Steward Machine Company, Inc. v. Board of Trustees of the University of Alabama, for its division University of Alabama Hospital

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REL: 10/16/2009 Notice: T h i s o p i n i o n i s s u b j e c t t o f o r m a l r e v i s i o n b e f o r e p u b l i c a t i o n i n t h e advance s h e e t s o f Southern R e p o r t e r . R e a d e r s a r e r e q u e s t e d t o n o t i f y t h e Reporter of Decisions, A l a b a m a A p p e l l a t e C o u r t s , 300 D e x t e r A v e n u e , M o n t g o m e r y , A l a b a m a 3 6 1 0 4 - 3 7 4 1 ((334) 2 2 9 - 0 6 4 9 ) , o f a n y t y p o g r a p h i c a l o r o t h e r e r r o r s , i n o r d e r t h a t c o r r e c t i o n s may be made b e f o r e t h e o p i n i o n i s p r i n t e d i n Southern R e p o r t e r . ALABAMA COURT OF CIVIL APPEALS OCTOBER TERM, 2009-2010 2080215 Steward Machine Company, Inc. v. Board o f Trustees o f the U n i v e r s i t y o f Alabama, f o r i t s d i v i s i o n U n i v e r s i t y o f Alabama H o s p i t a l Appeal from J e f f e r s o n C i r c u i t (CV-07-902443) Court MOORE, J u d g e . A f t e r i n p a t i e n t h o s p i t a l s e r v i c e s h a d b e e n p r o v i d e d t o an i n j u r e d e m p l o y e e o f S t e w a r d M a c h i n e Company, I n c . ( " S t e w a r d " ) , between April 4 and A p r i l 16, 2006, at the U n i v e r s i t y of 2080215 Alabama H o s p i t a l i n Birmingham, the B o a r d of T r u s t e e s of the U n i v e r s i t y of Alabama, f o r i t s d i v i s i o n U n i v e r s i t y of Alabama H o s p i t a l ( h e r e i n a f t e r r e f e r r e d t o as "UAB a bill bill to to party an Steward entity workers' After screening it disputed r e f e r r e d to compensation the b i l l , some o f o n l y $93,766.54. explaining f o r $130,284.09. that the Steward Avizent, Avizent submitted Steward's administrator, n o t i f i e d UAB c h a r g e s , and Avizent i t had as 1 H o s p i t a l " ) , tendered for third- payment. Hospital charges 2 that i t t e n d e r e d payment l a t e r s e n t a l e t t e r t o UAB disallowed the of Hospital i t concluded had been "unbundled or i n c l u d e d i n a n o t h e r s e r v i c e . " After efforts H o s p i t a l submitted to obtain the f u r t h e r payment had fee d i s p u t e failed, UAB t o the Alabama Department UAB H o s p i t a l i s s u e d a statement of " t o t a l charges" a m o u n t i n g t o $ 2 4 6 , 7 7 9 . 0 4 ; h o w e v e r , UAB H o s p i t a l d i s c o u n t e d t h e b i l l p u r s u a n t t o i t s w o r k e r s ' c o m p e n s a t i o n payment a g r e e m e n t w i t h the Alabama Department of I n d u s t r i a l R e l a t i o n s , which w i l l be d e t a i l e d i n f r a , and a P r e f e r r e d P r o v i d e r O r g a n i z a t i o n agreement w i t h Steward's t h i r d - p a r t y a d m i n i s t r a t o r . 1 A t t h e t i m e , A t t e n t a , I n c . , was a c t i n g as S t e w a r d ' s t h i r d - p a r t y a d m i n i s t r a t o r , b u t A t t e n t a has s i n c e merged w i t h a n o t h e r company, and t h e e n t i t y a c t i n g as S t e w a r d ' s t h i r d p a r t y w o r k e r s ' c o m p e n s a t i o n a d m i n i s t r a t o r has b e e n " r e b r a n d e d " as A v i z e n t . 