Palmer v. ST. JOSEPH HEALTHCARE

• Decision Date: 28 July 2003
• Docket Number: No. 22,728.,22,728.
• Citation: 77 P.3d 560,134 N.M. 405
• Parties: John PALMER, Delilah McGuire, and Lois Anderson, individually and on behalf of all other similarly situated persons, Plaintiffs-Appellants, v. ST. JOSEPH HEALTHCARE P.S.O., INC., St. Joseph Healthcare System, and Catholic Health Initiatives, all corporations, Defendants-Appellees.
• Court: Court of Appeals of New Mexico

77 P.3d 560

134 N.M. 405

John PALMER, Delilah McGuire, and Lois Anderson, individually and on behalf of all other similarly situated persons, Plaintiffs-Appellants, v. ST. JOSEPH HEALTHCARE P.S.O., INC., St. Joseph Healthcare System, and Catholic Health Initiatives, all corporations, Defendants-Appellees.

No. 22,728.

Court of Appeals of New Mexico.

July 28, 2003.

Certiorari Granted September 15, 2003.

Michael C. Parks, Senior Citizens Law Office, Inc., Albuquerque, NM, for Appellants.

Charles A. Pharris, Gary J. Van Luchene, Keleher & McLeod, P.A., Albuquerque, NM, for Appellees.

Certiorari Granted, No. 28,233, September 15, 2003.

OPINION

JONATHAN B. SUTIN, Judge.

{1} In this appeal, we address federal preemption in Medicare Plus Choice programs, known as M+C programs. Defendant St. Joseph Healthcare P.S.O., Inc. (St.Joseph) operated an M+C program under contract with a federal agency known as the Health Care Financing Administration (HCFA).¹ Plaintiffs, including the certified class, sued St. Joseph and related entities (Defendants) for damages and declaratory and injunctive relief alleging misrepresentation by St. Joseph in regard to M+C program benefits. Plaintiffs appeal a summary judgment dismissing their action on the ground of express federal preemption and also on the basis of conflict preemption on the ground that Defendants' compliance with both state law and directions of the regulatory agency would have been impossible under the circumstances. We reverse.

BACKGROUND

A. Preliminary: The Posture of the Case on Appeal

{2} For the most part, we set out the facts as recited by Defendants in their motion for summary judgment. Although Plaintiffs argued in their summary judgment response and now argue on appeal that Defendants' recitation of the facts is not accurate in certain respects, Plaintiffs failed below to properly challenge Defendants' asserted facts and to request the district court to deny summary judgment on the ground that genuine issues of material fact existed. Plaintiffs, as well, fail on appeal to seek reversal of the summary judgment on the ground genuine issues of material fact exist. We therefore address the facts according to the procedure agreed to and followed by the parties. See Barncastle v. Am. Nat'l Prop. & Cas. Cos., 2000-NMCA-095, ¶ 5, 129 N.M. 672, 11 P.3d 1234 (stipulated facts); Barnae v. Barnae, 1997-NMCA-077, ¶ 14, 123 N.M. 583, 943 P.2d 1036 (attorney representations); Gonzales v. Pub. Employees Ret. Bd., 114 N.M. 420, 422, 839 P.2d 630, 632 (Ct.App.1992) (agreement that facts were not in dispute); see also Montano v. Allstate Indem. Co., 2003-NMCA-066, ¶ 7, 133 N.M. 696, 68 P.3d 936 (citing foregoing cases and reviewing summary judgment de novo due to agreed-on posture of case on appeal); Ontiveros Insulation Co. v. Sanchez, 2000-NMCA-051, ¶¶ 8-9, 129 N.M. 200, 3 P.3d 695 (distinguishing the standard of review applicable to judgments "on the merits" as opposed to "summary judgment" in case decided on cross-motions for summary judgment).

B. Background on Medicare

{3} Among its various modifications to Medicare, as part of the fiscal 1997 budget bill, Congress established the M+C program. See Balanced Budget Act of 1997(BBA), Pub.L. No. 105-33, 111 Stat. 251, 275-328 (codified at 42 U.S.C. §§ 1395w-21 to w-28). "Participation in the [M+C] [p]rogram is conditioned on providers offering basic Medicare benefits, meeting certain other statutorily defined criteria, and neither charging more in premiums nor furnishing less in supplemental benefits than the levels established through regulation by the Secretary of Health and Human Services (the Secretary)." Massachusetts Ass'n of Health Main. Orgs. v. Ruthardt, 194 F.3d 176, 178 (1st Cir.1999) (citing §§ 1395w-22, w-24 to w-26).

{4} Under the M+C program, eligible individuals (members) are entitled to elect to receive Medicare benefits through a Medicare + Choice plan of health insurance offered by a Medicare+Choice organization (M+C organization), which includes provider-sponsored organizations known as PSOs. § 1395w-21(a)(1)(B), (a)(2)(A); 42 C.F.R. § 422.2 (2000); see § 1395w-25(d). In addition to receiving funding from Medicare for M+C programs, M+C organizations charge their enrollee beneficiaries (members) a combination of monthly premiums and co-pays for various benefit plans. M+C plans typically provide greater benefits than those provided under traditional Medicare. See, e.g., Hofler v. Aetna U.S. Healthcare of Cal., Inc., 296 F.3d 764, 766 (9th Cir.2002) (per curiam)

.

