Court of Appeals of Ohio, Second District, Montgomery
KETTERING HEALTH NETWORK, et al. Plaintiffs-Appellees
Appeal from Common Pleas Court, Trial Court Case Nos.
2013-CV-2016 Trial Court Case Nos. 2015-CV-4512
J. LEPPLA, Atty. Reg., and PHILIP J. LEPPLA, Atty., Attorneys
JEFFREY A. LIPPS, Atty., JOEL E. SECHLER, Atty., Carpenter
Lipps & Leland, LLP, And MARK R. CHILSON, Atty. Attorneys
1} CareSource appeals the trial court's
overruling of its application to vacate an arbitration award
in favor of Kettering Health Network. Finding no error, we
2} CareSource is a managed care payer that
administers Medicaid payments and services for certain Ohio
Medicaid beneficiaries under a contract with the Ohio
Department of Job and Family Services (ODJFS). ODJFS pays
CareSource a set amount per beneficiary, and CareSource in
turn contracts with health-care providers, like Kettering,
for the health care services. The plan and provider establish
the terms of service and payment in a contract between them.
3} CareSource and Kettering entered into such
agreements, which required Kettering to provide medical care
and services to CareSource beneficiaries in exchange for
payment from CareSource. Two of these agreements are relevant
in this case. The first one went into effect in 1987, and the
parties entered into a replacement in 2005. Among the
services covered by these two agreements are unlisted
outpatient surgical procedures (UOSPs). In the 1987
Agreement, for these UOSPs, CareSource agreed to pay
Kettering "compensation that is equivalent to the amount
that Hospital would have received if the State of Ohio had
not contracted with the DAHP [CareSource's former name]
to administer the Medicaid program." 1987 Agreement,
Section 3.7. The 2005 Agreement provides that CareSource will
pay Kettering "100% of the current prevailing Ohio
Medicaid fee schedule." 2005 Agreement, Attachment
The relevant line in the Medicaid fee schedule says that
unlisted healthcare services are paid at " '69% of
Charges.' " Interim Award, 5.
4} Since 1987, for every UOSP that Kettering
provided to a CareSource member, Kettering submitted an
invoice that broke down the charges into several line items.
One line item was the charge for the UOSP itself, and the
other line items were charges for related services.
CareSource paid Kettering for the UOSP line item only, paying
Kettering nothing for the related services. Kettering alleges
that CareSource should have paid it for each line item. There
are 588 UOSP underpayment claims at issue, made between 2001
and 2011, arising under both the 1987 Agreement and the 2005
Agreement. In 2013, Kettering filed a complaint and a motion
to compel partial arbitration. CareSource responded by filing
a motion to compel arbitration.
5} The 1987 and 2005 Agreements each contains a
dispute resolution provision. Section 4.1 of the 1987
Agreement says that "to resolve disputes, including fee
disputes, " the parties will use a particular grievance
procedure, described in an attachment to the agreement. And
Article 7.11 of the 2005 Agreement says that "[t]he
parties shall resolve complaints, grievances or disputes
arising between parties * * * in accordance with the dispute
resolution procedures described in the arbitration
proceedings of the American Health Lawyers Association
[AHLA]." The 2005 Agreement also contains an integration
clause, in Article 7.6, which pertinently states, "This
Agreement, Attachments, and Amendments hereto contain all the
terms and conditions agreed upon by the parties and
supersedes all other agreements, express or implied,
regarding the subject matter hereof." The question
before the trial court was whether Article 7.11 supersedes
Section 4.1. The court concluded that it does, so it ordered
the parties to arbitrate all of Kettering's underpayment
claims. Kettering appealed, and we affirmed. We concluded
that "Article 7.6 of the 2005 Agreement is reasonably
susceptible to CareSource's interpretation that its
effect is retroactive such that Article 7.11 of the 2005
Agreement supersedes the 1987 Agreement." Kettering
Health Network v. Caresource, 2d Dist. Montgomery No.
25928, 2014-Ohio-956, ¶ 39.
6} Kettering's underpayment claims then went to
arbitration under the auspices of the AHLA, and an
arbitration hearing was held over several days in March 2015.
On June 29, 2015, the arbitrator issued an "Interim
Award" to Kettering ordering CareSource to pay damages
of $2, 061, 803. The arbitrator then ordered the parties
to submit post- hearing briefs on the issue of prejudgment
interest. Once the interest issue is resolved, wrote the
arbitrator, "a Final Award will be entered."
