Foundation Health v. Westside Ekg Assoc.
| Decision Date | 19 October 2006 |
| Docket Number | No. SC05-870.,No. SC05-871.,No. SC05-872.,SC05-870.,SC05-871.,SC05-872. |
| Citation | 944 So.2d 188 |
| Parties | FOUNDATION HEALTH, et al., Petitioners, v. WESTSIDE EKG ASSOCIATES, Respondent. Health Options, Inc., et al., Petitioners, v. Westside EKG Associates, Respondent. Humana Medical Plan, Inc., etc., Petitioner, v. Westside EKG Associates, Respondent. |
| Court | Florida Supreme Court |
Craig J. Trigoboff and Glenn Jerrold Waldman of Waldman, Feluren, Hildebrant and Trigoboff, P.A., Weston, FL, for Petitioners Foundation Health, A Florida Health Plan, Inc., and Vista Health Plan, Inc. f/k/a HIP Health Plan of Florida, Inc.
Nancy W. Gregoire, W. Edward McIntyre, and Daniel Alter of Bunnell, Woulfe, Kirschbaum, Keller, McIntyre and Gregoire, P.A., Fort Lauderdale, FL, for Petitioners Health Options, Inc. and Health Options Connect, Inc. f/k/a Principal Health Care of Florida, Inc.
Andrew S. Berman of Young, Berman, Karpf and Gonzalez, P.A., North Miami Beach, FL, for Petitioner Humana Medical Plan, Inc.
Philip M. Burlington of Burlington and Rockenbach, P.A., West Palm Beach, FL, Jeffrey M. Liggio and Jene P. Williams of Liggio, Benrubi and Williams, P.A., West Palm Beach, FL, and Edward H. Zebersky of Zebersky and Payne, LLP, Hollywood, FL, for Respondents Westside EKG Associates.
Dorothy F. Easley and Steven M. Ziegler of Steven M. Ziegler, P.A., Hollywood, FL, on behalf of America's Health Insurance Plans; George N. Meros, Jr. and Jason L. Unger of GrayRobinson, P.A., Tallahassee, FL, on behalf of Florida Association of Health Plans; Edward J. Pozzuoli and Stephanie Alexander of Tripp Scott, P.A., Fort Lauderdale, FL, on behalf of Florida Hospital Association, the Florida College of Emergency Physicians, the Florida Medical Association, and the American Medical Association; and Bradley Winston, Plantation, FL, Rochelle Bobroff and Michael Schuster, AARP Foundation Litigation, Washington, DC, on behalf of AARP, for Amici Curiae.
We have for review Westside EKG Associates v. Foundation Health, 932 So.2d 214 (Fla. 4th DCA 2005), in which the Fourth District Court of Appeal certified the following question to be one of great public importance:
ARE THE PROMPT PAY PROVISIONS OF THE HEALTH MAINTENANCE ORGANIZATION ACT ENFORCEABLE BY COURTS IN AN ACTION FOUNDED ON PRINCIPLES OF BREACH OF CONTRACT BROUGHT AGAINST A HMO BY A SERVICE PROVIDER?
Id. at 220. We have jurisdiction,1 and rephrase the question as follows:
MAY A MEDICAL SERVICE PROVIDER BRING A CAUSE OF ACTION FOR BREACH OF A THIRD-PARTY BENEFICIARY CONTRACT BASED ON ALLEGATIONS THAT THE HMO FAILED TO COMPLY WITH THE "PROMPT PAY PROVISIONS" OF THE HEALTH MAINTENANCE ORGANIZATION ACT?
We answer the rephrased question in the affirmative. A medical service provider may bring a cause of action as a third-party beneficiary to the contract between the health maintenance organization and its subscriber based on allegations that the health maintenance organization failed to comply with section 641.3155, Florida Statutes (2001), the "prompt pay provisions" of the Health Maintenance Organization Act.
On September 20, 2001, Westside EKG Associates ("Westside")2 filed a complaint against seven health maintenance organizations ("HMOs"). After the HMOs unsuccessfully attempted to remove the case to federal court, the case was returned to the Seventeenth Judicial Circuit Court in Broward County, where Westside filed an amended complaint that asserted three causes of action. The only cause of action at issue before us is Westside's common law claim for breach of a third party beneficiary contract.
The amended complaint alleged that "the Defendants' insureds [sic] members sought and received emergency and non-emergency medical services from [Westside] and its physicians under insurance/health maintenance policies." Westside claimed it was a third-party beneficiary to "such insurance/health maintenance contracts," and "[d]espite repeated demands," the defendant-HMOs had breached this contract by, among other things, violating section 641.3155, Florida Statutes (2001), the "prompt pay provisions" of Florida's Health Maintenance Organization Act ("HMO Act"), and sections 641.17-641.3923, Florida Statutes (2001).3 "As a direct and proximate result of such Breach of the Third Party Beneficiary Contracts," Westside claimed it "suffered damages in the amount of outstanding balances for its charges for services, together with interest and reasonable attorneys fees and costs."
