United States District Court, N.D. Illinois
March 30, 2004.
RUSH PRESBYTERIAN ST. LUKE'S MEDICAL CENTER, Plaintiff
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant
The opinion of the court was delivered by: SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Plaintiff Rush Presbyterian-St.
Luke's Medical Center's ("Rush") motion for summary judgment and on
Defendant The Prudential Insurance Company of America's ("Prudential")
motion for summary judgment. For the reasons stated below we grant Rush's
motion for summary judgment on Count I and grant Prudential's motion for
summary judgment on Count II.
Plaintiff Rush is a non-for-profit corporation. Defendant Prudential is
insurance company. In August of 1993, Rush and Rush Prudential
Health Plans, Rush Prudential HMO, Inc., and Rush Prudential Insurance
Company (collectively "Unicare Group") entered into a Medical Service
Agreement ("MSA"). The MSA included attachment B which established the
rates at which Rush was to be reimbursed by the Unicare Group for various
services Rush provides to patients. Attachment B to the MSA underwent
several revisions, the last revision occurring on February 1, 1998, was
incorporated into the MSA pursuant to the Sixth Amendment to the MSA. In
December of 1999, Wellpoint Health Networks, Inc. acquired the Unicare
Group from Rush, Rush affiliates and Prudential, and in connection with
the acquisition, assumed all liabilities for certain disputed claims
related to any breach of the MSA by the Unicare Group.
Prudential, Rush and Wellpoint entered into a Settlement Agreement on
November 20, 2001. On November 21, 2001, the agreement was amended
whereby Prudential agreed to assume any and all liabilities for certain
disputed claims and pay Rush 50% of the amounts of the disputed claims
upon entry of a final, non-appealable judgment which specifies the
amounts of the disputed claims payable under the MSA. The parties agree
that amounts have been paid on each of the claims in question, but
disagree on whether Rush is entitled to any further payments. The dispute
in each count of Rush's complaint is purely a matter of contract
In Count I, the issue is whether the $110,000 case rate specified by
for a bone marrow transplant reimburses Rush only for inpatient
services related to the transplant, as asserted by Rush, or whether the
case rate reimburses Rush for both inpatient and outpatient services
relating to the transplant, as asserted by Prudential. Attachment B,
Section A to the MSA consists of four separate subsections: (1)
Transplantation; (2) All Other Inpatient Services; (3) Outpatient
Services and (4) Skilled Nursing Facility. Rush contends that the
organizational structure of the MSA shows that the transplant case rate
covers inpatient services only. Prudential relies on the language
"Covered Hospital Services" within Section A to Attachment B, which the
MSA defined in part as "inpatient and outpatient services . . . not
including long term care services" to support its contention that the
case rate covers both inpatient and outpatient services.
In Count II, the primary issue is which section of the fee schedule
applies to those patients who were treated at the J.R. Bowman Center
("JRB") for extended care inpatient services. Rush asserts that because
the inpatient services provided to JRB patients were a continuation of
the services that they were receiving at Rush, they should be reimbursed
according to the MSA provision that covers "inpatient services" (i.e.,
the stop loss provision). Under the stop loss provision, Rush claims that
Prudential is obligated to reimburse Rush 66% of the charges it incurred
providing inpatient services to JRB patients. Alternatively, Prudential
asserts that JRB is a skilled nursing facility which therefore entitles
Rush to reimbursement pursuant to a $450 per diem rate. The parties both
contest the status of JRB, Rush
claiming that it is a post-acute care facility which provides
post-hospital inpatient recovery and rehabilitation services and
Prudential claiming that it is a skilled nursing facility.
Rush has brought a breach of contract claim based on an alleged breach
of a Medical Service Agreement ("MSA") for failure to reimburse Rush for
various services provided to insured patients. In Count I, Rush seeks to
recover from Prudential $65,783.83 on charges submitted for services
provided to 9 patients (John Does I-IX) who underwent bone marrow
transplants at Rush Presbyterian-St. Luke's Medical Center under Section
A.3 of the MSA. In Count II, Rush seeks to recover $370,324.89 on charges
submitted for "extended care services" provided to 12 patients (John Does
X-XXI) at Rush's' J.R. Bowman Center under Paragraph 2(A) of Attachment
B of the MSA.
