DocketNumber： 1 CA-CV 05-0432
Citation Numbers： 163 P.3d 1096, 216 Ariz. 146, 2007 Ariz. App. LEXIS 153
Judges： Gemmill, Orozco
Filed Date： 8/14/2007
Status： Precedential
Modified Date： 11/2/2024
OPINION
¶ 1 Medical Savings Insurance Company (“MSIC”) and the individually named defendants (“Patients”) appeal from a judgment in favor of Banner Health. The Patients received medical services at various hospital facilities operated by Banner. After the Patients did not pay their respective invoices for the services, Banner filed suit to recover the amounts billed for its services. The trial court granted summary judgment to Banner. MSIC and the Patients claim that genuine issues of material fact exist regarding the prices charged by Banner for medical services under the “Conditions of Admission” (“COA”) forms signed by the Patients. Because we conclude that the trial court correctly granted summary judgment in favor of Banner, we affirm.
FACTS AND PROCEDURAL HISTORY
¶2 MSIC is a health insurer that issued “group health insurance” to each of the Patients or their families. Banner is an Arizona non-profit corporation that owns and operates several hospitals throughout the state. The Patients were either patients of a Banner hospital or were spouses or parents of a Banner patient. Each of the patients or their representatives signed a COA form before Banner provided treatment. The COA form signed by four of the seven Patients included the following provisions:
I agree that in return for the services provided to the patient by the hospital or other health care providers, I will pay the account of the patient.... I will pay the hospitals usual and customary charges, which are those rates filed annually with the Arizona Department of Health Services ____
It is understood that the undersigned and patient are primarily responsible for payment of patients bill.
(Emphasis removed.) The remaining three Patients signed a COA form that similarly promised to “pay the account of the patient” and acknowledged that the signer and the patient “are primarily responsible for payment of the patient’s bill.” These three COAs, however, did not include any provision referencing the “rates filed annually with the Arizona Department of Health Services.”
¶ 3 After treatment, Banner billed each of the Patients the full amount specified for the provided medical services in its Charge Description Master (“CDM”) that was filed with the Arizona Department of Health Services (“DHS”) in accordance with Arizona Revised Statutes (“A.R.S.”) sections 36-436 to -436.03 (2003).
¶4 The COA forms constituted the only agreements between Banner and the Patients regarding payment of Banner’s charges. Banner has no agreements with MSIC. No insurance company contracts or
¶ 5 MSIC, as the medical insurer of the Patients, reviewed the charges billed by Banner using a methodology developed by the MSIC to “calculate the reasonableness of hospital charges and thus the reimbursement rates paid to medical providers.” MSIC then tendered payment in the form of restrictively-endorsed checks
¶ 6 Banner sued the Patients and MSIC, asserting breach of contract for failure to pay. After Banner filed a motion for summary judgment, MSIC and the Patients argued that genuine issues of material fact existed because the amounts billed by Banner were unreasonable. MSIC and the Patients provided deposition testimony and various documents purporting to show that Banner charged the Patients over 400 per cent of its cost in providing their care, sought full payment from only 2 per cent of its customers, usually received only 34 per cent of its billed charges from patients who received treatment similar to that received by the Patients, and collected only 30 to 40 per cent of its overall billed charges annually-
¶ 7 The trial court granted summary judgment to Banner on its breach of contract claims against the Patients and awarded attorneys’ fees to Banner against the Patients on a pro-rata basis. The Patients and MSIC, as a party adversely affected by the ruling, filed timely notices of appeal. This court has jurisdiction pursuant to A.R.S. § 12-120.21(A)(1) (2003).
DISCUSSION
¶ 8 We conduct de novo review of a grant of summary judgment. Great Am. Mortgage, Inc. v. Statewide Ins. Co., 189 Ariz. 123, 125, 938 P.2d 1124, 1126 (App.1997). We view the facts and all reasonable inferences therefrom in a light most favorable to the party against whom summary judgment was entered. Id. at 124, 938 P.2d at 1125. Summary judgment is appropriately granted when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Orme Sch. v. Reeves, 166 Ariz. 301, 305, 802 P.2d 1000, 1004 (1990). We will affirm a summary judgment that was correctly granted, even if we disagree with the trial courts reasoning. See Guo v. Maricopa County Med. Ctr., 196 Ariz. 11, 15, ¶ 16, 992 P.2d 11, 15 (App.1999); Realty Associates of Sedona v. Valley Nat’l Bank of Ariz., 153 Ariz. 514, 521, 738 P.2d 1121, 1128 (App.1986).
