CANYON AMBULATORY SURGERY Ctr. v. SCF Ariz.

• Decision Date: 16 September 2010
• Docket Number: No. 1 CA-CV 09-0408.,1 CA-CV 09-0408.
• Citation: 239 P.3d 733,225 Ariz. 414
• Parties: CANYON AMBULATORY SURGERY CENTER, a North Carolina limited liability company, doing business as Canyon Surgery Center; and El Dorado Surgery Center, L.P., doing business as El Dorado Surgicenter, a foreign limited partnership, Plaintiffs/Appellants, v. SCF ARIZONA, Defendant/Appellee.
• Court: Arizona Court of Appeals

225 Ariz. 414

239 P.3d 733

CANYON AMBULATORY SURGERY CENTER, a North Carolina limited liability company, doing business as Canyon Surgery Center; and El Dorado Surgery Center, L.P., doing business as El Dorado Surgicenter, a foreign limited partnership, Plaintiffs/Appellants, v. SCF ARIZONA, Defendant/Appellee.

No. 1 CA-CV 09-0408.

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

Sept. 16, 2010.

COPYRIGHT MATERIAL OMITTED.

Gammage & Burnham P.L.C. By James A. Craft, Cameron C. Artigue, and Carolyn V. Williams, Phoenix, Attorneys for Plaintiffs/Appellants.

Sanders & Parks P.C. By Mark G. Worischeck, Debora L. Verdier and Shanks Leonhardt, Phoenix, Attorneys for Defendant/Appellee.

OPINION

BROWN, Judge.

¶ 1 Appellants Canyon Ambulatory Surgery Center (“Canyon”) and El Dorado Surgery Center (“El Dorado”) (collectively the “Surgery Centers”) appeal the trial court's dismissal of their claims against SCF Arizona ¹ (“SCF”) for alleged violation of SCF's statutory and contractual obligations to pay workers' compensation benefits for services rendered on behalf of injured workers. The Surgery Centers also challenge the court's grant of partial summary judgment finding SCF exempt from the rulemaking requirements of the Administrative Procedures Act (“APA”). They further contend the court erred in granting judgment as a matter of law (“JMOL”) in favor of SCF after an advisory jury found in favor of the Surgery Centers. Finally, the Surgery Centers challenge the sanctions awarded to SCF pursuant to Arizona Rule of Civil Procedure 68. For the following reasons, we affirm.

BACKGROUND

¶ 2 The Surgery Centers are two of approximately 150 ambulatory surgical centers (“ASCs”) in Arizona that provide facilities for various outpatient medical and surgical procedures. SCF provides workers' compensation coverage to Arizona employers, which indemnifies employers for financial obligations imposed by Arizona's workers' compensation laws. Ariz.Rev.Stat. (“A.R.S.”) § 23-981 (Supp.2009). ² Between March 2003 and March 2007, the Surgery Centers treated 2100 workers who were entitled to benefits under SCF insurance policies for work-related injuries (“injured workers”). The Surgery Centers did not have a contract with SCF establishing billing rates for services provided to the injured workers, ³ so they billed SCF according to the rates listed in the Surgery Centers' chargemasters. ⁴

¶ 3 Prior to March 2003, SCF paid the Surgery Centers the full amount billed. Thereafter, as part of its cost containment system, SCF hired Qmedtrix to review each bill submitted and recommend a reasonable reimbursement amount. Qmedtrix created a payment methodology based on reimbursements made by other carriers, which resulted in reduced payments to the Surgery Centers. As compensation for Qmedtrix's services, SCF paid Qmedtrix 25% of the recommended price reduction. ⁵

¶ 4 Canyon filed a declaratory judgment action in December 2003 alleging that SCF's reimbursement methodology constituted a“rule” under the APA, and was adopted in violation of the APA's notice and hearing requirements. ⁶ Canyon also sought a declaration that SCF was obligated to pay benefits in the amount of the charges billed. After cross-motions for summary judgment were filed concerning the applicability of the APA, the trial court entered partial summary judgment, rejecting Canyon's claim that SCF was subject to the APA rulemaking procedures.

¶ 5 In the meantime, El Dorado filed a separate declaratory judgment action in March 2004. After the trial court granted SCF's motion for partial summary judgment on the APA claim, the cases were consolidated. ⁷ The Surgery Centers then filed an amended complaint, omitting the prior declaratory judgment request and adding five new claims: (1) violations of statutory duties (“Count 1”); (2) implied contract/restitution (“Count 2”); (3) breach of policy benefits (“Count 3”); (4) bad faith by an insurer (“Count 4”); and (5) negligent misrepresentation (“Count 5”). SCF moved to dismiss all five counts for failure to state a claim upon which relief could be granted. Following argument, the court dismissed Counts 1 and 4 with prejudice and Count 3 without prejudice.

