Court Opinion

ID: 9747428
Source: CourtListenerOpinion
Date Created: 2023-08-27 15:14:51.591204+00
Date Added: 2024-06-11T07:25:23.213279
License: Public Domain

BELL, Judge,
dissenting.
In this case, the majority holds that the Developmental Disabilities Administration (“DDA”) of the Department of Health and Mental Hygiene did not violate the Maryland Administrative Procedure Act, Maryland Code (1984, 1995 Repl.Vol., 1995 Cum.Supp.) §§ 10-101 — 139 of the State Government Article, when it, without first promulgating a regulation,1 instituted a cost containment measure applicable to the *349Prospective Payment System (“PPS”).2 Specifically, it concludes:
In this case, DDA did not formulate new rules of widespread application, change existing law, or apply new standards retroactively to the detriment of an entity that had relied upon the agency’s past pronouncements. The “growth cap” at issue here applied only to a limited number of providers in their capacity as contractors with a State agency pursuant to contracts between the parties subject to termination by either side. Furthermore, the “growth cap” applied only in a particular program, in a particular year, and in response to a particular budget crisis. Thus, the “growth cap” was not a rule of widespread application.
In doing so, it stresses several factors: the purpose of the APA3; the existence of regulations and a manual pertaining to the PPS4; the prohibition, contained in Maryland Code (1985, *3501995 Repl.Vol., 1995 Cum.Supp.) §§ 7-2055 and 7-234(a)6 of the State Finance & Procurement Article, against State agencies exceeding their budget appropriations; and the fact that DDA, in the past, without protest or challenge, had instituted other cost containment measures.7 In support of its conclusion that the “growth cap” rather than change existing law, simply effectuates existing policy, the majority asserts that one of the properly promulgated regulations, COMAR 10.22.17.08.A, contemplates “establishing limits on the percentage of the prospective payment rate for any cost center.”
*351I gather from the foregoing that the majority does not view the “growth cap” as a regulation within the contemplation of APA § 10-101(g). The majority also seems to be saying that this particular cost containment measure is covered by the properly promulgated existing regulations and, in any event, it strikes the proper balance of being fair to the appellee and giving the agency the flexibility it needs to maintain an efficient operation. I am not persuaded. In fact, I find the reasoning of the Circuit Court for Baltimore County (Kahl, J.) to be compelling. Accordingly, I dissent.
The appellant argued before the circuit court, as it has before this court, that the “growth cap” is not of widespread applicability. The circuit court rejected that argument, I think properly, relying on opinions of the Attorney General addressing that very point. I adopt its analysis:
The two best analyses of the notion of “general application” in Maryland are found in 72 Op. Att’y Gen. 230 (July 8, 1987) and 75 Op. Att’y Gen. 15 (Jan. 23, 1990). Both opinions suggest that the term “regulation” has consistently been, and should be, construed “as broadly as its language and apparent underlying intent direct.” 75 Op. Att’y Gen. 15, 22 (quoting 72 Op. Att’y Gen. 230, 233). Accordingly, it would seem that any doubt should be resolved by finding the policy to be one of “general application”.... The Attorney General has also set forth in 72 Op. Att’y Gen. 230, n. 4, which DDA has relied upon in support of its contention that policies aimed at those in contractual relations with the agency in question are ordinarily not of “general application.” The Attorney General stated:
In 72 Opinions of the Attorney General 230, 234 n. 4 (1987) we suggested that when “a group of persons in a contractual relationship with a State agency [are] affected by agency directives authorized under the contract,” those directives might not be of “general application” and hence might be outside the definition of “regulation” in the APA. That suggestion, however, did not have in mind directives under a complex program like Medicaid, having effects on a large group of providers and, potentially on *352program beneficiaries as well. Thus, the better approach is to view Transmittal No. 91 as of “general applicability” and then analyze its effects in considering whether the internal management exception applies to it.
75 Op. Att’y Gen. 15, 24 n. 9.
Admittedly the PPS program is not as broad as Medicaid and covers, to date, only 93 providers, however the number of program beneficiaries to be impacted by the 1994 cost containment policy is potentially enormous. Accordingly, this Court adopts the rationale of the Attorney General set forth above.
The Attorney General has also opined that “[e]ven though an action applies to persons within a small class, the action is of general application if that class is described in general terms and new members can be added to the class.” 72 Op. Att’y Gen. 230, 234 n. 4 (quoting Citizens for Sensible Zoning v. Dept. of Natural Resources, 90 Wis.2d 804, 280 N.W.2d 702, 707-708 (1979). As asserted by Chimes, the 1994 cost containment policy applies to all DDA providers, a class described in general terms. In addition, new members can join that class by executing provider agreements with DDA and providing services for a period sufficient to allow for calculation of historic costs____ Thus it appears the policy is, indeed, one of “general Application” within the definition of SG 10-101(1)(e)(i), regardless of how this Court chooses to address that issue.
The circuit court also properly rejected the appellant’s argument, premised on the cost containment measure being merely reflective of existing regulations and, hence, simply effectuates the policy expressed therein. It relied on this Court’s opinion in Insurance Comm’r. v. Bankers Independent Insurance Company, 326 Md. 617, 624, 606 A.2d 1072, 1075 (1992). In that case, Chief Judge Murphy, the author of the majority opinion in this case, speaking for the Court, observed:
[A] legislatively delegated power to make rules and regulations is administrative in nature, and it is not and can not be *353the power to make laws; it is only the power to adopt regulations to carry into effect the will of the legislature as expressed by the statute. Legislation may not be enacted by an administrative agency under the guise of its exercise of the power to make rules and regulations by issuing a rule or regulation which is inconsistent or out of harmony with, or which alters, adds to, extends or enlarges, subverts, impairs, limits, or restricts the act being administered.

