McLaren Reg.’l Med. Ctr. v. City of Owosso

S T A T E O F M I C H I G A N

C O U R T O F A P P E A L S

MCLAREN REGIONAL MEDICAL CENTER
and MCLAREN MEDICAL MANAGEMENT,
INC.,

v

Petitioners-Appellants,

Respondent-Appellee.

CITY OF OWOSSO,

Before: Smolenski, P.J., and White and Kelly, JJ.

PER CURIAM.

FOR PUBLICATION
May 3, 2007
9:00 a.m.

No. 244386
Tax Tribunal
LC No. 00-268590

ON REMAND

This case is before us for the second time, on remand from the Supreme Court, after it
construed the charitable institution exemption in Wexford Medical Group v City of Cadillac, 474
Mich 192; 713 NW2d 734 (2006), an appeal that this Court had consolidated with the instant
case when it initially decided the property tax exemption question in McLaren Regional Medical
Ctr v City of Owosso, unpublished opinion per curiam of the Court of Appeals, issued August 24,
2004 (Docket Nos. 244386, 250197). In Wexford, supra, 474 Mich 204-221, the Supreme Court
reversed this Court’s affirmance of the Tax Tribunal’s conclusion that the Wexford Medical
Group did not constitute a charitable institution entitled to a tax exemption. The Supreme Court
additionally “vacate[d] the part of the Court of Appeals judgment that held that petitioner did not
qualify for th[e] [public health purpose] exemption.” Id. at 221.

The Supreme Court vacated this Court’s judgment regarding the McLaren petitioners
“and remand[ed] this case to the Court of Appeals for reconsideration in light of our decision in
Wexford,” supra, 474 Mich 192. McLaren Regional Medical Ctr v City of Owosso, 476 Mich
853 (2006). The Supreme Court instructed this Court to “reconsider petitioners’ claim that they
are entitled to an exemption under MCL 211.7o (charitable institution) or to an exemption under
MCL 211.7r (hospital or public health institution).” Id. at 853-854. We reverse and remand for
entry of judgment in favor of petitioners.

The applicable standard of review is set forth in Wexford, supra, 474 Mich 201-202:

The standard of review for Tax Tribunal cases is multifaceted. Where
fraud is not claimed, this Court reviews the tribunal’s decision for misapplication
of the law or adoption of a wrong principle. Michigan Bell Tel Co v Dep’t of

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Treasury, 445 Mich 470, 476; 518 NW2d 808 (1994). We deem the tribunal’s
factual findings conclusive if they are supported by “competent, material, and
substantial evidence on the whole record.” Id., citing Const 1963, art 6, § 28 and
Continental Cablevision [of Michigan, Inc] v Roseville, 430 Mich 727, 735; 425
NW2d 53 (1988). But when statutory interpretation is involved, this Court
reviews the tribunal’s decision de novo. . . . [Citation omitted.]

The crux of the question presented in this appeal is whether during the 1999 and 2000 tax

years, the McLaren petitioners fell within the scope of statutorily defined tax exemptions in
MCL 211.7o1 and MCL 211.7r.2 When engaging in statutory construction, a court’s “paramount
concern is identifying and effecting the Legislature’s intent. And where a tax exemption is

1 In 1999, the charitable institution exemption was defined as follows in MCL 211.7o:

(1) Property owned and occupied by a nonprofit charitable institution
while occupied by that nonprofit charitable institution solely for the purposes for
which it was incorporated is exempt from the collection of taxes under this act.

(3) Property owned by a nonprofit charitable institution or charitable trust that is
leased, loaned, or otherwise made available to another nonprofit charitable
institution or charitable trust or to a nonprofit hospital or a nonprofit educational
institution that is occupied by that nonprofit charitable institution, charitable trust,
nonprofit hospital, or nonprofit educational institution solely for the purposes for
which that nonprofit charitable institution, charitable trust, nonprofit hospital, or
nonprofit educational institution was organized or established and that would be
exempt from taxes collected under this act if the property were occupied by the
lessor nonprofit charitable institution or charitable trust solely for the purposes for
which the lessor charitable nonprofit institution was organized or the charitable
trust was established is exempt from the collection of taxes under this act.

In 2000, the Legislature replaced the term “property” with “real and personal property.” 2000
PA 309.
2 The public health purpose exemption provides as follows:

The real estate and building of a clinic erected, financed, occupied, and
operated by a nonprofit corporation or by the trustees of health and welfare funds
is exempt from taxation under this act, if the funds of the corporation or the
trustees are derived solely from payments and contributions under the terms of
collective bargaining agreements between employers and representatives of
employees for whose use the clinic is maintained. The real estate with the
buildings and other property located on the real estate on that acreage, owned
and occupied by a nonprofit trust and used for hospital or public health purposes
is exempt from taxation under this act, but not including excess acreage not
actively utilized for hospital or public health purposes and real estate and
dwellings located on that acreage used for dwelling purposes for resident
physicians and their families. [Emphasis added.]

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sought, [a court should] recall that because tax exemptions upset the desirable balance achieved
by equal taxation, they must be narrowly construed.” Wexford, supra, 474 Mich 204.

Charitable Institution Exemption

In Wexford, supra, 474 Mich 203, the Supreme Court reviewed the language of MCL

211.7o(1), and discerned three basic elements comprising the statutory exemption: “(1) The real
estate must be owned and occupied by the exemption claimant; (2) the exemption claimant must
be a nonprofit charitable institution; and (3) the exemption exists only when the buildings and
other property thereon are occupied by the claimant solely for the purposes for which it was
incorporated.”

We first address the ownership and occupancy issue. In the 1999 and 2000 tax years,
petitioners utilized different portions of the property, 216 East Comstock Street in Owosso. The
parties do not dispute the following findings of fact by the Tax Tribunal regarding the various
property uses during the tax years in question:

The [McLaren Community] Medical Center building on the subject
property was separated operationally into three areas for tax years 1999 and 2000.
(Pet Exh 22). The east portion (5,874 sq. ft.) was occupied and used by MMM for
the operation of a family medical practice. (Tr. Vol. I, pp. 183). The west portion
(4,365 sq. ft.) of the building was occupied and used by MRMC for a laboratory
draw station and weight management program. (Tr. Vol. I, pp. 183, 207).
MRMC also occupied and used the center portion (6,848 sq. ft.) of the building
for a physical therapy program that was discontinued for the tax year 2000. (Tr.
Vol. I, pp. 183, 208). No exemption is claimed for the center portion for the tax
year 2000.

MMM maintained before the Tax Tribunal and in the prior appeal in this Court that it
owned the real property. This Court did not reach the real property ownership question in the
prior appeal. McLaren Regional Medical Ctr, supra, slip op at 4. The Tax Tribunal rejected
MMM’s claim that it owned 216 East Comstock:

A threshold issue in this appeal concerns the ownership of the subject

property. On the relevant tax days, December 31, 1998 and 1999, title to the
subject real property was vested in MRMC by warranty deed executed by THI
Associates dated June 9, 1995 (Pet Exh 1). The deed was executed and delivered
pursuant to a real estate purchase and sale agreement of June 5, 1995 between
MRMC and THI Associates (Pet Exh 6) in connection with MRMC’s purchase of
the medical practice and designated assets of the Antoynatan Group, P.C. (Pet
Exh 5), consisting of three doctors engaged in the practice of internal medicine at
the subject property. Nonetheless, MMM claims that it owned the subject
property. MMM argues that a memorandum of understanding (Memorandum)
entered into as of October 1, 1996 between MRMC, MMM and McLaren Health
Care Corporation, the parent and sole member of MRMC and MMM, operated as
a conveyance of the subject property from MRMC to MMM. (Pet Exh 7).

Section 2.03 of the Memorandum provides:

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“2.03 Premises. The Medical Center (MRMC) assigns, transfers,

conveys, and delivers to the Parent (MHCC), and Parent accepts from the
Medical Center, the real property described on attached Exhibit E (the
“Premises”).” (Emphasis added)

The subject property is among those described on Exhibit E to the Memorandum.

Section 3 of the Memorandum provides:

“3. Contributions.

“The Parent contributes to MMM the Practices, the Assets to be

Transferred, and [$10,000,000] cash. It is the intent of the parties that the Parent
immediately divest itself of all interest in the Practices and that MMM assume all
aspects of the ownership and operation of the Practices.”

While Section 3 of the Memorandum provides that the Parent, McLaren Health
Care Corporation, contributes to MMM the [sic] “the Practices, the Assets to be
Transferred and cash,” such terms as used in the Memorandum do not include
“Premises.” No deed was ever executed by MRMC conveying the subject
property to either the Parent, McLaren Health Care Corporation, or to MMM
even though Section 9 of the Memorandum provides for the preparation and
execution of deeds to convey the premises as may be necessary to effectuate the
transfer and document the transactions contemplated in the Memorandum. The
Tribunal finds and concludes that Petitioners have failed to prove by a
preponderance of the evidence that MMM, and not MRMC, was the owner of the
subject real property on the relevant tax days.

Because (1) the parties do not dispute that in June 1995, MRMC obtained a warranty deed to 216
East Comstock; (2) petitioners introduced no evidence contradicting that the only relevant deed
to MMM was executed in November or December 2002; (3) the Tax Tribunal accurately
characterized the contents of the October 1996 memorandum, which distinguished between
“Assets to be Transferred” and “premises,” and did not expressly purport to transfer from parent
company McLaren Health Care Corporation to MMM any real property or “premises”; and (4)
respondent’s assessor testified that “even on the 2000 record, we still show that the owner of
record is McLaren Regional Medical Center,” we conclude that the Tax Tribunal’s factual
findings regarding ownership had competent, material and substantial evidentiary support in the
record, and that the tribunal did not misapply the law in reaching its conclusion regarding
ownership. Wexford, supra, 474 Mich 201-202. In summary, we accept the Tax Tribunal’s
determination that MRMC, not MMM, owned the property during the 1999 and 2000 tax years.

Notwithstanding that MMM did not own 216 East Comstock in 1999 and 2000, as
required for exemption purposes under MCL 211.7o(1), MMM still may qualify for a 1999 and
2000 tax exemption if it and the property’s true owner each qualifies as a “charitable institution.”
This scenario is contemplated by MCL 211.7o(3), which currently provides:

Real or personal property owned by a nonprofit charitable institution or

charitable trust that is leased, loaned, or otherwise made available to another

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nonprofit charitable institution or charitable trust or to a nonprofit hospital or a
nonprofit educational institution that is occupied by that nonprofit charitable
institution, charitable trust, nonprofit hospital, or nonprofit educational institution
solely for the purposes for which that nonprofit charitable institution, charitable
trust, nonprofit hospital, or nonprofit educational institution was organized or
established and that would be exempt from taxes collected under this act if the
real or personal property were occupied by the lessor nonprofit charitable
institution or charitable trust solely for the purposes for which the lessor
charitable nonprofit institution was organized or the charitable trust was
established is exempt from the collection of taxes under this act. [Emphasis
added.]3

MCL 211.7o(1) and MCL 211.7o(3) contain similar elements. The plain statutory
language of MCL 211.7o(3) conditions exemption on ownership of the property by a “charitable
institution,” and occupancy of the property by another “charitable institution” “solely for the
purposes for which that nonprofit charitable institution . . . was organized or established.” And,
echoing § 7o(1), § 7o(3) also imposes the condition that the property would be exempt if
occupied by its owner “solely for the purposes for which the lessor charitable nonprofit
institution [MRMC] was organized.” Consequently, the exemption in MCL 211.7o(3) does not
apply unless (1) MRMC, the owner of 216 East Comstock in 1999 and 2000, meets the definition
of a “nonprofit charitable institution;” (2) MMM, the occupant, also meets that definition; (3)
MMM’s occupancy of the property was solely for the purposes for which it was organized or
established, and (4) the property would be exempt if MRMC occupied it itself solely for the
purposes for which MRMC was organized or established.

Thus, we turn to the important question whether MMM and MRMC are charitable
institutions as delineated by the Michigan Supreme Court in Wexford, supra, 474 Mich 215.
Respondent concedes that petitioners meet the requirements of factors 1, 4 and 5, but contends
that they do not meet the requirements of factors 2, 3 and 6.

1) A “charitable institution” must be a nonprofit institution

The articles incorporating MRMC and MMM as Michigan corporations declare them to
be nonprofit entities, and respondent does not dispute that petitioners are nonprofit institutions.

2) A “charitable institution” is one that is organized chiefly, if not solely, for charity

We conclude that during the 1999 and 2000 tax years, both MRMC and MMM were
organized chiefly, if not solely, for charity. The articles incorporating MMM, as restated in
1996, list among its organizational purposes “[t]o establish, maintain, operate, support, and carry
on activities and services designed to advance or support the provision of effective and efficient
health care services” [Article II(B)], “[t]o engage in, promote or support any activity designed to

3 Before its amendment by 2000 PA 309, MCL 211.7o(3) referred to “property,” instead of “real
or personal property.”

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promote quality of care and the general health and welfare of the communities served by the
Corporation” [Article II(D)], and “[t]o engage in charitable, scientific, educational, and research
activities designed to promote the health of the public” [Article II(H)]. The articles
incorporating MRMC, as restated in 1994, similarly identify medical-related purposes of
incorporation, including “[t]o establish, construct, own, . . . operate, and support either directly,
through subsidiary or affiliate organizations, or in cooperation with other organizations, such
facilities and services providing care and treatment for sick, injured, disabled, aged or indigent
persons and providing for the preservation of health . . . ” [Article II(A)], “[t]o establish,
maintain, operate, support, and carry on activities and services designed to advance or support
the provision of health care services, including without limitation, programs involving scientific
research, preventative health activities, and other health-related education [Article II(B)], “[t]o
carry on, sponsor or participate in programs . . . for the education of the communities served by
the Corporation in the preservation of health” [Article II(C)], and “[t]o engage in, promote or
support any activity designed to promote the general health or welfare of the communities served
by the Corporation . . . .” [Article II(D).]

