Title: InforMed Physician v. Blue Cross

State: maryland

Issuer: Maryland Supreme Court

Document:

InforMed Physician Services, Inc. v. Blue Cross and Blue Shield of Maryland, Inc.
No. 130, September Term, 1997
Administrative law; summary judgment procedure.
IN THE COURT OF APPEALS OF MARYLAND
No. 130
September Term, 1997
______________________________________
INFORMED PHYSICIAN SERVICES, INC.
v.
BLUE CROSS AND BLUE SHIELD
OF MARYLAND, INC.
______________________________________
Bell, C.J.
Eldridge
Rodowsky
Chasanow
Raker
Wilner
 Cathell,
   JJ.
______________________________________
Opinion by Wilner, J.
______________________________________
Filed:  June 26, 1998
This appeal arises from the demise of an endeavor known as the Select Advantage
Network (SAN), developed in 1990 by Blue Cross and Blue Shield of Maryland, Inc.
(BCBS).  Appellant, InforMed Physicians Services, Inc. (InforMed), sued BCBS in the
Circuit Court for Baltimore County for injunctive relief and to recover some $16 million in
compensation that it contended BCBS  owed to InforMed or to physicians represented by
InforMed as a result of the SAN program.  The court granted summary judgment in favor of
BCBS, and InforMed appealed.  We granted certiorari prior to argument in the Court of
Special Appeals and shall affirm the judgment  entered by the circuit court.
BACKGROUND
In 1990, BCBS provided insurance for about 1.4 million Marylanders.  About one
million of its subscribers had some form of indemnity plan; the other 400,000 were in health
maintenance organizations.  Traditionally, at least with respect to group indemnity plans,
BCBS used the “usual, customary, and reasonable” (UCR) method of paying health care
providers for the covered services provided to BCBS subscribers.  We described that method
in Insurance Comm’r v. Blue Shield, 295 Md. 496, 501-02, 456 A.2d 914, 917-18 (1983).
Briefly,  BCBS would determine, for each provider, the fees most frequently charged by  that
provider for each covered service; that became the “usual” profile for that provider for that
service.  BCBS would then develop a composite of the various “usual” profiles and, using
a weighted system based on the total number of claims, calculate the “customary” profile for
that service.  The “usual” profiles were arrayed from high to low, and the level at which 90%
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of the claims would be paid in full became the “customary” profile for the service.  As we
indicated in Insurance Comm’r, “[o]rdinarily, the amount paid by a plan for a particular
service will be the lowest of the provider’s submitted charge, his usual profile, or the
customary profile.”  Id. at 501-02. 
In an effort to control the escalating costs of  health care coverage, BCBS, in the mid-
1980's, developed “preferred provider” plans, under which it afforded a higher level of
reimbursement to the subscriber for a covered service if the subscriber was treated by a
physician who was a member of the “preferred provider network,” i.e., a physician who
agreed to accept a discounted amount for services provided to plan members and to refer
subscribers only to physicians in the network.  As of 1990, a typical preferred provider
contract provided that the health care provider would accept as “payment in full for covered
services 90% of [BCBS]’s Usual, Customary, and Reasonable (UCR) payment
methodology.”
BCBS is a non-profit health service plan, as defined in then-Maryland Code, Article
48A, § 354 (current § 14-102 of the Insurance Article (1997)), and, until 1996, was
prohibited from amending “the terms and provisions of contracts executed or to be executed”
with health care providers “until such proposed amendments have been first submitted to,
and approved by, the Insurance Commissioner.”  See former Article 48A, § 356 (1994 Repl.
Vol.).  Any contractual change in the method of reimbursement to health care providers thus
had to be submitted to and approved by the Insurance Commissioner.  See Johns Hopkins
Hosp. v. Insurance Comm’r, 302 Md. 411, 413, 488 A.2d 942, 943 (1985); Weiner v.
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Maryland Ins., 337 Md. 181, 652 A.2d 125 (1995).
In late 1990, BCBS began to develop a more refined system of “credentialed”
provider networks, which became known as  the Select Advantage Network — the SAN.  It
was directed at physicians practicing in 20 designated specialties.  The objective of the SAN
was to recruit selected physicians in each of the 20 specialties who would agree to provide
certain statistical data regarding the frequency and costs of services provided by them, to
submit to evaluative site visits, and to permit their medical records to be reviewed for
content, format, and appropriateness.  The data would be analyzed, and each physician
would be informed of the comparison between his or her procedures and practices and those
of other Maryland physicians in the same specialty.  The theory was that, with this
knowledge, the physicians would develop more efficient approaches to managing health care.
The program was envisioned as part of a more general movement to assure better quality in
medical service and “to start winnowing down the gross numbers of providers in the
marketplace that are being insured to those that can have demonstrated quality and
effectiveness.”  Key to the recruitment of the physicians, who would be burdened with the
additional administrative work, was the prospect of a higher level of payment for the medical
services they provided to BCBS subscribers.
The SAN approach called for the site visits and clinical evaluations to be done by
BCBS, but for there to be an independent entity to collect and analyze the data submitted by
the physicians and to render general reports to BCBS and individual ones to the physicians.
BCBS therefore envisioned three sets of contractual relationships — one between BCBS and
 A companion effort, which was not itself part of SAN, was directed at primary care
1
physicians.  The details of that effort are somewhat sketchy in the record and come mostly from
comments made by a BCBS spokesman at an informational hearing before the Insurance
Commissioner, but it appears that those physicians also would be recruited and placed under a
separate agreement with BCBS.  Under that agreement, the doctors would be expected to submit to
site visits and provide certain information to the third party, and, as an incentive to participate, those
who otherwise participated in the preferred provider network would receive 100%, rather than 90%,
of the UCR for the services they rendered under the new program. 
 The only evidence in this record of that submission and approval was a statement by a BCBS
2
(continued...)
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the selected physicians, one between the third party and the physicians, and one between
BCBS and the third party governing, among other things, compensation for the data
collection and analysis service.  
1
The initial proposed contract between BCBS and the recruited specialists required the
doctors, subject to certain conditions, to allow BCBS’s agent access to data identified as
necessary to evaluate the effectiveness and efficiency of the doctor’s practice and to
cooperate with BCBS’s efforts to develop and conduct “utilization review activities.”  The
contract called for a one-year continuation of the current level of reimbursement at 90% of
UCR, but provided that, for subsequent years, BCBS would “adjust its calculation of UCR
for selected procedures, resulting in an increase  in compensation for qualifying physicians.”
