maryland Health Care Commission 26-27 (Sept. 18, 2003). Moreover, the Circuit Court observed that there was a lack of “a single instruction” in the applicable regulations or in the ¹¹⁷ Maryland Code “that a ‘relocated’ program must be subject to a review process separate from the comparative process established for ‘new’ programs.” Nor was the court willing to take the “inferential leap” from the “the mere fact that Policy 6.0 refers only to ‘relocated’ programs” to the conclusion “that the whole Chapter 2004 delineates between ‘new’ and ‘relocated’ programs, to the extent that it requires separate review process.” On the contrary, it found, “a far more reasonable explanation for Policy 6.0’s requirement that ‘relocated’ cardiac programs obtain Certificates of Need was that it was meant to distinguish cardiac programs from the other specialties in the State Health Plan that allow relocation of programs without obtaining a new Certificate of Need.” Adventist filed a petition for a writ of certiorari, which we granted, Adventist Health v. Health Care, 389 Md. 398 , 885 A.2d 823 (2005). As indicated, we shall affirm, and for the reasons that follow.

B. It is important clarify what is at issue in this case. The case sub judice presents a different issue, as well as different circumstances, than our recent decisions in Medstar Health v. Maryland Health Care Comm’n, 376 Md. 1 , 827 A.2d 83 (2003) (“Medstar I ”), and Medstar Health v. Maryland Health Care Comm’n, 391 Md. 427 , 893 A.2d 1099 (2006) (“Medstar II ”). In both of those cases, the Commission was charged with exceeding its power under its enabling statute by the promulgation of invalid regulations. Nothing concerning the meaning of the regulation at issue was presented; each of the regulations was quite clear, in fact.

Despite the contrasting results, both cases involved the Commission’s quasi-legislative role, in which the interpretation of a regulation played no part. 12 ¹¹⁸ Here, the critical issue is whether Adventist is entitled to a CON for the relocation of a portion of its existing cardiac surgery program from one hospital in the merged system to ¹¹⁹ another. Resolution of that question requires the determination of the proper procedure to be used to address the issue. That involves an interpretation of regulations relevant to the issue. Those regulations, as we have seen, were promulgated by the Commission, which now must interpret them.

Thus, we are faced, specifically, with a situation involving an administrative agency interpreting its own regulations in the context of its quasi-judicial role. Administrative agencies possess an “expertise” and, thus, have a greater ability to evaluate and determine the matters and issues that regularly arise, or can be expected to be presented, in the field in which they operate or in connection with the statute that they administer. In Board of Phys. Quality Assur., we stated: “[A] ‘court’s task in review is not to substitute its judgment for the expertise of those persons who constitute the administrative agency.’ ... [T]he expertise of the agency in its own field should be respected.” 354 Md. at 68-69, 729 A.2d at 381 (citations omitted).

Consequently, the interpretation of a statute by the agency charged with administering the statute is entitled to great weight. McCullough v. Wittner, 314 Md. 602, 612 , 552 A.2d 881, 886 (1989). See, e.g., Board of Phys. Quality Assur., 354 Md. at 68-69, 729 A.2d at 381; Sinai Hosp. v. Dep’t of Employment, 309 Md. 28, 46 , 522 A.2d 382 (1987); Balto.

Gas & Elec. v. Public Serv. Comm’n, 305 Md. 145, 161 , 501 A.2d 1307 (1986); Consumer Protection v. Consumer Pub., 304 Md. 731, 759 , 501 A.2d 48 (1985). Moreover, “th[e] authority delegated to executive branch agencies may include a broad power to promulgate legislative-type rules or regulations in order to implement the statute. Such rules or regulations will often, of necessity, embody significant discretionary policy determinations.” Christ v. Department of Natural Resources, 335 Md. 427, 445 , 644 A.2d 34, 42 (1994).

This Court has stated that, in the exercise of that authority, “[a] great deal of deference is owed ¹²⁰ an administrative agency’s interpretation of its own regulation.” Maryland Transp. Authority v. King, 369 Md. at 288 , 799 A.2d at 1254 (2002). Furthermore: “[A]gency rules are designed to serve specific needs of the agency, are promulgated by the agency, and are utilized on a day-to-day basis by the agency. A question concerning the interpretation of an agency’s rule is as central to its operation as an interpretation of the agency’s governing statute.