Provided that petitioners dispense gifts of medical services, such services meet the
definition of “charity” restated by the Supreme Court in Wexford, supra, 474 Mich 214:

(Charity) . . . (is) a gift, to be applied consistently with existing laws, for

the benefit of an indefinite number of persons, either by bringing their minds or
hearts under the influence of education or religion, by relieving their bodies from
disease, suffering or constraint, by assisting them to establish themselves for life,
or by erecting or maintaining public buildings or works or otherwise lessening the
burdens of government. [Internal quotations omitted, emphasis added.]

With respect to the gift element of the “charity” definition, petitioners’ articles of
incorporation also contain the following identical provision declaring their intent to organize
exclusively for charitable purposes:

Article VII

Notwithstanding any other provision of these Articles, the Corporation

shall be organized and operated exclusively for charitable, scientific, and
educational purposes within the meaning of Section 501(c)(3) of the Code. The
Corporation shall not conduct or carry on any activities not permitted to be
conducted or carried on by an organization exempt under Section 501(a) of the
Code and described in Section 501(c)(3) of the Code, or by an organization
contributions to which are deductible under Section 170(c)(2) of the Code. No
substantial part of the activities of the Corporation shall consist of carrying on
propaganda or otherwise attempting to influence legislation, nor shall the
Corporation participate in or intervene in (including the publication or distribution
of statements) any political campaign on behalf of (or in opposition to) any
candidate for public office. [Emphasis added.]

Article VIII governing both corporations also provides that “[n]o part of the net earnings of the
Corporation shall inure to the benefit of any private person,” except that petitioners may “pay
reasonable compensation for services rendered and . . . make such lawful payments and

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distributions in furtherance of the purposes of the Corporation, subject to limitations on the
nature and extent of such activities applicable to organizations exempt under Section 501(a) of
the Code and described in Section 501(c)(3) of the Code.” Additionally, § 1.01 of MMM’s
corporate bylaws and § 1.1 of the 1994 amended bylaws of MRMC reinforce that “[t]he
Corporation shall be operated exclusively for charitable, scientific, and educational purposes as
set forth in the Articles of Incorporation.”

In light of these consistent statements of organizational purpose to provide medical

services and to “operate[] exclusively for charitable, scientific, and educational purposes,” we
conclude that both MMM and MRMC satisfy the requirement that they be organized chiefly, if
not solely, for charity. Wexford, supra, 474 Mich 215 (observing that Wexford Medical Group
was “organized as a charitable institution as reflected in its statement of purpose and bylaws”);
Pheasant Ring v Waterford Twp, 272 Mich App 436, 440; 726 NW2d 741 (2006) (considering
articles of incorporation in determining whether the petitioner had organized for charity).

Respondent insists that neither petitioner has organized solely or chiefly for charity
because they “only claim[] charity when a debt cannot be collected.” However, respondent’s
contention does not relate to the nature of petitioners’ organization, but rather their operation.

3). A “charitable institution” does not offer its charity on a discriminatory basis by choosing
who, among the group it purports to serve, deserves the services. Rather, a “charitable
institution” serves any person who needs the particular type of charity being offered

Petitioners satisfy the nondiscrimination element of the “charitable institution” inquiry.
The 1996 bylaws of MMM and the 1994 amended bylaws of MRMC contain similar clauses
specifically prohibiting “discrimination against any person because of race, color, religion,
national origin, age handicap, ability to pay, or sex,” and providing that the “prohibition applies
to all phases of operation of the Corporation . . . .” MMM’s president, Dennis D. Krzeminski,
testified that MMM never turned away patients because of their inability to pay for medical
services. Additionally, a list of patient rights adopted by MMM and MRMC enshrines each
patient’s “right to care without regard for . . . source of payment.” Respondent presented no
evidence suggesting that petitioners did not adhere to their stated nondiscrimination policies in
providing medical services. The fact that MMM may have made efforts to attempt the collection
of debt owed from some particular patient or patients does not reasonably suggest that MMM
provided medical services only to those who could afford to pay for them.

4) A “charitable institution” brings people’s minds or hearts under the influence of education
or religion; relieves people’s bodies from disease, suffering, or constraint; assists people to
establish themselves for life; erects or maintains public buildings or works; or otherwise lessens
the burdens of government

As discussed above, both MMM and MRMC were organized to provide the community
with medical services, and respondent acknowledges that petitioners’ provision of medical
services relieves people’s bodies from disease, suffering or constraint.

5) A “charitable institution” can charge for its services as long as the charges are not more
than what is needed for its successful maintenance

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Respondent does not dispute that petitioners’ service charges do not exceed the amounts
of revenue they need for successful maintenance. Krzeminski averred that although MMM
charged patients who could afford to pay for medical services, MMM never had earned a profit,
and depended for its existence on subsidization by its parent, McLaren Health Care Corporation.

6) A “charitable institution” need not meet any monetary threshold of charity to merit the
charitable institution exemption; rather, if the overall nature of the institution is charitable, it is
a “charitable institution” regardless of how much money it devotes to charitable activities in a
particular year

The testimony at the Tax Tribunal hearing establishes that MMM, which as discussed
above is organized for charitable purposes, provided charity during the 1999 and 2000 tax years.
Krzeminski, MMM’s president, described that MMM placed no limitation on the number of
Medicaid and Medicare patients it treated at 216 East Comstock, that the government reimbursed
MMM for treatment of Medicaid patients at a rate of approximately 27 to 30 cents per dollar of
MMM’s standard charges, and that MMM accepted the government’s reimbursements as
“payment in full” and did not pursue Medicaid and Medicare patients for the differences between
MMM’s standard charges and the government reimbursement rates. The testimony of
Krzeminski, Dr. Carol Vorenkamp, who had worked at MMM’s Owosso clinic since February
1997, and Tracey Lynn Minarik, who had worked as clinical coordinator of the Owosso site from
the time that MMM acquired 216 East Comstock until she became the site’s office manager in
August 1998, reflects that apart from MMM’s official charity care policy, for which patients had
to fill out applications for assistance, MMM provided charitable care as follows: (1) consistent
with MMM policy, Dr. Vorenkamp saw and treated all patients irrespective of their ability to pay
or whether they owed money to MMM, (2) Dr. Vorenkamp had discretion to dispense with
charges for, or “no charge,” visits by patients who appeared to lack resources or expressed an
inability to pay for the services, (3) in MMM’s 1998 and 1999 fiscal years, respectively, Dr.
Vorenkamp documented 287 and 168 “no charge” visits, which she explained as typically
involving rechecks of various ailments and conditions, (4) according to Krzeminski, MMM
additionally sometimes wrote “off [amounts] that we accepted as payment in full with respect to
services rendered patients with no insurance,” (5) MMM dispensed free medication samples to
low-income patients and those without insurance, (6) in 1998 and 1999, MMM performed
physicals for local high school athletes for a $5 fee, which funds they donated to the high
schools, and (7) MMM also offered free health screenings, including breast examinations in
October 1998, and in 1999, free blood pressure, glucose and cholesterol testing at a local factory.

This evidence supports that during the 1999 and 2000 tax years, MMM devoted
substantial resources to charitable activities, and that MMM thus constitutes an institution of
overall charitable nature. The nature of MMM’s charitable activities in the 1999 and 2000 tax
years closely parallels the conduct of the petitioner in Wexford, which the Supreme Court found
qualified Wexford as an institution having an overall charitable nature:

Petitioner has a charity care program that offers free and reduced-cost
medical care to the indigent with no restrictions. It operates under an open-access
policy under which it accepts any patient who walks through its doors, with
preferential treatment given to no one. Although petitioner sustains notable
financial losses by not restricting the number of Medicare and Medicaid patients it
accepts, it bears those losses rather than restricting its treatment of patients who

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cannot afford to pay.

Petitioner more closely matches hospitals examined in [Auditor General v

R B Smith Mem Hosp Ass’n, 293 Mich 36; 291 NW 213 (1940),] and Michigan
Sanitarium & Benevolent Ass’n v Battle Creek, 138 Mich 676; 101 NW 855
(1904),] hospitals we found qualified for the charitable institution exemption.
Just as in those cases, the overall nature of petitioner’s organization is charitable.
The losses the institution sustains are not fully subsidized by the patients, but by
petitioner’s parent corporations, patients who can afford to pay, and, to some
extent, by government reimbursements. And the fact that petitioner receives
government reimbursements has little bearing on the analysis because, despite any
government aid, the beneficiary of the medical care receives a gift. . . .

Moreover, it is clear in this case that the reimbursements petitioner
receives from government funding fall well short of defraying the costs petitioner
incurs to render medical care. Thus, not only are Medicare and Medicaid patients
receiving a gift from petitioner, but petitioner is not fully recouping its costs from
the government because of the government’s underpayments. [Wexford, supra,
474 Mich 216-217 (emphasis added).]

Lastly, Section 7o(3) allows for an exemption only when the building is occupied by the
charitable institution solely for the purposes for which the charitable institution was
incorporated. The record contains ample evidence that in the 1999 and 2000 tax years, MMM
occupied 216 East Comstock solely for the primarily charitable health care purposes for which it
was incorporated.

MRMC

Still, however, MMM does not qualify for a property tax exemption under MCL
211.7o(3) unless MRMC, the owner of 216 East Comstock during the 1999 and 2000 tax years,
likewise proves that its “overall nature . . . is charitable.” While the evidence regarding MRMC
was not as extensive as regarding MMM, the record supports that MRMC services the MMM
patients as a lab drawing station, and in providing weight management and physical therapy, and
that MRMC accepted patients on the same basis as MMM.

We therefore conclude that under Wexford, supra, the portions of 216 East Comstock at

issue, for the years at issue, were 1) owned by MRMC, a nonprofit charitable institution; and 2)
either a) occupied by MRMC solely for the purposes for which MRMC was organized, or b)
made available to MMM, also a nonprofit charitable institution, and occupied by MMM solely
for the purposes for which MMM was organized. As to the portion of the property occupied by
MMM, had MRMC occupied this portion solely for the purposes for which it was organized, the
property would likewise be exempt.4

4 In light of this conclusion, we do not address the public health exemption, MCL 211.7r.

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Reversed and remanded to the Tax Tribunal for entry of judgment in favor of petitioners.
We do not retain jurisdiction.

/s/ Michael R. Smolenski
/s/ Helene N. White
/s/ Kirsten Frank Kelly

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McMeans v. Scripps Health Inc.,

McMeans v. Scripps Health Inc.,
No. D035486 (Cal. Ct. App. March 26, 2002)

Patients
who were injured in automobile accidents brought a class action suit against
a hospital. The patients were seeking a declaratory judgment that the hospital
was not entitled to liens on the patients’ tort recoveries. The Court of Appeal
of California ruled that any right of the hospital to collect from a tort recovery
would have to be defined by the contract between the injured party’s insurance
company and the health care provider. Therefore, the amount a hospital would
be entitled to collect would be limited to the amount it agreed to accept in
payment from the insurer.

Md. Gen. Hosp., Inc. v. Thompson,

Md. Gen. Hosp., Inc. v. Thompson,
No. 01-2012 (4th Cir. Oct. 9, 2002).

A
hospital established a hospital-based skilled nursing facility by purchasing
the bed rights from three other skilled nursing facilities. The hospital applied
for, and was denied, a "new provider exemption" by HHS which allows
higher Medicare reimbursement rates during the first years of operation. The
District Court upheld the decision of HHS, the hospital appealed, and the United
States Court of Appeals for the Fourth Circuit reversed. The Fourth Circuit
concluded that the hospital was entitled to the exemption because it had not
operated a skilled nursing facility in the past, even though it had purchased
the bed rights from skilled nursing facilities that had been in operation in
the past. Also, the Fourth Circuit found that the HHS interpretation of the
regulation at issue was entitled to no deference because it was plainly erroneous
and inconsistent with the plain meaning of the statute.

McLaren Reg.’l Med. Ctr. v. City of Owosso

TAX EXEMPTION

McLaren Reg’l Med. Ctr. v. City of Owosso, Docket No. 244386
(Mich. Ct. App. May 3, 2007)

The Michigan Court of Appeals held that, during the 1999 and 2000
tax years, a medical center and its tax-exempt subsidiary fell within the
scope of statutorily defined property tax exemptions under state law.

Based on a recent decision by the Michigan Supreme Court discussing the charitable
institution tax exemption, the Court of Appeals held that the real property
at issue was owned during the years at issue by the medical center, a nonprofit
charitable institution, and either occupied by the medical center solely for
the purposes for which the medical center was organized, or made available
to a tax-exempt subsidiary, which occupied the space solely for the purposes
for which the subsidiary was organized. The court ruled that the property would
be exempt regardless of whether it was occupied by the medical center or by
a tax-exempt subsidiary.

The court also analyzed and determined that the medical center and its subsidiary
corporation were "nonprofit charitable institutions" because they
met all of the factors delineated by the Michigan Supreme Court that a charitable
institution must meet: (1) they were nonprofit institutions; (2) during the
tax years in question, they were organized chiefly, if not solely, for charity;
(3) they adhered to their stated nondiscrimination policies in providing medical
services; (4) they were organized to provide the community with medical services
and relieve people’s bodies from disease, suffering or constraint; (5) their
service charges did not exceed the amounts of revenue they needed for successful
maintenance; and (6) they provided charity during the tax years in question.
Accordingly, the court remanded the matter to the Tax Tribunal for entry of
judgment in favor of the medical center.

