Department of Health & Mental Hygiene v. VNA Hospice

BARBERA, Judge. We consider in this appeal the constitutionality of the law presently codified at Maryland Code (1982, 2005 Repl.Vol.), § 19-906 of the Health General Article (“HG”). That section sets forth the requirements for obtaining a license to provide home-based hospice services. Before 2003, VNA Hospice of Maryland (‘VNA”), appellee, held a statewide license pursuant to the then-applicable version of HG § 19-906, to provide home-based hospice care service in Maryland.

In 2003, the General Assembly substantially amended HG § 19-906, causing appellant, the Department of Health and Mental Hygiene (“the Department”), to amend VNA’s license so that it could ⁴⁷⁹ no longer provide hospice services in Carroll and Prince George’s counties. VNA appealed the alteration of its license, challenging the constitutionality of the 2003 amendments. Following a hearing on the matter, an Administrative Law Judge (“ALJ”) issued a Proposed Decision upholding the amendments. VNA filed exceptions, and the designee of the Secretary of the Department issued a Final Decision adopting the proposed findings of fact and conclusions of law set forth in the ALJ’s Proposed Decision.

The Board of Review of the Department affirmed the decision of the Secretary’s designee. VNA filed a Petition for Judicial Review in the Circuit Court for Baltimore County. The court issued an opinion reversing the Department’s decision. The court ruled that the license issued to VNA in 1982 was a vested property right afforded constitutional protection under Article 24 of the Maryland Declaration of Rights.

Alternatively, the court ruled that HG § 19-906(c)(3), which restricts the licenses for home-based hospice providers to only those jurisdictions in which the providers had administered services within the 12-month period ending on December 31, 2001, was arbitrary. Finally, the court ruled that the State’s failure to provide, or offer to provide, any financial compensation to VNA as a result of the amendment of VNA’s license constituted a “taking” in violation of Article III, § 40, of the Maryland Constitution. The Department noted a timely appeal to this Court. For the reasons that follow, we conclude that HG § 19-906(c)(3) is not unconstitutional on any of the grounds asserted by VNA.

We therefore reverse the judgment of the circuit court with the direction that it affirm the Final Decision of the Department. BACKGROUND VNA offers home-based hospice and health care services in Maryland. 1 Since 1982, hospice care providers have been ⁴⁸⁰ included within the definition of “health care facility” under Title 19 of the Health-General Article. See HG § 19-114(d)(vii). As health care facilities, hospice care providers are required to obtain a Certificate of Need (“CON”), issued by the Maryland Health Care Commission, before developing or operating a hospice care facility or participating in hospice care.

HG § 19-120(e). A CON refers to a certification or finding of public need for a particular health care project. HG § 19-114(c). In Maryland, providers of hospice services must apply for a CON prior to developing, operating, or participating in these health care programs.

See HG § 19 -120(e). The general purpose of a CON is to ensure that new health care services and facilities are developed only as needed, based on the publicly developed measures of cost effectiveness, quality of care, and geographic and financial access to care. By 1987 Md. Laws, ch. 670, the General Assembly amended HG § 19-906, entitled “Qualifications for License,” to require home-based hospice care providers to obtain a license under that provision. The law also required that such programs obtain a CON.

An uncodified section of the 1987 law, see 1987 Md. Laws, ch. 670, § 2, provided that hospice care programs in existence and delivering hospice care services before January 1,1987, were exempt from the CON requirement. Because VNA was in existence and delivering hospice care services before January 1, 1987, it was exempt from the CON requirement that was added to the law in that year. Before enactment of the 2003 amendments to HG § 19-906, VNA was ⁴⁸¹ licensed to provide home-based hospice care services and provided such services in Baltimore City and Anne Arundel, Baltimore, Cecil, Carroll, Harford, Howard, and Prince George’s counties. In 2003, the General Assembly again amended HG § 19-906, by passing SB 732.

See 2003 Md. Laws, ch. 404. As a result of those amendments, HG § 19 — 906(c) provides, in relevant part: (2) The Secretary, in consultation with the Maryland Health Care Commission, shall specify those jurisdictions in which a general hospice is authorized to provide home-based hospice services. (3) A general hospice may not be licensed to provide home-based hospice services in a jurisdiction unless the general hospice or an entity acquired by the general hospice provided home-based hospice services to a patient in the jurisdiction during the 12-month period ending December 31, 2001. (5) Upon the notification by the Maryland Health Care Commission of the issuance of a certificate of need to a general hospice, the Secretary shall append to the general hospice license any additional jurisdictions in which the general hospice may provide home-based hospice services.

