Commonwealth by Shapiro v. UPMC

• Decision Date: 28 May 2019
• Docket Number: No. 39 MAP 2019,39 MAP 2019
• Citation: 208 A.3d 898
• Court: Pennsylvania Supreme Court
• Parties: COMMONWEALTH of Pennsylvania, BY Josh SHAPIRO, Attorney General; Pennsylvania Department of Insurance, by Jessica K. Altman, Insurance Commissioner and Pennsylvania Department of Health, by Rachel Levine, Secretary of Health v. UPMC, a Nonprofit Corp.; UPE, a/k/a Highmark Health, a Nonprofit Corp. and Highmark, Inc., a Nonprofit Corp. Appeal of: Commonwealth of Pennsylvania, by Josh Shapiro, Attorney General

208 A.3d 898

COMMONWEALTH of Pennsylvania, BY Josh SHAPIRO, Attorney General; Pennsylvania Department of Insurance, by Jessica K. Altman, Insurance Commissioner and Pennsylvania Department of Health, by Rachel Levine, Secretary of Health

v.UPMC, a Nonprofit Corp.; UPE, a/k/a Highmark Health, a Nonprofit Corp. and Highmark, Inc., a Nonprofit Corp.

Appeal of: Commonwealth of Pennsylvania, by Josh Shapiro, Attorney General

No. 39 MAP 2019

Supreme Court of Pennsylvania.

Argued/Submitted: May 16, 2019

Decided: May 28, 2019

OPINION

JUSTICE WECHT

Before this Court is the latest manifestation of a longstanding dispute between UPMC; UPE, a/k/a Highmark Health and Highmark, Inc. (collectively, "Highmark"); and the Commonwealth's Office of the Attorney General ("OAG") regarding the parties' rights and obligations under a pair of Consent Decrees that, since 2014, have governed the relationship between UPMC and Highmark with regard to the provision and financing of certain healthcare services to their respective insurance subscribers. The Consent Decrees currently are scheduled to terminate on June 30, 2019.¹

A thorough recitation of the circumstances leading to the drafting of the Consent Decrees may be found in this Court's first decision interpreting their provisions. See Commonwealth ex rel. Kane v. UPMC , 634 Pa. 97, 129 A.3d 441 (2015). Accordingly, we will not reproduce here the extensive background underlying this litigation. However, because our second case implicating the Consent Decrees, Commonwealth by Shapiro v. UPMC , 188 A.3d 1122 (Pa. 2018) (" Shapiro I "), features prominently in both the reasoning of the lower court and the arguments of the parties, a brief examination of that decision is warranted at the outset.

I. Shapiro I

At issue in Shapiro I was UPMC's obligation under the "Vulnerable Populations" provision of its Consent Decree to be "in a contract" with Highmark for the provision of healthcare services, at negotiated "In-Network" rates, to Highmark's Medicare Advantage ("MA") subscribers through the end date of the Consent Decrees, as required by our holding in Kane . See Kane , 129 A.3d at 469-70 ; Shapiro I , 188 A.3d at 1124.² UPMC signaled its intent to rely upon a six-month "runout" provision of its existing MA Provider Agreements, which, by its terms, would obligate UPMC "to continue to abide by the same terms and conditions of the Provider Agreement for six months following the end of the final annual renewal period." Shapiro I , 188 A.3d at 1125. Under UPMC's understanding of its Consent Decree and this Court's decision in Kane , upon its termination of the Provider Agreements on December 31, 2018, the runout provision would be triggered, thus continuing to bind UPMC to all of their terms until June 30, 2019, upon which date UPMC would satisfy its obligations under its Consent Decree.

OAG filed a Petition to Enforce the Consent Decrees, averring that the runout provision was insufficient to satisfy UPMC's obligations, that the Provider Agreements therefore could not be terminated before June 30, 2019, and further that, because the Provider Agreements renewed on an annual basis, the earliest possible termination date would be December 31, 2019, with the runout provision then binding UPMC to their terms until June 30, 2020—one year beyond the end date of the Consent Decrees. The Commonwealth Court, in a single-judge order and memorandum, granted OAG's Petition to Enforce and ordered that UPMC would remain bound to the terms of the Provider Agreements through the end of the calendar year 2019.

UPMC appealed the Commonwealth Court's order to this Court, and we reversed. We held that UPMC's proposed invocation of the runout clause would satisfy its obligation to be "in a contract" with Highmark through June 30, 2019. Under the language of the runout provision, we noted, it "seems self-evident that UPMC is in a contract to provide in-network access during the first six months of 2019." Id. at 1134. When read as a whole, the Provider Agreements "mandate in-network access to UPMC facilities through the first half of 2019, thus satisfying the substantive requirement of the Consent Decree that UPMC ‘treat those participants in Highmark [MA Plans] as In-Network.’ " Id. at 1135 (quoting Kane , 129 A.3d at 469 ) (bracketed material in original; internal quotation marks omitted).

