Baptist Physician v. Humana Military ( 2007 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 07a0107p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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BAPTIST PHYSICIAN HOSPITAL ORGANIZATION, INC. X
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Plaintiffs-Appellees, -
and BAPTIST HOSPITAL OF EAST TENNESSEE, INC.,
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-
No. 06-5364
,
v. >
-
-
Defendant-Appellant. -
HUMANA MILITARY HEALTHCARE SERVICES, INC.,
-
-
N
Appeal from the United States District Court
for the Eastern District of Tennessee at Knoxville.
No. 01-00588—Thomas W. Phillips, District Judge.
Argued: January 31, 2007
Decided and Filed: March 21, 2007
Before: NORRIS, COLE, and CLAY, Circuit Judges.
_________________
COUNSEL
ARGUED: Michael J. Kitchen, J. BRUCE MILLER LAW GROUP, Louisville, Kentucky, for
Appellant. Reuben N. Pelot IV, EGERTON, McAFEE, ARMISTEAD & DAVIS, Knoxville,
Tennessee, for Appellees. ON BRIEF: Michael J. Kitchen, J. Bruce Miller, J. BRUCE MILLER
LAW GROUP, Louisville, Kentucky, for Appellant. Reuben N. Pelot IV, Cheryl G. Rice,
EGERTON, McAFEE, ARMISTEAD & DAVIS, Knoxville, Tennessee, for Appellees.
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OPINION
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CLAY, Circuit Judge. In this appeal, Defendant, Humana Military Healthcare Services, Inc.,
appeals the district court’s order finding Defendant liable to Plaintiffs, Baptist Physician Hospital
Organization, Inc. and Baptist Hospital of East Tennessee, Inc., for breach of contract and awarding
Plaintiffs $1,277,872.90 in compensatory damages, as well as $731,488.65 in prejudgment interest.
Plaintiffs properly invoke diversity of citizenship as the basis for federal jurisdiction in this case.
See 28 U.S.C. § 1332. For the reasons that follow, we AFFIRM the district court’s order.
1
No. 06-5364 Baptist Physician Hospital Organization, Inc., et al. v. Page 2
Humana Military Healthcare Services, Inc.
BACKGROUND
This Tennessee breach of contract suit was previously before this Court. See Baptist
Physician Hosp. Org., Inc. v. Humana Military Healthcare Servs., Inc., 368 F.3d 894 (6th Cir. 2004)
(hereinafter “Baptist Physician I”). That appeal arose when the district court granted summary
judgment to Defendant on Plaintiffs’ breach of contract claim, and separately dismissed Plaintiffs’
remaining claims as untimely. On appeal, this Court reversed and remanded.
Baptist Physician I aptly set forth background relevant to the initial contract between the
parties:
Pursuant to authority delegated to it by Congress, the Department of Defense
established the Civilian Health and Medical Program of the Uniformed Services,
called CHAMPUS, in 1967. CHAMPUS beneficiaries include retired armed forces
personnel and dependents of both active and retired military personnel. In 1995, the
Department of Defense established TRICARE, a managed health care program
operating as a supplement to CHAMPUS and involving the competitive selection of
private contractors to financially underwrite the delivery of health care services
under CHAMPUS. The overall goal of the TRICARE program is to improve the
quality, cost, and accessibility of healthcare to the nation’s military through the
mechanism of a managed care program, and one aspect of the new TRICARE
program was the establishment of “Civilian Preferred Provider Networks.” See 32
C.F.R. § 199.17(p). TRICARE Management Activity, which was previously known
as Office of CHAMPUS, is the government office charged with the responsibility of
administering TRICARE/CHAMPUS.
In January 1996, Humana Military Healthcare Services, Inc. was awarded the
TRICARE contract for Regions 3 and 4, which covers seven states and includes the
State of Tennessee. Under the contract, Humana became the managed care support
contractor charged with the responsibility of establishing and managing a Civilian
Preferred Provider Network throughout the seven state area. Humana established the
preferred provider network by entering into contractual arrangements with individual
CHAMPUS participating providers of medical services, one of which was Baptist.
Broadly speaking, TRICARE preferred network providers agreed to accept from a
managed care support contractor lower reimbursement rates than those authorized
under the CHAMPUS reimbursement system, with the understanding that in
exchange they would see an increase in directed volume. These discounted rates
might be expressed as discounts from the maximum allowable rate under the
CHAMPUS diagnostic grouping system (DRG),1 or as a fixed per diem rate, or as
some other agreed-upon rate of reimbursement.
In the early spring of 1996, Baptist Physician Hospital Organization, Inc. and Baptist
Hospital of East Tennessee, or more simply “Baptist,” entered into negotiations with
Humana to become a TRICARE preferred network provider.
Baptist Physician I, 368 F.3d at 895-97.
1
Diagnostic related groups (DRGs) are “a method of dividing hospital patients into clinically coherent groups
based on the consumption of resources.” 32 C.F.R. § 199.2. “Patients are assigned to the groups based on their principle
[sic] diagnosis (the reason for admission, determined after study), secondary diagnoses, procedures performed, and the
patient’s age, sex, and discharge status.” Id.
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Humana Military Healthcare Services, Inc.
At trial, the parties presented a more detailed picture of their relationship preceding, during,
and subsequent to executing the Letter of Agreement (hereinafter “Agreement”), by which Plaintiffs
contracted to provide care to TRICARE beneficiaries in Defendant’s network.2 On August 6, 1996,
Defendant’s Director of Network Development, Richard Mancini (“Mancini”), signed the
Agreement on Defendant’s behalf. Therein, Defendant contracted to reimburse Plaintiffs according
to the terms of a “Hospital Payment Arrangement.” As the court in Baptist Physician I explained,
the parties adopted
a three-tiered system of discounted reimbursement from the CHAMPUS rates
depending on the number of other TRICARE providers in the area . . . . [T]he
“Hospital Payment Arrangement” . . . was expressed as a percentage discount off the
CHAMPUS DRG reimbursement rate with a “stop loss” provision (in the italicized
language below) consisting of an increased rate of payment for certain high-dollar
inpatient claims as an alternative to a percentage discount from standard government
rates. The purpose of the stop-loss provision is to reduce the risk of losses to Baptist
in large individual cases that Baptist believed the percentage discount off
CHAMPUS DRG rates would create. The contractual provision was expressed as
follows:
Baptist Health System as Exclusive Provider
Inpatient
20% Discount from CHAMPUS DRG rates;
Any case with provider charges greater than $30,000 reverting to a 45%
discount from provider charges.
