Court Opinion

ID: 9759092
Source: CourtListenerOpinion
Date Created: 2023-08-29 00:03:55.294069+00
Date Added: 2024-06-11T07:26:48.332279
License: Public Domain

STEIN, J.,
concurring
I concur in the Court’s judgment. I also join in the Court’s sound conclusion that Northwest Covenant Medical Center’s (Northwest) appeal is neither time-barred under Rule 2:4 — 1(b) nor barred by the doctrine of laches. However, because the doctrine of laches is rooted in principles of equity, I am impelled to write separately to reflect my concern that the Court’s disposition, although in favor of Northwest in all respects, substantially understates the equitable factors that overwhelmingly demonstrate the inappropriateness of applying laches to defeat its claim as well as the substantial meritorious justification for upholding its claim for approximately $2 million to correct an acknowledged underpayment in its 1997 charity-care subsidy.
I
A
The facts of this case should distress the executive branch of our State government. The simple version goes something like *143this. St. Clare’s Hospital, one of the member hospitals of Northwest, submitted on or before October 18, 1996 a timely claim for 1997 charity-care reimbursements to Unisys. That company was jointly hired by the Department of Human Services and the Department of Health and Senior Services (Department of Health) to process those claims. St. Clare’s submission was eoneededly deficient in some respects. Unisys never informed St. Clare’s that its submission was deficient and could not be processed.
On February 17, 1997, Northwest learned that St. Clare’s 1997 charity-care funding had been reduced from $10.7 million in 1996 to $5.8 million in 1997. Northwest immediately contacted the Department of Health and learned for the first time that because its October 1996 submission was considered deficient, Unisys calculated its subsidy by applying the lower pricing ratios of Dover General Hospital, one of the other hospitals in the Northwest group. By February 20, 1997, Northwest had provided the Department of Health with a new submission that demonstrated that St. Clare’s 1997 subsidy was approximately $2 million less than it should have been. A supplemental letter dated February 24, 1997, informed the Department that no one from Unisys had ever alerted staff at Northwest or St. Clare’s to the fact that the October 1996 submission was not being processed.
At a March 3, 1997 meeting between Northwest and Department of Health officials, convened by Senator Robert Littell, the Department’s representatives acknowledged that St. Clare’s allocation was too low but expressed a reluctance to recalculate the charity-care distribution because the other sixty-six participating hospitals would be affected. As an alternative, Senator Littell offered to sponsor a supplemental appropriation to make Northwest whole. He did so and it was approved by the Legislature, but vetoed by the Governor on June 27,1997.
The charity-care subsidy payments to the sixty-seven affected hospitals began on or about February 15, 1997, and continued in twelve monthly installments until January 15, 1998. After the *144Department of Health acknowledged a substantial deficiency in St. Clare’s allocation at the March 3, 1997 meeting, then Commissioner Fishman wrote to Senator Littell on May 29, 1997 and informed him that the charity-care allocation to St. Clare’s Hospital was $1,964,554 too low. In that letter Commissioner Fishman expressed a desire to assist Northwest in obtaining supplemental payments. The letter stated:
We would like to work with you and the Department of Human Services to determine whether any supplemental payments to North Covenant Health Systems could be structured so as to draw down additional federal funds____ [A]ny supplemental amounts would have to be paid after July 1, 1997 to have any possibility of federal matching funds.
Notwithstanding the Commissioner’s offer of help, after the Governor’s June 27 veto of the supplemental appropriation bill no action was taken by the Department during the remainder of 1997 to correct the allocation of charity-care funds among the sixty-seven participating hospitals.
Northwest filed this appeal on December 22,1997. The Departments, represented by the Attorney General, moved to dismiss the appeal as untimely and barred by laches, asserting in their brief that Northwest “never moved for a stay of the 1997 charity care payments. Appellant failed to seek a stay before the January 1998 final monthly distribution of funds to other hospitals.”
After a limited remand to the Commissioner of Health, who declined to provide relief to Northwest, the Appellate Division in an unpublished opinion held that Northwest’s appeal was time-barred pursuant to Rule 2:4-l(b) and also was barred by laches. In addressing the laches issue, the Appellate Division adopted the Attorney General’s contention that Northwest should have applied for a stay of the payments to the other hospitals, observing that Northwest “could have sought emergency relief in General Equity by filing [an] order to show cause seeking appropriate temporary restraints pending determination of a proper allocation.”
