Title: Oak Crest v. Murphy

State: maryland

Issuer: Maryland Supreme Court

Document:

In the Circuit Court for Baltimore County
Case No. 03-C-02-006364
IN THE COURT OF APPEALS OF MARYLAND
No. 27
September Term, 2003
______________________________________
OAK CREST VILLAGE, INC.
v.
SHERWOOD R. MURPHY
______________________________________
Bell, C.J.
         *Eldridge
Raker
Wilner
Cathell
Harrell
Battaglia,
   JJ.
______________________________________
Opinion by Wilner, J.
______________________________________
Filed:   February 9, 2004
*Eldridge, J., now retired, participated in the
hearing and conference of this case while an active
member of this Court; after being recalled pursuant
to the Constitution, Article IV, Section 3A, he also
participated in the decision and adoption of this
opinion.
1 Sherwood did not actually sign his agreement.  It was signed by Ruth on his behalf.
In November, 2001, Ruth and Sherwood Murphy moved into Oak Crest Village, a
continuing care retirement community (CCRC) in Baltimore County.  Ruth, then 81, moved
to an independent living apartment.  Sherwood, then 94, was admitted directly into a
comprehensive care facility (nursing facility), which Oak Crest called Renaissance Gardens.
As a condition to their acceptance into the CCRC, the Murphys were required to sign
Residence and Care Agreements.1  Section 8.11 of those agreements contained a covenant
that, unless they had the prior written consent of Oak Crest, Ruth and Sherwood would not
divest themselves of, or sell or transfer, any of their assets or property interests if the sale or
transfer would result in their respective net worth falling below the minimum necessary to
become an Oak Crest resident.  
The issue before us is whether that covenant, as applied to Sherwood, contravenes
Maryland Code, § 19.345 (b) of the Health General (HG) Article and implementing
regulations of the Department of Health and Mental Hygiene applicable to the Medicaid
program and, for that reason, is unenforceable, at least while he remains a resident in the
nursing facility.  The Circuit Court for Baltimore County, in response to Oak Crest’s action
for breach of contract, fraudulent inducement, and fraudulent transfer, held the covenant
invalid, and we shall affirm that judgment.
BACKGROUND
2 Maryland Code, Art. 70B, § 7(d), which is part of the law regulating CCRC’s and
continuing care contracts, defines “continuing care” as “furnishing or making available
shelter and either medical and nursing services or other health related services to an
individual 60 years of age or older not related by blood or marriage to the provider for the
life of the individual or for a period in excess of 1 year under one or more written agreements
that require a transfer of assets or an entrance fee notwithstanding periodic charges.”
3 In its amicus brief, the Department of Aging points out that CCRC’s also commonly
provide communal dining facilities and other amenities, such as libraries, pools, and gardens.
We shall assume that Oak Crest provides those services and facilities as well, although the
record does not reveal it.
-2-
CCRC’s provide elderly persons with a continuum of housing and health care so that
they may “age in place,” without having to move away from a familiar setting when medical
problems arise. In order to provide those services, CCRC’s normally require from
prospective residents either an advance transfer of a significant part of their assets or a
substantial entrance fee and a commitment to pay further periodic charges.2  Oak Crest uses
the latter approach.  CCRC’s in Maryland are subject to the requirements of Maryland Code,
Art. 70B, and to regulation thereunder by the State Department of Aging.  If, as Oak Crest
does, the CCRC chooses to participate in the Medicaid program, it is also subject to the
statutes and regulations governing that program.
Consistent with the general purpose of CCRC’s, Oak Crest operates three distinct,
but integrated, levels of housing and health care:  approximately 1,500 low-rise apartment
units, where residents may live largely independent lives; 129 assisted living units, in which
residents receive greater attention to their health care needs; and a 288-bed nursing home,
Renaissance Gardens, in which residents receive continuous nursing care.3  Renaissance
-3-
Gardens constitutes a Medicaid certified skilled nursing “facility,” as that term is defined
in Maryland Code, HG § 19-343(a).  Residents may move from one level of care to another,
as circumstances require and availability allows.  That, indeed, is one of the hallmarks of
a CCRC.
