Medical Management & Rehabilitation Services, Inc. v. Maryland Department of Health & Health Hygiene

KENNEY, J. October 26, 2015 Medical Management and Rehabilitation Services, Inc., and its owner, Carolyn Miller (collectively “MMARS”), challenge the Maryland Department of Health and Mental Hygiene’s (“the Department’s”) award of a case management contract to The Coordinating Center (“TCC”). The Circuit Court for Talbot County granted the Department’s Motion to Dismiss for Failure to State a Claim. MMARS presents a single question for our review, which we have reworded as follows: Did the circuit court err in granting the motion to dismiss the complaint for failure to exhaust administrative remedies? 1 For the reasons that follow, we shall affirm. FACTUAL AND PROCEDURAL BACKGROUND Under Section 15-103(a) of the Health-General Article of the Maryland Code (1982, 2009 RepLVol.) (“HGA”), the Secretary of Health and Mental Hygiene is charged with the administration of Maryland’s Medicaid program, which provides health care services to qualifying low-income individuals and families throughout Maryland.

Medicaid participants with specified rare, expensive, or medically complex conditions 2 can enroll in the Rare and Expensive Case Management (“REM”) program, which is a case managed fee-for- ³⁵⁶ service reimbursement system. Approximately 4000 Medicaid participants obtain medical care through the REM program. At the inception of the REM program in 1997, the Department contracted for the necessary case management services with several different individual agencies to facilitate the recipients’ medical needs. The case managers from the participating agencies would conduct an individual needs assessment, educate the recipient, provide family support, develop treatment plans, coordinate provider services, and monitor the recipient’s progress.

MMARS was one of the case management agencies selected in 1997 and has continued as a REM program case management provider for fifteen years. When the contract at issue was awarded, MMARS was providing services to over 1000 REM participants. In 2012, the Department decided to reduce the number of agencies providing REM program case management services from four to one, after both the American Academy of Pediatrics and the Maryland State Medical Society had expressed concern about the REM program’s use of multiple case management providers and its effect on efficiency and quality. It was their recommendation that one provider coordinate the case management services.

On December 20, 2012, the Department published a Request for Proposals (“RFP”) notifying case management providers of the Department’s intent to award the July 1, 2013 through June 30, 2016 contract for case management services to a single provider whose proposal it deemed most advantageous to the State. The RFP also set forth the procedures for protesting or disputing the RFP or the subsequent contract award, 3 in addition to those procedures already established in ³⁵⁷ 10.01.03 of the Code of Maryland Regulations (“COMAR”). It further stated that any appeals would not stay the starting date of the contested contract. The prior REM contracts fell under the state procurement regulations, and case management providers were selected through the competitive bid process set forth in COMAR 21.05.03. 4 But, because the Department, in 2009, set the rates for case management services by regulation 5 subsequent contracts for case management services were not procurement contracts governed by its competitive sealed proposal selection procedures. 6 ³⁵⁸ Five case management providers submitted proposals in response to the December 20, 2012 RFP, none of which objected to the procedures or to the reduction in the number of providers to one.

A three-person evaluation committee concluded that TCC best addressed the evaluation factors provided in the RFP by offering a combination of a superior work plan, corporate qualifications, and experience. After the Department notified MMARS, on April 12, 2013, that it had not received the contract award, MMARS challenged the award of the contract to TCC concurrently in multiple venues, including the Office of Administrative Hearings (“OAH”), the Maryland State Board of Contract Appeals (“the Board”), and the Circuit Court for Talbot County. The Department and OAH On April 15, 2013, MMARS, via email to the Department, objected to the award of the case management contract to TCC, asserting that its proposal was the most advantageous to the State based on the criteria listed in the RFP. MMARS, on April 25, 2013, supplemented its initial objection, asserting that “[the Department’s] evaluations were tainted by bias in favor of [TCC].” Based on its objections, the Department gave MMARS the opportunity to discuss its proposal (although it could not discuss competing proposals) in a debriefing on May 8, in which a procurement officer 7 explained the weaknesses ³⁵⁹ and deficiencies in MMARS’s proposal.

Following that debriefing, MMARS supplemented its objections with additional complaints. The Department, on May 6, 2013, delegated its authority to issue a proposed decision regarding MMARS’s objections to OAH. See COMAR 10.01.03.07. The Administrative Law Judge (“ALJ”) conducted hearings on October 2, 3, 4, and 31, and November 1, and issued a proposed decision on December 27, 2013.

The ALJ concluded that the Department did not improperly reject MMARS’s proposal in response to the RFP and recommended that MMARS’s appeal of the contract award be dismissed. MMARS filed exceptions to the ALJ’s proposed decision with the Secretary of the Department, but, in March of 2014, it dismissed those exceptions. The Board of Contract Appeals On June 24, 2013, MMARS filed a bid protest with the Board challenging the contract award. The Board, finding that the RFP fell outside the definition of a procurement contract, dismissed the protest for lack of jurisdiction on September 6, 2013.

