HCA Health Services of Virginia v. Metropolitan Life Ins. Co.
| Decision Date | 24 February 1992 |
| Docket Number | 91-2609,Nos. 91-2606,s. 91-2606 |
| Citation | 957 F.2d 120 |
| Parties | 14 Employee Benefits Cas. 2705 HCA HEALTH SERVICES OF VIRGINIA, t/a Henrico Doctors' Hospital; Richmond Community Hospital, a Virginia non-stock Corporation; Richmond Eye and Ear Hospital, a Virginia non-stock Corporation, Plaintiffs-Appellants, v. METROPOLITAN LIFE INSURANCE COMPANY, a New York Corporation; MetLife Healthcare Management Corporation, a Delaware Corporation, Defendants-Appellees. HCA HEALTH SERVICES OF VIRGINIA, t/a Henrico Doctors' Hospital; Richmond Community Hospital, a Virginia non-stock Corporation; Richmond Eye and Ear Hospital, a Virginia non-stock Corporation, Plaintiffs-Appellees, v. METROPOLITAN LIFE INSURANCE COMPANY, a New York Corporation; MetLife Healthcare Management Corporation, a Delaware Corporation, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fourth Circuit |
William R. Rakes and Gregory J. Haley, Gentry, Locke, Rakes & Moore, Roanoke, Va., argued, for HCA Health Services of Virginia, et al.
Robert F. Callahan, New York City, argued (William R. Toppeta, on brief), for Metropolitan Life Ins. Co., et al.
Before ERVIN, Chief Judge, TILLEY, District Judge for the Middle District of North Carolina, sitting by designation, and HERLONG, District Judge for the District of South Carolina, sitting by designation.
This case concerns a motion by appellants, HCA Health Services of Virginia, Inc., t/a Henrico Doctors' Hospital, Richmond Community Hospital, Inc., and Richmond Eye and Ear Hospital (hereinafter the "Hospitals"), to withdraw their appeal against Metropolitan Life Insurance Company and MetLife Healthcare Management Corp. (hereinafter "Metropolitan"). The district court held that Metropolitan's establishment of a Preferred Provider Organization ("PPO") of selected hospitals offering discounted rates to Metropolitan group customers in Richmond, Virginia did not violate a portion of Virginia's Insurance Code regulating insurance company-established PPO's. 752 F.Supp. 202. The Hospitals, three hospitals excluded from the PPO, appealed that ruling, alleging that Metropolitan's actions violated the statute. Metropolitan cross-appealed, arguing that the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 (ERISA), preempts the Virginia statute. The Hospitals moved to withdraw their appeal, and Metropolitan contested the motion. We grant the Hospitals' motion.
Metropolitan established a PPO in Richmond in 1988. A PPO is a group of selected health care providers that agrees to charge lower rates on services in exchange for attracting a greater number of patients. As the district court found:
4. The exclusion of some providers is a necessary prerequisite of a limited provider network. It is by limiting the number and types of providers included in a PPO that an insurer is able to implement cost reductions in services for health beneficiaries.
5. The establishment of PPO's has helped to stem the tide of steadily increasing health care costs in this country.
At 204. Metropolitan, on its own initiative, contacted hospitals in Richmond to become part of its PPO. Metropolitan also contacted its two Richmond employer-customers about incorporating the PPO into their employee benefit programs. Both Reynolds Metals Co. and Sovran Financial Corporation subsequently did so.
Metropolitan selected the hospitals to participate in its PPO by using internally developed criteria:
geographic location relative to the prospective employee population; range of services; cost efficiency; historical utilization [by the prospective employee population]; willingness to comply with medical management and utilization review; anticipated level of interest in the PPO by, and strength of, the medical staff of the hospital; and price.
J.A. 82. Metropolitan split Richmond into four, later three, areas, and contacted hospitals it was interested in including in the PPO. These hospitals, generally two to an area, then competed head-to-head, primarily on which would charge Metropolitan the lower price. The plaintiffs at bar are three hospitals that were excluded from participation in the PPO. One, Henrico Doctors' Hospital ("Henrico"), is owned by Hospital Corporation of America, which also owns two other Richmond hospitals that were included in the PPO plan. Henrico participated in the selection process, surviving the first round of Metropolitan's cuts, but ultimately could not match a competing hospital's offer. The second and third plaintiff hospitals, Richmond Eye and Ear Hospital ("Richmond Eye and Ear") and Richmond Community Hospital, Inc. ("Richmond Community"), did not survive the first round--the former because as a specialty hospital it does not provide the full range of services Metropolitan desired, the latter in part because it has not been sufficiently used by potential employee participants.