Oak Crest has a formal, structured application process.  In order to reserve space,
prospective residents must (1) complete an application and deposit agreement, and, in
furtherance of that application, provide detailed financial information to assure their ability
to pay the residential fees, and (2) submit to a “Pre-Residency Health Evaluation and
Interview,” to determine the level of care that will be needed.  If accepted, the applicants
then sign a Residence and Care Agreement.
For some period of time before his admission to Renaissance Gardens, Sherwood
Murphy suffered from a subdural hematoma – an accumulation of blood in the space
between the dural and arachnoidal membranes (the outer and middle coverings) of the brain
– which had rendered him incompetent to handle his affairs.  Although it does not appear
that he was ever declared legally disabled or that a guardian had ever been appointed for
him, Ruth acted as his attorney-in-fact.  He had been a patient at a facility known as Genesis
Elder Care in Severna Park since August, 1999.  The record does not reveal the nature of
that facility.  In April, 2000, Ruth sold the family home, deposited the proceeds of $178,000
in a bank account owned jointly by Ruth and her daughter, Mildred, and began living at an
independent living community in Severna Park known as Sunrise.  
-4-
In June, 2001, the Murphys, through Ruth, filed a residency application with Oak
Crest.  In furtherance of the application, they supplied detailed financial and health
information.  The health information is not in the record.  The financial information reveals
that the couple had about $450,000 in jointly owned assets, Sherwood had $19,000 in
personal savings in his own name, Ruth had $126,000 in personal savings in her own name,
and Ruth had an additional $68,000 in savings held jointly with her daughter.  The
Executive Director at Oak Crest reviewed the information, concluded that the Murphys had
sufficient assets to pay the requisite fees based on actuarial projections of their life
expectancy, and accepted the application.
Ruth signed two separate Residence and Care Agreements, one for her and one, along
with an addendum, on behalf of Sherwood.  Only Sherwood’s agreement is in the record.
That agreement, dated November 26, 2001, “governs residency at Oak Crest” and professes
to “detail[] the services provided in each level of care and the limited circumstances for
transfer to another level of care.”  Section 3.01 gives Sherwood the right to occupy room
RENS-N132 in the continuing care unit, subject to various provisions governing transfers
to other units or termination of the agreement.  The agreement recites that Sherwood had
paid a deposit fee of $150 and requires that he pay an entrance deposit of $78,000 and living
unit fees, which, for the room in the continuing care unit, was set at $192/day ($1,344/week,
4 By affidavit, Ruth averred that she had made the deposit of $78,000 with respect to
her agreement and that Sherwood had made a deposit of $133,000.  The discrepancy is
unimportant.  She claimed that, in addition to the $192/day for Sherwood’s room at the
nursing facility, she was obligated to pay $1,075/month for her independent living apartment.
-5-
$69,888/year), subject to annual revision.4  Section 8.11 of the agreement stated that the
financial information submitted by or on behalf of Sherwood was a material aspect upon
which Oak Crest relied in determining his qualifications for becoming an Oak Crest
resident.  It continued that Oak Crest was committed to assisting a resident who has depleted
his assets through normal living expenses so that he may continue to remain at Oak Crest,
but that,
“[t]o protect Oak Crest from a situation wherein a Resident
divests him/herself of those assets for the purpose of qualifying
for assistance or reduction of Monthly Fees, Resident agrees
not to divest him/herself of, sell, or transfer any assets or
property interests (excluding expenditures for Resident’s
normal living expenses) that would result in a reduction in
Resident’s net worth (assets less liabilities) which is below the
minimum criteria to become a Oak Crest resident, without
having first obtained the written consent of Oak Crest.”
Section 8.11 made reference to § 6.04 h., dealing with financial inability to pay.  That
section stated that it was not Oak Crest’s policy to terminate a resident’s occupancy because
of financial inability to pay, provided that the resident was “otherwise in compliance with
the terms of this Agreement,” and that Oak Crest would endeavor to assist such residents
by reducing monthly fees to an appropriate level or by providing other assistance.  The
section required, however, that a resident unable to make the full monthly payments take one
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or more of certain enumerated actions, as directed by Oak Crest’s Executive Director.  The
first was to make every reasonable effort to obtain assistance from family or other available
means.  The second, if the resident qualified, was to take necessary steps to obtain “county,
state, and federal aid or assistance, excluding Medicaid, but including Medicare, public
assistance and any other public benefit program.”  Procedurally, the resident would be
required to file a statement with the Executive Director acknowledging, among other things,
that the resident, from the date of application, “has not sold or transferred and will not sell
or otherwise transfer any property in violation of the terms of this Agreement (see Section
8.11).”