B
The foregoing summary of the material facts might well provoke one to inquire why, after the Department of Health learned in *145early March 1997 of the deficiency in St. Clare’s charity-care allocation — after only one monthly payment had been made to the other hospitals — no action was taken by the State to recalculate the allocation to adjust for St. Clare’s approximately $2 million deficiency. That failure to recalculate the allocation is even more astonishing when the record is examined in more detail with emphasis on the State’s explanations for resisting St. Clare’s claim for re-allocation.
1. Monthly v. Annual Filing
During the remand proceedings before the Commissioner of Health, the Departments’ brief alleged that St. Clare’s failed to submit its charity-care claims on a monthly basis, instead filing the entire year’s claim on or before Unisys’s October 18, 1996 deadline. The Commissioner agreed with the Departments’ contention. Northwest responded that although a schedule of non-mandatory monthly submissions had been promulgated, it understood the Unisys Essential Health Services Claims Pricing System Manual (Manual), paragraph 2F, to leave the issue of monthly versus annual filing to each hospital’s discretion, and submitted an uneontradicted certification naming five other hospitals that elected not to submit pricing data on a monthly basis. A supplemental certification filed in the remand proceedings by the Department of Health’s Health Care Financing Systems Unit’s Director acknowledged that hospitals could elect not to submit claims monthly, although in her view monthly filing improved the accuracy of the hospital submissions.
2. Quality of St. Clare’s Initial Submission
The record is unclear about the nature and extent of the deficiencies in St. Clare’s initial submission to Unisys. A certification filed in the remand proceeding by an Economic Research Specialist in the Department of Health stated that Unisys processed St. Clare’s initial submission on October 21, 1996 “and it was rejected due to missing revenue codes and because the claim detail lines exceeded 45 lines.” Another certification in the remand proceeding characterized St. Clare’s submission as “grossly *146deficient.” The Departments’ Appellate Division brief stated that the submission was rejected because of numerous errors “such as failure to use correct submitter identification and provider numbers, and submitting claims detail lines that were in excess of readable limits.” Northwest’s healthcare computer consultant, Elmer Bean, certified that once the Electronic Media Claims (EMC) Error Report was received from Unisys on February 18, 1997, only one day was required for Northwest’s staff to correct the deficiencies listed in the error report. Another consultant, Craig Rutledge, certified that after one day’s work addressing the problems in the error report, St. Clare’s next inpatient and outpatient submissions were usable and were processed by Unisys. He acknowledged that subsequent submissions were necessary to address claims for reimbursement that had been denied.
3. Notice of Errors to St. Clare’s/Remittance Advice
On remand before the Commissioner, Northwest contended that it should have received a remittance advice from Unisys informing it of the errors in its submission, noting that the Unisys Manual expressly provides:
All providers submitting claims to the NJMIS (New Jersey Management Information System) receive a hard copy remittance advice for reconciling their ECPS accounts.
[Manual at 1-4.]
Remittance advice (both tape and paper) are mailed by the 5th working day following the monthly adjudication cycle date.
[Manual at 3-4.]
The Commissioner concluded, without any reference to the Manual, that St. Clare’s was not entitled to a remittance advice because its claim submission was “not accepted for processing.” Although no remittance advice was sent by Unisys to St. Clare’s, the record reveals that Unisys had prepared an EMC error report, dated October 21, 1996, based on St. Clare’s initial submission, but the error report was never sent to St. Clare’s. It was picked up by a Northwest employee on February 17, 1997, after the 1997 charity-care allocation had been completed.
*147Concerning the issue of actual notice to St. Clare’s that its initial submission was deficient, in the remand proceeding the Departments submitted a certification from a Unisys employee stating that on October 22, 1996, she had telephoned Elmer Bean, St. Clare’s designated representative, at 201-625-6161, and informed him that “St. Clare’s tape submission of October 18, 1996, had been rejected on October 21, 1996, and that the hospital would have to correct and resubmit its charity care tape.”