¶ 6 Trial commenced to an advisory jury on the two remaining claims-implied contract/restitution and negligent misrepresentation. The court subsequently dismissed the negligent misrepresentation claim pursuant to Arizona Rule of Civil Procedure 50. The advisory jury awarded damages to Canyon in the amount of $1,125,562 and to El Dorado in the amount of $1,082,501. SCF then filed a “renewed motion for JMOL,” which the trial court granted, concluding that the Surgery Centers “have received the reasonable value of their services from SCF, if not more.” The Surgery Centers unsuccessfully moved for a new trial and then filed this appeal. ⁸

DISCUSSION

I. Dismissal of Counts 1 and 3 under Rule 12(b)(6)

¶ 7 The Surgery Centers first argue the trial court erred in dismissing Counts 1 and 3. We review de novo a trial court's grant of a motion to dismiss for failure to state a claim. Phelps Dodge Corp. v. El Paso Corp., 213 Ariz. 400, 402, ¶ 8, 142 P.3d 708, 710 (App.2006). We assume the allegations in the complaint are true, and will “uphold dismissal only if the plaintiff [ ] would not be entitled to relief under any facts susceptible of proof in the statement of the claim.” T.P. Racing, L.L.L.P. v. Ariz. Dep't of Racing, 223 Ariz. 257, 259, ¶ 8, 222 P.3d 280, 282 (App.2009) (citation omitted).

A. Count 1-Statutory Violations

¶ 8 As to Count 1, the Surgery Centers contend they pled a valid claim by asserting that “SCF is in continuing violation of its mandatory, non-discretionary duty to pay medical and surgical benefits_[,_]” citing A.R.S. §§ 23-1001 (1995), -1021(B) (Supp.2009), and -1062(A) (1995). ⁹ Those statutes state in pertinent part:

Every employer insuring with an insurance carrier shall receive from such insurance carrier a contract or policy of insurance. A.R.S. § 23-1001.

Every employee ... shall be entitled to receive and shall be paid such compensation from the state compensation fund for loss sustained on account of the injury or death, such medical, nurse and hospital services and medicines ... as are provided in this chapter. A.R.S. § 23-1021(B).

[E]very injured employee shall receive medical, surgical and hospital benefits or other treatment ... reasonably required at the time of injury, and during the period of disability. A.R.S. § 23-1062(A).

¶ 9 It is undisputed that SCF unilaterally reduced the payments it had been previously making to the Surgery Centers. That action, however, does not constitute a violation of the cited statutes. See Ariz. R. Civ. P. 8(a)(2); see also Rowland v. Kellogg Brown and Root, Inc., 210 Ariz. 530, 534, ¶ 15, 115 P.3d 124, 128 (App.2005) (recognizing that a complaint must set forth facts, that if proven, are sufficient to support a claim for relief as presented). Nowhere in the amended complaint do the Surgery Centers allege that (1) the injured workers' employers failed to receive a contract or policy of insurance from SCF, or that SCF failed to provide the same; (2) the injured workers were not paid compensation ¹⁰ for losses sustained on account of their injuries, or did not receive necessary medical treatment; or (3) such benefits and treatment were not provided at the time of injury and during the period of disability.

¶ 10 Attempting to overcome this facial defect, the Surgery Centers assert that the statutes cited, when read together with case law and in the greater context of the statutory scheme, create an obligation on the part of employers to not only provide medical treatment for injured workers, but also to pay for it. ¹¹ Notably, SCF does not dispute its obligation to pay for the medical services provided to injured workers, and the Surgery Centers do not allege they have not been paid. The Surgery Centers' only contention is that they were “underpaid” for the services they rendered. However, nothing in the statutes cited, or in the arguments advanced by the Surgery Centers, supports a finding that SCF has violated a statutory duty by paying less than the billed amount for services provided.

¶ 11 Because we conclude the Surgery Centers failed to allege facts sufficient to support a statutory violation claim, we need not address whether they had standing to bring such a claim or whether the superior court had jurisdiction over the claim.

B. Count 3-Policy Benefits

¶ 12 The Surgery Centers argue the trial court erred in dismissing Count 3, which alleged that SCF was in “breach of the insurance benefits promised [ ] for injured workers treated by [the Surgery Centers], [because] SCF has refused to pay those benefits.” They contend that because each injured worker in this case assigned to the Surgery Centers his or her right to enforce payment of benefits, the Surgery Centers may directly enforce SCF's obligation to pay. Alternatively, the Surgery Centers claim they are third-party beneficiaries of the insurance policies sold by SCF.

¶ 13 SCF counters that dismissal was appropriate because the Surgery Centers failed to allege what policy benefits the injured workers were entitled to but did not receive. They also claim the assignments of benefits were invalid. In addition, SCF asserts Arizona law bars the Surgery Centers from being third-party beneficiaries of a contract. Moreover, it contends that none of the Surgery Centers' arguments have merit because the trial court dismissed the claim without prejudice and therefore the order is not appealable. We hold that the final point is decisive as to Count 3.

¶ 14 In general, “an appeal lies only from a final judgment.” McMurray v. Dream Catcher USA, Inc., 220 Ariz. 71, 74, ¶ 4, 202 P.3d 536, 539 (App.2009) (citation and internal quotation marks omitted). A dismissal without prejudice is not a finaljudgment and is therefore generally not appealable. See id. (cit...