Because an agency is best able to discern its intent in promulgating a regulation, the agency’s expertise is more pertinent to the interpretation of an agency’s statute than to the interpretation of its governing statute.” Maryland Comm’n on Human Relations v. Bethlehem Steel Corp., 295 Md. at 593 , 457 A.2d at 1150 (1983). See also Pollock v. Patuxent Inst. Bd. of Review, 374 Md. 463 , 477 n. 6, 823 A.2d 626 , 634 n. 6 (2003) (“[A]n agency is best able to discern its intent in promulgating a regulation. Thus, an agency’s interpretation of the meaning and intent of its own regulation is entitled to deference [citations omitted]”); Maryland Transp.

Authority v. King, 369 Md. 274, 288-289 , 799 A.2d 1246, 1254 (2002) (“[A]n agency’s interpretation of an administrative regulation is ‘of controlling weight unless it is plainly erroneous or inconsistent with the regulation’ [citations omitted]”). Judicial review of the decision of an administrative agency rendered in a quasi-judicial proceeding is quite narrow, Jordan Towing, Inc. v. Hebbville Auto Repair, Inc., 369 Md. 439, 449-52 , 800 A.2d 768, 774-75 (2002); Gigeous v. ECI, 363 Md. 481, 495-97 , 769 A.2d 912, 921-22 (2001); United Parcel Service, Inc. v. People’s Counsel for Baltimore County, 336 Md. 569, 576-77 , 650 A.2d 226, 230 (1994); Liberty Nursing Center, Inc. v. Department of Health and Mental Hygiene, 330 Md. 433, 442 , 624 A.2d 941, 945 (1993) (“Judicial review of agency fact finding is narrow in scope and requires the exercise of a restrained and disciplined judicial judgment.”); Supervisor v. Asbury Methodist Home, 313 Md. 614, 626 , 547 A.2d 190, 195 (1988), consisting of determining whether the administrative agency made an error of law, i.e. the legality of ¹²¹ the decision, and whether the record as a whole contains substantial evidence, that is, “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,” Bulluck v. Pelham Wood Apartments, 283 Md. 505, 512 , 390 A.2d 1119, 1123 (1978); Snowden v. Mayor and City Council of Baltimore, 224 Md. 443, 448 , 168 A.2d 390 (1961) to support the administrative decision. Baltimore Lutheran High Sch. v. Employment Sec. Admin., 302 Md. 649, 662 , 490 A.2d 701, 708 (1985). The legality of the proceedings may depend, as it must in the case sub judice if the petitioner is to prevail, on the meaning of the enabling legislation or the regulations promulgated pursuant thereto, as pertains here, Policy 6.0.

Adventist argues that the Commission’s decision to reject its application for a relocation CON was error, but only because the Commission’s interpretation of Policy 6.0 as requiring its application to be considered in the CON process, with comparative review, for new programs was incorrect. Thus, in this sense, Adventist challenges the legality of the Commission’s decision. Although the construction of statutes and regulations is a legal matter, not factual, this Court has made clear that, because “the expertise of the agency in its own field should be respected,” Board of Phys. Quality Assur., 354 Md. at 69, 729 A.2d at 381, that “[e]ven with regard to some legal issues, a degree of deference should often be accorded the position of the administrative agency.” Id. at 68, 729 A.2d at 381.

As we have seen, that deference, which we characterized as “considerable weight,” id., is due the agency’s interpretation and application of the statute it administers and to the agency’s interpretation of its own regulations. King, 369 Md. at 288 , 799 A.2d at 1254 . Deference to the interpretation of the agency, however, does not mean acquiescence or abdication of our construction responsibility. Despite the deference, “it is always within our prerogative to determine whether an agency’s conclusions of law are correct.” Kushell v. Department of Natural Resources, 385 Md. 563, 576 , 870 A.2d 186, 193 (2005). ¹²² C. Because this case involves the interpretation of COMAR 10.24.17.04F, and Policy 6.0 contained within, and does not involve a challenge to the legality of the promulgated regulation itself, nor, except for the interpretation issue, a challenge to the Commission’s decision to reject Adventist’s proposal, the primary question is which party is correct: the Commission or appellant?

Typically, a Maryland hospital that wishes to create a new cardiac surgery program must apply for and be granted a CON from the Commission. Md.Code Ann., Health Gen. § 19—120(j)(2)(iii)(2). The Commission uses the CON approval process to address and regulate the medical needs of the State of Maryland. Because CON reviews apply to all cardiac surgery services, this court defers to the Commission with regard to these programs, because of their specialized nature.

These services treat “[t]he most complex health problems” in