NO. 92-450 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1993 

SAINT VINCENT HOSPITAL 

AND HEALTH CENTER, INC. , 

plaintiff and Appellant, 

BLUE CROSS AND BLUE SHIELD 

OF MONTANA, 

-.--. Defendant and Respondent. 

APPEAL FROM: District Court of the First Judicial District, 

In and for the County of Lewis and Clark, 

The Honorable Thomas C. Honzel, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Gregory G. Murphy; Moulton, Bellingham, 

Longo & Mather, ~illings, Montana 

For Respondent: 

John Alke (argued) and Mike McCarter; Hughes, 

Kellner, Sullivan & Alke, Helena, Montana 

Submitted: April 28, 1993 

Decided: October 12, 1993 

Fif ed : 
Justice William E. Hunt, Sr., delivered the opinion of the Court. 

Plaintiff Saint Vincent Hospital and Health Center, Inc., of 

Billings appeals an order of the First Judicial District Court, 

Lewis and Clark County, denying its request to compel a health care 

provider contract with Defendant Blue Cross and Blue Shield of 

Montana, Inc. (BC/BS). The District Court granted summary judgment 

for BC/BS. 

We affirm. 

Appellant raises two issues. 

1. Did the District Court err in finding that application of 

the amended statute required a retroactive application of law? 

2. Did the Legislature intend the amendment to apply to 

established agreements generally, and to Saint Vincent's desired 

agreement with BC/BS in particular? 

BC/BS raises three issues. 

1. Did the District Court correctly determine that the 

amendment did not apply in this case? 

2. Is the amendment preempted by the Employee Retirement 

Income Security Act of 1984, P.L. 93-406, 29 U.S.C. 1001, et sea. 

(ERISA), because it relates to ERISA plans and is not saved from 

preemption as the "regulation of insurance?" 

3. In the alternative, does application of the amendment 

unconstitutionally impair BC/BS1s obligation of contract? 
We determine the sole issue to be whether the District Court 

was correct when it decided that the amendment could not be 

retroactively applied in this case. 

In 1987, the Montana Legislature enacted the Preferred 

Provider Agreements Act, ch. 638, 1987 Mont. Laws 1756 (codified at 

§§ 33-22-1701 through -1707, MCA). The Act authorizes preferred 

provider agreements (PPAs) between health care insurers and health 

care providers. The Act defines a "preferred provider" as an 

individual or entity licensed or legally authorized to provide 

health care services or services covered within Title 33, 

chapter 22, part 7, who have contracted to provide specified health 

care services. Section 33-22-1703 (6) and (8) , MCA. The purpose of 

the Act is to permit health care insurers providing disability 

insurance benefits to its insureds or subscribers to contract with 

health care providers for reduced or negotiated fees. Section 

33-22-1702, MCA. The preferred providers may accept negotiated and 

discounted fees as payment for services to insured patients for 

which the insurer is required to pay under the health benefit plan. 

Section 33-22-1702(2), MCA. 

According to the 1987 Act, in exchange for acceptance of 

discounted fees, a preferred provider could receive an exclusive 

arrangement that steered insureds to the preferred provider. The 

arrangement assured the preferred provider substantial patient 

volume. As originally adopted, the Act contained a freedom of 

choice provision which stated: "This part does not require that an 

3 
insurer negotiate or enter into agreements with any specific 

provider or class of providers." Section 33-22-1704(3), MCA 

(1987). 

Based on affidavits in the record, on May 1, 1990, BC/BS 

entered into an exclusive "HealthLink" agreement with Deaconess 

Medical Center of Billings, Inc. The agreement established a 

preferred provider organization (PPO) known as "Montana HealthLink" 

in Yellowstone County. The agreement was to extend for a period of 

three years, beginning July 1, 1990. Montana HealthLink is one of 

many PPOs established throughout the United States by health care 

insurers. PPOs are cost containment devices which have been 

adopted by employers throughout the country. The HealthLink 

agreement contained confidentiality provisions concerning business 

records and pricing. The agreement also contained a provision 

granting Deaconess the option to terminate the contract if BC/BS 

entered into a PPA with another hospital in Yellowstone County. 

Saint Vincent is in Yellowstone County. 

On April 29, 1991, while the agreement between BC/BS and 

Deaconess was in force, the Montana Legislature amended the Act 

creating the Willing Provider Amendment. See ch. 714, 1991 Mont. 

