Hosp v. Auto–Owners Ins. Co.

• Decision Date: 16 February 2012
• Docket Number: 300567.,Docket Nos. 300566
• Citation: 814 N.W.2d 670,295 Mich.App. 431
• Parties: BRONSON METHODIST HOSPITAL v. AUTO–OWNERS INSURANCE COMPANY. Bronson Methodist Hospital v. Home–Owners Insurance Company.
• Court: Court of Appeal of Michigan — District of US

295 Mich.App. 431

814 N.W.2d 670

BRONSON METHODIST HOSPITAL

v.AUTO–OWNERS INSURANCE COMPANY.

Bronson Methodist Hospital

v.Home–Owners Insurance Company.

Docket Nos. 300566, 300567.

Court of Appeals of Michigan.

Submitted Dec. 14, 2011, at Grand Rapids.

Decided Feb. 16, 2012, at 9:00 a.m.

Miller Johnson (by Richard E. Hillary, II, and Joseph J. Gavin), Grand Rapids, for plaintiff.

Kuiper Orlebeke PC (by Jack L. Hoffman), Grand Rapids, for defendants.

Before: HOEKSTRA, P.J., and KIRSTEN FRANK KELLY and BECKERING, JJ.

PER CURIAM.

Defendants, Home–Owners Insurance Company and Auto–Owners Insurance Company, appeal as of right a trial court order granting summary dispositionin favor of plaintiff, Bronson Methodist Hospital, pursuant to MCR 2.116(C)(10) in these consolidated cases concerning the reasonableness of charges for surgical implant products billed by plaintiff to defendants' insureds under the no-fault insurance act, MCL 500.3101 et seq. Plaintiff cross-appeals that portion of the trial court's order denying its motion for attorney fees under MCL 500.3148. We consolidated the appeals and affirm in part, reverse in part, and remand. We conclude that, in accordance with defendants' clear statutory right and obligation to question the reasonableness of the charges, the no-fault act permits defendants to discover the wholesale cost to plaintiff of the surgical implant products for which the insureds were charged. Therefore, the trial court erred when it denied defendants' prior motion to compel discovery. Because of the error denying discovery, summary disposition was granted prematurely. We also stress that the ultimate burden of proof regarding the reasonableness of the charges rests with the provider. Finally, we conclude that the attorney-fee penalty provision of the no-fault act was not triggered.

I. BASIC FACTS AND PROCEDURAL HISTORY

These consolidated appeals arise from disputes over the reasonableness of plaintiff's charges for surgical implant products provided to defendants' insureds, Gavin Powell and Hector Serrano–Ruiz, each of whom were treated at plaintiff hospital after suffering serious injuries in separate and unrelated automobile accidents. At issue is whether defendants were entitled to information pertaining to the cost of the surgical implant products to plaintiff when defendants were determining whether the charges billed to defendants' insureds for those surgical implant products were “ reasonable” under the no-fault act and, accordingly, whether that information was discoverable during the course of litigation over the charges.

Powell was injured on July 2, 2009, when the vehicle he was driving struck a tree. Serrano–Ruiz was injured on July 17, 2009, when the motorcycle he was driving was struck by another vehicle. Both Powell and Serrano–Ruiz suffered broken bones that were treated with surgical implant products, including screws and plates. Plaintiff's charges for the medical treatment afforded to Powell totaled $242,941.09, of which $61,237.50 was for “supply/implant” products; plaintiff's total charges for Serrano–Ruiz's medical treatment were $143,477.76, of which $28,800 was for “supply/implant” products. Auto–Owners is responsible for payment of the insurance benefits for Powell's medical treatment; Home–Owners is responsible for payment of the insurance benefits for Serrano–Ruiz's medical treatment. Plaintiff provided defendants with uniform billing forms, itemized statements, and medical records identifying the medical treatment provided to Powell and Serrano–Ruiz, respectively. Defendants timely paid the portion of plaintiff's bills for all charges other than for the surgical implant products used to treat the two men. Defendants requested invoices showing the cost to plaintiff of those surgical implant products. Plaintiff refused to provide this information. Defendants did not pay the charges within the allotted statutory period, resulting in plaintiff's filing the instant actions to recover the unpaid amounts, together with statutory interest and attorney fees.

