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Kettering Health Network v. CareSource

Court of Appeals of Ohio, Second District, Montgomery

March 31, 2017

KETTERING HEALTH NETWORK, et al. Plaintiffs-Appellees
CARESOURCE Defendant-Appellee

         Civil Appeal from Common Pleas Court, Trial Court Case Nos. 2013-CV-2016 Trial Court Case Nos. 2015-CV-4512

          GARY J. LEPPLA, Atty. Reg., and PHILIP J. LEPPLA, Atty., Attorneys for Plaintiffs-Appellees

          JEFFREY A. LIPPS, Atty., JOEL E. SECHLER, Atty., Carpenter Lipps & Leland, LLP, And MARK R. CHILSON, Atty. Attorneys for Defendant-Appellant


          HALL, P.J.

         {¶ 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 affirm.

         I. Background

         {¶ 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 A.1.[1] 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[2]. 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.

         II. Analysis

         {¶ 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.[3]

         {¶ 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, [4] 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 proceed ...

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