Vencor Hospitals South v. Blue Cross & Blue Shield

• Decision Date: 06 March 2000
• Docket Number: No. 94-6881-CIV.,94-6881-CIV.
• Citation: 86 F.Supp.2d 1155
• Parties: VENCOR HOSPITALS SOUTH, INC., d/b/a Vencor Hospital — Fort Lauderdale, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF RHODE ISLAND, Defendant.
• Court: U.S. District Court — Southern District of Florida

86 F.Supp.2d 1155

VENCOR HOSPITALS SOUTH, INC., d/b/a Vencor Hospital — Fort Lauderdale, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF RHODE ISLAND, Defendant.

No. 94-6881-CIV.

United States District Court, S.D. Florida.

March 6, 2000.

Bradley L. Kelly, Laura J. Oberbroeckling, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, Washington, DC, Richard Benjamin Wilkes, Gardner, Wilkes, Shaheen & Candelora, Tampa, FL, for plaintiff.

Eric Christu, Elk, Bankier, Palmer & Christu, Boca Raton, FL, John E. Bulman, Little, Bulman, & Whitney, P.C., Providence, RI, for defendant.

ORDER

GONZALEZ, District Judge.

THIS CAUSE has come before the Court upon the Order of Remand from the Eleventh Circuit Court of Appeals, filed March 8, 1999. The parties have fully briefed the issues, and the Court finds that the majority of the issues can be decided without a hearing.

I. BACKGROUND

The facts of this case are reported in the opinion of the Court of Appeals, Vencor Hospitals v. Blue Cross Blue Shield of Rhode Island, 169 F.3d 677 (11th Cir.1999) (hereinafter BCBS II), and thus need not be fully recounted here.

In short, Vencor is a provider of long-term inpatient care. Blue Cross and Blue Shield ("BCBS") issues Medicare supplement insurance policies, otherwise known as Medigap policies. While two holders of BCBS Medigap policies (Esposito and Butler) were patients of Vencor their Medicare expired and they had to rely on Medigap policies to cover their hospitalization.

BCBS paid Vencor (or the insured directly) the amount that Medicare would have paid for the services provided. Vencor later filed suit alleging breach of contract, subrogation, and promissory estoppel. Vencor claims in its own right that it is entitled to collect its standard rates from BCBS. Vencor also claims that Esposito and Butler have causes of action against BCBS that are subrogated to Vencor.

The policy language at issue states:

Upon exhaustion of all Medicare hospital inpatient coverage including the above lifetime reserve days, we will cover up to ninety percent (90%) of all Medicare Part A Eligible Expenses for hospitalization not covered by Medicare subject to a lifetime maximum benefit of an additional 365 days.

(BCBS Individual Plan 65 Subscriber Agreement, § 3.1) (hereinafter "BCBS Policy"). The term "Medicare Eligible Expenses" is defined as "the health care expenses covered under Medicare which Medicare has determined are reasonable and medically necessary." (BCBS Policy, § 1.1). The policy also contains a merger clause that states, "The entire contract consists of the application, this agreement and any attached amendments." (BCBS Policy, § 2.1).

On June 11, 1996, the Court entered Final Judgment in favor of BCBS after the Court granted BCBS's Motion for Summary Judgment. The summary judgment order found that the policy unambiguously stated that BCBS was liable only for the amount that Medicare would have allowed. Vencor Hospitals South, Inc. v. Blue Cross Blue Shield of Rhode Island, 929 F.Supp. 420 (S.D.Fla.1996) (hereinafter BCBS I).

The Eleventh Circuit vacated and remanded for further proceedings. The Court of Appeals found that an issue of fact existed as to whether Vencor is entitled to payment based on its ordinary charges.¹ BCBS II, 169 F.3d at 680. The Court stated that it was uncertain as to exactly which documents comprise the insurance contract and remanded the case to this Court with instructions to consider whether the state regulatory scheme requires that an Outline of Coverage and a promotional brochure be considered part of the contract.² Id. at 681. The Court of Appeals also instructed this Court to consider the issues of accord and satisfaction of the Esposito claim and Vencor's assertion of a theory of promissory estoppel. Id. at 682.

II. DISCUSSION

The Court of Appeals delineated four specific and distinct issues for this Court to consider. Those issues are as follows:

(A) Whether "health care expenses" in the definition of "Medicare Eligible Expenses" refers exclusively to types of expenses (forms of treatment) — Vencor argument — or also includes amounts of expenses — BCBS argument.

An integral part of this question, the Court of Appeals found, is whether the insurance policy is the only document comprising the contract. The Court of Appeals directed this Court to consider whether under the state regulatory scheme the Outline of Coverage must be read into the contract. Also, the Court of Appeals instructed this Court to consider what significance, if any, should be accorded a promotional brochure in interpreting the policy? BCBS II, 169 F.3d at 681.

