Baptist Hosp. of Miami, Inc. v. Medica Healthcare Plans, Inc.
Docket: Case No. 18-cv-25460-UU
Court: District Court, S.D. Florida; April 29, 2019; Federal District Court
Magistrate Judge John O'Sullivan issued a Report and Recommendation on March 26, 2019, recommending the denial of Defendant Medica Healthcare Plans, Inc.'s Motion to Compel Arbitration and Stay the Litigation. The parties had until April 9, 2019, to file objections, but none were submitted, which precludes them from contesting factual findings on appeal as per the precedent set in LoConte v. Dugger. Upon conducting a de novo review of the case, the Court affirmed and adopted Judge O'Sullivan's recommendations, denying Medica's motion and ordering it to file an answer to the complaint by May 8, 2019.
The underlying action, initiated by Baptist Hospital of Miami, Inc., South Miami Hospital, Inc., Doctors Hospital, Inc., Homestead Hospital, Inc., and West Kendall Hospital, Inc., seeks over $800,000 for services rendered to Medicare beneficiaries under a Medical Hospital Provider Agreement effective January 1, 2005. The plaintiffs' complaint includes four counts: breach of contract, unjust enrichment/breach of implied-in-law contract, promissory estoppel, and a claim for benefits under contract by assignee. Medica removed the case to federal court, asserting it acted on behalf of the Centers for Medicare and Medicaid Services and claiming jurisdiction over related state law claims. Medica's argument for arbitration references a provision in the 2005 agreement that links compliance with its manuals, specifically citing the 2018 UnitedHealthcare Care Provider Administrative Guide, which includes an arbitration clause.
Baptist Hospital asserts that the applicable manual for its claims is the 2017 UHC Provider Guide, which lacks an arbitration clause, as its claims arose before the 2018 UHC Provider Guide became effective on April 1, 2018. Baptist Hospitals oppose arbitration for three reasons: (1) the 2005 Medica Hospital Provider Agreement does not include an arbitration provision; (2) the 2018 UHC Provider Guide represents an unenforceable amendment to the 2005 agreement; and (3) their claims do not fall under the 2018 UHC Provider Guide since they predate its effective date, and the 2017 guide also lacks an arbitration clause.
In their complaint filed on November 14, 2018, Baptist Hospitals seek approximately $800,000 for denied benefit claims related to services provided to Medicare beneficiaries under the 2005 Medica Hospital Provider Agreement. This agreement stipulates Medica's obligation to compensate the hospitals for covered services, with the specific claims occurring between January 2017 and January 2018. It is acknowledged that the 2005 agreement does not have an arbitration provision. Medica refers to Section 3.2 of this agreement, which emphasizes cooperation with the Hospital Manual and related programs, but does not mention arbitration. Section 3.11 addresses grievances and disputes without referencing arbitration, stating that providers should cooperate with Medica's grievance procedures.
The 2005 Medica Hospital Provider Agreement defines "Hospital Manual" as the publication containing relevant policies for participating hospitals, while asserting that in case of any conflict, the agreement's terms prevail. The 2018 UHC Provider Guide includes an arbitration provision pertaining to dispute resolution for claim appeals and other disputes.
Concerns or complaints regarding relationships with the organization should be submitted in writing to the address specified in the agreement. A representative will attempt to resolve the issue informally. If the resolution is unsatisfactory, arbitration may be pursued as outlined in the agreement, following the administrative dispute procedures in relevant benefit plans. For claim payment disputes, the claim reconsideration and appeal process must be completed before initiating arbitration. If informal discussions fail, arbitration proceedings will occur at the location specified in the agreement, or otherwise as indicated in the Arbitration Counties by Location section. The 2018 UHC Provider Guide is effective April 1, 2018, and applies to all healthcare providers in the commercial and Medicare networks, defining terms such as "provider" to include all relevant healthcare professionals and facilities. In case of inconsistencies, the agreement prevails unless specific protocols for affiliates are outlined in a supplement. The 2017 UHC Provider Guide lacks an arbitration provision but similarly instructs that complaints should be sent to the designated address for resolution. The Eleventh Circuit treats motions to compel arbitration as motions to dismiss for lack of subject matter jurisdiction and allows consideration of materials beyond the complaint. Federal law governs the enforceability of arbitration agreements, while state law dictates their interpretation and formation.
Arbitration is fundamentally a contractual matter, governed by the Federal Arbitration Act (FAA), which mandates that courts respect the parties' intentions and resolve doubts in favor of arbitration (AT&T Mobility LLC v. Concepcion). Federal law directs that any uncertainty regarding arbitrability should favor arbitration, whether it pertains to contract interpretation or defenses like waiver. However, disputes about the existence of an arbitration agreement itself do not benefit from this presumption (Bazemore v. Jefferson Capital Sys, LLC). The existence of an arbitration agreement is determined solely as a matter of contract (First Options of Chicago, Inc. v. Kaplan).
