Alaska Native Tribal Health Consortium v. Premera Blue Cross

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ALASKA
ALASKA NATIVE TRIBAL HEALTH )
CONSORTIUM, )
)
Plaintiff, )
)
vs. )
)
PREMERA BLUE CROSS, )
)
Defendant. )
__________________________________________)
)
SOUTHCENTRAL FOUNDATION, )
)
Plaintiff, ) No. 3:12-cv-0065-HRH
) (Consolidated with
vs. ) No. 3:12-cv-0165-HRH)
)
PREMERA BLUE CROSS, )
)
Defendant. )
__________________________________________)
O R D E R
Cross-Motions for Partial Summary Judgment
Plaintiff Alaska Native Tribal Health Consortium (ANTHC) moves for partial
summary judgment.1 This motion is opposed,2 and defendant cross-moves for partial
1Docket No. 133.
2Docket No. 152.
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summary judgment.3 Defendant also moves to strike ANTHC’s motion for partial
summary judgment.4 This motion is opposed.5 Oral argument was requested and has been
heard.
Also pending in this case are defendant’s motions to exclude the testimony of Lori
Gambrell, Paul Adams, and Peter Ripper6 and defendant’s motion for a Rule 56(d)
continuance should Adams’ and Ripper’s testimony not be excluded.7 For purposes of the
instant cross-motions for partial summary judgment and motion to strike, the court
assumes without deciding that all evidence submitted by either party in support of the
cross-motions for partial summary judgment is admissible.
Facts
ANTHC is a tribal organization that provides health care services to Alaska Natives,
American Indians, and other eligible individuals pursuant to Titles I and V of the Indian
Self-Determination and Education Assistance Act, 25 U.S.C. §§ 450f-450n, 458aaa-458aaa-18;
the Alaska Tribal Health Compact; and plaintiff’s Funding Agreement with the Secretary
of Health and Human Services. ANTHC co-manages the Alaska Native Medical Center
3Docket No. 153.
4Docket No. 150.
5Docket No. 161.
6Docket Nos. 146 & 147.
7Docket No. 151.
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(ANMC) in Anchorage, Alaska, under this authority. Alaska Natives and American
Indians who receive health care services at ANMC are not personally responsible for
paying costs associated with their care.
Defendant is Premera Blue Cross. Defendant provides health insurance to some of
the individuals who obtain health care services at ANMC. From 2001 through 2011,
ANTHC and defendant had a contract which provided the rates which defendant agreed
to pay for the health care services that ANTHC provided to defendant’s insureds. That
contract was terminated by ANTHC on April 15, 2011, as a consequence of a dispute
between the parties over ANTHC’s use of Guardian Flight for air ambulance services.
ANTHC commenced this action on March 27, 2012. ANTHC alleges that defendant
is not paying it in accordance with Section 206 of the Indian Health Care Improvement Act,
25 U.S.C. § 1621e. The only remaining claim in this action is Count 3 of ANTHC’s first
amended complaint, which deals with defendant’s post-contract payments to ANTHC. In
Count 3, ANTHC seeks to
recover from Premera the difference between the actual
amounts it paid to ANTHC and ANTHC’s reasonable charges
billed for health care and services provided to Premera’s
insureds or, if Premera paid any other nongovernmental
provider or reimbursed any individual at a higher rate for
similar health care and services, the difference between that
amount and the actual amounts Premera actually paid
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ANTHC, including all charges that Premera refused or failed
to pay entirely....[8]
The court has held that Section 206 requires defendant to pay ANTHC “the higher
of its reasonable billed charges or the Alaska UCR rate.”9 ANTHC contends that since
April 16, 2011, defendant has failed to pay it according to Section 206 because defendant
is paying it less than its billed charges, which ANTHC contends are reasonable.
ANTHC now moves for summary judgment that its billed charges are reasonable.
Defendant cross-moves for summary judgment that ANTHC’s billed charges are not
reasonable, or in the alternative, that it has paid ANTHC in accordance with the Alaska
UCR rate, which defendant contends ANTHC has admitted is usually higher than
ANTHC’s billed charges.
