Garden City Treatment Center, Inc. v. Coordinated Health Partners, Inc.

852 A.2d 535, 2004 R.I. LEXIS 158, 2004 WL 1562669
CourtSupreme Court of Rhode Island
DecidedJuly 14, 2004
Docket2003-517-Appeal
StatusPublished
Cited by44 cases

This text of 852 A.2d 535 (Garden City Treatment Center, Inc. v. Coordinated Health Partners, Inc.) is published on Counsel Stack Legal Research, covering Supreme Court of Rhode Island primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Garden City Treatment Center, Inc. v. Coordinated Health Partners, Inc., 852 A.2d 535, 2004 R.I. LEXIS 158, 2004 WL 1562669 (R.I. 2004).

Opinions

OPINION

PER CURIAM.

This appeal presents a fairly narrow and straightforward issue. In a contract between a medical services corporation that operates a prepaid program of health services for subscribers and a medical service provider, does the use of the word “audit,” without further definition or limitation, permit the use of statistical sampling and extrapolation of claims to calculate alleged overpayments? The defendants, Blue Cross and Blue Shield of Rhode Island (Blue Cross) and Coordinated Health Partners, Inc. (Blue CHiP) (collectively, defendants), appeal from a summary judgment in favor of Garden City Treatment Center, Inc. (Garden City or plaintiff). The motion justice found that the language was clear and the contract unambiguous, and ruled that it did not authorize the statistical and extrapolation methodology. Because our de novo “audit” yields the same result, we affirm.

This case came before the Supreme Court for oral argument pursuant to an order directing the parties to show cause why the issues raised in this appeal should not summarily be decided. After considering the arguments of counsel and examining the record and the memoranda filed by the parties, we are of the opinion that cause has not been shown, and we proceed to address defendant’s appeal at this time.

Facts and Travel

Garden City is a licensed emergency care facility in Cranston. Blue Cross is a nonprofit hospital and medical services corporation. Among its capacities, Blue [537]*537Cross is the carrier and intermediary for the Medicare program in Rhode Island. In April 1999, Garden City and Blue Cross entered into a Participating Provider Agreement (the Blue Cross agreement) for the term April 1, 1999, through March 31, 2001. This agreement was renewed automatically for an additional year. According to the terms of the Blue Cross agreement, Blue Cross was required to pay or reimburse Garden City for all covered medical services provided to Blue Cross subscribers according to particular billing codes recorded on a subscriber-patient’s medical chart.

Besides reimbursing Garden City for medical services that it provided for Blue Cross subscribers, the Blue Cross agreement required Garden City to “maintain appropriately complete medical records for each Subscriber that [Garden City] treats, in accordance with standards of the profession and as [Blue Cross] may reasonably require.” The agreement also allowed Blue Cross “upon request” to verify all subscriber medical records “for the purposes of monitoring billing * * *.” The agreement also contained a provision that allowed Blue Cross to “audit” Garden City’s financial records as they pertain to Blue Cross subscribers. This provision and the corresponding Blue CHiP provision are the subject of the present appeal. The “audit” provision provided as follows:

“[Blue Cross] shall have the right at no cost to [Garden City] to perform audits upon all of [Garden City’s] financial records as they pertain to any of the Subscribers. Any such audit of [Garden City’s] records shall be performed in accordance with the requirements of applicable statutes and regulations concerning confidentiality of information.”

Furthermore, the agreement gave Blue Cross the right to recover any overpay-ments made to Garden City for services that Blue Cross determined were “medically inappropriate for the purposes of reimbursement.”

Blue CHiP is a licensed health maintenance organization (HMO) and subsidiary of Blue Cross. It entered into a Non-Institutional Ancillary Provider Agreement (Blue CHiP agreement) that ran for the same term as the Blue Cross agreement, and was similarly renewed. The Blue CHiP agreement provided reimbursement to Garden City for health-care services provided to Blue CHiP members according to terms similar to those in the Blue Cross agreement. The Blue CHiP agreement contained a parallel provision that gave Blue CHiP access to Garden City’s billing and medical records relating to health-care services provided to Blue CHiP members. This access to Garden City’s records was allowed for compliance with applicable regulations and “program administrative purposes” including “billing verification, assessing the quality of care, medical necessity and appropriateness of care provided to Members * * The relevant Blue CHiP “audit” provision allows Blue CHiP “to inspect, evaluate, and audit any contracts, books, documents, papers and/or records of * * * [Garden City] * * * which relate to any aspect of the services performed by * * * [Garden City] in connection with the operation and maintenance of BlueCHiP for Medicare.” Furthermore, Blue CHiP had the right to recover any overpayments made to Garden City. The agreement gave Blue CHiP the option to recover any overpayments to Garden City, either by refund or by offsetting them against future payments to Garden City.

Of further significance to this appeal is that neither the Blue Cross nor the Blue CHiP agreements defined the term “audit.” Neither mentioned that sampling or extrapolation techniques could be em[538]*538ployed when performing audits and neither referred to any sources outside of the agreements in reference to performing audits.

In March 2001, Blue Cross conducted an audit of Garden City’s claims for reimbursement for the year 2000. In conducting the audit, Blue Cross reviewed 168 claims and adjusted 74 of them purportedly because the submitted patient records did not support the rate at which Garden City sought reimbursement. Because 74 of the 168 submitted claims were in error, an error rate of 45 percent, Blue Cross applied that error rate to all of the claims that Garden City submitted in 2000. Garden City complained, and Blue Cross adjusted its figures, but still found that 60 of the 163 claims reviewed were in error. This revised audit resulted in an error rate of 36 percent. Blue Cross then took the error rate from the 163 claims sampled and multiplied that rate by the 22,518 total claims that Garden City filed for 2000. Accordingly, Blue Cross found that 8,106.48 of the total claims submitted purportedly were in error. In addition, Blue Cross found that there was an average error of $15.47 per claim sampled. This resulted in an alleged overcharge of $125,407.24 for the claims that Garden City submitted for 2000.1 Including undocumented claims, Blue Cross claimed that Garden City was responsible for $125,549.24 in overcharges.

In June 2001, Blue CHiP audited the claims that Garden City submitted' for Blue CHiP commercial members for the year 2000.2 Blue CHiP employed an identical extrapolation method to the 165 Garden City claims that it reviewed. Blue CHiP said that 48 of the 165 claims required adjustment because of overcharges, an error rate of 29 percent. Accordingly, 989.19 of the 3,411 total claims that Garden City submitted to Blue CHiP were in error. Blue CHiP also said that the forty-eight errant claims averaged $35.79 in overcharges. Therefore, Blue CHiP said that Garden City overcharged it $35,403.11 for all the claims at issue in the audit.

At the same time, Blue CHiP audited an additional 149 claims that Garden City submitted on behalf of Blue CHiP’s Medicare members. In this audit, Blue CHiP reported that 75 of the 149 claims were adjusted because of overcharges, for an error rate of 50 percent. Blue CHiP applied this error rate to the 1,193 total claims in the audit and found that 596.50 of the claims were in error. It also said that the errors averaged $29.89 per claim.

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Bluebook (online)
852 A.2d 535, 2004 R.I. LEXIS 158, 2004 WL 1562669, Counsel Stack Legal Research, https://law.counselstack.com/opinion/garden-city-treatment-center-inc-v-coordinated-health-partners-inc-ri-2004.