Laws 2567 (amending 5 33-22-1704, MCA). The Legislature deleted 

the freedom of choice provision in 5 33-22-1704(3), MCA (l987), and 

added the following provision: 

(2) A health care insurer shall establish terms and 

conditions to be met by providers wishing to enter into 
an agreement with the health care insurer under 

subsection (1) (a). These terms and conditions may not 

discriminate against or among providers. Forthe purposes 

of this subsection, price differences among hospitals or 

other institutional providers produced by a process of 

individual negotiation or by price differences among 

different geographical areas or different specialties do 

not constitute discrimination. A health care insurer mav 

not denv a provider the rioht to enter into an aareement 

under 'ubsection (1) (a) if the ~rovider is willinq to 

meet the terms and conditions established in that 

aareement. [Emphasis added.] 

Section 33-22-1704(2), MCA (1991). 

The parties do not dispute the facts. 

On May 6, 1991, Saint Vincent requested from BC/BS that it 

participate in HealthLink. BC/BS declined the request. Saint 

Vincent filed an action in the District Court against BC/BS and 

requested production of the HealthLink contract. BC/BS responded 

with a motion for a protective order and for summary judgment. 

Saint Vincent initially resisted answering the motion for summary 

judgment, stating that it could not proceed without seeing the 

HealthLink contract. On April 24, 1992, the District Court 

determined that the lawsuit was predicated on whether the Willing 

Provider Amendment applied to HealthLink. 

On September 9, 1992, the District Court granted BC/BS1s 

motion for summary judgment, finding that the Willing Provider 

Amendment did not compel BC/BS to offer HealthLink to Saint 

Vincent. The District Court reasoned that the Willing Provider 

Amendment could not be applied retroactively because doing so would 

entail a substantive change in law, rather than merely a procedural 
change. Further, the District Court reasoned that the Legislature 

did not specifically declare the amendment to take effect 

retroactively. The court concluded that the 1991 amendment created 

a new obligation and imposed a new duty on BC/BS that did not exist 

when it entered into the agreement with Deaconess. 

The only issue we address is whether the District Court erred 

in finding that application of the Willing Provider Amendment of 

1991 to Saint Vincent's proposed and compelled contract with BC/BS 

would result in retroactive application of law? 

This Court's standard of review when reviewing conclusions of 

law by a trial court "is whether the tribunal's interpretation of 

the law is correct." steer, Inc. v. Department of Revenue (1990), 

245 Mont. 470, 474-75, 803 P.2d 601, 603. 

Retroactive laws include both retrospective and ex post facto 

laws; the former technically applying only to civil laws. We have 

defined a retrospective law as one "which takes away or impairs 

vested rights acquired under existing laws or creates a new 

obligation, imposes a new duty, or attaches a new disability in 

respect to transactions already passed." City of Harlem v. State 

Highway Comm'n. (1967), 149 Mont. 281, 284, 425 P.2d 718, 720. A 

retrospective law gives a transaction a different legal effect from 

that which it had under the law when it occurred. 

The United States and Montana Constitutions dictate that if a 

retrospective law impairs a vested right acquired under an existing 

law, or creates a new obligation or attaches a new disability with 

6 
respect to past transactions, the law is objectionable. Article I, 

Section 10, of the United States Constitution provides: "No State 

shall . . . pass any . . . ex post facto Law . . . ." Similarly, 

Article 11, Section 31, of the Montana Constitution provides: "No 

ex post facto law . . . shall be passed by the legislature." 

We have said that "retrospective laws are looked upon with 

disfa~or.~! Sullivan v. City of Butte (1922), 65 Mont. 495, 498, 

211 P. 301, 303. Montana's "retroactive law" statute provides: 

"No law contained in any of the statutes of Montana is retroactive 

unless expressly so declared." Section 1-2-109, MCA. Previously, 

this Court has construed Montana's retroactive law statute. In 

Dunham v. Southside National Bank (1976), 169 Mont. 466, 471, 548 

P.2d 1383, 1385, we held that "[tlhere is a presumption in Montana 

against construing a statute retroactively, unless specifically 

declared retroactive." Further, this Court has determined that 

"[tlhe legislative intent must be gathered from the act itself and 

no other source." Nee1 v. First Federal Savings & Loan Assln. 

(1984), 207 Mont. 376, 386, 675 P.2d 96, 102. 

Although the general rule of law is that a statute is not to 

be applied retroactively, an exception to that rule is change in a 

law that is merely procedural rather than substantive. State v. 

District Court of Fourth Judicial District (1966), 149 Mont. 22, 

417 P.2d 109. Here, however, the amendment of 1 33-22-1704, MCA, 

affected the substantive rights of the parties. Therefore, the 

exception does not apply. 

