JOHN C. LINCOLN HOSP. v. Maricopa County

Decision Date03 August 2004
Docket NumberNo. 1 CA-CV 03-0074.,1 CA-CV 03-0074.
Citation208 Ariz. 532,96 P.3d 530
PartiesJOHN C. LINCOLN HOSPITAL AND HEALTH CORPORATION, et al., Plaintiffs-Appellants/Cross-Appellees v. MARICOPA COUNTY, et al., all political bodies of the State of Arizona, Defendants-Appellees/Cross-Appellants.
CourtArizona Court of Appeals

Gammage & Burnham By Richard B. Burnham, Cameron C. Artigue, Phoenix, and Law Offices of Thomas A. Zlaket By Thomas A. Zlaket, Tucson, Attorneys for Plaintiffs-Appellants.

Meyer, Hendricks & Bivens, P.A. By Don Bivens, Marc Kalish, Phoenix, Attorney for Defendant-Appellee.

OPINION

HALL, Judge.

¶ 1 The trial court entered judgment in favor of John C. Lincoln Hospital Corporation; Scottsdale Memorial Health Systems, Inc.; Chandler Regional Hospital; St. Luke's Medical Center aka Ornda St. Luke's Medical Center; and Phoenix Children's Hospital (collectively, Hospitals) against Maricopa County (County) in the amount of $1,119,677.16 as reimbursement to the Hospitals for emergency medical treatment rendered to indigent patients pursuant to Arizona Revised Statutes (A.R.S.) section 11-291.01 (1997).1

¶ 2 The Hospitals appealed, raising the following issues:

1. Did the trial court err by determining the Hospitals' claims were unliquidated and therefore refusing to award them prejudgment interest?
2. Did the trial court err by determining the Hospitals were not entitled to attorneys' fees because their lawsuit was not a mandamus action pursuant to A.R.S. § 12-2030 (2002)?

¶ 3 The County raises the following issues on cross-appeal:

1. Did the trial court err by applying a "doctor-bill assumption" that non-hospital charges equal a fixed percentage of hospital charges in order to "spend-down" patients' excess income and allow them to qualify as indigents under A.R.S. § 11-297(B) (1997)?
2. Did the trial court err by concluding the Hospitals' administrative claims for reimbursement sufficiently complied with the requirements of A.R.S. § 11-622 (2002)?
3. Did the trial court err by determining the Hospitals provided sufficient evidence of the patients' eligibility to qualify for indigent, emergency coverage under § 11-291.01?
4. Did the trial court err by determining the Hospitals did not receive third-party payments that would offset their claims for reimbursement?
5. Did the trial court err in construing § 11-291.01(A) as precluding the County from reducing its eligibility standards, services or benefit levels from those in effect on January 1, 1981?
6. Did the trial court err by admitting certain expert testimony and various summaries that lacked sufficient foundation?

We affirm the judgment in all respects except that we vacate the trial court's determination that the Hospitals were not entitled to prejudgment interest on their claims, and remand so the trial court may calculate and include such interest in the judgment.

FACTS AND PROCEDURAL HISTORY

¶ 4 For the past twenty years, private hospitals, including the named appellants, have submitted claims for reimbursement to the County for emergency medical treatment provided to indigent County residents. Although tens of thousands of claims have been filed, most disputes between the County and the private hospitals have been settled without litigation. However, in May 2000, the County abandoned its general policy of seeking settlement resolution of contested claims, and instead adopted a posture of litigating all disputes.

¶ 5 Thousands of submitted claims, the validity of which the County has challenged, have been consolidated into twenty-eight cycles. The 461 claims at issue in this case represent Cycles II and III, claims from patients receiving treatment in the years 1997, 1998, and 1999. After a bench trial, the court rendered a judgment requiring the County to reimburse the Hospitals for $1,119,677.16 in expenses incurred providing emergency medical services to indigents. We have jurisdiction pursuant to A.R.S. § 12-2101(B) (2003).

DISCUSSION

¶ 6 We first address the issues the County raises in its cross-appeal attacking the merits of the judgment.

I. Doctor-Bill Spend-Down Assumption

¶ 7 Pursuant to § 11-297(A), the County provided emergency medical care for indigents without requiring application to the Arizona Health Care Cost Containment System (AHCCCS). Subsection (B)(1)(a) of the statute defined "indigent" as a person who does not have an annual income in excess of $2,500. However, even if a patient had an income exceeding the $2,500 ceiling at the time of hospital admission, the patient could become indigent during hospitalization by incurring hospital and medical charges that, after being deducted from the patient's income, qualified the patient for County medical care.2 Walter O. Boswell Mem'l Hosp., Inc. v. Yavapai County, 148 Ariz. 385, 388-89, 714 P.2d 878, 881-82 (App.1986); St. Joseph's Hosp. and Med. Ctr. v. Maricopa County, 130 Ariz. 239, 242-44, 635 P.2d 527, 530-31 (App.1981).

