Thе PENNSYLVANIA MEDICAL SOCIETY, on behalf of itself and all of its Members, and Peter M. Daloni, M.D., Karen A. Rizzo, M.D. and Martin D. Trichtinger, M.D., Appellees v. The DEPARTMENT OF PUBLIC WELFARE OF the COMMONWEALTH of Pennsylvania and Office of the Budget of the Commonwealth of Pennsylvania, Appellants. The Hospital and Healthsystem Association of Pennsylvania, Geisinger Health System, St. Vincent Health Center and Abington Memorial Hospital, Appellees v. The Department of Public Welfare of the Commonwealth of Pennsylvania, Office of the Budget of the Commonwealth of Pennsylvania, Appellants.
Supreme Court of Pennsylvania
Argued Sept. 14, 2011. Decided Feb. 29, 2012.
39 A.3d 267
Mark Alan Aronchick, Matthew Aaron Hamermesh, Daniel Segal, Dylan Joshua Steinberg, Philadelphia, Hangley Aronchick Segal & Pudlin, P.C., for Dept. of Public Welfare & Office of the Budget.
Barbara J. Holland, Office of General Counsel, Robert L. Pratter, PA Governor‘s Office of General Counsel, Mary Soderberg, for Office of the Budget.
Doris M. Leisch, Philadelphia, Allen C. Warshaw, Harrisburg, PA Department of Public Welfare, Estelle Richman, for Department of Public Welfare.
Tara Lynn Smith, PA House of Representatives, Nora Winkelman, for Appellant Amicus Curiae, Rep. Todd A. Eachus, Majority Leader of the PA House of Rep.
Kevin James McKeon, Scott Thomas Wyland, Harrisburg, Hawke McKeon & Sniscak, L.L.P., for PA Medical Society; Peter Daloni, M.D.; Karen Rizzo, M.D.; Martin Trichtinger, M.D.
BEFORE: CASTILLE, C.J., SAYLOR, EAKIN, BAER, TODD, McCAFFERY, ORIE MELVIN, JJ.
Justice BAER.
The Department of Public Welfare (“DPW“) and the Office of the Budget of the Commonwealth of Pennsylvania (collectively, the “Commonwealth“) appeal from an order of the Commonwealth Court, which granted summary relief to Appellees, the Pennsylvania Medical Society and its individual members (collectively, “PAMS“), and the Hospital and Healthsystem Association of Pennsylvania and its individual members (collectively, “HAP“), et al. The court declared that the Commonwealth had an obligation under the Health Care Provider Retention Law (“the Abatement Law“)1 to transfer monies to the Medical Care Availability and Reduction of Error Fund (“MCARE Fund“) in an amount necessary to fund, dollar for dollar, all abatements of annual assessments granted to health care providers for the years 2003-2007. For the reasons that follow, we reverse, and hold that the Abatement Law gave the Secretary оf the Budget the discretion, but not the obligation, to transfer monies into the MCARE Fund in an amount up to the total amount of abatements granted.2
The General Assembly enacted the MCARE Act in 2002, and created the MCARE Fund, which is a special fund in the Commonwealth‘s Treasury administered by the Pennsylvania Department of Insurance. The MCARE Fund provides a secondary layer of liability insurance coverage to health care providers by paying damages awarded in medical professional actions that exceed the minimum level of professional liability insurance the MCARE Act requires providers to maintain.
The MCARE Fund is primarily financed by mandatory annual assessments levied upon health care providers based on a statutory formula.5
If and when the Insurance Commissioner determines the private insurance market has the capacity to handle the professional liability requirements of health care providers, the MCARE Fund will, within a specified period from that determination, cease providing coverage and terminate.
In furtherance of its stated goal of retaining qualified health care providers in the Commonwealth, the General Assembly enacted the Abatement Law in 2003. The Abatement Law established the Health Care Provider Retention Program (“Abatement Program“), which, inter alia, served temporarily to abate (or reduce) the MCARE assessments paid by certain health care providers in the years 2003 to 2007.
As part of the Abatement Program, the Legislature established a special account within the General Fund, known as the Health Care Provider Retention Account (“HCPR Account“).
