HomeMy WebLinkAbout2016-0488
UPMC ALTOONA, UPMC : IN THE COURT OF COMMON PLEAS OF
BEDFORD D/B/A UPMC : CUMBERLAND COUNTY, PENNSYLVANIA
BEDFORD MEMORIAL, UPMC :
EAST, UPMC HAMOT, UPMC :
HORIZON, MAGEE-WOMENS : CIVIL ACTION – LAW
HOSPITAL OF UPMC, UPMC :
MCKEESPORT, UPMC MERCY, :
UPMC NORTHWEST, UPMC : NO. 2016-0488 CIVIL
PASSAVANT, UPMC PRESBY- :
TERIAN SHADYSIDE, UPMC :
ST. MARGARET, AND UPMC, :
Plaintiffs :
:
vs. :
:
HIGHMARK INC. D/B/A :
HIGHMARK BLUE CROSS BLUE :
SHIELD IN WESTERN :
PENNSYLVANIA D/B/A :
HIGHMARK BLUE SHIELD IN :
CENTRAL PENNSYLVANIA, :
AND KEYSTONE HEALTH :
PLAN WEST, INC., :
Defendants :
IN RE: PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
BEFORE EBERT AND BREWBAKER, J.J.
OPINION AND ORDER
FACTS AND PROCEDURAL HISTORY
Plaintiffs are a collective group of twelve non-profit hospitals, all operating under the
umbrella of the thirteenth plaintiff, the non-profit University of Pittsburgh Medical Center
1
(“UPMC”). Defendant Highmark, Inc. (“Highmark”) is a non-profit corporation providing
1
Plaintiffs’ Complaint, ¶¶ 5-17, filed January 27, 2016, and Defendants’ Answer, ¶¶ 5-17, filed July 28, 2016.
health insurance in the United States, while Defendant Keystone Health Plan West, Inc.
2
(“Keystone”) is a non-profit subsidiary of Highmark which processes health insurance claims.
Beginning in 1999, UPMC, on behalf of most of its hospitals, and Highmark entered into
Medicare Advantage (“MA”) Agreements under which Highmark administers the provision of
health care services to Medicare beneficiaries on a managed care basis, known as Medicare part
C, or Medicare Advantage, for the Federal Centers for Medicare and Medicaid Services
3
(“CMS”). The original 1999 agreements, in Exhibit I, state that “\[p\]ayment under this
Agreement will be derived from the amounts reimbursed to Health Plan \[Keystone\] by the
Health Care Financing Administration (HCFA)….These rates shall be recalculated annually,
based on the payment received by Health Plan from HCFA, and on the federal regulations in
4
effect for each year….” Furthermore, the agreements state that “¶ 7.1: Payment. Health Plan
agrees that Provider’s payment for Covered Services shall be at the rates set forth in the Provider
payment rates attached hereto as Exhibit I and made a part hereof.” However, the agreements
were subsequently amended by the parties multiple times, with the most recent amendment in
2008. The MA Agreements between UPMC and Defendants establish the rate at which
56
Highmark will reimburse Plaintiffs for the services provided. With one exception, the
language from the 2008 amendment, in relevant part, reads as follows:
Exhibit I (Inpatient Services)
: All applicable Inpatient Payment
elements are taken from the Medicare Inpatient PPS Pricer, as updated on
October 1 of each year, to be effective January 1 through December 31 of
the following year. If Health Plan determines, in its sole discretion, that
2
Plaintiffs’ Complaint and Defendants’ Answer, ¶¶ 18-19.
3
Plaintiffs’ Complaint and Defendants’ Answer, ¶¶ 22-23, 25.
4
UPMC Northwest entered into its Agreement with Highmark in 2005, and thus it does not have this 1999
language; instead, the contractual payment language mimics that seen in the 2008 amendments with the other
plaintiffs. Plaintiffs’ Appendix pg. 798.
5
Plaintiffs’ Complaint with Exhibits and Defendants’ Answer, ¶ 27.