{5} HCFA is the administrative subdivision of the United States Department of Health and Human Services that directly administers the entire Medicare program. McCall v. PacifiCare of Cal., Inc., 25 Cal.4th 412, 106 Cal.Rptr.2d 271, 21 P.3d 1189, 1193 (2001); Brogdon v. Nat'l Healthcare Corp., 103 F.Supp.2d 1322, 1327 (N.D.Ga.2000). In order to operate M+C plans, M+C organizations must have a contract with HCFA. The contract and plan benefits customarily run for a calendar year.

{6} During 2000, St. Joseph, a PSO, operated an M+C program under contract with HCFA, providing members a combination of Medicare benefits. However, in July 2000, St. Joseph decided to withdraw as of December 31, 2000, from the M+C market due to low reimbursement rates and high costs. St. Joseph notified its members of this decision in October 2000. In that notice, members were informed of their health care options. Other M+C organizations in the United States either withdrew from the program or drastically altered their plans.

{7} Congress acted to alleviate this health care concern. It enacted Title VI of the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000 (BIPA), Pub.L. No. 106-554, 114 Stat. 2763. BIPA provided for increased reimbursement rates and allowed M+C organizations, such as St. Joseph, that had not renewed their contracts with HCFA, to continue their participation in the program. In addition, BIPA allowed such M+C organizations, including St. Joseph, which had refrained from submitting proposed rates and benefits for approval by HCFA for 2001, to revise its rates and benefits. See BIPA, § 604(b).

{8} BIPA was signed into law on December 21, 2000. In response, St. Joseph decided to rescind its withdrawal from the program and to continue offering M+C benefits. But St. Joseph was concerned about its ability to continue to offer benefits during January and February 2001 and sought to assure that its members would not be without a plan for those two months while it prepared and submitted its rates and benefits for HCFA approval for the period of March through December 2001. So, on December 21, 2000, St. Joseph sought direction from HCFA on how St. Joseph could provide that January-February 2001 seamless coverage.

C. Background of Misrepresentation/Breach of Contract Issues

{9} In response to St. Joseph's contact, on December 22, 2000, HCFA sent a letter to St. Joseph outlining six requirements that St. Joseph had to meet to retain coverage for its members during January and February 2001. Two of the requirements were (1) the re-enrollment of all of its members for the January-February period, and (2) the submission of separate "ACR" proposals to HCFA outlining rates and benefits for the January-February 2001 period and also for the March-December 2001 period. ACRs were documents, usually submitted annually, outlining proposed rates and benefits for specific periods, with actuarial and historical support. As indicated in this opinion, St. Joseph was required to submit new ACRs because M+C organizations that had not renewed their HCFA contracts had not submitted proposed rate and benefit changes to HCFA, which normally would have happened in July 2000 for the 2001 calendar year.

{10} Also on December 22, 2000, HCFA faxed to St. Joseph a letter for St. Joseph to send to its members along with an abbreviated member enrollment form also prepared by HCFA. After St. Joseph received and reviewed the letter, but before St. Joseph sent the letter to its members, St. Joseph and HCFA personnel spoke on the telephone. Out of concern about language in HCFA's letter, a St. Joseph representative proposed a change in the letter to indicate that current plan rates and benefits may change after March 1 because of the new March-December 2001 ACRs that HCFA was requiring. St. Joseph's concern was that the letter, drafted by HCFA, would create confusion among recipients, including the possibility that the letter could be read as representing that current (2000 through February 2001) plan rates or benefits would remain the same throughout 2001. St. Joseph knew at the time that it planned to substantially change the benefit plans offered to members beginning March 2001.

{11} In the December 22, 2000, telephone call, St. Joseph proposed specific changes to the letter to remove the possibility of confusion, including a statement that rates and benefits would continue to be the same in January and February 2001 only. But HCFA did not allow St. Joseph to change the letter as proposed. HCFA stated that it would not allow mention of the potential change in benefits because no such change had yet been approved by HCFA. HCFA approved St. Joseph's ACRs for January and February 2001, which continued the rates and benefits as they were in 2000. St. Joseph then sent the letter to its members on December 26, 2000, in the form required by HCFA. In bold print, the letter informed the members that St. Joseph "will continue to offer St. Joseph MedicarePlus to people with Medicare ... effective January 1, 2001 through December 31, 2001," and that "[t]he benefits, premium and copayment amounts will remain the same as they have been in 2000." Again, in bold print, the letter told the members to complete and sign an enrollment form if they wanted "to continue to receive [their] benefits and health care from St. Joseph MedicarePlus beginning January 1, 2001."

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