Court Opinion

ID: 4378281
Source: CourtListenerOpinion
Date Created: 2019-03-19 12:06:18.496512+00
Date Added: 2024-06-11T07:39:58.761686
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                                   No. COA18-477

                                Filed: 19 March 2019

Orange County, No. 16 CVS 001206

ALEXANDER JULIAN, III, individually and on behalf of all others similarly
situated, Plaintiff,
             v.

THE UNIVERSITY OF NORTH CAROLINA HEALTH CARE SYSTEM, d/b/a THE
UNIVERSITY OF NORTH CAROLINA HOSPITALS, Defendant.

      Appeal by plaintiff from order entered 28 November 2017 by Judge Michael J.

O’Foghludha in Orange County Superior Court. Heard in the Court of Appeals 28

November 2018.

      Lewis & Roberts, PLLC, by Matthew D. Quinn and James A. Roberts, III, for
      plaintiff-appellant.

      Attorney General Joshua H. Stein, by Assistant Attorney General Derek L.
      Hunter, for defendant-appellee.

      DIETZ, Judge.

      Alexander Julian brought this class action lawsuit against the University of

North Carolina Health Care System after a visit to one of the system’s hospitals. The

hospital charges for operating room time in half-hour increments. Julian alleges that

this billing practice permits the hospital to overcharge patients—Julian, for example,

was in the operating room for approximately two hours and four minutes but the
               JULIAN V. UNIV. OF NORTH CAROLINA HEALTH CARE SYS.

                                   Opinion of the Court

hospital billed him for two and a half hours of operating room time. This, Julian

claims, is a breach of the contract between the hospital and its patients.

      The trial court dismissed Julian’s complaint under Rule 12(b)(6) for failure to

state a claim on which relief can be granted. As explained below, we affirm that

ruling. Julian asserts that N.C. Gen. Stat. § 131E-273—a statute he believes is

incorporated by law into his contract with the hospital—bars healthcare providers

from charging for a “component of any health care procedure that was not performed

or supplied.” Julian contends that the hospital violated this statute by charging him

for time when he was not actually in the operating room.

      But even assuming that this statute is part of the contract and means what

Julian claims (the hospital disputes both these points), the “component” of a

healthcare procedure at issue here is a half-hour block of operating room time. The

hospital supplied that component to Julian, although he did not use it in full. This is

no different from charging a patient for a bag of solution used in an intravenous fluid

drip even though the patient does not use every drop of fluid in the bag. The plain

language of N.C. Gen. Stat. § 131E-273 permits a hospital to bill for these types of

components of a procedure even if they are only partially used.

      Julian’s express contract claim fails for a similar reason: the terms of the

contract state that operating room time is billed in “half hour increments” even if only

a portion of that final half hour block is used. This means the hospital billed Julian

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               JULIAN V. UNIV. OF NORTH CAROLINA HEALTH CARE SYS.

                                   Opinion of the Court

precisely as the contract required. Accordingly, Julian’s claims fail as a matter of law

and the trial court properly dismissed them under Rule 12(b)(6).

                          Facts and Procedural History

      On 17 October 2014, Alexander Julian, III arrived at the UNC Ambulatory

Surgery Center in Chapel Hill for outpatient surgery. Before beginning his surgery,

Julian entered into a contract with the hospital. Julian concedes that this contract

included a document that the parties refer to as the “O.R. Charge Rules,” although

Julian did not receive a copy of that particular document before his surgery. The O.R.

Charge Rules establish the rates the hospital will charge for operating room services.

The rules state that the hospital charges patients for operating room time “based on

half hour increments with time measured from the time the patient enters the room

until the patient leaves the room.” The charge rules also state that “[i]f the procedure

goes into the next time increment, the charge is for the next increment of time.”

      In January 2015, Julian received a non-itemized bill from the hospital for his

surgery. The bill was much higher than Julian expected, so he contacted the hospital

for additional information. In February 2015, the hospital sent Julian a letter

explaining that his total operating room time was “2 hours and 4 minutes” and “OR

time is charged in 30 minutes [sic] increments, making 2 hours and 4 minutes fall

between the OR time charge of 2:01 to 2:30 hours.” Although Julian concedes in this

lawsuit that he agreed to be bound by the terms of the O.R. Charge Rules when he

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                                  Opinion of the Court

signed the contract with the hospital, the parties also acknowledge that Julian did

not receive a copy of the O.R. Charge Rules when he signed the contract and agreed

to be bound by its terms. As a result, when Julian received this response from the

hospital, it was the first time Julian learned that the hospital billed for operating

room time in half-hour increments.

      In 2016, Julian filed a putative class action against the University of North

Carolina Health Care System, alleging claims for breach of contract, breach of

implied-in-fact contract, and breach of the implied covenant of good faith and fair

dealing. The complaint also requested a declaratory judgment and injunctive relief.