¶ 9 It is undisputed by the parties on appeal that valid contracts exist between each of the Patients and Banner.
¶ 10 The COA agreements must be interpreted in light of existing Arizona statutes pertaining to hospital rates. See 11 Richard A Lord, Williston on Contracts § 30.19 (4th ed.2006) (“contractual language must be interpreted in light of existing law”). The legislature has enacted guidelines for the setting of hospital rates, and has established comprehensive procedures for the filing, re-
¶ 11 These statutes direct hospitals to use “the current edition of the statement on the financial requirements of health care institutions and services, as adopted by the American hospital association ... as a guide for establishing hospital rates and charges.” A.R.S. § 36-436(B). Nothing in the record suggests that Banner did not comply with this mandate when establishing its rates and charges.
¶ 12 Furthermore, hospitals “shall not engage in business within this state until there is filed a schedule of its rates and charges ... with the director [of DHS] for the directors review.” A.R.S. § 36-436(A). The director of DHS is given authority to determine the form of the schedule and the information contained therein. Id. The director is also responsible for adopting or establishing “reasonable guidelines for review of rates and charges.” A.R.S. § 36-436(B). After the schedule is filed, “the director shall promptly review the schedule within sixty days and publish information on gross charges based on that schedule.” A.R.S. § 36-436(C). The schedule must be legible, must list “all services performed and commodities furnished,” “shall be posted in a conspicuous place in the reception area of each hospital,” and must “be available for inspection by the public at all times.” A.R.S. § 36-436.0RA), (B).
¶ 13 Hospitals cannot “increase any rate or charge until the proposed increase has been filed with the director [of DHS] and reviewed” as explained above. A.R.S. § 36-436.02(A); Ariz. Admin. Code R 9-ll-303(B). Nor may hospitals reduce their rates and charges until a required filing has been made with the DHS director. A.R.S. § 36-436.02(B); A.A.C. R9-11-301(D) (“No decrease or deletion shall be made by any hospital ... in any rate or charge until the proposed decrease or deletion has been filed for informational purposes with the Director.”).
¶ 14 Accordingly, the published rates and charges of a hospital cannot be increased without going through the filing and review process, nor may the rates be decreased without a formal filing with the DHS. Although the rates and charges for a particular service are the same for every patient, hospitals are free to accept reduced payments in satisfaction of the full billed rates. This frequently occurs, for example, as a result of government programs and contracts with health care insurers. The amounts accepted by a hospital in satisfaction of its billed charges will vary, but the billed rates and charges for specific services do not. Arizona law does not permit a hospital to reduce its filed rates and charges — and therefore its billed rates and charges — without making further filings with the DHS. See id.
¶ 15 “It has long been the rule in Arizona that a valid statute is automatically part of any contract affected by it, even if the statute is not specifically mentioned in the contract.” Higginbottom v. State, 203 Ariz. 139, 142, ¶ 11, 51 P.3d 972, 975 (App.2002) (citing Yeazell v. Copins, 98 Ariz. 109, 113, 402 P.2d 541, 544 (1965), Lee Moor Contracting Co. v. Hardwicke, 56 Ariz. 149, 156, 106 P.2d 332, 335 (1940), and Havasu Heights Ranch & Dev. Corp. v. Desert Valley Wood Products, Inc., 167 Ariz. 383, 389, 807 P.2d 1119, 1125 (App.1990)). Therefore, these Arizona statutes and regulations are incorporated by operation of law into the COA agreements. Because of the statutory scheme and the resultant publishing of Banner’s rates and charges, there are no “open” or missing price terms in the COA agreements.
¶ 16 In four of the COA agreements, the Patients agreed to pay “the hospital’s usual and customary charges, which are those rates filed annually with the Arizona Department of Health Services.” Under this language, patients expressly agree to pay the rates and charges filed annually by Banner with DHS. The reference to the hospital’s “usual and customary charges” does not create any ambiguity or question of fact, because such charges are defined in the COAs as the rates filed with DHS. MSIC and the Patients acknowledge that Banner billed the Patients in accordance with its filed rates.
¶ 18 The statutes and regulations summarized in ¶¶ 10-18, supra, constitute part of the COA agreements and the agreements must be interpreted with this statutory scheme in view.