6
The Agreement with UPMC Northwest ¶ 7.1 reads: “Health Plan agrees that Provider’s payment for Covered
Services shall be in accordance with the methodologies and payment rates set forth in the Provider payment rates
attached hereto as Exhibit I and made a part hereof.” (Emphasis in original).
2
there has been a material change in the Medicare inpatient reimbursement
methodology, Health Plan and Provider agree to renegotiate the terms of
the inpatient reimbursement methodology.
Exhibit I (Outpatient Services):
Payment will be at (under seal)
percentage* of the Health Plan Institutional Outpatient Fee Schedule.
*The fee schedule multiplier will be adjusted on January 1, 2008 and
annually each subsequent January 1 by the CMS conversion factor update
percentage. This percentage is defined as the total percentage change in
the CMS Outpatient Prospective Payment System Ambulatory Payment
Classification conversion factor, when compared to the prior year,
7
inclusive of all adjustments and/or other factors applied by CMS.
Exhibit I
: By the signature below, Health Plan and Provider agree that
Exhibit I
is hereby amended by modifying payment rates and other
payment terms and conditions for those covered inpatient and outpatient
hospital services provided to eligible Members of Health Plan as of the
Effective Date of this Amendment and thereafter through the remaining
Exhibit I
term of the Agreement as set forth on the additional pages of
Exhibit I
attached hereto, which additional pages shall become a part of to
the Agreement.
Whole Agreement
: No representation, promises or inducements have
been made by the parties other than as appear in this Amendment. The
Agreement remains in full force and effect, except as amended herein or
as previously amended by the parties as evidenced by a formal written
executed amendment. This Amendment, upon execution by the parties,
becomes part of the Agreement. This Amendment constitutes the entire
understanding of the parties hereto and supersedes any prior oral or
written communications, representations or agreements pertaining to the
8
subject matter hereof.
In 2011 and 2012, Congress passed laws requiring a reduction in federal government
spending under Title I of the Budget Control Act of 2011; as a result and pursuant to the
Sequestration Law and Presidential Order of March 1, 2013, CMS began to apply a 2% reduction
7
UPMC Bedford and UPMC Northwest have arrangements requiring reimbursement on the basis of CMS’s
Ambulatory Payment Classification (“APC”) methodology; but this is a distinction without a difference, as neither
allow for a reduction based on CMS’ sequestration reduction.
8
Plaintiffs’ Complaint with Exhibits and Defendants’ Answer, ¶ 7.
3
9
to payments made by CMS to MA plans. In order to explain the effect of this reduction, CMS
issued a memorandum on May 1, 2013, which noted in relevant part:
Reducing Payments to Contracted Providers
Section 1854(a)(6)(B)(iii) of the Social Security Act prohibits CMS from
interfering in the payment arrangements between MAOs and contract
providers. The statute specifies that CMS ‘may not require any MA
organization to…require a particular price structure for payment under such a
contract…’ Thus, whether and how sequestration might affect an MAO’s
payments to its contracted providers are governed by the terms of the contract
between the MAO and the provider. We note that MAOs must follow the
prompt pay provisions established in their contracts with providers and to pay
10
providers under the terms of those contracts….
On or about October 28, 2013, Highmark notified UPMC that as of January 1, 2014 it
would be applying the 2% sequestration reduction to all claims submitted under the MA
11
agreements. UPMC responded with a letter to Highmark, also dated October 28, 2013, in
12
which they contested the reductions under the terms of their contract. Highmark then
responded on December 30, 2013, indicating that the payment reductions were “necessary and
13
appropriate.” Highmark began applying the 2% payment reduction for all claims that UPMC
14
has submitted under the MA agreements as of January 1, 2014. Plaintiffs’ Complaint and
Defendants’ Answer thereto do not reveal that there was any negotiation between the parties
regarding Highmark’s passing on of the 2% reduction to UPMC.
