Rosenberg v. Bluecross Blueshield of Tenn.

• Decision Date: 29 November 2006
• Docket Number: No. M2005-01070-COA-R9-CV.,M2005-01070-COA-R9-CV.
• Citation: 219 S.W.3d 892
• Parties: Zachary ROSENBERG, M.D., et al. v. BLUECROSS BLUESHIELD OF TENNESSEE, INC., et al.
• Court: Tennessee Court of Appeals

219 S.W.3d 892

Zachary ROSENBERG, M.D., et al. v. BLUECROSS BLUESHIELD OF TENNESSEE, INC., et al.

No. M2005-01070-COA-R9-CV.

Court of Appeals of Tennessee, at Nashville.

April 28, 2006 Session.

November 29, 2006.

Permission to Appeal Denied by Supreme Court April 16, 2007.

Edith M. Kallas, New York, New York; David L. Steed, Nashville, Tennessee, for the appellants, Zachary Rosenberg, M.D. and Dewayne Darby, M.D.

Gary C. Shockley, John S. Hicks, Mary Ann Miranda, Nashville, Tennessee for the appellees, BlueCross BlueShield of Tennessee, Inc., and Tennessee Healthcare Network, Inc.

OPINION

WILLIAM B. CAIN, J., delivered the opinion of the court, in which JERRY SCOTT, SR., J., joined. WILLIAM C. KOCH, JR., P.J., M.S., filed a separate concurring opinion.

This appeal results from the trial court's order granting a Motion to Compel Arbitration. Two doctors, Zachary Rosenberg, M.D. and Dewayne P. Darby, M.D., sued BlueCross BlueShield of Tennessee ("BCBST") and the Tennessee Healthcare Network alleging breach of contract, seeking class action status, and requesting injunctive relief under the Tennessee Consumer Protection Act. From the trial court's order compelling arbitration, the doctors appeal. We affirm.

I. FACTS

Zachary Rosenberg, M.D., an otolaryngologist in Memphis, and Dewayne P. Darby, M.D., a family practitioner in Jefferson City, entered into separate agreements with Blue Cross Blue Shield of Tennessee. These Participating Physician Agreements were drafted by BCBST for the purpose of obtaining the doctors' medical services for BCBST enrollees. The physicians alleged in their complaint that over the course of the contract period BCBST systematically and arbitrarily denied reimbursement for medically necessary charges claimed by the physicians and by other similarly situated medical service providers for otherwise medically necessary procedures. The doctors allege fourteen different types of conduct constituting breach of contract, unfair or deceptive business practices, and otherwise oppressive conduct, which would entitle the doctors to compensatory damages and permanent injunctive relief.

A. Contracts

The contracts which give rise to the appellants' complaint in Chancery Court were formed in connection with BCBST's provision of health insurance benefits to its enrollees. As part of the provision of these medical services, BCBST, along with Tennessee Healthcare Network, Inc., contracted with medical providers like Drs. Rosenberg and Darby. In order to participate in BCBST's network of physicians and to treat BCBST patients, these doctors who chose to enter into a Physician Agreement signed the same form contract prepared by BCBST. This document included the following provisions as of December 20, 2000:

8.2 Arbitration. If a dispute, other than a dispute for which the resolution is provided for in the Utilization Review Program, arises between the parties of this Agreement involving a contention by either party that the other has failed to perform its obligations and responsibilities under this Agreement, then the party making such contention shall promptly give written notice to the other. Such notice shall set forth in detail the basis for the party's contention, and shall be sent by certified mail, with a return receipt requested....[I]f the party that gave notice of dissatisfaction remains dissatisfied, then the party shall so notify the other party and the matter shall be promptly submitted to inexpensive and binding arbitration in accordance with the Tennessee Uniform Arbitration Act at Tennessee Code Annotated Section 29-5-301 et seq.

. . .

14.9 Amendment. Except as otherwise provided below, this Agreement, or any part, article, section, exhibit, or Network Attachment hereto, may be amended, altered, or modified only in writing as duly executed by both parties. However, ... a change ... (ii) to BCBST policies or procedures ..., shall be automatically incorporated herein to the extent the services rendered by the Physician pursuant to this Agreement are affected by such removal or change, and shall not be deemed an amendment to this Agreement, subject to the right of the Physician to terminate this Agreement without cause as provided in Section 12.2. In addition, and notwithstanding the foregoing, BCBST shall have the right to amend this Agreement in accordance with the following procedure:

