Court Opinion

ID: 852002
Source: CourtListenerOpinion
Date Created: 2013-03-02 01:14:25.918534+00
Date Added: 2024-06-11T09:04:08.159678
License: Public Domain

ATTORNEYS FOR APPELLANTS                                      ATTORNEYS FOR APPELLEE
Jerry Garau                                                   David J. Mallon
Garau Germane Hanley & Pennington, PC                         Phillip A. Whistler
Indianapolis, Indiana                                         Brian J. Paul
                  `                                           Edward P. Steegmann
Robert E. Burkett                                             Ice Miller LLP
Burkett Law Office                                            Indianapolis, Indiana
Indianapolis, Indiana
                                                              Jon Laramore
Scott Andrew Weathers                                         Baker & Daniels LLP
Indianapolis, Indiana                                         Indianapolis, Indiana

                                                              ATTORNEYS FOR AMICUS CURIAE
                                                              INDIANA HOSPITAL ASSOCIATION
                                                              Angela M. Smith
                                                              Hall Render Killian Heath & Lyman, PSC
                                                              Indianapolis, Indiana
______________________________________________________________________________

                                              In the
                                                                                  FILED
                             Indiana Supreme Court                              Dec 19 2012, 9:45 am

                             _________________________________
                                                                                        CLERK
                                                                                      of the supreme court,
                                        No. 49S02-1203-CT-140                         court of appeals and
                                                                                             tax court

ABBY ALLEN AND WALTER MOORE,
                                                              Appellants (Plaintiffs below),

                                                 v.

CLARIAN HEALTH PARTNERS, INC.
                                                       Appellee (Defendant below).
                             _________________________________

              Appeal from the Marion Superior Court, No. 49D01-1005-CT-020423
                             The Honorable David Shaheed, Judge
                            _________________________________

     On Petition To Transfer from the Indiana Court of Appeals, No. 49A02-1011-CT-1174
                           _________________________________

                                          December 19, 2012

Rucker, Justice.
       Uninsured patients filed a putative class action complaint against a hospital alleging
breach of contract and seeking a declaration that rates the hospital billed were unreasonable and
unenforceable. The trial court granted the hospital’s motion to dismiss. We affirm the trial
court’s judgment.

                                  Facts and Procedural History

       Because this case arises from a motion to dismiss the only facts on which we rely are
those alleged in the complaint. Abby Allen and Walter Moore (referred to collectively as
“Patients”) sought medical treatment at Clarian North Hospital, a hospital owned by Clarian
Health Partners, Inc. (“Clarian”). Before receiving treatment Allen, who is uninsured and not
covered by Medicare or Medicaid, signed a form contract drafted by Clarian under which she
agreed to pay all charges associated with her treatment. The contract did not specify a dollar
amount for services rendered, but provided that Allen “guarantees payment of the account.”
App. at 17. Clarian provided medical treatment to Allen and then billed its “chargemaster”1 rates
for medical services and supplies in the amount of $15,641.64. Patients’ two-count putative
class action complaint alleges breach of contract and seeks declaratory judgment, namely, that
rates the hospital bills its uninsured patients are unreasonable and unenforceable. According to
the complaint, if Allen had been insured then Clarian would have accepted $7,308.78 for the
same services and supplies. The complaint alleges that Clarian charges only uninsured patients
the chargemaster rates, while “[i]nsured patients and Medicare/Medicaid patients pay
significantly discounted rates for the same services and supplies.” App. at 9.

       Clarian moved to dismiss the complaint for failure to state a claim upon which relief can
be granted pursuant to Indiana Trial Rule 12(B)(6). The trial court granted the motion. Patients
appealed and the Court of Appeals reversed the trial court’s judgment and remanded this cause
for further proceedings. Among other things the Court of Appeals concluded that because the
contract did not contain a price term the reasonable value of services should be implied, and the
issue of reasonableness requires resolution by a fact-finder. Allen v. Clarian Health Partners,

1
  The “chargemaster,” also referred to as the “charge description master,” is “a listing of the amount
charged by a hospital for each service, item and procedure: (A) provided by the hospital; and (B) for
which a separate charge exists.” Ind. Code § 11-10-3-6(b)(1).

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Inc., 955 N.E.2d 804 (2011). We disagree with our colleagues, and having previously granted
transfer thereby vacating the opinion of the Court of Appeals, see Ind. Appellate Rule 58(A), we
now affirm the judgment of the trial court.

                                      Standard of Review

       A motion to dismiss for failure to state a claim tests the legal sufficiency of the
complaint, not the facts supporting it. Charter One Mortg. Corp. v. Condra, 865 N.E.2d 602, 604
(Ind. 2007). Thus, the motion tests whether the allegations in the complaint establish any set of
circumstances under which a plaintiff would be entitled to relief. Putnam Cnty. Sheriff v. Price,
954 N.E.2d 451, 453 (Ind. 2011). In ruling on a motion to dismiss for failure to state a claim, the
trial court is required to view the complaint in the light most favorable to the non-moving party
with every inference in its favor. Id. Our review of a trial court’s grant or denial of a motion to
dismiss based on Trial Rule 12(B)(6) is de novo. Charter One Mortg. Corp., 865 N.E.2d at 604.
Viewing the complaint in the light most favorable to the non-moving party, we must determine
whether the complaint states any facts on which the trial court could have granted relief. See id.
at 604-05.

