Community Clinic, Inc. v. Dept. of Health (Ct. of Special Appeals)

Filed May 3, 2007--Opinion by Judge Lawrence F. Rodowsky.

This is a judicial review of an administrative decision involving the disallowance by Maryland Department of Health and Mental Hygiene ("DHMH") of claims by two federally qualified health clinics ("FQHCs" or collectively, "Clinics") for reimbursement of costs under the Maryland Medical Assistance Program ("Medicaid" or the "Program"). The disallowance was based upon DHMH's application of its regulation establishing a monetary cap on a class of costs included in the Clinics' requests for reimbursement. The Clinics contend that the Maryland regulation does not comply with governing federal law.

States that elect to participate in Medicaid are required to submit to the U.S. Department of Health and Human Services a plan detailing how the State will expend federal funds. Entitled "State plans for medical assistance," 42 U.S.C. § 1396a (1994), provides in relevant part,

. . . for payment for services . . . under the plan 100 percent of costs which are reasonable and related to the cost of furnishing such services or based on such other tests of reasonableness, as the Secretary prescribes in regulations . . . or, in the case of services to which those regulations do not apply, on the same methodology used under section 13951(a)(e)."

Reasonable, and necessary and proper, costs were defined in 42 CFR § 413.9 (1996), as follows:

(1) Reasonable cost of any service must be determined in accordance with regulations establishing the method or methods to be used, and the items to be included. The regulations in this part take into account both direct and indirect costs of providers of services. The objective is that under the methods of determining costs, the costs with respect to individuals covered by the program will not be borne by individuals not so covered, and the costs with respect to individuals not so covered will not be borne by the program. These regulations also provide for the making of suitable retroactive adjustments after the provider has submitted fiscal and statistical reports. The retroactive adjustment will represent the difference between the amount received by the provider during the year for covered services from both Medicare and the beneficiaries and the amount determined in accordance with an accepted method of cost apportionment to be the actual cost of services furnished to beneficiaries during the year.

(2) Necessary and proper costs are costs that are appropriate and helpful in developing and maintaining the operation of patient care facilities and activities. They are usually costs that are common and accepted occurrences in the field of the provider's activity.

As part of its program, Maryland adopted regulations for FQHCs, entitled "Reimbursement Principles for FQHC Services Rendered Before and Including June 30, 1999," currently codified in COMAR 10.09.08.05.C. As relevant to the issue, the regulation provides that "federally qualified health centers shall be paid 100 percent of their reasonable allowable costs, subject to the limitations contained in § C(4)-(7) of this regulation, that are related to the provisions of covered services." Reimbursement of FQHCs is on a per visit basis. Reimbursement during a fiscal year is based on an interim per visit rate, with a final per visit rate determined for the entire year. The regulation further requires that an FQHC's cost be divided into four categories, called "centers." These are general service costs, primary care services cost, dental services costs and non-reimbursable costs. The instant matter concerns the general service cost center, for which the parties have adopted the term "administrative costs" as a shorthand reference.

The Administrative Law Judge ("ALJ") made findings of fact in each case, placing considerable emphasis on the discussion of reasonable costs in the Medicare Provider Reimbursement Manual, Part I, specifically:

It is the intent of the program that providers will be reimbursed for the actual costs if providing high quality care, regardless of how widely they may vary from provider to provider except where a particular institution's costs are found to be substantially out of line with other institutions in the same area which are similar in size, scope of services, utilization and other relevant factors.

Reasonable costs do not exceed what a prudent and cost-conscious buyer pays for a given item or service

Applying the above-quoted standards, the ALJ found that the Clinics had shown the costs were reasonable because the Clinics were subject to both internal and external checks on its fiscal practices, and there was no evidence of self-dealing or of any incentive to pay excessive salaries or rent.

DHMH excepted to the ALJ's recommended order that the disputed claim for reimbursement be paid. The Secretary of DHMH rejected the ALJ's conclusion , expressly adopting the findings of fact that the ALJ had made on the cross motions for summary decision but declining to adopt the ALJ's reasoning and legal conclusions. With respect to the DHMH exception that assumed the ALJ had concluded the cap was not reasonable on its face, the Secretary ruled that there was ample evidence supporting the reasonableness of the cap, pointing as evidence to the public process in the adoption of the cap, federal approval of the program, and the utilization of relatively comparable caps in five other states. In addition, the Secretary pointed to a cap, utilized in the program, on the reimbursable costs of managed care organizations.

The Clinics appealed from the Secretary to the Board of Review of DHMH (the "Board"). After review and oral argument, the Board affirmed the Secretary without further explanation. The Board's action constituted the final agency decision for purposes of judicial review under the Administrative Procedures Act. HG § 2-207(f)(2).

On petition for judicial review in the Circuit Court for Montgomery County, the Clinics advance the following arguments:

I. The circuit court erred in applying a substantial evidence test.

II. The Secretary erred in not accepting the ALJ's conclusions of law after accepting the ALJ's findings of fact.

III. DHMH never examined the limits at issue to determine whether they unlawfully curtailed the health centers' reasonable costs.

