LIBERTY NAT. v. UNIV. OF ALA. HEALTH SERVS.

• Decision Date: 19 September 2003
• Citation: 881 So.2d 1013
• Parties: LIBERTY NATIONAL LIFE INSURANCE COMPANY v. UNIVERSITY OF ALABAMA HEALTH SERVICES FOUNDATION, P.C., et al.
• Court: Alabama Supreme Court

881 So.2d 1013

LIBERTY NATIONAL LIFE INSURANCE COMPANY v. UNIVERSITY OF ALABAMA HEALTH SERVICES FOUNDATION, P.C., et al.

1012346.

Supreme Court of Alabama.

September 19, 2003.

Rehearing Denied November 21, 2003.

William J. Baxley and Charles A. Dauphin of Baxley, Dillard, Dauphin & McKnight, Birmingham, for appellant.

W. Stancil Starnes, Laura Howard Peck, and Bryan O. Balogh of Starne & Atchison, LLP, Birmingham, for appellees.

W. Boyd Reeves and M. Kathleen Miller of Armbrecht Jackson, LLP, Mobile, for amicus curiae Alabama Hospital Association.

Robert A. Huffaker and R. Austin Huffaker, Jr., of Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, for amicus curiae Hal Phillips, in support of the appellant.

HARWOOD, Justice.

On May 24, 2002, Liberty National Life Insurance Company ("Liberty National") sued the University of Alabama Health Services Foundation, P.C., University of Alabama at Birmingham Hospital, and UAB Health System (hereinafter collectively referred to as "UAB"). Liberty National's complaint presented claims alleging "prima facie tort";¹ violation of Ala.Code 1975, § 22-21-7;² intentional interference with Liberty National's "contractual and/or business relationships" with its insureds; and a claim seeking a declaratory judgment under the Alabama Declaratory Judgment Act ("the Act"). Liberty National alleged that UAB's billing statements to its patients who are also Liberty National policyholders often contain charges for various services that exceed the amounts UAB has accepted or will accept as full payment for those services; thus, Liberty National claims that UAB causes it to pay its policyholders amounts in reimbursements for services performed by UAB that exceed what UAB accepts as full satisfaction of those services. Liberty National sought an injunction to prevent UAB from continuing its allegedly improper billing practice, an award of compensatory and punitive damages, and a judgment declaring that UAB's billing practices violated Ala.Code 1975, § 22-21-7.

UAB filed a motion to dismiss the action pursuant to Rule 12(b)(1), (6), (7), and Rule 19, Ala.R.Civ.P. In its motion UAB asserted that the "Board of Trustees of the University of Alabama for its Division, University Hospital" was the correct designation for the defendant designated in Liberty National's complaint as "University of Alabama at Birmingham Hospital." This defendant is referred to hereinafter as "UAB Hospital." UAB asserted lack of subject-matter jurisdiction arising from Liberty National's lack of standing to bring any of the claims except the claim alleging intentional interference with contractual and/or business relationships; failure to state a claim upon which relief could be granted as to the prima facie tort claim and the claim asserting a violation of § 22-21-7; failure to join policyholders as necessary parties; and UAB Hospital's immunity from Liberty National's claims against it by virtue of Ala. Const.1901, Art. I, § 14. Liberty National responded and UAB then filed a reply brief in response to Liberty National's opposition. In that brief, UAB expanded its ground of failure to state a claim upon which relief could be granted to include the declaratory-judgment claim. On September 9, 2002, the trial court granted UAB's motion to dismiss the case, on the ground that the court lacked jurisdiction over the action because Liberty National lacked standing to bring it. Liberty National appealed.

On appeal, Liberty National argues that the trial court's ruling that it lacks standing was improper and that this Court cannot affirm the trial court's judgment on the basis of any of the other grounds contained in UAB's motion to dismiss.

"The appropriate standard of review of a trial court's [ruling on] of a motion to dismiss is whether `when the allegations of the complaint are viewed most strongly in the pleader's favor, it appears that the pleader could prove any set of circumstances that would entitle [the pleader] to relief.' Nance v. Matthews, 622 So.2d 297, 299 (Ala.1993); Raley v. Citibanc of Alabama/Andalusia, 474 So.2d 640, 641 (Ala.1985). This Court does not consider whether the plaintiff will ultimately prevail, but only whether the plaintiff may possibly prevail. Nance, 622 So.2d at 299. A `dismissal is proper only when it appears beyond doubt that the plaintiff can prove no set of facts in support of the claim that would entitle the plaintiff to relief.' Nance, 622 So.2d at 299; Garrett v. Hadden, 495 So.2d 616, 617 (Ala.1986); Hill v. Kraft, Inc., 496 So.2d 768, 769 (Ala.1986)."