¶ 8 During their course of dealing over the previous two decades, the County and Hospitals stipulated to the "doctor-bill spend-down assumption," an administrative convenience to facilitate the settlement of submitted claims by which non-hospital charges, that is, medical expenses incurred by the patient before hospital admission, were treated as a fixed percentage (25%) of hospital charges. In its findings of fact, the trial court found that the County was equitably estopped from contesting the 25% spend-down figure:

The evidence preponderates in plaintiffs' favor in the establishment of the principle that the parties agreed to use certain "conventions" in their dealings over the last 20+ years in their efforts to settle similar claims.... I find that the parties' history of applying these "conventions" or "protocols," including the application of a 25% "spenddown" figure for non-hospital charges, was a reasonable administrative convenience and both sides agreed to and did in fact use them. Although the witnesses' testimony conflicted on this issue, the plaintiffs' evidence preponderated when credibility is considered. Furthermore, it is reasonable to conclude that the non-hospital charges related to the care in question is equal to 25% of the bill charges of the hospital bills and that the plaintiffs reasonably and detrimentally relied upon that convention.

¶ 9 The County argues that the trial court erred in applying the 25% assumption because: (1) § 11-297(E)(1) only required the County to deduct verified medical expenses, therefore a fixed assumption did not comply with the statutory requirements; (2) the record is devoid of any evidence to establish that any portion of any patient's assumed spend-down was incurred before the patient's emergency hospital treatment as required under § 11-297(E)(1); (3) in several instances the Hospitals or non-hospital providers had received third-party payments, thereby releasing the patient from any obligation to pay and therefore disqualifying those charges as deductibles under § 11-297(E)(1); (4) the County stipulated to the assumption only to facilitate settlement, not for purposes of litigation, and because the assumption was never utilized outside the settlement context, Arizona Rules of Evidence (Rule) 408 precludes evidence of the assumption to prove liability or the amount of damages; and (5) the Hospitals did not reasonably rely on the assumption to their detriment.

¶ 10 We first address the trial court's finding that the County was equitably estopped from contesting the spend-down figure, which, if correct, is determinative on this issue. In order to establish equitable estoppel, a party must show: (1) affirmative acts inconsistent with a claim afterwards relied upon; (2) action by a party relying on such conduct; and (3) injury to the party resulting from a repudiation of such conduct. Tucson Elec. Power Co. v. Ariz. Dep't of Revenue, 174 Ariz. 507, 516, 851 P.2d 132, 141 (App.1992). As a further consideration, the effect on the public of imposing estoppel must be assessed because estoppel will not be applied to the detriment of the public interest. Valencia Energy Co. v. Ariz. Dep't of Revenue, 191 Ariz. 565, 576, ¶ 32, 959 P.2d 1256, 1267 (1998). Questions of estoppel, including reasonable reliance, are fact-intensive inquiries. See Nelson v. Phoenix Resort Corp., 181 Ariz. 188, 196, 888 P.2d 1375, 1383 (App.1994); Cook v. Great W. Bank & Trust, 141 Ariz. 80, 86, 685 P.2d 145, 151 (App.1984). We defer to the trial court with respect to any factual findings explicitly or implicitly made, affirming them so long as they are not clearly erroneous, even if substantial conflicting evidence exists. Twin City Fire Ins. Co. v. Burke, 204 Ariz. 251, 254, ¶ 10, 63 P.3d 282, 285 (2003); Kocher v. Ariz. Dep't of Revenue, 206 Ariz. 480, 482, ¶ 9, 80 P.3d 287, 289 (App.2003).

¶ 11 The first element of estoppel requires affirmative acts inconsistent with the position later relied on, with an action by the government requiring a considerable degree of formalism. Valencia, 191 Ariz. at 577, ¶ 36, 959 P.2d at 1268. In the series of letters exchanged between the parties, each agreed to employ the 25% doctor-bill spend-down assumption to all future settlements. The letters written by the Maricopa County Attorney's Office carried the requisite formality, and the Hospitals assert the County represented through these letters that the doctor-bill assumption would apply prospectively in all cases. Compare Open Primary Elections Now v. Bayless, 193 Ariz. 43, 47, ¶ 14, 969 P.2d 649, 653 (1998) (affirming dismissal of promissory estoppel argument because "[e]ven under the facts as alleged by appellants [the government officials] never reduced the alleged agreement to writing, and no degree of formality characterized the purported agreement"). However, we note the letters did not assure, as the Hospitals contend, that the assumption would be applied to all future claims. The precise...

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