Court Opinion

ID: 4959950
Source: CourtListenerOpinion
Date Created: 2021-09-24 14:46:10.280011+00
Date Added: 2024-06-11T08:15:46.195298
License: Public Domain

DISSENTING OPINION BY
TAMILIA, J.
¶ 1 Healthcare Management Alternatives (HMA) appeals the April 10, 2002 judgment in the amount of $4,310,494.34 plus interest from January 31, 1997. The judgment was entered in favor of appellee, Temple University Hospital (Hospital) and against HMA. For the reasons expressed as follows, I respectfully dissent to the majority Opinion and would affirm the judgment of the trial court.
¶2 As more fully discussed infra, this case previously has been before this Court, at which time Judge Ford Elliott authored an Opinion thoroughly detailing the facts and procedural history of this case. For purposes of my review of the issues now before us, I rely upon that statement of facts as set forth in Judge Ford Elliott’s Opinion.
Temple University Hospital, Inc. (“Hospital”) is a teaching hospital located in north Philadelphia, which has historically provided care to indigent individuals despite their inability to pay for care. Many of Hospital’s patients are eligible for Medicaid benefits under a program operated by the Pennsylvania Department of Public Welfare (“DPW”) and funded jointly by the Commonwealth and the federal government.
Federal law governing Medicaid programs authorizes the states to develop their own Medicaid reimbursement standards and methodologies for payment of hospital services, but subjects those standards and methodologies to three general federal requirements. These requirements include establishing rates that take into account the situation of hospitals serving a disproportionate number of low-income patients. States are also required to find that the rates are reasonable and adequate to meet the necessary costs of an efficiently operated hospital while assuring Medicaid patients reasonable access to inpatient hospital care. States must comply with these requirements to be eligible for federal funds.
Under Pennsylvania’s Medicaid program, known as the Medical Assistance Program or “MAP,” the DPW makes payments directly to providers of medical services on a “fee for service” basis. Until 1984, MAP through DPW reimbursed hospitals based on their actual costs. In the face of spiraling health care costs, however, in 1984, DPW adopted a prospective payment system. “Under that system, the operating costs of most acute care inpatient hospital stays are reimbursed by a flat payment per discharge that is a multiple of the hospital’s payment rate and a relative value assigned to the diagnostic related group (‘DRG’) into which the particular case falls.” Stated differently, in most cases, the patient’s diagnosis determined what DPW would pay, rather than the length of the patient’s stay in the hospital or the intensity of the care received there. Certain hospitals, such as Hospital in this case, were, however, still entitled to additional payments because they served a disproportionate share of indigent patients. Hospital also received additional payments to defray capital costs and in recognition of its status as a teaching hospital, for which the cost of providing medical care is higher than at a community hospital.
In the mid-1980’s, pursuant to § 1915(b) of the Social Security Act, 42 U.S.C. § 1396(n)(b), Pennsylvania obtained a waiver from some of the federal Medicaid program requirements. Sec*512tion 1915(b), as interpreted at that time by the federal agency responsible for approving waivers, allowed states flexibility, subject to certain limitations, in developing innovative, cost-effective, and efficient programs for providing care to indigent populations while maintaining access to and quality of care for those populations.
Pursuant to the waiver provision, DPW instituted an experimental program known as “HealthPASS” under which Medicaid recipients in certain sections of southern and western Philadelphia were required to enroll in a Medicaid managed care company. The managed care company, appellee Healthcare Management Alternatives, Inc. (“HMA”), contracted with DPW to provide inter alia, in-patient hospital services to persons in the targeted region who were eligible for Medicaid. HMA did not, however, provide medical services directly; rather, it entered into contracts with various health care providers, including Hospital, to provide such services. These contracts were subject to DPW approval.