Pursuant to the 2003 amendments, the Secretary of the Maryland Health Care Commission is required to specify the jurisdictions or counties in which a general hospice is authorized to provide home-based hospice services. A general hospice may enlarge its license to include additional jurisdictions by applying for a CON. General hospices are exempt from the CON requirement, however, if they provided hospice care services in a jurisdiction within the 12-month period ending on December 31, 2001. Following the enactment of the 2003 amendments to HG § 19-906, the Department of Health and Mental Hygiene Office of Health Care Quality (“OHCQ”), which issues licenses for hospice services in Maryland, reviewed a 2001 survey ⁴⁸² conducted by the Hospice Network of Maryland, Inc. OHCQ determined that VNA had not provided hospice care services in Carroll and Prince George’s counties during the 2001 calendar year.

By letter dated August 18, 2003, OHCQ notified VNA that, pursuant to the 2003 amendments to HG § 19-906, its license was amended to limit its operations to the six jurisdictions in which it h ad served home-based hospice patients in 2001: Baltimore City and Anne Arundel, Baltimore, Cecil, Harford, and Howard counties. Under the amended license, VNA could not provide services in Carroll and Prince George’s counties, unless it obtained a CON and became licensed to provide service in those counties. VNA appealed the alteration of its license to the Office of Administrative Hearings. A hearing on VNA’s appeal was conducted before an ALJ.

VNA argued, inter alia, 2 that the 2003 amendments to HG § 19-906 violated both the Maryland Declaration of Rights and the United States Constitution. VNA maintained that the 2003 amendments operated retroactively to abrogate its existing property right to provide hospice care services in Carroll and Prince George’s counties. The ALJ rendered a Proposed Decision declining to hold the 2003 amendments to HG § 19-906 unconstitutional as applied to VNA. The ALJ concluded that VNA did not have a vested property right in providing home-based hospice services.

The ALJ therefore concluded that the 2003 amendments to HG § 19-906 did not deprive VNA of its due process rights under Article 24 of the Maryland Declaration of Rights or the Fourteenth Amendment to the Constitution of the United States. The ALJ also concluded that the 2003 amendments did not constitute a taking under Article III, § 40 of the Maryland Constitution or the Fifth Amendment (as incorporated through the due process clause of the Fourteenth Amendment), and those amendments did not create a monopo ⁴⁸³ ly in violation of Article 41 of the Maryland Declaration of Rights. YNA filed exceptions to the Proposed Decision, and the designee of the Secretary of the Department held a hearing, at which the Secretary’s designee heard argument of counsel. She later issued a Final Decision adopting the proposed findings of fact and conclusions of law set forth in the Proposed Decision and “upholding the Office of Health Care Quality’s action to amend VNA’s hospice care license to exclude VNA from providing home-based hospice services in Carroll and Prince George’s counties pursuant to HG § 19-906(c)(3).” VNA appealed the decision to the Department’s Board of Review (“Board”).

At the hearing before the Board, VNA argued, as it had before the ALJ, that the 2003 amendments to HG § 19-906(c)(3) retroactively divested VNA of its right to a license to provide hospice services in Carroll and Prince George’s counties. The Board of Review disagreed and affirmed the Final Decision. VNA filed a Petition for Judicial Review in the Circuit Court for Baltimore County. Following a hearing, the court issued an opinion reversing the decision adopted by the Board of Review.

The court ruled that VNA had a vested property right in providing home-based hospice services that was abrogated by the 2003 amendments. The court further ruled that the provision of HG § 19-906 exempting from the CON requirement only general hospices that provided services in a jurisdiction in 2001 is arbitrary and unconstitutional under Article 24 of the Maryland Declaration of Rights and an improper exercise of the State’s police powers. The court did not reach the remaining claims. The Department timely appealed.