UPMC filed a complaint on January 27, 2016, alleging three counts, all sounding in
breach of contract. Highmark filed preliminary objections and oral argument on the objections
occurred on June 3, 2016. On June 13, 2016, the Court overruled the preliminary objections in
the nature of a demurrer as to Counts II and III, and sustained the preliminary objection for
9
Plaintiffs’ Complaint and Defendants’ Answer, ¶¶ 38-39.
10
Plaintiffs’ Complaint with Exhibit and Defendants’ Answer, ¶ 41.
11
Plaintiffs’ Complaint and Defendants’ Answer, ¶ 42.
12
Plaintiffs’ Complaint and Defendants’ Answer, ¶ 44.
13
Plaintiffs’ Complaint and Defendants’ Answer, ¶ 45.
14
Plaintiffs’ Complaint and Defendants’ Answer, ¶ 46.
4
failure to conform to a law or rule of court to Count III, ordering UPMC to submit copies of the
underlying agreements to Highmark. Highmark filed an Answer and New Matter on July 28,
2016, and UPMC filed a reply on August 17, 2016. UPMC then moved for partial summary
judgment on September 12, 2016, and listed the matter for oral argument on December 2, 2016.
DISCUSSION
UPMC and Highmark’s relationship is purely contractual; indeed, it is the contracts that
provide the connection between the two organizations, and counsel for both sides admit that the
contracts control the outcome of this motion. Furthermore, given the notification provided by
CMS accompanying its 2% reduction, it is clear that the issue before this Court involves a purely
contractual analysis.
A motion for summary judgment is proper where there are no genuine issues of material
fact and the moving party is entitled to judgment as a matter of law. Pa. R.C.P. 1035.2. “A
motion for summary judgment may be properly granted only if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” Washington Federal Savings and Loan Association v. Stein, 515
A.2d 980, 981 (Pa. Super. 1986). The reviewing court must view the record in the light most
favorable to the nonmoving party, resolving all doubts as to the existence of a genuine issue of
material fact against the moving party. Basile v. H & R Block, Inc., 761 A.2d 1115, 1118 (Pa.
2000). The court may grant summary judgment only where the right to such a judgment is clear
and free from doubt. Marks v. Tasman, 589 A.2d 205, 206 (Pa. 1991).
5
Under the terms of the agreements, amended last in 2008, and as applied to inpatient
services, the parties agreed that if there was “a material change in the Medicare inpatient
reimbursement methodology,” they would renegotiate the terms of their contract. In regard to
outpatient services, amended last in 2008, the parties agreed either that the “payment would be at
(under seal) conversion factor update percentage of the Health Plan Institutional Outpatient Fee
Schedule,” or that they would be based on the Health Plan Methodology, under which if there
was a material change, they would again renegotiate the terms of their contract. In direct
contravention of this agreement, when facing a reduction in its contract with CMS, Highmark
unilaterally reduced its payments to UPMC.
Highmark argues that the 2008 amendment is not in effect, but that instead, the terms of
15
the 2008 amendment merely supplement the original 1999 contract. While a reading of the
2008 amendment indicates that additional pages of Exhibit I, shall become “a part of” Exhibit I,
an examination of the specific provisions included in the 2008 amendment provides some clarity
in this regard.
The 1999 agreement, Exhibit I, Section 1.1 provides as follows: “Payment under this
Agreement will be derived from the amounts reimbursed to Health Plan by the Health Care
Financing Administration (HCFA)….These rates shall be recalculated annually, based on the
payment received by Health Plan from HCFA, and on the federal regulations in effect for each
year which govern how Health Plan is paid by HCFA….” As previously noted, the 2008
amendment, which is not limited to a single year duration, as were previous amendments, sets
forth the exact methodology used to determine the reimbursement rates mentioned in the
provision above. Assuming arguendo that the 1999 language still has any effect, it is clearly
15
Previous amendments to the Agreements speak in terms of “superseding and replacing” Exhibit I from the 1999
agreements. While the 2008 amendment does not have this same language, what it does say is significant, as is
discussed in the remainder of this opinion.