The contract between HMA and DPW described HMA as a “health insuring organization” (“HIO”), defined as an entity which assumes an underwriting risk to pay for medical services provided to recipients in exchange for a premium or subscription charge paid by the state agency. DPW therefore agreed to pay HMA a “capitation payment,” defined as a monthly payment for each recipient enrolled under the contract at the rates specified by the contract. While recognizing that DPW was responsible for prudently spending state and federal funds, the contract also recognized that HMA was a for-profit corporation. As a result, the contract provided a system of either refunds or credits under certain specific circumstances. As HMA’s chief witness testified, however, “HMA made money by spending less than it received from DPW. The focus of the HIO was basically to try to control or limit some hospitalizations and pass that money onto the other providers.” (Testimony of Richard Braksator, 3/16/99, at 6, R.R. at 1632a).
Pursuant to HMA’s contract with DPW, HMA entered into a contract with Hospital in 1991 to provide services to HealthPASS participants. According to Mr. Braksator, the terms of such contracts were set by negotiation. In the April 1, 1991 contract, Hospital agreed, inter alia, to provide inpatient hospital services to Medicaid recipients in the HealthPASS region in consideration for which HMA would pay Hospital at a rate of 114% of the relevant DRG rate. (R.R. at 99a.) By its terms, the contract remained in effect until June 30, 1993. During the contract period, Hospital would handwrite the applicable amount due under the contract for inpatient hospital care in the “Remarks” section of forms UB-82 and UB-92, the forms Hospital used to bill HMA. Hospital provided this service for the benefit of HMA, which lacked the computer software necessary to calculate the amount. (Testimony of Richard Braksator, 3/16/99, at 13, R.R. at 1639a.)
By letter dated April 20, 1993, Hospital informed HMA of its intent to renegotiate its existing arrangement with HMA. As the trial court found, “[Hospital] advised HMA by letter that it wished to renegotiate its payment arrangement with HMA and did not wish to extend the current contract. [Hospital] had concluded that HMA’s payments were no longer adequate.” (Trial Court Opinion, 4123/99, at 3, finding of fact 13, citing Hospital’s Exhibit 4 and Lux testimony at 90-94.) Nevertheless, after *513the contract expired in June of 1993 and through the period in controversy, until 1997, Hospital continued to hand-post the adjusted DRG rate on the UB-82’s and UB-92’s it submitted to HMA for payment.
During the period in dispute, however, specifically in March and April of 1994, the parties exchanged several letters. In the first letter, dated March 15, 1994, HMA indicated that it had previously extended the prior rate arrangements in anticipation of receiving Hospital’s proposal to renew its participation with HMA. (R.R. at 102a.) HMA concluded by indicating that it “will reimburse [Hospital] at the out of area rate paid to ah non-contracted facilities.”6
Hospital responded by letter dated March 24,1994, in which Herbert White, the Hospital agent to whom HMA’s March 15th letter had been directed, indicated dismay with HMA’s March 15th letter for two reasons: first, because Hospital had previously made it clear that it intended to bill and collect its published charges from all non-eon-tracted third-party payers such as HMA; and second, because Hospital had never agreed to extend the previous agreement. HMA answered by letter dated April 8, 1994, in which it acknowledged that Hospital considered the expired rate agreement no longer valid. The April 8, 1994 letter also indicated that because Hospital was negotiating in good faith, HMA was willing to leave the expired rate in effect until negotiations were complete; otherwise, it would reimburse Hospital at the rate of $ 705 per diem. Hospital replied by letter dated April 26,1994, flatly rejecting the out-of-area rate and reiterating its position that “to the extent that a future agreement results in a contractual gap in our relationship, [Hospital] will expect payment at full charges for any services provided during that gap.”7
During the period from January 1, 1994 to January 31, 1997, Hospital submitted hundreds of claims to HMA for payment.8 Each claim itemized Hospital’s published charges for each service provided, and also included the hand-posted DRG code and corresponding adjusted DRG rate in the “Remarks” section. (See R.R., vol. 2 at 478a-928a.) HMA paid the amount written in the “Remarks” section for most of these claims, but only paid the $ 705 per diem rate set for out-of-area non-contracting providers for others. (Braksator testimony, 3/16/99 at 42, R.R. at 1668a.) In December 1997, when HMA refused to reimburse Hospital for the difference between what HMA had paid and Hospital’s published charges for these claims, Hospital brought suit, alleging that “the surrounding circumstances, the ordinary course of dealing and the common understanding within the hospital and health care industry created an implied contract between HMA and [Hospital] for the payment of [Hospital’s] reasonable charges as set forth in [Hospital’s] bills ,...”9
Following a non-jury trial, the trial court found an implied contract in favor of HMA, stating that Hospital evidenced its intent to accept HMA’s offer to continue the terms of the 1991 contract when it wrote the DRG amounts in the “Remarks” portion of the UB-82’s and UB-92’s. (Trial Court Opinion, 4/23/99, at 6-7.) The trial court further concluded that Hospital, by asking for full payment for services rendered, “is asking this court to circumvent the base DRG Medicaid rates set by DPW and mandated by federal law. As the law does not violate the constitution, this court cannot and will not presume to act as a legislature.” (Id. at 7.)