2 2 2080215 of I n d u s t r i a l R e l a t i o n s it considered Avizent the disputed refused a civil action trial court") seeking the t r i a l on O c t o b e r Steward appeals Avizent charges t o be p a y a b l e . charges, i n the Jefferson C i r c u i t that After UAB H o s p i t a l C o u r t ("the a declaration of i t s right court entered to full a j u d g m e n t i n f a v o r o f UAB 22, 2008, i n t h e amount o f $ 3 7 , 8 4 5 . 6 9 . i t s 12-page on A p p e a l judgment, the t r i a l court had d i s a l l o w e d c e r t a i n charges f o r only "unbundling." 5 from t h a t judgment. Issues In which advised A v i z e n t A f t e r a b e n c h t r i a l a t w h i c h o r e t e n u s e v i d e n c e was 4 presented, Hospital 3 t o pay t h e d i s p u t e d filed payment. ("ADIR"), The t r i a l court found that 1 r e a s o n -¬ stated: P u r s u a n t t o A l a . Code 1975, § 2 5 - 5 - 7 7 ( h ) , a b i l l i n g d i s p u t e b e t w e e n a p r o v i d e r a n d an e m p l o y e r o r i n s u r a n c e c a r r i e r must, a s an i n i t i a l m a t t e r , be s u b m i t t e d t o ADIR. See a l s o U n i v e r s i t y o f S o u t h A l a b a m a v. P . J . Lumber Co., 990 So. 2d 369 ( A l a . C i v . App. 2 0 0 7 ) . 3 UAB H o s p i t a l a l s o s o u g h t i m p o s i t i o n o f t h e 10% p e n a l t y f o r l a t e payment f o u n d i n A l a . Code 1975, § 2 5 - 5 - 7 7 ( h ) . The t r i a l court denied that claim. 4 UAB H o s p i t a l i n i t i a l l y c l a i m e d t h a t A v i z e n t h a d u n d e r p a i d i t b y $36,517.55, b u t i t s u b s e q u e n t l y r e d u c e d t h a t amount t o $36,450.08. At t r i a l , UAB H o s p i t a l p r o v e d a slightly d i f f e r e n t amount -- $37,845.69 -- a s t h e u n d e r p a y m e n t . 5 3 2080215 "'Unbundling' i s a term a p p l i e d to e r r o r s i n m e d i c a l b i l l i n g where t h e payment i s b a s e d on t h e performance of procedures f o r which a p r i c e i s set i n advance. U n b u n d l i n g o c c u r s when a p r o v i d e r s e e k s t o b i l l f o r t h e s e p a r a t e components o f a p r o c e d u r e r a t h e r than accept the agreed rate s e t f o r the o v e r a l l procedure." The trial court concluded that "unbundled" its previously agreed services charges i t had charges to Rather, the itemized trial i t s fees any court UAB specific global UAB court reasoned, have had not charge for itemize service Hospital i t had accordance w i t h i t s i n t e r n a l "Chargemaster." trial not Avizent had the separate a g r e e d upon g l o b a l found, each could Hospital i t d i d not previously for Hospital because p r o v i d e d and e x c e e d i n g any UAB had charge. merely provided in T h e r e f o r e , the 6 improperly disallowed c e r t a i n charges f o r "unbundling," a b i l l i n g p r a c t i c e t h a t d i d not even apply. The trial court determined that UAB Hospital's b i l l i n g complied with i t s "Negotiated P a r t i c i p a t i n g Agreement University Between of Department Alabama of at Industrial Birmingham Relations Hospital" and ("the A "Chargemaster" i s a l i s t of fees a h o s p i t a l m a i n t a i n s t h a t s e t s out the c o s t of each s e r v i c e the h o s p i t a l p r o v i d e s . A c c o r d i n g t o UAB H o s p i t a l w i t n e s s e s , e v e r y b i l l i s s u e d by UAB H o s p i t a l i s c a l c u l a t e d b a s e d on t h e C h a r g e m a s t e r i n p l a c e on the d a t e o f t h e s e r v i c e . 