Id.

I note, at the outset, that the circuit court is absolutely correct — COMAR 10.22.17.08.A, upon which the appellant relies as authorizing it to proceed as it did and thus permits it to argue that the subject regulation is not a regulation at all, does not pass muster under Bankers. More fundamentally, I also agree with the circuit court that the subject “growth cap,” whatever the majority’s characterization, is a regulation within the definition set forth in § 10-101(g).
The majority states that the “growth cap” is not the statement of a new policy and that it did not change existing policy. The majority misspeaks. A form of reimbursement that requires the payment of all expenses incurred by the provider in supplying the services overseen by the agency is significantly different from one that recognizes, for reimbursement purposes, only some of those expenses. The moment the agency issues a directive adopting the new formula, that draws the distinction, it has stated a new policy and it certainly has significantly altered the old one. The only similarity between the two policies is that they both are reimbursement methods.
Prior to issuing the regulation which is the subject of this case, the DDA regulations required the DDA to reimburse the PPS provider based on the reports they submitted, adjusting for inflation and attendance rates. See COMAR 10.22.17.06 and Manual at 800-9. After the regulation, reimbursement was based on the provider reports and a “growth cap” imposed by the agency. Contrary to the majority, I consider the difference quite significant. Moreover, I am hard-pressed to *354find its authorization in the formally adopted regulations. There really is a difference between saying that certain measures may have to be taken in the future and, when the circumstances requiring the taking of the measures have occurred, formulating the precise responsive measures.
The APA prescribes the formal process, in accordance with which regulations must be promulgated and adopted. See APA §§ 10-109-117.8 It would indeed be a subversion of the purpose and intent of this aspect of the APA if, as Judge Kahl pointed out, an administrative agency were enabled to “sidestep [these] requirement[s] merely by allowing for implementation of ‘regulations’ by administrative fiat.” But that is precisely the effect of the appellant’s theory, adopted by the majority: a statement of agency policy otherwise meeting the definition of “regulation” somehow is rendered not a regulation by virtue of the agency having previously adopted a broad, open-ended rule contemplating future action by the agency. But a “regulation” is no less a “regulation” simply because a previous regulation has been drafted so as to recognize, if not anticipate, that, sometime in the future, it may be necessary to adopt other, different policies than those presently reflected in the formally adopted regulations, to *355include those that are the subject of the “regulation” at issue. And because it is a regulation and remains one despite the reference in the existing regulation, it too must be promulgated with the required formality. Anticipating the need for the policies such a regulation would effectuate in advance of the need for their implementation provides no basis for the informal rule-making that occurred in this case.
If the majority is correct, the benefits of formal rule-making will be significantly undermined. No longer will amendments to regulations to take account of changed circumstances be necessary. Each agency can be expected to include in the regulations it promulgates language indicating that it may be necessary for the agency to take future action of a general nature to address changed circumstances. Under this opinion, that would be all that is required to permit the agency to issue detailed directives, informed by the facts as they have developed, which significantly changes the policies announced by the original regulations. The fairness intended for the interested parties will be largely lost. At the same time, the very real potential for administrative agencies to abuse their power will concomitantly increase and at the expense of the very parties to whom the APA was intended to be fair. As the appellee puts it:
Such a regulatory short-cut completely undermines the APA’s goal of ensuring fairness and efficiency by allowing regulated populations who may be significantly affected by the proposed agency policy to participate in the rulemaking process.
In short, taking the majority’s approach skews the balance and it does it precipitously.
Neither time, expense, nor the need for flexibility warrants this result. When a regulation is required by the Legislature to be formally promulgated, it must be formally promulgated, notwithstanding the expense, the time involved, or the lack of flexibility that entails. Fraternal Order of Police, Montgomery County Lodge 35 et al. v. Mehrling, 343 Md. 155, 172-79, *356680 A.2d 1052, 1061-65 (1996). Expediency simply should not be allowed to hold sway over the regular and rightful process to which an interested party is entitled.
In any event, I am not convinced that requiring the DDA to follow the proper procedure for adopting regulations is so time-consuming or costly as to warrant its avoidance. The emergency rule-making procedures, which, according to the majority, are also too burdensome, are, in fact, intended and designed to take account of, and accommodate, the need for the agency to act quickly and with dispatch, thus giving it the needed flexibility. At the very least, the agency should be required to follow those procedures whenever -it desires to change, expand or clarify the regulations pursuant to which it and the providers under the program it administers are working. To the majority, however, it appears that nothing short of complete authority informally to make rules will suffice. It, like the agency would completely abrogate the APA’s requirement that amendments to existing regulations be adopted with the same formality that accompanied the original regulation. That approach renders nugatory the portion of § 10-101(g) that prescribes that requirement, contrary to the usual rules of statutory construction. See Prince George’s County v. Vieira, 340 Md. 651, 658, 667 A.2d 898, 901 (1995) (quoting GEICO v. Insurance Comm’r, 332 Md. 124, 132, 630 A.2d 713, 714 (1993)); Rose v. Fox Pool Corp., 335 Md. 351, 359, 643 A.2d 906, 910 (1994); Montgomery County v. Buckman, 333 Md. 516, 524-25, 636 A.2d 448, 452 (1994); Condon v. State, 332 Md. 481, 491, 632 A.2d 753, 758 (1993).

. Maryland Code (1984, 1995 Repl.Vol., 1995 Cum.Supp.) § 10-101(g) of the State Government Article provides:
(g) Regulation.-
(1) “Regulation” means a statement or an amendment or repeal of a statement that:
(1) has general application;
(ii) has future effect;
(iii) is adopted by a unit to:
1. detail or carry out a law that the unit administers;
2. govern organization of the unit;
3. govern the procedure of the unit; or
4. govern practice before the unit; and
(iv) is in any form, including:
1. a guideline;
2. a rule;
3. a standard;
4. a statement of interpretation; or
5. a statement of policy.
(2) "Regulation” does not include:
(i) a statement that:
1. concerns only internal management of the unit; and
2. does not affect directly the rights of the public or the procedures available to the public;
*349(ii) a response of the unit to a petition for adoption of a regulation, under! 10-123 of this subtitle; or
(iii) a declaratory ruling of the unit as to a regulation, order, or statute, under Subtitle 3 of this title.
(3) "Regulation”, as used in !! 10-110 and 10-111.1, means all or any portion of a regulation.