Outpatient
30% Discount from CHAMPUS allowables.
Baptist Health System + 1 Additional Provider
Inpatient
20% Discount from CHAMPUS DRG rates;
Any case with provider charges greater than $25,000 reverting to a 35%
discount from provider charges.
Outpatient
25% Discount from CHAMPUS allowables.
Baptist Health System + 2 Additional Providers
Inpatient
15% Discount from CHAMPUS DRG rates;
Any case with provider charges greater than $25,000 reverting to a 30%
discount from provider charges.
2
We are largely guided in our narrative by the district judge’s findings of fact, which we find – with one
insignificant exception – were not clearly erroneous. See Kalamazoo River Study Group v. Rockwell Int’l Corp., 355
F.3d 574, 589 (6th Cir. 2004).
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Humana Military Healthcare Services, Inc.
Outpatient
25% Discount from CHAMPUS allowables.
(Emphasis added.) Under each tier, Baptist and Humana agreed to the “stop loss”
language which increased reimbursement to Baptist when a particular inpatient
hospital stay exceeded a certain dollar amount. In such cases, the reimbursement rate
would not be a percentage discount off the CHAMPUS DRG rate, but rather would
“revert” to a percentage discount off the provider charges, which are the charges the
hospital would otherwise charge for the services rendered.
An example illustrates how the “stop loss” provision would work. Suppose a certain
hospital stay resulted in provider charges of $77,098, but the maximum CHAMPUS
DRG reimbursement rate for this particular stay is only $27,755.00. Without the stop
loss provision, Baptist as the exclusive TRICARE provider under the above
agreement would receive $22,204, which represents a 20% discount from the
CHAMPUS DRG rate and an effective 71% discount from provider charges. Under
the stop loss provision, however, Baptist would receive $42,404, or a 45% discount
from the provider charges. In effect, the stop loss provision operates to increase the
net overall discount for the business associated with the TRICARE program.
As illustrated above, for certain claims the reimbursement amount calculated as a
percentage of provider charges was greater than 100% of the CHAMPUS DRG rate.
Baptist Physician I, 368 F.3d at 896-97. At the time he signed the Agreement, Mancini knew
Defendant had no intention of paying the stop loss claims pursuant to the Agreement inasmuch as
they exceeded CHAMPUS allowable charges.
Two days after he executed the Agreement, in an August 8, 1996 letter to Plaintiffs’
representative, Jim Goodloe, Mancini wrote as follows:
Jim, as we move toward the next round of negotiations, specifically: Inpatient per
diem rates, I want to make sure we both understand that your claims will be paid
according to a discount from Government allowables. I know there has been some
question that you wanted to be paid more than the Government provides, but we
aren’t allowed to pay your facilities any greater than the non-network rate.
Accordingly, the per diem rates that we agree upon will need to be comparable as
provided for in paragraph M of our contract.
Baptist Physician Hosp. Org., Inc. v. Humana Military Healthcare Servs., Inc., 415 F. Supp. 2d 835,
848 (E.D. Tenn. 2006) (hereinafter “Baptist Physician II”). The district court3 found that this letter
concerned physician reimbursement terms, and not the stop loss provisions.
The Agreement contemplated additional negotiations in September 1996 to establish a
system of reimbursement on a per diem basis and, at trial, Mancini testified that he believed that the
parties would have dispensed with the stop loss provisions at that time. No subsequent renegotiation
occurred, and the stop loss provisions remained in effect throughout the life of the Agreement.
Mancini further testified that Defendant did not pursue renegotiation because the process would
have clarified that Defendant intended to cap payments at government allowables, and not to pay
according to the Agreement.
3
In fact, the district court found that the parties amended the physician payment provisions in September 1996,
but that those amendments did not impact hospital reimbursement for stop loss claims.
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Humana Military Healthcare Services, Inc.
In August 1996, Plaintiffs lacked the personnel and technology necessary to closely monitor
payments from third party payors, including Defendant, to insure payment of submitted claims
according to negotiated contract terms. However, over the course of the Agreement with Defendant,
Plaintiffs took steps to improve claims tracking. To start, Plaintiffs purchased software (called
“PCMS”) capable of auditing payments and exposing payment variances. This software required
Plaintiffs to load their contracts into the system before it could adequately monitor payment
compliance. Plaintiffs also hired a contract analyst, Anahita Hodge (“Hodge”), primarily assigning
her to scrutinize payments from third party payors. Ultimately, Plaintiffs loaded their contract with
Defendant into the PCMS system in November 1998.
In early 1999, Hodge identified the underpaid stop loss claims and, in February 1999,
requested that Defendant reprocess the claims in compliance with the terms of the Agreement. In
a July 22, 1999 letter to Defendant’s government benefits administrator, Hodge again requested the
additional stop loss reimbursement. Subsequently, Hodge spoke to Carmen Montanez
(“Montanez”), then one of Defendant’s employees, who informed her that Defendant would not pay
the full stop loss amount on the contested claims. During the conversation, Montanez cited the
TRICARE / CHAMPUS policies and procedures and told Hodge that those policies foreclosed
Defendant from paying rates in excess of the CHAMPUS DRG-rates. In the months that followed,
Plaintiffs at no point communicated to Defendant an intent to drop the stop loss claims. Ultimately,
Defendant sent Plaintiffs a letter on February 5, 2001 notifying Plaintiffs that it was exercising its
right to terminate the Agreement, effective May 6, 2001. Defendant terminated the Agreement due
to Plaintiffs’ continued insistence that they be reimbursed according to the Agreement’s stop loss
provisions.
Between July 1, 1996 and May 6, 2001 – the life of the Agreement – 85 inpatient claims for
medical care rendered at Plaintiffs’ facilities exceeded the stop loss threshold. In each instance,
Plaintiffs did not receive reimbursement according to the stop loss provisions. Rather, without
Plaintiffs’ knowledge, Defendant capped reimbursement at 100% of the CHAMPUS DRG-rate.
Applying the stop loss provisions of the Agreement, Plaintiffs should have received $2,595,294.94
in payment of those claims. In actuality, Defendant paid only $1,317,422.05, thus yielding an
underpayment of $1,277,872.89 on the stop loss claims.4
The district court considered several issues at trial on remand, including: (1) whether the
parties modified the Agreement so that high-dollar claims would be paid under the CHAMPUS
DRG-based payment system as opposed to the stop loss provisions; (2) whether Plaintiffs waived
their claims; (3) whether equitable doctrines barred Plaintiffs’ claims; and (4) whether Defendant
was entitled to recover alleged overpayments on outpatient claims. Ultimately, the district court
ruled in favor of Plaintiffs on their breach of contract claim, and against Defendant on its defenses
of modification, estoppel, failure to mitigate damages, and laches. The district court further found
that Defendant failed to prove damages, a required element of its counterclaim. In an opinion dated
February 13, 2006, the district court awarded Plaintiffs $1,277,872.90 on their breach of contract
claim, along with prejudgment interest totaling $731,488.65. Defendant timely appealed.