The parties are before the court based upon diversity jurisdiction.
28 U.S.C. § 1332(a)(1). Rush claims that it is a non-for-profit
corporation organized pursuant to the laws of Illinois and is located in
Chicago, Illinois. Prudential claims that it is a New Jersey company with
its principal place of business in Newark, New Jersey.
Summary judgment is appropriate when the record reveals that there is
no genuine issue as to any material fact and the moving party is entitled
to judgment as a matter of law. Fed.R.Civ.P. 56(c). In seeking a grant
of summary judgment the
moving party must identify "those portions of the pleadings,
depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any,' which it believes demonstrate the absence
of a genuine issue of material fact." Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P. 56(c)). This initial
burden may be satisfied by presenting specific evidence on a particular
issue or by pointing out "an absence of evidence to support the
non-moving party's case." Id. at 325. Once the movant has met
this burden, the non-moving party cannot simply rest on the allegations
or denials in the pleadings, but, "by affidavits or as otherwise provided
for in [Rule 56], must set forth specific facts showing that there is a
genuine issue for trial." Fed.R.Civ.P. 56(e). A "genuine issue" in the
context of a motion for summary judgment is not simply a "metaphysical
doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v.
Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, a genuine
issue of material fact exists when "the evidence is such that a
reasonable jury could return a verdict for the nonmoving party."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986);
Insolia v. Philip Morris, Inc., 216 F.3d 596, 599 (7th Cir.
2000). The court must consider the record as a whole, in a light most
favorable to the non-moving party, and draw all reasonable inferences
that favor the non-moving party. Anderson, 477 U.S. at 255;
Bay v. Cassens Transport Co., 212 F.3d 969, 972 (7th Cir.
The parties' dispute regarding both claims in this case is purely a
matter of contract interpretation. Summary judgment is particularly
appropriate in cases involving the interpretation of contractual
documents. Metalex Corp. v. Uniden Corp. of America, 863 F.2d 1331,
1333 (7th Cir. 1988). Where a contract is unambiguous, a court must
determine its meaning as a matter of law, and where the contract is
ambiguous the contract's meaning becomes a factual question and the
interpretation of the contract and resolution of the ambiguity is left to
the trier of fact. Id.; Illinois Conference of Teamsters and
Employers Welfare Fund v. Mrowicki, 44 F.3d 451, 459 (7th Cir. 1994)
The lack of ambiguity within the express terms of a contract "forecloses
any genuine issue of material fact." Ryan v. Chromalloy American
Corp., 877 F.2d 598, 602 (7th Cir. 1989). If the court determines
that the relevant provisions of the contract are unambiguous, the court
"need not consider extrinsic evidence" and should declare the meaning of
the provisions. Id.
The language within a contract must be "interpreted according to its
plain, ordinary, and popular meaning." Bourke v. Dun & Bradstreet
Corp., 159 F.3d 1032, 1038 (7th Cir. 1998)(quoting O'Rourke v.
Access Health, Inc., 668 N.E.2d 214, 220 (Ill.App. Ct. 1996));
See also International Business Lists, Ltd. V. American Tel. &
Tel. Co., 878 F. Supp. 102, 106 (N.D. Ill. 1994)(stating that
"[c]ourt's interpreting contracts must give effect to the parties'
intent, and that intent is best determined by
reference to the plain meaning of the words the parties used.").
The court must presume that "contracting parties intend[ed] all portions
of their contract to carry meaning and no portion was meant to be mere
surplusage." Shelten v. Schmidt Implement Co., 647 N.E.2d 1071,
1074 (Ill.App. Ct. 1995). Another rule of contract interpretation is
"that a document should be read to give effect to all its provisions and
to render them consistent with each other." Mastrobuono v. Shear son
Lehman Hutton, Inc., 514 U.S. 52, 63 (1995). See also Srivastava
v. Russell's Barbecue, Inc., 523 N.E.2d 30, 33 (Ill.App. Ct.