Discussion
Summary judgment is appropriate when there are no genuine issues of material fact
and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The
initial burden is on the moving party to show that there is an absence of genuine issues of
material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party meets
its initial burden, then the non-moving party must set forth specific facts showing that there
is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). In
8First Amended Complaint at 7, ¶ 19, Docket No. 10.
9Order re Motion for Judgment on the Pleadings at 13, Docket No. 73.
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deciding a motion for summary judgment, the court views the evidence of the non-movant
in the light most favorable to that party, and all justifiable inferences are also to be drawn
in its favor. Id. at 255. “[T]he court’s ultimate inquiry is to determine whether the ‘specific
facts’ set forth by the nonmoving party, coupled with undisputed background or
contextual facts, are such that a rational or reasonable jury might return a verdict in its
favor based on that evidence.” T.W. Elec. Service, Inc. v. Pacific Elec. Contractors Ass’n,
809 F.2d 626, 631 (9th Cir. 1987).
As an initial matter, defendant moves to strike ANTHC’s third motion for partial
summary judgment because ANTHC relies on untimely disclosed expert opinions in
support of this motion. As noted above, the court is assuming for purposes of the instant
cross-motions for summary judgment and motion to strike that all submitted evidence is
admissible. Thus, defendant’s motion to strike ANTHC’s third motion for partial summary
judgment is denied.
Turning then to the merits of the instant cross-motions for partial summary
judgment, ANTHC first argues that defendant has never and cannot now dispute the
reasonableness of ANTHC’s billed charges. In support of this argument, ANTHC cites to
defendant’s response to ANTHC’s interrogatory that asked if defendant contended that
ANTHC’s billed charges were not reasonable. Defendant responded by quoting the Alaska
UCR regulation because defendant took the position that Section 206 only required it to
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pay ANTHC the Alaska UCR rate.10 After the court rejected defendant’s position, ANTHC
asked defendant if its position had changed and defendant stated that it would supplement
its response with expert witness reports.11 ANTHC contends, however, that defendant has
never done so and when defendant’s expert, Todd Menenberg, was deposed, he testified
that he was not asked to analyze whether ANTHC’s charges were reasonable.12
As defendant is quick to point out, however, Menenberg would testify that
ANTHC’s rates are not reasonable, in part because “other, non-Premera insurance
companies do not treat ANTHC’s billed charges as reasonable amounts for actual
payment.”13 In short, defendant has and does contest the reasonableness of ANTHC’s
billed charges.
Defendant then argues that it is entitled to summary judgment on Count 3 because
ANTHC has conceded that its billed charges are almost always lower than the Alaska UCR
rate and because there is no dispute that defendant has paid ANTHC in accordance with
10Premera Blue Cross’s Responses to Plaintiffs’ First Discovery Requests at 15-16,
Exhibit 6, Plaintiffs’ Memorandum in Support of Third Motion for Summary Judgment,
Docket No. 134.
11Exhibit 7, Plaintiffs’ Memorandum in Support of Third Motion for Summary
Judgment, Docket No. 134.
12Deposition of Todd Menenberg at 29:23-30:2, Exhibit 8, Plaintiffs’ Memorandum
in Support of Third Motion for Summary Judgment, Docket No. 134.
13Declaration of Todd D. Menenberg at 3, ¶ 15, Docket No. 149.
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the Alaska UCR rate. Defendant points out that in ANTHC’s memorandum in support of
its instant motion for partial summary judgment, ANTHC stated that “ANTHC’s billed
charges to Premera are almost always lower, for both inpatient and outpatient services,
than the 80th percentile of similar charges billed by peer hospitals. This is the ‘Alaska UCR’
rate that Premera agrees is de jure ‘reasonable’ under Rule 206.”14 Defendant argues that
if ANTHC’s reasonable billed charges are “almost always” lower than the Alaska UCR rate,
then ANTHC would be entitled to be paid the Alaska UCR rate because it is higher than
ANTHC’s reasonable billed charges. Because defendant insists that it has paid ANTHC
according to the Alaska UCR rate, defendant contends that it is entitled to summary
judgment on Count 3.