Qualification for the adjustment would be determined by an index based on the efficiency
of the physician’s practices and procedures.  Paragraph 11 of the contract provided that, after
December 31, 1992, either party could terminate the contract upon 60 days notice.  We are
informed that, at some point prior to October, 1992, that contract was submitted to and
approved by the Insurance Commissioner.  
2
(...continued)
2
spokesman.  He identified the submission only as NS816.
 The $3.5 million appears to have been derived from applying an aggregate 5% increase to
3
the profiles in the 20 designated specialties against $70 million in estimated payments to recruited
specialists for covered services.
-5-
Initially, BCBS selected the Barton-Gillet Company, which had an existing
contractual relationship with the Medical and Chirurgical Faculty of Maryland, to serve as
the third party liaison with the recruited physicians, and, in 1990, an agreement was signed
between BCBS and Barton-Gillet.  In March, 1992, a new company, InforMed, was
chartered, and the rights and obligations of Barton-Gillet under the agreement with BCBS
were assigned to InforMed.  Under that agreement, BCBS was to use its best effort to enroll
2,500 primary care and specialist physicians in the SAN and companion program for primary
care physicians, to provide data to InforMed from the BCBS claims history files, and to pay
InforMed $162,000 for its services in 1992.  
In March, 1993, a new contract was signed between BCBS and InforMed.  According
to a January, 1994 internal BCBS memorandum written by Debora Craig, Director of
Networks Management, the new contract “differed greatly” from its predecessor.  Indeed,
it marked a major change in the fiscal aspect of the program.  For one thing, rather than
continuing in effect the current UCR rate of reimbursement for a year and then making
indexed adjustments in the future, the contract obligated BCBS to “commit $3.5 million to
fund incentive adjustments in the reimbursement profiles of specialty physicians who satisfy
[BCBS] selection criteria and who are willing to participate in the InforMed feedback loop.”3
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Those adjustments were to be in the form of a single incentive adjustment, to be implemented
at the beginning of the SAN contract period, with subsequent incentive adjustments to the
SAN physicians’ reimbursement profiles to be dependent on the continuing ability of those
physicians to demonstrate quality and effectiveness.  The new contract also, for the first time,
permitted InforMed to recover a fee from the physicians in the amount of 1.5% of the
payments they received from BCBS.  According to the Craig memorandum, that approach
was taken because InforMed had not recovered its full start-up costs and “therefore had to
find another way to recover expenses.”  The memorandum makes clear that the immediate
increase in physician profiles was driven by the agreement to allow InforMed to recover part
of its expenses from the physicians:  “InforMed was depending on these profile increases to
‘soften’ the blow of the InforMed fee to their physician clients, as they were collecting 1.5%
of BCBS payments.”
The new BCBS-InforMed contract was to take effect January 1, 1993 and continue
in effect “for 24 months following regulatory approval of the projected adjustments in
physician compensation.”  (Emphasis added.)  It would then be renewed annually, subject
to the right of a party to terminate on 90 days notice.  As compensation to InforMed, BCBS
agreed to pay $19,167 per month for consultation services and $15,000 per month for
providing feedback services to the physicians.
On October 6, 1992, in conformance with its undertaking in the new contract with
InforMed, BCBS unilaterally changed the arrangement with the recruited physicians.  In a
letter to the physicians, BCBS noted that the promised adjustment to their profile was to take
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place “when the effectiveness and efficiency of the SAN network could be documented by
InforMed” but advised that BCBS had decided to “accelerate the timing of our planned
increase” in accordance with an attached schedule.  That schedule, BCBS stated, would
provide the physician “with at least a 5% increase in revenue for your care of [BCBS]
patients” and would be implemented in about 14 days.  Nothing was said in that letter about
the physician having to pay a 1.5% fee to InforMed.
It appears that, during this period of time,  BCBS had a number of informal meetings
with the Insurance Commissioner’s staff regarding the SAN program.  Associate
Commissioner Donald Brandenberg later noted that, in early October, 1992, BCBS and  the
staff “discussed several form filings” related to the SAN program, that the Insurance Division
had also received some inquiries from physicians concerning adjustments to the profiles, and
that a meeting was held in late October to discuss the relationships between BCBS,
InforMed, and Barton-Gillet, the SAN program, and the funding mechanisms that would be
required to implement that program.  Mr. Brandenberg stated that, in November and
December, various communications “addressed the need for the Division’s approval of the
changes being proposed for the physician profiles.”
The change made by BCBS in its arrangement with the physicians, consistent with
the commitment it made in the 1993 agreement with InforMed, was obviously significant.
Whereas the initial contract approved by the Commissioner kept the profile at 90% of UCR
for the first year and provided for an undetermined index adjustment thereafter, the new
arrangement appeared to call for an immediate 5% increase in reimbursement.  As indicated
 As explained later by BCBS, the proposal submitted in December was quite complex.  It was
4
not a 5% across-the-board increase to each doctor for each procedure, but was based on a computer-
generated method of selecting specific procedures relevant to each individual physician and making
differing adjustments for each such physician-based procedure.  Some adjustments would be less than
5%, some would be greater, but an attempt  would be made to achieve an overall 5% increase in their
total compensation for covered services.  Whether a physician would achieve that increase would
depend on the amount of adjustment determined for each procedure and the frequency that the
physician used the various procedures in the mix.
-8-
in the Craig Memorandum, the money necessary to fund that immediate increase was to
come from a 3% general increase in profiles, which would require approval by the
Commissioner.  An application for approval was expected to be filed in the spring of 1993,
to take effect June 1, 1993.  On or about December 18, 1992, BCBS sought separate
approval by the Insurance Commissioner of the reconstituted SAN program.
On December 30, the Commissioner, through a letter signed by Associate
Commissioner Brandenberg, disapproved the program “as presently proposed.”
