Univ. Pediatricians v. Wilson

• Decision Date: 16 September 2021
• Docket Number: 353462
• Parties: UNIVERSITY PEDIATRICIANS, Plaintiff-Appellant, v. M. ROY WILSON and DAVID HEFNER, individually and in their official capacities, and BOARD OF GOVERNORS OF WAYNE STATE UNIVERSITY, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

UNIVERSITY PEDIATRICIANS, Plaintiff-Appellant, v. M. ROY WILSON and DAVID HEFNER, individually and in their official capacities, and BOARD OF GOVERNORS OF WAYNE STATE UNIVERSITY, Defendants-Appellees.

No. 353462

Court of Appeals of Michigan

September 16, 2021

UNPUBLISHED

Court of Claims LC No. 19-000143-MK.

Before: Rick, P.J., and Ronayne Krause and Letica, JJ.

PER CURIAM.

Plaintiff filed suit in the Court of Claims, alleging breach of contract, unjust enrichment, a variety of tort claims, claims under 42 USC 1983, and violations of the Freedom of Information Act (FOIA), MCL 15.231 et seq. Briefly stated, the parties' dispute relates to the distribution of funds under the Medicaid program, 42 USC 1396 et seq. Plaintiff sought more than $60 million in damages as well as an accounting and the imposition of a constructive trust. The trial court granted summary disposition to defendants under MCR 2.116(C)(7), (8), and (10). Plaintiff appeals as of right, challenging the trial court's grant of summary disposition, the denial of plaintiff's motion to amend, and a discovery ruling. We affirm.

I. BASIC FACTS

Wayne State University (WSU) is a public state university with a medical school, Wayne State University School of Medicine. WSU does not have its own hospital, but instead conducts clinical education programs at various hospitals and facilities in Detroit, including Children's Hospital of Michigan. Wayne State University Physician Group (WSUPG) is a nonprofit corporation affiliated with WSU as a "faculty practice" group. Defendant M. Roy Wilson, M.D., is WSU's president and a member of the Fund for Medical Research and Education (FMRE) board, which "holds a fund affiliated with" WSU, including funds used to support WSU's medical school and clinical practice groups. Defendant David Hefner was WSU's vice president of health affairs as well as vice president of FMRE.

Plaintiff is a nonprofit corporation made up of physicians and other medical professionals who provide pediatric care at Children's Hospital of Michigan in Detroit. In December 2014, plaintiff entered into an "Affiliation Agreement" with WSUPG to become an "affiliated unit" or an "affiliated group" within WSUPG. Among other matters, the Affiliation Agreement contains provisions related to the appointment of plaintiff's members as WSU faculty, and it addresses various financial issues, including compensation, financial responsibility insurance, and most notably, matters related to Medicaid.

In the present case, the dispute between the parties involves Medicaid funding, specifically distribution of monies known as the Michigan Enhanced Payment Program (MEPP) funds. In 2007, Michigan created the "Physician Adjuster Program," which provided for supplemental payments to healthcare providers with the goal of increasing the number of providers offering services to indigent patients. The funding for the supplemental payments included Fee for Service (FFS) funds and Specialty Network Access Fees (SNAF) funds, collectively referred to as MEPP funding or the Medicaid Public Entity Physician Payment Adjustment Program (PEPPAP). To be eligible for MEPP payments, providers must be affiliated with a state-approved "public entity." WSU is one of several such public entities in Michigan. In particular, the Michigan Medicaid State Plan, Attachment 4.19-B, provides that specific public entities, including WSU, may make "payment adjustments" for "practitioner services provided through" the public entity. These adjustments apply to both public and private practitioners and practice groups, provided that the practitioners or groups are employed by the public entity or under contract with the public entity.

WSUPG serves as WSU's agent for purposes of receiving and managing MEPP funds. To trigger the release of Medicaid funding to WSU, WSU made what are known as intergovernmental transfers (IGTs) to the state.^[1] After WSU paid this local match to the state, the MEPP funds were then paid by the state and Medicaid Health Plans into accounts held by WSUPG (on behalf of WSU) for distribution.

Significant to the issues on appeal, there are three documents in the record relevant to WSUPG's management of MEPP funds on behalf of WSU and, in particular, with regard to WSUPG's handling of MEPP funds with respect to plaintiff. First there is a "Funds Transfer Agreement" between WSU and WSUPG, which was signed in 2012 and amended in 2017. The Funds Transfer Agreement, and the 2017 amendment, authorize WSUPG to serve as WSU's agents with regard to certain governmental funds, including the MEPP funds.