The hospital moved to dismiss the complaint under Rules 12(b)(1), (2), and (6) of the

North Carolina Rules of Civil Procedure. After a hearing, the trial court granted the

hospital’s motion to dismiss the complaint under Rule 12(b)(6) for failure to state a

claim on which relief could be granted. Julian timely appealed.

                                      Analysis

      The basis of this breach of contract action is the hospital’s practice of charging

for operating room time in half-hour increments. Julian was in the hospital operating

room for slightly more than two hours and billed for two hours and thirty minutes of

operating room usage. Julian alleges that, as a result of this practice, he was charged

for twenty-six to twenty-eight minutes of operating room time when he was not

actually in the operating room receiving medical care.

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                                   Opinion of the Court

      The trial court dismissed Julian’s claims under Rule 12(b)(6) for failure to state

a claim on which relief can be granted. We review that ruling de novo, examining

“whether the allegations of the complaint, if treated as true, are sufficient to state a

claim upon which relief can be granted under some legal theory.” Jackson/Hill

Aviation, Inc. v. Town of Ocean Isle Beach, __ N.C. App. __, __, 796 S.E.2d 120, 123

(2017).

      Julian first contends that the hospital’s operating room billing practice violates

N.C. Gen. Stat. § 131E-273, a statute that he contends is incorporated into the terms

of the parties’ contract. Section 131E-273 prohibits health care providers from

charging patients for any component of a health care procedure that was not actually

performed or supplied:

             It shall be unlawful for any provider of health care services
             to charge or accept payment for any health care procedure
             or component of any health care procedure that was not
             performed or supplied. If a procedure requires the informed
             consent of a patient, the charge for any component of the
             procedure performed prior to consent being given shall not
             exceed the actual cost to the provider if the patient elects
             not to consent to the procedure.

N.C. Gen. Stat. § 131E-273. Julian argues that the hospital’s practice of billing for

operating room time in half-hour increments violates this statute because, unless the

patient was in the operating room for every minute of that half-hour block of time,

the hospital necessarily charged the patient for some operating room time that was

not actually supplied to the patient.

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                  JULIAN V. UNIV. OF NORTH CAROLINA HEALTH CARE SYS.

                                   Opinion of the Court

      Even assuming this statutory provision is incorporated into the contract

between Julian and the hospital—an issue we need not reach today—we reject

Julian’s argument that the hospital’s billing practice violates this provision. The flaw

in Julian’s legal theory is that the half-hour blocks of operating room time are the

components for which he was charged.

      The term “component” and the phrase “component of any health care

procedure” are not defined in N.C. Gen. Stat. § 131E-273 or anywhere else in that

chapter of the General Statutes. Thus, we give those words their plain meaning.

Midrex Techs., Inc. v. N.C. Dep’t of Revenue, 369 N.C. 250, 258, 794 S.E.2d 785, 792

(2016). A “component” is “a constituent part” or “one of the parts of something.”

Merriam-Webster Dictionary (2018). A “procedure” is “a medical treatment or

operation.” Id.

      Applying this plain meaning of the statute, the intermediate steps within a

complete healthcare procedure certainly are components of the overall procedure. In

a cancer surgery, for example, those components might include administering the

anesthesia, making the incision, removing the tumor, and so on. Julian contends that

the statute also governs the material components used in the surgery—the operating

room, the surgical instruments, the gauze, etc.

      But even if we assume that the statute covers charges associated with the

material components used in a healthcare procedure, that is precisely what the

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                                   Opinion of the Court

hospital did here. The statute prohibits healthcare providers from charging for

components that were not “supplied”—it does not prohibit charging for components

that were supplied but were only partially used during the procedure. Consider, for

example, a hospital that charges patients for the bags of solution used for an

intravenous fluid drip. Under Julian’s theory, if a patient used only a portion of the

fluid in the bag before being disconnected from the IV, the hospital would violate N.C.

Gen. Stat. § 131E-273 by charging the patient for the bag.

      That it not a reasonable interpretation of what this statute renders unlawful.

To be sure, if the hospital never provided the patient with a bag of IV solution during

the procedure, it could not charge the patient for one. But if the hospital used the bag

during the procedure, it does not violate N.C. Gen. Stat. § 131E-273 by charging the

patient for it, even if some portion of the solution in the bag went unused.

      The same is true for time in the operating room. The hospital provides access

to the operating room for patients in half-hour blocks of time. Those blocks of time

are components of the healthcare procedure. Although Julian did not use the entire

final half-hour block of time, he used some of that component, just as a patient

connected to an IV fluid drip might use some of the solution in a fluid bag, but not all

of it. Thus, the statute, by its plain terms, permitted the hospital to charge Julian for

that last half-hour block of time because that was a component of the procedure

supplied to Julian. Accordingly, the trial court did not err in determining that Julian’s

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                                         Opinion of the Court

claim for breach of contract based on a violation of N.C. Gen. Stat. § 131E-273 fails

as a matter of law.