MMARS filed a petition for judicial review of that decision in the Circuit Court for Talbot County on October 1, 2013, but dismissed that petition on April 9, 2014. 8 The Declaratory Judgment Action On September 4, 2013, MMARS filed a Complaint and Motion for Temporary Restraining Order in the Circuit Court for Talbot County. The Department filed a Motion to Dismiss for Failure to State a Claim (“Motion to Dismiss”) and Opposition to Plaintiffs Motion for Temporary Restraining Order on September 20. On October 1, 2013, MMARS withdrew its ³⁶⁰ Motion for a Temporary Restraining Order and filed a response to the Department’s Motion to Dismiss. MMARS filed an additional response on October 25, 2013.

That same day, the circuit court conducted a hearing on the Motion to Dismiss. On December 23, 2013, the court granted the Motion to Dismiss. The court stated that MMARS had failed to exhaust its available administrative remedies. At the time of the court’s ruling, the petition for judicial review of the Board’s decision was pending before the circuit court, and the exceptions and objections to the Department’s contract award were pending before OAH.

STANDARD OF REVIEW “[T]he grant of a motion to dismiss [is reviewed] de novo.” Reichs Ford Rd. Joint Venture v. State Rds. Comm’n of the State Highway Admin., 388 Md. 500, 509 , 880 A.2d 307 (2005). During that review, we must determine whether the trial court’s decision was legally correct.

Napata v. Univ. of Md. Med. Sys. Corp., 417 Md. 724, 732 , 12 A.3d 144 (2011), and “we must assume the truth of the well-pleaded factual allegations of the complaint, including the reasonable inferences that may be drawn from those allegations.” Gasper v. Ruffin Hotel Corp. Of Md., 183 Md.App. 211, 226 , 960 A.2d 1228 (2008) (quoting Adamson v. Corr. Med.

Servs., Inc., 359 Md. 238, 246 , 753 A.2d 501 (2000)). Determining the meaning of a statute, and in this case, the statutory definition of “regulation,” is a question of law and subject to de novo review. See Dixon v. Dep’t of Pub. Safety & Corr.

Sews., 175 Md.App. 384, 408 , 927 A.2d 445 (2007). In that review, we consider the language of the statute in context, not in isolation. See State Dep’t of Assessments & Taxation v. Andrecs, 444 Md. 585, 588-89 , 120 A.3d 734 (2015); see also Bldg. Materials Corp. of Am. v. Bd. of Educ. of Balt.

Cnty., 428 Md. 572, 585-86 , 53 A.3d 347 (2012). “Agency decisions premised upon case law, ... are not enti- ³⁶¹ tied to deference.” Gore Enter. Holdings, Inc. v. Comptroller of Treasury, 437 Md. 492, 505 , 87 A.3d 1263 (2014). DISCUSSION The Trial Court’s Failure to Address Expressly MMARS’s Regulation Argument MMARS filed a three count complaint in the circuit court captioned as follows: count one, “Declaratory Judgment Pursuant to State Government Article of the Maryland Annotated Code, Section 10-125”; count two, “Declaratory Judgment (Pursuant to the Courts and Judicial Proceedings Article of the Maryland Annotated Code, Subtitle Four and State Government Article of the Maryland Annotated Code, Section 10-125[) ]”; and count three, “Complaint for Temporary Restraining Order and Preliminary Permanent Injunctive Relief.” 9 The first count, as stated in the pleadings, was an “action for Declaratory Judgment pursuant to the State Government Article of the Maryland Code, Section 10-125, ... for the purpose of determining questions of actual controversy between the parties and terminating uncertainty and controversy giving rise to [this proceeding.]” According to the complaint, the uncertainty relates to the Department’s “attempt to legalize its position[, which] rests on certain regulations [that according to MMARS] are misrepresentations by the [Department,] [and] as interpreted [by the Department, in addition to] the proposed award of th[e] RFP to TCC, violate portions of the United States and Maryland Constitutions, ... [and] th[ose] interpretations or provisions exceed the statutory au ³⁶² thority of the [Department] as a unit under State Government Article 10—125(d)(2).” The second count, according to MMARS, was “an action for declaratory judgment pursuant to State Government Article of the Maryland Annotated [C]ode, Section 10-125, Sections 3-406 and 3-407 of the Courts and Judicial Proceedings Article of the Annotated Code of Maryland for the purpose of determining a question of actual controversy between the parties.” The claim, according to MMARS, related to its then-current contract with the Department. At a hearing on the Department’s Motion to Dismiss, MMARS advanced several arguments: first, as an exception to the exhaustion doctrine, Maryland Code (1984, 2009 Repl.