. The Developmental Disabilities Administration has since promulgated regulations incorporating the measure, the imposition of a percentage limit on the increase in certain overhead costs allowed all PPS providers, i.e. a "growth cap.” See Notice of Emergency Action, 22 Md. Reg. 1654 (1995). DDA concedes that, prior to taking this action, it had not followed the formal rulemaking procedures prescribed by the APA.

. Focusing on the purpose for the enactment of the APA, the majority notes that the Commission on Administrative Organization of the State commented that it was intended to "ensure that ‘certain basic principles of common sense, justice and fairness,' including notice to interested parties, are applied in administrative proceedings ‘without unduly restricting the agencies in the performance of their various tasks.' ” 343 Md. 336, 338, 681 A.2d 484, 485 (1996) (quoting the Commission’s Seventh Report 8 (1952)). As the majority sees it, therefore, what has to be achieved in this case is the balance that was intended when the APA was adopted: the State’s interest in efficient operation and the interested party's interest in fairness.

. The regulations establishing the PPS are codified at Code of Maryland Administrative Regulations (COMAR) 10.22.17. Those regulations, *350which incorporate by reference the “Prospective Payment System for Community Services to the Mentally Retarded and Developmentally Disabled Clients Procedures Manual (First Edition),” provide that PPS " is subject to the budget appropriations approved by the Legislature” and that
The Department may take cost containment measures to control total expenditures on the prospective payment system. These cost containment measures may include, but are not limited to:
(1) Sharing in any surplus on prospective payments less actual cost;
(2) Establishing limits on the percentage of the prospective payment rate for any cost center.
COMAR 10.22.17.08.A. The manual echoes that regulation, stating that "[ojther cost containment measures for budgetary control may be necessary.”

. § 7-205. Disbursements in accordance with current appropriation.
Money may be disbursed from the State Treasury only in accordance with the current appropriation for a program as amended from time to time in accordance with this title.

. § 7-234. Expenditures in excess of appropriation.
(a) Prohibited. — An officer or unit of the State government may not spend money:
(1) in excess of the total appropriation to the officer or unit; or
(2) in excess of the amounts set forth in the current schedule for apportionment and disbursement of the appropriation.

. It appears that these "cost containment measures” were instituted as early as fiscal year 1990 and were continued in each successive year thereafter, until the appellee challenged this most recent measure. That the providers may have acquiesced in these past cost containment measures, waiving their arguments under the APA, does not estop them to challenge the failure of DDA formally to adopt this regulation. To me, this is common sense. The majority has not explained or provided any authority for holding otherwise.

. Maryland Code (1982, 1994 Repl.Vol., 1995 Cum. Supp) § 2-104 of the Health General Article, which authorizes the Secretary of Health and Mental Hygiene to promulgate rules and regulations, seems also to contemplate, and, so, favors, formal rule-making. It provides:
(b) Rules and regulations.-
(1) The Secretary may adopt rules and regulations to carry out the provisions of law that are within the jurisdiction of the Secretary.
(2) (i) The Secretary shall adopt regulations, in consultation and cooperation with local governing bodies, to govern the siting of community residences for special populations funded by the Department, the Department of Housing and Community Development, the Department of Human Resources, and the Department of Juvenile Justice.
(ii) Any regulations adopted shall comply with the Federal Fair Housing Amendment Act of 1988.
(iii) Prior to the adoption of any regulations proposed under this subsection, the Secretary shall conduct a public hearing for the sole purpose of allowing all the governing bodies of each county and municipality the opportunity to review and comment on the proposed regulations.