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August 6, 2004.

HUMANA HEALTH PLAN, INC., et al., Defendants-Counterplaintiffs.

The opinion of the court was delivered by: MILTON SHADUR, Senior District Judge


This multiplaintiff multidefendant action involves a multiplicity of claims on behalf of one or more of the related plaintiffs, as well as counterclaims by one or more of the related defendants. Two of the defendants (Humana Health Plan, Inc. and Humana Insurance Company (collectively "Humana")) and one of the plaintiffs (St. Alexius Medical Center ("St. Alexius")) have filed motions for summary judgment under Fed.R.Civ.P. ("Rule") 56 as to Count VII of the First Amended Complaint ("FAC"), and the parties' cross-submissions have now made the dispute ripe for disposition.

St. Alexius alleges in Count VII that Humana was contractually required to pay certain annual rate increases to St. Alexius or its predecessor but that Humana has failed to do so since March 1, 1996. Humana admits that it did not adjust its payment rates after that date, but it says that it was not contractually required to do so because the relevant contract provision expired on March 1, 1996 and was never revived by a later agreement between the parties. Alternatively, Humana argues that the principles of waiver or equitable estoppel should bar St. Alexius from seeking those payment increases.

  For the reasons stated in this memorandum opinion and order, this Court grants Humana's motion and denies St. Alexius' motion. Accordingly FAC Count VII is dismissed.


  Humana originally signed a Hospital Services Agreement (the "Agreement") with Suburban Medical Center at Hoffman Estates, Inc. ("Hoffman"), specifying the conditions under which Hoffman would provide medical services to persons covered by Humana's insurance policies. Agreement § 4.1 (entitled "Term and Termination") provided:
The term of this Agreement ("Term") shall be for the three year period commencing on March 1, 1993.
Attachment B to the Agreement, which dealt with billing and payments, contained the following provisions for annual rate increases for non-medicare and medicare rates (emphasis added):

  B7.1 Effective on January 1, 1994, and on each succeeding January 1 thereafter during the Term, the Non-Medicare fixed fees, per diem, case rates, and HUMANA's reimbursement rate to HOSPITAL for outpatient services described in Schedules 1 and 2 shall increase by the lesser of (i) the increase in the Hospital and Related Services Component of the Consumer Price Index as reported by U.S. Bureau of Labor Statistics for the most recent available preceding 12 months, or (ii) the annualized percentage increase in premium prices for the most recent available preceding 12 month period, minus one percent, payable under HUMANA by groups in HOSPITAL's Market. If the Consumer Price Index is discontinued, a new applicable index will be defined to replace it.

  * * *

  B8 During the Term, the Medicare Risk Payment rates specified in Schedule 3 shall be adjusted by the same percentage adjustment in the Health Care Financing Administration's ("HCFA") Part A Adjusted Average Per Capita Cost Member — weighted average payment rate for HUMANA's Medicare Risk Members in HOSPITAL's market. Such adjustments shall be effective on the effective date HUMANA receives the adjusted payments from HCFA, with the next such adjustment date anticipated to be January 1, 1994.*fn2

  Humana increased its payment rates consistently with those obligations under Sections B7 and B8 in 1994, 1995 and 1996 — but not in 1997.*fn3 On February 17, 1997 Humana and Hoffman signed a document entitled "Amendment to Agreement" ("1997 Amendment") that changed a few specific provisions of the original Agreement (none of those changes is relevant to this decision). It also stated:
All other terms and conditions of the Agreement except as hereby amended shall remain in full force and effect.
Hoffman thereafter continued to provide medical services for Humana's members, and Humana continued to pay Hoffman — but at 1996 rates. At no time did Hoffman ever indicate to Humana that it believed it was entitled to any yearly rate adjustment after 1996. Their relationship continued through February 1, 1999, at which time Hoffman assigned all of its rights and obligations under the Agreement to St. Alexius.
  In February 2000 some "reimbursement issues" arose between Humana and a number of medical providers, including St. Alexius (which did not advance a claimed right to yearly rate increases as one of those issues). In the course of discussion of those issues, St. Alexius' parent company, Alexian Brothers of Illinois, tendered a termination notice to Humana. After some further negotiation the parties appeared to resolve their disputes, and Alexian Brothers of Illinois agreed to withdraw its termination notice if Humana agreed to the conditions summarized in a May 15, 2000 letter (FAC ¶ 23). On June 6, 2000 Humana accepted the provisions outlined in the letter. For its part, St. Alexius agreed to "[c]ontinue participation in both Medicare and Commercial plans at their existing contract rates through December 31, 2001," with the reimbursement rate to increase by "no less than 6%" effective January 1, 2002 (FAC Ex. A).

  Despite the parties' attempt to work through the reimbursement issues, the problems did not go away. So on November 30, 2001 St. Alexius and affiliated entities filed suit in Illinois state court. St. Alexius alleged, among other things, that Humana had failed to provide the yearly rate increases as assertedly required under the original Agreement. On January 11, 2002 Humana removed the case to this federal court on diversity grounds.

  Summary Judgment Standards

  Familiar Rule 56 principles apply to cross-motions for summary judgment just as they would to a one-party summary judgment motion (Int'l Bhd. Of Elec. Workers, Local 176 v. Balmoral Racing Club, Inc., 293 F.3d 402, 404 (7th Cir. 2002)) — that is, summary judgment is proper in favor of either party if the record demonstrates that there is no genuine issue of material fact and that party would be entitled to a judgment as a matter of law (id.). Taking each motion in turn, this Court must "consider the evidentiary record in the light most favorable to the non-moving party . . . and draw all reasonable inferences in his favor" (Lesch v. Crown Cork & Seal Co., 282 F.3d 467, 471 (7th Cir. ...

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