This argument fails because even if ANTHC has conceded that its billed charges are
almost always lower than the Alaska UCR rate, which the court is not convinced it has,15
there is no evidence in the record that defendant has paid ANTHC according to the Alaska
UCR rate. Menenberg opines that defendant’s “methodologies for reimbursing ANMC
14Plaintiffs’ Memorandum in Support of Third Motion for Summary Judgment at 3,
Docket No. 134 (footnotes omitted).
15Even if ANTHC’s billed charges are lower than the Alaska UCR rate, ANTHC
seeks to be paid its reasonable billed charges because it believes that it will be entitled to
a larger payment if it is paid its reasonable billed charges. The court has held that cost-
sharing amounts cannot be deducted from ANTHC’s billed charges but that it is likely that
cost-sharing amounts could be deducted from the Alaska UCR rate.
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represent a reasonable approach to implement 3 AAC 26.110“16 but he never opines that
defendant paid ANTHC according to the Alaska UCR rate. In prior motion practice,
defendant cited to a declaration from Rich Maturi, its senior vice-president, as evidence that
it had paid ANTHC according to the Alaska UCR rate, but Maturi’s declaration does not
say that. In addition, Menenberg has opined that defendant failed to “update the UCR
calculations every six months”17 as required by law, which at least suggests that defen-
dant’s payments to ANTHC might not have always been in accordance with the Alaska
UCR rate. Thus, even assuming that the Alaska UCR rate is generally higher than
ANTHC’s billed charges, defendant is not entitled to summary judgment on Count 3 based
on its contention that it has paid ANTHC according to the Alaska UCR rate.
Turning then to the primary question presented here, namely whether ANTHC’s
billed charges are reasonable, courts have consistently found that the “‘reasonableness of
charges inquiry requires individual considerations....’” Eufaula Hosp. Corp. v. Lawrence,
32 So.3d 30, 45 (Ala. 2009) (quoting Howard v. Willis-Knighton Med. Ctr., 924 So.2d 1245,
1263 (La. Ct. App. 2006)). As one court noted, “[a] thorough review of the case law from
Florida and elsewhere leads to the conclusion that no single factor can be used to determine
the reasonableness of [a] hospital[’]s charges. Rather, several non-exclusive factors are
16Expert Witness Report at 22, Exhibit A, Menenberg Declaration, Docket No. 149.
17Id.
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relevant to the inquiry.” Colomar v. Mercy Hosp., Inc., 461 F. Supp. 2d 1265, 1269 (S.D. Fla.
2006) (emphasis added). These factors include 1) “an analysis of the relevant market for
hospital services”, 2) the usual and customary rate the hospital charges, 3) the hospital’s
internal cost structure, 4) the nature of the services provided,18 5) the average payment the
provider would have accepted as full payment from third-parties, and 6) the price an
average patient would agree to pay for the service at issue.19 Id.; Howard, 924 So.2d at
1254; Eufaula, 32 So.3d at 45-46.
1. Market Price Analysis
This factor includes consideration of “the rates charged by other similarly situated
hospitals for similar services....” Colomar, 461 F. Supp. 2d at 1269. ANTHC has offered
evidence that its billed charged are almost always lower, for both inpatient and outpatient
services, than the 80th percentile of similar charges billed by peer hospitals. Lori Gambrell,
plaintiff’s expert, opines that
the charges billed by [ANTHC] from 2010 to present are
reasonable when compared to either [ANTHC’s] peer group of
four Alaska hospitals[20] or to a hypothetical rate calculated
18The parties have made no argument as to this factor, presumably because this case
involves a wide variety of services.
19ANTHC contends, and defendant does not dispute, that this factor has no
application here because ANTHC does not charge its patients for services.
20ANTHC’s peer hospitals are identified as “Providence Alaska Medical Center
(continued...)