Is the cap invalid under all circumstances? The Clinics contended that Maryland could not cap administrative expenses at a fixed percentage of total allowable costs unless it first had undertaken a study demonstrating that administrative costs above the chosen percentage are always unreasonable. The Court found that the cap was adopted in accordance with the Maryland Administrative Procedure Act and that it was approved by HCFA as complying with federal law. Consequently, the cap is presumed valid, and the burden rests with the Clinics to demonstrate its invalidity. In Maryland, the test for determining the validity of the adoption of a regulation is whether it contradicts the language or purpose of the statute authorizing the regulation. The Court held that the federal requirement for state reimbursement of 100% of an FQHC’s reasonable cost is satisfied by the state system that affords the FQHC the opportunity to demonstrate that its costs, albeit in excess of a cap, are reasonable. To answer the Clinics’ second question, whether the cap was validly applied in the instant matter, the Court found that the Secretary was not restrained by the recommended conclusion drawn by the ALJ; rather, the Secretary was free to make the determinative inference that the excess costs were unreasonable if that inference was supported by substantial evidence.

In addressing the Clinics’ first argument, the Court relied on the issue of whether the Secretary’s decision was supported by substantial evidence. Consequently, Argument 1 missed the mark. The Secretary did not act arbitrarily or capriciously in declining to draw the inference that the Clinics’ costs were reasonable. Nor did the Secretary act arbitrarily in concluding that the Clinics’ primary evidence, due to the absence of specific comparisons to administrative costs of other FQHCs, did not persuade him that the Clinics’ administrative costs, in excess of the cap, were reasonable.

Based on the foregoing reasoning, the Court found it unnecessary to decide if the cap is a valid conclusive presumption.

Judgment was affirmed.

The full opinion is available in PDF

Prince George County v. Ray's Used Cars (Ct. of Appeals)

Filed May 4, 2003--Opinion by Judge John Eldridge.

This case concerns a challenge to the constitutionality of a zoning ordinance establishing the minimum lot size of 25,000 square feet for used motor vehicle, mobile home or camping trailer sales lots. The dispositive issue in the case, however, is whether the ordinance's challengers were first required to invoke and exhaust administrative remedies. The petitioner, Prince George's County, argues that a judicial determination of the constitutionality of the zoning ordinance is premature because the respondent used car dealers failed to invoke and exhaust their administrative remedies. The respondents claim that pursuit and exhaustion of administrative remedies were not required in this case and that the zoning ordinance is unconstitutional on the ground that it violates due process and equal protection principles.

The Court held that the respondent used car dealers were required to invoke and exhaust administrative remedies prior to obtaining judicial review.

The full opinion is available in PDF.

Miller v. Comptroller of Maryland (Ct. of Appeals)

Filed April 10, 2007 -- Opinion by Judge Dale Cathell

This case involed the issues of how a State employee is to be compensated for time spent commuting to and from an out-of-regular work site and whether a State employee is entitled to an award of compensation for acts occurring outside a 20 day period prior to the filing of a grievance. The Court held that COMAR17.04.11.02B (1)(j) does not entitle employees to compensation for all time spent traveling between home and a work site other than their assigned office and that Maryland Code (1993, 2004 Repl. Vol.), § 12-203(b) of the State Personnel and Pensions Article requires a remedy to be limited to compensation for claims existing within 20 days prior to the initiation of a grievance.

The opinion is available in PDF.

Cinque v. Montgomery County Planning Board (Ct. of Special Appeals)

Filed March 15, 2007. Opinion by Judge James Kenney.

This case concerns the ability of an administrative agency to reconsider a quasi-judicial decision.

The Montgomery County Planning Board of the Maryland-National Capital Park and Planning Commission (the "MCPB"), first approved a preliminary plan for a subdivision in Montgomery County's Agricultural Reserve, then reconsidered its decision and denied the proposed plan, and then reconsidered its denial and ultimately approved the application. Appellants, individual property owners and various organizations, argued that the MCPB violated its own Rules of Procedure and the McKinney test in granting the second reconsideration and approving the proposed subdivision.

An administrative agency may grant reconsideration pursuant to a statute or regulation. In the absence of such express authority, an agency has the inherent power to reconsider its decision in the event of fraud, surprise, mistake or inadvertence. Miles v. McKinney, 174 Md. 551, 199 A.2d 502 (1938). In this case, MCPB regulations provided that the agency may reconsider upon "a clear showing that the [agency] did not conform to relevant law or its rules of procedure." Accordingly, when the MCPB accepted the argument of the property owner that the denial of the application was not in accordance with the development standards of the applicable zone, it had a valid ground to grant reconsideration. Neither the fact that the membership of the MCPB had changed nor the fact that one member had reversed his own views made the reconsideration decision an impermissible change of mind.

The opinion is available in PDF.

Reier v. SDAT (Ct of Appeals)

Issued February 5, 2007 -- Opinion of Judge Glenn T. Harrell, Jr.