4
The district court additionally found facts relevant to Defendant’s counterclaim that it had overpaid Plaintiffs
for a number of outpatient claims by misapplying the “tier” system established in the Agreement. On appeal, Defendant
waives its challenge to the district court’s dismissal of its counterclaim. Accordingly, we need not further explore the
circumstances of Defendant’s overpayment.
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Humana Military Healthcare Services, Inc.
DISCUSSION
I. THE DISTRICT COURT DID NOT ERR IN DEEMING CAPITAL
REIMBURSEMENT EVIDENCE IRRELEVANT
As a matter of law, the district court concluded that “[t]he monies paid to [Plaintiffs]
pursuant to Capital Reimbursements are totally irrelevant to the Agreement at issue, would have
been paid with or without an agreement between the parties, and were not paid pursuant to the
Agreement.” Baptist Physician II, 415 F. Supp. 2d at 853. Defendant vehemently disagrees and,
in fact, rests the weight of its appeal on this very question. Because the district court’s disposition
does not elucidate the rationale underlying its conclusion that capital payment evidence was
irrelevant, we review the matter de novo as a conclusion of law.5 Kalamazoo River Study Group,
355 F.3d at 589.
The relevance of the proffered capital payment evidence substantially turns on a question
of regulatory interpretation. That is, whether capital payments flow only to those preferred network
providers subject to the DRG-based payment system, or whether providers which contract for
alternative payment methodologies may also receive capital payments consistent with the
TRICARE / CHAMPUS regulations. As a corollary, we must also consider the significance of
certifications submitted to obtain capital payments, wherein providers document the total number
of inpatient days “provided to all patients in units subject to DRG-based payment,” as well as the
“[t]otal allowed CHAMPUS inpatient days provided in units subject to DRG-based payment.” See
32 C.F.R. § 199.14(a)(1)(iii)(G)(3)(vi)-(vii).
As with all matters of regulatory interpretation, we look first to the plain and unambiguous
meaning of the regulation, if any. See Henry Ford Health Sys. v. Shalala, 233 F.3d 907, 910 (6th
Cir. 2000) (quoting Bartlik v. U.S. Dep’t of Labor, 62 F.3d 163, 165-66 (6th Cir. 1995)) (“We read
statutes and regulations with an eye to their straightforward and commonsense meanings,” and
where the regulation’s language reveals an “unambiguous and plain meaning . . . , our task is at an
end”). Defendant fails to identify provisions either in the applicable regulations or the authorizing
statutes that plainly sets forth the meaning of the regulations. Nor could it, for the TRICARE /
CHAMPUS regulations do not squarely address this question.
We next look to the regulatory scheme, reading the regulation in its entirety to glean its
meaning. In so doing, we find that the TRICARE / CHAMPUS regulations do not preclude capital
payments to preferred network providers which, by agreement with Managed Care Support (“MCS”)
Contractors, receive reimbursement for inpatient care under alternative payment methodologies.
As detailed in the TRICARE regulations,
[t]he TRICARE program implements management improvements primarily through
managed care support contracts that include special arrangements with civilian sector
health care providers . . . . Implementation of these management improvements
includes adoption of special rules and procedures not ordinarily followed under
CHAMPUS . . . . This section establishes those special rules and procedures.
5
In the alternative, we could construe this as a ruling on the admissibility of the capital payment evidence and,
accordingly, could review for abuse of discretion. See Kumho Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999).
Although the district court’s review of the evidence presented at trial notably excludes reference to Defendant’s proffered
capital payment exhibits (Exhibits 54(A)-(K)), it does recount witness testimony on the issue. See Baptist Physician II,
415 F. Supp. 2d at 841, 847. Because we cannot say with certainty that the district court intended to rule on the
admissibility of the capital payment exhibits, we err on the side of caution and apply the less deferential de novo standard
of review.
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Humana Military Healthcare Services, Inc.
32 C.F.R. § 199.17(a)(1). While managed care contractors may enter into special arrangements with
preferred network providers consistent with the “special rules and procedures” set forth in the
TRICARE regulations, CHAMPUS regulations remain effective and applicable to TRICARE
providers unless the special rules and procedures state otherwise.
As CHAMPUS providers, by default, Plaintiffs were entitled to receive capital payments
regardless of their Agreement with Defendant. Federal regulations permit all CHAMPUS providers
to receive capital payments to offset the costs of treating CHAMPUS beneficiaries. See 32 C.F.R.
§ 199.14(a)(1)(iii)(G).6 Under 32 C.F.R. § 199.14, a TRICARE preferred network provider is not
rendered ineligible for capital payments merely because they have negotiated an “alternative
payment methodology” for reimbursement. Regulations implementing the TRICARE Program
provide that where “rules, procedures, rights and obligations” under TRICARE differ from those
under CHAMPUS, those set forth in the TRICARE regulations “take precedence and are binding.”
32 C.F.R. § 199.17(a)(4). Illustratively, the TRICARE Reimbursement Manual (“the Manual”) cites
to 32 C.F.R. § 199.14 as authority for its discussion of capital payments. Accordingly, where the
TRICARE regulations do not explicitly conflict with the CHAMPUS regulations, those pre-existing
regulations apply to TRICARE as well.
Defendant directs our attention to the section of the Manual that discusses adjustments to
payment amounts, such as capital payments, and, specifically, to the introductory paragraph on
‘Applicability.’ There, the Manual states –
This policy is mandatory for reimbursement of services provided by either network
or non-network providers. However, alternative network reimbursement
methodologies are permitted when approved by TMA and specifically included in
the network provider agreement.
TRICARE / CHAMPUS Policy Manual, 6010.53-M, Ch. 6, Section 8 at I (available at J.A. at 1050
(emphasis added)) The Agreement at issue does not specifically include language excepting
Plaintiffs from the category of providers typically eligible to receive capital payments under the
regulations.
