S. Tex. Health Sys. v. Care Improvement Plus of Tex. Ins. Co.
| Decision Date | 09 February 2016 |
| Docket Number | CIVIL ACTION NO. 7:14–CV–912 |
| Citation | 159 F.Supp.3d 763 |
| Parties | South Texas Health System, Plaintiff, v. Care Improvement Plus of Texas Insurance Company, Defendant. |
| Court | U.S. District Court — Southern District of Texas |
Jennifer Rudenick Ecklund, Andrew Christian Cookingham, William Lowell Banowsky, Thompson and Knight LLP, Dallas, TX, Mason Craig Meyer, Sullins Johnston et al, Houston, TX, Austin P. Tighe, Jr., Feazell & Tighe LLP, Austin, TX, for Plaintiff.
Andrew G. Jubinsky, Raymond Earl Walker, Figari Davenport LLP, Dallas, TX, for Defendant.
Randy Crane
Now before the Court is Defendant Care Improvement Plus of Texas Insurance Company's Second Motion for Summary Judgment. . Having considered the Motion and the responsive briefing, (Dkt.Nos. 51, 53), in light of the relevant law, and for the reasons articulated below, the Court is of the opinion that Defendant's Motion should be GRANTED.
Plaintiff South Texas Health System (“STHS”) owns and operates a number of hospitals in Hidalgo County, Texas, and is a “provider” as that term is defined by Medicare regulations. (Dkt. No. 35); see 42 C.F.R. § 422.2
. Defendant Care Improvement Plus (“Care Improvement”) is a Medicare Advantage (“MA”) organization, a private company that provides healthcare coverage to Medicare beneficiaries. (Dkt. No. 2–1). It is registered as a Health Maintenance Organization (“HMO”) under Chapter 843 of the Texas Insurance Code, but does not operate any plans outside of the MA program. Id. ; (Dkt. No. 49, Exh. A, Stip.1). STHS and Care Improvement entered into a Hospital Care Agreement (“the Agreement”) whereby STHS agreed to treat individuals enrolled in Care Improvement's MA plans. (Dkt. No. 2–2). Generally, under the Agreement, STHS provides medical care to enrollees and then makes claims to Care Improvement in order to receive payment. Id. The Agreement includes provisions for the timing of payments and, importantly, a provision requiring Care Improvement to pay “any interest owing or accruing on a claim under any applicable State or federal law or contract” if they fail to comply with the timing provisions. Id ., § 4.2.6. STHS brought this suit alleging that it made some 453 claims pursuant to the Agreement that were not timely paid by Care Improvement. (Dkt. No. 13–2).
In its First Amended Complaint, STHS brought claims for violation of the Texas Insurance Code, Sections 843.342 and 1301.137, portions of the Texas Prompt Pay Act (“prompt pay claims”), and for Breach of Contract. (Dkt. No. 35).1 Care Improvement subsequently filed a partial Motion for Summary Judgment, seeking summary judgment on the grounds that STHS's prompt pay claims were preempted by federal law. (Dkt. No. 16). The Court granted this motion, finding regulations under Part C of Medicare that regulate the prompt payment of claims under MA plans expressly preempted STHS's claims under the Texas prompt pay statutes. (Dkt.46). Thus, the only remaining claim before the Court is STHS's claim for breach of contract.
Care Improvement brings the present Motion seeking summary judgment that: (1) STHS cannot recover State statutory penalties under Chapter 843 on their breach of contract claim, and (2) for any claim untimely paid under the Agreement, the proper contractual remedy is interest at the applicable rate set by the U.S. Treasury.
A district court must grant summary judgment when there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a)
. A fact is material if it might affect the outcome of the lawsuit under the governing law, and is genuinely in dispute only if a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A party moving for summary judgment has the initial responsibility of informing the court of the basis for its motion and identifying those portions of the pleadings and materials in the record, if any, which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ; Fed. R. Civ. P. 56(a), (c). Where the movant bears the burden of proof, it must establish “ ‘beyond peradventure all of the essential elements of the claim or defense to warrant judgment in [its] favor.’ ” Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir.1986) (emphasis in original). Once the moving party carries its burden, the burden shifts to the nonmovant to go beyond the pleadings and provide specific facts showing the existence of a genuine issue for trial. Celotex, 477 U.S. at 324, 106 S.Ct. 2548 ; Fed. R. Civ. P. 56(c). In conducting its review of the summary judgment record, the court “may not make credibility determinations or weigh the evidence” and must resolve doubts and reasonable inferences regarding the facts in favor of the nonmoving party. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) ; Anderson, 477 U.S. at 255, 106 S.Ct. 2505 ; Dean v. City of Shreveport, 438 F.3d 448, 454 (5th Cir.2006)
. However, the nonmovant cannot satisfy its burden with “conclusory allegations, speculation, and unsubstantiated assertions which are either entirely unsupported, or supported by a mere scintilla of evidence.” Chaney v. Dreyfus Serv. Corp., 595 F.3d 219, 229 (5th Cir.2010) ; see also
Brown v. City of Houston, 337 F.3d 539, 541 (5th Cir.2003) ().
