Court Opinion

ID: 9781030
Source: CourtListenerOpinion
Date Created: 2023-08-30 16:00:47.346636+00
Date Added: 2024-06-11T12:09:25.415070
License: Public Domain

United States Court of Appeals
                             For the Eighth Circuit
                         ___________________________

                                 No. 22-3121
                         ___________________________

   Select Specialty Hospital - Sioux Falls, Inc., a Missouri business corporation

                                       Plaintiff - Appellant

                                          v.

Brentwood Hutterian, Brethren, Inc., a South Dakota non-profit corporation; South
    Dakota Medical Holding Company, Inc., a South Dakota corporation doing
business as Dakotacare; Hutterian Brethren General Medical Fund, a South Dakota
                             non-profit corporation

                                     Defendants - Appellees
                                   ____________

                     Appeal from United States District Court
                    for the District of South Dakota - Southern
                                   ____________

                            Submitted: March 21, 2023
                              Filed: August 30, 2023
                                  ____________

Before BENTON, ERICKSON, and KOBES, Circuit Judges.
                          ____________

KOBES, Circuit Judge.

      After suffering a stroke, Mary, a member of the Brentwood Hutterite
Brethren, received care at a Select Specialty Hospital. During her time at Select, she
was covered by Brentwood’s insurance. But after Mary applied for and received
Medicaid, it retroactively covered her time at Select. Select accepted $300,000 from
Medicaid for Mary’s care—far less than it was expecting from Mary’s Brentwood
insurance. Select now seeks payment from Brentwood, the Hutterite Brethren
General Fund (the Fund), and South Dakota Medical Holdings Company
(Dakotacare) for breach of contract. It also seeks damages from Brentwood and the
Fund for fraud and deceit. The district court 1 granted summary judgment to
Brentwood, the Fund, and Dakotacare. We affirm.

                                          I.

       Select, a long-term care facility, provided $1.9 million of care to Mary
between March and December 2018. As a Brentwood member, Mary was insured
under Brentwood’s insurance plan (the Plan), which covers all members until “the
Participant leaves the Colony, turns age 65, or becomes deceased.” The Plan was
sponsored by the Fund—a consortium of Hutterite Colonies that provides medical
coverage for members—and administered by Dakotacare. Before Select cared for
Mary, it received preauthorization from Dakotacare.

      As part of her care, Mary needed to be transferred to a ventilator facility, but
the ventilator facility closest to her family required Medicaid. A director of the
Fund, Jared Wollman, applied for disability benefits on Mary’s behalf, which would
make her automatically eligible for Medicaid. Mary’s application for disability
benefits stated that she did not have “any private, group or government health
insurance that pays the cost of her medical care.” But Mary did have insurance
coverage under the Plan.

       On May 1, 2018, Mary qualified for disability benefits and automatically
became Medicaid-eligible. Wollman then realized that Mary also qualified for
retroactive coverage, meaning that Medicaid—not the Plan—could cover Mary’s
care even before May 1. Wollman was notified in late November that Mary was

      1
        The Honorable Karen E. Schreier, United States District Judge for the
District of South Dakota.
                                    -2-
approved for retroactive Medicaid coverage for her entire time at Select. After
receiving this approval, Wollman sent Mary’s Plan termination forms to Dakotacare.

        Select suspected that Mary’s coverage could not have been terminated and
initially instructed its staff to wait on seeking Medicaid payment for Mary. But then
Select decided to move forward with Medicaid “in the event [it was] not successful”
getting reimbursed by Dakotacare. In May 2019, Medicaid approved the payment,
and Select accepted about $300,000 from Medicaid.

                                         II.

      Select argues that Brentwood and the Fund breached their contractual
obligations by refusing to pay for Mary’s treatment. But Select has already accepted
money from Medicaid “as payment in full” for Mary’s care. 42 C.F.R. § 447.15.
The district court found that this barred Select from recovering and granted summary
judgment to Brentwood and the Fund. We review de novo. Cent. Specialties, Inc.
v. Large, 18 F.4th 989, 996 (8th Cir. 2021).

       Under 42 C.F.R. § 447.15, “the Medicaid agency must limit participation in
the Medicaid program to providers who accept, as payment in full, the amounts paid
by the agency.” (emphasis added). As a Medicaid program participant, Select must
follow this regulation. The central issue here is whether § 447.15’s “payment in
full” provision bars Select from pursuing third parties like Brentwood and the Fund
after accepting payment from Medicaid.