The record demonstrates that the statements contained in the certification were incorrect. In their Appellate Division brief the Departments acknowledged that they could not substantiate the claimed notification. The Billing Agreement submitted by St. Clare’s to Unisys in October 1995 listed the Hospital’s telephone number, facsimile number, and address on the first page, and also listed the charity-care contact person as Elmer Bean, at 201-625-6161. In the remand proceeding, Northwest submitted certifications attesting that before October 1996 Mr. Bean’s office was relocated and his telephone number changed. The certifications stated that a caller dialing his former telephone number would have been connected to the Hospital’s central supply department.
More to the point, the record reveals that whether or not an attempt was made by Unisys to telephone Mr. Bean at the number listed on the Billing Agreement, no further attempt of any kind, neither by telephone, facsimile or letter, was made by Unisys employees to inform St. Clare’s that its submission was deficient. In the remand proceeding, Commissioner Fishman initially found as a fact that a Unisys employee spoke with Elmer Bean. In his supplemental decision the Commissioner retracted that finding, but nevertheless blamed Northwest for failing to inquire about the status of its submission. He stated:
I find that whether or not there was telephone contact by UNISYS on October 22, 1996, the fact remains that Northwest Covenant received remittance advices for two of its three hospitals. At that point, Northwest Covenant knew or should have known that there were problems with its submission. Because of this information, Northwest Covenant had an obligation to contact the Department immediately in order to determine the status of its submission. I find that it failed to do so.
*148In my view, the Commissioner’s conclusion is quite remarkable in view of the relative ease with which Unisys could have contacted Northwest and provided it with a copy of the error report prepared on October 21,1996. His conclusion was endorsed in the Departments’ brief to the Appellate Division:
It was St. Clare’s obligation to follow up on its submission within 14 days and to resubmit corrected data to Unisys____Because St. Clare’s submission could not go through the pre-process stage, the hospital did not receive a remittance advice. However, despite imputed, notice, through non-receipt of a remittance advice, St. Clare’s did not make the necessary corrections for its submission to be processed by the fiscal agent.
[ (Emphasis added.)]
The originality of the Department’s argument is astonishing: although Unisys never notified St. Clare’s that its submission was deficient, St. Clare’s should have known enough to correct its deficient submission because it received “imputed” notice through “non-receipt of a remittance advice.”
4. Unisys’s Use of Dover Hospital’s Pricing Ratios
The parties disputed the reasonableness of Unisys’s decision to use Dover General Hospital’s pricing ratios in calculating St. Clare’s 1997 charity-care allocation. (Unisys was required to calculate for each hospital two “pay to charge” ratios, one for inpatient admissions and one for outpatient services. Each ratio approximated the ratio of total claims priced at Medicaid payment rates divided by total claims priced at actual charges. For each hospital, the inpatient and outpatient pay-to-eharge ratios were multiplied by the total inpatient and outpatient charges, respectively, to arrive at the priced charity-care reimbursement figure.)
St. Clare’s Director of Finance certified in the remand proceeding that the Department should have used St. Clare’s 1996 pricing ratios rather than the 1997 pricing ratios of Dover General Hospital. He noted in his certification that St. Clare’s outpatient ratio for 1996 was 93.6% and its outpatient ratio for 1997 was 94.06%, a difference of only .46%, and that the inpatient ratios for those years also were almost identical. Although the Department’s expert asserted that St. Clare’s 1996 pricing ratios could not be used because they were based on the Medicaid rather than *149the eharity-care population, St. Clare’s Finance Director replied that the outpatient services used by Medicaid and eharity-care patients were virtually identical. Had the Department used St. Clare’s 1996 pricing ratios, rather than Dover’s, to calculate its 1997 allocation, the record reveals that its 1997 allocation would have been increased by about $1.6 million.
C
The Court’s opinion cogently concludes, ante at 140-42, 770 A.2d 244-45, that the Appellate Division erred in applying the equitable doctrine of laches to bar Northwest’s appeal. In justifying its application of laches, the Appellate Division adopted the Attorney General’s contention on behalf of the Departments that Northwest “never moved for a stay of the 1997 charity care payments,” the court concluding that laches applied because Northwest “could have sought ... appropriate temporary restraints pending determination of a proper allocation.”