The Abatement Law designated DPW as administrator of the HCPR Account, and directed that the HCPR Account funds be subject to an annual appropriation by the General Assembly to DPW.
Significantly, in 2004, the Legislature amended the Abatement Law to authorize the Budget Secretary to make transfers from the HCPR Account to the MCARE Fund, and to determine the amount of such transfers up to a specified limit. Section 1112(c) stated, “[t]he Secretary of the Budget may annually transfer from the [HCPR] account to the [MCARE]
As explained in detail infra, the crux of Appellees’ cause of action lies in its assertion that the Budget Secretary was required to transfer monies from the HCPR Account to the MCARE Fund in an amount equal to the total amount of abatements granted to health care providers during the relevant years, i.e., that the Commonwealth should pay for all abatements of health care provider assessments from the HCPR Account. The record demonstrates that the amount of assessment abatements granted to health care providers substantially exceeded the amount of money transferred from the HCPR Account to the MCARE Fund.
To illustrate, from 2003 to 2007, health care providers were granted abatements from their assessments in the amount of $946 million. Despite having significant funds in the HCPR Account, the Budget Secretary transferred a total of only $330 million from the HCPR Account to the MCARE Fund in 2004 and 2005. Although abatements continued to be granted through 2007, and revenues continued to accumulate in the HCPR Account, the Budget Secretary made no more transfers to the MCARE Fund after 2005. It is important to note, however, that post-2005, the measures taken by the Legislature and the Judiciary to reduce medical malpractice claims proved to be effective, and MCARE claims began to decline. Accordingly, notwithstanding that the Budget Secretary made no further transfers from the HCPR Account to the MCARE Fund post-2005, the MCARE Fund contained sufficient monies to pay all MCARE claims, as well as permit all abatements guaranteed to health care providers by the Abatement Law to occur. Because funds continued to accumulate in the HCPR Account, but were not being transferred to the MCARE Fund, the HCPR Account had a balance exceeding $700 million as of July 31, 2009.
In 2009, the Commonwealth was confronted with a budget crisis. On October 9, 2009, the General Assembly enacted amendments to the Fiscal Code, which repealed the Abate
Prior to these events, in December 2008, Appellees, apparently recognizing that the Budget Secretary was no longer transferring monies from the HCPR Account to the MCARE Fund for the abatements, filed Petitions for Review in the Commonwealth Court‘s original jurisdiction against DPW and the Office of the Budget of the Commonwealth. In Counts I and II, the Petitions for Review sought a declaratory judgment that: (1) the Commonwealth violated the Abatement Law by not transferring sufficient funds from the HCPR Account to the MCARE Fund to reimburse fully the MCARE Fund for assessments granted (Count I); and (2) the Abatement Program, as implemented, having been essentially funded out of the MCARE Fund, constituted a progrаm of unequal taxation in violation of the Uniformity Clause of the Pennsylvania Constitution because the refusal to fund the abatements shifted the costs of the Abatement Program from the general taxpayers to the subset of health care providers who paid MCARE assessments (Count II). In Count III, the Petitions for Review sought mandamus and/or injunctive relief in the form of an order directing the Commonwealth to transfer monies from the HCPR Account to the MCARE Fund up to the aggregate amount of the abatements.8 On January 14, 2009, the actions were consolidated.
On January 12, 2009, the Commonwealth filed preliminary objections in the nature of a demurrer, asserting that the claims made in the Petitions for Review failed as a matter of law. It posited that the General Assembly did not link the HCPR Account directly to the Abatement Program, and,
On September 9, 2009, Appellees filed a Joint Application for Summary Relief, referencing Counts I and III in the Petition for Review filed by PAMS. See
The Commonwealth Court granted Appellees summary relief. Pennsylvania Med. Soc‘y v. Dep‘t of Public Welfare, 994 A.2d 33 (Pa.Cmwlth.2010) (en banc). Initially, the court determined that there were no genuine issues of material fact that prevented the court from determining, as a matter of law, whether the Commonwealth had an obligation under the Abatement Law to reimburse the MCARE Fund for all abatements granted. Further, it noted that whether the Commonwealth fulfilled its alleged funding obligation was a question of undisputed fact that would not preclude the grant of summary relief.9 Finally, the court found that Appellees’ inability to
The court also rejected the Commonwealth‘s contention that Appellees lacked standing to commence the instant actions. It determined that PAMS and HAP were associations that had standing to bring a cause of action on behalf of their individual members who alleged substantial, immediate, and direct injury resulting from the Commonwealth‘s failure to fulfill its alleged duty to fund all abatements granted in the relevant years. The court found it clear that the interests alleged to have adversely affected Appellees differed from the interests of the general citizenry. Id. at 41-42.