                                              Discussion

       Patients first assert the chargemaster rates imposed by Clarian are unreasonable and
constitute a breach of contract. This breach of contract claim rests on a critical underlying
premise, namely, that the contract lacks the material term of price, and because no price term is
present a “reasonable price” is imputed to the contract. See App. at 13. Second, Patients seek a
declaratory judgment that “the chargemaster rates billed by Clarian to its uninsured patients [are]
unreasonable and unenforceable.” App. at 15. Because the viability of the breach of contract
claim must necessarily be decided in Patients’ favor in order for the declaratory judgment claim
to come before us, we address Patients’ breach of contract claim first.

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        The provision of the contract at issue provides in relevant part:

                In consideration of services delivered by Clarian North Medical
                Center and/or the physicians, the undersigned guarantees payment
                of the account, and agrees to pay the same upon discharge if such
                account is not paid by a private or governmental insurance carrier.
                . . . If the amounts due Clarian North Medical Center for services
                rendered become delinquent and the debt is referred to an attorney
                for collection, it is understood and agreed that I shall be
                responsible for reasonable attorneys’ fees, court costs, and pre-
                judgment interest.

App. at 17.2 Patients complain the contract “failed to specify a price for the medical services
provided.” App. at 48. Indeed, according to Patients, the contract is “silent” on price. App. at
51. Thus, they argue “[w]here a contract does not specify a price for services under the contract,
Indiana law implies a reasonable price.” App. at 51. See, e.g., Ind. Bell Tel. Co. v. Ice Serv.,
Inc., 231 N.E.2d 820, 824 (Ind. Ct. App. 1967) (“Where there is an agreement that compensation
is to be paid but the price is not fixed, the party furnishing services and materials in performance
of the contract is entitled to the reasonable value thereof.”), trans. denied.

        Our objective in interpreting a contract is “to ascertain the meaning and intent of the
parties as expressed in the language used.” Evansville-Vanderburgh Sch. Corp. v. Moll, 344
N.E.2d 831, 837 (Ind. 1976) (quoting Jenkins v. King, 65 N.E.2d 121, 123 (Ind. 1946)). “In
determining the intention of the parties, a contract should be considered in the light of the
surrounding circumstances existing at the time it was made. The court should consider the
nature of the agreement, together with all the facts and circumstances leading up to the execution
of the contract, the relation of the parties, the nature and situation of the subject matter, and the
apparent purpose of making the contract.” Coleman v. Chapman, 220 N.E.2d 285, 288 (Ind. Ct.
App. 1966).

        We agree that if a contract is uncertain as to a material term such as price then Indiana
courts may impute a reasonable price. See id. at 289 (noting the “law implies a promise . . . to

2
 This language is taken from Moore’s contract, which is attached to the complaint. Allen states that
Clarian is in possession of her contract, and it is “essentially the same as the contract between Clarian and
Moore.” App. at 7.

                                                     4
pay a reasonable compensation” in the absence of an express agreement). In fact “[t]o be valid
and enforceable, a contract must be reasonably definite and certain.” Conwell v. Gray Loon
Outdoor Mktg. Grp., Inc., 906 N.E.2d 805, 813 (Ind. 2009). See also Restatement (Second) of
Contracts § 33 (recognizing that in order to give effect to a contract, its terms must be
“reasonably certain”). But “[a]n offer which appears to be indefinite may be given precision by
usage of trade or by course of dealing between the parties.” Id., cmt. a. Only “reasonable”
certainty is necessary; “absolute certainty in all terms is not required.” Conwell, 906 N.E.2d at
813.

       A contract need not declare a specific a dollar amount for goods or services in order to be
enforceable. See id. (finding contract was enforceable at price billed where buyer requested
services, seller performed, and no specific price term was agreed upon); Restatement (Second)
Contracts § 4, illus. 1 (“A telephones to his grocer, ‘Send me a ten-pound bag of flour.’ The
grocer sends it. A has thereby promised to pay the grocer’s current price therefor.”). In the
context of contracts providing for health care services precision concerning price is close to
impossible. As the Third Circuit has recognized, omitting a specific dollar figure is “the only
practical way in which the obligations of the patient to pay can be set forth, given the fact that
nobody yet knows just what condition the patient has, and what treatments will be necessary to
remedy what ails him or her.” DiCarlo v. St. Mary Hosp., 530 F.3d 255, 264 (3d Cir. 2008).
And a leading scholarly article on the subject—while advocating for courts to “shelter” patients
in the health care market—recognizes that “courts have generally tolerated low levels of
specificity in medical contracts.” Mark A. Hall and Carl E. Schneider, Patients as Consumers:
Courts, Contracts, and the New Medical Marketplace, 106 Mich. L. Rev. 643, 646, 674 (2008).