Unfortunately, because the papers that BCBS filed with the Commissioner on December 18
are not in the record before us, we have no clear idea of what, in fact, was proposed; it is
apparent, however, that the submission did not include an application for a general increase
in profiles.  Mr. Brandenberg gave six reasons for the disapproval:  (1) the methodology for
increasing payments to the selected physicians was “unwieldy and a potential boondoggle
for physicians and [BCBS] service personnel to understand”;  (2) the additional
4
administrative work for the physicians, coupled with the requirement that 1.5% of BCBS
payments be remitted to InforMed, would likely negate the benefit of the additional
remuneration; (3) because the actual increases in remuneration would vary by procedure and
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by specialty, there would be considerable problems for BCBS in determining the correct
payment, explaining the process, and keeping track of administration; (4) the methodology
“bears no relationship to underlying cost for each procedure other than as a mechanism,
presumably, to spread an overall 5% increase across a selected limited number of specific
procedures” and that arguments “for this apparent mathematical drill are not convincing to
the Insurance Division”; (5) there was concern that what appeared to be administrative
services from InforMed may flow through the BCBS accounting system as claims or cost of
care; and (6) there was concern as to whether an intermediary such as InforMed was
necessary, and BCBS would have to demonstrate why similar services could not be provided
in house via BCBS’s own databases.  The letter concluded with the statement that the
Insurance Division “is ready to further discuss this disapproval or consider your revised
program if appropriate.”  (Emphasis added.)
Unfortunately, BCBS did not await approval by the Insurance Commissioner before
proceeding with the program.  Prior to the December 30 letter, an undetermined number of
physicians had been recruited and had, in fact, signed new contracts, some as early as
August, 1992.  Indeed,  “a former employee” of BCBS had proceeded to increase the profiles
of at least 728 physicians in accordance with the revised SAN plan.  For those physicians,
the plan had been at least partially implemented, and it remained so, notwithstanding the
disapproval of December 30, until April, 1995.  BCBS continued its recruitment efforts, and,
by January 12, 1993, informed the Insurance Commissioner that over 1,000 specialists and
600 primary care physicians had signed new SAN contracts.
-10-
On January 12, apparently at BCBS’s request, an informal meeting was held with Mr.
Brandenberg to discuss the concerns raised in his December 30 letter.  Later that day, BCBS,
in a letter to Brandenberg, attempted to allay those concerns.  It insisted that the new
arrangement was well understood by both BCBS and the physicians, that the additional 5%
would be “loaded into our pricing file” and would therefore be “transparent,” and that an
intermediary such as InforMed was necessary.  In that last regard, it stated that the BCBS
database was inadequate and that BCBS would be unable to access the database of the
Health Services Cost Review Commission.  That letter was followed by two others.  On
January 20, BCBS sent a one-page conclusory document estimating a savings from the SAN
program of between $20 million and $48 million.  Two days later, InforMed confirmed that
the request was for permission “to adjust $70 million in specialist physician fees, for a total
fee effect of $3.5 million.”  It assured the Commissioner that the increase for SAN physicians
would not reduce the amount other participating physicians would receive as part of a
general profile adjustment BCBS intended to request in June, 1993.  None of these letters
appears to contain or suggest any revision to the proposed program, but constituted, instead,
arguments in support of the program that had been presented and disapproved and, at least
inferentially, sought reconsideration of that disapproval.
In response to those and other letters that he received concerning the SAN proposal,
the Commissioner caused notice to be published in the MARYLAND REGISTER of a public
hearing on March 1, 1993, the hearing to be
 “an informational hearing to receive information on whether to
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approve a change in the usual, customary, and reasonable
method (UCR) of health care provider reimbursement submitted
by [BCBS] that would permit a 5 percent increase in the
reimbursement provided to health care providers who qualify for
participation in a proposed Select Advantage Network (SAN).”
Mr. Brandenberg, who conducted the hearing, noted at the outset that the Insurance
Division had met several times with representatives from BCBS and InforMed and had heard
from many other persons, that the Division had “gotten some slightly different answers on
certain issues” resulting in some confusion, and that the purpose of the hearing was to get
“everybody together” and “get the final version of everything.”
It appears from  the presentations made by BCBS that the SAN program was still
evolving, and that some of the information previously supplied to the Commissioner was
either incorrect or no longer valid.  The BCBS representative, Mr. Sutton, indicated that only
$2.5 million would be needed for profile adjustments in the current year, not $3.5 million,
as initially asserted.  He stated that instead of an overall profile adjustment of 4%, which had
previously been expected, BCBS would be asking for only 3%.  He disavowed the
implication in the document accompanying the January 20, 1993 letter that the SAN profile
adjustment for the primary care physicians would be allocated from the anticipated 1993
general profile adjustment, asserting instead that any adjustment for the primary care
physicians would be done separately.  Mr. Sutton clarified that the SAN profile increase was
not going to be a straight 5% for each procedure but rather was to be an anticipated
composite.  In response to questions from the Commissioner’s assistant chief actuary, he
acknowledged that for some procedures there may be no increase at all, while for others the
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increase could be as much as 10%.  Indeed, Mr. Sutton made clear that there was no
guarantee that any physician would actually receive a composite 5% increase.  In his words,
“[t]hey are guaranteed that the procedures that are being identified will, are estimated on our
part and with their concurrence represent a potential for a 5 percent increase.”  (Emphasis
added.)  He acknowledged the prospect that physicians could receive “much more than a 5
percent increase,” and, in response to further questions from the actuary, that physicians
might be inclined to use one procedure rather than another based on the percentage increase
attached to it.
Following the presentation by Mr. Sutton, a representative from the State Department
of Personnel registered an objection to the proposal.  Noting that the State was the second
largest account administered by BCBS, she complained that BCBS had not informed the
State of its SAN plans during the 1992 contract negotiations but had represented instead that
the preferred provider network was the only network it had.  She expressed concern that the
SAN program would undermine the preferred provider network and urged that BCBS learn
to manage its present network before launching into a new one.  It was later pointed out by
BCBS that the State had been informed of the SAN program during the contract negotiations.
On March 24, Mr. Brandenberg requested certain documents and information from
BCBS.  In light of the fact that BCBS intended to request a general profile increase on or
about May 1, he questioned whether there was any need to proceed with separate increases
for the SAN program.  He also asked whether the profile increases would be prospective only
— for services rendered after approval — and sought actuarial documentation of BCBS’s
 A May 19 memorandum from the Assistant Chief Actuary to Mr. Brandenberg observed that
5
“there is not enough information on which to base any action.  Not only is the letter ‘light on financial
justification,’ there is practically no financial information presented.”  The actuary suggested that Mr.
Sutton be advised to contact the Insurance Division “to get some idea of the type of material
submitted in prior years in connection with similar requests.”