Less than two months after the Appellate Division’s decision, however, the Departments of Health and Human Services, in a brief filed in an analogous charity care dispute between the Departments and University of Medicine and Dentistry—University Hospital (UMDNJ), repudiated the legal position they had successfully advanced before the Appellate Division. In UMDNJ v. Grant, No. A-3014-99T3 (App.Div. Mar. 13, 2000), UMDNJ was disputing its charity-care allocation for calendar year 2000 on numerous grounds. Since July of 1999 the Department of Health had been distributing eharity-care payments for the year 2000 on an interim basis predicated on the 1999 allocations. When UMDNJ could not resolve its dispute concerning its year 2000 allocation, it sought a stay from the Commissioner of further distributions of year 2000 allocations and of any recoupments from UMDNJ to recover overpayments made since July 1999. The Commissioner of Health denied the stay based on UMDNJ’s failure to demonstrate a likelihood of success.
*150UMDNJ appealed to the Appellate Division contending, consistent with that court’s decision in Northwest’s appeal, that a stay was warranted if for no other reason than to avoid the argument that UMDNJ took no action to prevent the subsidy payments from being made to the other hospitals. UMDNJ asserted, as did the Attorney General in the Northwest appeal, that a stay was essential because if it were ultimately successful on appeal the other hospitals would be required to return funds they had received in excess of their revised allocation.
The Attorney General, on behalf of the Departments, rejected UMDNJ’s contention and argued, contrary to the Departments’ position in Northwest, that there was no need for a stay because the Department of Health had the ability to increase UMDNJ’s allocation even after all of the year 2000 charity-care subsidy had been distributed:
Appellant’s argument is that irreparable harm will result because, if it is ultimately successful on its appeal, the amounts paid to other hospitals at the new rate may have to be disgorged by those hospitals, and that DHSS lacks the ability in any event to carry that out since all of the funds for the year will have been expanded. However, the payment of money has never been seen to constitute irreparable harm. Moreover, contrary to appellant’s assertion, there is no legal prohibition to recalculating the FY00 charity care subsidy. DHSS certainly has the ability, through various mechanisms, to accomplish any readjustment, even after the end of the fiscal year.
The Attorney General’s brief, although acknowledging that UMDNJ’s position was consistent with the Appellate Division’s holding in Northwest, remarkably concludes by asserting that the application of the holding in Northwest — a holding for which it had argued — would be “unworkable” in the UMDNJ matter:
It is true that the court in Northwest Covenant indicated that prejudice could result to a hospital that was forced to return previously paid funds; as a result, the court invoked the equitable doctrine of laches so as to bar the appellant in that case from filing an untimely action. Application of that principle to the current context would be unworkable. If appellant’s argument is accepted, then any time a single hospital contests any part of the calculation of the charity care subsidy, it will be able to enjoin any payment of the subsidy to all hospitals, on the ground that irreparable harm exists because such hospitals may in the future be required to return those monies. This is clearly not what the Northwest Covenant couH intended.
[(Emphasis added.)]
*151Respectfully, that is precisely “what the Northwest Covenant court intended.” Its holding, based on the Attorney General’s inaccurate assertion that a stay should have been sought, could not have been clearer:
Had appellant acted promptly and asserted its right earlier by filing the appropriate judicial or administrative intervention, we could have averted the prejudice to other hospitals resulting from their use of distributed funds by deciding the proper allocation in the same fiscal year and prior to the time that all the funds were to be distributed. In short, appellant’s unexplained acquiescence in failing to seek emergent intervention after the Governor exercised her veto, combined with the change in conditions resulting from the distribution of the 1997 charitable subsidies, lead us to conclude that the within appeal is barred by the doctrine of laches.
Unsurprisingly, the Appellate Division denied by order UMDNJ’s stay application.
II
In view of the Departments’ belated acknowledgment in the UMDNJ matter that Northwest need not have sought a stay because the Departments could supplement its 1997 charity-care allocation even after all payments had been distributed, it is incontestable that the Appellate Division misapplied the doctrine of laches in barring Northwest’s appeal. Responsibility for that misapplication of laches must be shared by the Departments and the Attorney General.