       This is an issue of first impression for the Court. We first consider the plain
language of § 447.15, asking “whether the language at issue has a plain and
unambiguous meaning with regard to the particular dispute in the case.” Solis v.
Summit Contractors, Inc., 558 F.3d 815, 823 (8th Cir. 2009) (citation omitted). “If
the statute is unambiguous, we simply apply the statute.” Andrade-Zamora v. Lynch,
814 F.3d 945, 951 (8th Cir. 2016).

                                         -3-
       In our view, § 447.15’s “payment in full” language is plain and unambiguous:
Once Select accepted payment from Medicaid, it was paid in full for Mary’s care.2
See Miller v. Wladyslaw Est., 547 F.3d 273, 284 (5th Cir. 2008) (explaining that the
bar in § 447.15 is triggered when “a provider bills and accepts payments from
Medicaid”). Select could either try to collect directly from Mary or a third party, or
it could instead accept a reduced payment from Medicaid. It chose the latter. We
hold that § 447.15’s “payment in full” provision does not allow Select to pursue third
parties for payment after accepting funds from Medicaid as payment in full.

       This holding aligns with our precedent. We have previously suggested that
accepting payment from Medicaid bars further recovery. Robinett v. Shelby Cnty.
Healthcare Corp., 895 F.3d 582, 587 (8th Cir. 2018) (“Unless and until a medical
services provider chooses to charge and to accept payment from Medicaid, the
provider is free to attempt to recover from . . . a liable third party.”). And other
courts’ interpretations of § 447.15 support this. See, e.g., Lizer v. Eagle Air Med
Corp., 308 F. Supp. 2d 1006, 1009 (D. Ariz. 2004); Gist v. Atlas Staffing, Inc., 910
N.W.2d 24, 31–32 (Minn. 2018); Nickel v. W.C.A.B. (Agway Agronomy), 959 A.2d
498, 506 (Pa. Commw. Ct. 2008). But see Montefiore Med. Ctr. v. Empire
Healthchoice HMO, Inc., 140 N.Y.S.3d 517, 518 (N.Y. App. Div. 2021) (concluding
that § 447.15 did not bar recovery because of the contractual relationship between
the parties).

      Select argues that today’s holding violates the principle that Medicaid is the
“payor of last resort.” Not so. If “reasonable measures” reveal that Brentwood and
the Fund are liable for Mary’s care and that the recoverable amount “reasonably
expect[ed]” exceeds the cost of recovery, Medicaid must pursue them for payment.

      2
         Select argues that we should read § 447.15 in conjunction with other non-
recourse provisions: 42 U.S.C. § 1396(a)(25)(C), 42 C.F.R. § 447.20, and S.D.
Admin. R. 67:16:01:07. It is true that these provisions outline non-recourse
protection only for individuals and do not specify shielding third parties from
liability. But these provisions also do not modify the plain and unambiguous text of
§ 447.15.
                                          -4-
42 U.S.C. § 1396a(a)(25)(A)–(B). This preserves Medicaid’s role as the “payor of
last resort” while ensuring that providers—like Select—don’t use Medicaid as their
personal insurance policy against nonpayment.

                                       III.

       Select also appeals the district court’s grant of summary judgment on its
breach of contract claim against Dakotacare. Select and Dakotacare’s relationship
was governed by the Hospital Participation Agreement, which acknowledged that
the Fund—not Dakotacare—was responsible for paying claims. And under the
agreement between Dakotacare and the Fund, Dakotacare could make payments
only when authorized. Select argues that Dakotacare breached the Hospital
Participation Agreement because it did not (1) promptly pay valid claims, (2)
encourage the Fund to pay claims and assist Select with issues in delay or
nonpayment, or (3) make retroactive denials of claims in good faith and for valid
reasons.

      First, Dakotacare did not fail to promptly pay claims. After learning about
Mary’s Medicaid eligibility, Wollman asked Dakotacare to retroactively cancel
Mary’s Plan coverage as of April 30, meaning that the Plan would still pay for much
of Mary’s care. But rather than immediately terminating coverage, Dakotacare said
it would review Mary’s documents to make sure that it had the correct effective
Medicaid date. At this point, Dakotacare had not received any claims from Select.
Five days later, Dakotacare received Select’s first claim for Mary’s care, and the
next day, Wollman instructed Dakotacare not to pay any of Select’s claims until he
had the final determination of the effective date for Mary’s Medicaid. Under its
Administrative Services Agreement with the Fund, Dakotacare could make
payments only when authorized. So Dakotacare had no opportunity to delay or
withhold payments.

      Next, Dakotacare did encourage the Fund to pay its claims. The record shows
that Dakotacare contacted Wollman on November 6 and November 20 about Mary’s
                                        -5-
Medicaid status. In response to the second prompting, Wollman assured Dakotacare
that he would have an answer about Medicaid by mid-December. Because the Fund
has authority over payment, the most Dakotacare could do was prompt the Fund.