6 4 2080215 P a r t i c i p a t i n g Agreement"), the r e l e v a n t language of which w i l l be s e t o u t i n d e t a i l i n f r a , and w i t h t h e t e r m s o f t h e Alabama W o r k e r s ' C o m p e n s a t i o n A c t , § 25-5-1 e t s e q . , A l a . Code On appeal, Steward argues that the 1975. trial court e r r o n e o u s l y i n t e r p r e t e d t h e P a r t i c i p a t i n g A g r e e m e n t so in Steward's words, "a from p e r f o r m i n g b i l l self-insured screening s u c h as u n b u n d l i n g o f c h a r g e s . " employer of the t r i a l i s prohibited for identification of issues F o r t h e f o l l o w i n g r e a s o n s , we r e s p e c t f u l l y d i s a g r e e w i t h S t e w a r d ' s argument judgment that, and a f f i r m t h e court. Discussion In 1992, the Alabama changes t o t h e Alabama stated goals affordable of the workers' Legislature Workers' Compensation A c t . new Act was compensation to f a i r cost to employers." sustain system" " q u a l i t y m e d i c a l s e r v i c e s t o employees" and sweeping Among t h e "a to fair and provide " a t a r e a s o n a b l e and A l a . A c t s 1992, A c t No. 92-537, § 1. To a c c o m p l i s h t h o s e g o a l s , t h e l e g i s l a t u r e the enacted incorporated A c t , among o t h e r t h i n g s , t h e c o n c e p t o f managed c a r e into and a s y s t e m b y w h i c h h e a l t h - c a r e p r o v i d e r s a r e t o be r e i m b u r s e d according to "prevailing" rates. 5 See A l a . Code 1975, § 25-5- 2080215 1(15) ( d e f i n i n g the t e r m " p r e v a i l i n g " as occurring reimbursements f o r h e a l t h provided by federal ( M e d i c a r e ) and For and hospitals, § 25-5-77. "participating n e g o t i a t e d " by [the the programs prevailing by That the for ADIR and the Ala. elderly reimbursement forth Code that, for provides prevailing rate shall be "based on comparable type cases" f o r Code 1975, § or in Ala. participating hospital t r e a t m e n t of year. of section "the 7 rate the (Medicaid)"). method s e t Code hospitals," hospital's] preceding s e r v i c e s , other than those economically disadvantaged payment i s e s t a b l i s h e d 1975, state " [ t ] h e most commonly 25-5-77(a). the "By d e f i n i t i o n , t h e p r e v a i l i n g r a t e o f payment o r r e i m b u r s e m e n t i s self-defining 293(f). In and o t h e r words, the participating with ADIR hospital its reimbursement; hospital's self-setting." own own those Ala. Code 1975, § l e g i s l a t u r e intended that would e s t a b l i s h through individualized prevailing negotiations were to i n t e r n a l d a t a r e g a r d i n g the be 25-5each negotiations based f e e s i t had rate on of each charged S e e A l a . Code 1975, § 2 5 - 5 - 1 ( 1 6 ) ( d e f i n i n g " p a r t i c i p a t i n g h o s p i t a l s " as " [ t ] h o s e h o s p i t a l s t h a t have a n e g o t i a t e d r a t e o f r e i m b u r s e m e n t o r payment w i t h t h e D e p a r t m e n t o f I n d u s t r i a l Relations"). 7 6 2080215 during the preceding year f o r comparable medical treatment provided to the public. In accordance w i t h § 25-5-77, UAB H o s p i t a l e n t e r e d into t h e a p p l i c a b l e P a r t i c i p a t i n g A g r e e m e n t w i t h ADIR on F e b r u a r y 1, 2006. The P a r t i c i p a t i n g A g r e e m e n t s t a t e d , i n g e n e r a l , t h a t UAB H o s p i t a l w o u l d b i l l u s u a l , customary f o r s e r v i c e s p r o v i d e d i n 2006 "[t]he a n d r e a s o n a b l e c h a r g e s o f [UAB H o s p i t a l ] f o r i n p a t i e n t o r o u t p a t i e n t s e r v i c e s i n e f f e c t on t h e 1 s t d a y o