Moses H. Cone Mem'l Hosp. Operating Corp. v. Conifer Physician Servs., Inc., 1:13CV651
| Decision Date | 11 April 2017 |
| Docket Number | 1:13CV651 |
| Court | U.S. District Court — Middle District of North Carolina |
| Parties | THE MOSES H. CONE MEMORIAL HOSPITAL OPERATING CORPORATION d/b/a CONE HEALTH, Plaintiff, v. CONIFER PHYSICIAN SERVICES, INC. f/k/a SPRINGFIELD SERVICE CORPORATION, Defendant. |
This matter is before the Court upon Plaintiff, The Moses H. Cone Memorial Hospital Operating Cooperation's ("Cone Health") motion for partial summary judgment (Docket Entry 100), and Defendant Conifer Physician Services, Inc.'s ("Conifer") motion for partial summary judgment. (Docket Entry 103.) Both matters have been fully briefed and are ripe for disposition. For the reasons stated herein, the Court will deny Conifer's motion for partial summary judgment and grant in part and deny in part Cone Health's motion for partial summary judgment.1
Cone Health filed its original complaint on August 8, 2013, alleging that Conifer breached the parties' Master Outsourcing Services Agreement and Supplement 1 ("Agreement") and that Cone Health was terminating the Agreement as a result of Conifer's breach. (See generally Compl., Docket Entry 1.) Cone Health alleged a claim for breach of contract (and the supplement) (Counts I and II), and also alleged five separate causes of action for declaratory judgment (Counts III through VII). (Id. ¶¶ 75-96.) Conifer filed a motion to dismiss Counts III through VII of the Complaint. (Docket Entry 10.) The Court thereafter granted Conifer's motion (Docket Entry 27), and the parties submitted a Joint Rule 26(f) Report which the Court adopted. (Docket Entries 28, 30.) After discovery commenced, Cone Health filed a consent motion to amend its Complaint, which was granted. (Docket Entries 39, 42.) After the Amended Complaint was filed (Docket Entry 45), Conifer answered and asserted a counterclaim against Cone Health. (Docket Entry 48.) Thereafter extensive discovery took place in this matter and both parties submitted motions for partial summary judgment. (Docket Entries 100, 103.) In its motion, Cone Health seeks partial summary judgment as to damages on Conifer's counterclaim. (Docket Entry 100.) Conifer's motion seeks partial summary judgment as to: (1) liability on its counterclaim, (2) all claims for relief in Cone Health's Amended Complaint except the claim for a performance adjustment; (3) and other relief the Court finds appropriate. (Docket Entry 103.)
According to the Amended Complaint, Cone Health provides health care services through a network of hospitals and physicians in North Carolina. ( Conifer provides revenue management, health information management, andbilling services to health care providers like Cone Health.2 (Id. ¶ 6.) On August 8, 2011, Cone Health and Conifer entered into a Master Agreement (the "Agreement") under which Cone Health outsourced certain claims management and accounts receivable functions to Conifer. Thereafter, the parties executed "Supplement 1" to the Agreement, under which Conifer began providing billing and claims management services to physicians owned by, or affiliated with, Cone Health. .) The term of the Agreement under Supplement 1 was five years from the commencement date of Supplement 1. (Id. at 32.)
On May 10, 2013, Cone Health notified Conifer of several purported breaches of the Agreement and threatened to terminate it for cause as of July 12, 2013. The alleged breaches include Conifer's failure to properly manage Cone Heath's accounts receivable ("A/R"), failure to implement a denial management team to process denied claims, failure to provide adequate customer service to patients, failure to provide daily reconciliation, and improper billing of Medicaid beneficiaries. (Id. ¶¶ 19-54.) Under the Agreement, Cone Health (with written notice) could terminate the Agreement for cause if Conifer failed to fix a material breach within sixty (60) days, or Cone Health could terminate if a material breach was incurable. (Id. ¶ 56; Master Agreement § 15.2(a).) The Agreement also provided for termination without cause at any time after the three-year anniversary of the Agreement, provided that Cone Health give six (6) months written notice. (Master Agreement § 15.2(c).) After receiving notice of Cone Health's intentto terminate the Agreement, Conifer responded by letter, addressing the issues in the notice from Cone Health. (Am. Compl. ¶ 59; see also May 30 Letter, Ex. B, Docket Entry 51-2.)
Cone Health concluded that Conifer did not have the ability to cure its breaches, nor had Conifer remedied the issues raised in the May 10 letter. (Id. ¶ 60.) Cone Health agreed to suspend its termination notice until August 12, 2013, to allow the parties to discuss termination transition resolutions. (Id. ¶ 63.) Cone Health then filed this action on August 8, 2013, alleging that Conifer breached the Agreement.