Vol.) § 10-125 of the State Government Article (“SG § 10-125”) states that an action can be brought in the circuit court without exhausting administrative remedies; second, “by giving [the REM contract] to one company, without any benevolent reason to the people of Maryland [the Department created] a monopoly[;]” and finally that “[t]he RFP is a regulation in itself that created a monopoly in itself because it changed [the REM] program and gave it to one individual contractor when the Department had a few months before stated that all of these contractors had done an exceptional job.... ” The circuit court, in granting the Department’s Motion to Dismiss, expressly stated that MMARS had “clearly not exhausted [all] administrative remedies.” On appeal, MMARS asserts that the trial court erred, contending that the exhaustion doctrine does not apply because the single provider RFP and the subsequent contract award were, in effect, a regulation and that SG § 10-125 provides “an exception to [the] general rule” that courts “will review only a ‘final’ decision of an [a]gency.” We ordinarily presume that the circuit court knows the law, and in this case, we can presume its statement regarding MMARS’s failure to exhaust administrative remedies was an implicit finding that the exhaustion exception in SG § 10-125 does not apply. But, even if that were not the ³⁶³ case, “we may affirm the judgment of a trial court to grant a motion to dismiss on a different ground than that relied upon by the trial court, as long as the alternative ground is before the Court properly on the record.” Forster v. State Office of Pub. Defender, 426 Md. 565, 580-81 , 45 A.3d 180 (2012). “[Wjhere the record in a case adequately demonstrates that the decision of the trial court was correct, although on a ground not relied upon by the trial court and perhaps not even raised by the parties, [we] will affirm.” Robeson v. State, 285 Md. 498, 502 , 403 A.2d 1221 , 403 A.2d 1221 (1979). “[Considerations of judicial economy justify the policy of upholding a trial court decision which was correct although on a different ground than relied upon.” City of Frederick v. Pickett, 392 Md. 411, 424 , 897 A.2d 228 (2006) (quoting Robeson v. State, 285 Md. 498, 503 , 403 A.2d 1221 (1979)). Did the RFP and Contract Award Constitute a Regulation?

The Department derives its authority to administer the REM program from statutes that emphasize individualized care and appropriate case management, and that exempt REM participants from mandatory enrollment in standard managed care organizations. See Md.Code (1982, 2009 Repl. Vol.), §§ 15-102.1(b)(l), 10 15—103(b)(4)(i) 11 of the Health General Article (“HGA”). Supporting regulations set forth REM participant eligibility, COMAR 10.09.69.17; case management reimbursement rates, COMAR 10.09.69.14; and the procedures for contracting for services, see COMAR 21.01. ³⁶⁴ Regulations are to be enacted in accordance with procedures set forth in Title 10 subtitle 1 of the Maryland Administrative Procedure Act (“APA”).

Md.Code (1984, 2009 Repl. Vol., 2010 Supp.). In Balfour Beatty Const. v. Md. Dep’t of Gen. Servs., 220 Md.App. 384, 356 , 103 A.3d 1091 (2014) we stated: [An agency] “may not adopt a proposed regulation” until it has sent a proposed draft to the Attorney General or unit counsel for approval as to legality, and also to the General Assembly’s Joint Administrative, Executive, and Legislative Review Committee (“AELR Committee”).

Next, the proposed regulation must be published in the Maryland Register and be accompanied by a notice that: (1) states the economic impact of the proposed regulation on State and local government revenues and expenditures and on groups that may be affected by it, and (2) sets a date, time, and place for public hearing. For the next 30 out of the 45 days during which the regulation is published in the Maryland Register, [the agency] must accept public comment on the proposed regulation. (Citations omitted). Arguing that the circuit court erred in dismissing its complaint for failure to exhaust its administrative remedies and that the contract award to TCC created an unconstitutional monopoly, MMARS contends that the single provider RFP “changed the [REM] program” and is effectively a regulation that was not adopted in accordance with Title 10 of the APA.

Therefore, MMARS was entitled to petition for a declaratory judgment challenging the Department’s award of the contract to TCC because SG § 10-125(a)(l) states “[an individual] may file a petition for a declaratory judgment on the validity of any regulation, whether or not the person has asked the unit to consider the validity of the regulation.” In response, the Department argues that the circuit court properly dismissed the case for failure to exhaust administrative remedies because the RFP and the award of a case management contract pursuant to that RFP fall outside of the ³⁶⁵ APA’s definition of a regulation and are not subject to judicial challenge through a petition for a declaratory judgment under SG § 10-125. As evidence that MMARS had failed to exhaust all