 

McMeans v. Scripps Health,

McMeans v. Scripps Health,
No. D035486 (Cal. App. July 24, 2002)

The
California Court of Appeals held that, under the Hospital Lien Act, a hospital’s
lien rights could not exceed the amount it agreed to accept from an insurance
carrier as payment in full for the services provided (the amount the patient
is indebted to the hospital). Accordingly, since one patient’s insurance policy
covered and paid for the procedures performed, and the hospital agreed to accept
payment from the insurance company as payment in full, the hospital could not
place a lien on a settlement that the patient received from a personal injury
lawsuit. However, for two other patients whose insurance policies did not cover
the procedures performed, the hospital had the right to place a lien on a settlement
in order to recover the "reasonable cash value of the benefits."

Md. State Bd. of Physicians v. Eist (Full Text)

IN THE COURT OF APPEALS OF MARYLAND

No . 110
Sep tember Term, 2007
_________________________________________

MARYLAND STATE BOARD OF PHYSICIANS

v .

HAROLD I . EIST

__________________________________________

Bell , C . J .
Harre ll
Battaglia
Greene
E ldr idge , John C . (Re t ired , Spec ia l ly
Ass igned)
Raker , Irma S . (Re t ired , Spec ia l ly
Assigned)
Cathell , Dale R . (Retired , Specially
Assigned)

JJ .
__________________________________________

Opinion by Eldridge , J .
Be ll , C .J . , Raker and Ca the ll , JJ . , dissen t .
_________________________________________

Filed: January 21 , 2011

Th is is an ac t ion under the jud ic ia l rev iew sec t ion of the Mary land

Admin is tra t ive Procedure Ac t1 to rev iew a repr imand and f ine , imposed on a l icensed

phys ic ian by the Mary land S ta te Board of Phys ic ians , based upon the Board’s

conc lus ion tha t the phys ic ian had fa i led to coopera te w i th a lawfu l inves t iga t ion

conduc ted by the Board .2 The bas is for the Board’s conc lus ion was the fa i lure by the

phys ic ian , responden t Dr . Haro ld I . E is t , to obey , t ime ly , a subpoena for the produc t ion

of cer ta in pa t ien ts’ med ica l records in h is possess ion . The C ircu i t Cour t for

Mon tgomery Coun ty reversed the Board’s dec is ion , and the Cour t of Spec ia l Appea ls

aff irmed the judgmen t of the C ircu i t Cour t . The in termed ia te appe l la te cour t he ld tha t

the Board was no t en t i t led to the records and tha t , therefore , Dr . E is t d id no t fa i l to

coopera te w i th a lawfu l inves t iga t ion .

We sha l l ho ld tha t , because ne i ther Dr . E is t nor the pa t ien ts took any appropr ia te

ac t ion to cha l lenge the subpoena , such as f i l ing in the C ircu i t Cour t a mot ion to quash

or a mot ion for a pro tec t ive order , as requ ired by the app l icab le s ta tu tes , and because

Dr . E is t c lear ly fa i led to comply w i th the subpoena in a t ime ly manner , the Board’s

dec is ion was lega l ly correc t . Consequen t ly , we sha l l reverse the judgmen ts of bo th

cour ts be low and d irec t tha t the Board’s dec is ion be aff irmed .

1 Maryland Code (1984, 2009 Repl. Vol.), § 10-222 of the State Government Article.

2 At the time the initial complaint was received, the Maryland State Board of Physicians was
named the Board of Physicians Quality Assurance. Pursuant to Ch. 252 of the Acts of 2003,
effective July 1, 2003, during the pendency of this case, the name of the agency was changed to the
Maryland State Board of Physicians. The agency will usually be referred to as “the Board” in this
opinion.

-2-

I .

In a le t ter da ted February 19 , 2001 , the pe t i t ioner , the Mary land S ta te Board of

Phys ic ians , rece ived a comp la in t from the es tranged husband of a pa t ien t of

Dr . Haro ld I . E is t . Dr . E is t , a psych ia tr is t l icensed to prac t ice med ic ine in Mary land ,

had prac t iced for th ir ty-seven years a t the t ime the compla in t was f i led . The compla in t

a l leged tha t Dr . E is t had “over-med ica ted my w ife and my sons” and de ta i led an

inc iden t in wh ich Dr . E is t had “s tar ted ca l l ing [ the compla inan t] a l iar and ye l l ing a t

[ the compla inan t].” The le t ter fur ther a l leged tha t Dr . E is t had “ los t any ab i l i ty to

prac t ice med ic ine in a tru ly ob jec t ive and profess iona l manner .”

On March 15 , 2001 , Haro ld Rose , a “Comp l iance Ana lys t” for the Board , wro te

to Dr . E is t , no t ify ing h im tha t a compla in t had been f i led aga ins t h im and a t tach ing a

copy of the compla in t . The Board reques ted a wr i t ten response w i th in 21 days , and

asked Dr . E is t to ind ica te whe ther h is response cou ld be re leased to the compla inan t .

A long w i th the le t ter , the Board issued a subpoena duces tecum wh ich s ta ted :

“Pursuan t to Sec t ions 14-206(a) and 14-401(g) of the Hea l th
Occupa t ion[s] Ar t ic le of the Anno ta ted Code of Mary land , YOU
ARE HEREBY SUMMONED and COMMANDED by the BOARD
OF PHYSICIAN QUALITY ASSURANCE OF MARYLAND to
de l iver IMMEDIATELY UPON SERVICE OF PROCESS a copy
of all med ical records of patients [names the wife and two sons of
the compla inan t] trea ted a t your fac i l i ty ; wh ich ma ter ia ls are in
your custody , possession or control .

“And by v ir tue of the au thor i ty of the sa id BOARD OF
PHYSICIAN QUALITY ASSURANCE , such informa t ion is
thereby made re turnab le within 10 (ten) days . . . .

“FOR FAILURE TO OBEY th is summons on pe t i t ion of the

-3-

Board a cour t of compe ten t jur isd ic t ion may pun ish the person as
for con temp t of cour t , pursuan t to the prov is ions of the Hea l th
Occupa t ions Ar t ic le of the Anno ta ted Code of Mary land Sec t ion
14-206(b) .”

The le t ter to Dr . E is t from the Board and the subpoena were da ted March 15 , 2001 , bu t

they were de l ivered to the wrong address . The same le t ter and subpoena were

d ispa tched aga in by the Board on Apr i l 18 , 2001 , and were rece ived by Dr . E is t on

Apr i l 19 , 2001 . The Board agreed tha t the subpoenaed records were due ten days from

Apr i l 19 , 2001 , the da te when Dr . E is t ac tua l ly rece ived the subpoena .

Dr . E is t responded to the Board on Apr i l 20 , 2001 . H is le t ter informed the Board

tha t the comp la inan t was no t one of h is pa t ien ts , and tha t Dr . E is t had trea ted on ly the

compla inan t’s “es tranged w ife and , a t t imes , three of the ir ch i ldren .” Dr . E is t reasoned

that the complaint might have been motivated by the compla inan t’s “b i t ter ly con tes ted”

d ivorce l i t iga t ion w i th Dr . E is t’s pa t ien t , in wh ich Dr . E is t had been ca l led as a w i tness

“concern ing the ch i ldren of the marr iage .” Dr . E is t s ta ted to the Board as fo l lows :

“I am no t cer ta in wha t I w i l l be asked to respond to in the
course of your inves t iga t ion , nor wha t informa t ion rece ived in
conf idence from [my pa t ien ts] migh t come in to the record . I t is my
be l ief tha t they are requ ired to be no t if ied of th is ma t ter and any
reques t for informa t ion wh ich you migh t make of me concern ing
the ir trea tmen t and the ir conf iden t ia l commun ica t ions to me . I w i l l
be pleased to cooperate fully with any investigator with the consent
of the pa t ien ts ( inc lud ing any guard ian necessary to wa ive the
ch i ldren’s pr iv i lege) , or , if the pa t ien ts ob jec t and take s teps to
pro tec t the ir commun ica t ions w i th any appropr ia te dec is ion
overru l ing the ir ob jec t ions and requ ir ing tha t I furn ish the
informa t ion . A t th is po in t , they have no t f i led a compla in t nor in
any o ther way consen ted to re lease of informa t ion to BPQA so far
as I know .”

-4-

On May 1 , 2001 , Dr . E is t forwarded a copy of the subpoena to h is pa t ien t , the

w ife of the comp la inan t , and reques ted tha t she inform h im “as soon as you can ,

whe ther you , or your a t torney , are tak ing any ac t ion to oppose my compl iance w i th th is

subpoena .” Dr . E is t conc luded h is le t ter by s ta t ing tha t , if he had no t heard from her

“w i th in one week , I w i l l forward the records to the Board .” Dr . E is t sen t a copy of th is

le t ter to Mr . Rose of the Board .

On May 4 , 2001 , Dr . E is t rece ived a copy of a repor t f i led by the ch i ldren’s

cour t-appo in ted a t torney . The repor t , f i led w i th the C ircu i t Cour t for Mon tgomery

Coun ty , s ta ted tha t the cour t-appo in ted a t torney refused to wa ive the “pr iv i lege” tha t

ex is ted be tween the ch i ldren of the comp la inan t and Dr . E is t , or “any men ta l hea l th

profess iona l .”3 Dr . E is t sen t th is repor t to the Board , a long w i th a le t ter in wh ich he se t

for th a transcr ip t ion of a te lephone message wh ich he had rece ived from h is pa t ien t , the

w ife of the compla inan t . In her message , h is pa t ien t s ta ted : “I refuse to a l low you to

re lease my med ica l record to the med ica l board .” Add i t iona l ly , h is pa t ien t’s a t torney

sen t a le t ter , da ted May 14 , 2001 , to Mr . Rose of the Board , no t ing tha t the pa t ien t

“does no t wa ive her pr iv i lege w i th Dr . E is t and has asked tha t he no t re lease her records

in response to the reques t .” The le t ter wen t on to s ta te tha t the pa t ien t wan ted the

Board to know tha t “she has abso lu te ly no compla in ts abou t Dr . E is t” and tha t “he has

The report failed to indicate precisely the privilege which the attorney refused to waive.
3
Presumably, the attorney was referring to the statutory psychiatrist-patient privilege set forth in
Maryland Code (1974, 2006 Repl. Vol., 2010 Supp.), § 9-109(b) of the Courts and Judicial
Proceedings Article.

a lways conduc ted h imse lf in a profess iona l manner .”

-5-

The Board responded to Dr . E is t in a le t ter da ted June 27 , 2001 , from Frank

Bubczyk , ano ther “Comp l iance Ana lys t” w i th the Board . The le t ter informed Dr . E is t

tha t , based on the comp la in t rece ived , the Board had opened an inves t iga t ion . The

le t ter a lso inc luded ano ther reques t for the med ica l records covered by the subpoena .

Moreover , the le t ter informed Dr . E is t tha t, “[f]or your informa t ion , rece ip t of those

med ica l records is no t con t ingen t on the consen t of the pa t ien t /s .” The le t ter cau t ioned

Dr . E is t tha t fa i lure to produce the reques ted records “may be grounds for d isc ip l inary

ac t ion pursuan t to Md . Code Ann . Hea l th Occ . § 14-404 (a)(33) for fa i l[ure] to

coopera te w i th a lawfu l inves t iga t ion conduc ted by the Board .”

On Ju ly 11 , 2001 , Dr . E is t’s a t torney sen t to the Board a le t ter s ta t ing tha t

“Dr . E is t is under the impress ion tha t he does no t have h is pa t ien ts’
permiss ion to revea l the ir conf idences , and tha t no cour t has
we ighed the necess i ty for v io la t ing the ir conf idences based upon
the unsuppor ted a l lega t ions of someone w i th a c lear conf l ic t of
in teres t , and a des ire to v io la te those conf idences .”

The le t ter re i tera ted tha t “Dr . E is t does no t d ispu te the au thor i ty of the [Board] to

examine these ma t ters ,” and if a cour t agreed tha t the records cou ld be examined ,

“Dr . E is t cer ta in ly w i l l comply .” The le t ter a lso d iscussed the pa t ien ts’ pr ivacy

interes ts .

In a subsequen t le t ter to the Board da ted Ju ly 16 , 2001 , Dr . E is t de ta i led h is

re la t ionsh ip w i th the comp la inan t , informed the Board tha t the compla inan t “has never

been my pa t ien t ,” and s ta ted tha t the compla inan t “ is e i ther confused or ou tr igh t

-6-

d ishones t in h is asser t ions .” Dr . E is t a lso submi t ted to the Board supp lemen ta l

documen ts concern ing h is re la t ionsh ip w i th the compla inan t and a le t ter from the

compla inan t’s w ife pra is ing the care tha t she and her ch i ldren had rece ived from

Dr . Eis t .

During the en t ire process , ne ither Dr . Eist nor his patients instituted any judicia l

proceedings to quash the subpoena issued by the Board or to obtain a protective order .