1998)(stating that a principle of contract construction is that contracts
are to be interpreted as a whole, giving meaning and effect to each
I. Whether Transplant Case Rate Applied to Outpatient
Rush argues that pursuant to the express terms and organizational
structure of the MS A and Revised Attachment B, Section A, Part 1, the
$110,000 case rate for transplantation applies only to those inpatient
services, specifically the organ transplant itself, provided to the bone
marrow transplant patients. Rush points out Section A has 4 Parts
respectively labeled: (1) Transplantation; (2) All Other Inpatient
Services; (3) Outpatient Services and (4) Skilled Nursing Facility.
Relying on this organizational structure, Rush contends that the use of
the verbiage "All Other Inpatient Services" utilized in Part 2 clearly
indicates that Part 1 also covers inpatient services. Rush argues that
the more broad language in Part 3 covering
"Outpatient Services" further indicates that Part 1 and 2 were not
intended to cover services provided on an outpatient basis. Rush further
relies on the express terminology "Transplantation" to support their
interpretation of the contract. Rush asserts that by its plain meaning,
transplantation may only occur on an inpatient basis and that there is no
express language in the MSA to support any other interpretation.
Prudential argues that the introductory clause to Section A, which uses
the terminology "Covered Hospital Services" evidences the intent of the
parties that the case rate for transplantation covers both inpatient and
outpatient services. "Covered Hospital Services" is previously defined
within the MSA as both "inpatient and outpatient services . . . which
are included on Attachment B". Prudential contends that this language can
only be reasonably interpreted to include both inpatient and outpatient
services in the $110,000 case rate for bone marrow transplants.
Prudential also argues that Rush improperly relied on the term
"Transplantation" to define the subsection because pursuant to Article
VIII, Section D of the MSA the parties agreed that the "headings of the
various Articles of [the] Agreement are inserted merely for the purpose
of convenience and do not, expressly or by implication, limit or define
. . . the specific terms of the Articles so designated." Prudential
finally argues that because Part 3 does not read "All Outpatient
Services" (emphasis added), there is no indication that outpatient
services cannot be also included in Part 1 of the Agreement.
The case rate identified in Attachment B to the MSA clearly delineates
subsections where different rates of reimbursement apply. Part 1 sets
forth the case rate for particular types of organ transplants. The term
"transplantation," given its plain and ordinary meaning, must refer to
the actual surgical procedure which occurs on an inpatient basis. Had the
parties intended an alternative meaning of "transplantation" the term
could have been alternatively defined in Article I of the MSA where other
possibly ambiguous terms are defined. A term of a contract is "not
rendered ambiguous simply because the parties do not agree upon its
meaning." White v. White, 378 N.E.2d 1255, 1258 (Ill.App. Ct.
1978). The fact that Part II specifically refers to "All Other Inpatient
Services" gives additional effect to the reasonable interpretation that
Part I also covers certain inpatient services, specifically organ
transplants. Viewing the subparts of Section A in light of one another,
the only reasonable interpretation is that the case rates set forth in
Part I cover only the inpatient services related to the actual organ
transplant, not a combination of both inpatient and outpatient services.
Prudential improperly relies on the definition of "Covered Hospital
Services" to counter Rush's interpretation of Section A to Attachment B.
The term "Covered Hospital Services" is included as part of an
introductory clause that gives effect to all subparts, Transplantation,
All Other Inpatient Services, Outpatient Services and Skilled Nursing
Facility, The fact that "Covered Hospital Services" is defined as both
"inpatient and outpatient services . . . which are included on
actually supports this Court's interpretation that the phrase gives
meaning to all 3 Parts of Section A.
It is clear from the placement of the term "Covered Hospital Services"
in the introduction that it is intended to refer to the various services
listed in the three sections of Attachment B which included some
inpatient service sections and some outpatient service sections. Section
1 entitled Transplantation does not contain the term "Covered Services."
Thus, we would not be reading the MSA according to its plain meaning if
we were to find that Covered Services, which includes inpatient and
outpatient services, meant that the Transplantation section must also
include in-patient and outpatient services.