Under the FAA, a party cannot be compelled to arbitrate unless there is an established agreement to do so (Mercury Construction). The federal policy promoting arbitration cannot extend beyond the original intent of the parties (Dasher v. RBC Bank). Before applying the presumption in favor of arbitration, courts must find evidence of a mutual intention to arbitrate (First Options).
In motions to compel arbitration, courts evaluate: 1) the validity of the arbitration agreement, 2) the existence of an arbitrable issue, and 3) any waiver of the right to arbitrate, with the current case only addressing the first two factors.
Medica claims that Baptist Hospitals are bound to arbitrate under the 2005 Medica Hospital Provider Agreement, which mandates compliance with Medica’s guidelines, specifically the 2018 UHC Provider Guide. Baptist Hospitals contest this, arguing: 1) there is no arbitration clause in the 2005 Agreement, 2) the 2018 Guide is an unenforceable modification, and 3) even if the 2018 Guide were applicable, the arbitration clause does not pertain to claims arising from non-payments predating its effective date.
Baptist Hospitals did not raise a waiver issue, leading to the examination of whether a written arbitration agreement exists and whether the claims fall under its provision. It is acknowledged that the 2005 Medica Hospital Provider Agreement between Baptist and Medica lacks an arbitration clause. Medica relies on the 2018 UHC Provider Guide, issued by its parent company, UnitedHealthcare, which contains an arbitration provision effective April 1, 2018, for existing providers in UHC's networks. The 2005 agreement incorporates the UHC Provider Guide and mandates Baptist Hospitals to cooperate with the policies unless they conflict with the agreement's terms. Medica asserts that Baptist's only basis to oppose the UHC Guide's terms is if they conflict with the 2005 agreement, which does not explicitly require litigation for dispute resolution. Medica argues that the UHC Guide allows for dispute resolution and that the use of "may" in the arbitration context grants either party the right to demand arbitration. Conversely, Baptist contends that the arbitration clause conflicts with Section 3.11 of the 2005 agreement, which requires cooperation with Medica's grievance procedures, suggesting a preference for handling disputes outside of arbitration.
Baptist Hospitals contend that the 2018 UHC Provider Guide's Medica Supplement does not mandate arbitration for disputes, referencing pages 145-156 to support their position. Medica, however, asserts that the "Resolving Disputes, Concerns or Complaints" section obligates Baptist Hospitals to engage in binding arbitration. Baptist Hospitals argue that Section 3.11 of the 2005 Medical Hospital Provider Agreement contradicts the 2018 Guide's provisions. They cite several cases, including In re Checking Account Overdraft Litigation, where arbitration was not compelled due to the absence of an arbitration clause in the operative agreement, and Careplus Health Plans, which similarly denied arbitration requests based on a lack of relevant clauses in the governing agreements. Baptist Hospitals assert that reasonable cooperation does not equate to consent for mandatory arbitration. Medica counters that the cited cases are factually distinct, emphasizing that prior agreements were superseded by new ones lacking arbitration clauses, and highlighting that none of the cases involved agreements allowing unilateral amendments by one party. Medica insists that the arbitration provision in the 2018 Guide does not conflict with the 2005 Agreement, as it does not exclusively dictate litigation as the sole dispute resolution method.
Baptist Hospitals' assertion that the arbitration provision conflicts with the 2005 Medica Hospital Provider Agreement's Section 3.11 "Grievances and Disputes" is deemed incorrect. The arbitration provision is not inconsistent with Section 3.11, as both outline administrative grievance and appeal procedures, with arbitration taking effect only after these processes have been exhausted. Medica clarifies that "appeal" refers to administrative appeals, not litigation appeals. The arbitration provision in the 2018 UHC Provider Agreement does not conflict with Section 3.11, which does not mandate litigation as the sole dispute resolution method.
Citing Caley v. Gulfstream Aerospace Corp., the document emphasizes that a valid arbitration agreement can exist without a signature, based on continued employment after notification of the policy. It concludes that the 2018 UHC Provider Guide constitutes a written arbitration agreement as an amendment to the 2005 agreement. However, Baptist Hospitals' claims do not fall within the scope of this arbitration provision because they predate its effective date of April 1, 2018, and no retroactive language exists in the Guide. Medica's argument that the provision covers all claims is countered by precedents indicating that arbitration cannot be compelled for disputes arising before the effective contract date.
