Banner Health v. Medical Sav. Ins. Co.

• Decision Date: 14 August 2007
• Docket Number: No. 1 CA-CV 05-0432.,1 CA-CV 05-0432.
• Citation: 163 P.3d 1096,216 Ariz. 146
• Parties: BANNER HEALTH, an Arizona nonprofit corporation, Plaintiff/Appellee, v. MEDICAL SAVINGS INSURANCE COMPANY, an entity of unknown domicile; Camryn Compeau, a minor; Henry Compeau and Geri Compeau, husband and wife; Thomas Parks and Elaine Parks husband and wife; Robert Duncan and Sandee Duncan, husband and wife; Jennifer Covey and Richard Covey, wife and husband; Alexandra Serrano, a minor Lawrence Serrano and Jane Doe Serrano, husband and wife; Megan Olson, a minor; Brett Olson and Barbara Olson, husband and wife, Defendants/Appellants.
• Court: Arizona Court of Appeals

163 P.3d 1096

216 Ariz. 146

BANNER HEALTH, an Arizona nonprofit corporation, Plaintiff/Appellee, v. MEDICAL SAVINGS INSURANCE COMPANY, an entity of unknown domicile; Camryn Compeau, a minor; Henry Compeau and Geri Compeau, husband and wife; Thomas Parks and Elaine Parks husband and wife; Robert Duncan and Sandee Duncan, husband and wife; Jennifer Covey and Richard Covey, wife and husband; Alexandra Serrano, a minor Lawrence Serrano and Jane Doe Serrano, husband and wife; Megan Olson, a minor; Brett Olson and Barbara Olson, husband and wife, Defendants/Appellants.

No. 1 CA-CV 05-0432.

Court of Appeals of Arizona, Division 1, Department D.

August 14, 2007.

The Karman Firm by Kirk Karman, Apache Junction, for Appellants Parks.

Schian Walker, P.L.C. by Michael R. Walker, Phoenix, for Appellants Compeaus.

Henley & Hicks, P.L.C. by J. Ridge Hicks, Mesa, for Appellants Duncans.

Gibson, Ferrn & Riggs, P.L.C. by Scott Gibson, Mesa, for Appellant Megan Olson.

Low & Childers, P.C. by David Childers, Christy C. Brown, Tasha N. Cycholl, Nathanael J. Scheer, Phoenix, for Appellant Medical Savings Insurance Company.

Carson Messinger Elliott Laughlin & Ragan, P.L.L.C. by Wallace L. Larson, Travis B. Hill, Phoenix, for Appellants Coveys.

O'Connor & Campbell, P.C., by Tamara S. McKane, J. Daniel Campbell, Phoenix, for Appellants Serranos.

Gammage and Burnham, P.L.C. by Richard B. Burnham, James A. Craft, Cameron C. Artigue, Phoenix, for Appellee.

OPINION

GEMMILL, Judge.

¶ 1 Medical Savings Insurance Company ("MSIC") and the individually named defendants ("Patients") appeal from a judgment in favor of Banner Health. The Patients received medical services at various hospital facilities operated by Banner. After the Patients did not pay their respective invoices for the services, Banner filed suit to recover the amounts billed for its services. The trial court granted summary judgment to Banner. MSIC and the Patients claim that genuine issues of material fact exist regarding the prices charged by Banner for medical services under the "Conditions of Admission" ("COA") forms signed by the Patients. Because we conclude that the trial court correctly granted summary judgment in favor of Banner, we affirm.

FACTS AND PROCEDURAL HISTORY

¶ 2 MSIC is a health insurer that issued "group health insurance" to each of the Patients or their families. Banner is an Arizona non-profit corporation that owns and operates several hospitals throughout the state. The Patients were either patients of a Banner hospital or were spouses or parents of a Banner patient. Each of the patients or their representatives signed a COA form before Banner provided treatment. The COA form signed by four of the seven Patients included the following provisions:

I agree that in return for the services provided to the patient by the hospital or other health care providers, I will pay the account of the patient . . . . I will pay the hospitals usual and customary charges, which are those rates filed annually with the Arizona Department of Health Services. . . .

. . . .

It is understood that the undersigned and patient are primarily responsible for payment of patients bill.

(Emphasis removed.) The remaining three Patients signed a COA form that similarly promised to "pay the account of the patient" and acknowledged that the signer and the patient "are primarily responsible for payment of the patient's bill." These three COAs, however, did not include any provision referencing the "rates filed annually with the Arizona Department of Health Services."

¶ 3 After treatment, Banner billed each of the Patients the full amount specified for the provided medical services in its Charge Description Master ("CDM") that was filed with the Arizona Department of Health Services ("DHS") in accordance with Arizona Revised Statutes ("A.R.S.") sections 36-436 to -436.03 (2003).

¶ 4 The COA forms constituted the only agreements between Banner and the Patients regarding payment of Banner's charges. Banner has no agreements with MSIC. No insurance company contracts or government programs require Banner to accept reduced payments in satisfaction of its billed charges to the Patients.