Furthermore, Prudential's contention that Rush improperly relied on
the heading "Transplantation" to define the terms of the Articles within
the MSA is without merit. Article VIII, Section D specifically refers to
headings of the various Articles of the agreement. Attachment B is not an
Article consistent with the structure of the MSA. The MSA contains eight
specific Articles which all introduce subject transitions within the
contract. Rush is not seeking to give additional meaning to any of those
eight articles, but merely requests that the term "Transplantation" be
given its plain and ordinary meaning consistent with cannons of contract
interpretation. See Interim Health Care of Northern Illinois, Inc. v.
Interim Health Care, Inc., 225 F.3d 876, 881 (7th Cir. 2000)(stating
that the cannons of contract construction require the court to "construe
the words' plain meaning
rather than a broader meaning. . . ."). Therefore, we grant
Rush's motion for summary judgment on Count I and deny Prudential's
motion for summary judgment on Count I.
II. Reimbursement of Rush
Rush argues that pursuant to the "stop loss" provision of Attachment B,
Section A.2(a), it is entitled to be reimbursed 66% of all charges for
cases exceeding $52,000. Rush takes the position that because the
services provided to patients at the JRB were all part of the same
"case", the services provided were merely a continuation of the "Other
Inpatient Services", also known as "extended care services" provided at
Rush. Rush does not characterize JRB as a Skilled Nursing Facility, but
rather relies on the different types of services that are rendered at the
facility to determine which provision of the fee schedule should apply.
Rush relies on diagnosis codes indicating that patients were transferred
for followup care as opposed to custodial care for various conditions to
prove that these services were merely a continuation of inpatient
Rush initially indicates in its Complaint that JRB is a Skilled Nursing
Facility. (Comp. par. 40). Also, pursuant to Local Rule 56.1 Rush admits
that JRB is a skilled nursing facility. Rush fails to directly deny
Prudential's statement of fact indicating that JRB is a skilled nursing
facility. (R SF 44). Instead, Rush responds simply by summarizing an
affidavit of Barbara J. Martin, Director of Nursing at JRB. See
Jankovich v. Exelon Corp., 2003 WL 260714, at *5 (N.D.
Ill. 2003)(indicating that evasive denials, that do not directly oppose
an assertion are improper and thus the contested fact is deemed to be
admitted pursuant to Local Rule 56.1).
Prudential argues that the rate of reimbursement for these services is
determined by Section A.4 which expressly defines rates which apply to a
"Skilled Nursing Facility". Prudential contends that throughout the
series of revisions of the MSA and Attachment B, that Skilled Nursing
Facility services have always been treated separately and distinctly from
all other inpatient service cases. Prudential specifically notes that
Skilled Nursing Facility services are not listed in the services that are
covered under the stop loss provision of Section A.2, although they could
have easily been added were that the intent of the parties. Prudential
also relies on the fact that the Skilled Nursing Facility provision is
more specific than the general "All Other Inpatient Services" language
within Section A.2. Based on this observation, Prudential urges the court
to apply the specific contractual provisions of Section A.4 over the
general contractual provisions of Section A.2. Furthermore, Prudential
notes that Section A.4 does not explicitly contain a stop loss prevision
and thus the court should not be inclined to read such a provision into
the contract where it does not exist.
A court should be wary of reading terms into a contract and "[t]here is
a strong presumption against provisions that easily could have been
included in the contract but were not." Wright v. Chicago Title Ins.
Co., 554 N.E.2d 511, 514 (Ill.App. Ct.
1990). A court will not add another term to an agreement where an
agreement is silent, American States Insurance Co. v. A.J. Maggio
Co., Inc., 593 N.E.2d 1083, 1086 (Ill.App. Ct. 1992). A
"well-settled principle of contract construction [is] that where a
contract contains both general and specific provisions relating to the
same subject, the specific provision controls." Medcom Holding Co. v.
Baxter Travenol Laboratories, Inc., 984 F.2d 223, 227 (7th Cir.
