Froedtert v. National States

• Decision Date: 18 March 2008
• Docket Number: No. 2007AP934.,2007AP934.
• Citation: 2008 WI App 58,750 N.W.2d 926
• Parties: FROEDTERT MEMORIAL LUTHERAN HOSPITAL, INC., Plaintiff-Respondent, v. NATIONAL STATES INSURANCE COMPANY, Defendant-Appellant,<SMALL><SUP>&#x2020;</SUP></SMALL> The Loren Ledger Trust, Defendant-Respondent.
• Court: Wisconsin Court of Appeals

750 N.W.2d 926

2008 WI App 58

FROEDTERT MEMORIAL LUTHERAN HOSPITAL, INC., Plaintiff-Respondent, v. NATIONAL STATES INSURANCE COMPANY, Defendant-Appellant,^† The Loren Ledger Trust, Defendant-Respondent.

No. 2007AP934.

Court of Appeals of Wisconsin.

Submitted on Briefs January 02, 2008.

Opinion Filed March 18, 2008.

On behalf of the defendant-appellant, the cause was submitted on the briefs of Norman D. Farnam and John J. Laubmeier of Stroud, Willink & Howard, LLC of Madison.

On behalf of the plaintiff-respondent, the cause was submitted on the brief of Susan E. Lovern and Rachel N. Schepp of von Briesen & Roper, S.C. of Milwaukee.

On behalf of the defendant, the cause was submitted on the brief of Thomas M. Devine of Hostak, Henzl & Bichler, S.C. of Racine.

Before CURLEY, P.J., FINE and KESSLER, JJ.

¶ 1 KESSLER, J

National States Insurance Company (National States) appeals the award of summary judgment to Froedtert Memorial Lutheran Hospital, Inc. (Froedtert) and The Loren Ledger Trust, holding that the National States contract required it to pay the actual charges billed by Froedtert for inpatient hospital care of Kathleen Ledger after all of her Medicare Part A benefits had been exhausted, and to pay interest on the unpaid amount pursuant to WIS. STAT. § 628.46(1) (1999-2000).¹ We conclude that summary judgment was proper because there were no material facts in dispute, and that National States' insurance contract required it to pay all of the hospital charges incurred by its insured for Medicare-eligible services after Medicare Part A benefits were exhausted, and affirm.

BACKGROUND

¶ 2 Kathleen Ledger received a kidney transplant in May 2000.² From October 26, 2000, until her death on February 12, 2001, Kathleen received inpatient medical care and treatment at Froedtert. Before she was admitted to Froedtert on October 26, 2000, Kathleen's Medicare Part A coverage was exhausted, including her maximum lifetime benefits. However, on October 26, 2000, she was covered by the terms of a medical supplemental policy purchased from National States, entitled "Medicare Supplement Insurance."³ The policy was issued in 1998. Policy language, which Froedtert and Ledger contend requires payment of all charges, and which National States contends requires payment only of what Medicare would have paid for these services if Medicare benefits had not been exhausted, states:

BENEFITS AFTER MEDICARE STOPS—If maximum benefits have been paid under Medicare for in-patient hospital expense, including the lifetime reserve days, we will pay all further expense incurred for hospital confinement that would have been covered by Medicare Part A.

(Capitalization in original; italics added.)

¶ 3 Upon admission to Froedtert, Kathleen signed a Conditions of Admission form which covered the treatment at issue here. The relevant language, entitled "Financial Agreement and Assignment," is undisputed.

I, the undersigned agree, whether signing as agent or as patient, that I am financially responsible for all charges incurred. Assignment of commercial insurance benefits to the Hospital does not reduce the responsibility for payment.... Further, by signing below, I authorize payment to be made directly to FROEDTERT MEMORIAL LUTHERAN HOSPITAL and/or FACULTY PHYSICIANS AND SURGEONS for the benefits otherwise payable to me by any third party including major medical benefits.

(Capitalization in original; italics added.)

¶ 4 National States argues that the language of this clause does not give Froedtert standing to sue for the balance due on Ledger's bill because there was never a proper assignment to Froedtert of Ledger's right to any insurance proceeds, and because Ledger never specifically assigned her Medicare supplement insurance benefits to Froedtert.

¶ 5 The bill for Kathleen's medical care at Froedtert from October 26, 2000 through February 12, 2001, was $267,074.93. Of this amount, $60,240.05 related to charges associated with services covered by Medicare Part B⁴ for which Ledger made a co-payment of $2,800.00. National States paid $73,309.25, which represents the amount Medicare would have paid Froedtert for the services to Kathleen had Medicare Part A not been exhausted. The remaining balance of Froedtert's charges is $130,725.63.