In fact, that same section of the Manual details the entitlement to, and procedures for
payment of, capital costs. More specifically, it establishes the obligations of both the provider and
the MCS contractor. In a subpart with the heading “Negotiated Rates,” the Manual states:
If a contract between the MSC prime contractor and a subcontractor or institutional
network provider does not specifically state the negotiated rate includes all costs
that would otherwise be eligible for additional payment, such as capital and DME,
the MCS prime contractor is responsible for reimbursing these costs to the
subcontractors and institutional network providers if a request for reimbursement is
made.
6
Specifically, the regulations state:
When requested in writing by a hospital, CHAMPUS shall reimburse the hospital its share of actual
capital costs reported annually to the CHAMPUS fiscal intermediary. Payment for capital costs shall
be made annually based on the ratio of CHAMPUS inpatient days for those beneficiaries subject to
the CHAMPUS DRG-based payment system to total inpatient days applied to the hospital’s total
allowable capital costs. Reductions in payments for capital costs which are required under Medicare
shall also be applied to payments for capital costs under CHAMPUS.
32 C.F.R. § 199.14(a)(1)(iii)(G)(1).
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Humana Military Healthcare Services, Inc.
Id. at III.B.4.d. (available at J.A. at 1058-59 (emphasis added)) Defendant, as the MCS contractor
for its region, negotiated rates with Plaintiffs, an institutional network provider.7 Consistent with
the Manual, the Agreement could have expressly stipulated that payment at the negotiated rate
would incorporate capital payments. The Agreement did not make Plaintiffs’ receipt of
reimbursement under the stop loss provisions conditional upon forbearance from receipt of capital
payments.8 Plaintiffs therefore remained entitled to receive capital payments notwithstanding the
operation of the negotiated alternative to the DRG-based rates.
This reading of the regulations is reinforced by the Department of Defense’s (“DOD’s”)
intent in implementing the TRICARE program. In response to its Proposed Rule, DOD received
comments suggesting that the Final Rule should more specifically detail special reimbursement
methods for network providers under § 199.17(p). DOD responded:
The rule provides added flexibility to vary payment provisions from those
established by regulation, to accommodate local market conditions. To attempt to
specify in advance the possible reimbursement approaches would defeat our purpose
of providing a flexible mechanism. We also disagree that network rate setting should
be the same as under standard CHAMPUS rules; a key aim of managed care
programs is to negotiate lower rates of reimbursement with networks of preferred
providers.
TRICARE Program; Uniform HMO Benefit; Special Health Care Delivery Programs, 60 Fed. Reg.
52,078-01, at 52,086 (Oct. 5, 1995) (now codified at 32 C.F.R. § 199.17). Although the parties here
did not negotiate lower rates of reimbursement for the stop loss claims, Defendant did have
increased flexibility in negotiations enabling it to insure access to health care for the TRICARE
beneficiaries in its region.
We additionally note that this result is manifestly consistent in purpose and effect with more
traditional CHAMPUS reimbursement methods, which permit payment of capital costs along with
additional payments for outlier cases. 32 C.F.R. § 199.14(a)(1). Specifically, the regulations
provide reimbursement greater than the standard DRG-rate for cost outliers and for length-of-stay
outliers. Id. at § 199.14(a)(1)(iii)(E)(1)(ii) (providing additional payment for “[a]ny discharge which
has standardized costs that exceed a[n established] threshold”); id. at § 199.14(a)(1)(iii)(E)(1)(i)
(additional payment for “[a]ny discharge . . . which has a length-of-stay (LOS) exceeding a threshold
established”). The additional outlier payment in no way diminishes the provider’s entitlement to
capital payments under the same regulatory provision. Id. at § 199.14(a)(1)(iii)(G). Thus, Plaintiffs’
receipt of both capital payments and inpatient reimbursement under the stop loss provisions runs
consistent with the apparent intent of the regulators to appropriately reimburse more costly patient
care.
7
Neither the statute nor the regulations reveal a relevant distinction between an “MSC prime contractor” and
an “MSC contractor” more generally. The statutory provisions that, in part, establish the TRICARE program define
“TRICARE Prime” as “the managed care option of the TRICARE program.” 10 U.S.C. § 1079(g)(5); 10 U.S.C.
§ 1097a(f)(1). Although those provisions make the definition applicable only to those sections, no more generally
applicable definition of TRICARE Prime exists in the current statute or regulations. Nor do the statute or regulations
define “MSC Prime Contractor.” The Manual lends further support to this view in clarifying that the MCS Contractor
is responsible for all TRICARE Prime, Extra, and Standard claims. (See J.A. at 1006)
8
On appeal, Defendant argues “there is no question that the parties can contractually eliminate the entitlement
to Capital Reimbursement.” (Def.’s Br. at 28-29) We agree. Yet, while this may be true, Defendant does not identify
any provision in the Agreement to this effect and, accordingly, the argument does little to advance Defendant’s cause.
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Humana Military Healthcare Services, Inc.
Other portions of the TRICARE / CHAMPUS regulations demonstrate the DOD did not
intend to preclude capital payments to providers under special programs, even though they may be
reimbursed in excess of government allowable rates. For example, under the Supplemental Care
Program, a program related to CHAMPUS, the military provides payment for health care services
rendered at civilian facilities for its active duty members. See 32 C.F.R. § 199.16(a)(2). The
regulations implementing the Supplemental Care Program acknowledge that the CHAMPUS
provider reimbursement regulations generally will guide payment and administration of
Supplemental Care claims. 32 C.F.R. § 199.16(c). However, the regulations further establish
exceptions and clarifications to the general rule. See 32 C.F.R. § 199.16(d). Specifically, the
regulations clarify that “annual cost pass-throughs for capital . . . costs that are available under the
CHAMPUS DRG-based payment system are also available, upon request, under the supplemental
care program.” 32 C.F.R. § 199.16(d)(4). Notwithstanding the entitlement to capital payments, that
same subsection goes on to clarify that for some providers, “payment in excess of CHAMPUS
allowable amounts” may be authorized. Id. at § 199.16(d)(5). Accordingly, the Supplemental Care
Program regulations demonstrate that DOD contemplated simultaneous entitlement to capital
payments and payments exceeding typical CHAMPUS allowable amounts.
In view of the foregoing, we hold that the regulations authorize capital payments to
TRICARE preferred network providers regardless of the methodology employed to reimburse claims
for inpatient care – whether it be the DRG-based system, or some alternative.