In the case at hand, the original and revised versions of Attachment B
both contained a Section 2 that governed "All Other Inpatient Services".
Attachment E was added to the MSA by the First Amendment to the contract
and while at that time separate from the revised Attachment E, provided
that Rush was entitled to reimbursement at a rate of $450 per diem for
care received in a Skilled Nursing Facility. The Sixth Amendment to the
MSA, effective on February 1, 1998 deleted Attachment E in its entirety
and incorporated the Skilled Nursing Facility Provision, A.4 into Revised
Attachment B. Section A.2, "All Other Inpatient Services" at no time
contained any language indicating that it applied to services rendered in
a Skilled Nursing Facility. Section A.4 is exclusively devoted to
services provided at a Skilled Nursing Facility and does not include a
stop loss provision. There is no additional language within Attachment B
that indicates any additional reimbursement is necessitated above the
$450 per diem rate expressly listed.
Central to the inquiry, Prudential asserts, and Rush has not refuted,
that the JRB is a Skilled Nursing Facility. Because Attachment B
specifically delineates "All
Other Inpatient Services" from services derived at a "Skilled
Nursing Facility", the only reasonable interpretation is that Rush is
only entitled to reimbursement for these services pursuant to Section A.4
of Attachment B. Where specific contractual provisions are present, the
court must apply those provisions over any general provisions listed
within the contract. See Central Die Casting and Mfg. Co. v. Tokheim
Corp., 1995 WL 699714 at *4 (N.D. Ill. 1995)(stating that "when a
contract contains both general and specific provisions relating to the
same subject, the specific provision controls")(quoting Dolezal v.
Plastic Resonstructive Surgery, S.C., 640 N.E.2d 1359, 1366 (Ill.
App. Ct. 1994)).
Rush argues that Section A.2(a) should cover the services provided at
JRB and that the court should overlook the basic fact that JRB is a
Skilled Nursing Facility. Rush improperly relies on two particular
factors in their arguments. First, Rush relies on the diagnosis codes
utilized for the patients at issue. The codes describing the types of
services provided, "post-surgical care" and "post congestive heart
failure" are irrelevant to the query. Such administrative codes are not
determinative of the actual type of care or the proper category of care
under the MS A. Second, the reliance on affidavit testimony of Barbara J.
Martin, Director of Nursing is misplaced because her conclusion that the
JRB provides the type of care covered under Section A.2(a) is not
relevant for interpreting the intent of the parties at the time the MSA
and Attachment B were implemented.
Rush itself referred to JRB as a skilled nursing facility in its
complaint. Rush states that "[a] number of insured patients were
transferred from Rush to skilled nursing facilities for provision of
extended care services . . . [and that] patient John Doe X was
transferred to the J.R. Bowman Center ("JRB") for provision of extended
care inpatient services." (R SF 40, 41). The affidavit from Rush appears
to be nothing other than an attempt to rephrase the JRB services after
Rush realized that it could not recover under A.2(a), The threshold
question for Illinois' "four corners" test contract interpretation is
"whether the contract is ambiguous. Bourke, 159 F.3d at 1036. If
the relevant provisions of a contract are not ambiguous, then the
provisions "should be generally enforced as they appear, and those terms
will control the rights of the parties." Dowd & Dowd, Ltd v.
Gleason, 693 N.E.2d 358, 368 (Ill. 1998)(citations omitted). Rush is
unable to present any provision within the contract that evidences intent
that services rendered at a Skilled Nursing Facility are subject to
reimbursement under Section A.2(a). Accordingly, Rush's motion for
Summary Judgment on Count II is denied and Prudential's motion for
Summary Judgment on Count II is granted. Services rendered to John Does
X-XXI must be reimbursed pursuant to Section A.4, the Skilled Nursing
Provision, of Attachment B.
For the reasons stated above, we grant Plaintiff Rush's motion for
summary judgment on Count I and deny Plaintiff Rush's motion for summary
Count II. Furthermore, Defendant Prudential's motion for summary
judgment on Count I is denied and Defendant Prudential's motion for
summary judgment on Count II is granted.
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