The addendum stated that it was “anticipated” that Sherwood’s care would be paid
for by “your own income, funds, and/or assets,” and it included a section dealing with
“Private Pay Residents.”  That section stated that Ruth would be responsible for paying for
items and services provided to Sherwood during any period of time that Sherwood was a
resident of the facility and not determined eligible for medical assistance.  In the event Ruth
did not pay what was owed, it required her to seek from Medicaid a determination of
Sherwood’s income and assets available to pay the cost of his care and to use those assets
and income to pay for his care.  If Sherwood should have insufficient income or assets to
meet his financial obligations, Ruth agreed to apply for Medicaid benefits and to cooperate
fully in the eligibility determination process.  Indeed, the addendum warned Ruth that she
faced a $10,000 civil penalty if she willfully or with gross negligence failed to seek
-7-
Medicaid assistance on behalf of Sherwood or failed to cooperate fully in the Medicaid
eligibility determination process.
The addendum also contained a section dealing with “Medicaid Residents,” which
noted that Oak Crest participates in the Medicaid program and provided that a resident was
“not required to give up any of the Resident’s rights to Medicaid benefits to be admitted or
to stay at the Facility.”  It continued that if the resident’s private funds were “used up”
during his/her stay at the facility and the resident is eligible for Medicaid, “we will accept
Medicaid payments.”  The addendum added that if the resident was eligible for Medicaid,
“we may not charge, ask for, accept or receive any gift, money, donation or consideration
other than Medicaid reimbursement as a condition of the Resident’s admission or continued
stay at the Facility.”  The term “Facility” was defined as “the nursing Facility.”
The addendum to Sherwood’s agreement was required to be signed by Ruth because
it recited that she had access to and management or control of Sherwood’s income, funds,
or assets.  Although the agreement made clear that Ruth was not required to use her own
funds to pay the fees charged to Sherwood, it obligated her to pay those fees from
Sherwood’s funds.  
Shortly after their move to the Oak Crest facilities, Ruth transferred over $356,000,
which included the proceeds from the sale of the family home, savings that she and
Sherwood owned jointly in the form of bank accounts, certificates of deposit, and brokerage
accounts, and funds that she and her daughter owned jointly, into a consolidated bank
-8-
account in her name and that of her daughter, as joint owners with the right of survivorship.
In February, 2002, she used $250,000 from that account to purchase a seven-year fixed term
annuity that provided for monthly payments to Ruth of $3,520.  In May, 2002, she used
$30,000 from the account to purchase an eight-year fixed term annuity that provided
monthly payments of $353.  Ruth withdrew the money and purchased the annuities as joint
owner of the account and not as agent for Sherwood.  The monthly payments are solely for
the benefit of Ruth; Sherwood has no interest in them.  At some point, Sherwood, being then
bereft of substantial assets or income, applied for Medicaid benefits, and on July 24, 2002,
effective June 1, 2002, he was found eligible.  All private pay charges for Sherwood’s care
up to June 1, 2002, were paid in full.
When Oak Crest learned that Sherwood had been approved for Medicaid, it filed this
lawsuit for declaratory and equitable relief, alleging a violation of § 8.11 of Sherwood’s
Residence and Care Agreement.  Oak Crest sought to have the transfer of Sherwood’s assets
annulled and, alternatively, a declaration that, by virtue of the breach, Oak Crest had the
right to rescind the executory aspects of the agreement, terminate Sherwood’s membership
at Oak Crest, and discharge him from the nursing facility.  Sherwood responded with a
motion to dismiss the complaint on a number of grounds, including assertions that the
contract – presumably § 8.11 – was unlawful under Federal and State law and void for that
reason and that it also conflicted with provisions in the addendum that assured Oak Crest’s
participation in Medicaid.