On December 19 , 2001 , the Board voted to charge Dr . Eist with a violation under

Mary land Code (1981 , 2009 Rep l . Vo l .) , § 14-404(a)(33) of the Hea l th Occupa t ions

Ar t ic le . Tha t prov is ion au thor izes the Board to

“repr imand any l icensee , p lace any l icensee on proba t ion , or
suspend or revoke a l icense if the l icensee : * * * (33) Fa i ls to
coopera te w i th a lawfu l inves t iga t ion conduc ted by the Board
. . . .”4

The charge was off ic ia l ly issued by the Board on February 4 , 2002 . The February 4 ,

2002 , documen t s ta ted tha t a “reso lu t ion conference” had been schedu led for Apr i l 3 ,

2002 , a t the Board’s Off ice , and a “prehear ing conference in th is ma t ter” had been

schedu led for June 6 , 2002 , in the Off ice of Admin is tra t ive Hear ings .

Af ter the Board had forma l ly ins t i tu ted charges aga ins t Dr . E is t , he aga in wro te

to h is pa t ien t’s a t torney informing the a t torney tha t

4 While the Health Occupations Article, as well as the Health-General Article, of the Code have
undergone some changes between the year 2001 and the present, none of the provisions applicable
to this case and cited in this opinion have been changed in substance. Consequently, we shall in this
opinion cite the current provisions of both Articles.

-7-

“to try and bring this ma tter to a close , we are hereby giving you
and your c l ien t no t ice tha t un less we hear from you w i th in one
week tha t (1) as a resu l t of your effor ts , the Board has ceased to ask
for these documen ts ; (2) you have ob ta ined a cour t order en jo in ing
Dr . E is t from send ing the documen ts to the [Board]; or (3) an
ac t ion has been
f i led seek ing such an
in junc t ion , bu t
no tw i ths tand ing good fa i th effor ts , i t has no t been comple ted ,
Dr . E is t in tends to make your c l ien t’s en t ire f i le ava i lab le to the
[Board] .”

A s imi lar message was g iven to the represen ta t ive of the ch i ldren . None of the par t ies

responded to these reques ts .

Dr . E is t turned over the pa t ien ts’ records to the Board on March 20 , 2002 .

Dr . E is t’s a t torney wro te to bo th the Ass is tan t A t torney Genera l for the Depar tmen t of

Hea l th and Men ta l Hyg iene and the “Comp l iance Ana lys t” for the Board , s ta t ing tha t ,

in turn ing over the records , “we do no t concede tha t Dr . E is t in any way refused in the

pas t to coopera te w i th an ‘ inves t iga t ion .’”

On Oc tobe r 31 , 2002 , the Boa rd fo rwa rded the f i les , inc lud ing the o r ig ina l

comp la in t and the pa t ien t records produced by Dr . E is t , to the Mary land Psych ia tr ic

Soc ie ty’s Peer Rev iew Commi t tee . Dr . E is t appeared before the Peer Rev iew

Commi t tee on Augus t 26 , 2003 . The repor t of the Mary land Psych ia tr ic Soc ie ty Peer

Rev iew Commi t tee , da ted November 30 , 2003 , u l t ima te ly de termined tha t Dr . E is t had

“prescr ibed med ica t ions appropr ia te ly” and tha t there was “no ev idence tha t he over

prescribed any medication or induced psychotic symptoms.” The Committee also found

tha t Dr . E is t “behaved in a profess iona l manner” when interac ting with the compla inant

and tha t there had been “no breach in any app l icab le s tandard of care in h is trea tmen t

or conduc t w i th the pa t ien ts .”

-8-

On December 1 , 2003 , the Board rece ived the repor t of the Peer Rev iew

Commi t tee , and , on February 5 , 2004 , the Board dec ided no t to charge Dr . E is t based

on the compla in t of the pa t ien t’s es tranged husband . The husband’s compla in t was

d ismissed . Never the less , the Board po in ted ou t tha t the ma t ter “of fa i l ing to coopera te

w i th a lawfu l inves t iga t ion conduc ted by the Board . . . rema ins open .”

Wh i le the above-rev iewed even ts were tak ing p lace , the Board’s charge , tha t Dr .

E is t fa i led to coopera te w i th a lawfu l inves t iga t ion by the Board , was be ing processed

by the Mary land Off ice of Admin is tra t ive Hear ings . Numerous mot ions , memoranda

and exh ib i ts were f i led w i th tha t Off ice , by bo th s ides , be tween February 4 , 2002 , and

Ju ly 15 , 2002 . A hear ing took p lace before an Admin is tra t ive Law Judge (ALJ) of the

Off ice of Admin is tra t ive Hear ings on Ju ly 15 , 2002 .

Bo th s ides agreed tha t there were no d ispu tes as to the ma ter ia l fac ts , and bo th

s ides f i led mo t ions for summary dec is ion pursuan t to COMAR 28 .02 .01 .12D .5 On

5

COMAR 28.02.01.12D provides as follows:

“D. Motion for Summary Decision.

“(1) Any party may file a motion for summary decision on all or part of an action,
at any time, on the ground that there is no genuine dispute as to any material fact and
that the party is entitled to judgment as a matter of law. Motions for summary
decision shall be supported by affidavits.

“(2) The response to a motion for summary decision shall identify the material facts
that are disputed.

“(3) An affidavit supporting or opposing a motion for summary decision shall be
made upon personal knowledge, shall set forth the facts that would be admissible in
evidence, and shall show affirmatively that the affiant is competent to testify to the
(continued…)

Augus t 14 , 2002 , the ALJ issued a recommended dec is ion in favor of Dr . E is t . The ALJ

-9-

in i t ia l ly he ld tha t

“ the Board’s r igh t to ob ta in the men ta l hea l th records of pa t ien ts or
conf iden t ia l informa t ion regard ing the trea tmen t of a men ta l hea l th
pa t ien t is no t abso lu te where the pa t ien t ob jec ts to the d isc losure of
tha t informa t ion . Any reques t for a subpoena for men ta l hea l th
records where an ob jec t ion has been ra ised by the ho lder of tha t
pr iv i lege shou ld be sub jec t to the scru t iny of an independen t
fac tf inder .”

The ALJ ind ica ted tha t the “ independen t fac tf inder” w i th regard to the pa t ien t’s

asser t ion of pr iv i lege shou ld be a judge , tha t the Board had the ob l iga t ion of seek ing

judicial enforcement of the subpoena , and that “the Board’s failure to seek enforcement

of the subpoena does no t p lace the onus of seek ing jud ic ia l in terven t ion on the

Responden t [Dr . E is t] .” The ALJ conc luded “ tha t the Responden t fo l lowed the on ly

e th ica l course of ac t ion ava i lab le to h im under the c ircums tances” and tha t the

“Responden t d id no t fa i l to coopera te ; ra ther he a t tempted to coopera te wh i le

preserv ing the in tegr i ty of the conf iden t ial re la t ionsh ip w i th h is pa t ien ts .” The ALJ

gran ted the Responden t’s Mo t ion for Summary Dec is ion , den ied the Board’s Mo t ion

for Summary Dec is ion , and recommended tha t the charges be d ismissed .

The “Admin is tra t ive Prosecu tor” f i led w i th the Board excep t ions to the ALJ’s

5

(…continued)
matters stated in the affidavit.

“(4) The judge may issue a proposed or final decision in favor of or against the
moving party if the motion and response show that there is no genuine dispute as to
any material fact and that the party in whose favor judgment is entered is entitled to
judgment as a matter of law.”

-10-

recommended dec is ion . Af ter a hear ing before the Board , the Board on January 28 ,

2003 , re jec ted the ALJ’s recommended dec is ion and found tha t Dr . E is t had fa i led to

coopera te w i th a lawfu l inves t iga t ion . In a four teen page op in ion , the Board rev iewed

the und ispu ted fac ts as we l l as the app l icab le law . The Board po in ted ou t tha t the p la in

word ing of the app l icab le s ta tu te requ ires a hea l th care prov ider , in accordance w i th a

subpoena , to d isc lose to the Board a par t icu lar pa t ien t’s med ica l records , regard less of

the pa t ien t’s consen t , for purpose of an inves t iga t ion in to the a l leged improper prac t ice

of a hea l th profess iona l . See Mary land Code (2000 , 2009 Rep l . Vo l .) , §§ 4-306 and 4-

307(k)(1)(v)(1) of the Hea l th-Genera l Ar t ic le . The Board recogn ized the ro le of a

cour t , in ru l ing upon a mo t ion to quash or a motion for a protective order , to weigh a

pat ient’s const itu tional privacy interests in the records against the Board’s need for the

records . The Board , however , d isagreed w i th the ALJ’s v iew tha t “ the Board mus t

pe t i t ion a cour t in each and every ins tance” a subpoena is issued . Accord ing to the

Board , the “par ty who w ishes to presen t a cons t i tu t iona l c la im has the burden of

presen t ing i t to a cour t .”6 The Board issued a f ina l order repr imand ing Dr . E is t and

impos ing a $5 ,000 f ine .

Dr . E is t f i led in the C ircu i t Cour t for Mon tgomery Coun ty an ac t ion for jud ic ia l

rev iew of the Board’s dec is ion repr imand ing h im and impos ing a $5 ,000 f ine .7 Af ter

The opinion pointed out that the Board’s Annual Report for the year 2000 lists the number of
6
investigations at 1,252 for that year.

7 As earlier noted, Dr. Eist’s action for judicial review was pursuant to the judicial review section
of the Maryland Administrative Procedure Act, Maryland Code (1984, 2009 Rep. Vol.), § 10-222
of the State Government Article. That section provides in relevant part as follows:

(continued…)

-11-

hear ing argumen ts from the par t ies , the C ircu i t Cour t issued an ora l ru l ing in wh ich the

cour t de termined tha t , a l though the Board was en t i t led to sanc t ion Dr . E is t , the Board

had made an error of law . The C ircu i t Cour t s ta ted tha t i t agreed w i th the Board tha t ,

“[w]hen dealing with a party , [the statu te] does no t requ ire the Board to seek

in terven t ion of the cour t before the subpoena can be enforced” and tha t “ the par ty fa i ls

to respond to the subpoena a t i ts own r isk if they fa i l to f i le a mot ion to quash and /or

a mot ion for a pro tec t ive order .”

The Circu it Cour t went on to point out tha t “a pa t ien t’s r igh t to pr ivacy” may be

“ou twe ighed by a board’s need for informa t ion when conduc t ing a lawfu l inves t iga t ion

under i ts s ta tu tory au thor i ty .” The cour t con t inued :

7

(…continued)
Ҥ 10-222 Judicial review.
“(a) Review of final decision. – (1) Except as provided in subsection (b) of
this section, a party who is aggrieved by the final decision in a contested case is
entitled to judicial review of the decision as provided in this section.
(2) An agency, including an agency that has delegated a contested
case to the Office, is entitled to judicial review of a decision as provided in this
section if the agency was a party before the agency or the Office.

***

“(h) Decision. – In a proceeding under this section, the court may:
(1) remand the case for further proceedings;
(2) affirm the final decision; or
(3) reverse or modify the decision if any substantial right of the
petitioner may have been prejudiced because a finding, conclusion, or
decision:

(i) is unconstitutional;
(ii) exceeds the statutory authority or jurisdiction of
the final decision maker;
(iii) results from an unlawful procedure;
(iv) is affected by any other error of law;
(v) is unsupported by competent, material, and
substantial evidence in light of the entire record as submitted; or
(vi) is arbitrary or capricious.”

-12-

“The doc tor has the r igh t under the s ta tu te . . . to f i le a mot ion to
quash or a mot ion for a pro tec t ive order , as does the par ty . Fur ther ,
the doc tor . . . wou ld have the r igh t to do ne i ther , bu t then the
doc tor accep ts the r isk tha t if i t is la ter de termined tha t the
subpoena was lawfu l . . . of perhaps be ing sanc t ioned for h is fa i lure
to turn over those records .”

Turn ing to the app l icab le s ta tu te ,8 the C ircu i t Cour t acknow ledged tha t

“ the s ta tu te imposes the burden of asser t ing tha t [pr ivacy] r igh t on
the doc tor or the pa t ien t . The s ta tu te does no t requ ire the Board ,
even when faced w i th an ob jec t ion , to go to the cour t and seek
in terven t ion of the cour t to enforce the subpoena . Ra ther , the
s ta tu te requ ires tha t the par ty who seeks to asser t the r igh t of
pr ivacy app ly to the cour t and seek the in terven t ion of the cour t .
And tha t the s ta tu te is no t cons t i tu t iona l ly inf irm by v ir tue of
p lac ing tha t ob l iga t ion on the par ty asser t ing the r igh t , and because
the s ta tu te never the less ensures to the par ty w i th the pr ivacy
in teres t an ab i l i ty to seek the in terven t ion of the cour t to pro tec t
tha t r igh t , tha t the s ta tu te is no t cons t i tu t iona l ly inf irm.”

Never the less , the C ircu i t Cour t found tha t an “error of law” was commi t ted in

the admin is tra t ive proceed ings . The cour t found tha t , because the ALJ had dec ided the

case on cross mot ions for summary dec is ions , the record had no t been suff ic ien t ly

deve loped to dec ide whe ther there wou ld be a v io la t ion of the s ta tu te

“ if a doc tor fa i ls to coopera te because of . . . a good fa i th
and reasonab le be l ief tha t [he] had the r igh t to w i thho ld the
documen ts , par t icu lar ly upon the adv ice of counse l , as i t
appears tha t the doc tor ac ted in th is case .”9

8 Maryland Code (2000, 2009 Repl. Vol.), § 4-307(k)(6) of the Health-General Article.

9

In this connection, see Giant of Md. v. State’s Attorney, 274 Md. 158, 179, 334 A.2d 107, 119
(continued…)

-13-

The cour t remanded the case to the Board for the Board to dec ide whe ther Dr . E is t

ac ted “reasonab ly and in good fa i th .” The C ircu i t Cour t a lso s ta ted :

“If , upon an ana lys is by the admin is tra t ive law judge , they found
in th is par t icu lar ins tance tha t * * * the Board’s in teres t d id no t
ou twe igh the pr ivacy in teres ts of the ind iv idua l pa t ien ts * * *
[ then ,] in th is ins tance , those subpoenas were no t lawfu l . . . . In
which case , then [Dr . Eist] would not have been in violation of [the
s ta tu te] because he d idn’ t fa i l to respond to a lawfu l subpoena .”