Petitioner David Reier, until his termination on 7 October 1996 for asserted misconduct and poor performance, was employed as an assessor in the Carroll County office of the State Department of Assessments and Taxation (SDAT). As an assessor, Reier was responsible for conducting assessments of individual property "accounts" to determine their fair market value for taxation purposes. Reier’s work, like that of all assessors, was subject to audit by supervisors upon its completion. Events leading up to the audit process in the final months of the 1996 assessment cycle lead to Reier’s eventual termination.

In early August 1996, the Assistant Supervisor of Assessments for Carroll County, Lumen Norris, found a stack of 8 to 10 building permits on top of, or otherwise in close proximity to, a filing cabinet designated for the storage of such permits. Shortly after his discovery, Norris brought the misplaced permits to the attention of the Supervisor of Assessments for Carroll County, Larry White. White decided to use the permits as a sampling of Reier’s work for audit purposes. The timeline of the proceeding audit process became the subject of great dispute because of its significance to the determination of the date on which SDAT became aware of the extent of Reier’s poor performance and misconduct. The audit revealed excessive errors in Reier’s work and evidence that he had derogated his duties as an assessor. After the conclusion of the audit and a conference with Reier as to the audit results, White terminated Reier. Reier pursued an administrative appeal of his termination to the Maryland Office of Administrative Hearings (OAH).

The Administrative Law Judge (ALJ) presiding over the first OAH hearing on the matter affirmed the timeliness of the termination, finding that Reier was given notice of his termination within 30 days of the commencement of the investigation in accord with Maryland Code (1993), State Personnel and Pensions Article, § 11-106(b). Reier sought judicial review of the decision in the Circuit Court for Baltimore County, which remanded the case to the OAH for application of the Court of Special Appeals’ interpretation of § 11-106(b) then just announced in Western Correctional Institute v. Geiger, 130 Md. App. 562,747 A.2d 697 (2000) (Geiger I). Aggrieved by the Remand Decision rendered by a different ALJ, Reier again sought judicial review in the Circuit Court, which affirmed the ALJ. On appeal to the Court of Special A ppeals (Reier I), the intermediate appellate court remanded the case to the OAH to apply the yet newer judicial gloss giv en § 11-1 06(b) in the Court of Appeals’ Western Correctional Institute v. Geiger, 371 Md. 125, 807 A.2d 32 (2000)(Geiger II).

The same ALJ undertook this case for a third time and, after rendering factual findings varying as to some key dates from her previous findings regarding when the SDAT was on notice of Reier’s misconduct, determined that more than 30 days had passed since the SDAT became aware of facts sufficient to prompt an investigation into Reier’s job performance. The ALJ ordered that Reier be reinstated and awarded back pay, consisting solely of lost monetary wages. The Circuit Court affirmed Reier’s reinstatement and awarded him benefits as part of his back pay. On appeal by the SDAT, the Court of Special Appeals affirmed Reier’s reinstatement, concluding that the intermediate appellate court’s decision in Reier I and the opinion in Geiger II effectively vacated the factual findings made by the ALJ on the first remand. The appellate court panel, however, concluded that back pay was limited to monetary wages. Dep’t of Taxation v. Reier, 167 Md. App. 559, 893 A.2d 1195 (2006) (Reier II).

The Court of Appeals rejected the SDAT’s arguments that the findings of fact made by the ALJ on the first remand, and relied upon by the Court of Special Appeals in Reier I, could not be disturbed under the doctrine of the law of the case. The Court noted that the doctrine, which prevents par ties from re-litigating issues already decided by a higher tribunal, is generally invoked only for decided questions of law, rather than pure questions of fact. Thus, because the ALJ upon the second remand revised only her findings of fact, which had not been relied upon by the intermediate appellate court in any event, the doctrine of the law of the case did not apply here . Instead, the revised factual findings were determined to be within the ambit of the mandate and opinion of Reier I, which had requested a clarification of certain key facts made more significant in light of the new interpretation of the statutory 30-day notice standard interpreted in Geiger II.

The phrase "full back pay", as it is used in Maryland Code (1993), State Personnel and Pensions Article, § 11-110(d)(1)(iii), does not explicitly include State-offered benefits.. The Court looked to the legislative history of the statute to determine its meaning, paying particular attention to Governor’s Task Force Report that indicated that the word "full" had significance apart from a deleted set-off provision in an earlier iteration of the bill before enactment.

Several factors led the Court to conclude that "full back pay" must embrace also State-offered benefits. First, Maryland courts previously conflated the provisions of § 11-110(d )(1)(ii) and (iii) to both reinstate and provide back pay with benefits to erroneously terminated employees. Second, the Court held that the entire State Personnel and Pension Article addresses the pay scheme in a manner that contemplates benefits, such as health care and leave, to be inextricably linked with pay. Third, the Task Force Report belies the notion that § 11-110(d)(1) was written in the disjunctive with respect to pay and benefits. Finally, the Court held it to be unreasonable for the General Assembly to permit recipients of lesser wrongful discipline to be made whole entirely, while simultaneously depriving wrongfully terminated employees of their accrued State benefits.

The full opinion is available here in PDF.