MEDICAL MANAGEMENT AND REHABILITATION SERVICES, INC., et al. v. MARYLAND DEPARTMENT OF HEALTH AND MENTAL HYGIENE.
No. 02386, Sept. Term, 2013.
Court of Special Appeals of Maryland.
Oct. 28, 2015.
124 A.3d 1137
Claire A. Pierson (Joshua N. Auerbach, Douglas F. Gansler, on the brief), Baltimore, MD, for Appellee.
Panel: KRAUSER, C.J., WOODWARD, and JAMES A. KENNEY, III (Retired, Specially Assigned), JJ.
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 havе 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
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.
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
The prior REM contracts fell under the state procurement regulations, and case management providers were selected through the competitive bid process set forth in
Five case management providers submitted proposals in response to the December
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 officer7 explained the weaknesses
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
The Board of Contract Appeals
On June 24, 2013, MMARS filed a bid protest with the Boаrd 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
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 Oсtober 1, 2013, MMARS withdrew its
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 cоntract 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. Servs., 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. Balt. Cnty., 428 Md. 572, 585-86, 53 A.3d 347 (2012). “Agency decisions premised upon case law, ... are not enti-
tled 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 Prеliminary Permanent Injunctive Relief.”9
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 fоr 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,
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
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
case, “we may affirm the judgment of a trial court to grant a motion to dismiss оn 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). “[W]here 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 (1979). “[C]onsiderations 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 authоrity 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
Regulations are to be enacted in accordance with procedures set forth in Title 10 subtitle 1 of the Maryland Administrative Procedure Act (“APA“).
[An agency] “may not adopt a proposed regulation” until it has sent a proposed draft tо 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
In response, the Department argues that the circuit court properly dismissed the case for failure to exhaust administrative remedies because the RFP
APA‘s definition of a regulation and are not subject to judicial challenge through a petition for a declaratory judgment under
The APA defines the term “regulation” as follows:
“Regulation” means a statement or an amendment or repeal of a statement that: (i) has general application; (ii) has future effect; (iii) is adopted by a unit to: 1. detail or carry out a law that the unit administers; 2. govern organization of the unit; 3. govern the procedure of the unit; or 4. govern practice before the unit; and (iv) is in any form, including: 1. a guideline; 2. a rule; 3. a standard; 4. a statement of interpretation; or 5. a statement of policy.
provisions in a single RFP and that case-by-case agency determinations fall outside of the definition of a regulаtion. Balfour, 220 Md.App. at 357-58, 103 A.3d 1091.
In Balfour, the State issued a RFP for construction services relating to the construction of a new juvenile detention center. Id. at 338, 103 A.3d 1091. Prior to submitting their proposals, several potential bidders filed a joint protest with the Department of General Services (“DGS“) challenging the State‘s inclusion of a Project Labor Agreement (“PLA“) as an evaluation factor in the contract selection process. Id. at 338-39, 103 A.3d 1091. The protesting bidders contended that, by including the PLA as a factor to be considered, DGS had created a new procurement policy in violation of state administrative rulemaking provisions. Id. at 346, 103 A.3d 1091. We concluded that the inclusion of the PLA in the RFP was a “pilot project” that “is neither of general application nor future effect.” Id. at 361, 103 A.3d 1091. Therefore, its inclusion was not a regulation. See id. at 339, 103 A.3d 1091 (“a novel specification included in a single RFP, without more, does not ... formulate a new policy of widespread application or future effect and, therefore, does not mandate predicate rulemaking under the Maryland Administrative Procedure Act.“).
lenged on the ground that “as a statement, standard and rule of Commission policy, with general application and future effect ... [it was] indisputably a regulation under the APA.” Id. at 599-600, 741 A.2d 483. The Court of Appeals disagreed, noting that the change in its review methodology, even at its inception, did not “represent a change in the policies or standards applied by the Commission.” Id. at 602, 741 A.2d 483. Rather, it was more analogous to internal policies or methods, as found in the adoption of a Prospective Payment System in Dep‘t of Health & Mental Hygiene v. Chimes, 343 Md. 336, 681 A.2d 484 (1996), which implemented a growth cap on the costs factored into the agency‘s payments to providers, which was not considered a regulation. See 356 Md. at 602, 741 A.2d 483.