Regarding the merits of Appellees’ contentions, and relying in large part on its previous opinion disposing of the Commonwealth‘s preliminary objections, the court concluded that the Abatement Law, when read in its entirety, required the Commonwealth to transfer monies from the HCPR Account to the MCARE Fund to pay, dollar for dollar, an amount equal to all hеalth care provider assessment abatements. It acknowledged that Section 1112(a) of the Abatement Law employed the term “may” and, thus, appeared to give the Budget Secretary discretion concerning the transfer of funds from the HCPR Account to the MCARE Fund. 994 A.2d at 43. However, it relied upon the fact that the General Assembly established mandatory abatements, a mandatory account from which to fund the abatements, and mandatory funding sources
Finally, the court discounted the Commonwealth‘s contention that the October 2009 budget legislation repealing the Abatement Law extinguished Appellees’ right to relief. Citing Section 1976(a) of the Statutory Construction Act of 1972,
[T]he end of the HCPR Program only means that the Insurance Department will no longer grant abatements to eligible health care providers. It does not mean that DPW and Budget Secretary may avoid their statutory responsibilities to fund the program from the specifically designated HCPR Account while the program was in effect.
Id. at 44.
Judge Pellegrini filed a dissenting opinion. In his view, because all the abatements were provided and participating physicians received everything they were “promised” under the Abatement Law, the majority opinion gave Appellees an unwarranted personal windfall, with the consequential effect of rendering the 2009-2010 budget out of balance. Id. at 46. He opined that Section 1112(c) of the Abatement Law did not mandate transfers from the HCPR Account to the MCARE Fund or create vested rights to monies in the HCPR Account. Judge Pellegrini further asserted that the grant of summary relief was improper because: there were disputed facts in need of rеsolution, such as the effect of closing the HCPR Account on the MCARE Fund; the members of PAMS and
These direct appeals are now ready for disposition.10 As the cases involve petitions for summary relief, we begin by acknowledging that an application for summary relief may be granted if a party‘s right to judgment is clear and no material issues of fact are in dispute. Jubelirer v. Rendell, 598 Pa. 16, 953 A.2d 514, 521 (2008);
We begin by addressing the Commonwealth‘s contention that there are material facts in dispute precluding the grant of
In response, Appellees maintain that the Commonwealth Court correctly determined that there are no material issues of fact that preclude the grant of summary relief, and that no additional discovery was necessary to resolve the purely legal question of whether the Abatement Law required the Commonwealth to fund fully the abatements grаnted to health care providers. The Commonwealth‘s failure to fund the abatements, they submit, can be determined from the undisputed facts contained in the existing record. Contrary to the Commonwealth‘s contention, Appellees assert that the determination of whether future health care assessments will increase as a result of the Budget Secretary‘s failure to transfer additional monies to the MCARE Fund is not a question of fact, but rather is a legal conclusion based on statutory interpretation and undisputed facts.
