Munson Medical Center v. Auto Club Ins. Ass'n, Docket No. 177469

• Decision Date: 23 August 1996
• Docket Number: Docket No. 177469
• Parties: MUNSON MEDICAL CENTER, Plaintiff-Appellee, v. AUTO CLUB INSURANCE ASSOCIATION, also known as AAA Insurance Company, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 49

554 N.W.2d 49

218 Mich.App. 375

MUNSON MEDICAL CENTER, Plaintiff-Appellee, v. AUTO CLUB INSURANCE ASSOCIATION, also known as AAA Insurance Company, Defendant-Appellant.

Docket No. 177469.

Court of Appeals of Michigan.

Submitted March 5, 1996, at Grand Rapids.

Decided Aug. 23, 1996, at 9:10 a.m.

Released for Publication Oct. 15, 1996.

Honigman Miller Schwartz & Cohn by Michael A. Gruskin, Detroit, and Munson Healthcare by Stephen P. Clifton, Corporate Vice President and General Counsel, Traverse City, for plaintiff.

Becker, Lanctot, McCutcheon, Schoolmaster, Taylor & Hom by Clair W. Hoehn Gross, Nemeth & Silverman, P.L.C., by Steven G. Silverman, of Counsel, Detroit, for defendant.

Mantese & Carozza, P.L.L.C. by Gerard Mantese and Regis A. Carozza, Huntington Woods, for Amicus Curiae, Michigan Health and Hospital Association.

Before SAAD, P.J., and McDONALD and M.A. CHRZANOWSKI, ^* JJ.

SAAD, Presiding Judge.

This case arises out of a payment dispute for medical services rendered and billed by plaintiff Munson Medical Center under the no-fault act to defendant Auto Club Insurance Association (ACIA). The dispute centers on the appropriate statutory amount I

ACIA is required to pay Munson under the no-fault act. ACIA appeals from the circuit court's order (1) granting Munson's motion to amend its complaint, (2) granting summary disposition pursuant to MCR 2.116(C)(10) against ACIA, and (3) entering judgment in favor of Munson in the amount of $100,141.66 plus interest. ACIA also challenges the trial court's denial of its motion for rehearing. We affirm on all grounds.

BACKGROUND AND FACTS

Under Michigan's no-fault act, M.C.L. § 500.3101 et seq.; M.S.A. § 24.13101 et seq., when a person is injured in an automobile-related accident, a hospital that provides medical care is to be reimbursed by the injured person's no-fault insurance company. Since 1973, a number of ACIA insureds were treated at Munson Medical Center for injuries arising out of automobile accidents. Historically, Munson would bill ACIA for the services, and, until 1992, ACIA paid the full no-fault amounts billed by Munson. However, beginning in 1992, ACIA stopped paying the entire amount of Munson's no-fault bills and began paying only a portion of the charges. It is undisputed that, instead of paying the full amount billed by Munson, ACIA began to pay Munson according to the fee schedule promulgated under the Worker's Disability Compensation Act, M.C.L. § 418.101 et seq.; M.S.A. § 17.237(101) et seq. As a practical matter, payments made pursuant to this fee schedule were routinely less than the amount actually billed ¹ by Munson to ACIA.

In December 1992, Munson filed suit against ACIA under the no-fault act for the unpaid portion of its bills. Munson thereafter amended its complaint to increase the amount of damages sought. In October 1993, Munson filed a motion for summary disposition pursuant to MCR 2.116(C)(9) (failure to state a valid defense) and MCR 2.116(C)(10) (no genuine issue of material fact). Munson argued (1) that ACIA made only partial payments to Munson, according to the payment schedule of the Workers Disability Compensation Act, even though the injuries did not arise from employment, (2) that the worker's compensation payment schedule had not been promulgated pursuant to the no-fault act, and (3) that the no-fault act itself required payment of all of the insureds' allowable medical expenses. With its motion for summary disposition, Munson provided affidavits attesting that its charges were "customary" (because they were uniform to all who used its services, regardless of whether an insurer ultimately paid the entire amount billed), and that its charges were reasonable because none of the twenty-five to thirty other no-fault insurers with whom Munson dealt objected to the reasonableness of the charges. The unpaid portion of the bills at issue is $100,274.41.