       Julian next argues that the hospital breached the parties’ contract because the

contract states that the patient will only be charged for “clinic facility, drugs, and

drug administration, and any tests you receive during your visit” and that the patient

will be charged for use of the operating room based “on the amount of time the OR is

used.” (Emphasis added). Julian contends that the hospital breached these provisions

because he “was billed for 28 minutes of operating room time” that he did not actually

receive or use.

       This argument fails because the language of the contract, which is incorporated

into the complaint, expressly refutes it.1 The provision of the contract governing

charges for operating room time states that patients will be billed “based on the

amount of time the OR is used” but then immediately follows that statement with the

explanation that “[t]he charge is based on half hour increments”:

           1. OR Time Charges

           Definition – The charge for the use of the operating room
           is currently based on the amount of time the OR is used,
           regardless of OR site. The charge is based on half hour
           increments with time measured from the time the patient enters
           the room until the patient leaves the room. (Total time from 1-
           30 minute is the first step, 31-60 minutes the second, etc.).

       1  Although the O.R. Charge Rules were not attached to Julian’s complaint, Julian concedes
that this document is part of the contract that is the subject matter of the lawsuit and thus the trial
court properly considered it when evaluating the hospital’s Rule 12(b)(6) motion. Oberlin Capital, L.P.
v. Slavin, 147 N.C. App. 52, 60–61, 554 S.E.2d 840, 847 (2001).

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               JULIAN V. UNIV. OF NORTH CAROLINA HEALTH CARE SYS.

                                  Opinion of the Court

          Calculation of Charge – A specified or set charge based
          upon the length of the case is established for each ½ hour
          increment of time. If the procedure goes into the next
          increment, the charge is for the next increment of time . . .

(Boldface in original).

      In other words, the parties’ contract states that it is based on “time the OR is

used” but defines how that use is calculated as being in “half hour increments.”

Julian’s complaint alleges that he was billed in half hour increments, and that, after

spending approximately two hours and two to four minutes in the operating room,

was billed for five half-hour increments. This is precisely what the contract requires.

Accordingly, the trial court properly determined that this breach of contract claim

also fails as a matter of law.

      We acknowledge that it is healthcare providers, not patients, who choose how

to draw these lines. Here, for example, the hospital decided to use half-hour

increments instead of, say, 10-minute increments, or 5-minute ones. Julian certainly

believes that smaller increments would be more reasonable, and many other patients

likely would agree. But Julian concedes that he is not challenging (and cannot

challenge) the reasonableness of that decision because our precedent precludes that

claim. See Shelton v. Duke Univ. Health Sys., 179 N.C. App. 120, 123, 633 S.E.2d 113,

115 (2006).

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                                        Opinion of the Court

       Julian also argues that the hospital’s billing practice permits it to “double bill”

patients and inflate healthcare costs. In Julian’s case, for example, he left the

operating room and went to a recovery room, resulting in charges for “being in two

places at the same time.” But this is a policy argument, not a contract one. If the

parties to a contract assent to a billing structure that permits “double billing” or

billing for time “in two places at once,” it is not a breach of contract when that type of

billing occurs—that is the nature of freedom of contract. If Julian believes that

hospitals ought to be prohibited from offering these contract terms to their patients,

he must take that up with the other branches of government. The role of the courts

is limited to interpreting contract law as it exists, not to rewriting it to rein in rising

healthcare costs. Fagundes v. Ammons Dev. Grp., Inc., __ N.C. App. __, __, 796 S.E.2d
529, 533 (2017).

       In sum, because Julian’s contract claims failed to state a claim on which relief

could be granted as a matter of law, the trial court properly dismissed them under

Rule 12(b)(6). And, because Julian’s remaining claims all necessarily depend on the

breach of contract claims (and Julian does not contend otherwise on appeal), the trial

court properly dismissed the complaint in its entirety.2 We therefore affirm the trial

court’s order.

       2 Julian’s appellate brief only addresses the two contract arguments analyzed in this opinion.
Thus, even if there were other arguments that could be made with respect to the remaining claims,
Julian abandoned those arguments by failing to raise them in his brief. See N.C. R. App. P. 28(b)(6).

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        JULIAN V. UNIV. OF NORTH CAROLINA HEALTH CARE SYS.

                           Opinion of the Court

                              Conclusion

For the reasons explained above, we affirm the trial court’s order.

AFFIRMED.

Judges STROUD and MURPHY concur.

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