Opinion ID: 1951521
Heading Depth: 2
Heading Rank: 2

Heading: Merits of the Agency Decision

Text: Petitioners attack the merits of the DISR decision on two main grounds. Specifically, petitioners assert that (1) the DISR committed a clear error of law when it relied on the District of Columbia Hospital and Medical Services Corporation Regulatory Act (HMSCRA), D.C.Code §§ 35-4702 to -4724 (1997), to determine that the proposed transaction would not convert GHMSI into a for-profit institution, and as a result of that determination, abused its discretion and acted arbitrarily and capriciously in declining to decide whether GHMSI was a charitable institution subject to a charitable set-aside; and (2) the DISR's finding that there was no deficiency in the integrity of GHMSI officers was arbitrary, capricious and without substantial evidence. In reviewing an agency decision, we operate under a familiar set of deferential rules. We must assess: (1) whether the agency has made a finding of fact on each material contested issue of fact; (2) whether substantial evidence of record supports each finding; and (3) whether conclusions legally sufficient to support the decision flow rationally from the findings. Metropolitan Poultry v. District of Columbia Dep't of Employment Servs., 706 A.2d 33, 34 (D.C.1998) (citing Ferreira v. District of Columbia Dep't of Employment Servs., 667 A.2d 310, 312 (D.C.1995)). Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Id. (citing Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938)). We will only set aside an agency ruling if we conclude that it was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. Teal v. District of Columbia Dep't of Employment Servs., 580 A.2d 647, 650 (D.C. 1990); see D.C.Code § 1-1510(a)(3). This court has the statutory authority to decide all relevant questions of law. D.C.Code § 1-1510(a)(1).
Petitioners argue that, because it is undisputed that GHMSI is not regulated by the District of Columbia Hospital and Medical Services Corporation Regulatory Act, the DISR committed a clear error of law by relying on that Act to determine that it was premature to resolve the question of whether GHMSI is a charitable institution. Petitioners contend that the proposed transaction poses a threat to GHMSI's charitable assets and is therefore not in the public interest. We reject this challenge to the decision. In its decision and order, the Agency undertook a lengthy discussion centered on whether the proposed transaction would convert GHMSI into a for-profit corporation, a conversion that could jeopardize GHMSI's public assets. Although the transaction was not subject to HMSCRA at that point, GHMSI intended to become licensed under the Act as part of the transaction. As such, the DISR analyzed the transaction to determine if it would constitute a conversion under HMSCRA. The Agency determined that the transaction would not alter GHMSI's status as a non-profit corporation, and that there would be extensive and sufficient regulatory oversight to protect improper future corporate maneuvers. The Agency then concluded that any discussion of whether GHMSI was a charitable institution subject to a charitable set-aside was therefore premature. Furthermore, in order to ensure that no future conversion could occur without regulatory oversight, the Agency imposed several relevant conditions including: (1) requiring GHMSI to conduct its affairs pursuant to the requirements contained in its federal charter; (2) requiring GHMSI to retain a financial consultant to assist in valuing GHMSI's assets; and (3) requiring CareFirst to amend its articles of incorporation to expressly set forth an obligation to safeguard the assets of GHMSI and to preserve GHMSI's non-profit status. The Commissioner clearly considered petitioners' main contention regarding whether GHMSI's assets required protection after the transaction. In fact, the Agency decision noted that Because the issue of a `charitable set-aside' is central to the analysis of the entire Proposed Transaction, we will consider it first. Relying on the [s]ubstantial testimony presented on the issue, which included testimony by petitioners and documents submitted by the Office of Corporation Counsel, the DISR concluded that GHMSI would not be converted to a for-profit corporation and GHMSI's assets were therefore not at risk; accordingly, it ruled that the issue of whether or not GHMSI is a `charity' does not need to be determined at this time. In the light of this record, we cannot conclude that the DISR committed an error of law or an abuse of discretion, nor do we find that the DISR acted arbitrarily or capriciously. The order addressed petitioners' concerns squarely and thoroughly, and the outcome flowed rationally from findings based on substantial evidence.
Petitioners contend that issues relating to the structuring of executive compensation contracts placed the integrity of GHMSI's officers in question, and that the DISR acted arbitrarily and capriciously and without substantial evidence in affirming the competence, experience, and integrity of those persons who would control the operation of the insurer. D.C.Code § 35-3703(g)(1)(E); see note 7, supra. Petitioners also complain that the DISR issued its order without analyzing the executive compensation contracts firsthand. The contracts about which petitioners complain were those executive compensation contracts that provided for severance pay in case of a change in control of GHMSI. In the order, the Commissioner stated that No evidence or testimony was introduced that would give the DISR any reason to question the integrity of GHMSI's officers. While the record contains some evidence that GHMSI's officers may have placed themselves in a position to profit greatly from the transaction, there is also substantial evidence that the officers' integrity is beyond question. Unhelpful to petitioners' contention is petitioner Newmyer's own testimony which, though attacking GHMSI officers' management abilities and GHMSI policies, was complimentary to GHMSI officers' personal integrity: We have known several members of both boards [GHMSI and BCBSMD] for years. I have known Larry Glasscock [Chief Executive Officer of GHMSI] through civic activities and gotten to know Bill Jews [Chief Executive Officer of BCBSMD] more recently. While I doubt that this testimony will make us better friends, I don't think for a moment that these guys are bad people. The health care industry is riddled with bad actors.... We don't think that the Blues are riddled with bad actors. The Commissioner was aware of the severance pay provisions in the executive compensation contracts, and concluded that the provisions did not adversely affect the GHMSI officers' integrity. To some extent, petitioners' own testimony provided evidence for this conclusion. In addition, to avoid future impropriety, the Commissioner imposed important conditions on the funding of those contracts in order to ensure that the integrity of the officers would remain intact, see, e.g., note 14, infra, and reserved the right to disapprove of the contracts in the future if they were later found to be inappropriate. On this record, we conclude that the Commissioner properly addressed the issue of GHMSI officers' integrity and based his decision on substantial evidence.