6
supplemented by the 2008 amendment which provides specific formulas to determine the rates of
16
reimbursement. As a result, the reduction mandated by CMS did not affect the reimbursement
17
calculations from Highmark to UPMC.
In further support of this conclusion, the 2008 amendment to the agreements provides
Exhibit I
that “ is hereby amended by modifying payment rates and other terms and
conditions….” (emphasis in original). The specifics of Exhibit I in the 2008 amendment
thereafter provide the formulae under which the payments are calculated. Additionally, the
amendment mandates that the parties renegotiate the terms if there is a material change in the
reimbursement methodology. Even if the CMS reduction had affected the reimbursement
calculations, the 2008 amendment mandated that before unilaterally passing on the reduction
Highmark would renegotiate with UPMC. As there is absolutely no claim that Highmark ever
attempted to engage in any negotiations with UPMC, it acted in breach of their agreement.
Highmark next argues, somewhat hypocritically, that paragraph 8 of the 1999 agreement,
stating that the parties “shall at all times maintain an effective liaison and close cooperation…to
provide Covered Services…at the most reasonable cost consistent with the quality standards of
care,” requires UPMC to accept Highmark’s passing-on of CMS’ 2% reduction. Not only does
the contract explicitly require renegotiation in such a situation, but contractual language
requiring cooperation in no way implies that UPMC should suffer alone, while Highmark
continues on without consequence. While implying that UPMC is being unreasonable in not
16
It is a widely accepted principle of contract law that the specific controls the general. See e.g., Minnotte’s Appeal,
411 Pa. 492, 496, 192 A.2d 394, 396 (Pa. 1963), “specific provisions ordinarily will be regarded as qualifying the
meaning of broad general terms in relation to a particular subject.” (Further citations omitted).
17
An examination of Exhibit 1 to Plaintiff’s Motion for Partial Summary Judgment, the Affidavit of Joseph T.
Chuba, reveals that the 2% reduction by CMS did not affect the Medicare Inpatient PPS Pricer or the Highmark
Medicare Advantage hospital outpatient fee schedule, which are the bases of the two formulas used to calculate the
reimbursement from Highmark to UPMC as established in the 2008 amendment. This Affidavit was not countered
or argued against by Highmark, nor did it present a counter-affidavit in any of the numerous filings and briefs in this
case.
7
simply accepting full responsibility for the 2% reduction, Highmark ignores the fact that the
basis of this lawsuit is its attempt to do the very same thing.
Highmark’s final argument is that UPMC waived its right to object to Highmark’s
unilateral action. Highmark argues that because UPMC and Highmark settled other contractual
issues arising under a consent agreement, and Highmark did not “preserve” this issue during that
negotiation and settlement, they have waived their right to further pursue it. This argument is
disingenuous for two reasons. First, UPMC clearly objected to Highmark’s unilateral change in
reimbursement by its letter of October 28, 2013, in which it responded to Highmark’s
notification of the reduction. Second, and perhaps more significant, is the fact that UPMC filed
its claim well before the statute of limitations had run. As this action rests in breach of contract,
18
there is a four-year statute of limitations. Highmark began reducing its payments to UPMC on
January 1, 2014, and UPMC filed the instant suit on January 27, 2016. Waiver is clearly
inapplicable to this case.
Highmark also argues that because discovery is incomplete and remains open until April
17, 2017, summary judgment is inappropriate at this time. This is incorrect. No additional
discovery is required regarding the terms of the MA Agreements and the interpretation of that
language is clear and free from doubt. Therefore, summary judgment is appropriate at this time
on Count I of the complaint.
Finally, while UPMC argues collateral estoppel on the basis of the Allegheny Court
decision in Butler Healthcare Providers, et al. v. Highmark, Inc. and Keystone Health Plan
West, Inc., GD-14-016452 (Ct. Com. Pl. Allegheny Cty., May 6, 2015), because UPMC prevails
18
42 Pa.C.S. § 5525(a).
8
on the merits of its first issue, the Court will not be addressing the applicability of Butler to the
instant case.