*514The parties agree that the written 1991 contract had expired by its terms on June 30, 1993. (See Lux testimony, 3/15/99, at 113, R.R. at 1452a; Braksator testimony, 3/16/99, at 18, R.R. at 1644a.) Furthermore, neither party avers the existence of an oral contract. As a result, during the relevant time period, if a contract existed at all, its existence was premised on the parties’ conduct.
In this case, it is undisputed that HMA offered in writing to extend the terms of the 1991 contract until the parties reached an agreement as to the terms of a new contract. It is also undisputed that the parties continued to engage in a course of conduct similar to that established by their prior agreement: Hospital provided medical services to HealthPASS participants and submitted forms UB-82 and UB-92 reflecting both its published charges and the adjusted DRG rate. HMA then paid for Hospital’s services, most frequently basing its payments on the hand-written adjusted DRG rate, which was calculated using the base DRG rate for Hospital prior to July 1, 1993, but sometimes paying the $ 705 per diem rate. This course of conduct continued from June 30,1993 through January 31,1997. other hospitals were charging for similar services.
Temple University Hospital, Inc. v. Healthcare Management Alternatives, Inc., 764 A.2d 587, 589-593 (Pa.Super.2000) (internal footnotes at conclusion of text.)
¶3 Finding Hospital’s actions did not manifest assent to extension of the 1991 contract and that no implied contract existed between the parties, this Court reversed and remanded the case. Evidentia-ry hearings were conducted on December 10 and 11, 2001. Thereafter, the trial court determined that Hospital was entitled to receive payment at its published rates, based upon a common law theory of contract law.
¶ 4 HMA appeals and raises the following questions for our review.
1. Whether the trial court abused its discretion when it denied HMA’s request for post-trial relief and awarded Temple its full published charges on a quasi-contract theory where Temple did not meet its burden of proving that HMA had been unjustly enriched considering that HMA had paid Temple $2 million for the services provided.
2. Whether the trial court committed an error of law when it denied HMA’s request for post-trial relief and awarded Temple its full published charges based on its finding that those charges were “not unconscionable” instead of determining the reasonable value of the services provided by Temple as required by Pennsylvania law.
3. Whether the trial court abused its discretion when it denied HMA’s request for post-trial relief and awarded Temple its full published charges although the court acknowledged *515that full published charges were “commercially unreasonable.”
4. Whether the trial court abused its discretion to the extent it relied on a theory of estoppel in awarding Temple its full published charges where there was no record evidence of detrimental reliance by Temple.
(Appellant’s brief at 3.)
The role of an appellate court in reviewing the trial court’s final judgment is to determine whether the findings of the trial court are supported by competent evidence and whether the trial court committed error in the application of law. Furthermore, the findings of the trial judge in a nonjury case must be given the same weight as a jury verdict and will not be disturbed on appeal absent error of law or abuse of discretion. When this Court reviews the findings of the trial judge, the evidence is viewed in the light most favorable to the victorious party below and all evidence and proper inferences favorable to that party must be taken as true and, conversely, all unfavorable inferences rejected.