The second document relevant to MEPP funds, which more specifically relates to plaintiff, is the 2014 Affiliation Agreement between plaintiff and WSUPG. Relevant to MEPP funds, the Affiliation Agreement states:

5. Medicaid Payment Adjustment Programs. Affiliated Group acknowledges that WSUPG is Wayne State University's agent for purposes of receiving and managing distribution of certain funding to physician providers that has been authorized by the State of Michigan to support increased physician access for Medicaid beneficiaries in the State of Michigan. This funding is comprised of payment adjustments for services payable under the Medicaid Fee-For-Service ("FFS Program") and Medicaid managed care Specialty Network Access Fee ("SNAF Program") programs (together, the "Programs"). To qualify to receive these payment adjustments, Affiliated Group Physicians agree to, and Affiliated Group shall ensure that Affiliated Group Physicians provide Medicaid Fee-For-Service and Medicaid HMO enrollees access to their services, shall agree to accept new Medicaid Fee-For-Service and Medicaid HMO enrollees up to the Affiliated Group's patient capacity (subject to annual verification by WSUPG), and comply with all requirements necessary to receive payment adjustments under the Programs.

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c. Payments.

(i ) FFS Program Payments. The parties agree that FFS Program payments are calculated and paid by the Michigan Department of Community Health on a per claim basis.

(ii) SNAF Program Payments. WSUPG has directly contracted with the Michigan Medicaid HMO plans to receive the payment adjustments associated with those plans under the SNAF Program. The parties hereby agree that SNAF Program payments will be paid according to the formula described in this Section and on Exhibit A.

d. Institutional Adjustments. Institutional adjustments are those quarterly adjustments that reduce funding under the Programs as determined by the State of Michigan, Medicaid Health Plans, or Wayne State University prior to distribution.

e. SNAF Payment Formula. The parties agree that Program payments will be made to Affiliated Group on a quarterly basis and shall be calculated as a certain percentage of the quarterly SNAF distribution. The percentages will be equal to the percentage calculated by the State of Michigan Department of Community Health ("MDCH") based on four (4) quarters of their HMO claims data. This percentage will be multiplied by the total distribution for all participants to determine Affiliated Group's respective distributable amount before other adjustments as delineated in Exhibit A. The SNAF payment attributed to the Children's Special Health Care Services (CSHCS) will be distributed based on data supplied by MDCH and paid with the base SNAF payment.

f . WSUPG Administration Fee. Affiliated Group recognizes that WSUPG incurs costs associated with administration of the Programs, including, but not necessarily limited to, WSUPG overhead for staff, attorney fees and consultant fees (the "Administration Fee"). The Administration Fee is allocated among each of the WSUPG Departments and those external groups participating in these Programs. As its share of these costs, Affiliated Group will pay the amounts indicated on Exhibit A.

As set forth in Exhibit A and a later addendum to the Affiliation Agreement, the contract specified WSUPG's administration fee as well as payment of a monthly "dean's tax" to the FMRE.

The third document related to plaintiffs receipt of MEPP funds is the "Public Entity Physician Payment Adjustment Program & Specialty Network Access Fee Program Related Party Questionnaire & Program Enrollment Application," (enrollment application) which WSUPG and plaintiff submitted to the Michigan Department of Community Health. The enrollment application was signed in December 2014 by Kenneth Lee, WSUPG's executive director, and Steven Lipshultz plaintiffs president. The document identifies WSU as the "public entity" and plaintiff as the "provider." The document contains the following questions:

2.Does the Provider Entity stated herein contract with the Public Entity for professional services?

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3. Does the contract between the Public Entity and Provider Entity stated herein result in a tangible benefit to both parties?

Both of these questions are answered "Yes." The parties also provided a summary of the tangible benefits to both parties under their contract.

The enrollment application was apparently approved by the state and plaintiff did in fact receive MEPP funds as a provider affiliated with WSU. Central to the parties' dispute related to the MEPP funds are "institutional adjustments" made by WSU in the course of its distribution of the MEPP funds. As noted, the Affiliation Agreement between plaintiff and WSUPG provided for "institutional adjustments" to Medicaid funding by WSU. According to an affidavit submitted by Hefner, WSU has in fact been making institutional adjustments each quarter, before distribution of any MEPP funds. Approximately two dozen groups received MEPP funds through WSU. All of these groups, including plaintiff, were subject to quarterly institutional adjustments....