7 
We reject Saint Vincent's assertion that this Court has 

effectively reversed the presumption against retroactive laws in 

State Compensation Insurance Fund v. Sky Country, Inc. (1989), 239 

Mont. 376, 780 P.2d 1135. There we looked beyond the statute 

itself to legislative committee minutes to determine legislative 

intent. The statute established a simplified procedure for 

settling disputes over the status of workers as employees or 

independent contractors for both unemployment compensation and 

workers' compensation purposes. In that case, the law affected 

only procedural matters not relating to substantive rights of the 

parties. For that reason, Saint Vincent's application of Skv 

Countrv to this case is misplaced. 

If applied to BC/BS in this case, the Willing Provider 

Amendment would impair BC/BS ' s vested rights, create new 

obligations for BC/BS, and attach a new disability with respect to 

its transactions with Deaconess. Effectively, the Amendment would 

nullify the exclusivity and confidentiality provisions of the 

BC/BS/Deaconess HealthLink contract. Such an alteration of the 

contract would divest BC/BS of its right to an exclusive contract 

with Deaconess and permit unanticipated access to the contract's 

bidding figures and other confidential terms and conditions by 

competitors, such as Saint Vincent. Further, the Amendment would 

obligate BC/BS to offer a previously exclusive HealthLink contract 

to Saint Vincent, a party with which it did not intend to contract 

and was not required to do so under existing law. In turn, BC/BS 

8 
would incur a new disability as Deaconess would be free to exercise 

its option to terminate the contract. 

In sum, the Willing Provider Amendment would affect BC/BS1s 

substantive rights. Thus, it is a substantive change in law, and 

cannot be applied to HealthLink unless the Legislature expressly 

had declared it to be retroactive in the Act itself; which it did 

not. Chapter 714 of the 1991 Montana Session Laws contains no 

express intent that the statute be applied retroactively. Instead, 

the amendment is declared to be effective on passage and approval, 

and was approved on April 29, 1991. Therefore, the Willing 

Provider Amendment cannot be applied to a contract entered into 

before that date. 

Application of the Willing Provider Amendment would give 

effect to a retrospective law; a result which the Laws of Montana 

and this Court rejects. We hold that the District Court did not 

err in finding that application of the Willing Provider Amendment 

of 1991 to BC/BS, by compelling a BC/BS/Saint Vincent agreement, 

would result in retroactive application of law. 

We affirm. 
We concur: 

Chief Justice 

Justices 
District Court Judge John Warner specially concurring. 

I concur in the opinion of Justice Hunt that Chapter 714, 1991 

Mont. Laws 2567, must not be applied to the May 1, 1990, preferred 

provider agreement between respondent Blue Cross and Deaconess 

Medical Center of Billings. The amendment is substantive, enacting 

a Itwilling provider'l provision which profoundly affected preferred 

provider agreements in Montana. As the Legislature did not express 

its intention to make the amendment's application retrospective, it 

must not be so construed by this Court. Section 1-2-109, MCA. 

In my opinion, the argument of St. Vincent Hospital that this 

Court must reverse because the District Court denied discovery of 

a copy of the agreement at issue must also be addressed. 

In the District Court, St. Vincent moved to produce the 

preferred provider agreement, any correspondence relating thereto, 

in-house notes concerning the agreement, lists of all participants 

in the program, and complete financial information concerning the 

agreement. Blue Cross objected on the grounds the contract was not 

relevant, much of the requested information was proprietary, and 

moved for a protective order. Blue Cross also moved for summary 

judgment. St. Vincent moved to compel production of the demanded 

information. 

The District Court denied the requested discovery, including 

the preferred provider agreement, until after it ruled on the 

motion for summary judgment. As Blue Cross was granted summary 

judgment, none of the information demanded was produced. 
St. Vincent complained bitterly in the District Court, in its 

briefs to this Court, on oral argument here, and even in a "Motion 

to clarify Record" submitted after oral argument, that it was never 

allowed to examine a copy of the preferred provider agreement at 

issue, and thus was placed at an unfair disadvantage in arguing 

that the 1991 statutory amendment applied to such agreement. 

The rules concerning discovery are broad and liberal. 

Parties may obtain discovery regarding any matter, not 

privileged, which is relevant to the subject matter 

involved in the pending action, whether it relates to the 

claim or defense of the party seeking discovery or to the 

claim or defense of any other party . . . . It is not 

ground for objection that the information sought will be 

inadmissible at the trial if the information sought 

appears reasonably calculated to lead to the discovery of 

admissible evidence. 