-9-
The claim of illegality was based, in part, on (1) 42 U.S.C. § 1396r(c)(5)(A)(i), which
prohibits a nursing facility from requiring written or oral assurance that applicants for
residence are not eligible for and will not apply for Medicaid benefits, (2) 42 U.S.C. § 1320a
- 7b(d)(2), which makes it a criminal offense for a person to charge, solicit, accept, or
receive, any amount in excess of the consideration established in a State Medicaid plan as
a precondition to admitting a patient to a nursing facility or as a requirement for the patient’s
continued stay in such a facility, (3) Maryland Code, HG § 19-345(b)(1), which is part of
the Maryland Nursing Home Residents’ Bill of Rights and precludes a Medicaid certified
facility from including in an admission contract any requirement that, to stay at the facility,
the resident “will be required to pay for any period of time or amount of money as a private
pay resident for any period when the resident is eligible for Medicaid benefits,” and (4) a
regulation of the Department of Health and Mental Hygiene (COMAR 10.07.09.05B(4))
prohibiting a nursing facility from requiring residents or applicants to waive their rights to
Medicaid.  
The court treated the motion to dismiss as one for summary judgment (see Maryland
Rule 2-322(c)) and, finding no genuine dispute of material fact, granted it.  The court found
§ 8.11, upon which Oak Crest’s action rested, to be in violation of the State statute and
regulation and therefore void.  It declined to reach the question of whether § 8.11 also
contravened either of the Federal statutes.  Oak Crest appealed, complaining that (1) HG §
19-345 (b) does not apply to CCRC’s and, for that reason, § 8.11 of the Agreement does not
-10-
violate Maryland law, (2) the trial court failed to give appropriate deference to a
determination by the State Department of Aging that the Agreement complies with
applicable Maryland law, (3) Sherwood’s continued residence at Oak Crest violates Oak
Crest’s exemption from the State requirement of a certificate of need, and (4) “Policy
Issues” preclude Sherwood’s interpretation of the law.  We granted certiorari prior to
proceedings in the Court of Special Appeals to consider those issues, and, as noted, shall
affirm.  As the Circuit Court restricted itself to the State law issue in entering the summary
judgment, we shall do likewise.
DISCUSSION
Application of § 19-345
HG § 19-345 is part of a subset of statutes sometimes referred to as the Nursing
Home Residents’ Bill of Rights.  Along with §§ 19-345.1 and 19-345.2, it places certain
limits and conditions on the ability of nursing facilities to transfer or discharge patients
without their consent.  Section 19-345(a) prohibits a “facility” from transferring or
discharging a resident except when (1) the transfer or discharge is necessary for the
resident’s welfare, (2) it is appropriate because the resident’s health has improved
sufficiently that the resident no longer needs the services provided by the facility, (3) the
health or safety of an individual in the facility is endangered, (4) the resident has failed, after
reasonable notice to pay for, or have Medicare or Medicaid pay for, a stay at the facility, or
-11-
(5) the facility ceases to operate. 
Section 19-345(b) applies to a “Medicaid certified facility.”  It precludes such a
facility from including in a resident’s admission contract “any requirement that, to stay at
the facility, the resident will be required to pay for any period of time or amount of money
as a private pay resident for any period when the resident is eligible for Medicaid benefits,”
and it also precludes the facility from transferring or discharging a resident involuntarily
“because the resident is a Medicaid benefits recipient.”  Sherwood’s argument, which found
favor with the Circuit Court, is that, to the extent that § 8.11 of the Residence and Care
Agreement precludes him from qualifying for Medicaid in order to discharge his obligations
to Oak Crest and authorizes his discharge from Renaissance Gardens because he has
qualified for Medicaid benefits, it is inconsistent with those statutory limitations.