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estimate of the savings to be realized from the SAN program.  The letter concluded with the
statement that the Insurance Division intended to “immediately address” the BCBS response
and “hopefully move to a timely conclusion of these issues.”  BCBS responded on March 31,
noting, among other things, that the filing for a general profile increase was being delayed
to June 1.
On April 8, 1993, the Governor removed the incumbent Insurance Commissioner, Mr.
Donaho, and replaced him with an interim Commissioner, Mr. Benton.  Eleven days later,
in response to an inquiry from the State Secretary of Personnel, who apparently continued
to harbor objections to the proposal, Mr. Benton related his own substantial concerns about
the proposal, but advised that (1) Mr. Brandenberg was “still in the process of assembling
information to formulate a recommendation to the Commissioner,” and (2) in light of his
expectation that the Governor would name a permanent Commissioner shortly, he did not
intend to rule “on this or any other similar request.”
On May 17, BCBS filed its application for the 3% general profile increase, to become
effective June 1, 1993.  That application projected an increase of $14.5 million, with $2.5
million allocated to the SAN program.  On May 25, Mr. Brandenberg rejected the application
as “not comparable to previous profile updates” and lacking in certain information.   He
5
 That disinclination, as noted, was expressed by Mr. Benton in his letter to the Secretary of
6
Personnel.  The letter itself does not indicate that a copy was sent to BCBS.  Without citation to the
record, InforMed states in its Brief that BCBS received a copy of the letter and was thus already
aware of Mr. Benton’s position.  As BCBS does not contest that assertion, we shall accept it as
correct.
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informed BCBS that any resubmission would be subject to Mr. Benton’s disinclination to
rule on the SAN proposal pending the appointment of a permanent Commissioner.6
The May 25 letter from Mr. Brandenberg was the last official communication between
BCBS and the Commissioner concerning the SAN program.  Significant changes in the top
management of BCBS occurred around that time, and the new management, in effect,
abandoned SAN in favor of more orthodox forms of managed care.  It never submitted a
revised SAN proposal; it supplied no additional information concerning the proposal that had
been rejected; and it never resubmitted the application for general profile increase, from
which the funds for SAN were to come.  In an internal memorandum dated September 29,
1993, BCBS’s Director of Sales suggested that BCBS “pull the plug on SAN.”  A January
4, 1994 memorandum from Ms. Craig acknowledged that, following the March 1 hearing,
“the SAN product was considered by many internally as DOA.”  She opined that the
Insurance Division “was not about to budge” but observed that no one had informed
InforMed “that SAN as a product is dead.”  She recommended that the agreement with
InforMed be terminated, noting that, in any event, “[t]here are many items in the existing
agreement that have not been delivered.”  At some point, the President of InforMed was
informed orally by BCBS that, in June, 1993, BCBS “changed its strategy” and that, as a
 In deposition testimony, Mr. Brandenberg noted that there was concern at the time that “this
7
was a program initiated under the reign of [BCBS’s former president] and since he had left, the
feeling was the new regime should have a chance to evaluate this and see whether or not it fit into
whatever the new regime intended to do.”
-15-
result, “no one at BCBS supported SAN and no one was trying to get Insurance Division
approval of either the SAN increase or the general profile increase.”  Mr. Brandenberg had
some informal conversations with BCBS following the May 25 letter, but, in light of the
management changes at BCBS, regarded the SAN matter as “just generally under review.”
In the summer of 1994, BCBS attempted to disengage from InforMed.  On July 18,
its chief legal officer, Mr. Broccolino,  wrote to InforMed’s attorney, noting that an earlier
settlement proposal had not been responded to and advising that BCBS would make only one
further payment.  InforMed was instructed to stop all work being done for BCBS.  In
December, 1994, InforMed wrote to Mr. Brandenberg, inquiring about the status of the SAN
proposal.  In response, Brandenberg confirmed that the original proposal “was formally
disapproved via a December 30, 1992 letter” and that that disapproval “precipitated the
various meetings, communications, and hearing in early 1993.”  With the appointment of a
new Commissioner and the management changes at BCBS,  it was his understanding that
BCBS, aware of the Insurance Division’s concerns, would “reevaluate its proposals under
the developing circumstances” but that nothing more had been received from BCBS.7
Five days after receiving Mr. Brandenberg’s response, InforMed filed this lawsuit,
both in its own right and as agent for the doctors who had been recruited for SAN, seeking
(1) an injunction to restrain BCBS from terminating the increased payments being made to
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the SAN doctors, (2) an accounting, and (3) damages of up to $16 million for breach of
contract, unjust enrichment, fraud, and negligent misrepresentation.  It also, apparently, sent
a letter to the various physicians who had been recruited for the SAN program, although that
letter is not in the record before us.  What is in the record is the BCBS response to that letter.
On March 27, 1995, BCBS informed the physicians of its efforts to obtain approval of the
SAN program.  It advised, however:
“Unfortunately, the Insurance Administration did not approve
the increases proposed for the SPO/SAN delivery system, thus
rendering our SPO/SAN addendum with you a nullity.
Therefore, a formal notice of termination under Paragraph 11
was unnecessary.  However, if needed, this letter shall serve as
such notice.”
In April, 1995, perhaps as a result of the suit, Mr. Broccolino informed the
Commissioner that, in December, 1992, BCBS “incorrectly instituted profile increases for
a number of physicians who had agreed to participate in [the] SAN program” and that BCBS
was then attempting to determine how many providers had their fees adjusted.  Associate
Commissioner Randi Reichel responded, seeking specific information regarding the SAN
program and the adjustments.  On May 17, Mr. Broccolino advised that BCBS “never
implemented the SAN program” but that a “former employee” had increased the profiles of
728 physicians while the request for SAN approval was pending and before the disapproval
was received.  He said that gathering more detailed information was difficult because none
of the managerial persons who worked on the SAN were still employed by BCBS.
BCBS’s initial response to the InforMed complaint was a motion to dismiss it,
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principally on the grounds that (1) the court had no jurisdiction to enjoin BCBS from altering
its reimbursement payments, (2) InforMed had no standing to bring an action on behalf of
the physicians, and (3) any enforcement of the SAN program would be unlawful, in light of
its disapproval by the Commissioner.  The motion was granted in part and denied in part by
Judge Cahill, following which an amended complaint was filed.  BCBS answered that
complaint and moved for partial summary judgment on the ground that, because the profile
increases had never been approved by the Commissioner, any payments to the physicians
under it would be unlawful.