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according to the Alaska Division of Insurance regulations, 3
AAC 26.110 ( the ‘80th percentile’ rate). My analysis shows
that ANTHC’s charges during this period were lower than the
80th percentile of charges by those hospitals for in-patient
services and roughly at the 80th percentile for out-patient
services.[21]
Although the parties disagree as to whether the comparison for a market analysis should
be between actual billed charges or between allowed amounts, Gambrell’s testimony
suggests that ANTHC’s charges are reasonable when compared to what other hospitals are
charging.
2. Usual and Customary Rate Charged
Defendant argues that ANTHC’s usual and customary rates, i.e., its billed charges,
are the least important factor because billed charges are almost never fully paid by third
parties. Defendant contends that if this factor is given any weight here it would allow
ANTHC to unilaterally decide what its reasonable billed charges are.
ANTHC is not arguing that its billed charges are reasonable because those charges
are its usual and customary charges. Rather, ANTHC has taken the position that this factor
does not apply here because it does not directly charge its patients. In Colomar, there were
20(...continued)
(Anchorage), Alaska Regional (Anchorage), Fairbanks Memorial (Fairbanks), and Central
Peninsula General (Soldotna).” Declaration of Peter Ripper (dated August 28, 2013) at 3,
¶ 5, Exhibit C, Opposition to Motion for Judgment on the Pleadings, Docket No. 67.
21Expert Report of Lori Gambrell at 1, ¶ 1, Exhibit 2, Plaintiffs’ Memorandum in
Support of Third Motion for Summary Judgment, Docket No. 134.
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allegations that the hospital was charging uninsured patients higher rates than patients
with insurance or Medicaid patients and the court concluded that the price charged for the
same services to other patients within the same hospital was relevant to the question of
reasonableness. Colomar, 461 F. Supp. 2d at 1271-72. Because ANTHC does not charge its
patients, this factor has little, if any, relevance in this case.
3. Average Payment ANTHC Accepts from Third Parties
Both parties’ experts have analyzed ANTHC’s EOBs (explanations of benefits)22 to
determine what ANTHC accepts as payment from other insurance companies. Paul
Adams, plaintiff’s expert, avers that based on his analysis, defendant allowed 72% of
ANTHC’s billed charges, while Cigna and Meritan allowed 100% and Premera FEHB
allowed 94%.23 Adams also avers that after cost-sharing amounts are deducted and other
adjustments are made, Cigna paid 86% of ANTHC’s billed charges and Meritan paid 67%,
while defendant paid only 47%.24 ANTHC argues that based on Adams’ testimony this
factor weighs in favor of finding its billed charges reasonable.
22In the spring of 2014, in response to a court order, ANTHC produced some 83,000
pages of EOBs, which were used to compare “ANTHC’s billed charged submitted to
insurance companies other than Premera for services provided to their members with
amounts actually paid by such third-party payors for those services.” Menenberg
Declaration at 2, ¶ 6, Docket No. 149.
23Affidavit of Paul A. Adams at 8, ¶ 13, Exhibit 9, Plaintiffs’ Memorandum in
Support of Third Motion for Summary Judgment, Docket No. 134.
24Id. at 8-9, ¶¶ 14-15.
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However, defendant’s expert avers that
the EOBs clearly indicate that other, non-Premera insurance
companies do not treat ANTHC’s billed charges as reasonable
amounts for actual payment. In total, the EOBs analyzed
contained billed charges of $1,198,955. Of this amount, the
insurance companies “allowed” $943,915, which is 79% of the
billed amount. Generally, “allowed” charges can be described
as the maximum amount that an insurer would consider
paying for a medical service or procedure, before excluding
any figures for which the insured individual would be respon-
sible (e.g., co-pays and deductibles). After “allowing”
$943,915, the insurance companies actually paid $705,235 (after
consideration of patient responsibility amounts such as co-
pays, co-insurance, and deductibles), which is 59% of the billed
amount.[25]
A reasonable fact finder could consider these opinions and the evidence supporting
them and conclude that ANTHC’s billed charges were unreasonable, but a reasonable fact
finder could also conclude ANTHC’s billed charges were reasonable based on what other
third parties are paying ANTHC.