We hold that there are no material issues of fact that preclude the grant of summary relief in favor of either party. Further, no additional discovery is necessary to resolve the purely legal question of whether the Abatement Law requires the Commonwealth to fund all assessment abatements granted
Next, we turn to the Commonwealth‘s argument that Appellees lack standing to pursue the instant actions. We begin by reviewing the relevant law. This Court has held that “where a person is not adversely affected in any way by the matter challenged, he is not aggrieved and thus has no standing to obtain a judicial resolution of that challenge.” Hosp. & Healthsystem Ass‘n of Pennsylvania v. Department of Public Welfare, 585 Pa. 106, 888 A.2d 601, 607 (2005) (citing William Penn Parking Garage, Inc., v. City of Pittsburgh, 464 Pa. 168, 346 A.2d 269, 280 (1975)). Moreover, in order to be aggrieved, a party must show that it has a substantial, direct and immediate interest in the claim sought to be litigated. Id.; William Penn, 346 A.2d at 280-83. We have defined these requirements as follows: a “substantial” interest is an interest in the outcome of the litigation which surpasses the common interest of all citizens in procuring obedience to the law; a “direct” interest requires a showing that the matter complained of caused harm to the party‘s interest; an “immediate” interest involves the nature of the causal connection between the action complained of and the injury to the party challenging it, and is shown where the interest the party seeks to protect is within the zone of interests sought to be protected by the statute or constitutional guarantee in question. Hosp. & Healthsystem Ass‘n, 888 A.2d at 607; South Whitehall Township Police Service v. South Whitehall Township, 521 Pa. 82, 555 A.2d 793, 795 (1989). Additionаlly, an association, as a representative of its members, has standing to bring a cause of action even in the absence of injury to itself if the association alleges that at least one of its members is suffering immediate or threatened injury as a result of the challenged action and the members of the association have an interest in the litigation that is substantial, direct, and immediate. Warth v. Seldin, 422 U.S. 490, 511, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975).
Finally, the Commonwealth reiterates, the claim that the Budget Secretary‘s failure to fund all abatements will result in increased assessments in the future does not reflect an imminent or inevitable controversy. Transfers from the HCPR Account to the MCARE Fund will have no impact on future assessments, the Commonwealth maintains, because the statutory formula for calculating health care provider assessments does not take into consideration the balance of the MCARE fund. See
Appellees respond that the Commonwealth Court correctly found that they had standing to maintain these actions be
We conclude that Appellees have standing to maintain the instant actions. As noted, the General Assembly specifically enacted the Abatement Law to reduce the MCARE assessments paid by health care providers in an effort to discourage them from leaving the Commonwealth due to the perceived rising costs of medical malpractice claims. Appellees, as health care providers and the associations representing them, have a direct interest in the litigation as they alleged harm in the form of increased future assessments arising from the Budget Secretary‘s failure to fund the abatements via transfers from the HCPR Account to the MCARE Fund. Further, Appellees’ interest is immediate because there is a causal connection between the Budget Secretary‘s failure to fund all abatements granted and their alleged harm. Finally, we find that Appellees’ interests are substantial as their interest in the outcome of the litigation clearly surpasses the common interest of the general citizenry. Accordingly, we conclude that Appellees have standing to pursue the instant actions.
We now proceed to the merits of the Commonwealth‘s appeal. The most fundamental of the Commonwealth Court‘s errors, it submits, was the court‘s misunderstanding of the
nature and purpose of the HCPR Account, as reflected in its holding that
The Secretary of the Budget may annually transfer from the [HCPR] account to the [MCARE] Fund an amount up to the aggregate amount of abatements granted by the Insurance Department under
section 1104(b) [40 P.S. § 1303.1104 ].
According to the Commonwealth, this plain language demonstrates that transfers, if made at all, were within the Budget Secretary‘s discretion and did not need to equal the total amount of abatements granted. Rather, it asserts, the statutory language states expressly that the Budget Secretary may transfer monies to the MCARE Fund in an amount “up to the aggregate amount of abatements granted.”
In support of its position that the HCPR Account was not created solely to pay for abatements, the Commonwealth emphasizes that: the General Assembly did not deposit cigarette tax funds directly into the MCARE Fund, as it did with motor vehicle violation surcharges pursuant to
Further, the Commonwealth vigorously disputes the Commonwealth Court‘s finding that the failure to transfer money from the HCPR Account to the MCARE Fund will result in increased future health care provider assessments, and will jeopardize the MCARE Fund‘s ability to pay its claims. It reiterates that the MCARE Act‘s assessment formula is based on the amount of money actually paid in the previous year, the Fund‘s expenses, and its repayments of loans, see
The Commonwealth also challenges the Commonwealth Court‘s determination that Appellees have vested rights in HCPR Account monies, which survived the reрeal of the Abatement Law. Additionally, the Commonwealth submits that the Commonwealth Court lacked jurisdiction under the political question doctrine, as these appeals concern issues of public policy relating to a crisis in the medical malpractice insurance industry and a crisis involving the state budget. They also argue that only the General Assembly has the authority to perform the acts necessary to afford Appellees the relief they seek, i.e., the transfer of funds, and that a mandatory injunction and writ of mandamus are unavailable as remedies in this context. For all these reasons, the Commonwealth requests that we reverse the grant of summary relief.
