Maak v. IHC Health Servs., Inc.

• Decision Date: 14 April 2016
• Docket Number: No. 20140003–CA.,20140003–CA.
• Citation: 372 P.3d 64,2016 UT App 73
• Parties: Ann V. MAAK, Appellant, v. IHC HEALTH SERVICES, INC., Appellee.
• Court: Utah Court of Appeals

372 P.3d 64

2016 UT App 73

Ann V. MAAK, Appellant

v.IHC HEALTH SERVICES, INC., Appellee.

No. 20140003–CA.

Court of Appeals of Utah.

April 14, 2016.

Gregory M. Hess, Terry E. Welch, Breanne D. Fors, and LaShel Shaw, Salt Lake City, for Appellant.

Alan C. Bradshaw, Steven C. Bednar, and Chad R. Derum, Salt Lake City, for Appellee.

Justice JOHN A. PEARCE authored this Opinion, in which Judges J. FREDERIC VOROS JR. and STEPHEN L. ROTH concurred.¹

Opinion

PEARCE

, Justice:

¶ 1 Appellant Ann V. Maak appeals from the district court's order granting IHC Health Services, Inc.'s (IHC) motion to decertify a class and denying Maak's motion to amend the class definition. Maak contends the district court abused its discretion in so ruling. Maak also contends that the district court erred in determining that IHC had not waived its counterclaims against class members. We are unable to discern the basis for the district court's conclusion that IHC did not waive its counterclaims. We therefore remand for the entry of a new decision on that issue—one that is accompanied by a development of the factual record and appropriate legal analysis. Because the district court relied on the viability of IHC's counterclaims in its decision to grant IHC's motion to decertify the class, we vacate the court's decertification decision for further consideration in light of the district court's resolution, on remand, of Maak's challenge to IHC's counterclaims. We also conclude that the district court's order does not permit us to determine whether it properly acted within its discretion in denying Maak's motion to amend the class definition, and we vacate that decision as well. We therefore remand the case to the district court for further consideration.

BACKGROUND²

¶ 2 Maak sued IHC, arguing that IHC had engaged in “fraudulent and improper billing practices.” Maak alleged that IHC improperly overcharged her for medical care she had received and that the overcharges resulted from IHC's regular and systematic billing practices.

¶ 3 After Maak received treatment at LDS Hospital—an IHC facility—she received a statement of itemized charges totaling $11,396.11. Regence Blue Cross Blue Shield (Regence) provided health insurance to Maak at the time of her treatment. Regence reimbursed IHC $12,310.36 for Maak's treatment, an amount that exceeded the itemized charges. Regence paid the greater amount because, “[p]ursuant to a contract between IHC and Regence, all medical procedures performed at LDS Hospital are classified in a Diagnostic Related Group (DRG), which Regence agrees to reimburse, at a predetermined fixed rate, without regard to the actual costs LDS Hospital incurs for the services.” Maak v. IHC Health Servs., Inc., 2007 UT App 244, ¶ 3, 166 P.3d 631

. In addition to the payment it received from Regence, IHC billed Maak an additional $986.63 “based on Maak's twenty percent coinsurance obligation” her insurance contract with Regence imposed. Id. ¶ 4.

¶ 4 During discovery, an IHC employee explained the billing practices IHC employed when an insurer had agreed to reimburse IHC a fixed price for a medical procedure based on a DRG classification. In addition to reimbursing IHC based upon the DRG classification, the insurance company would “determine [ ] the patient's liability based on the benefits of [the patient's] particular [insurance] policy.” The insurance company would then inform IHC of any responsibility for payment that the patient might owe under the insurer's agreement with the patient. For example, the contract between the insurer and insured might impose a coinsurance obligation on the patient.³

¶ 5 IHC would then combine the payment it received from the insurance company and “the amount due from the patient.” If the combined amount did not match the original itemized charges of the insured's medical procedure, IHC's system would automatically make an adjustment to the account, which IHC terms a “contractual adjustment.” The contractual adjustment was designed “to bring the charges in line with the terms of the reimbursement contract” between IHC and Regence. In cases where the sum of the amount IHC received from the insurer and the patient's responsibility exceeded the itemized charges, the contractual adjustment would be an additional amount posted to the patient's account. In cases where the sum of the insurer's payment and the patient's responsibility was less than the itemized charges, the contractual adjustment would reduce the patient's original itemized charges. Thus, where the insurer and IHC agreed to reimbursement based upon DRG classifications, IHC's billing system would adjust a patient's account so that the amount ultimately billed equaled the combined amount of the DRG reimbursement from the insurer and the amount of the patient's responsibility under the patient's insurance contract. This created a system where in some cases a patient and her insurance company would be charged more than the sum total of the patient's itemized charges and in other cases they would be charged less.