We next examine the significance, if any, of the capital payment certifications. Because the
regulations authorize capital payments for all TRICARE / CHAMPUS providers, we find the
certifications do not somehow operate to make Plaintiffs’ application for and receipt of capital
payments dispositive. Defendant would rely on Plaintiffs’ capital payment certifications as evidence
of mutuality of assent to modify the Agreement. To that end, Defendant seizes upon language
contained on the capital payment certification forms and in correspondence between Plaintiffs and
Defendant’s government benefits administrator. The certification forms refer to TRICARE /
CHAMPUS inpatient days as “[p]rovided in units subject to DRG-based payment,” while the
correspondence characterizes capital payments as “reimbursement . . . under the CHAMPUS DRG-
based payment system.” (See, e.g., J.A. at 1294, 1299)
Looking first to the plain language of the regulations, we find that Plaintiffs’ hospitals were
“subject to the DRG-based payment system.” The CHAMPUS regulations provide –
(ii) Applicability of the DRG system.
...
(B) Services subject to the DRG-based payment system. All normally
covered inpatient hospital services furnished to CHAMPUS beneficiaries by
hospitals are subject to the CHAMPUS DRG-based payment system.
...
(D) Hospitals subject to the CHAMPUS DRG-based payment system. All
hospitals within the fifty states . . . which are certified to provide services to
CHAMPUS beneficiaries are subject to the DRG-based payment system
except for . . . hospitals units which are exempt.
32 C.F.R. § 199.14(a)(1)(ii)(D) (emphasis added). Typically, only hospital units exempt from the
Medicare Prospective Payment System are exempt from the CHAMPUS DRG-based payment
system. Id. at § 199.14(a)(1)(ii)(D)(1)-(5). Additionally, “[a]ll hospitals subject to the CHAMPUS
DRG-based payment system . . . may be reimbursed for allowed capital . . . costs by submitting a
request to the CHAMPUS contractor.” Id. at § 199.14(a)(1)(iii)(G)(3).
No. 06-5364 Baptist Physician Hospital Organization, Inc., et al. v. Page 10
Humana Military Healthcare Services, Inc.
The capital payment provision of the CHAMPUS regulations lists the information required
in order to verify the appropriate capital payment amount. Among this list, the regulation directs
providers to submit “[t]otal inpatient days provided to all patients in units subject to DRG-based
payment” and “[t]otal allowed CHAMPUS inpatient days provided in units subject to DRG-based
payment.” Id. at § 199.14(a)(1)(iii)(G)(3)(vi)-(vii) (emphasis added). The regulations notably do
not define “DRG-based payment.” Nor do the regulations clarify whether “DRG-based payment”
in the former context refers collectively to Medicare and CHAMPUS inpatients, to some broader
group, or to CHAMPUS alone.9
The Manual makes clear, however, that TRICARE uses the certification forms to insure that
it does not pay capital costs for patients whose other (primary) health insurance fully covered the
patient’s charges. TRICARE / CHAMPUS Policy Manual, 6010.53-M, Ch. 6, Section 8 at III.B.3
(available at J.A. at 1053) (setting forth the method of calculating capital payment and noting
“[t]hroughout these calculations claims on which TRICARE / CHAMPUS made no payment
because other health insurance paid the full TRICARE / CHAMPUS-allowable amount are not to
be counted”). The Manual details the steps that providers must follow in determining the “total
allowable TRICARE / CHAMPUS capital payment for DRG discharges.” Id. To begin, providers
calculate the total TRICARE / CHAMPUS inpatient days. According to the Manual, providers
should exclude –
(1) Any days determined to be not medically necessary, and
(2) Days included on claims for which TRICARE / CHAMPUS made no payment
because other health insurance paid the full TRICARE / CHAMPUS-allowable
amount.
Id. (emphasis added). Later in the same section, the Manual clarifies that TRICARE will not make
capital payments for claims of dual-eligible beneficiaries that were paid by Medicare. Id. at B.4.f
(available at J.A. at 1058) Rather, it expressly states that “TRICARE capital . . . cost payments will
be made only on claims on which TRICARE is the primary payer.” Id. Thus, the point of the
certification forms is to separate the claims for which TRICARE / CHAMPUS serves as the primary
payor from those where third parties foot the bill.
As careful review of the regulations makes abundantly clear, the CHAMPUS regulations
were never thoroughly amended following implementation of the TRICARE program to allow for
the possibility that MCS contractors would enter into alternative payment arrangements with health
care providers in their networks. In fact, the DOD Final Rule implementing the TRICARE program
proves as much. TRICARE Program; Uniform HMO Benefit; Special Health Care Delivery
Programs, 60 Fed. Reg. 52,078-01, at 52,079 (Oct. 5, 1995) (now codified at 32 C.F.R. § 199.17)
(“Our regulatory approach is to leave the existing CHAMPUS rules largely intact and to create new
sections 199.17 and 199.18 to describe the TRICARE Program and the uniform HMO benefit.”).
As a result, the claims forms and the capital payment request forms that the TRICARE / CHAMPUS
regulations require TRICARE providers to use essentially pound a square peg to a round hole. They
simply do not neatly fit together.
Furthermore, as a strictly factual matter, Defendant’s proffered capital payment evidence
does not “tend[] to make the existence of any fact that is of consequence to the determination of the
action more probable than it would be” otherwise. See Fed. R. Evid. 401. Importantly, the
9
As the regulation provides, “All costs reported to the CHAMPUS contractor must correspond to the costs
reported on the hospital’s Medicare cost report.” 32 C.F.R. § 199.14(a)(1)(iii)(G)(3). The term “DRG-rate” originated
in Medicare. See id. at § 199.14(a)(1)(i)(A).
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Agreement at issue remained in effect from August 6, 1996 to May 6, 2001. Accordingly, only
Plaintiffs’ certifications for purposes of capital payment during Fiscal Years (FY) 1997 through
2001 would even arguably be relevant. In Plaintiffs’ FY 1997 submission, they certified 536 “[t]otal
inpatient days . . . [b]ased on discharges within [the] reporting period.” (J.A. at 1284) From
FY1998-2000, when TRICARE modified the certification form to request “[t]otal
TRICARE/CHAMPUS inpatient days . . . [p]rovided in units subject to DRG-based payment,”
Plaintiffs’ certification forms did not set forth a number. (J.A. at 1299, 1343, 1378) Rather, on each
occasion, Plaintiffs directed the government benefits administrator to “Use System Data.” (Id.) In
FY 2001, Plaintiffs failed to timely submit certification for capital payments. Thus, none of
Plaintiffs’ requests for capital payments during the relevant period affirmatively certified that the
stop loss claims were “subject to DRG-based payment;” rather, Defendant’s own government
benefits administrator put forth the numbers that included Plaintiffs’ stop loss inpatients. It strikes
this Court as disingenuous that Defendant now seeks to rely on those certifications to establish
mutuality of assent to modification of the Agreement, and communication of intent to waive its
rights under the stop loss provisions. This is particularly so because evidence pre-dating and post-
dating the relevant period clearly demonstrates that Plaintiffs applied for and received capital
payments at times not covered by the Agreement.