       In the context of a contract for the provision of and payment for medical services, a
hospital’s chargemaster rates serve as the basis for its pricing. Each hospital sets its own
chargemaster rates, thus each hospital’s chargemaster is unique. See Br. for Ind. Hosp. Ass’n as
Amicus Curiae at 3. It is from these chargemaster prices that insurance companies negotiate
with hospitals for discounts for their policyholders. Id. at 6. And other reimbursement schemes
are based in part on hospital chargemaster rates. See, e.g., I.C. § 11-10-3-6(d)(1) (reimbursing
hospitals 65% of their chargemaster rates for medical care provided to Indiana inmates). Even

                                                5
the 2010 Federal Patient Protection and Affordable Care Act recognized the centrality of
chargemasters to hospital billing practices. See Timothy D. Martin, The Impact of Healthcare
Reform on Revenue-Cycle Management and Claim Coding, 4 J. Health & Life Sci. L. 159, 175
(2011) (recognizing that the Act requires hospitals to publish their chargemasters annually).

        Patients contend their promise to pay “the account” for treatment is indefinite and
therefore cannot constitute a price term for the hospital’s services. We disagree. Many courts
have addressed contracts similar to those of Patients’ and most have held that price terms in these
contracts, while imprecise, are not sufficiently indefinite to justify imposition of a “reasonable”
price standard. For example, the Third Circuit held that a patient’s promise to pay “all charges
and collection costs for services rendered” was not indefinite, and “can only refer to [the
hospital’s] uniform charges set forth in its Chargemaster.” DiCarlo, 530 F.3d at 264. Other
courts have reached similar conclusions. See, e.g., Banner Health v. Med. Sav. Ins. Co., 163
P.3d 1096, 1101 (Ariz. Ct. App. 2007) (finding that patients who agreed to “pay the account”
agreed to pay charges billed in accordance with the hospital’s chargemaster that was filed with
the state health department pursuant to statute); Holland v. Trinity Health Care Corp., 791
N.W.2d 724, 730 (Mich. Ct. App. 2010) (concluding the phrase “usual and customary charges”
in hospital’s contract with a patient “unambiguously refers to the ‘Charge Master’”); Shelton v.
Duke Univ. Health Sys., Inc., 633 S.E.2d 113, 114, 116-17 (N.C. Ct. App. 2006) (finding the
language “regular rates and terms of the Hospital” not to be an open price term where the prices
were set forth in the hospital’s chargemaster), review denied; Nygaard v. Sioux Valley Hosp. &
Health Sys., 731 N.W.2d 184, 188-89, 191 (S.D. 2007) (interpreting as definite a price term
requiring patient to pay “unspecified and undiscounted charges for medical care” which were
“pre-set by [the hospital] in its sole discretion”). But see Doe v. HCA Health Svcs. of Tenn.,
Inc., 46 S.W.3d 191, 197 (Tenn. 2001) (holding that a patient’s agreement to be “financially
responsible to the hospital for charges not covered by” insurance contained an indefinite price
term because although “the Charge Master could be used as a reference in determining a
patient’s charges” the contact at issue did not contain a reference to the chargemaster) (emphasis
in original).

                                                6
        Patients rely on Stanley v. Walker, 906 N.E.2d 852 (Ind. 2009) to support their
contention this Court has “already determined that courts can and should assess the
reasonableness of hospital charges.” Appellant’s Br. in Opposition to Trans. at 6. But Stanley is
inapplicable. In that case the Court was faced with a much different issue than the one presented
here.   Stanley was a personal injury case in which the plaintiff received medical services
following a car accident. The medical expenses were discounted from the chargemaster rate due
to an arrangement between the medical provider and plaintiff’s health insurer. At trial, the
defendant sought to introduce evidence of this discounted amount as relevant to damages. The
issue presented was whether Indiana’s collateral source statute, which prohibits the introduction
of evidence of insurance benefits in personal injury actions, barred admission of the defendant’s
proffered evidence. Holding that the evidence was admissible “[t]o the extent the discounted
amounts may be introduced without referencing insurance” the Court concluded that the
collateral source rule did not prohibit the introduction of discounted hospital billing in
determining—for evidentiary purposes—the reasonable value of medical expenses in a claim for
damages. See Stanley, 906 N.E.2d at 853. We decline to extend Stanley to actions for breach of
contract.

        We align ourselves with those courts that have recognized the uniqueness of the market
for health care services delivered by hospitals, and hold that Patients’ agreement to pay “the
account” in the context of Clarian’s contract to provide medical services is not indefinite and
refers to Clarian’s chargemaster. As a result, we cannot impute a “reasonable” price term into
this contract. See First Fed. Sav. Bank of Ind. v. Key Markets, Inc., 559 N.E.2d 600, 604 (Ind.
1990) (refusing to engraft reasonableness language onto a real estate lease, where the express
provision at issue was “well understood in the business community and commonly found in such
leases”). Because Patients’ complaint stated no facts on which the trial court could have granted
relief, it properly granted Clarian’s motion to dismiss. Having thus resolved Patients’ breach of
contract claim, we need not reach Patients’ declaratory judgment claim.

                                               7
                                          Conclusion

       We affirm the judgment of the trial court.

Dickson, C.J, and David, Massa and Rush, JJ., concur.

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