(B) If the BCBS interpretation is correct, what amount is owed to Vencor? In other words, what amount would Medicare have paid? BCBS II, 169 F.3d at 681.

(C) Was there accord and satisfaction of the Esposito claim? The Court of Appeals found that there was no accord and satisfaction on the Butler claim, but that there exist genuine issues of material fact as to the Esposito claim. BCBS II, 169 F.3d at 682.

(D) Notwithstanding all of the above, is Vencor entitled relief under a theory of promissory estoppel? The Court of Appeals found that this issue was not ripe for review until the breach of contract claim is decided. BCBS II, 169 F.3d at 682 n. 14.

The Court will address each of these issues in turn.

A. THE CONTRACT

1. Whether the Outline of Coverage and Promotional Brochure are Part of the Insurance Contract

The Court of Appeals' primary concern seemed to be whether the Florida or Rhode Island state regulatory scheme required that the Outline of Coverage be considered part of the contract. BCBS II, 169 F.3d at 681. If the Outline is considered part of the contract, the Circuit Court held, then the contract is ambiguous and, in accordance with Florida law, that ambiguity must be resolved in favor of Vencor.³ Id.

The Court of Appeals found that one reason to consider the Outline as part of the contract is that state law required that BCBS provide such an outline. Id. (citing Fla.Admin.Code Ann. r. 41-51.006(3) (1990)). The Court of Appeals found that the presumable intent of the legislature was to provide the insured with a document setting forth the insured's rights with more clarity than is provided in the policy, and thus "mak[e] it more difficult for the insurance company to defraud purchasers regarding the scope of coverage." Id. The Court of Appeals further found that the legislature's intent may be frustrated if the Outline were not considered part of the contract. Id.

The Court of Appeals' concerns are allayed by the regulation itself and the mandatory language of the Outline. Florida Department of Insurance⁴ Rule 4-51.006(3)(c) prescribes a form for the Outline of Coverage and mandates that the Outline be in that form. The very first point of the form outline reads as follows:

1. Read your policy carefully — This outline of coverage provides a brief description of the important features of your policy. This is not the insurance contract, and only the actual policy provisions will control. The policy itself sets forth in detail the rights and obligation of both you and your insurance company. It is, therefore, important that you READ YOUR POLICY CAREFULLY!

Fla.Admin.Code Ann. r. 41-51.006 (1990) (emphasis added; capitals in original). While Vencor argues that this rule requires that the Outline of Coverage be considered part of the insurance contract the plain language of this very rule expressly rejects such a contention.⁵

In addition to the Department of Insurance regulations, Florida statutory law mandates the same result. Section 627.642 of Florida Statutes prescribes that all health insurance policies shall be accompanied by an outline of coverage. § 627.642(1), Fla.Stat.Ann. (1996). The statute goes on to say though that such outline of coverage shall contain, "A statement that the outline contains a summary only of the details of the policy ... and that the issued policy should be referred to for the actual contractual governing provisions." § 627.642(2)(e), Fla.Stat.Ann.

The Court finds that it need not look into the legislative history to determine whether the legislature intended that the Outline be considered part of the contract. The intent is evident from the face of the Department of Insurance regulation and the health insurance statute. Where the language of a statute or regulation is clear, there is no occasion to look to the legislative history behind that statute or regulation. See United States v. Oregon, 366 U.S. 643, 648, 81 S.Ct. 1278, 6 L.Ed.2d 575 (1961) (where statutory provisions are "clear and unequivocal on their face," there is "no need to resort to the legislative history of the Act").

It is more than apparent that it was the intent of the regulatory scheme that the policy itself govern and that the Outline of Coverage not be considered part of the insurance contract. Had the Legislature intended that the Outline be considered a part of the insurance contract, the Legislature and the Department of Insurance surely would not have mandated language to the contrary.

In addition, the Outline of Coverage itself makes clear that it is not to be construed as part of the insurance contract. As required by law, BCBS's Outline of Coverage for Plan 65 opens with language identical to that in the Rule 4-51.006 form. Thus the Outline makes plain that if an insured has any doubts as to the coverage, the insured should look to the policy itself, not to the Outline. It would be nonsensical to consider the Outline to be a part of the contract when on its face and in a very conspicuous manner it declares that it is not.

The Court acknowledges that the relevant portion of the Outline of Coverage, see Appendix A, may be a bit confusing. For the most part, it is quite accurate. As it states, during the period when Medicare coverage is in effect, BCBS pays the inpatient deductible required by Medicare during the first sixty...