       Finally, Dakotacare did not fail to make a retroactive denial of claims in good
faith or for valid reasons. Select argues that Mary’s termination under the Plan was
ineffective or unlawful, but the Hospital Participation Agreement simply requires
that Dakotacare make eligibility determinations in good faith. And under the terms
of the Plan, the Fund had the final authority to interpret Mary’s eligibility. Even if
the Fund’s decision was ineffective and incorrect, the Hospital Participation
Agreement did not require Dakotacare to indemnify or reimburse Select for the
Fund’s decision.

                                         IV.

       Select also brought a fraud and deceit claim against Brentwood and the Fund.
Select argues that they falsely represented that Mary’s coverage was terminated and
failed to provide Select with a copy of Plan documents despite Select’s requests.
The district court granted summary judgment to Brentwood and the Fund because
Select did not show the necessary reliance to sustain a fraud and deceit claim. Select
contests this finding.

       As a threshold matter, the district court determined that § 447.15 did not bar
Select’s fraud and deceit claim because it was not seeking damages for Mary’s care
but for damages from allegedly deceitful acts. We agree. Although the relief for the
breach of contract and tort claim is the same—the difference between the Medicaid
payment and the payment under the contract—§ 447.15 does not prevent providers
from seeking damages for tortious conduct.

       But Select cannot prevail on its fraud and deceit claim. Under South Dakota
law, “one who willfully deceives another, with intent to induce him to alter his
position to his injury or risk, is liable for any damage which he thereby suffers.”
                                         -6-
Garrett v. BankWest, Inc., 459 N.W.2d 833, 847 (S.D. 1990) (cleaned up). Because
“reliance is a necessary element in proving an alleged fraud,” Aschoff v. Mobil Oil
Corp., 261 N.W.2d 120, 124 (S.D. 1977),3 Select needs to show that it relied on the
representation that Mary wasn’t covered under the Plan when it accepted the
Medicaid payment. It cannot do so. Emails demonstrate that Select suspected that
Mary could not have been terminated from the Plan and that it continued to seek
Medicaid payments to ensure at least some payment:

      [T]here is a question as to whether one of [the Brethren’s] members is
      covered under Medicaid . . . . It is our belief that this should be covered
      by a separate policy but we have been unable to verify this at present.
      Nonetheless, in the event Medicaid does make this payment, we intend
      to continue pursuing this if we find a legal basis exists for the same.

Select sent these emails as late as May 30, 2019, and mentioned no additional
representations from Brentwood or the Fund between May 30 and when it accepted
money from Medicaid. The district court properly found that Select did not show
reliance for its fraud and deceit claim.

       Select argues that the district court ignored an alternative definition of fraud
and deceit—“[t]he suppression of a fact by one who is bound to disclose it, or who
gives information of other facts which are likely to mislead for want of
communication of that fact.” S.D. Codified Laws § 20-10-2(3). Under this
definition, Select needed to show that Brentwood and the Fund had a duty to disclose
Plan documents. Select argues that Brentwood and the Fund had a duty to disclose
because they knew that Select “would reasonably expect disclosure of th[e] facts”

      3
        Select argues that it has a viable fraud claim because Mary falsely represented
that she did not have insurance on her disability benefits application. Select claims
that under Tucek v. Mueller, 511 N.W.2d 832 (S.D. 1994), this is sufficient. We
disagree. See Aschoff, 261 N.W.2d at 124 (explaining that “reliance is a necessary
element in proving an alleged fraud”).
                                             -7-
“because of the relationship between them, the customs of the trade or other
objective circumstances.” Restatement (Second) of Torts § 551(2)(e).

       But this standard applies when “advantage taken of the plaintiff’s ignorance
is so shocking to the ethical sense of the community, and is so extreme and unfair,
as to amount to a form of swindling.” Id. § 551(2)(e) cmt. l; see also Schwartz v.
Morgan, 776 N.W.2d 827, 831 (S.D. 2009). Here, Select is far more sophisticated
than Brentwood and the Fund, and their conduct does not meet this high bar. The
district court properly found that Select cannot prevail on its fraud and deceit claim.4

                                          V.

      For these reasons, we affirm.
                      ______________________________

      4
       Because we affirm the grant of summary judgment on the fraud and deceit
claim, we deny Select’s request to reinstate its civil conspiracy claim due to the lack
of an underlying tort. See Kirlin v. Halverson, 758 N.W.2d 436, 455 (S.D. 2008)
(explaining that civil conspiracy is not an independent cause of action and requires
an underlying tort claim).
                                          -8-