Interim Award, 34. On August 27, 2015, the
arbitrator issued a "Final Award, " which
"incorporates by reference * * * the merits
determinations of the Interim Award * * *, adds the decision
on pre-award interest, makes the costs allocation, and
determines a total amount owed." Final Award,
1. The arbitrator awarded Kettering prejudgment interest
totaling $756, 660.
7} On August 13, a couple of weeks before the
arbitrator issued the Final Award, CareSource notified the
arbitrator and Kettering that it was terminating arbitration.
CareSource argued that the deadline for a final award was
July 3 and that the arbitrator was in violation of AHLA
Rules. And on August 14, CareSource filed an application to
vacate the Interim Award. On August 27, Kettering filed an
application to confirm the Final Award. The cases were
consolidated. Thereafter, CareSource filed an application to
vacate the Final Award too. On August 22, 2016, the trial
court denied the applications to vacate and granted the
application to confirm.
8} CareSource appealed.
9} CareSource assigns four errors to the trial
court. Each argues a particular basis for why the court erred
by not vacating the arbitration awards. The first assignment
of error argues that the Final Award was untimely and is
invalid under the AHLA Rules. The second argues that the
awards conflict with provisions in the parties'
agreements. The third argues that the arbitrator
misinterpreted Ohio course-of-performance law. And the fourth
assignment of error argues that the prejudgment-interest
award conflicts with the parties' agreements and
disregards Ohio's Prompt Pay Act. Before getting to the
assignments of error, we discuss our standard of review and
the scope of the arbitrator's power.
10} Under the Ohio Arbitration Act, the court of
common pleas must confirm an arbitration award unless the
award is modified, corrected, or vacated. R.C. 2711.09. The
court's confirmation or vacation decision may then be
appealed. R.C. 2711.15. Ohio district courts do not appear to
agree on the appropriate standard of review for a decision
confirming an award. Some districts apply an
abuse-of-discretion standard. See, e.g., Fresh Eggs Mgr,
LLC. v. Ohio Fresh Eggs, 10th Dist. Franklin No.
12AP-1074, 2013-Ohio-3454, ¶ 18. ("This court has
recognized that a trial court's judgment confirming an
arbitration award is subject to review using an abuse of
discretion standard"); Marshall v. Colonial Ins.
Co., 11th Dist. Trumbull No. 2007-T-0013,
2007-Ohio-6248, ¶ 14 ("The standard of review for
judgments on arbitration awards is abuse of
discretion."). Other districts apply a de novo standard,
reviewing a confirmation decision only to see if the trial
court erred as a matter of law. See, e.g., Bowden v.
Weickert, 6th Dist. Sandusky No. S-05-009,
2006-Ohio-471, ¶ 51 ("The standard of review to be
employed on appeal is whether the lower court erred as a
matter of law in confirming the arbitration award.");
Lauro v. Twinsburg, 9th Dist. Summit No. 23711,
2007-Ohio-6613, ¶ 7 ("[A]n appellate court may only
review the lower court's order to discern whether an
error occurred as a matter of law."). This Court too
reviews decisions confirming an arbitration award de novo,
asking "whether the trial court erred as a matter of
law, " Dayton v. Internatl. Assn. of Firefighters,
Local No. 136, 2d Dist. Montgomery No. 21681,
2007-Ohio-1337, ¶ 11.
11} Kettering argues that appellate review "is
not a de novo review of the merits of the dispute" but a
review for abuse of discretion. We agree that a de novo
review of the merits would be incorrect, but so too is review
for abuse of discretion. The Ohio Arbitration Act does not
give a trial court discretion in its review of an award. By
statute, a court must confirm if it does not modify, correct,
or vacate. R.C. 2711.09. And a court can vacate an award only
for the reasons enumerated in R.C. 2711.10. Also, under the
analogous, substantively equivalent provisions in the Federal
Arbitration Act,  the U.S. Supreme Court has said that there
is "no special standard" (emphasis sic.)
governing a circuit court's review of a district
court's decision to confirm an arbitration award,
First Options of Chicago, Inc. v. Kaplan, 514 U.S.
938, 947, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995).
"Rather, " said the Court, review "should