f January, 2006." More specifically, the Participating Agreement p r o v i d e d : " I t i s h e r e b y a g r e e d t o b y t h e p a r t i e s t h a t [UAB H o s p i t a l ] s h a l l a c c e p t as f u l l r e i m b u r s e m e n t f o r a l l medically necessary and authorized Hospital inpatient services in authorized workers' c o m p e n s a t i o n c a s e s a maximum amount n o t t o e x c e e d the inpatient per diem prevailing rate of r e i m b u r s e m e n t f o r t h e f o l l o w i n g t y p e s o f c a s e s : ... All O t h e r C a s e s , E x c e p t T r a n s p l a n t s , s h a l l be a p r o s p e c t i v e payment o f $3,600 f o r d a y one (1) a n d day two ( 2 ) , a n d a p r o s p e c t i v e payment n o t t o e x c e e d $3,200 f o r d a y t h r e e (3) a n d a l l f o l l o w i n g i n p a t i e n t days. [UAB H o s p i t a l ] a g r e e s t o b i l l i t s billed charges f o r medically necessary authorized i n p a t i e n t s e r v i c e s , b u t a g r e e s t o a c c e p t as maximum reimbursement f o r i n p a t i e n t days t h e l e s s e r o f t o t a l c h a r g e s o r t h e h e r e t o f o r e a g r e e d upon i n p a t i e n t p e r diem p r e v a i l i n g r a t e o f reimbursement. I f the t o t a l per diem p r e v a i l i n g r a t e o f reimbursement i s less t h a n 6 3 p e r c e n t (%) o f t h e t o t a l a l l o w e d c h a r g e s , t h e n t h e payment s h a l l be 6 3 p e r c e n t (%) o f t o t a l allowed charges." 7 2080215 (Underlining in further provided original.) The Participating Agreement that " [ i ] t i s e x p r e s s l y understood t h a t the s e l f - i n s u r e d e m p l o y e r and i n s u r a n c e c a r r i e r may p e r f o r m ... b i l l s c r e e n i n g f o r the d e t e r m i n a t i o n of a l l o w e d charges for i n p a t i e n t and/or o u t p a t i e n t s e r v i c e s rendered i n an a c c e p t e d w o r k e r s ' c o m p e n s a t i o n c l a i m p u r s u a n t t o Code o f A l a b a m a , 1975, § 2 5 - 5 - 2 9 3 ( g ) . Utilization r e v i e w and b i l l s c r e e n i n g a r e d e f i n e d i n Code o f A l a b a m a , 1975, § 25-5-1 and D e p a r t m e n t o f I n d u s t r i a l R e l a t i o n s A d m i n i s t r a t i v e Code R u l e 480-5-5-.02." Our supreme c o u r t has stated: "General c o n t r a c t law requires a court to e n f o r c e an u n a m b i g u o u s , l a w f u l c o n t r a c t , as i t i s written. A c o u r t may n o t make a new c o n t r a c t f o r the p a r t i e s or r e w r i t e t h e i r c o n t r a c t under the guise of c o n s t r u i n g i t . ... " P a r t i e s t o a c o n t r a c t a r e b o u n d by p e r t i n e n t r e f e r e n c e s t h e r e i n t o o u t s i d e f a c t s and d o c u m e n t s . 'Other w r i t i n g s , o r m a t t e r s c o n t a i n e d t h e r e i n , w h i c h are r e f e r r e d t o i n a w r i t t e n c o n t r a c t may be r e g a r d e d as i n c o r p o r a t e d by t h e r e f e r e n c e as a p a r t o f t h e c o n t r a c t a n d [ , ] t h e r e f o r e , may p r o p e r l y be c o n s i d e r e d i n t h e c o n s t r u c t i o n o f t h e c o n t r a c t . ' 17A Am. J u r . 