Lyons v. River Road Constr., Inc., 858 So.2d 257, 260 (Ala.2003).

The complaint states that since 1969, Liberty National has issued cancer insurance policies that pay policyholders amounts equal to their medical expenses for the treatment of cancer. These cancer policies are supplemental, as opposed to primary, insurance policies; Liberty National makes payments directly to the policyholders or their family members, and only "rarely, if ever," makes payments directly to health-care service providers. The cancer policies are intended to assist in paying medical bills or other expenses incurred by policyholders afflicted with cancer and to pay the expenses of cancer treatment, regardless of the presence of, and payments by, other insurance or other primary payment sources, such as Medicare. As Liberty National states in its brief to this Court:

"It is thus inherent in the promises made in [Liberty National's] insurance that the patient, if he or she has other insurance (or Medicare or other coverage), will be covered more than once for the treatments he or she receives — once by payment to the hospital or doctor and once to the insured...."

These cancer policies are renewable for the life of the policyholder; Liberty National cannot modify or eliminate any of the terms or conditions of the policies. However, Liberty National may, subject to regulatory limitations, increase the annual premiums. As Liberty National stated in its complaint, "[U]nder the terms of the Cancer Policies, Liberty National is obligated to pay Liberty National Insureds benefits on some policies of `expenses incurred' or, in other policies, the `actual charges by a hospital, physician or other provider' for a Covered Treatment of the Liberty National Insured.... [Liberty National] is not obligated to pay benefits `in excess of the usual and customary charges' for such treatment." Many of the cancer policies issued by Liberty National have no dollar limit on the amounts Liberty National may be required to pay for radiation treatment, chemotherapy, prescription chemotherapy drugs, and other out-of-hospital prescription drugs. Liberty National designates those policies as the "no dollar limit policies." The complaint states that at the end of the year 2001, Liberty National had approximately 78,000 no dollar limit policies in force.³

As a part of its billing practice, UAB used a price list it refers to as "Charge Master." UAB states that this price list "exhaustively compiles" its actual charges. It explained in its reply brief in the trial court that "[t]he Charge Master inventories the actual charges and ensures their universal application to every patient, irrespective of whether a third party payor may ultimately satisfy part or all of the charges." The "actual charges" thus derived are the amounts billed by UAB. However, as is common practice in the health-care industry, and as required by law in certain instances, UAB often accepts as payment in full an amount less than the actual total charge reflected on the billing statement generated using Charge Master. For example, pursuant to 42 C.F.R. § 412.42(a): "A hospital may not charge a beneficiary for any services for which payment is made by Medicare, even if the hospital's costs of furnishing services to that beneficiary are greater than the amount the hospital is paid under the prospective payment systems." The Medicare Provider Reimbursement Manual, Part I, Chapter 22, § 2203, states: "While the Medicare program cannot dictate to a provider what it charges or charge structure may be used, the program may determine whether or not the charges are allowable for use in apportioning costs under the program." (UAB's brief, p. 7.) Also, hospitals often enter into agreements with insurance companies pursuant to which the hospital agrees to accept a "reimbursed amount" that is less than the actual charge incurred by the policyholder.⁴ As stated in UAB's reply brief in the trial court, unless UAB is statutorily or contractually limited to the amount it may accept as full payment for the health-care services it provides, it expects reimbursement for the "full amount of the actual charges."

Liberty National's complaint states that when UAB provides cancer treatment to a Liberty National policyholder, UAB issues a billing statement that some policyholders then present to Liberty National. That statement does not reflect the actual amount UAB can charge and collect for treatments if the policyholder also receives benefits from Medicare or from some other insurance company that has a special arrangement with UAB for reimbursing its charges. Rather, as noted, the statement reflects the charges an otherwise uninsured patient must pay, compiled using Charge Master, without regard to any limiting special program or contract. Thus, the Liberty National policyholder, just like all other patients, receives a statement showing amounts extracted using Charge Master, amounts that are not necessarily the amounts UAB has accepted or will accept as full payment of its services. The terms of Liberty National's cancer policies require that Liberty National pay the policyholder the full amount listed on the statement. As Liberty National states in its brief to this Court: "It is the practice of [Liberty National] to pay the insureds the amount billed by [UAB] even though the amounts are greatly inflated."...