THE PARTIES’ CONTENTIONS The Department contends that the Final Decision is proper because VNA did not establish that HG § 19-906, as amended in 2003, is unconstitutional on any of the grounds that VNA ⁴⁸⁴ asserted. The Department therefore asks us to reverse the decision of the circuit court and affirm the decision of the Department. The Department argues that VNA has no property interest in continuing to provide hospice services in Carroll and Prince George’s counties; therefore, the 2003 amendments do not deprive VNA of a vested property right in violation of due process under either Article 24 of the Maryland Declaration of Rights or the Fourteenth Amendment to the Constitution. For the same reason, the Department argues that the 2003 amendments also do not offend the prohibition in the Fifth Amendment and Article III, § 40 of the Maryland Constitution against a taking without just compensation.

The Department also argues that the 2003 changes to the law do not constitute an improper exercise of the State’s police power, and they do not create a monopoly prohibited by Article 41 of the Maryland Declaration of Rights. VNA disagrees with each of the Department’s contentions. VNA reasserts all of the state and Federal constitutional arguments that it raised at the administrative level and before the circuit court. STANDARD OF REVIEW “In reviewing the decision of an administrative agency, this Court performs the same function as the circuit court.” Bd. of License Comm’rs for Prince George’s County v. Global Express Money Orders, Inc., 168 Md.App. 339, 344 , 896 A.2d 432 (2006). “We review the decision of the agency, not that of the circuit court.” Id.

When reviewing an administrative agency decision, the court’s task “is not to substitute its judgment for the expertise of those persons who constitute the administrative agency[.]” United Parcel Serv., Inc. v. People’s Counsel for Balt. County, 336 Md. 569, 576-77 , 650 A.2d 226 (1994) (citation and internal quotation marks omitted). “Even with regard to some legal issues, a degree of deference should often be accorded the position of the administrative agency.” Md. Aviation Admin. v. Noland, 386 Md. 556, 572 , 873 A.2d 1145 ⁴⁸⁵ (2005). When, as in this case, the issue decided by the administrative agency involves pure questions of law, we review the issue de novo to determine if the agency’s decision “is premised upon an erroneous conclusion of law.” See id. at 571 , 873 A.2d 1145 ; Md. Bd. of Physicians v. Elliott, 170 Md.App. 369, 425 , 907 A.2d 321 (2006). DISCUSSION Before we address the specific arguments presented by the parties, we review in somewhat greater detail than at the outset of this opinion the statutory context of HG § 19-906.

HG § 19-906 is part of what has been termed a “comprehensive health care statutory framework.” Catonsville Nursing Home, Inc. v. Loveman, 349 Md. 560, 573 , 709 A.2d 749 (1998). That statutory framework is highly regulated. See HG § 19-102(a) (“The General Assembly finds that the health care regulatory system in this State is a highly complex structure that needs to be constantly reevaluated and modified in order to better reflect and be more responsive to the ever changing health care environment and the needs of the citizens of this State”). HG § 19-906, including the 2003 amendments that added subsections (c)(2) through (c)(5), must be viewed together with other provisions of the Health Care Facilities Subtitle, particularly the provisions that address CONs.

CONs give effect to the priority in Maryland “ ‘to promote the development of a health care system that provides, for all citizens, financial and geographic access to quality health care at a reasonable cost.’ ” Sinai Hosp. of Balt., Inc. v. Md. Health Res. Planning Comm’n, 306 Md. 472, 473 , 509 A.2d 1202 (1986) (quoting HG § 19-102). The Court of Appeals traced the origins of Maryland’s CON requirement in Loveman, 349 Md. at 572-75 , 709 A.2d 749 . CONs are a product of the National Health Planning and Resources Development Act of 1974, codified at 42 U.S.C. § 300k-300n-6 (1982) (“Federal Act”).

See Loveman, 349 Md. at 572 , 709 A.2d 749 . The Federal Act, “an attempt to curb the rising costs of health care across the country,” ⁴⁸⁶ provided substantial federal funding conditioned on a state’s enactment of certain health care planning laws____ [T]he Federal Act required states to implement a state health plan (SHP) and administer a CON program for “new institutional health services proposed to be offered or developed within the State.” The purpose of the CON requirement was to add “teeth” to the Federal Act and to help Congress achieve its goals of limiting skyrocketing health care costs, preventing unnecessary duplication of health facilities and resources, and fostering equal access to quality health care for a reasonable cost. Id. (citations omitted).