Home–Owners admitted that it did not pay the $28,800 charge for surgical implant products and denied that such payment was due and owing on the basis that plaintiff had failed to provide reasonable proof of the fact and amount of the loss and failed to comply with MCL 500.3158(2) by refusing to provide copies of the invoices showing the cost to plaintiff of the items billed as “supply implants.” Home–Owners claimed that, without such information, it was unable to make a determination regarding the reasonableness of the charges for the implants. Similarly, Auto–Owners admitted that it did not pay $61,237.50 for surgical implants because Auto–Owners believed that plaintiff had failed to provide sufficient documentation regarding the cost of treatment as required by MCL 500.3158(2) and failed to provide reasonable proof of the fact and amount of loss as required by MCL 500.3142 by refusing to provide copies of purchase invoices showing the cost to plaintiff of the items billed as “Supply/Implants in the amount of $61,237.50.”

Defendants submitted discovery requests seeking information regarding the wholesale cost to plaintiff of the surgical implant products at issue; plaintiff's “total revenue and operating expenses and the ‘cost-to-charge ratio’ which is derived from these numbers”; the percentages of plaintiff's patients that are uninsured or covered by no-fault insurance; the average annual increase in plaintiff's charges over the last five years; and any billing manuals or guidelines used to prepare itemized charges or other billing documents. Plaintiff objected to defendants' discovery requests, arguing that the information sought was irrelevant to the claims asserted in plaintiff's complaints and that defendants were not entitled to the information sought because the information regarding “costs of treatment” to which defendants were entitled under MCL 500.3158(2) pertained to the cost to the “injured person” of the medical care and treatment that person received, i.e., the charges incurred by the patient at plaintiff's hospital.

Defendants later moved to compel discovery, asserting that the information sought was relevant to their determination whether the charges billed were reasonable under the no-fault act. Pursuant to MCL 500.3158(2), plaintiff was required to provide insurers with information relating to the cost of treatment of the injured person, which, defendants argued, included the wholesale cost to the provider of the surgical implant products for which the insured was charged. Defendants also asserted that MCR 2.302 required that plaintiff produce the requested information because the information was relevant to the factual question whether plaintiff's charges for the surgical implant products were “reasonable” within the meaning of the no-fault act. Defendants noted that they paid plaintiff a substantial portion of the total charges billed in each case and that the unpaid portions of plaintiff's bills related solely to charges for the surgical implant products for which defendants sought, and plaintiff refused to provide, underlying cost information. Defendants further asserted that whether plaintiff's charges are “reasonable” and whether plaintiff provided “reasonable proof” of the fact and amount of loss as required by the act are determinations to be made by the finder of fact and were issues to which the requested materials were relevant and discoverable.

Plaintiff opposed defendants' motions, again asserting that defendants were not entitled to the information sought. Plaintiff also moved for summary disposition under MCR 2.116(C)(9) on the basis that defendants had abdicated their duty to process the balance of plaintiff's claims in accordance with the no-fault act and were, instead, seeking to use the discovery process to obtain information that they were not entitled to obtain under the no-fault act: plaintiff's underlying—and often confidential—proprietary-cost data. Plaintiff asserted that defendants could not merely refuse to process the claims; rather, defendants were required to fully process plaintiff's claims by adopting a method for assessing the reasonableness of those claims. Further, plaintiff argued that the information about the “costs of treatment” that it was required to provide under MCL 500.3158(2) pertained to the cost of treatment to the injured person, not the cost to the provider for providing the treatment.

At the hearing on the motions, defendants reiterated their position that the no-fault act required them to determine whether the charges assessed were reasonable and that MCL 500.3158(2) entitled them to documentation regarding the cost to plaintiff of the surgical implant products in order to make that determination. Defendants argued that by failing to provide that information, plaintiff had not met its burden of providing reasonable proof of loss under the act so as to entitle it to payment for the surgical implant products. In response, plaintiff argued that by submitting a uniform billing form, an itemized statement, and the patient's medical records, it had met its burden in each case to provide defendants with reasonable proof of the amount of the loss under MCL 500.3142 and that, thereafter, defendants failed to evaluate the claims, pay what they believed to be reasonable, and deny what they believed to be excessive. Plaintiff argued that defendants were required to conduct an investigation to determine whether the charges were reasonable by comparing costs among providers “similarly located geographically” for the products at issue. Plaintiff also asserted that allowing insurers to obtain providers' cost data would undermine the goals and objectives of the no-fault act and would cause that reparation system to come to a grinding halt. Plaintiff reiterated that all it is required to do is put the insurer on notice of the charges and the...