InforMed responded that the December 30 disapproval was irrelevant.  It regarded the
March 1 hearing as a reconsideration of the disapproval and urged that, as the Commissioner
never issued a second disapproval, the SAN program was deemed approved.  That argument
was based on  provisions in then-Article 48A, §§ 242B(1) and 356(a) (current §§ 11-502(f)
and 14-126 of the Insurance Article), which we shall discuss later in this Opinion.  In
summary, § 242B provided that, if a person  aggrieved by a decision of the Commissioner
that was made without a hearing requested a hearing, one must be held, and the
Commissioner was required to affirm, reverse, or modify the previous decision within 20
days after the conclusion of the hearing.  If the Commissioner failed to hold or complete the
hearing or make a decision within the time specified, the filing or application “shall be
deemed approved.”  Section 356(a) required a proposed amendment to a BCBS physician
contract to remain on file with the Commissioner for 60 days, unless that time was extended,
and provided that the filing would be deemed approved unless disapproved within the
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waiting period.  The section also stated that, if the Commissioner demanded additional
information regarding the proposed amendment, the waiting period would be suspended until
the information was supplied.  The dispute concerning § 356 was largely over whether all
of the information requested by Mr. Brandenberg had been supplied, and InforMed filed a
motion under Maryland Rule 2-502 for a separate determination of that issue.
Believing, in light of InforMed’s argument, that whether the SAN proposal had been
approved or disapproved was a question of disputed fact, the court, through Judge Turnbull,
initially denied the motion for partial summary judgment.  The case was then assigned to
Judge Fader, who conducted several hearings — one in July, 1996, one in June, 1997, and
two in July, 1997.  Like Judge Turnbull, he initially viewed the issue as being whether, for
purposes of the “deeming” provisions in §§ 242B and 356, the Commissioner was still
gathering information.  Prior to the 1997 hearings, however, the General Assembly enacted
1996 Md. Laws, ch. 645, repealing the requirement in § 356 that amendments to BCBS
physician contracts be approved by the Commissioner.  The new Act became effective
October 1, 1996.  In light of that enactment, InforMed insisted that BCBS’s illegality
argument had no further basis — that the Commissioner’s approval was no longer required
and it was therefore not unlawful for BCBS to honor its contractual undertakings. After
hearing argument, Judge Fader concluded that the 1996 Act did not apply retrospectively to
contracts entered into prior to its enactment, that the Commissioner’s approval was therefore
necessary,  that the SAN proposal had not been approved by the Commissioner, and that the
contracts implementing the program could not be enforced.  He granted the motion for
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summary judgment as to all counts in the amended complaint.  He also denied the InforMed
motion under Maryland Rule 2-502 for a separate determination of whether the application
for the SAN  profile increase had been approved.  
DISCUSSION
InforMed raises four issues in this appeal:  (1) whether the 1996 law is a procedural,
remedial measure that should be applied to the SAN profile increases in this case;
(2) whether the proposed amendment to the physician profile was deemed approved under
§ 356; (3) whether that proposed amendment was deemed approved under § 242B; and
(4) whether summary judgment should have been granted on the counts relating to (A)
whether BCBS failed to make a good faith effort to obtain approval, (B) misrepresentations
made by BCBS regarding its efforts to obtain approval, and (C) claims made by InforMed
for its own compensation, that did not require Commissioner approval.  We shall deal with
these issues seriatim.
Application of 1996 Law
The principal defense offered by BCBS to the claims asserted by InforMed on behalf
of the physicians was that the increase in profile upon which those claims were based
required approval of the Insurance Commissioner, that the increase was never approved by
the Commissioner, and that payment of the increase would therefore be unlawful.  The 1996
law, repealing the requirement of Commissioner approval, according to InforMed, eliminated
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that defense.  That might be true, however, only if the law applied to increases contracted
for by BCBS in 1992.
InforMed acknowledges that, as a general rule, statutes are presumed to operate
prospectively only.  Indeed, as we held in WSSC v. Riverdale Fire Co., 308 Md. 556, 561,
520 A.2d 1319, 1322 (1987), “[t]he presumption against retrospectivity is rebutted only
where there are clear expressions in the statute to the contrary.”  The basis of InforMed’s
replication is the corollary principle, announced in Janda v. General Motors Corp., 237 Md.
161, 205 A.2d 228 (1964) and confirmed in WSSC, that “a statute governing procedure or
remedy will be applied to cases pending when the statute becomes effective.”  WSSC, supra,
308 Md. at 564, 520 A.2d at 1323.  It regards the 1996 law as being procedural, rather than
substantive, in nature, and it urges that, if, following the reconsideration hearing of March
1, 1993, the SAN proposal was not deemed approved under § 242B or § 356, it must still
have been pending when the 1996 law took effect, for the Commissioner did not otherwise
rule on the reconsideration.  Accordingly, it avers,  repeal of the requirement of approval was
effective and allowed BCBS to proceed with its contractual commitment.
The simple answer to that defense is that, quite apart from any notion of deemed
approval, the issue was not pending before the Commissioner and there was no existing
contractual commitment when the 1996 law took effect.  It is clear, beyond cavil, that both
BCBS and the Insurance Commissioner regarded the SAN proposal as disapproved and
 InforMed itself acknowledged that status.  In ¶ 46 of its  complaint, InforMed noted Mr.
8
Brandenberg’s December 30, 1992 letter disapproving the proposal as submitted.  In ¶¶ 59 and 60,
it averred that BCBS and the Insurance Division agreed that BCBS would “resubmit its proposal to
the new Commissioner and request approval” but that “[n]o such resubmission or request for
approval was ever made by BCBS . . . .”  Although in ¶¶ 58 and 60, it alleges that there was some
kind of indefinite stay of proceedings, it gives no indication of what was left for the Commissioner
to rule upon.  The one submission had been formally disapproved and there never was another
submission.