The court in Azevedo v. Carnival Corp. ruled that an arbitration clause in a 2006 contract could not be applied retroactively to claims arising in 2004, as the complaint did not indicate ongoing misconduct or claims occurring after the 2006 contract's effective date. Medica has not provided supporting case law for retroactive application of its arbitration provision to Baptist Hospitals' claims for non-payment from January 2017 to January 2018. Baptist Hospitals assert that, at the time their claims arose, the relevant policies did not mandate arbitration, referencing the 2017 Medica Healthcare Provider Manual, which lacked an arbitration requirement. They argue that the 2018 UHC Provider Guide cannot retroactively impose arbitration obligations for claims related to the 2017 Manual. The court concurs with Baptist Hospitals' position.
Baptist Hospitals cite All South Subcontractors and Careplus Health Plans, which involved two separate agreements—one with an arbitration clause and one without, both having merger clauses similar to the one in the current case. In All South Subcontractors, the court determined that the plaintiffs could not be compelled to arbitration under a 2012 agreement's terms because there was no agreement to arbitrate based on the earlier contract. Similarly, in Careplus Health Plans, the plaintiff's 2004 agreement lacked an arbitration clause, and the subsequent 2010 agreement, which did contain an arbitration provision, was not signed by the relevant party, preventing retroactive enforcement. Both cases illustrate the principle that parties cannot be bound to arbitration terms without explicit consent in the agreements applicable at the time the claims arose.
The Florida appellate court in Careplus Health upheld the trial court's refusal to compel arbitration, determining that there was no significant relationship between the claim and the arbitration clause in the agreement. The court referenced Seifert, which states that a claim must have a nexus to the contract containing the arbitration provision for arbitration to be enforced. In Careplus Health, the claims originated from a 2004 Agreement lacking an arbitration clause, and therefore, the plaintiff did not need to reference or interpret any part of a subsequent 2010 Agreement that contained such a clause. The absence of a significant relationship between the 2010 Agreement and the claims from the 2004 Agreement was crucial to the decision.
Similarly, Baptist Hospitals' claims arose from a 2017 Manual with no arbitration provision, and there was no connection to the 2018 UHC Provider Guide, which did contain an arbitration clause. The court cited additional cases supporting the principle that arbitration is contractual and cannot be retroactively imposed. Baptist Hospitals' claims predated the effective date of the 2018 UHC Provider Guide, and thus, Medica could not enforce the arbitration provision retroactively.
Furthermore, Baptist Hospitals argued that a merger clause in the 2005 Medica Hospital Provider Agreement necessitated any modifications to be documented in writing and signed by both parties. They contended that Medica's unilateral addition of an arbitration requirement in the 2018 UHC Provider Guide was unenforceable, as Baptist Hospitals did not consent to such terms.
Baptist Hospitals' argument regarding the merger clause in the 2005 Medica Hospital Provider Agreement is deemed unfounded. The merger clause explicitly states that the Agreement, along with its attachments, constitutes the entire agreement between the parties, overriding any prior agreements. It also stipulates that amendments can only be made through a written document signed by all parties. However, Baptist Hospitals' interpretation would undermine their obligation to reasonably cooperate with Medica's policies, which Medica has the right to amend unilaterally. Sections 3.2 and 1.24 of the Agreement permit Medica to revise policies as long as they do not conflict with the Agreement itself.
The Court concludes that Baptist Hospitals' interpretation would negate Medica's rights under these sections, thus rejecting the merger clause argument. The motion to compel arbitration is denied, as the arbitration provision in the 2018 UHC Provider Guide is enforceable but not retroactive, meaning claims from January 2017 to January 2018 cannot be subject to arbitration. Additionally, because Baptist Hospitals' claims do not relate to the 2018 UHC Provider Guide, they do not fall under its arbitration scope.
Consequently, the request for a stay is also denied, as the Eleventh Circuit mandates that a stay or dismissal should only occur if all claims are subject to arbitration. Furthermore, if the motion to compel arbitration is denied, Medica may file a motion to dismiss under Rule 12, which Baptist Hospitals did not contest.
The recommendation states that Medica Healthcare Plans, Inc.'s Motion to Compel Arbitration and Stay the Litigation is to be denied. The parties have fourteen days from receipt of the Report and Recommendation to file written objections with Judge Ursula Ungaro. Failure to do so will prevent de novo review by the District Judge on any issues discussed in the Report and will limit the ability to contest unobjected-to factual and legal conclusions on appeal, except on grounds of plain error. Additionally, the excerpt notes that the attached 2005 Medica Hospital Provider Agreement does not disclose the content of Section 3.11, and emphasizes that the agreement's merger clause requires any amendments to be made in a written and signed document that references the Agreement specifically. The document is submitted from Miami, Florida, on March 26, 2019.