2d C o n t r a c t s § 400 ( 1 9 9 1 ) . ... "When i n t e r p r e t i n g a c o n t r a c t , a c o u r t s h o u l d g i v e t h e t e r m s o f t h e a g r e e m e n t t h e i r c l e a r and p l a i n m e a n i n g and s h o u l d presume t h a t t h e p a r t i e s i n t e n d e d what t h e t e r m s o f t h e a g r e e m e n t c l e a r l y s t a t e . Words u s e d i n a c o n t r a c t w i l l be g i v e n t h e i r o r d i n a r y , p l a i n , o r n a t u r a l m e a n i n g where n o t h i n g a p p e a r s t o show t h e y were u s e d i n a d i f f e r e n t s e n s e o r t h a t t h e y have a t e c h n i c a l m e a n i n g . " 8 2080215 Ex parte (Ala. Dan 1998) Tucker Auto Sales, (some c i t a t i o n s Relying on the c o n s t r u c t i o n , we Inc., 718 So. 2d principles 33, of 35-36 omitted). foregoing c o n c l u d e t h a t UAB contract H o s p i t a l a g r e e d w i t h ADIR i n t h e P a r t i c i p a t i n g A g r e e m e n t t o a c c e p t as payment t h e l e s s e r of its billed applicable charges per diem or rate. the amount If calculated using the per diem rate the became a p p l i c a b l e , t h e amount c a l c u l a t e d u s i n g t h a t p e r d i e m r a t e t o be t h e maximum amount p a y a b l e t o UAB Hospital unless, was under t h e p e r d i e m r a t e method, UAB H o s p i t a l would r e c e i v e l e s s than 63% charges." of the total Participating payment o f "allowed Agreement 63% of authorized i t s total In UAB "allowed that Hospital charges." event, the to receive The parties r e f e r t o t h i s l a s t c l a u s e as a " s t o p - l o s s p r o v i s i o n , " w h i c h a UAB Hospital witness testified was included in P a r t i c i p a t i n g Agreement t o ensure t h a t , i n c a t a s t r o p h i c the cases, UAB H o s p i t a l w o u l d r e c e i v e payment o f a t l e a s t a m a j o r i t y its total The of fees. Participating charges," but determined by Agreement did i t i n d i c a t e d that "allowed "bill screening" 9 as not define "allowed c h a r g e s " were t o defined in the be Alabama 2080215 Workers' Compensation Act Section Ala. and the r e l e v a n t ADIR 2 5 - 5 - 1 ( 2 0 ) , A l a . Code 1975, Admin. Code (ADIR), d e f i n e regulations. and R u l e 4 8 0 - 5 - 5 - . 0 2 ( 1 3 ) , "bill screening" as: " [ t ] h e e v a l u a t i o n and a d j u d i c a t i o n o f p r o v i d e r b i l l s f o r a p p r o p r i a t e n e s s of reimbursement r e l a t i v e to medical necessity and prevailing rates of reimbursement, d u p l i c a t e charges, unbundling of charges, r e l a t i v e n e s s of s e r v i c e s to i n j u r y or illness, necessity of assistant surgeons, adjudication of multiple procedures, number of modalities, global procedures, and any other p r e v a i l i n g a d j u d i c a t i o n i s s u e s t h a t may a p p l y . " By i n c o r p o r a t i n g by r e f e r e n c e the f o r e g o i n g terms, the p a r t i e s t o the P a r t i c i p a t i n g Agreement i n t e n d e d t h a t " a l l o w e d would be those established charges due defined by "allowed within by to the an its With "unbundling," trial rights that S t e w a r d , as that the UAB properly appropriate charges." " u n b u n d l i n g " of trial charges court billed bill as screen the UAB Hospital screening. succinctly above, would not T h e r e f o r e , we to by charges" conclude that UAB Excessive and be as correctly included in Steward was Hospital bill for charges. said, we party seeking to avoid Hospital conclude had that the was payment, t o p r o v e "unbundled" 10 burden i t s fees so as on at to 2080215 charge more than the prevailing rate of reimbursement. Steward attempted to s a t i s f y t h a t burden through the o f two w i t n e s s e s , and Dr. a former A v i z e n t b i l l - s c r