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effectively abandoned long before October 1, 1996.   There can be no doubt that the filing
8
made on December 18, 1992 was formally disapproved on December 30.  It is also clear that
the general profile increase, from which the SAN increases were to come, was formally
disapproved on May 25, 1993, and that no further filings were made with respect to either
proposal.  All of the evidence, uncontradicted, shows that the new management of BCBS
abandoned the entire SAN program in 1993 or 1994.  In July, 1994, BCBS terminated its
contract with InforMed, and in March, 1995, it formally terminated the new contracts it had
entered into with the doctors.  Thus, even if the 1996 law could or should be applied
retroactively, there was nothing left  to which it could apply.  Both when the contracts were
entered into and when they were terminated, the Commissioner’s approval for profile
increases was required and had not been obtained.
Deemed Approved Under § 356
Article 48A, § 356(a), as noted, prohibited BCBS from amending the terms and
provisions of contracts executed or to be executed with physicians until the amendment had
“first been submitted to, and approved by, the Insurance Commissioner.”  Each amendment,
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it stated, was to remain on file with the Commissioner “for a waiting period of 60 working
days before it becomes effective.”  The statute then provided, in relevant part:
“When in the Commissioner’s opinion an amendment is not
accompanied by the information needed to support it and the
Commissioner does not have sufficient information to determine
whether the filing meets the requirements of this section, the
nonprofit health service plan shall be required to furnish the
needed information and in this event the waiting period shall be
suspended and shall recommence as of the date the information
is furnished. . . .  A filing shall be deemed approved unless
disapproved by the Commissioner within the waiting period or
any extension thereof.”
InforMed urges that the March 1 hearing constituted, in effect, a reconsideration of
the December 30 disapproval, and that the SAN proposal, as submitted, was therefore still
before the Commissioner.  It contends that the only actual requirement for additional
information came at that hearing and from Mr. Brandenberg’s ensuing letter of March 24,
1993.  Mr. Sutton’s presentation on March 1 and BCBS’s response on March 31, it avers,
supplied all of the information required by Mr. Brandenberg.  InforMed regards the
application for general profile increase as being entirely separate, having no bearing on the
SAN proposal.  Thus, in its view, the waiting period recommenced at least by March 31,
1993, and, when the Commissioner took no action thereafter, the initial proposal was deemed
approved.
The fallacy in InforMed’s argument arises from its erroneous supposition that the
Commissioner ever reconsidered the initial disapproval.  The statute makes clear that a filing
shall be deemed approved “unless disapproved by the Commissioner within the waiting
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period.”  The SAN proposal was disapproved within the waiting period, and that disapproval
was never reconsidered or lifted.  It is evident from Mr. Sutton’s presentation that some loose
and inaccurate information had been given to both the physicians and to the Commissioner
regarding the proposal, and, having received letters of inquiry or concern from State officials
and a number of physicians, the Commissioner agreed merely to hold an informational
hearing to clarify the details of the proposal.  If anything is evident from the March 1
hearing, it is that BCBS did not allay all of the concerns expressed in the letter of
disapproval.  Holding a public informational hearing does not constitute a reconsideration
of the disapproval or a resuscitation of the disapproved proposal, and, indeed, neither BCBS
nor the Commissioner ever thought otherwise.
Although sometimes blurred when proceedings are conducted informally,
reconsideration is necessarily a two-step process.  First, the tribunal must decide whether it
wishes to reconsider an earlier ruling — whether it is agreeable to placing back before it the
issue ruled upon and the merits of the proposal.  That is a threshold step, procedural in
nature.  The second step, which is substantive and can be taken only if the tribunal takes the
first step, is to determine whether the previous ruling should be confirmed or altered in some
way.  The simple answer to InforMed’s argument is that the Commissioner never took the
first step here.
Deemed Approved Under § 242B
Section 242B (current § 11-502) was part of subtitle 16 of Article 48A, dealing with
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rates charged for property, casualty, surety, marine, and title insurance.  See former Article
48A, §§ 242, 242A.  Subtitle 16 did not apply to BCBS, which, as a nonprofit health service
plan, was regulated under subtitle 20 of Article 48A, §§ 354 through 361H.  See § 9(2) of
former Article 48A, declaring that the provisions of Article 48A did not apply to nonprofit
health service plans “except as otherwise provided in this article.”  The sections in subtitle
16 provided for the filing of rates and rate schedules by insurers and rating organizations
subject to that subtitle and for consideration, approval, and disapproval of those filings by
the Insurance Commissioner.
Section 242B dealt with hearings and judicial review.  Section 242B(1) concerned
hearings and provided, in relevant part, that an insurer or rating organization aggrieved by
any order or decision of the Commissioner “under this subtitle” made without a hearing
could, within 30 days, request a hearing.  Within 20 days after receiving such a request, the
Commissioner was required to conduct a hearing.  The hearing was to be concluded within
15 days, and, within 20 days after its conclusion, the Commissioner was directed to affirm,
reverse, or modify the previous action.  As noted earlier, § 242B(1) went on to provide that,
if the Commissioner failed, within the times specified, to hold or complete a hearing or
render a decision following a hearing, “the filing or application in issue shall be deemed to
meet the requirements of this subtitle and shall be deemed approved.”
Section 242B(2) dealt with judicial review.  It made all decisions and orders of the
Commissioner subject to judicial review “by appeal to the Circuit Court for Baltimore City”
and set out some of the procedure governing the action for judicial review.  Section 242B,
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itself, had utterly no application to BCBS or to the approval or disapproval of contracts with
health care providers.  Subsection (3) made clear that the section applied only to “hearings,
orders, and appeals in matters arising under the provisions of this subtitle.”
InforMed seeks to avail itself of the “deemed approved” provision in § 242B(1)
through § 361B(a) of former Article 48A.  That section was part of subtitle 20, dealing with
BCBS.  It provided that “[a]ll decisions and findings of the Commissioner regarding rates
and forms made under § 356 of this subtitle are subject to review by the court in accordance
with the provisions of § 242B of this article.”  InforMed regards this language as
incorporating § 242B into subtitle 20 of Article 48A.  It did no such thing.  It incorporated
the judicial review provisions of § 242B(2) into subtitle 20, but it made no pretense of
incorporating the hearing provisions of § 242B(1) into that subtitle.  The only “deemed
approved” provision applicable to filings by BCBS was that contained in § 356(a), which we
have already concluded was not applicable in this case.