The language at issue in the Agreement is found in the section dealing with compensation and billing. See Dkt. No. 2–2. Under the Agreement, STHS and Care Improvement agreed that STHS would bill for covered services according to a prescribed procedure, and that Care Improvement would pay at a rate between 85% and 103% of rates determined by the Centers for Medicare and Medicaid Services (“CMS”) for those services, depending on the type of care provided. Id., at § 4.1, Attachs. A, B. STHS agreed to bill for covered services within 180 days and to submit claims on CMS claim forms. Id. at §§ 4.2.1–4.2.2. Section 4.2.3 sets forth a 30–day period in which Care Improvement must pay a valid claim:
Subject to the regulations of the State of Texas and 42 CFR 422.520 et seq.
, PLAN, where it is the Payor, shall pay a Valid Clean Claim within thirty (30) days of receipt of the claim unless PLAN has a reasonable basis supported by specific information to make a good faith determination that the claim is not a Valid Clean Claim, or the claim was submitted fraudulently.
Id., at § 4.2.3 (emphasis added). Similarly, Section 4.2.5 specifies that, within 30 days of the submission of a claim by STHS, Care Improvement must either pay the claim or deny it and request more information:
PLAN shall, within thirty (30) days after receipt of a claim, either pay the claim or issue a denial. If claim is not to be paid, PLAN must request electronically or in writing from the Hospital submitting the claim the information and documentation that PLAN reasonable believes will be required to process and pay the claim or to determine if the claim is a Valid Clean Claim or Hospital must be given notice that claim is being denied and the reason for the denial. Once the additional information and documentation that is necessary to process the claim is received by PLAN, PLAN shall pay the claim within thirty (30) days from the receipt of the additional information.
Id., § 4.2.5. Finally, § 4.2.6 provides the repercussions for any failure to pay or deny a claim on time:
If PLAN fails to comply with § 4.2.5, PLAN shall pay any interest owing or accruing on a claim under any applicable State or federal law or contract, without necessity of demand by the Hospital, at the time the claim is paid.
Id. § 4.2.6 (emphasis added).
STHS interprets the language of both § 4.2.3 and § 4.2.6 to incorporate the penalties set out in the Texas Prompt Pay Act, codified in the Texas Insurance Code at § 843.342
. (Dkt. No. 35, ¶ 16; Dkt. No. 51). That statute sets out escalating penalties for HMOs that fail to pay valid claims on or before the date they are due: half of the difference between the agreed-upon rate and the provider's billed charges—up to $100,000—if the payment is 0–45 days late, the entire difference between the agreed-upon rate and the provider's billed charges—up to $200,000—if payment is 45–90 days late, and the entire difference between the agreed-upon rate and STHS's billed charges plus 18% annual interest if payment is more than 90 days late. Tex. Ins. Code § 843.342
; See also Dkt. No. 51, p. 2.
STHS alleges that Care Improvement failed to pay hundreds of properly-submitted claims within the periods delineated in the Agreement. .2 In sum, for the 453 late payments alleged, STHS claims over $11 million in statutory penalties for late payments of claims totaling roughly $22,000. .
In its Motion for Summary Judgment, Care Improvement asserts that the Agreement does not incorporate Texas statutory penalties as a contractual remedy for late-paid claims. (Dkt. No. 49). It argues that the penalty scheme under Ch. 843 of the Texas Insurance Code (“prompt pay laws”) is not “applicable” to MA claims because, as this Court has already ruled, they are preempted by the Medicare statute. Id. at pp. 6–7. The laws' inapplicability is further evidenced, it argues, by TDI and CMS guidelines in effect at the time the Agreement was signed. Id. at pp. 7–8. Furthermore, it argues that because Ch. 843...
To continue reading
Request your trial