Putting aside the Departments’ recognition that no stay application was necessary, the application of laches to bar Northwest’s appeal is, in my view, antagonistic to the equitable principles that inform the doctrine. It is well settled that laches is “an equitable defense that may be interposed in the absence of the statute of limitations.” Lavin v. Bd. of Educ. of Hackensack, 90 N.J. 145, 151, 447 A.2d 516 (1982). Over one hundred years ago in Hall v. Otterson, 52 N.J. Eq. 522, 28 A. 907 (1894), our Chancery court observed that the doctrine is rooted in principles of equity, and noted that equitable principles, not just delay alone, should govern application of the doctrine:
[T]he doctrine of laches in courts of equity ... is not an arbitrary or a technical doctrine____But in every case, if an argument against relief, which otherwise *152would be just, is founded upon mere delay, that delay, of course, not amounting to a bar by any statute of limitation, the validity of that defen[s]e must be tided upon principles substantially equitable. Two circumstances, always important in such cases, are the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance, of justice or injustice, in taking the one course or the other, so far as relates to the remedy.
[Id. at 535, 28 A. 907 (quoting Lindsay Petroleum Co. v. Hurd, L.R., 5 P.C. 221, 239-40 (1874)).]
As we observed in Lavin, supra, “the central issue is whether it is inequitable to permit the claim to be enforced,” and that “[ijnequity, more often than not, will turn on whether a party has been misled to his harm by the delay.” 90 N.J. at 152-53, 447 A.2d 516.
As this record demonstrates, the equities in this dispute abound in favor of Northwest. The St. Clare’s Hospital 1997 charity-care allocation was miscalculated by Unisys after it rejected St. Clare’s submission without sending it the error report Unisys had generated, or even notifying it of the rejection. The miscalculation, in excess of $1.9 million, resulted from Unisys’s decision to apply Dover Hospital’s substantially lower pay to charge ratios, rather than St. Clare’s virtually unchanged 1996 ratios, in calculating St. Clare’s allocation. By late February or early March 1997, less than one month after the first monthly payment of the 1997 charity-care allocation had been sent to the sixty-seven participating hospitals, the Department of Health became aware that there had been a miscalculation of approximately $2 million, and by late May 1997 the Commissioner acknowledged in writing that St. Clare’s 1997 charity-care allocation was understated by $1,964,554. Concededly, the intention then was to make St. Clare’s whole through a supplemental appropriation sponsored by Senator Lit-tell and passed by the Legislature. But when the Governor vetoed that supplemental appropriation, the Departments inexplicably took no action to recalculate the allocation among the hospitals to restore to St. Clare’s the funds it had lost.
One can only wonder what principle of law or public policy— other than obeisance to the Governor’s veto — could possibly have justified the Departments’ failure to act. We are informed by the Attorney General’s brief in the UMDNJ appeal that the Depart*153ments have “the ability, through various mechanisms, to accomplish any readjustment, even after the end of the fiscal year.” The certification in the remand proceedings submitted by the Director of the Health Care Financing Systems Unit acknowledged as much when she stated that a reallocation to reimburse St. Clare’s would require recoupment from sixty-six hospitals of amounts ranging from a maximum of $118,345 to a minimum of $4,692, with the largest recoupments taken from teaching hospitals such as Hackensack Medical Center ($118,345), Morristown Memorial Hospital ($84,476), Cooper Hospital ($82,621), Jersey Shore Medical Center ($64,045), and Atlantic City Medical Center ($59,-226).
It is self evident that the amounts recouped from those hospitals would have been substantially less if the Departments had corrected the charity-care allocation in March 1997 when the error was discovered. More to the point, the recoupment from those named hospitals and the remaining sixty-one hospitals would have served the salutary purpose of returning from those hospitals in the aggregate more than $1.9 million incorrectly and unnecessarily paid to them and justly due and owing to St. Clare’s.
In another context we have reminded State government of its obligation to “ ‘turn square corners’ rather than exploit litigational or bargaining advantages that might otherwise be available to private citizens.” W.V. Pangborne & Co. v. N.J. Dep’t of Transp., 116 N.J. 543, 561, 562 A.2d 222 (1989) (quoting F.M.C. Stores Co. v. Borough of Morris Plains, 100 N.J. 418, 426, 495 A.2d 1313 (1985)). If State government had “turned square corners” in this case, St. Clare’s would long since have received its full and correct 1997 charity-care allocation, and the claim of laches would never have seen the light of day.
For the reasons stated, I join in the Court’s sound disposition of this appeal.
Justice LONG joins in this concurring opinion.
*154For reversal and remandment — Chief Justice PORITZ and Justices STEIN, COLEMAN, LONG, VERNIERO, LaVECCHIA and ZAZZALI — 7.
Opposed — none.