3. Internal Cost Structure
“In addition to what a hospital charges others for the same services, and what the
market charges in general, another relevant factor that emerges from the pertinent case law
is the particular hospital’s internal cost structure.” Colomar, 461 F. Supp. 2d at 1272. “It
makes sense to consider a hospital’s internal costs in determining whether the hospital’s
charges are reasonable because such evidence might account for different prices that would
25Menenberg Declaration at 3-4, ¶ 15, Docket No. 149.
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not be fairly reflected in a simple comparison to other hospitals in the market.” Id. “That
is, if a hospital has additional, atypical internal costs compared to others in the market, then
higher prices might still be reasonable even though those rates exceed the market price.”
Id.
ANTHC argues that ANMC has unique “internal factors” that weigh in favor of
finding its billed charges reasonable. These factors include 1) that ANMC is the trauma
center and tertiary care facility for the seven hospitals and roughly 260 village and urban
health clinics that make up the Alaska Tribal Health network, which ANTHC contends
means that its patients suffer the highest health disparities of any ethnic group in Alaska
and are disproportionately likely to be uninsured, and 2) that ANMC is the only Level II
Trauma Center in Alaska, which ANTHC contends means it handles the worst (and most
expensive) injury cases. ANTHC argues that these internal factors explain why its RCC
(ratio of cost to charge) is higher than its peer hospitals. In 2011, ANTHC’s RCC was 40.5%,
Alaska Regional’s was 24%, Central Peninsula’s was 51%, Fairbanks’ was 53%, Mat-Su
Regional’s was 25% and Providence’s was 31%.26
A reasonable fact finder considering this evidence might find that it weighed in
favor of finding ANTHC’s billed charges reasonable, but a reasonable fact finder could also
find that ANTHC’s RCC indicates that ANTHC’s billed charges are not reasonable.
26Menenberg Deposition at 54:2-57:6, Exhibit 8, Plaintiffs’ Memorandum in Support
of Third Motion for Summary Judgment, Docket No. 134.
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4. Commercial Reasonableness
ANTHC argues that its billed charges should be considered reasonable because they
have been determined using a process that is commercially reasonable, prudent, and
equitable. ANTHC contracts with PARA to develop its chargemaster. ANTHC contends
that PARA’s pricing recommendations are conservative, follow best industry practices and
are in line with ANTHC’s guiding philosophy that its charges should be fair, equitable, and
at the lower end of the Anchorage and Alaska hospital charge spectrum.
Defendant, on the other hand, argues that its use of the UCR rate to pay ANTHC is
commercially reasonable. Menenberg opines that “Premera’s methodologies for
reimbursing ANMC represent a reasonable approach to implement 3 AAC 26.110.”27
Menenberg also compared defendant’s inpatient and outpatient allowable charge rates to
the estimated cost per unit for each medical service in Anchorage. Menenberg’s
comparison revealed that “Premera’s April 2011 inpatient allowable charges were between
137% and 652% of the estimated cost for providing the inpatient medical service at a peer
group of hospitals” and that “Premera’s April 2011 outpatient allowable charges were
between 133% and 464% of the estimated cost for providing the outpatient medical service
at a peer group of hospitals.”28 Menenberg thus opines that “Premera’s inpatient allowable
27Expert Witness Report at 22, Exhibit A, Menenberg Declaration, Docket No. 149.
28Id. at 15 & 22.
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charges are more than adequate to cover the cost of providing inpatient medical services
in the region” and that “Premera’s outpatient allowable charges are more than adequate
to cover the cost of providing outpatient medical services in the region.”29
Again, a reasonable fact finder considering the foregoing evidence might conclude
that this factor weighs in favor of finding ANTHC’s billed charges reasonable, but a
reasonable fact finder could also conclude the opposite.
Conclusion
Based on the foregoing, defendant’s motion to strike ANTHC’s third motion for
partial summary judgment is denied,30 as are ANTHC’s third motion for partial summary
judgment31 and defendant’s cross-motion for summary judgment.32
DATED at Anchorage, Alaska, this 2nd day of July, 2015.
/s/ H. Russel Holland
United States District Judge
29Id. at 22.
30Docket No. 150.
31Docket No. 133.
32Docket No. 153.
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