¶ 6 When National States refused to pay the outstanding balance of the Froedtert bill, Loren complained to the Wisconsin Office of the Commissioner of Insurance (OCI). National States consistently claimed that it had paid all it owed under its policy. Twice, the OCI informed National States that its interpretation of its policy was wrong. On July 1, 2003, the OCI wrote to National States saying:

In your response to Mr. Ledger[']s complaint you stated payment was made based on hospital confinement that would have been covered by Medicare Part A. That is not what you did. You made payment on what Medicare would have paid had the service been approved by Medicare. The language in the policy says something quite different. The language in the policy does not mention how claims are paid, it mentions hospital confinement that would have been covered by Medicare Part A. This claim should be paid at the actual charge.

(Underlining in original.)

¶ 7 National States refused to change its position. It continued to insist, as it does here, that it owes only what Medicare would have paid, and that its analysis is supported in current federal regulations which direct states to follow the National Association of Insurance Commissioners' (NAIC) Model Regulations for Medigap coverage. National States asserts that Wisconsin was required by federal law to follow the NAIC Model Regulations for Medigap insurance, and that Froedtert was violating Medicare law when it charged more than the Medicare reimbursement rate for these services.

¶ 8 However, Wisconsin and three other states were given waivers from application of that law because they had standardized their Medigap policy requirements before the federal legislation was enacted. See 42 U.S.C. § 1395ss(p)(1)(E), (p)(6) (2004); 63 Fed.Reg. 67,078, 67,079 (Dec. 4, 1998); 65 Fed.Reg. 18,999, 18,999 n.1 (Apr. 10, 2000). On December 23, 2004, the OIC explained to National States that the NAIC Model Regulations were not the law in Wisconsin.

It does not appear that language in the NAIC model is valid in this scenario. OIC did not incorporate into its rule at the time of this claim that a provider was not permitted to bill the Medicare recipient at a higher rate than Medicare was paying at the time Medicare's' [sic] benefits were exhausted. Because this language is in the model regulation, does not mean it has to be incorporated into Wisconsin's' [sic] rule.

¶ 9 National States, in January 5, 2005 correspondence, repeating its already rejected analysis of its policy obligation, but acknowledging that Wisconsin was exempted from the federal regulations on which National States relied, advised Froedtert:

[W]e have already paid the maximum under our policy for the claim in question. The policy language specifies that we will pay all further expense that would have been covered by Medicare following the exhaustion of Medicare benefits. We have performed in accordance with the contract by paying the expenses that would have been covered by Medicare.

.... We do not believe that the waiver granted to Wisconsin from complying with Federal Standards for Medicare supplements was intended to result in either higher hospital costs or higher insurance costs for Wisconsin residents.

Froedtert thereafter commenced this action.

¶ 10 The trial court rejected National States' argument that Froedtert had no standing to sue, found that National States had not raised material facts which dispute Froedtert's bill, and awarded summary judgment to Froedtert for the balance due, rejecting National States' claim that Froedtert could not legally charge more than what Medicare would have paid if its benefits had not been exhausted and further rejecting National States' claim that the language of its insurance policy limited National States' liability to the amount Medicare would have paid for the services provided if the benefits had not been exhausted.⁵ Judgment was entered for the amount due. The trial court also awarded statutory interest at twelve percent, pursuant to Wis. STAT. § 628.46(1) (1999-2000). National States appeals.

STANDARD OF REVIEW

¶ 11 In reviewing the grant or denial of a summary judgment, we apply the same methodology as the trial court and review de novo the grant or denial of summary judgment. Green Spring Farms v. Kersten, 136 Wis.2d 304, 315-17, 401 N.W.2d 816 (1987). That methodology is well-established and we will not repeat it here. See, e.g., Lambrecht v. Estate of Kaczmarczyk, 2001 WI 25, ¶¶ 20-24, 241 Wis.2d 804, 623 N.W.2d 751. Summary judgment is proper if there are no genuine issues of material fact and one party is entitled to judgment as a matter of law. WIS. STAT. § 802.08(2).

¶ 12 Contract interpretation is a question of law we review de novo. Edwards v. Petrone, 160 Wis.2d 255, 258, 465 N.W.2d 847 (Ct.App.1990); Ford Motor Co. v. Lyons, 137 Wis.2d 397, 460, 405 N.W.2d 354 (Ct.App.1987). The interpretation of terms and clauses in an insurance contract is a question of law. Kremers-Urban Co. v. American Employers Ins. Co., 119 Wis.2d 722, 735, 351 N.W.2d 156 (1984). The objective in interpreting an insurance contract is to ascertain the parties' intent. Fireman's Fund Ins. Co. of Wis. v. Bradley Corp., 2003 WI 33, ¶ 16, 261 Wis.2d 4, 660 N.W.2d 666. Insurance contracts are to be construed from the standpoint of an ordinary person. Cieslewicz v. Mutual Serv. Cas. Ins. Co., 84 Wis.2d 91, 97-98, 267 N.W.2d 595 (1978). Where possible, courts will "enforce plain and unambiguous policy language as written." State v. City of Rhinelander, 2003 WI App 87, ¶ 5, 263 Wis.2d 311, 661 N.W.2d 509. "As a general rule, the language in an insurance contract is...