Whether viewed as a legal conclusion or an evidentiary ruling, we affirm the district court’s
view on the significance of capital payment evidence.
II. ADDITIONAL CLAIMS ON APPEAL
On appeal, Defendant challenges several of the district court’s conclusions of law, alleging:
(1) Plaintiffs’ application for and acceptance of capital payments effectively modified the contract
such that the stop loss claims would be subject to the DRG-based payment system; (2) Plaintiffs
waived their rights to payment under the stop loss provision and “decisively communicated . . .
intent to waive” by certifying, for purposes of capital payment, that those “claims were subject to
DRG-based payment,” (Def.’s Br. at 38).10 Additionally, Defendant asserted defenses of equitable
estoppel, failure to mitigate, and laches. Finally, Defendant claims the district court abused its
discretion in awarding prejudgment interest.
A. No Valid Modification Occurred
Defendant posits that Plaintiffs’ application for and acceptance of capital payments
effectively modified the contract. In Defendant’s view, Plaintiffs demonstratively assented to
modify the Agreement by certifying that the inpatient stop loss claims were “subject to the DRG-
based payment system.” Moreover, Defendant contends that the capital payments themselves
constitute consideration. The district court concluded that “[t]he evidence did not reveal a meeting
of the minds or an exchange of consideration necessary to support defendant’s claim of
modification.” Baptist Physician II, 415 F. Supp. 2d at 851. We review the district court’s
conclusions of law de novo. See Kalamazoo River Study Group, 355 F.3d at 589. In doing so, we
uphold the district court’s determination that the parties did not validly modify the Agreement.
Tennessee substantive law controls in the instant case, as it comes before us on diversity.
In Tennessee, the parties to an existing contract can modify its terms at any time. Bonastia v.
Berman Bros., Inc., 914 F. Supp. 1533, 1538 (W.D. Tenn. 1995). However, an existing contract
cannot be unilaterally modified. Balderacchi v. Ruth, 256 S.W.2d 390, 391 (Tenn. Ct. App. 1952).
10
Although Defendant’s “Statement of Issues” contemplates additional challenges to the district court’s rulings,
as we later note, Defendant waived them on appeal.
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Rather, valid modification requires “the same mutuality of assent and meeting of the minds as
required to make a contract” in the first instance. Id.; see also Prudential Sec., Inc. v. Mills, 944 F.
Supp. 631, 635 (W.D. Tenn. 1996). Additionally, consideration must be exchanged to effect
modification of an existing contract. Boyd v. McCarty, 222 S.W. 528, 529-30 (Tenn. 1920).
Importantly for our purpose today though, “[p]erforming what was already promised in the original
contract is not consideration to support a second contract.” Dunlop Tire & Rubber Corp. v. Serv.
Merch. Co., 667 S.W.2d 754, 758-59 (Tenn. Ct. App. 1983) (citing Am. Fruit Growers, Inc. v.
Hawkinson, 106 S.W.2d 564 (Tenn. Ct. App. 1937)).
To show mutual assent, Defendant relies on the certifications Plaintiffs submitted requesting
capital payments. We cannot agree that the certifications manifest Plaintiffs’ intent to modify the
Agreement and forego payment under the stop loss provisions therein contained. As previously
discussed at length, neither the statute, nor the implementing regulations, nor the policy manual
preclude Plaintiffs, as preferred network providers, from requesting and receiving capital payments.
This is so notwithstanding the operation of an Agreement establishing a negotiated rate of
reimbursement for inpatient care which exceeds 100% of the DRG-rate. Although Defendant, and
other MCS Contractors, can expressly provide that negotiated rates include costs otherwise
additionally payable under the statute and regulations, such as capital costs, providers remain
eligible to receive such additional payments upon request. See TRICARE / CHAMPUS Policy
Manual, 6010.53-M, Ch. 6, Section 8 at III.B.4.d. (available at J.A. 1057-58).
Defendant analogizes the instant case to Bonastia. There, a company hired the plaintiff as
an account manager and by letter conveyed that plaintiff’s “annual salary will be $62,400 for the
next two years.” Bonastia, 914 F. Supp. at 1535. On his first day of work, the plaintiff signed a
document acknowledging that he “read and received the company’s Employee Handbook and agrees
to abide by the policies, procedures, and rules it contains.” Id. The document continues, however,
and clarifies that the “Employee Handbook is not, and is not intended to be, a contract of
employment,” and that the plaintiff’s “employment is ‘at will.’” Id. Nearly a year later, the plaintiff
signed yet another copy of the acknowledgment form. Id. Less than two years after reporting to
work, the company terminated the plaintiff, who then sued for breach of an employment contract.
Id. at 1535-36. The court in Bonastia assumed that the company’s letter constituted a binding two-
year employment contract, but found the second acknowledgment form modified that contract to
create an employment at-will arrangement. Id. at 1538-39.
Bonastia is not on point. Defendant likens Plaintiffs’ capital payment certifications to the
acknowledgment form in Bonastia. The acknowledgment form indicates an agreement to comply
with the policies and procedures of the Employee Handbook. The capital payment certifications,
however, do not reference the regulations, policies, or procedures governing TRICARE /
CHAMPUS and, even if they did, those regulations and policies comprise a complex federal
regulatory scheme devoid of a definition of “DRG-based payment.” Ambiguously, the phrase “units
subject to DRG-based payment” appears at two places in the certification forms – both under
“inpatient days” and under “total TRICARE/CHAMPUS inpatient days.” (See J.A. at 1343) What
is more, the information certified must comport with information submitted in the hospital’s
Medicare cost report and “DRG-based payment” is a phrase with its origins under the Medicare
program. Thus, unlike the rather straightforward acknowledgment form in Bonastia, the signature
of which could appropriately be taken to manifest intent, Plaintiffs’ certifications for capital payment
in the case at hand cannot be employed to demonstrate Plaintiffs’ intent.