On remand , the Board aga in referred the case to an ALJ for an ev iden t iary

hear ing on the issues se t for th in the C ircu i t Cour t’s remand order . Af ter hear ing from

several witnesses and developing an extensive record , the ALJ again decided the ma tter

in Dr . E is t’s favor . The ALJ de termined tha t the subpoena was no t lawfu l ly issued

because the Board had fa i led to correc t ly we igh the pa t ien ts’ pr ivacy r igh ts aga ins t the

Board’s in teres t in ob ta in ing the ir records . The ALJ a lso found tha t Dr . E is t had ac ted

in good fa i th because he re l ied upon the adv ice of counse l . Based on these

de termina t ions , the ALJ conc luded tha t Dr . E is t had no t v io la ted § 14-404(a)(33) of the

Hea l th Occupa t ions Ar t ic le . The ALJ’s Proposed Dec is ion recommended tha t the

charges aga ins t Dr . E is t be d ismissed . The Admin is tra t ive Prosecu tor aga in f i led

excep t ions to the Proposed Dec is ion of the ALJ . Af ter a hear ing , the Board dec l ined to

adop t the Proposed Dec is ion and ins tead issued a F ina l Dec is ion sanc t ion ing Dr . E is t

(…continued)
9
(1975) (“‘[T]he fact that failure to comply with the [order] . . . was based on the advice of counsel
is generally held to be no justification,’” quoting Weaver v. State, 244 Md. 640, 644, 224 A.2d 684,
687 (1966)).

w i th a repr imand and a f ine of $5 ,000 .

-14-

The presen t ac t ion for jud ic ia l rev iew was then f i led in the C ircu i t Cour t . The

cour t , in a br ief order , reversed the Board’s dec is ion and ordered the Board to d ismiss

the charges aga ins t Dr . E is t . The Board appea led to the Cour t of Spec ia l Appea ls , and

tha t cour t , in an ex tens ive op in ion , aff irmed the judgmen t of the tr ia l cour t . Board o f

Phys ic ians v . E is t , 176 Md . App . 82 , 932 A .2d 783 (2007) . The Cour t of Spec ia l

Appea ls , l ike the ALJ bu t con trary to the f irs t c ircu i t cour t dec is ion , he ld tha t “ the

burden [was] on the Board to obtain a ruling from a court on the [patients’] privacy

issue” w i th respec t to the subpoenaed records . Board of Physicians v . Eist , supra , 176

Md . App . at 135 , 932 A .2d at 814 . The intermediate appe l la te cour t fur ther he ld tha t ,

un t i l the Board does ob ta in a jud ic ia l ru l ing (176 Md . App . a t 134 , 932 A .2d a t 814) ,

“so long as a doc tor is ac t ing in good fa i th in w i thho ld ing the
subpoenaed records un t i l the pa t ien t w i thdraws h is pr ivacy r igh t
ob jec t ion or a governmen ta l in teres t /pr ivacy in teres t we igh ing
assessmen t is made by a cour t , the phys ic ian is no t fa i l ing to
coopera te w i th a lawfu l inves t iga t ion of the Board .”

A t o ther p laces in i ts op in ion , however , the Cour t of Spec ia l Appea ls seemed to

v iew the “governmen ta l in teres t /pr ivacy in teres t” issue as one wh ich cou ld proper ly be

reso lved in th is jud ic ia l rev iew ac t ion , and the in termed ia te appe l la te cour t he ld (176

Md . a t 120 , 932 A .2d at 805-806):

“[T]he agency record leads us to conc lude that , when the Subpoena
was issued , and un til the patients’ withdrew their privacy right
assertion , the Board’s governmental interest in obtaining Dr . Eist’s
psych ia tr ic records of [the] Pa t ien ts . . . was no t a compe l l ing

-15-

in teres t tha t ou twe ighed the pa t ien ts’ pr ivacy in teres ts in those
records .”

In the f ina l paragraph of i ts op in ion , the Cour t of Spec ia l Appea ls conc luded as fo l lows

(176 Md . a t 135 , 932 A .2d a t 814-815) :

“On the fac ts found by the Board , as supported by substantia l
ev idence in the agency record , the Board’s in teres t in ob ta in ing the
pa t ien ts’ psych ia tr ic records to inves t iga te the s tandard of care
a l lega t ion leve led by Mr . S aga ins t Dr . E is t d id no t ou twe igh the
pa t ien ts’ pr ivacy in teres ts in those h igh ly persona l records . Had
e i ther the Board , Dr . E is t , or the pa t ien ts sough t cour t in terven t ion
in the per iod of t ime soon af ter the Subpoena was issued , the
proper ru l ing by the cour t wou ld have been tha t the Board was no t
en t i t led to the records in ques t ion because d isc los ing them wou ld
violate the patients’ constitutiona l rights. Accordingly, Dr. Eist did
no t , as a ma t ter of law , fa i l to coopera te w i th a lawfu l inves t iga t ion
of the Board by no t furn ish ing the pa t ien ts’ psych ia tr ic records to
the Board , in response to the Subpoena , un t i l the pa t ien ts w i thdrew
the ir pr ivacy ob jec t ion .”

The Board f i led in th is Cour t a pe t i t ion for a wr i t of cer t iorar i wh ich was gran ted .

Board o f Phys ic ians v . E is t, 402 Md . 355 , 936 A .2d 852 (2007) . Dr . Eist did not file

a cross-pe t i t ion for a wr i t of cer t iorar i . The Board’s pe t i t ion presen ted the fo l low ing

two ques t ions (c i ta t ions to the Mary land Code omi t ted) :

“1 . Where , as par t of i ts inves t iga t ion of a comp la in t
a l leg ing tha t a phys ic ian’s psych ia tr ic trea tmen t was
endanger ing pa t ien ts , a profess iona l
l icens ing and
d isc ip l inary board issued a subpoena to the phys ic ian for
pa t ien ts’ men ta l hea l th trea tmen t records and ne i ther the
phys ic ian nor the pa t ien ts moved to quash the subpoena or
to ob ta in a pro tec t ive order on cons t i tu t iona l or o ther
grounds , d id the phys ic ian’s refusa l to d isc lose the
subpoenaed records cons t i tu te a fa i lure to coopera te w i th a

-16-

lawfu l inves t iga t ion conduc ted by the Board under the terms
of the Med ica l Prac t ice Ac t . . . .”

“2 . D id the Cour t of Spec ia l Appea ls commi t revers ib le
error by revers ing an admin is tra t ive agency dec is ion
suppor ted by subs tan t ia l ev idence , fa i l ing to defer to the
agency’s au thor i ty as fac t f inder to draw inferences from the
evidence , substitu ting its judgment for the agency’s
expertise , and imposing upon the agency novel legal burdens
as obs tac les to the exerc ise of i ts s ta tu tory au thor i ty to
inves t iga te and d isc ip l ine phys ic ians?”

We sha l l answer the f irs t ques t ion in the aff irma t ive . Therefore , we need no t , and sha l l

no t , reach the second ques t ion .

II .

A ma jor premise underlying the recommended decisions of the ALJ and the

dec is ion of the Cour t of Spec ia l Appea ls is tha t the Board bears the burden of

ins t i tu t ing a jud ic ia l proceed ing to enforce the subpoena . A t such proceed ing , a cour t

wou ld we igh the pa t ien ts’ pr ivacy in teres ts in the subpoenaed records aga ins t the

Board’s need for those records . The Cour t of Spec ia l Appea ls he ld tha t , in the absence

of a jud ic ia l proceed ing to enforce the subpoena , Dr . E is t , ac t ing in good fa i th , cou ld

no t be gu i l ty of fa i l ing to coopera te w i th the Board’s inves t iga t ion . The in termed ia te

appe l la te cour t a lso seemed to ho ld tha t the issue of we igh ing the Board’s need for the

records aga ins t the pa t ien ts’ pr ivacy r igh ts cou ld proper ly be reached in the presen t

admin is tra t ive / jud ic ia l rev iew ac t ion , and tha t , on th is record , the pa t ien ts’ pr ivacy

r igh ts ou twe ighed the Board’s need . Consequen t ly , accord ing to the Cour t of Spec ia l

Appea ls , Dr . E is t d id no t fa i l to coopera te by refus ing to turn over the records .

-17-

The premise , tha t the Board had the burden of ins t i tu t ing a jud ic ia l ac t ion to

enforce the subpoena , is incons is ten t w i th the app l icab le s ta tu tes and is no t suppor ted

by the Mary land cases re l ied on by the ALJ and the Cour t of Spec ia l Appea ls .

Moreover , the issue of we igh ing the pa t ien ts’ pr ivacy r igh ts aga ins t the Board’s need

for the records shou ld have been reso lved in an ac t ion by the pa t ien ts or Dr . E is t to

quash the subpoena or for a pro tec t ive order . I t was no t an appropr ia te issue in the

presen t admin is tra t ive / jud ic ia l rev iew ac t ion . In th is ac t ion , the und ispu ted ev idence

show ing Dr . E is t’s de l ibera te refusa l to comply w i th the subpoena in a t ime ly manner

c lear ly suppor ted the Board’s dec is ion .

Turn ing f irs t to the app l icab le s ta tu tes , §§14-401 e t seq . of the Hea l th

Occupa t ions Ar t ic le of the Code comprehens ive ly au thor ize the Board to take

d isc ip l inary ac t ion aga ins t hea l th care prov iders , to inves t iga te a l lega t ions of conduc t

warran t ing d isc ip l inary ac t ion , to ho ld hear ings , e tc . Sec t ion 14-401( i) prov ides tha t

the “Board may issue subpoenas . . . in connec t ion w i th any inves t iga t ion . . . .” Sec t ion

14-206(a) of the Hea l th Occupa t ions Ar t ic le re i tera tes tha t “ the Board may issue

subpoenas . . . in connec t ion w i th any inves t iga t ion under th is t i t le . . . .” As ear l ier

no ted , supra n . 4 , §14-404(a)(33) of the Hea l th Occupa t ions Ar t ic le au thor izes the

Board to “repr imand any l icensee , p lace any l icensee on proba t ion , or suspend or

revoke a l icense if the l icensee : * * * (33) Fa i ls to coopera te w i th a lawfu l inves t iga t ion

conduc ted by the Board .” Sec t ion 14-405 .1 of the Hea l th Occupa t ions Ar t ic le prov ides

tha t , if the Board f inds grounds to suspend or revoke a phys ic ian’s l icense , or to

-18-

repr imand a phys ic ian , the Board may a lso impose a f ine upon the phys ic ian .10

The per t inen t s ta tu tory prov is ions govern ing the conf iden t ia l i ty and d isc losure

by hea l th care prov iders of med ica l records , inc lud ing men ta l hea l th med ica l records ,

are se t for th in Mary land Code (2000 , 2009 Rep l . Vo l .) , T i t le 4 , Sub t i t le 3 , §§ 4-301

through 4-309 of the Hea l th-Genera l Ar t ic le . The bas ic sec t ion dea l ing w i th

inves t iga t ions and the d isc losures of med ica l records “w i thou t [the] au thor iza t ion of

[the] person in in teres t” is § 4-306 . Tha t sec t ion prov ides in re levan t par t as fo l lows

(emphas is added) :

“(b) . . . A hea l th care prov ider shall disclose a med ica l record
wi thout the au thor ization of a person in interest.”

* * *

“(2) Sub jec t to the add i t iona l l imi ta t ions for a med ica l record
deve loped pr imar i ly in connec t ion w i th the prov is ion of men ta l
hea l th serv ices in § 4-307 of th is sub t i t le , to health professional
licens ing and d isciplinary boards , in accordance with a subpoena
for med ical records for the so le purpose of an inves t iga t ion
regard ing :

10 Section 14-405.1 states as follows:

Ҥ 14.4-05.1. Penalty instead of suspension or in addition to
suspension or revocation.

(a) Imposition of penalty. – If after a hearing under § 14-405
of this subtitle the Board finds that there are grounds under § 14-404
of this subtitle to suspend or revoke a license to practice medicine or
osteopathy, or to reprimand a licensed physician or osteopath, the
Board may impose a fine subject to the Board’s regulations:
(1) Instead of suspending the license; or
(2) In addition to suspending or revoking the license
or reprimanding the licensee.
(b) Disposition of funds. – The Board shall pay any fines
collected under this section into the General Fund.”

-19-

( i) L icensure , cer t if ica t ion , or d isc ip l ine of a hea l th
profess iona l ; or
( i i) The improper prac t ice o f a hea l th pro fess ion . . . .”

* * *

Sec tion 4-306(b)(6) contains , inter alia , statutory forms of notice to accompany

subpoenas for med ical records , and each mandates in pertinent part as follows (ita lics

supplied) :

“P lease examine these papers carefu l ly . IF YOU HAVE ANY
OBJECTION TO THE PRODUCTION OF THESE DOCUMENTS,
YOU MUST FILE A MOTION FOR A PROTECTIVE ORDER OR
A MOTION TO QUASH THE SUBPOENA ISSUED FOR THESE
DOCUMENTS UNDER MARYLAND RULES 2-403 AND 2-510
NO LATER THAN FIFTEEN (15) DAYS FROM THE DATE
THIS NOTICE IS MAILED . For examp le , a pro tec t ive order may
be gran ted if the records are no t re levan t to the issues in th is case ,
the reques t undu ly invades your pr ivacy , or causes you spec if ic
harm.”