Congress repealed the CON requirements in 1986, see Pub. L. No. 99-600 § 701 , 100 Stat. 3743 , 3799 (1986), evidently because the requirements were “counterproductive for reforming health care.” Id. (citation and internal quotation marks omitted). Nevertheless, Maryland, among many other states, retained its CON laws.

Id. In 1975, the Maryland General Assembly authorized the Governor to implement provisions of the Federal Act. Id. at 573 , 709 A.2d 749 . Then, in 1978, the General Assembly, “finding that it was a priority of the State to assure equal financial and geographic access to quality health care for all citizens at a reasonable cost, created the Maryland Health Planning and Development Agency and the Maryland Health Resources Planning Commission [now, the Maryland Health Care Commission] to carry out the federal and state legislation.” Id. at 573 , 709 A.2d 749 (citing 1978 Md. Laws, ch. 911).

Chapter 911 codified Maryland’s Health Planning and Development Act and implemented the laws and procedures for obtaining a CON. The Maryland Health Care Commission (“Commission”) is an independent commission that functions within the Department of Health and Mental Hygiene. HG § 19-103. The Commission is authorized by HG § 19-115 to promulgate rules and regulations concerning issuance of CONs in a manner that “ensure[s] that changes in service capacity and major ⁴⁸⁷ expenditures for health care facilities are needed and affordable, and consistent with the Commission’s policies.” See Sinai Hosp., 306 Md. at 474 , 509 A.2d 1202 (citation and internal quotation marks omitted).

Before a person can develop, operate, or participate in certain health care projects, the Commission must issue a CON. HG § 19-115. The CON requirement serves ‘“to assure an efficient and effective health care system for Maryland.’ ” Loveman, 349 Md. at 575 , 709 A.2d 749 (citation and internal quotation marks omitted). At the same time that the General Assembly enacted the CON requirements in 1978, it provided that the requirement of a CON “does not apply to a health care project which: (I) was not subject to Certificate of Conformance Review as required by Chapter 222 of the Acts of 1968; and (II) was completed and in operation on or before June 1, 1978.” 1978 Md. Laws, ch. 911.

The Loveman Court determined that even though the word “exempt” was not used in that provision of the law, “the effect of [it] was to ‘exempt’ those facilities from the requirement to obtain a CON.” 349 Md. at 575 , 709 A.2d 749 . The Loveman Court concluded that the exemption from the obligation of obtaining a CON was a privilege, “personal to the person or entity exempted.” Id. at 577 , 709 A.2d 749 . The Court noted that such exemptions “must b e narrowly construed.” Id. at 578 , 709 A.2d 749 . The Court disagreed with Loveman that there existed in the grant of the CON exemption a broad right to retain the exemption, as if it were “created to run with the land much like a zoning nonconforming use provision.” Id. at 580 , 709 A.2d 749 .

The Court said in that regard: The Health Planning and Development Act is a regulatory scheme. The General Assembly gave the Commission the power to regulate the placement of health care projects, the types of services offered, and the number of persons to be served in an attempt to reduce the number of unused or unuseful projects throughout the State. Accordingly, this statute is regulatory in nature in terms of the distribution of ⁴⁸⁸ health care services and does not, nor was it intended to, confer any specific real property rights. Moreover, if [Loveman’s] interest in the health care project was a property right, it was, at best, an incorporeal hereditament.

Id. We have said that, by 1987 Md. Laws, ch. 670, the General Assembly amended HG § 19-906 to require home-based hospice care providers to obtain a license under Subtitle 9 of Title 19. The 1987 amendment also required that such programs obtain a CON. An uncodified section of the 1987 law provided that hospice care programs in existence and delivering hospice care services before January 1, 1987, were exempt from the CON requirement.

The uncodified section of the enactment provided that those hospice care programs in existence and delivering hospice care services before January 1, 1987, that request licensure between July 1,1987 and July 1,1998, 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. See 1987 Md. Laws, ch. 670, § 2. Therefore, the uncodified provision of the 1987 law, like the similar provision of the 1978 law, created an exemption from the requirement of a CON for hospice care programs already in existence and requesting licensure within the period designated by the law.