ACIA opposed Munson's motion for summary disposition and sought summary disposition. Basically, ACIA argued that Munson was not entitled to summary disposition because Munson's motion was unsupported by competent evidence that its charges were reasonable or customary. In support of ACIA's own motion for summary disposition, ACIA argued that its payments accurately reflected what Munson's reasonable charges should have been, so that the resulting payments (computed according to the worker's compensation payment schedule) were reasonable as a matter of law. ACIA reasoned that hospitals such as Munson were unable to obtain adequate (full) payment from Medicare, Medicaid, and Blue Cross and Blue Shield of Michigan (hereafter BCBSM) to cover the hospital's actual costs, and this meant that hospitals such as Munson would unfairly shift these unmet costs onto no-fault insurers like ACIA. ACIA further reasoned that this cost shifting resulted in unreasonable charges, so that ACIA could no longer accept Munson's charges as reasonable. Instead In a nutshell, ACIA complained that if it paid the entire bill submitted by Munson for a particular injury, it would be paying more than Medicare, Medicaid, or BCBSM would pay for the same injury. ACIA pointed out that a broken leg is a broken leg, whether broken on the job or in an automobile accident. Accordingly, it argued that it was unreasonable and unfair for ACIA to be billed by hospitals more to treat a broken leg because the leg was broken in an automobile accident rather than in a manner that is covered by Medicare, Medicaid, or BCBSM. Although Munson claimed that it billed everyone the same "customary charges" for the same services, ACIA argued that the customary charges were not "customary" at all, because Munson did not expect to receive and did not actually receive the same amount from all payors as payment in full.

ACIA determined that the worker's compensation payment scheme was a suitable objective measure of "reasonable" costs.

The circuit court issued a bench opinion that granted summary disposition in favor of Munson. The court agreed with ACIA that the cost for treating identical broken legs should be identical for each patient, but noted that government regulation of the insurance and health-care industries prevented that result. The court therefore found that Munson had a legal right to payment in full of its "customary charges," but expressly noted that in its view ACIA had the "high moral ground" with regard to its concerns about cost shifting. ACIA's subsequent motion for rehearing was denied as untimely and lacking substantive merit. This appeal followed.

On appeal, the Michigan Health and Hospital Association filed an amicus curiae brief in support of Munson. The brief discusses that fact that ACIA has not singled out Munson alone for it partial payments--in fact it has used the worker's compensation payment schedule to reduce payments at numerous hospitals across the state. The amicus curiae brief also discussed several lower court cases in which hospitals have been forced to litigate their claims against ACIA to obtain full payment for the medical services rendered to ACIA's insureds. Apparently, this is the first such case to reach this Court.

II

ANALYSIS

A. Reasonable and Customary Charges.

ACIA's obligation to pay and Munson's right to be paid for the injureds' no-fault medical expenses arise pursuant to M.C.L. §§ 500.3105, 500.3107, and 500.3157; M.S.A. §§ 24.13105, 24.13107, and 24.13157, which provide in part as follows:

Sec. 3105. (1) Under personal protection insurance an insurer is liable to pay benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle, subject to the provisions of this chapter.

Sec. 3107. (1) Except as provided in subsection (2), personal protection insurance benefits are payable for the following:

(a) Allowable expenses consisting of all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person's care, recovery, or rehabilitation.

Sec. 3157. A physician, hospital, clinic or other person or institution lawfully rendering treatment to an injured person for an accidental bodily injury covered by personal protection insurance, and a person or institution providing rehabilitative occupational training following the injury, may charge a reasonable amount for the products, services and accommodations rendered. The charge shall not exceed the amount the person or institution customarily charges for like products, services and accommodations in cases not involving insurance. [Emphasis added.]

Under this statutory scheme, ACIA is required to pay the "customary charges" for services rendered by Munson. The critical issue in this case is what the statutory term "customary charges" means. Munson, of course, argues that "customary charges" means the standard amount it bills on behalf of every patient treated, regardless of the fact that Munson routinely accepts less than this amount in many cases (Medicare, Medicaid, and BCBSM insured cases). ACIA argues that "customary charges" means the lesser amount that Munson actually accepts in full satisfaction of the bill for the services rendered. ACIA argues on appeal that the lower court erred in construing M.C.L. § 500.3157; M.S.A. § 24.13157 according to the meaning urged by Munson. We disagree and therefore affirm the decision of the trial court.

A trial court's grant of summary disposition is reviewed de novo by this Court to determine whether the prevailing party was entitled to judgment as a matter of law. Borman v. State Farm Fire & Casualty Co., 198 Mich.App. 675, 678, 499 N.W.2d 419 (1993). Statutory construction is a question of law for the court. See Aikens v. Dep't of Conservation, 387 Mich. 495, 499, 198 N.W.2d 304 (1972).

This Court recently considered ACIA's proffered construction of the term "customary charge" and found ACIA's position "untenable ... in light of the...