The Genera l Assemb ly , by us ing the word “mus t ,” expressed the in ten t tha t a mot ion

to quash or a mot ion for a pro tec t ive order is the exc lus ive remedy for a rec ip ien t of the

subpoena who ob jec ts to the produc t ion of the records .

Sec t ion 4-307 , concern ing men ta l hea l th med ica l records , re i tera tes tha t , in

connec t ion w i th a Board inves t iga t ion , records mus t be prov ided to the Board

regard less of a pa t ien t’s au thor iza t ion , and tha t the appropr ia te procedure for we igh ing

a pa t ien t’s pr ivacy in teres ts aga ins t the Board’s need for the records is for the pa t ien t

or the hea l th care prov ider to f i le a cour t ac t ion to quash the subpoena or for a

pro tec t ive order . Sec t ion 4-307(k)(1)(v)(1) s ta tes :

-20-

“(1) A hea l th care prov ider sha l l d isc lose a med ica l record
w i thou t the au thor iza t ion of a person in in teres t :

* * *

“(v) In accordance w i th a subpoena for med ica l records on
spec if ic rec ip ien ts :
1 . To hea l th profess iona l l icens ing and d isc ip l inary
boards for the so le purpose of an inves t iga t ion regard ing l icensure ,
cer t if ica t ion , or d isc ip l ine of a hea l th profess iona l or the improper
prac t ice of a hea l th profess ion . . . .”

W i th respec t to a hea l th care prov ider’s or pa t ien t’s remedy , § 4-307(k)(6) s ta tes

(emphas is added) :

“(6) Th is subsec t ion may no t prec lude a hea l th care prov ider ,
a rec ip ien t , or person in in teres t from asser t ing in a motion to
quash or a mo tion for a protective order any constitutional right or
o ther legal authori ty in opposition to disclosure .”

Thus the statute grants standing to the health care provider , as well as others opposed

to disclosure , to ra ise the patient’s constitutional rights or other grounds for

nond isc losure , by f i l ing in cour t a mot ion to quash or a mot ion for a pro tec t ive order .

Consequen t ly , the above-rev iewed s ta tu tory prov is ions make i t c lear tha t , when

the Board is inves t iga t ing a compla in t aga ins t a hea l th care prov ider and subpoenas

cer ta in med ica l records in h is or her possess ion , the hea l th care prov ider is requ ired to

prov ide the med ica l records to the Board regard less of the pa t ien t’s au thor iza t ion .

Con trary to a cr i t ic ism expressed by the ALJ and the Cour t of Spec ia l Appea ls ,

however , ne i ther the s ta tu tes nor the Board trea t the hea l th care prov ider’s ob l iga t ion

-21-

to prov ide the records as an “abso lu te” one . If the pa t ien t and /or the hea l th care

prov ider be l ieve tha t there are grounds for no t produc ing the records , the pa t ien t or the

hea l th care prov ider “mus t” f i le a mot ion to quash the subpoena or a mo t ion for a

pro tec t ive order pursuan t to Mary land Ru les 2-403 or 2-510 . Th is is the rou te chosen

by the Genera l Assemb ly for the reso lu t ion of cons t i tu t iona l or o ther ob jec t ions to the

subpoena . The Genera l Assemb ly d id no t prov ide for an ac t ion by the Board to enforce

the subpoena .11 Furthermore , the General Assembly did not provide that the health care

prov ider cou ld refuse to comply w i th the subpoena , fa i l to f i le a mo t ion to quash or a

mot ion for a pro tec t ive order , and la ter , in a d isc ip l inary ac t ion , defend on the ground

tha t the pa t ien t’s pr ivacy r igh ts were infr inged by the subpoena .12

The Cour t of Spec ia l Appea ls and the ALJ , in we igh ing the pa t ien ts’ pr ivacy

11 When the General Assembly intends that a state agency issuing the subpoena should bring a
court action to enforce the subpoena when there is a failure to comply, the General Assembly knows
how to provide for such a procedure. See Maryland Code (1984, 2009 Repl. Vol.), §20-1010(c) of
the State Government Article, relating to the enforcement of subpoenas issued by the Maryland
Commission on Human Relations; Maryland Code (1975, 2007 Repl. Vol.), § 11-701(c) of the
Corporations and Associations Article, providing, inter alia, that when there is a “refusal to obey
a subpoena,” the Securities Commissioner may apply to a court for enforcement of the subpoena.

Whether the Board, in its discretion, could bring a judicial action to enforce the subpoena is an
issue which was not raised before us. The General Assembly’s use of the word “MUST” in § 4-
306(b)(6) of the Health Occupations Article may suggest that a motion to quash or a motion for a
protective order are the exclusive methods to resolve challenges to the subpoenas. On the other
hand, § 4-306(b)(6) relates just to recipients of a subpoena. Because the issue was not raised, we
shall not explore it further. We hold only that, in light of the statutory provisions, the Board is not
required to bring a judicial action to enforce the subpoena.

It is noteworthy that the General Assembly provided for alternative proceedings to discipline
12
a health care provider who failed to comply with a subpoena issued by the Board. In addition to the
present administrative/judicial review proceeding under § 14-404(a)(33) of the Health Occupations
Article, § 14-206(b) of the Health Occupations Article provides, inter alia, that if “a person disobeys
a subpoena from the Board,” a court “may punish the person as for contempt of court.” See also § 4-
309 of the Health-General Article, relating to a health care provider’s refusal to disclose records.

-22-

r igh ts aga ins t the Board’s need for the med ica l records in Dr . E is t’s possess ion ,

extensively relied upon this Court’s opinion in Doe v . Maryland Board of Soc ial Work

Exam iners , 384 Md . 161 , 862 A .2d 996 (2004) , and upon the Court of Special Appea ls’

earl ier op inion in Dr . K . v . S tate Board of Physic ian Quality Assurance , 98 Md .App .

103 , 632 A .2d 453 (1993) , cert . denied , 334 Md . 18 , 637 A .2d 1191 , cert . denied , 513

U .S . 817 , 115 S .Ct . 75 , 130 L .Ed .2d 29 (1994) . The Doe case invo lved a subpoena for

records of a soc ia l worker concern ing two of the soc ia l worker’s c l ien ts . Dr . K , l ike the

presen t case , invo lved a subpoena for a psych ia tr is t’s med ica l records re la t ing to one

of the psych ia tr is t’s pa t ien ts . In bo th of these cases , the appe l la te cour ts , inter a lia ,

we ighed the agenc ies’ need for the subpoenaed records aga ins t the c l ien ts’ and

pa t ien t’s pr ivacy r igh ts in the records . The Cou r t o f Appea l s in Doe and the Cou r t o f

Spec ia l Appea l s in D r . K he ld tha t the agenc ie s ’ need fo r the reco rd s outwe ighed the

pr ivacy in teres ts of the c l ien ts in Doe and the pa t ien t in Dr . K . Wha t is s ign if ican t for

purposes of the presen t case , and wha t was over looked by the ALJ and the Cour t of

Spec ia l Appea ls in the presen t case , is tha t bo th Doe and Dr . K were jud ic ia l ac t ions to

quash the subpoenas issued by the admin is tra t ive agenc ies dur ing the agenc ies’

investigations . In both cases , the trial courts denied motions to quash the subpoenas ,

and these dec is ions were aff irmed on appea l . Doe and Dr . K were no t , l ike the presen t

case , ac t ions for jud ic ia l rev iew of f inal ad jud ica tory dec is ions by the admin is tra t ive

agenc ies .13

13

In fact, this point was emphasized in Dr. K, 98 Md. App. at 121, 632 A.2d at 462, as follows:

(continued…)

-23-

O ther cases in th is Cour t i l lus tra te tha t a mot ion to quash , or a mot ion for a

protective order , or a motion for enforcement of the subpoena if provided for by statute ,

are the appropr ia te rou tes for ra is ing cha l lenges to admin is tra t ive subpoenas . See , e .g . ,

Unnamed A t torney v . A t torney Gr ievance Comm iss ion , 409 Md . 509 , 976 A .2d 267

(2009); Lub in v . Agora , 389 Md . 1 , 882 A .2d 833 (2005); State Commission v . Freedom

Express , 375 Md . 2 , 825 A .2d 354 (2003); Dep’t of Social Services v . Ste in , 328 Md . 1 ,

612 A .2d 880 (1992) ; Unnamed A t ty . v . A t torney Gr iev . Comm’n, 303 Md . 473 , 494

A .2d 940 (1985); Fred W . Allnu tt , Inc . v . Comm’r , Lab . & Ind . , 289 Md . 35 , 421 A .2d

1360 (1980) ; Banach v . S ta te Comm’n On Human Re la t ions , 277 Md . 502 , 356 A .2d

242 (1976) . The par t ies have no t ca l led to our a t ten t ion any op in ion of th is Cour t ,

invo lv ing cha l lenges to an admin is tra t ive subpoena , wh ich wou ld sanc t ion the

procedure requ ired by , and the dec is ions of , the ALJ and the rev iew ing cour ts in the

presen t case .14

13

(…continued)

“We emphasize that as yet no charges have been filed and no
disciplinary action has been taken against Dr. K. At this stage, it is
just as likely as not that the Board will agree with Dr. K’s defense to
the complaints filed against him and take no disciplinary action.
Further, there are statutory provisions protecting patient A’s records
from being used for any purpose other than this investigation of
Dr. K. Patient A may be entitled to sue for civil damages for any
unauthorized disclosure of her medical records.”

Even if §§ 4-306 and 4-307 of the Health-General Article had not expressly provided that
14
Dr. Eist’s exclusive remedy was to file in the Circuit Court a motion to quash the subpoena or a
motion for a protective order, the result would be the same. It is a settled principle of Maryland law
that, when a tribunal having jurisdiction issues to a person an order, that person may not refuse to
obey the order on the theory that it is unlawful or unwarranted and, in a later collateral proceeding
such as a contempt action or other disciplinary action like the present one, defend by attacking the
earlier order. Instead, that person is required to challenge the order directly, in a proceeding
(continued…)

-24-

Under § 4-306 and 4-307 of the Hea l th-Genera l Ar t ic le of the Mary land Code ,

Dr . E is t’s exc lus ive jud ic ia l remedy was to f i le , in the C ircu i t Cour t for Mon tgomery

Coun ty , a mot ion to quash the subpoena or a mot ion for a pro tec t ive order . He was no t

en t i t led to refuse t ime ly compl iance w i th the subpoena , refra in from f i l ing a mot ion to

quash or a mo t ion for a pro tec t ive order , and la ter , in th is co l la tera l con tes ted case

admin is tra t ive proceed ing , cha l lenge the subpoena .

(…continued)
14
available for such challenges, such as a motion to quash, an appeal, etc. See, e.g., Attorney Griev.
Comm. v. Garland, 345 Md. 383, 398-399, 692 A.2d 465, 472-473 (1997); Harford Co. Educ. Ass’n
v. Board, 281 Md. 574, 585-588, 380 A.2d 1041, 1048-1050 (1977); Shapiro v. Ryan, 233 Md. 82,
86-87, 195 A.2d 596, 598-599 (1963); Sheets v. City of Hagerstown, 204 Md. 113, 124-125, 102
A.2d 734, 738-739 (1954); Donner v. Calvert Distillers Corp., 196 Md. 475, 488-489, 77 A.2d 305,
310 (1950). See also United States v. United Mine Workers, 330 U.S. 258, 293-294, 67 S.Ct. 677,
696, 91 L.Ed. 884, 912-913 (1947). There is no reason why the same principle should not be
applicable to an administrative agency such as the Board, where the Legislature authorized the
agency to issue a subpoena and authorized a court to punish a person, “as for contempt of court,”
who disobeyed the subpoena. See § 14-206(b) of the Health Occupations Article.

It should be pointed out that the above-discussed principle would not apply in cases involving
subpoenas issued by federal grand juries or federal agencies. The reason for this is that denial of
a motion to quash by a federal trial court is not appealable even though the denial of the motion
terminates the proceeding in the trial court. See United States v. Ryan, 402 U.S. 530, 91 S.Ct. 1580,
29 L.Ed.2d 85 (1971); Cobbledick v. United States, 309 U.S. 323, 60 S.Ct. 540, 84 L.Ed. 783 (1940);
Alexander v. United States, 201 U.S. 117, 26 S. Ct. 356, 50 L.Ed.686 (1906). If the recipient of a
federal subpoena desires to continue challenging it after the trial court denies a motion to quash, the
recipient must disobey the subpoena and challenge it in a collateral proceeding such as a contempt
action. This Court, however, has consistently refused to follow the non-appealability rule adopted
by the Supreme Court in Alexander, Cobbledick, and Ryan. When a Maryland trial court denies a
motion to quash or a motion for a protective order, and that action terminates the proceedings in the
court, the trial court’s denial is appealable even though administrative proceedings, or investigative
proceedings, or separate court proceedings where the recipient of the subpoena was not a party, are
ongoing. See, e.g., Unnamed Attorney v. Attorney Grievance Commission, 409 Md. 509, 513-514
n.2, 976 A.2d 267, 270 n.2 (2009); St. Joseph’s v. Cardiac Surgery, 392 Md. 75, 88-91, 896 A.2d
304, 312-313 (2006); Dep’t of Social Services v. Stein, 328 Md. 1, 20-22, 612 A.2d 880, 885-886
(1992); Unnamed Atty. v. Attorney Griev. Comm’n, 303 Md. 473, 480-483, 494 A.2d 940, 943-945
(1985); In Re: Special Investigation No. 244, 296 Md. 80, 83-86, 459 A.2d 1111, 1114 (1983).