At any rate, Defendant cannot show valid consideration. The Agreement did not strip
Plaintiffs of their entitlement to capital payment, even for the stop loss claims. In making capital
payments to Plaintiffs, Defendant’s government benefits administrator merely performed
consistently with a pre-existing duty under the Agreement and the applicable regulations. See
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Dunlop Tire & Rubber Corp., 667 S.W.2d at 758-59. Additionally, under the TRICARE /
CHAMPUS regulations and policies, Defendant’s government benefits administrator made capital
payments independently of Plaintiffs’ regularly submitted claims for reimbursement under the
Agreement. These constitute “pass-through” payments and, accordingly, although Plaintiffs
submitted their capital payment requests to Defendant’s government benefits administrator, the
payments themselves flow directly from the federal government. See 32 C.F.R. §
199.14(a)(1)(iii)(G)(3) (“CHAMPUS shall reimburse the hospital its share of actual capital costs.”)
(emphasis added); see also General Accounting Office, Defense Health Program (DHP), B-287619,
(July 5, 2001), http://redbook.gao.gov/17/fl0083859.php (“For payment of pass through costs, the
contractor provides information to DOD to seek approval for payment. If DOD approves payment,
the contractor is notified to pay the claim.”). Thus, Defendant’s claim of modification falls on two
swords. We affirm the district court on this claim.
B. Plaintiffs Never Waived Their Rights
Defendant asserts that Plaintiffs waived their right to receive stop loss payments. To support
this claim, Defendant states that, in early 1999, Plaintiffs knew of the stop loss underpayment and
of Defendant’s actions in capping those claims at 100% of the DRG-rate and, yet, did not terminate
the Agreement. Defendant further relies on Plaintiffs’ capital payment certifications as evidence of
intent to waive. In fact, on more than one occasion, Defendant goes so far as to classify Plaintiffs’
submission of capital payment requests as “unequivocal and decisive acts.” (Def.’s Br. at 35, 37)
The district court concluded, as a matter of law, that Plaintiffs did not “intentionally and knowingly
waive[] their rights to receive payments pursuant to the stop loss provisions,” nor did Plaintiffs
“manifest any such intent.” Baptist Physician II, 415 F. Supp. 2d at 851. Reviewing this issue de
novo, see Kalamazoo River Study Group, 355 F.3d at 589, we agree with the district court that
Plaintiffs did not waive their right to payment under the stop loss provisions.
Waiver is the knowing and intentional relinquishment or abandonment of a known right.
Gitter v. Tenn. Farmers Mut. Ins. Co., 450 S.W.2d 780, 784 (Tenn. Ct. App. 1969); Faught v. Estate
of Faught, 730 S.W.2d 323, 325 (Tenn. 1987). There can, therefore, be no effective waiver of rights
where a party either does not know its rights or fails to fully understand those rights. Faught, 730
S.W.2d at 326. Put another way, intent to waive is required. “Waiver may be proved by express
declaration; or by acts and declarations manifesting an intent and purpose not to claim the supposed
advantage; or by a course of acts and conduct.” Reed v. Wash. County Bd. of Educ., 756 S.W.2d
250, 255 (Tenn. 1988); see also Faught, 730 S.W.2d.at 326; Gitter, 450 S.W.2d at 784. Where a
party seeks to prove waiver by course of conduct, “there must be clear, unequivocal and decisive
acts of the party or an act which shows determination not to have the benefit intended in order to
constitute a waiver.” Gitter, 450 S.W.2d at 784 (citing Webb v. Bd. of Trs. of Webb Sch., 271
S.W.2d 6, 19 (1954)).
Plaintiffs did not knowingly relinquish their rights to reimbursement. At the time Plaintiffs
entered into the Agreement, Plaintiffs lacked the resources necessary to adequately monitor third
party payor compliance with agreed-upon contract terms and, thus, to identify underpayments. To
more closely track payments, Plaintiffs acquired new payment tracking software (PCMS) and hired
a contract analyst whose primary task was to monitor payments. Plaintiffs loaded their contract with
Defendant into the PCMS system in November 1998 and, in early 1999, Plaintiffs learned – through
Hodge, its contract analyst – that Defendant had been reimbursing stop loss claims at an amount
lower than the stop loss amounts.
Plaintiffs’ contract analyst began conversations with Defendant in February 1999 to secure
full payment of the stop loss claims. On July 22, 1999, she wrote to Defendant’s government
benefits administrator demanding full payment of the stop loss claims. Plaintiffs never
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communicated an intent to waive Plaintiffs’ rights under the Agreement, nor did Plaintiffs intend
to waive those rights. By letter dated February 5, 2001, Defendant ultimately terminated the
Agreement with Plaintiffs because they had reached an impasse on the amount due under the stop
loss provisions. Additionally, Plaintiffs’ request and receipt of capital payments cannot be deemed
“clear, unequivocal and decisive acts . . . which show[] determination not to have the benefit
intended.” See Gitter, 450 S.W.2d at 784. Our exploration of the regulatory scheme underlying the
TRICARE / CHAMPUS program proves as much. Consequently, we find that Plaintiffs did not
waive their rights under the Agreement.11
C. Laches Does Not Bar Plaintiffs’ Claim, Nor Did Plaintiffs Fail to Mitigate
The district court concluded that the doctrine of laches did not bar Plaintiffs’ claim since
Plaintiffs took action to obtain full reimbursement upon learning of the underpayment and filed suit
“when [it] felt it had exhausted all options of receiving payment.” Baptist Physician II, 415 F. Supp.
2d at 852. Additionally, the district court determined that, after learning of the breach, Plaintiffs did
not fail to mitigate damages. Defendant challenges these conclusions. Again, we review de novo,
see Kalamazoo River Study Group, 355 F.3d at 589, and Defendant’s claims fail.
“[E]quitable defenses may bar purely legal claims.” M.J. Jansen v. Clayton, 816 S.W.2d 49,
52 (Tenn. Ct. App. 1991). To successfully invoke the doctrine of laches, a defendant must show “an
inexcusably long delay in commencing the action which causes prejudice to the other party,” and
mere delay will not suffice. Patton v. Bearden, 8 F.3d 343, 347 (6th Cir. 1993) (internal citations
omitted); see also M.J. Jansen, 816 S.W.2d at 51. A finding of sufficient prejudice frequently
follows from “the death of witnesses[,] . . . the loss of evidence,” M.J. Jansen, 816 S.W.2d at 52
(collecting cases), or “failure of memory resulting in obscuration of facts” which “render uncertain
the ascertainment of truth, and make it impossible for the court to pronounce a decree with
confidence.” Brown v. Ogle, 46 S.W.3d 721, 727 (Tenn. Ct. App. 2000).