Oak Crest’s response to that argument is essentially that § 19-345 (b) does not apply
to CCRC’s.  In a three-line footnote in its initial brief, Oak Crest averred that the court’s
holding “was also error because the CCRC provision at issue does not require Mr. Murphy
to pay at a private pay rate ‘for any period when [Mr. Murphy] is eligible for Medicaid
benefits,’ and thus does not violate Section 19-345.”  No further explanation is provided in
that brief on the issue of whether, if § 19-345 (b) does apply, there is a conflict between it
and § 8.11.  In a reply brief, Oak Crest addressed the issue further but added little to that
unenlightening comment.  It noted that, under § 8.11, CCRC residents are prohibited from
making expenditures, other than normal living expenses, that would reduce their net worth
-12-
below the minimum criteria for admission and posited simply that “[t]his provision does not
violate Section 19-345's prohibition against requiring Medicaid nursing facility residents to
pay privately for a period of time.”  It conceded that the requirement that residents use all
of their assets not required for normal living expenses to pay the private pay rate ($192/day
for Sherwood) “can affect the pace at which resident assets are diminished” but, claimed
that “there is no requirement to maintain this pace for any predetermined period of time or
at any prescribed rate.”
Our initial response to this argument is that it is not properly before us.  We have
long and consistently held to the view that “if a point germane to the appeal is not
adequately raised in a party’s brief, the court may, and ordinarily should, decline to address
it.”  DiPino v. Davis, 354 Md. 18, 56, 729 A.2d 354, 374 (1999); Klauenberg v. State, 355
Md. 528, 552, 735 A.2d 1061, 1073-74 (1999); Moosavi v. State, 355 Md. 651, 660-61, 736
A.2d 285, 290 (1999).  See also Maryland Rule 8-504(a)(5).  The three-line conclusory
footnote in Oak Crest’s brief does not adequately present the issue; it gives no reasons or
no basis for challenging the Circuit Court’s ruling that § 8.11 was substantively in conflict
with HG § 19-345 (b).  Nor is it permissible to present that argument in a reply brief.  In
Federal Land Bank v. Esham, 43 Md. App. 458, 459, 406 A.2d 928, 936 (1979), the Court
of Special Appeals correctly noted that, although reply briefs are permitted under the Rules
of appellate procedure, their function is limited to responding to points and issues raised in
the appellee’s brief.  An appellant is required to articulate and adequately argue all issues
-13-
the appellant desires the appellate court to consider in the appellant’s initial brief.  It is
impermissible to hold back the main force of an argument to a reply brief and thereby
diminish the opportunity of the appellee to respond to it.  We have echoed similar
sentiments.  See Fearnow v. C&P Telephone, 342 Md. 363, 384, 676 A.2d 65, 75 (1996);
Warsame v. State, 338 Md. 513, 517, n.4, 659 A.2d 1271, 1273, n.4 (1995).
We shall address the substantive conflict issue, notwithstanding Oak Crest’s failure
to properly present it, in part because of its public importance, but mostly because it does
not appear that Sherwood was prejudiced.  Presumably in response to the footnote in Oak
Crest’s initial brief, he did present argument on the point.
On its face, § 8.11 does not affirmatively impose a requirement that Sherwood pay
at the private pay rate for any established period of time, even if he were to qualify for
Medicaid benefits.  The effect of the anti-alienation provision, however, when coupled with
§ 6.04h., is to preclude Sherwood from taking lawful steps to qualify for Medicaid benefits.
Even should his resources become insufficient to pay his fees for reasons other than
alienation, he is precluded from qualifying for Medicaid, absent Oak Crest’s consent,
without first seeking assistance from his family, and then seeking public assistance (other
than Medicaid) from the county, State, and Federal governments — becoming a public
charge.  Section 8.11 thus effectively requires that he continue to pay at the private pay rate
even when he would be or could lawfully become eligible for Medicaid benefits, contrary
to HG § 19-345 (b)(l)(i), and permits him to be discharged from a Medicaid certified nursing
-14-
facility because he is a Medicaid recipient, contrary to § 19-345 (b)(l)(ii).
The thrust of the argument properly presented by Oak Crest is that § 19-345(b) does
not apply to CCRC’s.  Oak Crest urges that the statute applies only to nursing facilities and
that Oak Crest, as a continuing care community, is not a nursing facility.  For that reason,
it says, § 19-345(b) does not apply to its agreement, which is a CCRC agreement and not
a nursing facility agreement, and thus does not serve to invalidate § 8.11 of its agreement.
The short answer to this argument is that Renaissance Gardens – the facility into which
Sherwood was admitted – is a Medicaid certified nursing facility to which the statute
applies.