-25-

JUDGMENT OF THE COURT OF SPECIAL
A P P E A L S R E V E R S E D A N D C A S E
REMANDED TO THE COURT OF SPECIAL
A P P E A L S W I T H D I R E C T I O N S T O
REVERSE THE JUDGMENT OF THE
CIRCUIT COURT FOR MONTGOMERY
COUNTY AND REMAND THE CASE TO
THE CIRCUIT COURT WITH DIRECTIONS
TO AFFIRM THE DECISION OF THE
M A R Y L A N D S T A T E B O A R D O F
PHYSICIANS . RESPONDENT TO PAY THE
COSTS IN THIS COURT AND IN THE
COURT OF SPECIAL APPEALS .

IN THE COURT OF APPEALS OF MARYLAND

No . 110
Sep tember Term, 2007
_________________________________________

MARYLAND STATE BOARD OF
PHYSICIANS ,

v .

HAROLD I . EIST

__________________________________________

Bell , C . J .
Harre ll
Battaglia
Greene
E ldr idge , John C . (Re t ired , Spec ia l ly
Ass igned)
Raker , Irma S . (Re t ired , Spec ia l ly
Assigned)
Cathell , Dale R . (Retired , Spec ially
Assigned)

JJ .

__________________________________________

Dissenting Opinion by Raker , J . , which
Be ll , C .J . , and Ca the ll , J . , Join .
_________________________________________

Filed: January 21 , 2011

Raker , J . , dissen ting , joined by Bell , C .J . and Cathell , J .

The C ircuit Cour t for Montgomery County reversed the decision of the Maryland

S tate Board of Physicians on Apr il 5 , 2006 , and remanded the ma tter to the Board w ith

ins truct ions to dismiss the charge against Dr . Eist . Earlier , in August of 2005 , the same

cour t ru led , from the bench , tha t the Board had commi t ted an error of law when i t

de termined , in ter alia , tha t a doc tor who fa i ls to produce records in response to a

Board- issued subpoena necessar i ly v io la tes Mary land Code (1981 , 2009 Rep l . Vo l .) §

14-404(a)(33) of the Hea l th Occupa t ions Ar t ic le , even if he ac ted in good fa i th and in

re l iance upon the adv ice of counse l . The cour t then remanded the ma t ter to the Board

for a fu l l con tes ted case hear ing before the ALJ . I wou ld aff irm the C ircu i t Cour t for

Mon tgomery Coun ty on the grounds tha t Dr . E is t , in re ly ing upon the adv ice of h is

counse l , d id no t fa i l to coopera te w i th a lawfu l inves t iga t ion conduc ted by the Board .1

Dr . E is t was represented on this issue by a highly respected and competent a ttorney ,

Arm in U . Kuder . I t is c lear from the fac ts tha t Mr . Kuder was adv is ing Dr . E is t

throughou t these proceed ings . Under the c ircums tances presen ted here in , and whe ther

a doctor must file a mo tion to quash a subpoena or simply may decline to provide the

med ica l records , i t seems to me tha t a physic ian shou ld be ab le to re ly upon and fo l low

the adv ice of h is a t torney .

I g leaned the fo l low ing fac ts re la ted to th is represen ta t ion from the op in ion of the

1 Because the Court of Special Appeals decided the case on other grounds, i.e., that the
Board was not entitled to the records, the court did not consider whether Dr. Eist acted in
good faith and/or upon the advice of counsel in refusing to furnish the records in response
to the subpoena.

Cour t of Spec ia l Appea ls , wh ich no ted as fo l lows :

-2-

“Dr . E is t then ca l led Armin U . Kuder , Esqu ire , for adv ice .
Mr . Kuder to ld h im tha t [ the Board] was wrong and tha t i t
was essen t ia l to ob ta in the pa t ien ts’ permiss ion before
d isc los ing the ir men ta l hea l th records . . . .

Dr . E is t d id no t rece ive [ the Board’s second] le t ter un t i l Ju ly
7 , 2001 . He con tac ted Mr . Kuder , who on Ju ly 11 responded
to [ the Board] in wr i t ing . Mr . Kuder gave background
information about the Domestic Case for context , and said
tha t Dr . E is t was prepar ing , and shor t ly wou ld send , a
wr i t ten response to Mr . S’s unprofess iona l conduc t
a l lega t ion . Mr . Kuder wen t on to say tha t , to the ex ten t the
Board was cons ider ing the ‘a l lega t ions’ aga ins t Dr . E is t to
inc lude Mr . S’s compla in t abou t the propr ie ty of the
trea tmen t be ing rendered to Pa t ien ts A , B , and C ( i .e . , the
s tandard of care a l lega t ion) , ‘Dr . E is t is under the
impress ion tha t he does no t have h is pa t ien ts’ permiss ion to
revea l the ir conf idences , and tha t no cour t has we ighed the
necess i ty for v io la t ing the ir conf idences based upon the
unsuppor ted a l lega t ions of someone w i th a c lear conf l ic t of
in teres t , and a des ire to v io la te those conf idences .’”

Board o f Phys icians v . E ist , 176 Md . App . 82 , 104-06 , 932 A .2d 783 , 796-97 (2007) .

I wou ld aff irm the judgmen t of the Court of Spec ia l Appea ls , a lbe i t on d ifferen t

grounds than tha t cour t he ld . I wou ld ho ld tha t Dr . E is t re l ied in good fa i th upon the

adv ice of h is counse l and tha t he d id no t fa i l to coopera te w i th an inves t iga t ion of the

Board .

I am au thor ized to s ta te tha t Ch ief Judge Rober t M . Be l l and Judge Da le Ca the l l

join in the views expressed in this dissenting opinion .

McLaren Reg.’l Med. Ctr. v. City of Owosso

Tax Exemption

McLaren Reg.’l Med. Ctr. v. City of
Owosso, Wexford Med. Grp. No. 244386, 250197 (Mich. Ct. App. Aug. 24, 2004)

The Court of Appeals of Michigan held that a medical group, a medical management
company, and a regional medical center were not exempt from taxation of their
real and personal property. The court held that the public health tax exemption
is not available for a fairly typical medical practice whose patients are expected
to pay for medical care received, through either private or government insurance
programs.

The court first determined that the medical group was not exempt because,
of the over 44,000 patient visits it had per year, it provided no-cost services
to only 13 patients in a two-year span. The fact that the group had accepted
an unlimited number of Medicare and Medicaid patients was irrelevant.

The court also held that the medical management company and regional medical
center were not exempt because they did not establish that they operated other
than as typical private medical centers, rather than as organizations for the
benefit of the public at large. Furthermore, the regional medical center did
not use the property sought to be exempt from property tax as an inpatient
hospital, but as an extension of the hospital outpatient department.

McMillan v. Oconee Mem’l Hosp.

McLeay v. Metro. Hosp. Auth. (Summary)

EMPLOYMENT LAW

McLeay v. Metro. Hosp. Auth., No. M2006-01369-COA-R3-CV (Tenn. Ct. App. Nov. 20, 2008)

The Tennessee Court of Appeals affirmed the trial court’s rulings and held that a physician’s assistant ("PA") was justly terminated for completing a surgical consent without the presence, supervision, or approval of a physician and that any due process violations during her administrative hearing were cured by the de novo trial court hearing. Based on the evidence presented to the trial court, the appellate court concluded that the PA’s termination was based on her failure to follow policies and procedures and not for retaliatory reasons. Additionally, even though the trial court set limitations on the time allowed for the examination of witnesses, the PA was afforded sufficient opportunity to present evidence in court, including her own testimony. Therefore, any alleged procedural deficiencies at the administrative level were corrected by the de novo hearing in the trial court.

 

 

McLeay v. Bergan Mercy Health Systems Corp.

John F. McLeay, M.D., appellee, v.
Bergan Mercy Health Systems
Corp., doing business as
Bergan Mercy Medical Center, appellant.

McLeay v. Bergan Mercy Health Sys.
(not designated for permanent
publication)

Filed February 27, 2001.    No. A-99-474.

    Appeal from the District Court for Douglas County: Joseph
S. Troia, Judge. Reversed and vacated, and cause remanded for a new trial.

    P. Shawn McCann and Joseph S. Daly, of Sodoro, Daly &
Sodoro, for appellant.

    David S. Houghton and J.P. Sam King, of Leiben, Whitted,
Houghton, Slowiaczek & Cavanagh, P.C., for appellee.

    Irwin, Chief Judge, and Sievers and Carlson, Judges.

    Carlson, Judge.
INTRODUCTION

    Bergan Mercy Health Systems Corp., doing business as
Bergan Mercy Medical Center (Bergan Mercy), appeals from a $451,000 judgment
entered against it pursuant to a jury verdict in this breach of contract action.
For the reasons set forth below, we vacate the jury’s verdict, reverse the
judgment of the district court, and remand the cause for a new trial.

BACKGROUND

    John F. McLeay, M.D., is a general surgeon in Omaha, in
solo private practice since 1963. He has been a member of Bergan Mercy’s medical
staff since that date and, at all times relevant, had hospital privileges at
both Bergan Mercy and St. Joseph Hospital.

    On or about October 19, 1992, McLeay received a letter
from Dr. Richard Feldhaus, then chief of the medical staff at Bergan Mercy and a
member of the hospital’s surgery advisory committee. In that letter, Feldhaus
advised McLeay that the committee had been authorized to undertake an
investigation of patient care provided by McLeay to unspecified patients at
Bergan Mercy. McLeay received no further communications from Bergan Mercy until
December 2, when he received a letter from Richard Hachten II, president of
Bergan Mercy, advising him that a monitoring requirement for surgeries had been
imposed upon him. Shortly after receiving this letter, McLeay had a personal
conversation with Feldhaus, complaining that he had not received any advance
notice about the monitoring requirement. On December 28, McLeay received a
telephone call from Dr. Dwaine Peetz, chairman of the hospital’s surgical
advisory committee. Peetz asked McLeay to meet with him and two other members of
an ad hoc committee to review some medical charts and to discuss the monitoring
requirement. McLeay met with Peetz and another member of the ad hoc committee,
Dr. Daniel McKinney, on the morning of December 29. At that time, McLeay was
told the names of eight patients whom he had treated over the past 15 months and
whose quality of care underlay the imposition of the monitoring requirement. No
files or charts regarding those patients were available for review at that
meeting. The discussion focused upon the committee’s decision to continue the
monitoring requirement. According to McLeay, the discussion resulted in an oral
agreement that (1) the monitoring requirement would remain in place for 6 to 12
months, (2) the monitoring requirement would be kept confidential, and (3) the
committee would provide McLeay with a “laundry list” of relatively minor
surgical procedures that could be performed without a monitor.

    On January 8, 1993, McLeay met again with Peetz, Feldhaus,
and McKinney of the ad hoc committee. On that date, the eight cases were again
discussed. At the conclusion of that meeting, McLeay was presented with a copy
of the minutes of a previous meeting of the ad hoc committee held the previous
day without McLeay. Those minutes included the following:

Based on the information available to the Committee, the members
decided on the following actions:
    1. An imposition of a
restriction of Dr. John McLeay’s surgical privileges in which there is a
requirement that the physician must have an assistant for all surgery
performed. Dr. Anthony Pantano or a Board Certified surgeon may serve as the
assistant.
    2. Dr. McLeay will be removed from the call
list for the Emergency Medicine department.

The minutes also
contained the following statement: “These minutes are privileged communications
and are not subject to disclosure or legal discovery proceedings under [Neb.
Rev. Stat. ??] 71.2046 to 2048.” McLeay signed the minutes, but later testified
that he understood from his meeting on January 8 that the monitoring requirement
would continue for 6 months to 1 year and that he would be provided with a
laundry list.

    On January 12, 1993, McLeay was presented with a copy of
the minutes from a meeting of the ad hoc committee held the previous day. Those
minutes were stamped “confidential” at the top and again contained the
statement: “These minutes are privileged communications and are not subject to
disclosure or legal discovery proceedings under [Neb. Rev. Stat. ??] 71.2046 to
2048.” Those minutes stated, inter alia:

    Following discussion, motion was made and
unanimously passed approving the restriction of Dr. John McLeay’s surgical
privileges as follows:
    1. An imposition of . . . a
requirement that the physician must have an assistant for all surgery
performed. Dr. Anthony Pantano or a Board Certified surgeon may serve as the
assistant.
    . . . .
    4. The
following minor procedures were agreed upon as those which Dr. McLeay could
perform without an assistant:
    1. removal of skin
lesions
    2. carpal tunnel repair
    3.
outpatient hernia repair defined as inguinal hernia including direct,
and
    4. repair of lacerations.
    5.
The surveillance of this restriction will be maintained through the normal
monitoring mechanisms.
    This recommendation will be
forwarded to the Board of Directors and is effective January 11, 1993 subject
to subsequently [sic] Board approval.

McLeay signed those minutes on
a signature line which stated that those minutes were “accepted and agreed to.”

