Board of Trustees, Bay Medical v. Humana Military

• Decision Date: 04 May 2006
• Docket Number: No. 05-1501.,05-1501.
• Citation: 447 F.3d 1370
• Parties: BOARD OF TRUSTEES OF BAY MEDICAL CENTER, Baptist Hospital, Inc., and the Healthcare Authority of the City of Huntsville, Plaintiffs-Appellees, v. HUMANA MILITARY HEALTHCARE SERVICES, INC., Defendant-Appellant, and Office of Civilian Health and Medical Program of the Uniformed Services, Tricare Management Activity, Department of Defense, and Donald H. Rumsfeld, Secretary of Defense, Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1370

447 F.3d 1370

BOARD OF TRUSTEES OF BAY MEDICAL CENTER, Baptist Hospital, Inc., and the Healthcare Authority of the City of Huntsville, Plaintiffs-Appellees, v. HUMANA MILITARY HEALTHCARE SERVICES, INC., Defendant-Appellant, and Office of Civilian Health and Medical Program of the Uniformed Services, Tricare Management Activity, Department of Defense, and Donald H. Rumsfeld, Secretary of Defense, Defendants-Appellees.

No. 05-1501.

United States Court of Appeals, Federal Circuit.

May 4, 2006.

J. Nixon Daniel, III, Beggs & Lane LLP, of Pensacola, Florida, argued for plaintiffs-appellees. With him on the brief was Russell F. Van Sickle. Of counsel was Terrie L. Didier.

Peter L. Wellington, Steptoe & Johnson LLP, of Washington, DC, argued for defendant-appellant. With him on the brief was Andrew D. Irwin. Of counsel on the brief was Charles M. Trippe, Moseley, Prichard, Parrish, Knight & Jones, of Jacksonville, Florida.

Kyle E. Chadwick, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendants-appellees. With him on the brief were Peter D. Keisler, Assistant Attorney General, David M. Cohen, Director, and Mark A. Melnick, Assistant Director.

Before LOURIE, Circuit Judge, CLEVENGER, Senior Circuit Judge, and BRYSON, Circuit Judge.

LOURIE, Circuit Judge.

Humana Military Healthcare Services, Inc. ("Humana") appeals from the final decision of the United States District Court for the Northern District of Florida denying its motion to dismiss or transfer its complaint to the United States Court of Federal Claims, and denying its motion for reconsideration. Bd. of Trs. of Bay Med. Ctr. v. Humana, No. 5:03-CV-144, 2004 WL 3314946 (N.D.Fla. Mar. 16, 2004) ("Transfer Decision"); Bd. of Trs. of Bay Med. Ctr. v. Humana, No. 5:03-CV-144, (N.D.Fla. July 1, 2005) ("Reconsideration Decision"). Because the contract claims brought by the Board of Trustees of Bay Medical Center, Baptist Hospital, Inc., and the Healthcare Authority of the City of Huntsville (collectively the "Hospitals") are not claims for money damages against CHAMPUS, TMA, DOD and Donald Rumsfeld (collectively the "government"), and the district court did not abuse its discretion in denying Humana's motion for reconsideration, we affirm.

BACKGROUND

This appeal relates to administrator-provider contracts for medical services under the Department of Defense ("DOD") Civilian Health and Medical Program of the Uniformed Services ("CHAMPUS"), which was established in 1967. Transfer Decision, slip op. at 2. Before the establishment of TRICARE, the DOD used claims processors, called fiscal intermediaries, to process claims under the CHAMPUS program. Id., slip op. at 4. Under the fiscal intermediary ("FI") contracts, fiscal intermediaries were not legally responsible for claims that arose regarding the discharge of duties required under those contracts. Id. The FI contracts thus included the following indemnification clause: "In civil law suits which seek the disbursement of funds, the United States is the real party in interest since the funds disbursed are United States Treasury funds appropriated by Congress to the Department of Defense."

In 1995, the DOD established TRICARE, a managed healthcare program that involved the competitive selection of contracts to financially underwrite the delivery of healthcare services under CHAMPUS. Id., slip op. at 2. The program was administered through the TRICARE Management Activity ("TMA"), which was previously the Office of CHAMPUS. Id., slip op. at 4. Under the TRICARE system, the DOD began using managed care support ("MCS") providers whose contracts did not contain the indemnity provisions found in the FI contracts. Id.

On January 23, 1996, Humana and the DOD entered into an MCS contract (the "Prime Contract") whereby Humana agreed to provide managed care support services for all CHAMPUS beneficiaries residing in a particular southeastern geographical area ("Regions 3 and 4"). Id., slip op. at 3. Humana then subcontracted with the Hospitals ("network provider contracts") to provide the healthcare services required under the Prime Contract for CHAMPUS beneficiaries residing within Regions 3 and 4. Id., slip op. at 6.