In response, Appellees argue that the statutory language of the Abatement Law demonstrates that the Abatement Program, the HCPR Account, and the increase in the cigarette tax are all part of an integrated scheme to fund, dollar for
In support of their position, Appellees rely on those provisions of the Abatement Law which mandate the grant of abatements to eligible health care providers,
Funds in the [HCPR] account shall be subject to an annual appropriation by the General Assembly to the Department of Public Welfare. The Department of Public Welfare shall administer funds appropriated under this section consistent with its duties under section 201(1) of the Act of June 13, 1967 (P.L. 31, No. 21) [
62 P.S. § 201 ], known as the Public Welfare Code.
Appellees additionally refute the Commonwealth‘s reliance on
Appellees further note their agreement with the Commonwealth Court‘s holding that the failure to fund all abatements from HCPR Account monies will increase health care provider‘s future assessments and jeopardize the MCARE Fund‘s ability to pay claims. To finance the abatements from the MCARE Fund, which is financed primarily by the health care providers, is no abatement at all, Appellees submit, because it reduces the total balance in the MCARE Fund and thereby decreases the amount of funds available to pay future MCARE claims. According to Appellees, funding the abatements with MCARE Fund monies is actually an abatement deferral because “[e]very unfunded abatement dollar is a dollar that either a health care provider must pay now or in the future, or that providers will not receive when MCARE terminates operations.” Brief for Appellees at 26. Thus, they maintain, “an abatement not funded is, for all practical purposes, an abatement not granted.”
Contrary to the Commonwealth‘s arguments, Appellees further argue that the 2009 budget legislation, which repealed the Abatement Law and abolished the HCPR Account, does not preclude them from obtaining a remedy addressing the Commonwealth‘s statutory violation pertaining to prior years. They argue that this Court‘s authority to determine that the Commonwealth abrogated a statutory duty, which impaired their vested right, is not dependent upon whether funds currently remain in the HCPR Account. Rather, Appellees suggest, the Commonwealth‘s obligation to fund the abatements vested when the abatements were awarded, and, therefore, cannot lapse or be impaired by subsequent legislation.
Additionally, Appellees contend that the Commonwealth cannot now take the position that it is unable to provide relief when, while litigating Appellees’ request for a preliminary or special injunction, it assured the court that it would satisfy a
Finally, Appellees argue that the Uniformity Clause of the Pennsylvania Constitution provides an independent basis for a judgment in their favor. They assert that the refusal to fund all abatements from the HCPR Account, which consists of public monies, shifted the cost of the Abatement Program from the general public taxpayers to the subset of health care providers who paid MCARE assessments, thereby constituting a non-uniform, impermissible tax.19
Because these appeals are governed by interpretation of the relevant provisions of the Abatement Law, we begin with a review of the principles set forth in the
With these guidelines in mind, we examine those provisions of the Abatement Law which, according to Appellees, required the Commonwealth to transfer funds from the HCPR Account to the MCARE Fund in an amount equal to the entire amount of abatements granted to health care providers. We consider first the provisions addressing the purpose of the legislation and the mandatory nature of the abatements. It is readily apparent, based on the plain language of the statute, that the Abatement Program was created to alleviate the health care providers’ burden of paying MCARE assessments for a temporary period of time by granting abatements of assessments to all eligible providers. See
Similarly, we find minimal significance in the General Assembly‘s creation of a special account within the General Fund, designated as the Health Care Provider Retention Account,
We also find no support in the remaining language of
Funds in the [HCPR] account shall be subject to an annual appropriation by the General Assembly to the Department of Public Welfare. The Department of Public Welfare shall administer funds appropriated under this section consistent with its duties under section 201(1) of the Act of June 13,
1967 (P.L. 31, No. 21) [ 62 P.S. § 201 ], known as the Public Welfare Code.