In a passage that is a subject of dispute in the instant case, this Court noted that our "primary hesitation" with the Commonwealth Court's order was that it "alters an unambiguous and material term of the Consent Decree—the June 30, 2019 end date." Id. at 1132. We found "no basis upon which to alter this unambiguous date, to which the parties agreed, and correspondingly, no foundation for ordering the renewal of the Provider Agreements for the entirety of the 2019 calendar year." Id. at 1134.

II. Background and Procedural History

Following our decision in Shapiro I , on February 7, 2019, OAG filed in the Commonwealth Court a four-count Petition to Modify Consent Decrees ("Petition"), thus commencing the instant litigation.³ Invoking its parens patriae authority, OAG centrally averred that UPMC has departed from its mission as a charitable nonprofit healthcare institution, and that, negotiations with UPMC having failed, court-ordered modifications to the Consent Decrees thus are necessary to protect the public interest. OAG's requested relief is grounded in the language of the Consent Decrees that contemplates modifications thereof, which, as set forth in UPMC's Consent Decree, provides as follows:

10. Modification — If the OAG, PID, DOH or UPMC believes that modification of this Consent Decree would be in the public interest, that party shall give notice to the other and the parties shall attempt to agree on a modification. If the parties agree on a modification, they shall jointly petition the Court to modify the Consent Decree. If the parties cannot agree on a modification, the party seeking modification may petition the Court for modification and shall bear the burden of persuasion that the requested modification is in the public interest.

UPMC Consent Decree § IV(C)(10) (the

"Modification Provision").^{4 ,5}

At Count I, OAG sought eighteen modifications to the Consent Decrees pursuant to the Modification Provision.⁶ Most importantly to the instant dispute, OAG requested a modification "[e]xtending the duration of the modified Consent Decrees indefinitely." Petition at ¶ 75(r).

At Count II, OAG alleged that UPMC has violated the Solicitation of Funds for Charitable Purposes Act, 10 P.S. §§ 162.1 - 162.24. See Petition at ¶¶ 85-97. At Count III, OAG alleged that UPMC has breached its fiduciary duties of loyalty and care owed to its constituent healthcare providers and to the public-at-large, in violation of provisions of the Nonprofit Corporation Law, 15 Pa.C.S. §§ 5101 - 6162, and the Uniform Trust Act, 20 Pa.C.S. §§ 7701 - 7790.3. See Petition at ¶¶ 98-110. At Count IV, OAG alleged that UPMC has violated the Unfair Trade Practices and Consumer Protection Law, 73 P.S. §§ 201-1 - 201-9.3. See Petition at ¶¶ 111-125.

Highmark filed a response to OAG's Petition, through which it agreed to the proposed modifications set forth at Count I, provided that any such modifications apply equally to both UPMC and Highmark. Highmark denied, however, that it has engaged in misleading marketing tactics as alleged in OAG's Petition.⁷

UPMC did not assent to the proposed modifications. Rather, UPMC filed a responsive pleading asserting that OAG's claims are insufficient as a matter of law, i.e. , preliminary objections in the nature of a demurrer. See Pa.R.C.P. 1028(a)(4). As relevant herein, UPMC asserted that OAG's proposed modifications are not permissible under the Modification Provision, that the Consent Decree "cannot be extended through nonconsensual ‘modification,’ "⁸ and that OAG, therefore, "seeks an invalid modification."⁹ UPMC further argued that OAG's claims are barred as a matter of law inasmuch as they are released, forfeited, unripe, precluded by res judicata , proceeding without the proper parties, and exceeding the bounds of OAG's parens patriae authority.

Recognizing the necessity of an expedient resolution given the impending June 30, 2019 termination date, the Commonwealth Court severed Count I from the remainder of OAG's Petition. See Cmwlth. Ct. Scheduling Order II, 3/12/2019. Counts II-IV remain before the Commonwealth Court, and are not at issue in this appeal.

On April 3, 2019, the Commonwealth Court ruled upon UPMC's preliminary objections to Count I via a thorough single-judge memorandum and order. Commonwealth by Shapiro v. UPMC , 334 M.D. 2014 (Pa. Cmwlth. Apr. 3, 2019) ("Cmwlth. Ct. Op."). The court correctly noted that, in ruling upon preliminary objections, a court must accept as true all well-pleaded allegations of material fact and all reasonable inferences deducible from those facts, that any doubt must be resolved in favor of the non-moving party, and that "the question presented by the demurrer is whether, on the facts averred, the law says with certainty that no recovery is possible." Id. at 24 n.9 (citing Tucker v. Phila. Daily News , 577 Pa. 598, 848 A.2d 113 (2004) ).

The Commonwealth Court considered and rejected each of UPMC's objections as applied to the relief sought in Count I. In the portion of the court's analysis at issue in this appeal, the court addressed UPMC's contention that OAG's proposed modifications are impermissible under the Modification Provision. The court overruled UPMC's demurrer with respect to the vast majority of the OAG's requested relief, observing that the Modification Provision authorizes OAG to petition the Commonwealth Court for modifications alleged to be in the public interest, and that OAG had followed that procedure. "Because the Consent Decree sets forth no other constraints on OAG's ability to seek modification," the Commonwealth Court "decline[d] to state with certainty that, at...