¶ 6 In this instance, IHC billed Maak for $986.63, her patient responsibility under her contract with Regence. Maak initially resisted IHC's efforts to collect but eventually paid the full amount. Maak continued to dispute IHC's ability to collect the coinsurance because “IHC already had been more than fully compensated by Regence for the hospital charges incurred on her behalf.” Id. ¶ 4. Maak then sued IHC, on behalf of herself and a class of similarly situated patients for, among other causes of action, fraud and breach of contract. See id. The district court granted summary judgment to IHC on all of Maak's claims.

¶ 7 Maak appealed to this court and argued, among other things, that the district court erred in concluding that IHC's efforts to bill Maak in excess of the itemized charges did not breach Maak's contracts with IHC and Regence. Id. ¶ 7. We agreed with Maak and reversed the district court's grant of summary judgment on Maak's breach of contract claim. Id. ¶ 29. We held “that as a matter of contract law, IHC could not bill Maak for medical services after it had collected the full amount chargeable for those services from Maak's insurer.” Id. We then remanded the matter for a determination of whether Maak could satisfy the class certification requirements contained in rule 23 of the Utah Rules of Civil Procedure

. Id. ¶ 32; see also Utah R. Civ. P. 23(a)–(b).

¶ 8 On remand, the district court conditionally certified the case as a class action. The court determined that all elements of rule 23

were conditionally satisfied, and certified a class of:

All patients who at any time after or within six years prior to May 27, 2003 received medical services from an IHC-owned or operated medical facility or an IHC health-care provider of any kind and then were billed for amounts that, when collected, resulted in IHC receiving in combination from the patient's insurance company and the patient more than actual charges. Medicare patients are excluded.

Although it certified the class, the district court questioned whether “the class should include only individuals who were insured by Regence, or alternatively, patients, regardless of insurer, who were billed for amounts that resulted in IHC receiving from the insurer and patient more than the actual expenses.” The court ultimately concluded, “Unless a patient's insurance company's contract with the patient grants IHC the right or obligation to collect a co-payment from a patient, the identity of the insurer is irrelevant to the fact that IHC breached its contract with the patient....” Because the court certified the class in the midst of discovery, it had insufficient information to determine if other insurance companies' contracts were similar to Regence's. Thus, the court “conditionally include[d] class members not limited to Regence insureds.” The court cautioned that the “class definition is conditional” and noted that rule 23

“permits an order on class certification to be altered or amended at any time before a decision on the merits.” See Utah R. Civ. P. 23(c)(1).

¶ 9 Following class certification, the parties developed a two-stage discovery process to identify class members, designated as “Tier 1” and “Tier 2.” In the first stage, IHC initiated an automated review of its records “to identify instances when [it] may have collected more than what was listed on” the patient's itemized statement. In the second stage, IHC organized “a manual audit of [its] patient files to identify instances in which IHC collected more than the itemized statements.” The district court noted that this process identified 41,849 instances where IHC collected money in excess of an itemized statement. It also noted that the overcharges totaled roughly $9,500,000, with an average of more than $220 per instance.

¶ 10 In addition to collecting data regarding its billing of patients for more than their itemized charges, IHC identified instances when its billing practices led to “shortfalls between what patients and their insurers paid and what was listed on the itemized statements.” IHC referred to this data as “Tier 1.5,” and contended that approximately ninety percent of the class members had at some point paid less than their itemized statements. IHC then asserted counterclaims against Maak and the class members for those alleged shortfalls. IHC estimated that aggregate total damages for these counterclaims amounted to $220,000,000, with an average of $6,822 per instance.

¶ 11 Maak moved for summary judgment on IHC's counterclaims. Maak argued that IHC had no valid counterclaims for the so-called “shortfall amounts” and that even if it did, the claims failed because IHC had waived its right to bill and collect any “shortfall[s].” IHC opposed summary judgment, arguing that its counterclaims were valid and that it had not waived its right to collect the shortfall amounts. Approximately six months later, Maak filed a notice to submit...