Appellees allege thаt this language, which was part of the original enactment of the Abatement Law, requires an annual appropriation, and directs DPW to “administer” the HCPR Account funds. They interpret the word “administer,” to mean “pay for all abatements.” This interpretation is strained and unsupported by the plain and unambiguous statutory language. The term “administer” must be read in conjunction with the phrase that modifies it. Specifically,
Accordingly, we conclude that none of the provisions of the Abatement Law cited by Appellees or the Commonwealth Court below, when considered individually or in the aggregate, required the Commonwealth to transfer HCPR Account monies to the MCARE Fund in an amount necessary to fund all abatements granted. In fact, as the Commonwealth cogently argues, the only рrovision of the Abatement Law that contemplates transfers of monies from the HCPR Account to the MCARE Fund is
In
The Secretary of the Budget may annually transfer from the [HCPR] account to the Medical Care Availability and Reduction of Error (MCARE) Fund an amount up to the aggregate amount of abatements granted by the Insurance Department under section 1104(b) [setting forth eligibility criteria for abatements].
The plain language of this provision demonstrates that the Budget Secretary “may” transfer HCPR Account monies to the MCARE Fund in an amount “up to” the aggregate amount of abatements granted. To adopt Appellees’ position would require this Court to ignore the discretionary nature of the grant of authority to the Budget Secretary, and the express language permitting the Budget Secretary to determine the amount of such transfers up to a specified limit. See
Having concluded that Appellees have no statutory entitlement to the funds held in the HCPR Account, we likewise conclude that the Commonwealth Court erred by holding that Appellees had a vested right to such funds. See
The only issue remaining for disposition is Appellees’ alternative argument that the Uniformity Clause of the Pennsylvania Constitution provides an independent basis for a judgment in their favor. They posit that the refusal to fund the abatements from the HCPR Account, which consists of public monies, shifted the costs of the Abatement Program from the general taxpayers to the subset of health care providers who paid MCARE assessments, thereby constituting a non-uniform, impermissible tax. This contention fails as there is no unequal tax burden placed on Appellees, or any tax at all, as the health care providers received what they were entitled to under the Abatement Law. Thus, there is no factual predicate for a Uniformity Clause challenge. See Alliance Home of Carlisle v. Bd. of Assessment Appeals, 591 Pa. 436, 919 A.2d 206, 214-15 (2007) (providing that the general rule of tax uniformity embodied in
Accordingly, for the aforementioned reasons, we reverse the order of the Commonwealth Court.
Justice TODD files a concurring opinion.
Justice TODD, concurring.
I join the majority‘s reversal of the Commonwealth Court‘s order granting summary relief to Appellees. Indeed, I agree with the majority‘s determination that the Health Care Provider Retention Law gave the Budget Secretary discretionary authority with regard to the transfer of monies from the Health Care Provider Retention Account (“HCPR Account“) to the Medical Care Availability and Reduction of Error Fund (“MCARE Fund“), and, thus, I too conclude that Appellees’ vested rights theory has no foundation. See
I do not, however, agree with the majority that Appellees have standing to maintain these actions, as I conclude they failed to demonstrate they are aggrieved by the Commonwealth‘s decision not to transfer monies from the MCARE Fund in an amount sufficient to fully fund assessment abatement granted from 2003 to 2007. See City of Philadelphia v. Commonwealth, 575 Pa. 542, 559-60, 838 A.2d 566, 577 (2003) (“The [standing] doctrine‘s core conception [is] that a party who is not negatively affеcted by the matter he seeks to challenge is not aggrieved, and thus, has no right to obtain judicial resolution of his challenge.“). As the Commonwealth demonstrates, the statutory formula for assessment calculation, as applied by Pennsylvania‘s Insurance Commissioner since the MCARE Fund‘s creation in 2002, does not take the Fund‘s balance into account. See