Section 641.3155 provides a time frame in which HMOs must respond to and pay claims properly submitted by medical service providers. At the time Westside filed its complaint in 2001, the pertinent part of the statute read as follows:
641.3155 Payment of Claims. —
. . . .
(2)(a) A health maintenance organization shall pay any clean claim or any portion of a clean claim made by a contract provider for services or goods provided under a contract with the health maintenance organization or a clean claim made by a noncontract provider which the organization does not contest or deny within 35 days after receipt of the claim by the health maintenance organization which is mailed or electronically transferred by the provider.
(b) A health maintenance organization that denies or contests a provider's claim or any portion of a claim shall notify the provider, in writing, within 35 days after the health maintenance organization receives the claim that the claim is contested or denied. The notice that the claim is denied or contested must identify the contested portion of the claim and the specific reason for contesting or denying the claim, and, if contested, must include a request for additional information. If the provider submits additional information, the provider must, within 35 days after receipt of the request, mail or electronically transfer the information to the health maintenance organization. The health maintenance organization shall pay or deny the claim or portion of the claim within 45 days after receipt of the information.
(3) Payment of a claim is considered made on the date the payment was received or electronically transferred or otherwise delivered. An overdue payment of a claim bears simple interest at the rate of 10 percent per year. Interest on an overdue payment for a clean claim or for any uncontested portion of a clean claim begins to accrue on the 36th day after the claim has been received. The interest is payable with the payment of the claim.
(4) A health maintenance organization shall pay or deny any claim no later than 120 days after receiving the claim. Failure to do so creates an uncontestable obligation for the health maintenance organization to pay the claim to the provider.
. . . .
(7)(a) A provider['s] claim for payment shall be considered received by the health maintenance organization, if the claim has been electronically transmitted to the health maintenance organization, when receipt is verified electronically or, if the claim is mailed to the address disclosed by the organization, on the date indicated on the return receipt. A provider must wait 45 days following receipt of a claim before submitting a duplicate claim.
. . . .
(8) A provider, or the provider's designee, who bills electronically is entitled to electronic acknowledgement of the receipt of a claim within 72 hours.
(9) A health maintenance organization may not retroactively deny a claim because of subscriber ineligibility more than 1 year after the date of payment of the clean claim.
(10) A health maintenance organization shall pay a contracted primary care or admitting physician, pursuant to such physician's contract, for providing inpatient services in a contracted hospital to a subscriber, if such services are determined by the organization to be medically necessary and covered services under the organization's contract with the contract holder.
§ 641.3155, Fla. Stat. (2001). In addition, this statute defined the term "clean claim,"4 imposed nearly reciprocal obligations on providers to respond to an HMO's claim for overpayment, and required that the amount of overpayment be reconciled to specific claims unless the parties agree otherwise. § 641.3155(1), (5)-(6), Fla. Stat. (2001).5
The HMOs moved for judgment on the pleadings, which the trial court granted after conducting a hearing on the motion and a later status conference. The trial court's final judgment on the pleadings dismissed Westside's amended complaint with prejudice because it did "not allege cognizable causes of action" under Villazon v. Prudential Health Care Plan, Inc., 843 So.2d 842 (Fla.2003).
On appeal, the Fourth District Court of Appeal reversed the trial court and remanded the case for further proceedings. Westside, 932 So.2d at 220. The Fourth District held that Villazon was not "applicable to an action founded on a theory of breach of contract," because, while Villazon denies the existence of a private cause of action under the HMO Act, it also "acknowledge[s] the plaintiff's underlying right to bring a common law negligence claim based upon the same allegations." Id. at 216 (citing Villazon, 843 So.2d at 852). In assessing whether Westside has an available breach of contract claim, the Fourth District relied on the "accepted principle of law that when parties contract upon a matter which is the subject of statutory regulation, the parties are presumed to have entered into their agreement with reference to such statute, which becomes a part of the contract." Id. It then recognized that "[s]ervice providers are recognized as third party beneficiaries of insurance contracts in other contexts" and that an insurer's failure to pay a medical service provider is a valid basis for a breach of contract action. Id. at 219 (citing Allstate Ins. Co. v. Kaklamanos, 843 So.2d 885 (Fla.2003)). Based on this analysis, the Fourth District ultimately "conclude[d] that service providers, claiming as third party...
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