Harris v. St. Vincent Healthcare, 2013 MT 207 (July 25, 2013) (5-0) (Cotter, J.; McKinnon, J., concurring)
Consolidated appeal with Harris v. Billings Clinic
Issue: Did the district court err in dismissing the plaintiffs’ breach of contract and constructive fraud claims for failure to state a claim?
Short Answer: No.
Facts: Plaintiff Tedeen Holbert was in a car accident in November 2008. The at-fault driver was insured by Farmers Insurance. Holbert was treated at Billings Clinic from the time of the accident until December 2009. The clinic billed Holbert $6,073, and Farmers paid the expenses in full.
Plaintiff Dorothy Harris was injured in a different car accident caused by a different driver in February 2010. The other driver carried State Farm auto insurance. Harris was treated at St. Vincent Healthcare on two occasions, and was billed $777, which State Farm paid. Harris was also treated at Billings Clinic on nine occasions, and State Farm paid Harris’s $8,993 bill.
Both Holbert and Harris were members of health plans administered by Blue Cross and Blue Shield of Montana. BCBS entered into preferred provider agreements with the Billings Clinic and St. Vincent Heathcare under which the defendants agreed to accept payment from BCBS at a discounted rate for certain medical services provided to BCBS insureds.
Procedural Posture & Holding: In January 2012, Harris sued Billings Clinic for individual and class claims of breach of contract and constructive fraud, seeking damages equal to the difference between the amount the insurers paid to Billings Clinic and the reduced reimbursement rates under the agreements with BCBS. The district court granted Billings Clinic’s motion to dismiss in July 2012, holding that an insured plaintiff may recover only the amount of medical expenses paid and accepted by the medical provider, not the amount billed. The court further held that the plaintiffs did not show proof of damages, as they did not owe the clinic any money and were therefore made whole, they were in the same position they would have been had the alleged breach never occurred, and there was no allegation that they had been deprived of settlement or insurance proceeds.
In January 2012, Harris also filed a complaint against St. Vincent Healthcare, alleging similar claims as those made against the clinic. The case was assigned to a different judge than the one against Billings Clinic. Harris moved for class certification in August 2012, a day before St. Vincent moved to dismiss. The court held argument on both motions, and in October 2012, granted St. Vincent’s motion to dismiss. The court reasoned that St. Vincent had no contractual obligation to bill insurers at its discounted rates, as those rates applied only when BCBS was billing for services provided to its insureds. Harris and Holbert appeal, and the Court consolidated their appeals. It affirms both decisions.
Reasoning: The Court notes that a recent decision it rendered under similar facts is “instructive.” In Conway v. Benefis Health System, 2013 MT 73, the Court determined that while Benefis was required under its preferred provider agreement with health insurer TRICARE to accept TRICARE’s discounted payments for covered services, nothing in the agreement prohibited Benefis from accepting the full amount from a responsible auto insurer. It further held that Conway was not entitled to receive the difference between the TRICARE reimbursement rate and the amount actually paid by the auto insurer, reasoning it would be a windfall to the plaintiff.
Here, the interpretation of the term “covered services” in the preferred provider agreement is essential to the outcome of this case. The defendants’ obligation to bill and collect the reduced reimbursement rate applies only to “covered services.” The district courts determined that the defendants are contractually obligated to bill or collect discounted rates only when a plaintiff receives services that are paid for under a BCBS health plan. The courts also looked to the Preferred Provider Agreements Act, § 33-22-1702, MCA, which says that the purpose of a preferred provider agreement is to allow an insurer to entered into agreements in which the providers accept negotiated fees for services the health insurer is obligated to provide or pay for under the health plan. Both district courts concluded that when a person or entity other than BCBS is liable for the cost of the medical services, the preferred provider agreement does not govern and the defendants may bill and collect at their usual rates.
Harris and Holbert argue that “covered services” are not restricted only to services paid for by BCBS, pointing to different sections of the agreement and arguing the document must be construed as a whole. They identify inconsistencies in the use of the term “covered services” to argue that the agreement is ambiguous, and the ambiguity must be construed against the defendants. The Court “reject[s] Harris and Holbert’s attempt to import our rules regarding interpretation of an insurance policy into our construction of the [preferred provider agreement].” ¶ 23.
Where third party coverage is available and responsible for paying medical expenses, the medical services are not “covered services” under the preferred provider agreements. Harris and Holbert did not allege that BCBS was billed for the services, or made any payment on plaintiffs’ behalf. State Farm and Farmers were not parties to the preferred provider agreement, and therefore not obligated to comply with its terms. The defendants did not breach the preferred provider agreement by acce: pting payments above the rate set by that agreement.
Because the medical providers had not duty to bill the auto insurers at the BCBS reduced rates, the plaintiffs’ constructive fraud claims must fail.
Justice McKinnon’s Concurrence: Justice McKinnon concurs in the Court’s decision, but writes separately to acknowledge two other deficiencies in the plaintiffs’ breach of contract claim. First, Harris and Holbert are neither parties to nor third-party beneficiaries of the preferred provider agreements. Second, they have suffered no loss, and any recovery would be a windfall. They asserted in their motion to amend the judgment that they suffered damages because a high portion of the policy limits were applied to medical expenses, leaving less for their general damages. This district court agreed this could be a compensable injury, but no such facts were alleged in the complaint, and a motion to alter or amend a judgment is not the proper vehicle for amending a complaint.