Summary Judgment Issues
(1) Reasonable Effort To Obtain Approval
InforMed quite correctly points out that a person “may not rely on illegality or
invalidity where the doing of that said to be forbidden may reasonably be made legal and
possible through administrative or judicial action.”  McNally v. Moser, 210 Md. 127, 138,
122 A.2d 555, 561 (1956).  That principle is merely another way of saying that, when
performance of a contract is conditioned, expressly or by force of law, on the obtaining of
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some governmental permit or approval, the party required to obtain the permit or approval
has an implied obligation to make a reasonable effort to do so.  Allview Acres v. Howard, 229
Md. 238, 182 A.2d 793 (1962).  As we further indicated in Allview, “[w]hat will constitute
reasonable efforts under a contract expressly or impliedly calling for them is largely a
question of fact in each particular case and entails a showing by the party required to make
them of ‘activity reasonably calculated to obtain the approval by action or expenditure not
disproportionate in the circumstances.’”  Id. at 244, 182 A.2d at 796.
Because the issue is largely a factual one, most of the cases in which it has arisen have
reached the appellate courts after a full trial, and, where material facts, or inferences from
them, are in dispute, summary judgment would be inappropriate.  See Smith v. Currie, 253
S.E.2d 645 (N.C. 1979).  Nonetheless, like most other legal issues that are fact-dependent,
summary judgment is permissible on this issue if the relevant evidence before the court is not
in substantial dispute and allows a conclusion to be drawn as a matter of law.  See Korman
v. Kieckhefer, 559 P.2d 683 (Ariz. App. 1977).
At least two bracketing principles have been established by the cases.  On the one
hand, failing to file, support, or pursue an application for approval because of a party’s belief
— even a belief based on advice of counsel — that the application would not likely be
approved, has been held insufficient.  See  McNally v. Moser, supra, 210 Md. 127, 122 A.2d
555; St. Luke’s House v. DiGiulian, 274 Md. 317, 336 A.2d 781 (1975).  In McNally, the
tenant of a unit in a residential property leased for a medical practice attempted to terminate
the lease on the ground that, under the zoning law, such a lease was permissible only if the
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doctor lived in the property.  Although there was some legitimate question of whether that
restriction actually applied to the lease in question and it appeared that, even if it did, a
special exception or variance may have been possible, the tenant solicited and accepted an
oral statement from the building inspector that the lease was impermissible.  We found that
to be insufficient to establish the illegality defense, holding instead that the tenant, “having
brought about the challenge to the use so that he could escape his responsibilities under the
lease, could not stand idly by and, because of a notice to that effect from an administrative
official, gladly accept as a fact that the use of his office was illegal.”  Id. at 137.  He was
under an obligation, on his own or with the landlords’ assistance, “to attempt to establish a
right to continue that use, or at least to wait until impossibility became a fact, not merely a
possibility.”  Id.  Citing liberally from McNally, we reached a similar conclusion in St.
Luke’s House, where the tenant, upon the advice of its attorney that the lease would violate
a restrictive covenant and a zoning ordinance, “relied upon a ‘mere possibility’ of the
illegality of its use and did not fulfill its obligation in establishing, by litigation, the fact of
the impossibility of its contemplated use.”  Id. at 329.  See also Rhodessa Development Co.
v. Simpson, 658 S.W.2d 218 (Tex. Ct. App. 1983); Korman v. Kiechhefer, supra, 559 P.2d
683;  Sechrest v. Safiol, 419 N.E.2d 1384 (Mass. 1981); Stabile v. McCarthy, 145 N.E.2d
821 (Mass. 1957); Leonard v. Koval, 543 N.E.2d 911 (Ill. App. Ct. 1989); Alliance Financial
Services v. Cummings, 526 So.2d 324 (La. Ct. App. 1988), holding that failure to make
application, support application with needed documentation, or accede to reasonable requests
for revisions does not constitute reasonable effort; but compare Knight v. McCain, 531 So.2d
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590 (Miss. 1988) (not necessary to file application for building permit when purchaser told
not to do so by permit office because permit would not be issued).
Although “standing idly by” and falling on one’s sword does not constitute the
requisite reasonable effort, a party is not required to pursue baseless and expensive litigation
or incur extraordinary expense  simply to establish reasonableness or good faith.  In Allview
Acres, supra, 229 Md. 238, 182 A.2d 793, a contract of sale was contingent on rezoning,
which the seller was obligated to pursue.  The seller applied for the rezoning even before the
contract was signed, and, when the application was denied by the county commissioners, it
sought review of that decision in the circuit court, unsuccessfully.  We concluded that those
efforts were reasonable and rejected the contention that the seller should have refiled the
application after the contract was signed and the suggestion that the effort lacked
reasonableness because the seller failed to appeal the judgment of the circuit court.  See also
Foodmaker, Inc. v. Denny, 32 Md. App. 350, 360 A.2d 446 (1976), cert. denied, 278 Md.
720 (1976), holding that, when a vigorous effort was made to obtain the necessary
administrative approval for a sign permit and a limited time was allowed for obtaining the
permit, judicial action was not necessary in order to establish a reasonable effort.  Cases
from other States are in accord.  See Jamison v. Concepts Plus, Inc., 552 A.2d 265 (Pa.
Super. 1988), (a real estate purchase contract contingent on subdivision approval does not
require the buyer to appeal from an adverse administrative decision); Columbia Christian
College v. Cmwlth. Prop., Inc., 594 P.2d 401 (Or. 1979) (not unreasonable for purchaser to
abandon effort to obtain rezoning when evidence showed it would have cost $100,000 and
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taken six months of research to answer concerns expressed by Planning Commission).
The facts here are essentially undisputed and have been recounted in great detail.
BCBS did not sit “idly by.”  It made application for approval, and for at least three months
it pursued that application vigorously.  It attempted to inform and persuade the
Commissioner’s staff in advance, it attended informal meetings with the staff following the
formal disapproval, it sought and participated significantly in the informational hearing of
March 1, and it continued to supply information afterward.  In light of the formal disapproval
of the SAN application on December 30, 1992, the questioning of Mr. Sutton at the hearing
on March 1, 1993, the sentiments expressed by Mr. Benton in his April 19, 1993 letter to the
Secretary of Personnel, the demand for further information on March 24, 1993, and the
rejection of the general profile increase on May 17, 1993, BCBS reasonably came to the
conclusion that the Insurance Division “was not about to budge” and that approval of the
proposal as submitted and clarified would not be forthcoming.  The Insurance Division
continued to harbor concern over the need for and method of increasing the physician
profiles and the need for InforMed’s services.