The Court of Appeals has also determined that case-by-case agency actions, even when these actions may have farther reaching implications, are not subject to rulemaking procedures. In Consumer Prot. Div. Office of Attorney Gen. v. Consumer Publ‘g, Co., 304 Md. 731, 501 A.2d 48 (1985), the Consumer Protection Division of the Office of Attorney General (“Division“) filed charges for false and misleading advertising practiсes against a business that sold mail-order diet pills. Id. at 737-38, 501 A.2d 48. A final order following an administrative hearing on these charges required that, among other things, the business significantly alter the manner in which it advertised its products. Id. at 739-40, 501 A.2d 48. Because several businesses marketed similar diet pills in the State, the business challenged the order by arguing that the Division was making industry-wide policy that is subject to rulemaking procedures. Id. at 751, 753, 501 A.2d 48. The Consumer Publ‘g Co. Court, citing SEC v. Chenery Corp., 332 U.S. 194, 202-03, 67 S.Ct. 1575, 91 L.Ed. 1995 (1947), stated that “even if [Consumer Publishing] had proven an industry-wide practice, the Division would not have been required to proceed by rulemaking[,]” because an agency must retain the authority to addrеss problems on a case-by-case basis if the administrative process is to be effective.
In other words, case-by-case determinations will not be considered regulations, so long as an agency action does not apply “materially modified or new standards ... retroactively to the detriment of [an individual who] relied upon the [agency]‘s past pronouncements[.]” Balt. Gas & Electric v. Pub. Serv. Comm‘n, 305 Md. 145, 169, 501 A.2d 1307 (1986). It is only when an agency creates a “substantially new generally applicable policy” will it be considered to have promulgated a regulation that is subject to rulemaking procedures. CBS Inc. v. Comptroller of the Treasury, 319 Md. 687, 698-99, 575 A.2d 324 (1990).
In this case, we are not persuaded that the Department, through the RFP, formulated
Moreovеr, the single provider RFP, and the subsequent contract award is limited to case management services for a finite segment of the greater Medicaid population for a single contract period of July 1, 2013 through June 30, 2016, and applies only to the case management agencies responding to the RFP. The Department, through the RFP and the contract award, did not impair MMARS‘s rights under the existing case management contract. And, any claimed detrimental reliance on the Department‘s previous contract awards to multiple case management would hаve been unreasonable in light of the clear language of the RFP: “[t]he Department intends to make one award to a single Offeror whose proposal is deemed the most advantageous to the State.”
In our view, the RFP does not “formulate a new policy of widespread application or future effect.” See, e.g., Balfour, 220 Md.App. at 357, 103 A.3d 1091. That the Department may decide to continue to contract with only one REM case
management provider in the future does not make the RFP or the contract award now before us a regulation. Md. Ass‘n of Health Maint. Orgs., 356 Md. at 602, 741 A.2d 483. A determination about how many providers would best serve the REM population, like the implementation of an Inflation Adjustment System in a hospital rate review, is a matter of methodology of how best to carry out the Department‘s statutory mandate to provide quality healthcare to the people it serves.
JUDGMENT OF THE CIRCUIT COURT FOR TALBOT COUNTY AFFIRMED. COSTS TO BE PAID BY APPELLANT.
Notes
Any appeal related to this solicitation shall be subject to the provisions of
E. Effective July 1, 2009, the Department shall pay $406 for case management assessment, as described in Regulation .05C of this chapter.
F. Effective July 1, 2009, the Department shall make payments monthly for case management services at one of the rates specified belоw: (1) Level of Care 1: $302; (2) Level of Care 2: $180; or (3) Level of Care 3: $95.