e e n i n g D a v i d P e r l m a n , an expert b o t h o f whom t e s t i f i e d t h a t UAB charges that charge. should finding that, i n fact, We been court no p r e s e t testimony supervisor, bill screening, had included itemized in a rejected their global testimony, g l o b a l charges e x i s t e d from H o s p i t a l c o u l d have u n b u n d l e d i t s f e e s . review cases under 1975, § testimony trial on Hospital's b i l l have a l r e a d y However, t h e w h i c h UAB witness 8 pure f a c t u a l f i n d i n g s i n workers' the substantial-evidence 25-5-81(e)(2). o f UAB After a rule. 9 thorough Hospital's witnesses, we compensation See Ala. review of f i n d the t r i a l Code the court T h e t r i a l c o u r t n o t e d t h a t S t e w a r d had a t t e m p t e d t o p r o v e n o t o n l y t h a t UAB H o s p i t a l was g u i l t y o f u n b u n d l i n g , b u t a l s o t h a t UAB H o s p i t a l had c h a r g e d d u p l i c a t e f e e s . The t r i a l c o u r t b a s i c a l l y c o n c l u d e d t h a t S t e w a r d was e s t o p p e d f r o m a s s e r t i n g any g r o u n d s f o r d e n y i n g payment o t h e r t h a n t h o s e p r e s e n t e d t o UAB H o s p i t a l a t t h e t i m e o f and p r e c e d i n g t h e ADIR r e v i e w . Steward does not a p p e a l t h a t a s p e c t of the t r i a l court's j u d g m e n t , so we e x p r e s s no o p i n i o n as t o i t s c o r r e c t n e s s . 8 A l t h o u g h t h e c o m p l a i n t i s s t y l e d as p r e s e n t i n g an a c t i o n u n d e r t h e D e c l a r a t o r y Judgment A c t , A l a . Code 1975, § 6-6-220 e t s e q . , t h e a c t i o n a c t u a l l y a r o s e u n d e r A l a . Code 1975, § 255-77(i)(4) ( a u t h o r i z i n g a party to a medical dispute that r e m a i n s u n r e s o l v e d a f t e r a r e v i e w o f m e d i c a l s e r v i c e s by ADIR to p e t i t i o n the c o u r t f o r r e l i e f ) . 9 11 2080215 had ample e v i d e n c e b e f o r e i t t o s u p p o r t t h a t UAB H o s p i t a l d i d not unbundle i t s charges. conclude t h a t the t r i a l in concluding contention screening In r e a c h i n g that the our trial f o r unbundling. court authorize Hospital billed Compensation result, the t r i a l bill court's court simply concluded its that no charges. agree w i t h Steward t h a t and the Participating of UAB Hospital's bill However, such of must be made case we Act allowed was Steward charges. appropriate in light applicable by h o s p i t a l s s u c h as UAB this from screenings bill methodology in reading i t c o u l d have p o s s i b l y o c c u r r e d b a s e d on t h e manner i n determination screening we r e j e c t Steward's prohibited Rather, For the f o r e g o i n g reasons, Workers' Therefore, d i s a l l o w e d charges f o r h o l d i n g , we j u d g m e n t as a w h o l e , t h e t r i a l unbundling conclusion c o u r t d i d n o t commit r e v e r s i b l e e r r o r t h a t Steward improperly "unbundling." w h i c h UAB i t s factual Hospital. not the The improperly reduced 12 Agreement for a a bill of the reimbursement Act to participating bill appropriately the screening conducted, its conducted and, payment to as a UAB 2080215 Hospital. We, therefore, affirm t h e judgment c o u r t on t h e g r o u n d s s t a t e d i n t h i s of the trial opinion. AFFIRMED. Thompson, P . J . , and Pittman, concur. 13 Bryan, and Thomas, J J . ,

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