Prior to October 1, 1999, Humana paid the Hospitals the agreed-upon amounts set forth in the network provider contracts. Id., slip op. at 6-7. However, beginning October 1, 1999, Humana, without prior notice, ceased paying the Hospitals the normal amount for reimbursement of outpatient non-surgical services, reducing the payments to the Hospitals by applying CHAMPUS Maximum Allowable Charge ("CMAC") rates to those services. Id., slip op. at 7.

On June 3, 2003, the Hospitals filed suit in the United States District Court for the Northern District of Florida seeking damages for breach of the contract by Humana and a declaratory judgment against the government. Specifically, in count I of the complaint, the Hospitals asserted that Humana's application of the CMAC rates to cap the reimbursement of out-patient non-surgical services breached the previously agreed-upon reimbursement methodology for those services in the network provider contracts.¹

In addition, the Hospitals noted that, on March 10, 2000, approximately five months after Humana began reducing payments to the Hospitals, the TMA had issued a policy statement relating to the reimbursement of outpatient hospital services ("Policy Statement"), which approved of the application of the CMAC rates to institutional providers. In count II of the complaint, the Hospitals accordingly asserted that the Policy Statement was void because "it was in direct conflict with the reimbursement plan for those services promulgated as 34 C.F.R. § 199.14" and "it was actually an attempt to issue a substantive rule that [should have been] promulgated as a regulation." Complaint, at ¶ 28. The Hospitals also asserted that, "[r]egardless of the validity of the policy, its existence did not change or otherwise affect the contracts entered into between Humana and [the Hospitals]." Id., at ¶ 29.

On August 25, 2003, the government filed a Rule 12(b)(1) motion to dismiss the declaratory judgment claim. On the same day, Humana filed a Rule 12(b)(1) motion to dismiss the contract claims or alternatively to transfer the case to the Court of Federal Claims, asserting that the real party in interest on the Hospitals' claims was the government. On March 16, 2004, the district court granted the government's motion to dismiss based on the Hospitals' lack of standing to sue the government on the contract claims and denied Humana's motion to transfer or dismiss because the district court determined that it had subject matter jurisdiction over the breach of contract claims. The Hospitals did not appeal or seek reconsideration of the ruling granting the government's motion.

On March 30, 2004, Humana filed a motion for reconsideration in the district court. Humana did not identify this motion as a Rule 59(e) Motion to Alter or Amend Judgment under the Federal Rules of Civil Procedure. Before the district court ruled on the merits of the motion for reconsideration, Humana filed a notice of appeal from the jurisdiction decision on April 15, 2004. The district court denied the motion for reconsideration as moot on April 19, 2004, because the court determined that the April 15 notice of appeal divested the court of jurisdiction.

On April 22, 2004, Humana filed a second notice of appeal incorporating both the denial of the motion to dismiss or transfer and the denial of the motion for reconsideration. Humana requested that we remand the case to the district court for review of the merits of the motion for reconsideration, or, in the alternative, that we transfer the case to the Court of Federal Claims. On January 8, 2005, we found that the district court erred in determining that the motion for reconsideration was moot and remanded for a determination of the motion on the merits. Bd. of Trs. of Bay Med. Ctr. v. Humana, 123 Fed.Appx. 995, 997 (Fed.Cir.2005). We did not review the denial of the motion to dismiss or transfer to the Court of Federal Claims. Id. at 997-98.

After our remand, the district court denied Humana's motion for reconsideration. Bd. of Trs. of Bay Med. Ctr. v. Humana, No. 5:03-CV-144 (N.D.Fla. July 1, 2005). The court reasoned that "Humana [had] failed to present `evidence of an intervening change in controlling law, the availability of new evidence, or the need to correct clear error or manifest injustice.'" Id., slip op. at 7 (quoting Summit Med. Ctr. of Alabama, Inc. v. Riley, 284 F.Supp.2d 1350, 1355 (M.D.Ala.2003)). Humana timely appealed on July 29, 2005, and we have jurisdiction to hear this appeal pursuant to 28 U.S.C. § 1292(d)(4)(A).

DISCUSSION

This court reviews legal questions without deference. Consolidated Edison Co. of New York v. United States, 247 F.3d 1378, 1382 (Fed.Cir.2001). Questions concerning jurisdiction and transfer to the Court of Federal Claims are also reviewed de novo. United States v. County of Cook, 170 F.3d 1084, 1087 (Fed.Cir.1999). A denial of a motion for reconsideration by a district court is reviewed under the standard of review used by the governing regional circuit. Minton v. NASD, Inc., 336 F.3d 1373, 1378-79 (Fed.Cir.2003). The Eleventh Circuit, the regional circuit that governs the Northern District of Florida and is relevant here, reviews the denial of a motion for reconsideration for an abuse of discretion. Cliff v. Payco Gen. Am. Credits, Inc., 363 F.3d 1113, 1121 (11th Cir.2004).

On appeal, Humana argues that the government is the "real party in interest" on the Hospitals' claims because the true nature of the Hospitals' breach of contract claims is for money damages against the government under the CHAMPUS/TRICARE statutes and regulations. Humana points out that the Hospitals' complaint set forth a direct noncontractual claim...