ORDER
nd
AND NOW, this 22 day of December, 2016, upon consideration of Plaintiffs’ Motion
for Partial Summary Judgment, along with the briefs and arguments related thereto, the Motion is
GRANTED
hereby . Judgment is entered in favor of Plaintiffs as to Count I of the Complaint,
ORDERED
and the parties are hereby to meet and discuss regarding the final amount of
damages to be awarded to UPMC. A conference with the Court will be scheduled to address the
results of that discussion on Wednesday, March 1, 2017 at 1:30 p.m., unless the parties notify the
Court that such a conference is not necessary.
BY THE COURT,
__________________________
Jessica E. Brewbaker, J.
Hubert X. Gilroy, Esquire
George B. Faller, Jr., Esquire
10 East High Street
Carlisle, PA 17013
Leon F. DeJulius, Jr., Esquire
Rebekah B. Kcehowski, Esquire
500 Grant Street, Suite 4500
Pittsburg, PA 15219
Matthew E. Hamlin, Esquire
1700 Bent Creek Blvd., Suite 160
P. O. Box 659
Mechanicsburg, PA 17055-0659
Daniel I. Booker, Esquire
P. Gavin Eastgate, Esquire
William J. Sheridan, Esquire
225 Fifth Avenue
Pittsburgh, PA 15222
9
UPMC ALTOONA, UPMC : IN THE COURT OF COMMON PLEAS OF
BEDFORD D/B/A UPMC : CUMBERLAND COUNTY, PENNSYLVANIA
BEDFORD MEMORIAL, UPMC :
EAST, UPMC HAMOT, UPMC :
HORIZON, MAGEE-WOMENS : CIVIL ACTION – LAW
HOSPITAL OF UPMC, UPMC :
MCKEESPORT, UPMC MERCY, :
UPMC NORTHWEST, UPMC : NO. 2016-0488 CIVIL
PASSAVANT, UPMC PRESBY- :
TERIAN SHADYSIDE, UPMC :
ST. MARGARET, AND UPMC, :
Plaintiffs :
:
vs. :
:
HIGHMARK INC. D/B/A :
HIGHMARK BLUE CROSS BLUE :
SHIELD IN WESTERN :
PENNSYLVANIA D/B/A :
HIGHMARK BLUE SHIELD IN :
CENTRAL PENNSYLVANIA, :
AND KEYSTONE HEALTH :
PLAN WEST, INC., :
Defendants :
IN RE: PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
BEFORE EBERT AND BREWBAKER, J.J.
ORDER
nd
AND NOW, this 22 day of December, 2016, upon consideration of Plaintiffs’ Motion
for Partial Summary Judgment, along with the briefs and arguments related thereto, the Motion is
GRANTED
hereby . Judgment is entered in favor of Plaintiffs as to Count I of the Complaint,
ORDERED
and the parties are hereby to meet and discuss regarding the final amount of
damages to be awarded to UPMC. A conference with the Court will be scheduled to address the
results of that discussion on Wednesday, March 1, 2017 at 1:30 p.m., unless the parties notify the
Court that such a conference is not necessary.
BY THE COURT,
__________________________
Jessica E. Brewbaker, J.
Hubert X. Gilroy, Esquire
George B. Faller, Jr., Esquire
10 East High Street
Carlisle, PA 17013
Leon F. DeJulius, Jr., Esquire
Rebekah B. Kcehowski, Esquire
500 Grant Street, Suite 4500
Pittsburg, PA 15219
Matthew E. Hamlin, Esquire
1700 Bent Creek Blvd., Suite 160
P. O. Box 659
Mechanicsburg, PA 17055-0659
Daniel I. Booker, Esquire
P. Gavin Eastgate, Esquire
William J. Sheridan, Esquire
225 Fifth Avenue
Pittsburgh, PA 15222
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