Title 19 of the Health-General Article deals with health care facilities.  Subtitle 3 of
that title deals with hospitals and “related institutions.”  With an exception not relevant here,
HG § 19-301(o) defines a “related institution” as an “organized institution, environment, or
home” that
“(i) Maintains conditions or facilities and equipment to provide
domiciliary, personal, or nursing care for 2 or more unrelated
individuals who are dependent on the administrator, operator,
or proprietor for nursing care or the subsistence of daily living
in a safe, sanitary, and healthful environment; and
 (ii) Admits or retains the individuals for overnight care.”
HG § 19-307(b) creates two classes of related institutions: a care home and a nursing
home.  A care home provides care to individuals who, because of advanced age or disability,
require domiciliary or personal care in a protective environment.  A related institution is
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regarded as a nursing home if it “(i) [p]rovides nursing care for chronically ill or
convalescent patients; or (ii) [o]ffers to provide 24-hour a day nursing care of patients in a
home-type facility such as . . . [a] nursing unit of a home for the aged . . .”  Renaissance
Gardens is clearly a nursing home under that definition.
Sections 19-342 through 19-352 provide certain individual rights for patients in
hospitals and related institutions.  Section 19-345, dealing with the transfer or discharge of
patients, speaks in terms of residents of a “facility.”  That term, with respect to “related
institutions,” is defined in § 19-343 as a “related institution that, under the rules and
regulations of the Department [of Health and Mental Hygiene], is a comprehensive care
facility or an extended care facility.”  A “comprehensive care facility” is defined in COMAR
10.07.02.01(6) as “a facility which admits patients suffering from disease or disabilities or
advanced age, requiring medical service and nursing service rendered by or under the
supervision of a registered nurse.”  Renaissance Gardens is a “comprehensive care facility”
under that definition and thus a “facility” under HG § 19-345.  Because Renaissance
Gardens participates in the Medicaid program, it is also a “Medicaid certified facility” for
purposes of § 19-345(b). See also COMAR 10.09.10.01(14), the definition section of
regulations dealing with nursing facility services, which defines “facility” as “a facility
licensed under COMAR 10.07.02 and certified as meeting the requirements of Title XIX of
the Social Security Act, 42 U.S.C. § 1396 et seq., for participation as a nursing facility.”
A CCRC, as noted, provides a range of accommodations and services and is not just
-16-
a nursing facility.  See Art. 70B, § 7(d), supra, defining “continuing care.”  CCRC’s are
subject to regulation by the Department of Aging under Art. 70B of the Maryland Code, and
there is no provision in Art. 70B comparable to HG § 19-345 (b).  In seeking exclusion from
§ 19-345(b), Oak Crest stresses its status as a CCRC, urging that  § 19-345 (b) applies only
to a stand-alone nursing facility, not a broad CCRC community that, as part of its overall
service, includes a nursing facility.  
Oak Crest raises an issue that is also of concern to the Department of Aging and that,
in another context, might have more arguable validity.  Because HG § 19-345(b) applies
only to a “Medicaid certified facility,” and thus only to comprehensive and extended care
facilities, it would not preclude a provision such as § 8.11 in a contract for independent or
assisted living – the other two residential-type services provided by a CCRC.  If a person,
such as Ruth, moved into an independent or assisted living unit pursuant to a CCRC
Residence and Care Agreement containing such a provision, there would be no conflict with
§ 19-345(b) and she would, indeed, be precluded from unilaterally transferring assets so as
to deplete her net worth.  The question might arise, should she later need admission into a
Medicaid-certified nursing home associated with the CCRC to deal with some temporary
medical problem, whether HG § 19-345(b) would become applicable during the period of
her stay in that facility, causing a temporary suspension of the § 8.11 provision.  That is not
the case here, however, and we therefore need not address that situation.  Sherwood was
admitted directly into the nursing home and, at least at the time the judgment below was
5 Prior to 1995, HG § 19-345(c) precluded a Medicaid certified facility from including
in an admission contract a requirement that, to stay at the facility, the resident “continue as
a private pay resident for more than 1 year, if the resident becomes eligible for Medicaid
benefits” or from transferring or discharging a resident involuntarily because the resident
became a Medicaid benefits recipient.  1995 Md. Laws, ch. 547 extended the preclusion to
“any period” and thus eliminated the ability of such nursing facilities to require Medicaid-
eligible residents to pay the private pay rate for up to one-year.  That law also imposed a
number of limitations and conditions on the discharge or transfer of nursing facility patients.