Conifer filed an Answer and also asserted a counterclaim in this action alleging that Cone Health's termination was improper, and thus, a breach of the Agreement. (Counterclaim ¶ 3, Docket Entry 48 at 7.) Conifer alleges that it was (1) never in material breach of the Agreement and (2) that it cured, or offered to cure any purported breach before Cone Health terminated the Agreement. (Id.) Conifer seeks compensatory damages in excess of $20 million dollars. (Id. ¶ 46.)
Some background undisputed facts are as follows:3 Cone health was initially struggling with revenue cycle performance prior to the execution of the Agreement. (Kenneth Boggs Dep., Ex. 5 47:5-48:5, Docket Entry 105-4 at 7.) Revenue cycle functions include scheduling, registration, billing for medical services, collecting payment, account adjustments, and collections follow-up. (Ex. 2, Docket Entry 105-1 at 33.) Cone Health's in-house struggles with billing and collection services were primarily the result of staffing issues. (Boggs Dep.,Ex. 5 47:8-12.) In 2010, Cone Health decided to change its electronic healthcare records system from the "GE/IDX" platform to the "EPIC" platform. (Mark R. Gorham Dep., Ex. 6 44:19-25, Docket Entry 105-4 at 16.) EPIC was set to go "live" on February 1, 2012. (Id. 73:12-19.) As part of Cone Health's efforts to improve revenue cycle functions, it also entered into the Agreement with Conifer. Conifer begin services on the GE/IDX system and later moved to the EPIC system. Conifer's services included A/R follow-up, payment posting, and customer service. (Ex. 8, Docket Entry 105-4 at 65-66.) Cone health was still responsible for some revenue cycle functions. (Id.)
What transpired (and why it transpired) after Conifer begin performing under the Agreement is the root of considerable disagreement, but it is clear that by early 2013, Cone Health was unsatisfied with Conifers' performance and intended to terminate its agreement with Conifer. Cone Health hired another revenue cycle management company in March 2013, Alleviant, and on April 18, 2013, a Cone Health executive, Jeffrey F. Jones, contacted Conifer's executive, John O'Donnell, regarding terminating the Agreement. (Jeffrey Jones Dep., Ex. 76 271:1-272:20:, Docket Entry 121-15 at 13-14.) Mr. O'Donnell wanted something in writing and on May 10, 2013, Mr. Jones sent a letter to Conifer regarding Cone Health's grounds for termination. (May 10 Letter at 2-3.) Thereafter, Conifer provided a response to the issues raised in the letter whereby Conifer denied that Cone Health could terminate the Agreement with cause. (May 30 Letter at 2-7.) Cone Health wrote a follow-up letter on June 14, 2013 expressing further disagreement. (June 14 Letter, Ex. C, Docket Entry 51-3.) Cone Health then filed the pending action against Conifer in August 2013.
Both parties have moved for partial summary judgment in this matter. (Docket Entries 100, 103.) Summary judgment is appropriate when there exists no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c); Zahodnick v. Int'l Bus. Machs. Corp., 135 F.3d 911, 913 (4th Cir. 1997). The party seeking summary judgment bears the initial burden of coming forward and demonstrating the absence of a genuine issue of material fact. Temkin v. Frederick County Comm'rs, 945 F.2d 716, 718 (4th Cir. 1991) (citing Celotex v. Catrett, 477 U.S. 317, 322 (1986)). Once the moving party has met its burden, the non-moving party must then affirmatively demonstrate that there is a genuine issue of material fact which requires trial. Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). There is no issue for trial unless there is sufficient evidence favoring the non-moving party for a fact finder to return a verdict for that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); Sylvia Dev. Corp. v. Calvert County, Md., 48 F.3d 810, 817 (4th Cir. 1995). Thus, the moving party can bear his burden either by presenting affirmative evidence or by demonstrating that the non-moving party's evidence is insufficient to establish his claim. Celotex, 477 U.S. at 331 (Brennan, dissenting). When making the summary judgment determination, the Court must view the evidence, and all justifiable inferences from the evidence, in the light most favorable to the non-moving party. Zahodnick, 135 F.3d at 913; Halperin v. Abacus Tech. Corp., 128 F.3d 191, 196 (4th Cir. 1997). However, the party opposing summary judgment may not rest on mere allegations or denials, and the court need not consider "unsupported assertions" or "self-serving opinions without objective corroboration." Evans v. Techs. Applications & Serv. Co., 80 F.3d 954, 962 (4th Cir. 1996); Anderson, 477 U.S. at 248-49."When faced with cross-motions for summary judgment, the court must review each motion separately on its own...
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