1. A telephones to his grocer, “Send me a ten-pound bag of flour.” The grocer sends it. A has thereby promised to pay the grocer’s current price therefor.
Restatement (Second) of Contracts § 4 cmt. a, Illus. 1 (1981). The fact that a hospital could choose to accept a reduced amount in satisfaction of the full billed charges — as, for example, when a hospital has a contract with an insurer or has agreed to provide services under a government program — does not mean that there is a missing price term in these three COA agreements.
¶ 19 The dissent cites Doe v. HCA Health Services of Tennessee, Inc., 46 S.W.3d 191 (Tenn.2001), in support of the proposition that the price term is missing and a reasonable price should be determined by the quasi-contractual remedy of quantum meruit. See infra ¶ 45. But Doe involved very different facts. There was no statutory scheme governing the setting, filing, and publishing of hospital rates and charges; the hospital’s “Charge Master” rates were in fact confidential and not ascertainable by a patient; and the contract with the patient contained no reference to the “Charge Master” rates. 46 S.W.3d at 193-94. The Doe court concluded that the contract was “indefinite” and unenforceable because it did “not refer to a document or extrinsic facts by which the price will be determined.” Id. at 197. In contrast, the three COA agreements here include by operation of law the Arizona statutory scheme that requires the filing and publishing of each hospital’s rates. Banner’s rates and charges were filed and available for review and comparison by the public and these Patients. Because the statutory scheme is incorporated into these agreements and reveals the system of filed rates, the agreements therefore refer to “extrinsic facts”— the rates that are required to be filed and published — from which the hospitals’ bills to the Patients were determined.
¶20 Having concluded that there are no open or missing price terms in the COA agreements, we necessarily reject the contentions of MSIC and the Patients that a “reasonable” price term must be implied into the contracts and determined by negotiation or litigation after the services have been rendered.
¶ 21 Even though the Patients are not insured by any entity with which Banner has agreed to accept less than its published rates in full satisfaction of its bills, MSIC and the Patients contend that it is unfair for Banner to charge them more than it accepts in full payment from insured patients and patients under government contracts. There is nothing illegal or unauthorized, however,
¶22 The Georgia Court of Appeals has recently rejected similar arguments presented by uninsured patients against hospitals. In Cox v. Athens Regional Medical Center, Inc., 279 Ga.App. 586, 631 S.E.2d 792 (2006), the patients argued that the hospital had not charged them “reasonable” rates and that the rates charged were unfair because the hospital charged its insured patients much lower rates. Because the contracts signed by the patients obligated them to pay the hospital “in accordance with the rates and terms of the hospital,” the patients asserted that there were “open” price terms for which “reasonable” prices must be substituted by the court. Id. at 796. The court noted that the Georgia legislature had enacted statutes requiring the filing and disclosure of hospital rates and charges, and further noted that laws in existence at the time a contract is created are part of the contract. Id. at 797. The court affirmed summary judgment in favor of the hospital, reasoning in part as follows:
Moreover, appellants do not allege that they requested pricing information and [the hospital] failed to comply with this scheme, or that the required written summary of charges would not have been available to them upon request. Indeed, the language in [the hospitales admission form readily dovetails with the General Assembly’s price-comparison scheme at OCGA § 31-7-11(a) (which puts the burden on patients to request the pricing information), because it puts patients on notice that they will be charged rates established by [the hospital]. While appellants may deem it desirable for [the hospital] to make reference to available pricing information in its admission form, this is by no means required by OCGA § 31-7-ll(a); therefore, its absence from the admission form is not grounds for reversal.
631 S.E.2d at 797. The court in Cox also recognized that it must, under the circumstances, defer to the legislature in light of the statutory scheme in existence:
At the heart of this case is the notion that those who do not participate in an insurance policy do not benefit from the lower rates hospitals charge insured patients. Appellants do not allege that [the hospital] has violated any of the statutory schemes noted here; they simply challenge the fairness of charging uninsured patients more than insured patients. In doing so, they ultimately seek judicial intervention in a commercial transaction (for which the legislature has already established a policy favoring price comparison by the patient), whereby judges and juries would be called on to set appropriate prices for hospitals to charge their patients. We do not answer this call, and instead address the legal arguments properly presented before us.
Id. at 795.