The bill was introduced at the urging of the Attorney General and, in its introductory form,
was strongly supported by the then-Office on Aging, the precursor agency to the current
Department of Aging.  Among other things, the bill added a new § 19-345.2, placing certain
substantive and procedural limitations on the involuntary discharge or transfer of a nursing
home patient.  Section 19-345.2(b) required that certain information and medication be given
to the patient or his representative at the time of transfer or discharge.  Subsection (c)(1),
which was more substantive, prohibited the non-consensual discharge or transfer of a patient,
except to a safe and secure environment where the patient would be under the care of a
licensed provider or one who agreed in writing to provide the appropriate environment.  The
House of Delegates added an amendment to the bill that would have allowed a facility to
transfer a patient without his consent if the transfer was from a nursing facility in a CCRC
to a different level of care within the same CCRC.  The Attorney General’s Office, noting
(continued...)
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entered, had never left it.  Indeed, unlike the situation in Ruth’s agreement, the periodic fee
was set in his Agreement at the $192/day rate for the nursing home.
The fact that a CCRC is subject to regulation under Art. 70B by the Department of
Aging does not render HG § 19-345(b) inapplicable to a Medicaid certified nursing facility
operated as part of the CCRC.  There is nothing in that section that even suggests, much less
directs, that it does not apply to a nursing facility connected with a CCRC and on the same
campus with the independent and assisted living units that are also part of the CCRC, and,
indeed, during consideration of the bill that enacted the provision, an effort to exempt
CCRC’s from part of its scope was rejected.5  As a matter of basic statutory construction,
5(...continued)
that the effect of that amendment was “to exempt residents of continuing care retirement
facilities from the safeguards we have worked so hard to craft,”informed the Senate that it
opposed that amendment, as did the Department of Health and Mental Hygiene and the
Office on Aging.  The Office on Aging, in a letter from its Director, pointed out that it was
not the intent of Art. 70B “to exclude CCRCs from laws applicable to nursing home
requirements.”  Faced with that opposition, the Senate deleted that amendment and excused
CCRC’s only from the informational and medication requirements of subsection (b) if the
transfer was to a lower level of care within the same facility in accordance with a contractual
agreement.  Even this limited attempt to exclude CCRC’s from the effect of the restrictions
failed.
-18-
we hold that § 19-345(b) applies to a Medicaid certified nursing facility, even when the
nursing home is part of a CCRC.
Approval by Department of Aging
As noted, Art. 70B of the Maryland Code subjects CCRC’s to certain statutory
requirements and to regulation by the Department of Aging.  A person may not operate as
a CCRC unless it receives a certificate of registration from that Department.  See §§ 9 and
11 of Art. 70B.  Section 13 contains certain requirements for CCRC agreements.  Oak Crest
points out that, prior to commencing its operation as a CCRC, it received a certificate of
registration and that, in granting the certificate, the Department approved its CCRC
Residence and Care Agreement and found it compliant with § 13.  Oak Crest urges that the
Department’s determination that the agreement was compliant, and therefore lawful, must
be given appropriate deference by the court.
Oak Crest’s argument is a valid one, so far as it goes, but has no relevance to the
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issue before us.  As we have indicated, there is nothing in Art. 70B or COMAR 32.02.01.28
that prohibits a provision like § 8.11.  The conflict arises from § 19-345(b) of the Health
General Article, which applies to Medicaid certified nursing facilities, not to CCRC’s
generally, and, so far as this case is concerned, arises from the more limited circumstance
of the direct admission of a patient into such a nursing facility.  The precise issue before us
is one of first impression and does not appear to be one upon which the Department of
Aging has previously taken any position. As noted, however, its predecessor agency, the
Maryland Office on Aging, had recorded its view in 1995 that it was not the intent of Art.
70B “to exclude CCRCs from laws applicable to nursing home requirements.”
