Comanche County Hospital v. Blue Cross of Kansas, Inc., 51784

• Decision Date: 18 July 1980
• Docket Number: No. 51784,51784
• Citation: 228 Kan. 364,613 P.2d 950
• Parties: COMANCHE COUNTY HOSPITAL et al., Appellees, v. BLUE CROSS OF KANSAS, INC., Appellant.
• Court: Kansas Supreme Court

Page 950

613 P.2d 950

228 Kan. 364

COMANCHE COUNTY HOSPITAL et al., Appellees, v. BLUE CROSS OF KANSAS, INC., Appellant.

No. 51784.

Supreme Court of Kansas.

July 18, 1980.

Syllabus by the Court

1. A temporary injunction merely preserves the status quo until a final determination of a controversy can be made.

2. A trial court is vested with a large measure of discretion in granting a temporary injunction, and appellate courts will not interfere absent a manifest abuse of discretion.

3. In reviewing the grant of a preliminary injunction the appellate court should examine the record only to determine if there were any reasonable grounds for the action of the court below; if there were, the grant should be affirmed.

4. In a declaratory judgment action brought to construe provisions of a form of membership contract between Blue Cross and certain member hospitals, the record is examined and it is held that reasonable grounds for the issuance of the temporary injunction were established by the hospitals to maintain their membership status pending final determination of the controversy.

Harold S. Youngentob, of Goodell, Stratton, Edmonds, Palmer & Wright, Topeka, argued the cause, and Gerald L. Goodell Topeka, was with him on the briefs for the appellant.

Robert J. Roth, of Hershberger, Patterson, Jones & Roth, Wichita, argued the cause and was on the brief for the appellees.

FROMME, Justice:

This is the third chapter in continuing litigation arising from conflicting ideas on how to contain spiraling hospital service costs in Kansas. The first chapter was written in Blue Cross & Blue Shield v. Bell, 227 Kan. 426, 607 P.2d 498 (1980), where it was held that Fletcher Bell, Commissioner of Insurance of Kansas, had the statutory duty and authority under K.S.A. 40-1806 and 40-1906 to review rate filings of Blue Cross and Blue Shield, and to consider, among other things, the trend projections and reasonableness of projected loss experience used in the rate filings. In order for him to approve rate filings as being reasonable the Commissioner insisted that Blue Cross enter into prospective cost review contracts with hospitals in Kansas, which contracts appeared to the Commissioner to provide some control over spiraling hospital service costs. The contracts which were to be replaced were described as the 1970 retrospective contracts. Under this form of contract member hospitals are reimbursed at the end of each year to the extent of one hundred four percent (104%) of allowable costs of furnishing hospital services.

The second chapter was written in Augusta Medical Complex, Inc. v. Blue Cross, 227 Kan. 469, 608 P.2d 890 (1980). In Augusta a provision for termination contained in the 1970 retrospective contracts was construed by this court and it was determined that Blue Cross had exercised the right of termination as required by the contract and twenty-one hospitals, including Augusta Medical Complex, Inc., had been terminated and were no longer member hospitals of Blue Cross of Kansas, Inc., unless they signed new prospective rate review contracts.

The present appeal is the third chapter and presents a single, limited question. Did the trial court err in granting a temporary injunction pending a trial of the case on the merits?

This action was commenced by Comanche County Hospital and others seeking a declaratory judgment as to the rights of the parties under the 1970 retrospective contracts entered into between the individual hospitals and Blue Cross of Kansas, Inc. The hospitals are seeking specific performance of the 1970 retrospective contracts. Blue Cross is contending the 1970 retrospective contracts are no longer in effect.

The controversy among these parties arises a little differently than did the controversy in Augusta. Here the hospitals did sign the 1978 prospective rate review contracts. However, it was conceded below at the hearing on the temporary injunction that 75% of the member hospitals with 75% of the hospital beds had not signed the 1978 contract. The 1970 contracts of these hospitals contained the identical provision for replacement contracts which was discussed in the Augusta case. The provision reads:

"3. This agreement may be modified or may be replaced with a new agreement when the modification or the new agreement is approved by at least 75% of the Member Hospitals in the Kansas Blue Cross service area representing at least 75% of the beds and approved by the Blue Cross Board of Directors."

The pleadings and evidence introduced at the hearing to obtain the temporary injunction clearly indicate that in the present case Blue Cross did not serve or attempt to serve a notice of...