Children's Hospital and Research Center at Oakland v. Health Plan of Nevada, Inc.,

Filing 73

ORDER by Judge Samuel Conti denying 47 Motion for Partial Summary Judgment (sclc1, COURT STAFF) (Filed on 3/23/2009)

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UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

CHILDREN'S HOSPITAL AND RESEARCH CENTER AT OAKLAND, Plaintiff, v. HEALTH PLAN OF NEVADA, INC.; and DOES 1 THROUGH 25, INCLUSIVE, Defendants.

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No. 07-6069 SC ORDER DENYING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

I.

INTRODUCTION The Children's Hospital and Research Center at Oakland ("the

Hospital") brought this suit in the Alameda County Superior Court in October 2007, alleging that Defendant Health Plan of Nevada ("HPN") failed to pay the contractually required sum for medical services provided to one of HPN's members. Docket No. 1, Ex. A ("Compl."). See Notice of Removal,

The Hospital is a California HPN invoked the

corporation and HPN is a Nevada corporation.

Court's diversity jurisdiction and removed the action from the Superior Court on November 5, 2007. See Notice of Removal. HPN

then filed its Answer on December 5, 2007.

See Docket No. 3.

With leave of the Court, see Docket No. 34, HPN filed an Amended Answer and Counterclaim ("Counterclaim"), asserting that it overpaid for medical services the Hospital provided to two of

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HPN's members and that it is entitled to recover the excess payments. Docket No. 35.

Before the Court is HPN's Motion for Partial Summary Judgment ("Motion"). Docket No. 47. In its Motion, HPN seeks judgment on

both claims in the Hospital's Complaint, as well as judgment on the issue of liability in the Counterclaim. See id. The Hospital Docket

filed an Opposition to the Motion and HPN filed a Reply. Nos. 56, 61.

Having considered the parties' arguments in full,

the Court hereby DENIES HPN's Motion.

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II.

BACKGROUND Beginning in May 2006, the Hospital rendered medical care to

a patient ("Patient A") who was enrolled in HPN's Medicaid Managed Care Program. See Schoener Decl. ¶ 6.1 Pursuant to a Letter of

Agreement between the parties, HPN was to pay the Hospital as follows: For Medically Necessary Covered Services rendered by PROVIDER in association with the above reference number, COMPANY shall reimburse PROVIDER one-hundred percent (100%) of the California Medi-Cal Contracted Maximum Allowable Reimbursement rate less applicable copayments, coinsurance, and/or deductibles. Id. Ex. A ("LoA 1"). At about the same time, the Hospital

provided care to another HPN member ("Patient B"), under nearly identical terms in a second Letter of Agreement: For Medically Necessary Covered Services rendered by PROVIDER, COMPANY shall reimburse Shaun Schoener, Manager of Network Development and Contracts at HPN, submitted a declaration in support of the Motion. Motion Ex. 1. 2
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PROVIDER one-hundred percent (100%) of the California Medi-Cal Contracted Maximum Allowable Reimbursement rate less applicable copayments, coinsurance, and/or deductibles. Id. ¶ 7, Ex. B ("LoA 2"). The Hospital billed HPN approximately $2,008,550.40 for services provided to Patient A between her admission and her death on September 1, 2006. Spaeth Decl. ¶¶ 2, 3.2 The Hospital

refused to provide HPN with the California Medi-Cal Contracted Maximum Allowable Reimbursement applicable to the services rendered to Patient A. Id. ¶ 4. In October 2006, HPN paid the

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Hospital $341,325.00 of the billed amount, based on a per diem rate of $2,775.00 for the 123 days Patient A was admitted to the Hospital. Id. ¶¶ 5, 6.

The Hospital billed HPN $101,832.53 for services provided to Patient B between May 17 and May 22, 2006. Id. ¶¶ 7, 8. As with

Patient A, the Hospital has refused to provide HPN with the applicable California Medi-Cal Contracted Maximum Allowable Rate for the services rendered to Patient B. Id. ¶ 9. In July 2006,

HPN paid the Hospital $37,510.09 of the amount billed for services provided to Patient B. Id. ¶ 10. HPN paid based on the rate set

forth in the State of California Department of Health Services Quarterly Hospital Interim Rate Report, 45% of the total amount billed. /// /// Corrine Spaeth, the Director of Claims at HPN, submitted a declaration in support of the Motion. Motion Ex. 2. 3
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See id. ¶ 11, Ex. A at HPN022.

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III. LEGAL STANDARD Entry of summary judgment is proper "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." R. Civ. P. 56(c). Fed.

"Summary judgment should be granted where the

evidence is such that it would require a directed verdict for the moving party." (1986). Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250

Thus, "Rule 56(c) mandates the entry of summary judgment

. . . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In

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addition, entry of summary judgment in a party's favor is appropriate when there are no material issues of fact as to the essential elements of the party's claim. 247-49. Anderson, 477 U.S. at

IV.

DISCUSSION The question before the Court in the instant Motion is a

narrow one.

The Hospital asserts that the provision in the two

letter agreements which requires HPN to pay "one-hundred percent (100%) of the California Medi-Cal Contracted Maximum Allowable Reimbursement rate" means that HPN was to pay the Hospital 45% of the amount billed, also known as the "interim rate." HPN contends

that disputed phrase refers to a pre-set per diem amount that is much lower than the interim rate and is not tied to the amount 4

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billed.