The provision of the Virginia Insurance Code in controversy is Virginia Code Section 38.2-3407(B). Section A allows insurers to
offer or administer a health benefit program under which the insurer or insurers may offer preferred provider policies or contracts that limit the numbers and types of providers of health care services eligible for payment as preferred providers.
VA.CODE ANN. § 38.2-3407(A). The Hospitals thus do not argue that Metropolitan was prohibited from setting up a PPO; they argue instead that Metropolitan improperly selected the participating hospitals for it, pursuant to section B:
Any such insurer shall establish terms and conditions that shall be met by a hospital ... to qualify for payment as a preferred provider.... These terms and conditions shall not discriminate unreasonably against or among such health care providers. No hospital ... willing to meet the terms and conditions offered to it or him shall be excluded. Neither differences in prices among hospitals ... produced by a process of individual negotiations with providers or based on market conditions, or price differences among providers in different geographical areas, shall be deemed unreasonable discrimination.
VA.CODE ANN. § 38.2-3407(B).
The Hospitals alleged both in this court and below that Metropolitan's internal selection criteria were not "terms and conditions" under the statute; that the selection criteria "discriminate[d] unreasonably" against specialty hospitals, community hospitals, and those located in the same geographical area as a selected preferred provider; and that such discriminated-against providers who were "willing to meet the terms and conditions" should not have been excluded. Metropolitan pleaded ERISA preemption as an affirmative defense and requested declaratory relief based on ERISA in its prayer for relief.
Following a bench trial, the district court rejected the Hospitals' claims by applying the Virginia statute. First, according to the court, Metropolitan's selection criteria were "the functional equivalent" of terms and conditions. Second, Metropolitan's division of Richmond into service areas, its exclusion from consideration of specialty hospitals or hospitals that have not been heavily utilized by Metropolitan's beneficiaries, and its exclusion of a hospital that lost in head-to-head price competition did not constitute unreasonable discrimination among providers. Third, the court concluded that its "finding that Metropolitan's selection criteria constitute terms and conditions which do not unreasonably discriminate among providers renders the laches, unclean hands, and ERISA preemption defenses asserted by the defendant moot." At 208.
The Hospitals timely appealed the dismissal of the complaint and Metropolitan cross-appealed the ERISA preemption issue. Two days before oral argument, the Hospitals moved to withdraw their appeal, and Metropolitan contested the motion.
An appellant's motion to voluntarily dismiss its own appeal is generally granted, although courts of appeal have the discretionary authority not to dismiss the case in appropriate circumstances. United States v. State of Wash., Dep't of Fisheries, 573 F.2d 1117, 1118 (9th Cir.1978). Here, however, Metropolitan cross-appealed the district court's judgment. Thus if Metropolitan's appeal independently grants it standing, this court may not dismiss the case. A party must be "aggrieved" by a district court judgment or order in order to have standing to appeal. Deposit Guar. Nat'l. Bank v. Roper, 445 U.S. 326, 333, 100 S.Ct. 1166, 1171, 63 L.Ed.2d 427 (1980). Generally, a prevailing party is not aggrieved by the judgment and may not appeal on the ground that the trial court based its decision on a reason other than one the party may have wished. See, e.g., Perez v. Ledesma, 401 U.S. 82, 87 n. 3, 91 S.Ct. 674, 678 n. 3, 27 L.Ed.2d 701 (1971). However, a prevailing party may appeal an adverse ruling collateral to the judgment on the merits "so long as that party retains a stake in the appeal satisfying the requirements of Art. III." Deposit Guar., 445 U.S. at 334, 100 S.Ct. at 1171.
Metropolitan lacks standing to prosecute its cross-appeal, since it is aggrieved neither in its relationship with the parties to this case nor with respect to any other potential future litigant. First, Metropolitan is not aggrieved against the Hospitals. As this court has stated, "the party 'aggrieved' concept must be given a practical rather than hypertechnical meaning." Department of Defense, Office of Dependent Sch. v. Federal Labor Relations Auth., 879 F.2d 1220, 1222 (4th Cir.1989) (citing Aetna Casualty and Sur. Co. v. Cunningham 24 F.2d 478 (5th Cir.1955)). In Aetna, Aetna was aggrieved in its relationship with its party opponent even though, by prevailing on one claim, it recovered the full amount of money it sought at trial. The court allowed Aetna to appeal on a second alternative claim that would give Aetna greater rights against the opposing party (the party's debts would be...
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