    On or about February 11, 1993, McLeay received a letter
from Hachten advising McLeay that Bergan Mercy’s board of directors had approved
and accepted the recommendations outlined in the minutes signed by McLeay on
January 12. On February 18, McLeay wrote to Peetz asking that a laundry list be
provided and listing several suggested procedures he would like to have included
on that list. On or about February 26, McLeay received a letter from Hachten
advising him that the monitoring requirement had been reported to the National
Practitioner Data Bank (NPDB), a national information clearinghouse established
by the U.S. government pursuant to the Health Care Quality Improvement Act of
1986 (HCQIA), 42 U.S.C. ? 11101 et seq. (1994).

    On March 12, 1993, McLeay received a letter from the NPDB
advising him of the information reported by Bergan Mercy and notifying him of
the procedures to correct any inaccurate information. McLeay responded to the
NPDB letter, asserting that the information was inaccurate; the record, however,
contains no indication as to the effect of this response. In a letter dated May
13, 1993, Hachten advised McLeay that the conditions set out in the January 12
minutes would not be modified in any manner.

    On December 2, 1993, McLeay sent a letter to Peetz
requesting reinstatement of full surgical privileges without a monitoring
requirement. That request was denied by the board of directors, according to a
letter from Hachten dated June 1, 1994. In that letter, Hachten further stated
that “the Board of Directors did request the Medical Executive Committee and the
Surgery Ad Hoc Review Committee to develop criteria you may strive to meet in
order to have this requirement removed.”

    McLeay then hired an attorney and had a petition of a
lawsuit drafted, and on September 9, 1994, he had a copy of that unfiled
petition delivered to Bergan Mercy’s lawyers. On December 9, Feldhaus called
McLeay to schedule a meeting with him. McLeay asked to have his attorney
accompany him, but Feldhaus said attorneys were not invited. McLeay refused to
attend without his attorney. Shortly after the conclusion of that telephone
call, Hachten telephoned McLeay and read him a letter advising McLeay that his
privileges at Bergan Mercy had been summarily suspended, ostensibly because of
information relating to a procedure performed by McLeay in 1991. McLeay received
that letter a few days later.

    On or about December 13, 1994, Hachten sent McLeay a
letter advising him that the medical executive committee had voted to continue
his summary suspension pending a final decision by the board of directors. On or
about January 11, 1995, McLeay, through his attorney, requested a hearing before
the medical executive committee. A hearing was scheduled for March 9, but on or
about March 8, McLeay requested a postponement; the hearing was never held. The
NPDB was notified of the summary suspension, and on or about March 23, McLeay
received a copy of the NPDB report, which stated that he had been summarily
suspended because of incompetence, negligence, and malpractice.

    On February 26, 1996, McLeay filed an amended petition in
Douglas County District Court alleging breach of contract and asserting that he
had suffered lost income, damage to his career and reputation, and unspecified
general damages. The case was tried to a jury beginning on November 9, 1998.

    After Bergan Mercy rested, the jury was instructed that
McLeay’s action alleged two counts: breach of contract and breach of the
hospital bylaws. On November 16, the jury returned a verdict of $451,000 for
breach of agreement and $1 for breach of bylaws. Bergan Mercy’s subsequent
motions for judgment notwithstanding the verdict and for a new trial were
overruled on March 30, 1999. Bergan Mercy timely filed the instant notice of
appeal on April 29.

ASSIGNMENTS OF ERROR

    Bergan Mercy’s broad attack upon the decision of the
district court consists of a fusillade of 23 asserted and assorted procedural,
evidentiary, and legal errors. All but lost in that assault is the first portion
of assignment of error No. 17, in which Bergan Mercy asserts that the trial
court erred by “admitting into evidence testimony concerning whether Bergan was
required to file a Data Bank Report.” As further explained below, we find that
particular assertion of error to be dispositive of this appeal. Accordingly, we
will not definitively address the remaining assignments of error.

STANDARD OF REVIEW

    A civil verdict will not be set aside where evidence is in
conflict or where reasonable minds may reach different conclusions or
inferences, as it is within the jury’s province to decide issues of fact.
Ratigan v. K.D.L., Inc., 259 Neb. 283, 609 N.W.2d 376 (2000). A jury
verdict will not be set aside unless clearly wrong, and it is sufficient if any
competent evidence is presented to the jury upon which it could find for the
successful party. Id.

    When reviewing a question of law, an appellate court
reaches a conclusion independent of the lower court’s ruling. Ethanair Corp.
v. Thompson, 252 Neb. 245, 561 N.W.2d 225 (1997).

    The admissibility of evidence is reviewed for an abuse of
discretion where the Nebraska Evidence Rules commit the evidentiary question at
issue to the discretion of the trial court. State v. Allen, 252 Neb. 187,
560 N.W.2d 829 (1997). A trial court has the discretion to determine the
relevance and admissibility of evidence, and such determinations will not be
disturbed absent an abuse of that discretion. Blue Valley Co-op v. National
Farmers Org., 257 Neb. 751, 600 N.W.2d 786 (1999).

ANALYSIS

Dispositive Issue: Inappropriate Expert Testimony

    Bergan Mercy asserts that the trial court erred in
permitting Kelly Clarke, an attorney called by McLeay as an expert witness, to
present his opinion as to whether Bergan Mercy was obligated by law to report
its peer review decision to the NPDB. Bergan Mercy had objected to that the
testimony on the ground, inter alia, that “it’s not proper use of expert
testimony.” We agree.

    In Kaiser v. Western R/C Flyers, 239 Neb. 624, 477
N.W.2d 557 (1991), the trial court had been presented with the issue of whether
the relevant zoning ordinance precluded operation of a model airplane flying
field near the village of Springfield. Both parties had introduced expert
testimony in support of their respective interpretations of the Springfield
zoning ordinances. The Supreme Court held that this evidence was irrelevant,
explaining:

[E]xpert testimony is relevant and admissible only if it tends to
help the trier of fact understand the evidence or to determine a fact issue
and that expert testimony concerning the status of the law does not tend to
accomplish either of these goals. Expert testimony concerning a question of
law is generally not admissible in evidence. . . . The interpretation of a
zoning ordinance presents a question of law, and we decline to consider any
expert testimony as to what constitutes a “commercial” or a “private”
recreational use under the Springfield zoning ordinances.

(Citations
omitted.) Id. at 628, 477 N.W.2d at 560. Similarly, in Sports Courts
of Omaha v. Brower, 248 Neb. 272, 534 N.W.2d 317 (1995), a law professor
testified, over objection, that the actions taken by an attorney serving as
monitor and agent of a corporation constituted a disposition of collateral under
provisions of Neb. U.C.C. ? 9-504 (Reissue 1980) and that appropriate notice was
not given. The Supreme Court held that the trial court erred in permitting the
professor to testify on what the Supreme Court deemed to be a matter of
statutory interpretation.

    Clearly, by these standards, Clarke’s testimony, which had
the sole purpose of advising the court of the status of the law as it relates to
reporting to the NPDB, was irrelevant and inadmissible. It was accordingly an
abuse of discretion for the district court to admit it. A judicial abuse of
discretion exists when the reasons or rulings of a trial judge are clearly
untenable, unfairly depriving a litigant of a substantial right and a just
result. Westgate Rec. Assn. v. Papio-Missouri River NRD, 250 Neb. 10, 547
N.W.2d 484 (1996).

    However, our conclusion that the trial court erred in
admitting Clarke’s testimony does not end our inquiry. To constitute reversible
error in a civil case, the admission or exclusion of evidence must unfairly
prejudice a substantial right of a litigant complaining about evidence admitted
or excluded. Sacco v. Carothers, 257 Neb. 672, 601 N.W.2d 493 (1999). We
believe such prejudice occurred in this case. “Proof in the trial of a jury case
should be confined to the issues made by the pleadings, and the admission of
testimony wrongfully received in a case tried to a jury is prejudicial error
where it may have influenced the verdict.” Witte v. Lisle, 184 Neb. 742,
746, 171 N.W.2d 781, 783 (1969). Obviously, permitting the jury to decide, as it
necessarily had to do under the evidence and instructions, whether Bergan Mercy
made its report because the law required it or because it freely chose to do so,
may well have influenced the verdict. As we suggest later herein, it appears
that the question of whether Bergan Mercy was required by law to report its
actions against McLeay is not a jury question. But examination of the jury
instructions reveals that the trial court submitted to the jury the fact of
Bergan Mercy’s filing of an adverse action report with the NPDB as part of what
McLeay needed to prove with respect to his claim that Bergan Mercy breached its
bylaws. In short, a matter upon which expert testimony was wrongfully received
was submitted to the jury, when as we later suggest the question is one of law
for the court. Nebraska case law makes it clear that unless it appears from the
record that evidence wrongfully admitted in a jury trial did not affect the
result of the trial unfavorably to the party against whom it was admitted, its
reception must be considered prejudicial error. Westgate Rec. Assn.,
supra; Singles v. Union P. R.R. Co., 174 Neb. 816, 119 N.W.2d 680
(1963); Fries v. Goldsby, 163 Neb. 424, 80 N.W.2d 171 (1956); Lane v.
Burt County Rural Public Power Dist., 163 Neb. 1, 77 N.W.2d 773 (1956).
Under these circumstances, we find the admission of Clarke’s expert testimony to
be prejudicial error which necessitates a new trial.

Remaining Assignments of Error

    Our holding that a new trial is required makes it
undesirable and inefficient for us to attempt to decide Bergan Mercy’s remaining
assigned errors. We reach this conclusion because the majority of the other
assigned errors appear to stem from the fact that this case was seemingly tried
with little regard for the role that the HCQIA would play (including as a matter
of law) in a case centered around a hospital’s discipline of a staff physician.
The general rule is that an appellate court is not obligated to engage in
analysis not necessary to adjudicate the case and controversy before it.
Springer v. Bohling, 259 Neb. 71, 607 N.W.2d 836 (2000); Kelly v.
Kelly, 246 Neb. 55, 516 N.W.2d 612 (1994). However, it is also true that
even where a cause is remanded for new trial, other issues raised, but not
necessary for disposition of the instant case, should be addressed where doing
so would be in the interest of judicial economy. See, State v. Porter,
235 Neb. 476, 455 N.W.2d 787 (1990); Smith v. Kellerman, 4 Neb. App. 178,
541 N.W.2d 59 (1995). But, we conclude that attempting to decide the remaining
issues in view of the fact that a new trial is required would not be judicial
economy.

    Many of the remaining issues raised on appeal, for example
exhaustion of remedies, the “primary jurisdiction doctrine,” the parol evidence
rule, and claims of statutory immunity or common-law privilege for actions
arising out of the peer review process, are matters that would have been better
addressed by various pretrial procedural avenues. We believe, although we do not
decide the matter, that the core facts of this case are such that the immunity
provisions of the HCQIA are likely implicated in a substantial way. For an
excellent discussion of the HCQIA, see Bryan v. James E. Holmes Regional
Medical Center, 33 F.3d 1318, 1337 (11th Cir. 1994), a case described by the
court as “a disciplined physician attempt[ing] to have a jury revisit the
adverse decision of his medical colleagues.” In Bryan, supra, on the
basis of immunity under the HCQIA, a $4.2 million judgment in favor of a
disciplined doctor against the hospital was reversed, including a state law
claim that the hospital had breached its bylaws upon which the jury had found in
the doctor’s favor and awarded millions of dollars in damages. The Bryan
court also said that the HCQIA immunity is a “question of law for the court to
decide and [the immunity] may be resolved whenever the record in a particular
case is sufficiently developed.” 33 F.3d at 1332.

    It is of no small consequence that the HCQIA creates a
presumption favoring immunity which McLeay has the burden to overcome. Thus, in
the interest of judicial economy, we do not attempt to decide all assignments of
error, knowing that after this appeal a retrial is likely to be very different
from the first trial.

    We recognize that the answer of Bergan Mercy does not
directly allege that its actions concerning McLeay are immunized under the
HCQIA. Nonetheless, the answer does allege that Bergan Mercy “properly filed”
notice of its adverse action and “was required to file the report by federal
law.” Finally, as said earlier, immunity under the HCQIA is a question of law
which Congress intended to be resolved at the early stages of litigation, such
as by a motion for summary judgment. Babcock v. Saint Francis Med. Ctr.,
4 Neb. App. 362, 543 N.W.2d 749 (1996).

    We further note, though not raised by the parties in their
briefs, lurking issues of potential contractual construction. Bergan Mercy
appears to suggest that it should be excused from performance of any contractual
obligation of confidentiality because it could not legally meet that obligation
due to the reporting requirements of the HCQIA. Presuming, but not deciding,
that Bergan Mercy was so obligated, the obvious question then arises, whether by
using the term “confidentiality” the parties intended for Bergan Mercy to
totally suppress all communication about the consequences of the peer review
process, regardless of the HCQIA, or whether they intended that Bergan Mercy
would simply refrain from making any communications not statutorily required. In
this regard, we read the evidence (and McLeay’s contentions) to be that Bergan
Mercy made no disclosure except within the peer review process and to the NPDB.
If the parties intended that Bergan Mercy would break the law, then McLeay would
be precluded from seeking judicial enforcement of that portion of the contract,
since the courts will not aid either party to an illegal contract, Springer
v. Kuhns, 6 Neb. App. 115, 571 N.W.2d 323 (1997). These issues, again, would
appear to be prime candidates for early resolution upon our remand.

CONCLUSION

    We conclude that the trial court committed prejudicial and
reversible error in permitting McLeay to introduce expert testimony relating to
the question of whether Bergan Mercy was obligated by law to report its peer
review process actions to the NPDB. We accordingly vacate the jury’s verdict,
reverse the judgment of the trial court, and remand the cause to the district
court for a new trial.