Tagliati v. Nationwide Ins. Co., 720 A.2d 1051, 1052-1053 (Pa.Super.1998), appeal denied, 559 Pa. 706, 740 A.2d 234, (1999), quoting Romano v. Nationwide Mutual Fire Insurance Co., 435 Pa.Super. 545, 646 A.2d 1228, 1231 (1994) (citations omitted).
¶ 5 While this Court in Temple I reached a different conclusion of law than the trial court, holding no implied contract existed, we left relatively untouched the findings of fact which drive the resolution of this case, Temple II. In determining the outcome of Temple II, the trial judge relied on common law principles of contract, which are broad enough to incorporate the concepts of quasi-contract and include the element of unjust enrichment.
¶ 6 Upon review of the record,3 it is clear that the disposition of this matter must be guided by the principles pertaining to a quasi-contract.
A quasi-contract imposes a duty, not as a result of any agreement, whether express or implied, but in spite of the absence of an agreement, when one party receives unjust enrichment at the expense of another. In determining if the doctrine applies, we focus not on the intention of the parties, but rather on whether the defendant has been unjustly enriched. The elements of unjust enrichment are “benefits conferred on defendant by plaintiff, appreciation of such benefits by defendant, and acceptance and retention of such benefits under such circumstances that it would be inequitable for defendant to retain the benefit without payment of value.” The most significant element of the doctrine is whether the enrichment of the defendant is unjust; the doctrine does not apply simply because the defendant may have benefited as a result of the actions of the plaintiff. Where unjust enrichment is found, the law implies a quasi-contract which requires the defendant to pay to plaintiff the value of the benefit conferred. In other words, the defendant makes restitution to the plaintiff in quantum meruit.
AmeriPro Search, Inc. v. Fleming Steel Co., 787 A.2d 988, 991 (Pa.Super.2001) (internal citations omitted.)
¶ 7 Contrary to HMA’s argument Hospital failed to establish that it was unjustly enriched, I find the benefit received by HMA to be well documented in the record. During the time in question, and despite the expiration of the 1991 written contract with HMA, Hospital continued to treat HealthPASS participants as it is required *516to do pursuant to the Emergency Medical Treatment and Active Labor Act, 42 USCS § 1395dd. The record supports the trial court’s finding, “HMA was a fiscal intermediary for federal Medicaid funds that was administered by the Commonwealth of Pennsylvania Department of Public Welfare. The HealthPASS program placed Medicaid patients in an HMO program whereby intermediaries paid for their hospital treatment. Thus, [Hospital] was a third-party beneficiary of the contract for care between the HMO and the Medicaid recipient.” Trial Court Opinion, Cohen, J., 4/10/02, at 7.
¶ 8 Further, I believe the evidence fully supports the trial court’s conclusion Hospital was entitled to request payment at the rate of its published charges. The evidence supports the conclusion Hospital’s published rate is the same or less than other Philadelphia hospitals. Moreover, there was no credible evidence presented to suggest the published rate was unconscionable, and there is no language in the applicable federal or state legislation that prohibits Hospital, under the circumstances of this case, from charging its published rates. In the absence of a contract with HMA, which serves as the intermediary between DPW and the hospitals and has a stated goal of minimizing Medicaid payment to providers which can be accomplished only by good faith negotiation with said providers, Hospital had no recourse but to rely upon its published charge. As stated in the briefs of the parties, and adopted by this Court in both its prior and present Opinions, hospitals have no choice under federal and state law but to accept indigents in emergency care and, to the extent they treat such patients without reasonable compensation, the burden is thrust upon paying patients or insurers under non-government programs to assume the cost of that care. When hospitals are required to enter into non-compensatory or inadequately compensated treatment, their ability to service the community will sooner or later be eliminated through bankruptcy, merger with a more productive cost effective institution, or reliance on a non-contractual modality, as here, where Hospital’s established published rates are based on the community standard and are equivalent to rates equal or lower than the rates charged by other Philadelphia hospitals. See Temple I, Statement of Facts, footnote 9. HMA’s negotiated rates may only substitute for published rates if they are negotiated fairly, with reasonable payment to Hospital, rather than being imposed arbitrarily.