¶ 23 Similarly, in Morrell v. Wellstar Health System, Inc., 280 Ga.App. 1, 633 S.E.2d 68 (2006), another panel of the Georgia Court of Appeals affirmed summary judgment in favor of a hospital against uninsured patients who claimed they were overcharged. Each contract provided that the patient “accepted] full financial responsibility for all charges incurred for services received today.” Id. at 71. The patients argued that these were “open price” contracts that contained an implied agreement for the hospital to charge a reasonable amount and that the hospital breached the contracts by billing the full “chargemaster” rates. Id. As in Cox, the Morrell court examined the Georgia statutes and noted that “statutory provisions related to the contract construction must be considered a part of the contract.” Id. The court affirmed the finding of no breach of contract:
*153 The rules of contract construction enabled the trial court to conclude that the agreement in the contracts to pay for “all charges” unambiguously referred to the ■written summary of specific charges required by OCGA § 31-7-ll(a) which established the price terms on which the parties intended to bind themselves. It follows that the Morrells and [the hospital] agreed to contracts for payment of all charges for medical care provided at the “chargemaster” rates, and [the hospital] did not breach the contracts by charging those rates.
633 S.E.2d at 72 (citations omitted). Our conclusions here are supported by the reasoning and holdings of Cox and Morrell.
¶ 24 MSIC and the Patients further argue that the COA agreements should be declared unenforceable because enforcing the filed (and billed) rates would violate the Patients’ reasonable expectations and be unconscionable. These arguments fail to take into account the public filing of the rates and Banner’s compliance with the legislatively-created process for setting and filing the rates and charges. Hospitals are required to follow specified guidelines in setting their rates; and then the rates are filed with DHS, reviewed by the Director, disclosed publicly, and available upon request. MSIC and the Patients have not asserted that these statutes and regulations are invalid, that Banner failed to follow the specified guidelines and procedures, that the actual billed rates were not in accordance with the filed rates, or that the services and supplies for which the Patients were billed were not provided as described. Because Banner followed the statutory and regulatory procedures and Banner’s rates are filed and available to the public, we conclude as a matter of law that there is no violation of the Patients’ reasonable expectations. We similarly conclude that the potential application of the equitable doctrine of unconscionability is significantly narrowed under these circumstances and, as a matter of law, the billed rates and charges are not unconscionable. We do not believe it is within the province of the courts, on this record, to declare billings based on the filed rates to be unenforceable.
¶25 Finally, MSIC and the Patients also contend that the trial court erred by distinguishing and not applying LaBombard v. Samaritan Health System, 195 Ariz. 543, 991 P.2d 246 (App.1998). LaBombard involved a dispute between a hospital and an individual over funds received in settlement of a personal injury claim. The hospital had a statutory hen for its “customary charges” under A.R.S. § 33-931 (2007). This court held that a genuine issue of material fact existed regarding whether the hospital’s “customary charges” under this statutory language were the same as its “billed charges.” Id. at 552, ¶ 35, 991 P.2d at 255.
¶ 26 LaBombard is inapposite. The issue of “customary” charges under the hen statute is quite different from the question whether the COA agreements will be enforced using the filed CDM rates and charges. Although four of the COA agreements mention “customary charges,” this phrase is specifically defined to mean the rates and charges filed with DHS. Because these four agreements provide the definition, no question arises regarding the meaning of “customary charges.” The trial court correctly determined that LaBombard does not apply here.
¶27 Both parties have asked this court to award attorneys’ fees on appeal under A.R.S. § 12-341.0HA) (2003). Banner is the prevailing party on appeal. In the exercise of our discretion, we will grant Banner an award of reasonable attorneys’ fees on appeal, in an amount to be determined upon compliance with ARCAP 21.
CONCLUSION
¶ 28 For these reasons, we affirm.
. Each of the checks was marked "Payment in Full.”
. At oral argument before the trial court, at least one Patient argued that no contract existed because she was rendered incompetent by the circumstances existing when she signed the COA. This argument has not, however, been asserted on appeal.
. Our dissenting colleague incorrectly characterizes our analysis when he states that we conclude that the filed rates are incorporated as a matter of law into the three COA agreements that do not specifically reference them. See infra ¶¶ 29, 32, and n. 5. It is the statutory scheme that requires the filing and publishing of the rates that is incorporated into these three COA agreements, not the actual rates and charges.
. See also Shelton v. Duke Univ. Health Sys., Inc., 633 S.E.2d 113, 116 (N.C.App.2006) (holding that hospital did not breach contract with uninsured patient by charging the full "charge master” rates, when contract obligated patient to pay "the regular rates and terms” of hospital).