Laches does not bar Plaintiffs’ claim. Plaintiffs timely filed this suit within the applicable
statute of limitations. See Tenn. Code Ann. § 28-3-109 (six-year statute of limitations). Moreover,
Plaintiffs filed suit in December 2001 – ten months after Defendant notified Plaintiffs of its intent
to terminate the Agreement following impasse, seven months after the effective termination date,
and approximately two years and ten months following discovery of the underpayments. Up until
February 1999, Plaintiffs did not know that Defendant was reimbursing its stop loss claims at below
the agreed-upon rate. At that time, Plaintiffs’ contract analyst began conversations with Defendant
to secure full payment of the stop loss claims. On July 22, 1999, the analyst wrote to Defendant’s
claims administrator demanding full payment of the stop loss claims. This delay does not rise to the
level of “inexcusably long.” Further, Defendant has not shown that it suffered prejudice in the form
of lost evidence, deceased witnesses, or failed memory sufficient to impede the truth-finding
process. See M.J. Jansen, 816 S.W.2d at 52; Brown, 46 S.W.3d at 727.
Neither can Defendant succeed on its claim of failure to mitigate. The party alleging breach
of contract “has a legal duty to exercise reasonable and ordinary care under the[] circumstances to
prevent and diminish the damages.” ACG, Inc. v. Se. Elevator, Inc., 912 S.W.2d 163, 169 (Tenn.
Ct. App. 1995). Although the injured party must take “reasonable and ordinary” steps to mitigate,
11
Although Defendant’s brief on appeal alludes to implied waiver, Defendant wholly fails to develop such an
argument. Accordingly, Defendant has waived a challenge on implied waiver grounds. See Moore v. LaFayette Life
Ins. Co., 458 F.3d 416, 448 (6th Cir. 2006) (“The courts of appeals are not self-directed boards of legal inquiry and
research, but essentially arbiters of legal questions presented and argued by the parties.”); Indeck Energy Servs., Inc. v.
Consumer Energy Co., 250 F.3d 972, 979 (6th Cir. 2000) (“[I]ssues adverted to in a perfunctory manner, unaccompanied
by some effort at developed argumentation, are deemed waived.”).
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“[o]ne is not required . . . to make extraordinary efforts.” Id. (citing Arkansas River Packet Co. v.
Hobbs, 58 S.W. 278, 282 (Tenn. 1900)). Plaintiffs acted with “reasonable and ordinary care” by
informing Defendant promptly upon discovery that, in their view, Defendant was in breach of the
Agreement’s stop loss provisions. Plaintiffs pressed their view in a subsequent letter and phone call
with Defendant. Defendant concedes in its brief that it terminated the Agreement with Plaintiffs in
February 2001 “because [Plaintiffs] insisted on being paid the full stop loss, and in excess of DRG.”
(Def.’s Br. at 21) Defendant knew of this insistence long before February 2001. Plaintiffs were not
required “to make extraordinary efforts” to further clarify their position for Defendant’s benefit. See
ACG, Inc., 912 S.W.2d at 169. Consequently, we find that the district court correctly ruled that the
defense of laches does not bar Plaintiffs’ claim, and that Plaintiffs took reasonable steps to mitigate.
D. Prejudgment Interest
Defendant further argues that the district court abused its discretion in awarding prejudgment
interest because “[u]p to the day of trial the number and amount of stop loss claims was contested.”
(Def.’s Br. at 46) The district court awarded prejudgment interest at a rate of ten percent per annum
“from the date that payment was actually posted on each inpatient claim” improperly reimbursed.
Baptist Physician II, 415 F. Supp. 2d at 853. In so doing, the district court observed that Plaintiffs
“ha[d] remained without the use of the money” and “[Defendant] could have entirely avoided the
dispute . . . had it simply disclosed to [Plaintiffs] prior to signing the Agreement that it had no
intention of paying more than CHAMPUS DRG on those claims.” Id. On review, challenges to the
district court’s award of prejudgment interest “will not be disturbed . . . unless the record reveals a
manifest and palpable abuse of discretion.” Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn.
1998); see also Daily v. Gusto Records, Inc., 14 F. App’x 579, 591 (6th Cir. 2001) (noting that state
law determines the appropriate standard of review). We find no abuse of discretion.
Where consistent with principles of justice and equity, Tennessee Code provides for the
award of prejudgment interest at a rate not to exceed ten percent per annum. Tenn. Code Ann. § 47-
14-123. First and foremost, principles of equity guide trial courts in exercising their discretion to
award prejudgment interest. Myint, 970 S.W.2d at 927; see also Otis v. Cambridge Mut. Fire Ins.
Co., 850 S.W.2d 439, 447 (Tenn. 1992). Second, a trial court will more readily award prejudgment
interest “when the amount of the obligation is certain, or can be ascertained by proper accounting.”
Myint, 970 S.W.2d at 927 (citing Mitchell v. Mitchell, 876 S.W.2d 830, 832 (Tenn. 1994)). Third,
“interest is allowed when the existence of the obligation itself is not disputed on reasonable
grounds.” Id. While useful as guideposts, the Tennessee Supreme Court has observed that “these
criteria have not been used to deny prejudgment interest in every case where the defendant
reasonably disputed the existence or amount of an obligation.” Id.
The district court did not abuse its discretion in awarding prejudgment interest. First, the
award is consistent with principles of equity. Defendant entered into the Agreement knowing full
well it had no intention of ever paying over 100% of the CHAMPUS DRG-rate on the stop loss
claims. Defendant deliberately failed to reimburse Plaintiffs according to the stop loss provisions,
and thereby deprived Plaintiffs of the use of the difference in reimbursement. Second, the parties
stipulated to the “accuracy, and admissibility” of a list detailing the inpatient claims at issue in the
case. (J.A. at 1568, 1570-74) Thus, the amount of the obligation could be readily “ascertained by
proper accounting.” See Myint, 970 S.W.2d at 927. Finally, although Defendant disputed Plaintiffs’
claim of breach, it did not “reasonably dispute” the claim in light of its intent from the start of the
Agreement not to honor the stop loss reimbursement provisions contained therein. Accordingly, we
find the district court did not abuse its discretion in awarding prejudgment interest.
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E. Claims Waived on Appeal
At the outset, Defendant’s brief contemplates challenges to the district court’s conclusions
on Defendant’s equitable estoppel claim and its counterclaim. However, Defendant’s brief is
notably devoid of any developed argumentation on these issues. Accordingly, Defendant has waived
these challenges. See Moore, 458 F.3d at 448; Indeck Energy Servs., Inc., 250 F.3d at 979.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s order.