We see nothing either explicit or implicit in the Department of Aging’s issuance of
a certificate of registration to Oak Crest that suggests a determination on the Department’s
part that HG § 19-345(b) is not applicable to Renaissance Gardens.  The Department’s only
concern, as expressed in its amicus brief in this case, is that any decision holding the anti-
alienation clause ineffective be “limited to situations involving residents directly admitted
into a Medicaid-participating nursing home that is a part of a CCRC.”  That is the only
effect of our decision.
Certificate of Need
As a general rule, a nursing facility may not operate without having received a
Certificate of Need (CON) from the M aryland Health Care Commission.  See HG § 19-120.
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Subject to certain conditions and limitations, § 19-114(d)(2)(ii) provides an exemption from
that requirement for a CCRC.  One of the conditions stated in that section is that the nursing
facility be for the exclusive use of subscribers who, prior to entering the nursing facility,
have executed continuing care agreements and paid entrance fees equal to the lowest fee
charged for an independent or assisted living unit.  That condition, enacted no doubt to
avoid giving CCRC-operated nursing facilities an unfair advantage over stand-alone nursing
facilities, would apparently preclude a CCRC without a CON from admitting a patient
directly into its nursing facility.
Sections 19-123 and 19-124 provide limited exceptions to that condition.  Section 19-
123 states that a CCRC does not lose its CON exemption by admitting an individual directly
into a nursing facility if the admittee’s spouse, relative, or other person with whom the
admittee has a long-term significant relationship is admitted at the same time to an
independent or assisted living unit within the CCRC community.  Section 10-124 allows a
CCRC that qualifies for a CON exemption to admit a subscriber directly into a
comprehensive care nursing bed if, at the time of admission, the subscriber has “the
potential for an eventual transfer” to an independent or assisted living unit, as determined
by the subscriber’s personal physician.  Those appear to be the bases upon which Sherwood
was admitted to Renaissance Gardens.  Ruth was admitted contemporaneously into an
independent living unit and, notwithstanding Sherwood’s medical history and condition, his
physician certified that he had “the potential for eventual transfer to an independent or
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assisted living unit at Oak Crest Village CCRC.”
Oak Crest argues that, as Sherwood “no longer qualifies for admission to the CCRC
(because he breached ¶ 8.11 of the CCRC Agreement when he alienated his assets), he no
longer qualifies for the nursing home CON exemption” and therefore can no longer reside
at Oak Crest’s nursing facility.  There may be several fallacies with that argument, but we
need dwell only on one.  The argument assumes, a priori, the validity of § 8.11.  If, as we
hold, § 8.11 is inconsistent with § 19-345(b) and, for that reason, is invalid, Sherwood is not
in breach of the Residence and Care Agreement, and is certainly not in breach of the
addendum to that agreement.  Assuming that the doctor’s certificate was not a sham,
Sherwood was properly admitted under § 19-124 and probably under § 19-123 as well.  Oak
Crest produced no evidence that Sherwood is no longer potentially able to move to an
independent or assisted living unit, as the physician’s certificate opined, so we see no
violation of the condition to the CON exemption.
Policy Issues
Throughout its brief, Oak Crest asserts both the unfairness and the dreadful
consequences of allowing people like Sherwood to agree to anti-alienation clauses like §
8.11 as a condition of being admitted to CCRC’s that are so dependent upon such clauses
and then, with impunity, violate them.  As we have taken pains to point out, our decision in
this case is a limited one.  It precludes such clauses from being enforced when patients are
6 Although we have based our decision in this case solely on State law, there are
Federal statutes and regulations of similar import that may limit the General Assembly’s
authority in this area.  We do not address that issue here.
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admitted directly into Medicaid certified nursing facilities, at least during the period that the
patient continues to reside in the nursing facility.  It does not otherwise invalidate those
clauses.  To find such a provision valid in the situation of a direct admission to a Medicaid
certified nursing facility would be to ignore the clear language of the statute and obvious
intent of the Legislature.  If our enforcement of the statute creates unfairness or endangers
the financial health of CCRC’s, the address for relief should be made to the General
Assembly.6
JUDGMENT AFFIRMED, WITH COSTS.