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PPO Check, Ltd. v. Midwestern Regional Medical Center

March 20, 2009

PPO CHECK, LTD., PLAINTIFF,
v.
MIDWESTERN REGIONAL MEDICAL CENTER, SOUTHWESTERN REGIONAL MEDICAL CENTER, AND CANCER TREATMENT CENTERS OF AMERICA, INC., DEFENDANTS.



The opinion of the court was delivered by: Judge Joan H. Lefkow

MEMORANDUM OPINION AND ORDER

Plaintiff, PPO Check, Ltd. ("PPO Check"), filed a one-count complaint against defendants, Midwestern Regional Medical Center ("MRMC"), Southwestern Regional Medical Center ("SRMC"), and Cancer Treatment Centers of America, Inc. ("CTCAI"), for breach of contract. In short, PPO Check alleges that defendants failed to pay a 50% contingent fee due for certain amounts that defendants recovered as a result of PPO Check's auditing of MRMC and SRMC's patient accounts for underpayments.

Before the court are plaintiff's motion for partial summary judgment and defendants' cross-motion for summary judgment. For the following reasons, plaintiff's motion [#58] will be denied, and defendants' motion [#70] will be granted in part and denied in part.

JURISDICTION

The court has jurisdiction to hear this case pursuant to 28 U.S.C. § 1332, as the plaintiff is a citizen of a different state from any of the defendants and the amount in controversy exceeds $75,000. Although this case was originally filed in a Texas state court, it was removed to the United States District Court for the Southern District of Texas pursuant to 28 U.S.C. §§ 1441 and 1446 and subsequently transferred to this court.

LEGAL STANDARDS

Summary judgment obviates the need for a trial where 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). To determine whether any genuine issue of fact exists, the court must pierce the pleadings and assess the proof as presented in the depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed R. Civ. P. 56(c) & advisory committee's notes.

The party seeking summary judgment bears the initial burden of showing that there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed. 2d 265 (1986). In response, the non-moving party cannot rest on mere pleadings alone but must use the evidentiary tools listed above to designate specific material facts showing that there is a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). A material fact is one that might affect the outcome of the suit. Insolia, 216 F.3d at 598--99. Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the court must construe all facts in a light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed. 2d 202 (1986).

BACKGROUND*fn1

MRMC and SRMC ("the defendant hospitals") are acute care hospitals located in Zion, Illinois and Tulsa, Oklahoma, respectively. CTCAI is a separate corporation which provides marketing, billing, information technology, and other business and management services to MRMC and SRMC, as well as other healthcare businesses.

In 2003, PPO Check entered into a hospital service agreement (the "HSA") with the defendant hospitals to perform auditing and collection services on underpaid accounts of MRMC and SRMC. The HSA describes PPO Check's scope of work as follows:

1. PPO CHECK SERVICES.

1.1 PPO Check Audit. PPO Check will audit patient accounts determined and provided by CTCA[*fn2 ] in its discretion on an ongoing basis for the purpose of identifying patient account claims that have been improperly underpaid, in whole or in part, (each such identified account being hereinafter referred to as an "Account" and collectively as "Accounts").

1.3 PPO Check Auditing Efforts.

a. After receipt of the appropriate claim data and information, PPO Check will use reasonable efforts to coordinate additional payment due CTCA on Accounts to which CTCA may be entitled additional insurance payment, as well as to compromise and settle all Accounts and known claims relating thereto.

b. In this connection, PPO Check will use reasonable efforts to recover unpaid or underpaid claims, including, without limitation, silent PPO's, erroneous managed-care discounts, timely-payment violations, underpayments, and wrongful denials. PPO Check will reasonably manage the collection of any improperly paid Account and, as indicated hereinafter, will receive CTCA's reasonable cooperation in coordinating reimbursement payments from payors.

c. CTCA and PPO Check shall agree that managed care discounts and/or contract rates will not be honored when (1) a discount arrangement is not specifically disclosed in a patient's insurance plan/policy, and/or (2) a CTCA managed-care contract is breached or partially breached, and/or (3) federal or state laws, rules, or regulations have been violated.

Pl.'s SoF, Ex. 4 (the HSA), at 1.

The HSA further provided that PPO Check was to be paid a contingent fee of 50% for economic benefits obtained by the defendant hospitals as a result of the parties' agreement, as follows:

3. COMPENSATION.

3.1 Compensation to PPO Check. For services rendered by PPO Check, CTCA shall compensate PPO Check 50% (fifty percent) of the amount actually paid to the CTCA as a result of this Agreement. CTCA shall issue payment to PPO Check at Harris County, Texas (or at such other location as PPO Check may specify) on a periodic (monthly) basis for PPO Check's portion of monthly collections actually received.

PPO Check will be compensated for its services only if a recovery is actually obtained by CTCA. In addition, if an Account or claim is such that the compensation allowed to PPO Check is set by law, the compensation to be paid PPO Check will be limited to the maximum so allowed by law. CTCA will not settle any Account or claim which PPO Check is handling without prior consultation with PPO Check.

3.2 Collection. For purposes of this section, "collected" means (1) funds paid by payors and received by CTCA against Accounts, whether by check, credit, or other economic benefit, and (2) if payment is by check, cleared and collected funds. 3.3 Calculation and Explanation of Contingency Invoices. The percentage paid to PPO Check on each account will be calculated before expenses are deducted from the amount of the recovery. PPO Check intends to report to CTCA by invoice on a monthly basis and in such invoice provide CTCA a statement clearly detailing the determination of compensation and the remittance then due PPO Check.

Pl.'s SoF, Ex. 4 (the HSA), at 2--3.

Beginning in July 2003, the defendant hospitals transmitted 8369 patient accounts to PPO Check for services contemplated under the HSA. PPO Check immediately began working on these accounts and was able to recover over $5.1 million for the defendant hospitals as a result of its audit findings on 1484 accounts. Of that $5.1 million (on 1484 accounts), roughly $4.0 million (on 1152 accounts) involved inappropriate discounts taken by clients of Multiplan, Inc. ("Multiplan"). Multiplan is a network provider that is in the business of creating and managing ...


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