14.9.1 BCBST shall furnish physician with the proposed amendment in writing;

14.9.2 Physician shall have thirty (30) days after delivery of the proposed amendment in which to respond in writing to BCBST. If Physician either accepts such amendment or fails to respond in writing within such period, the proposed amendment shall become effective and therefore binding on Physician upon the earlier of the Physician's written acceptance or the expiration of such thirty (30) day period; and

14.9.3 If Physician notifies BCBST in writing by certified mail within thirty (30) days after the delivery of the proposed amendment that Physician does not accept the proposed amendment, such amendment shall not take effect and BCBST shall have the right to elect either (I) to have this Agreement remain in effect in accordance with its terms without the proposed amendment or (ii) to terminate this Agreement by giving written notice fifteen (15) days prior to the effective date of termination.

In addition to the Physician Agreement signed by the doctors, BCBST provided access to a "Commercial Provider Administration Manual," which defined "binding arbitration" as that term is used in the Agreement:

A. PROVIDER DISPUTE RESOLUTION PROCEDURE

I. INTRODUCTION.

A. This Procedure describes the exclusive method of resolving any Disputes related to a Provider's participation in BCBST's network(s). It is incorporated by reference into the participation agreement between the parties (the "Participation Agreement") and shall survive the termination of that Agreement.

. . .

G. A party must commence an action to resolve a Dispute pursuant to this procedure statement within two (2) years after the date of the event causing that Dispute occurred (e.g. the date of the letter informing the Provider of a determination). This provision shall not extend the period during which a Participating Provider must submit a claim to BCBST pursuant to applicable provisions of the provider's agreement(s) with BCBST, although the Provider may commence a dispute related to the denial of a claim that was not filed in a timely manner within two years after receiving notice of the denial of that claim. If BCBST discovers a matter creating a Dispute with a Participating Provider during an audit, it shall have two years from the conclusion of that audit to initiate a Dispute concerning that matter. The failure to initiate a Dispute within that period specified in this subsection shall bar any type of action related to the event causing that Dispute, unless the parties agree to extend the time period for initiating an action to resolve that Dispute pursuant to this procedure statement.

H. ALL DISPUTES WILL BE SUBJECT TO BINDING ARBITRATION IF THEY CAN NOT BE RESOLVED TO THE PARTIES' SATISFACTION PURSUANT TO SECTIONS II(A-C) OF THIS PROCEDURE STATEMENT.

. . .

II. DESCRIPTION OF THE DISPUTE RESOLUTION PROCEDURE

D. BINDING ARBITRATION.

If the parties do not resolve their Dispute, either party may make a written request that the Dispute be submitted to binding arbitration within thirty (30) days after it receives a response to its request for reconsideration or the conclusion of the mediation of that Dispute. Unless the parties otherwise agree, the Dispute shall be arbitrated in accordance with current AAA Commercial Arbitration Rules, in Chattanooga, Tennessee. The arbitration will be conducted by a panel of three (3) qualified arbitrators, unless the parties agree otherwise. The arbitrators may sanction a party, including ruling in favor of the other party, if appropriate, if a party fails to comply with applicable procedures or deadlines established by those Arbitration Rules.

Each party shall be responsible for one-half of the arbitration agency's administrative fee, the arbitrators' fees and other expenses directly related to conducting that arbitration. Each party shall otherwise be solely responsible for any other expenses incurred in preparing for or participating in the arbitration process, including that party's attorney's fees.

The arbitrators: shall be required to issue a reasoned written decision explaining the basis of their decision and the manner of calculating any award; may not award punitive, or exemplary damages; may not vary or disregard the terms of the Provider's participation agreement, the certificate of coverage and other agreements, if applicable; and shall be bound by controlling law; when issuing a decision concerning the Dispute. The arbitrators' award, order or judgment shall be final and binding upon the parties. That decision may be entered and enforced in any state or federal court of competent jurisdiction. That arbitration award may only be modified, corrected[, or] vacated for the reasons set forth in the United States Arbitration Act (9 USC § 1).

E. EFFECTIVE DATE

This procedure statement was adopted by BCBST on June 1, 1997. This arbitration provision supersedes any prior arbitration clause or provision contained in any other document. This arbitration clause may be modified or amended by BCBST and the Provider will receive notice of any modifications through updates to the Provider Manual.¹

B. Performance

Pursuant to the agreements, the doctors would customarily treat enrollee/patients and then seek reimbursement through a claims process based on "current procedural technology" or "CPT" codes. The CPT codes were designed by the American Medical Association and adopted by the federal Center for Medicare and Medicaid Services for the purpose of easily identifying the type of service performed, the...