At this stage, the Court must only decide if HPN's

interpretation of the contract is correct as a matter of law. The first step is a determination of whether the contract is ambiguous. HPN argues that the contract language is not ambiguous

on its face, and that the Court's inquiry should end there, because parol evidence is only admissible if a contract is ambiguous. See e.g., Consol. World Invs., Inc. v. Lido Preferred,

Ltd., 11 Cal. Rptr. 2d 524, 526-27 (1992) ("One exception to the parol evidence rule is that extrinsic evidence may be introduced to explain the meaning of ambiguous contractual language."). Court agrees with HPN to an extent. The phrase in dispute is The

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"one-hundred percent (100%) of the California Medi-Cal Contracted Maximum Allowable Reimbursement rate." Considering the ordinary

meaning of the words in this phrase, it appears that there is an established maximum rate for Medi-Cal contracts in the State of California, and that the parties agreed HPN would pay the Hospital this rate for services provided to Patient A and Patient B. See

Cal. Civ. Code 1644 ("The words of a contract are to be understood in their ordinary and popular sense"); LoA 1; LoA 2.3 However, under California law, parties may introduce evidence to prove a latent ambiguity in the terms of a contract. "The test

of admissibility of extrinsic evidence to explain the meaning of a HPN moves for summary judgment on the issue of liability, to be followed by an evidentiary hearing on the issue of damages. At most, however, the Court could adopt HPN's interpretation of the agreement. As neither party submitted evidence about what the California Medi-Cal Contracted Maximum rate is, it would still be impossible to determine the correct amount due under either LoA, and therefore impossible to determine which party, if either, is entitled to recover. 5
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written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible." Pac. Gas & Elec. Co.

v. G.W. Thomas Drayage & Rigging Co., 442 P.2d 641, 644 (Cal. 1968). The Hospital seeks to introduce a variety of evidence

supporting its contention that the disputed phrase refers to the interim rate. Before considering the evidence, the Court must

evaluate whether the Hospital's proposed interpretation is reasonable. As noted above, the interim rate for the Hospital is See Spaeth Decl. Ex. A at HPN0022.

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45% of the billed charges.

The Court concludes that the disputed phrase could reasonably refer to the interim rate. Nothing in the language of the

contract gives any indication what the "California Medi-Cal Contracted Maximum Allowable Reimbursement rate" actually is. Moreover, without referring to extrinsic evidence itself, HPN is unable to provide a reason why the disputed phrase could not plausibly refer to the interim rate. Given that the contract language is reasonably susceptible to the interpretation the Hospital advances, the Court concludes that the contracts are ambiguous. evidence. The Court therefore looks to parol First,

The Hospital relies on two forms of evidence.

when HPN paid for the services rendered to Patient A and Patient B, it paid different rates, despite LoA 1 and LoA 2 having the same payment provision. See Lovich Decl. Ex. 1 (Spaeth Deposition

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Excerpts) at 13:16-14:13, 16:13-17:21.4

Thus, HPN's own conduct

suggests that its proposed interpretation may not be correct, particularly given that HPN actually paid the interim rate for one of the two contracts, supporting the interpretation advanced by the Hospital. See id. at 16:13-17:21. According to HPN, it paid

the differing rates because the Hospital refused to provide the contracted maximum rate information. See Reply at 6-7, Ex. 1 HPN does not

(Spaeth Deposition Excerpts) at 17:10-21, 18:8-15.

deny that it paid different rates on the two contracts, but the testimony it offers to explain the difference is not sufficient to determine that its proposed interpretation of the contract language is correct as a matter of law. This factual issue is

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sufficient basis for the Court to deny summary judgment. The Hospital also directs the Court's attention to a fax it sent to HPN regarding billing rates. According to that fax, the

interim rate is the "basis that [the Hospital] utilize[s] for payment expectations with out-of-state Medicaid plans and out-ofstate Medicated managed care plans." Lovich Decl. Ex. 2. HPN

argues that the Hospital's expectations are not material, and that the faxed document refers to the rates paid in the absence of a contract, which should not be applicable under LoA 1 or LoA 2. This is a further factual dispute, making summary judgment inappropriate. ///

Richard A. Lovich, counsel for the Hospital, filed a declaration in support of the Hospital's Opposition. Docket No. 57. 7

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V.

CONCLUSION The Court has identified a number of material issues of fact

that remain in dispute.

The appropriate course is to proceed with The Court therefore DENIES HPN's

trial to resolve these issues.

Motion for Partial Summary Judgment.5 The April 6, 2009, trial date is hereby VACATED. The trial

is reset for Monday, April 20, 2009, at 9:30 a.m. in Courtroom 1.

IT IS SO ORDERED.

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11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The Court has neither accepted nor rejected HPN's interpretation of the contract language. Magistrate Judge Chen previously issued an order requiring the Hospital to respond to certain of HPN's discovery requests unless the Court rejected HPN's interpretation. See Docket No. 67 at 2. If the Hospital has not yet responded to the interrogatories in question, it must do so. 8
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March 23, 2009

UNITED STATES DISTRICT JUDGE