Given the nature of the concerns expressed by Mr. Brandenberg and his staff, it does
not appear likely that an action for judicial review under § 361B would have been successful,
and InforMed does not suggest otherwise.  It complains, rather, that BCBS failed to insist
that the Commissioner render a decision on what it regards as his “agreement to reconsider
SAN,” that BCBS never argued that the proposal had been “deemed approved” under §§
242B and 356, and that it never resubmitted its request for general profile increase.  We have
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already answered those complaints.  There never was an “agreement to reconsider” 
the disapproval of the SAN proposal, but only a willingness to gather information in an
attempt to sort out what, in fact, was being proposed; BCBS was not obliged to argue that
its proposal had been “deemed approved,” because there was no legal or factual basis for
such an argument; and it is clear that, given the Commissioner’s unsatisfied concerns over
SAN,  resubmission of the request for general profile increase would have been of no
assistance.  It is evident that the Commissioner objected to the substance and details of the
SAN proposal and was not about to approve that proposal.  At some point, BCBS simply
accepted that reality; there was little else it reasonably could do.  
(2) Scope of the Summary Judgment
BCBS’s motion for summary judgment did not extend to the entire amended
complaint but was limited to the claims based on the disapproved physician compensation
increases -- those included in Counts II, IV, VI, VIII, and X.  It was those claims to which
BCBS interposed the defense of illegality.  The amended complaint also included claims for
accounting and compensation allegedly due to InforMed itself.  They encompassed Counts
I, III, V, VII, and IX.  The summary judgment entered by the court, however, extended to all
counts of the amended complaint, and InforMed complains that the judgment exceeded the
scope of the motion.
In Hartford Ins. Co. v. Manor Inn, 335 Md. 135, 642 A.2d 219 (1994), we construed
Maryland Rule 2-501 — the rule governing summary judgments — as not permitting a court
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to grant summary judgment entirely on its own initiative, where none of the parties moved
for that relief.  In that case, the plaintiff sued the State and Manor Inn for negligence.  The
State’s alleged negligence was in allowing a patient to elope from a State mental hospital.
Manor Inn was sued for leaving a van unattended, thereby allowing the patient to steal it and
injure the plaintiff.  The State moved for summary judgment against both the plaintiff and
Manor Inn; its motion was granted.  The court also granted summary judgment in favor of
Manor Inn, although no motion for summary judgment had been filed by that defendant.
That, we held, was error.
BCBS’s motion for partial summary judgment was filed in September, 1995.  The first
hearing was held on it, by Judge Turnbull, in March, 1996, at which time the motion was
denied.  Judge Fader held four additional hearings on the issues raised in the motion, spread
over a 12-month period.  The focus in all of those hearings was on the claims made on behalf
of the physicians — those that were the subject of the motion.  At the penultimate hearing,
conducted on July 1, 1997, the court expressed its inclination to grant summary judgment on
the contract claims but had some reservation about the fraud counts.  Counsel for InforMed
noted that the case was going to be appealed and that “the only way that an appeal can be
heard is if there is a final judgment rendered as to all pending matters.”  No final action was
taken at that time on any of the counts.
At the final hearing, on July 14, 1997, the court indicated its intent to grant summary
judgment on all of the derivative claims.  In reviewing the various counts and perhaps
recalling counsel’s comment two weeks earlier, Judge Fader indicated his willingness to
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grant summary judgment on all of the counts, so that an immediate appeal could be taken,
but only if that was acceptable to InforMed.  Counsel for InforMed agreed, procedurally,
with that approach, responding that “without acquiescing in the Court’s decision and without
waiving any of the positions which we have taken in the pleadings, if the Court is of the
mind to grant summary judgment, then perhaps the best thing to do is just enter the summary
judgment and let us take it up on appeal and we can get some guidance from the appellate
court as to some of these very complicated legal issues that the Court has been struggling
with and that we have been too.”  In the absence of any objection from BCBS, it was then
that the court granted the judgment, finding “no evidence sufficient . . . to support a breach
of contract, unjust enrichment, fraud, or negligent misrepresentation.  The affirmative
evidence that is required by the Plaintiffs to be presented to survive summary judgment is
not there.”
In its Brief in this Court, InforMed complains that the court “apparently overlooked
the fact that InforMed was not a medical provider and had separate claims for accounting,
breach of contract, unjust enrichment, fraud and negligent misrepresentation based on
agreements which did not require Insurance Division approval under Article 48A, § 356.”
It also avers that an affidavit filed by its president in the proceeding raised substantial issues
that precluded the entry of summary judgment on those counts.
Although the court’s attention was directed throughout at the derivative claims
attacked in the motion for partial summary judgment, and properly so, the court did not, in
the end, “overlook” the claims made by InforMed in its own right.  As noted, the court’s
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initial inclination was to limit its judgment, in accordance with the motion, to the derivative
claims, and it was only upon InforMed’s acquiescence in the court’s entering a final
judgment on all counts that such a judgment was entered.  InforMed very clearly reserved
the right to contend that entry of summary judgment on any of the counts was substantively
in error, but it just as clearly waived its right to complain that the judgments exceeded the
scope of the motion.  BCBS’s decision to  raise no objection to that approach may, indeed,
be taken as a tacit consent to an enlargement of its motion to cover the non-agency claims.
InforMed’s procedural complaint is without merit.
The substantive issue, of whether summary judgment was appropriate on the non-
derivative claims, is before us.  Unfortunately, however, other than making a reference to
Mr. Willse’s affidavit, InforMed presents no argument as to why summary judgment should
not have been entered on those claims.  A number of the claims made by InforMed in its own
right were parallel to the derivative claims and were worded almost identically, except for
the allegation of agency.  InforMed makes no argument in its Brief as to how each or any of
the non-derivative counts differed from their derivative analogues.  Some of them appear
almost facially to hinge on whether the increased profiles were lawful.  It is not for us to
marshal the facts and construct appellant’s argument.  The evidence shows that BCBS paid
the monthly fees called for in the 1993 contract with InforMed — a contract that, on its face,
was contingent upon “regulatory approval of the projected adjustments in physician
compensation” — until the contract was terminated in July, 1995, and it is not clear to us
what independent basis existed for that termination to be regarded as unlawful.
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JUDGMENT AFFIRMED;
APPELLANT TO PAY TO PAY THE COSTS.