By application of the reasoning the Love-man Court employed, the exemption created by the 1987 law is a privilege, not a real property right, and “if’ a property right at all, it is, “at best, an incorporeal hereditament” that ⁴⁸⁹ must be construed narrowly. See 349 Md. at 578, 580 , 709 A.2d 749 . Pursuant to the exemption or “grandfather clause” in the 1987 law, some hospice programs acquired the authority to provide home-based hospice services throughout the State without ever having to obtain a CON for such services. Concern about the number of service providers being permitted to operate state-wide prompted the General Assembly to enact the changes to Subtitle 19 that have precipitated this litigation.

Of particular relevance to the present ease, the law now requires the Secretary of the Department, in consultation with the Commission, to specify the jurisdictions in which a general hospice is licensed to provide home-based hospice services. See HG § 19 — 906(c)(2). The law also limits the jurisdictions for which a general hospice can be licensed to provide home-based hospice services to those in which the program provided home-based services to a patient during calendar year 2001. See HG § 19-906(c)(3).

A program is entitled to seek licensure to provide services in additional jurisdictions by applying for and receiving a CON. See HG § 19 — 906(c)(5). 3 This Case At issue in the present case is the lawfulness of the Department’s amendment of VNA’s license, pursuant to the dictates of the 2003 amendments to HG § 19-906. The amendment of the license had the effect of reducing by two the number of jurisdictions in which VNA can provide home hospice services, in the absence of its first obtaining a CON to provide services in those jurisdictions. We already have identified the various constitutional arguments that VNA makes concerning those ⁴⁹⁰ changes to the law and the Department’s responses to each.

We shall consider each contention, in turn. Do the 2003 amendments to HG § 19-906(c) constitute a retroactive abrogation of a vested right ? It has been firmly settled by the opinions of the Court of Appeals “that the Constitution of Maryland prohibits legislation which retroactively abrogates vested rights. No matter how ‘rational’ under particular circumstances, the State is constitutionally precluded from abolishing a vested property right or taking one person’s property and giving it to someone else.” Dua v. Comcast Cable of Md., Inc., 370 Md. 604, 623 , 805 A.2d 1061 (2002). “[E]ven a remedial or procedural statute may not be applied retroactively if it will interfere with vested or substantive rights.” Id. at 625 , 805 A.2d 1061 (citations and internal quotation marks omitted).

The concept of vested property rights, in connection with retroactive civil legislation, with some exceptions, “includes that which is regarded as a property right under Maryland property law.” Id. at 631 , 805 A.2d 1061 . Under Maryland law, the meaning of “property” is “quite broad,” and includes “real, personal, mixed, tangible or intangible property of every kind.” Id. at 631 n. 10, 805 A.2d 1061 (quoting Md. Rule l-202(v)). VNA argues that its license to provide services in Carroll and Prince George’s counties is a vested property right that was retroactively abrogated by the passage of the 2003 amendments. The Department responds that VNA’s argument fails in its premise because a license to provide hospice services is not a vested property right. 4 We have defined a vested right as a right so fixed that it is not dependent on any future act, contingency or decision to make it more secure....

In other words, [t]o be vested, a right must be more that a mere expectation based on an anticipation of the continuance of ⁴⁹¹ an existing law; it must have become a title, legal or equitable, to the present or future enforcement of a demand. McComas v. Criminal Injuries Comp. Bd., 88 Md.App. 143, 149-50 , 594 A.2d 583 (1991) (citations and internal quotation marks omitted); see also Langston v. Riffe, 359 Md. 396, 419-20 , 754 A.2d 389 (2000) (summarizing various definitions of “vested right”). The appellate courts of this State have said on more than one occasion that a professional license, though having certain “property” rights, is not an absolute vested right, “ ‘but only a conditional right which is subordinate to the police power of the State to protect and preserve the public health.’ ” Comm’n on Med.

Discipline v. Stillman, 291 Md. 390, 405 , 435 A.2d 747 (1981) (quoting Aitchison v. State, 204 Md. 538 , 105 A.2d 495 , cert. denied, 348 U.S. 880 , 75 S.Ct. 116 , 99 L.Ed. 692 (1954)); see also Landsman v. Md. Home Improvement Com’n, 154 Md.App. 241, 259 , 839 A.2d 743 (2003) (quoting Dr. K. v.