Rule 26(b) (1) , M.R.Civ.P. 

That the preferred provider agreement is relevant to this 

lawsuit cannot be gainsaid. The contract is the basis of the 

lawsuit. Whether it exists, falls within the type of agreement 

allowed by the statutes, or contains provisions which contemplate 

the demand by St. Vincent to match its terms, are all relevant 

considerations. Further, the provisions of the agreement could 

suggest other avenues of attack on its validity, such as the 

anti-trust laws. As the complaint prays for whatever relief may be 

appropriate, the discovery demand forthe agreement's production is 

reasonably calculated to lead to the discovery of admissible 

evidence. 

The District Court has the ability to protect proprietary 

information that may be in the agreement. 
Upon motion by a party or by the person from whom 

discovery is sought, and for good cause shown, the court 

in which the action is pending . . . may make any order 

which justice requires to protect a party or a person 

from annoyance, embarrassment, oppression, or undue 

burden or expense, including . . . (7) that a trade 

secret or other confidential research development, or 

commercial information not be disclosed or be disclosed 

only in a designated way . . . . 

Rule 26(c), M.R.Civ.P. 

All information concerning the existence of the agreement, its 

date, parties, term, provisions, and effect come from the 

affidavits of employees of Blue Cross, which affidavits cannot be 

cross-examined or disputed. What information Blue Cross chooses to 

reveal comes into the record piecemeal, at the convenience of, and 

in words chosen by, Blue Cross. On the surface, it appears 

impossible for St. Vincent to dispute what is revealed, or to 

compare and cross-reference such information with other parts of 

the agreement, as the contract which is the very basis of the 

lawsuit is not produced. 

However, the record before this Court confirms the statement 

of counsel for Blue Cross on oral argument that, in fact, St. 

Vincent had available to it, without the necessity of court order, 

a copy of the preferred provider agreement. Attachments to the 

affidavit of a Blue Cross vice president, submitted to the ~istrict 

Court, indicate that Blue Cross did seek and obtain the permission 

of the other contracting party, Deaconess Medical Center, to 

release to St. Vincent a complete copy of the preferred provider 

agreement so it could determine what rights it might have under the 
amended law. Blue Cross then informed St. Vincent that access to 

an excerpted copy of the agreement was available. 

Blue Cross did demand to withhold some pricing and other 

information which could cause a competitive detriment. 

The record is devoid of any indication that St. Vincent took 

advantage of its opportunity to examine the agreement. It rather 

continued in its demand that information with an allegedly 

commercial value be provided along with the contract in question. 

This leads to the conclusion that it was really commercially 

valuable information which was sought. 

Thus, while the District Court should have partially granted 

the motion to compel, allowing St. Vincent to have a copy of the 

preferred provider agreement, there was no substantial harm caused 

by not doing so. 

A further cause of serious concern not addressed in the 

majority opinion is the information revealed by Blue Cross for the 

first time in oral argument that the preferred provider agreement 

is self-perpetuating. Apparently, if neither party gives notice to 

terminate, the agreement is automatically renewed year after year. 

However, the 1993 Legislature amended the applicable statute to 

provide that any preferred provider agreement which is renewed 

after March 26, 1993, must give all health care providers the 

opportunity to participate on the basis of a competitive bid. 

Section 33-22-1704(3), MCA. 

Blue Cross conceded at oral argument that the agreement which 

is the subject of this case is subject to the 1993 amendment. 
Also, St. Vincent can demand the opportunity to bid, and litigate 

the issue if it is denied that opportunity. Therefore, remand for 

consideration of the new information is not required. 

For these reasons, in addition to those statep by Justice 

Hunt, I would affirm the District Court. 

Justice Fred J. Weber concurs in the foregoing special concurrence. 

/-5L dtice 

Chief Justice J. A. Turnaqe: 

I concur in the specially concurring opinion of Judge Warner. 
October 12. 1993 

CERTIFICATE OF SERVICE 

I hereby certify that the following order was sent by United States mail, prepaid, to the 

following named: 

Gregory G. Murphy 

Moulton, Bellingham, Longo & Mather 

P.O. Box 2559 

Billings, MT 59103-2559 

John Alke and Mike McCarter 

Hughes, Kellner, Sullivan & Alke 

P.O. Box 1166 

Helena, MT 59624 

ED SMITH 

CLERK OF THE SUPREME COURT 

STATE OF MONTANA