¶ 9 HMA argues the trial court erred in evaluating the appropriateness of the charges based upon an analysis of whether the charges were unconscionable. HMA maintains that this matter requires application of a “reasonable value” standard.
¶ 10 A “reasonable value standard” may be the only yardstick by which programs such as HMA and HealthPASS can prudently assign a cost for services provided. This remains true despite the cost effectiveness of such programs to taxpayers, government entities and institutions. What constitutes a “reasonable value,” however, while a matter of much debate among medical care providers and commercial health insuring organizations, is a matter not to be decided by this Court.4
“In the absence of an express agreement as to amount, the law implies a promise to pay for a physician’s services as much *517as they are reasonably worth. Professional services are worth what they are rated at on the professional market. The physician has his services to sell, the patient agrees to buy them and pay for them the customary price. When the services are properly rendered the patient has received what he has contracted for and has necessarily received legal benefit. Even when the agreement is completely the creation of the law the implied promise is to pay for the services what they are ordinarily worth in the community.”
Eagle v. Snyder, 412 Pa.Super. 557, 604 A.2d 253, 259 (1992), quoting Husik v. Lever, 95 Pa.Super. 258, 260, 1929 Pa.Super. LEXIS 24, **8 (Pa.Super.1929) (emphasis added.)
¶ 11 The trial court, as the fact finder, reviewed Hospital’s published rates and found the evidence supported the finding that HMA’s payment of the published rates would not cause it any undue hardship. As clear example of the disparity between payment proposed by HMA in relation to Hospital’s medical assistance cost per day, we need only look to footnote 6 of Temple I, wherein it states Hospital would be reimbursed $705 per diem, well below Hospital’s medical assistance cost per day of $1,204 — a disparity of 58.5%. Hospital could not survive financially if this rule were imposed across the board. While Hospital might have an advantage by refusing to enter into a contract, HMA has the definite advantage in negotiations due to the imposition of the law requiring Hospital to treat indigent patients at whatever rate it can negotiate or, in the alternative, free of charge. I find no support for HMA’s argument that payment of the published rates would cause it undue hardship.
¶ 12 Contrary to what HMA and DPW argue, I believe in this case the denial of payment based upon published rates will be destructive of the HMA-HIO/DPW system of regulating hospital costs while assuring adequate emergency and other hospital care for Medicaid and indigent persons. The denial to hospitals of a fair return by HMA/DPW under a “reasonable basis contract,” while hospitals remain compelled under law to accept such indigent patients, will assure the demise of the system of hospitals in this country, and result in unjust enrichment to HMAs and the perversion of federal regulation governing this area of Medicaid law.
¶ 13 Based upon the foregoing, I would affirm the April 10, 2002 judgment in the amount of $4,310,494.34 plus interest from January 31,1997.

 This rate amounted to $ 705 per diem, well below Hospital's medical assistance cost-per-day of $ 1,204.

 The parties apparently negotiated a new contract in January 1997, when the Health-PASS program ended. Mr. Braksator did not know whether the subject of retroactivity arose during contract negotiations because he was not a party to those negotiations.

 Hospital’s complaint sets the number at more than 250; however, the record contains more than 450 claims.

 The trial court found that Hospital established its published rates, which were equivalent to or lower than the rates of other Philadelphia hospitals, after considering what

. See footnote one (1), majority Opinion.

. The majority’s second remand of this case to establish "reasonable value” as a non-negotiated determination is totally beyond the capacity of the trial court. See Temple University Hospital, Inc. v. Healthcare Management Alternatives, Inc., 764 A.2d 587, 592 n. 9 (Pa.Super.2000).