¶ 5 MSIC, as the medical insurer of the Patients, reviewed the charges billed by Banner using a methodology developed by the MSIC to "calculate the reasonableness of hospital charges and thus the reimbursement rates paid to medical providers." MSIC then tendered payment in the form of restrictively-endorsed checks¹ to Banner on the seven Patients' bills that ranged from approximately 15 to 43 per cent of the billed charges. Banner refused to negotiate these checks.

¶ 6 Banner sued the Patients and MSIC, asserting breach of contract for failure to pay. After Banner filed a motion for summary judgment, MSIC and the Patients argued that genuine issues of material fact existed because the amounts billed by Banner were unreasonable. MSIC and the Patients provided deposition testimony and various documents purporting to show that Banner charged the Patients over 400 per cent of its cost in providing their care, sought full payment from only 2 per cent of its customers, usually received only 34 per cent of its billed charges from patients who received treatment similar to that received by the Patients, and collected only 30 to 40 per cent of its overall billed charges annually.

¶ 7 The trial court granted summary judgment to Banner on its breach of contract claims against the Patients and awarded attorneys' fees to Banner against the Patients on a pro-rata basis. The Patients and MSIC, as a party adversely affected by the ruling, filed timely notices of appeal. This court has jurisdiction pursuant to A.R.S. § 12-120.21(A)(1) (2003).

DISCUSSION

¶ 8 We conduct de novo review of a grant of summary judgment. Great Am. Mortgage, Inc. v. Statewide Ins. Co., 189 Ariz. 123, 125, 938 P.2d 1124, 1126 (App.1997). We view the facts and all reasonable inferences therefrom in a light most favorable to the party against whom summary judgment was entered. Id. at 124, 938 P.2d at 1125. Summary judgment is appropriately granted when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Orme Sch. v. Reeves, 166 Ariz. 301, 305, 802 P.2d 1000, 1004 (1990). We will affirm a summary judgment that was correctly granted, even if we disagree with the trial courts reasoning. See Guo v. Maricopa County Med. Ctr., 196 Ariz. 11, 15, ¶ 16, 992 P.2d 11, 15 (App.1999); Realty Associates of Sedona v. Valley Nat'l Bank of Ariz., 153 Ariz. 514, 521, 738 P.2d 1121, 1128 (App.1986).

¶ 9 It is undisputed by the parties on appeal that valid contracts exist between each of the Patients and Banner.² What is contested, however, is the interpretation of the contracts with respect to the charges for the medical services. MSIC and the Patients argue that the price term is missing from the COAs, the amounts billed by Banner are unreasonable, the Patients should be responsible only for reasonable charges, and summary judgment should not have been granted because questions of fact exist regarding the reasonableness of the charges. Banner argues that it appropriately billed the Patients using the CDM rates and charges on file with the DHS. MSIC and the Patients are not challenging the treatment provided by Banner nor are they claiming that Banners charges did not correspond correctly with the rates filed with DHS.

¶ 10 The COA agreements must be interpreted in light of existing Arizona statutes pertaining to hospital rates. See 11 Richard A. Lord, Williston on Contracts § 30.19 (4th ed.2006) ("contractual language must be interpreted in light of existing law"). The legislature has enacted guidelines for the setting of hospital rates, and has established comprehensive procedures for the filing, review and disclosure of hospital rates and charges. See A.R.S. §§ 36-436 to -436.03.

¶ 11 These statutes direct hospitals to use "the current edition of the statement on the financial requirements of health care institutions and services, as adopted by the American hospital association . . . as a guide for establishing hospital rates and charges." A.R.S. § 36-436(B). Nothing in the record suggests that Banner did not comply with this mandate when establishing its rates and charges.

¶ 12 Furthermore, hospitals "shall not engage in business within this state until there is filed a schedule of its rates and charges . . . with the director [of DHS] for the directors review." A.R.S. § 36-436(A). The director of DHS is given authority to determine the form of the schedule and the information contained therein. Id. The director is also responsible for adopting or establishing "reasonable guidelines for review of rates and charges." A.R.S. § 36-436(B). After the schedule is filed, "the director shall promptly review the schedule within sixty days and publish information on gross charges based on that schedule." A.R.S. § 36-436(C). The schedule must be legible, must list "all services performed and commodities furnished," "shall be posted in a conspicuous place in the reception area of each hospital," and must "be available for inspection by the public at all times." A.R.S. § 36-436.01(A), (B).

¶ 13 Hospitals cannot "increase any rate or charge until the proposed increase has been filed with the director [of DHS] and reviewed" as explained above. A.R.S. § 36-436.02(A); Ariz. Admin. Code R 9-11-303(B). Nor may hospitals reduce their rates and charges until a required filing has been made with the DHS director. A.R.S. § 36-436.02(B); A.A.C. R9-11-301(D) ("No decrease or deletion shall be made by any hospital . . . in any rate or charge until the proposed decrease or deletion has been filed for informational purposes with the Director.").

¶ 14 Accordingly, the published rates and charges of a hospital cannot be increased without going through the filing and review process, nor may the rates be decreased...