Opelousas General Hospital Authority v. Fairpay Solutions, Inc.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

17-42

OPELOUSAS GENERAL HOSPITAL AUTHORITY, A PUBLIC TRUST,
D/B/A OPELOUSAS GENERAL HEALTH SYSTEM AND ARKLAMISS
SURGERY CENTER, L.L.C.

VERSUS

FAIRPAY SOLUTIONS, INC.

**********
APPEAL FROM THE
TWENTY-SEVENTH JUDICIAL DISTRICT COURT
PARISH OF ST. LANDRY, DOCKET NO. 12-C-1599-C
HONORABLE ALONZO HARRIS, DISTRICT JUDGE

**********
SYLVIA R. COOKS
JUDGE
**********

Court composed of Sylvia R. Cooks, Billy Howard Ezell and Van H. Kyzar,
Judges.

AFFIRMED.

Darrell W. Cook
Stephen W. Davis
Darrell W. Cook & Associates
6688 N. Central Expressway, Suite 1000
Dallas, TX 75206
Telephone: (214) 368-4686
COUNSEL FOR:
Appellant – Fairpay Solutions, Inc.

Gerald A. Melchiode
Renee S. Melchiode
Melchiode Marx King, LLC
639 Loyola Avenue, Suite 2550
New Orleans, LA 70113
Telephone: (504) 336-2880
COUNSEL FOR:
Appellant – Fairpay Solutions, Inc.

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Thomas A. Filo
Somer G. Brown
Cox, Cox, Filo, Camel & Wilson, LLC
723 Broad Street
Lake Charles, LA 70601
Telephone: (337) 436-6611
COUNSEL FOR:
Appellee – Opelousas General Hospital Authority, A Public Trust, d/b/a Opelousas
General Health System and ArkLaMiss Sugery Center, LLC

Patrick C. Morrow
James P. Ryan
Morrow, Morrow, Ryan & Bassett
324 West Landry Street
Opelousas, LA 70570
Telephone: (337) 948-4483
COUNSEL FOR:
Appellee – Opelousas General Hospital Authority, A Public Trust, d/b/a Opelousas
General Health System and ArkLaMiss Sugery Center, LLC

John S. Bradford
William B. Monk
Stockwell, Sievert, Viccellio, Clements & Shaddock, L.L.P.
One Lakeside Plaza, Fourth Floor
Lake Charles, LA 70601
Telephone: (337) 436-9491
COUNSEL FOR:
Appellee – Opelousas General Hospital Authority, A Public Trust, d/b/a Opelousas
General Health System and ArkLaMiss Sugery Center, LLC

Stephen B. Murray
Stephen B. Murray, Jr.
Arthur M. Murray
Nicole Murray-Ieyoub
Murray Law Firm
909 Poydras Street
New Orleans, LA 70112
Telephone: (504) 525-8100
COUNSEL FOR:
Appellee – Opelousas General Hospital Authority, A Public Trust, d/b/a Opelousas
General Health System and ArkLaMiss Sugery Center, LLC

R. Bray Williams
Williams Family Law Firm
162 Jefferson Street
P.O. Box 15
Natchitoches, LA 71458-0015
Telephone: (318) 352-6695
COUNSEL FOR:
Appellee – Opelousas General Hospital Authority, A Public Trust, d/b/a Opelousas
General Health System and ArkLaMiss Sugery Center, LLC

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COOKS, Judge.

The Defendant in this matter is Mitchell International, Inc. who was the

successor by merger to FairPay Solutions, Inc. FairPay is a company that provides

a service to insurance providers, essentially processing the bills received by

insurance providers from medical providers. FairPay uses computer coding to

review all bills for the insurance providers to ensure that everything is paid

properly. FairPay contends its process “ensures that its customers avoid making

overpayments, or paying duplicative, or double charges included in the bills.”

It was asserted by the Plaintiffs, Opelousas General Hospital Authority and a

class of numerous Louisiana hospitals and ambulatory surgery centers, that

FairPay’s recommendations to its insurance providers were too low in cases of

workers’ compensation claims. The Plaintiffs sued FairPay under the Louisiana

Racketeering Act, alleging FairPay had recommended fraudulent reductions to the

Plaintiffs outpatient workers’ compensation medical bills. FairPay denied that

assertion, but did eventually execute a Settlement Agreement between the parties

on August 17, 2012. Included in the Settlement Agreement was a reference to the

Future FairPay Pricing Methodology (hereafter FFPM), which specifically detailed

how FairPay would review bills submitted by Plaintiffs’ medical providers in

workers’ compensation claims. A fairness hearing was held at which the parties

agreed the Settlement Agreement was both fair and an accurate depiction of the

intent of all parties involved. The trial court approved the Settlement Agreement,

and after a competitor appealed, this court affirmed the trial court’s final approval.

Opelousas Gen. Hosp. Auth. v. Fairpay Solutions, Inc., 13-17 (La.App. 3 Cir.

7/3/13), 118 So.3d 1269.

FairPay asserts the FFPM is intended to govern how it recommends payment

to its insurance providers. Plaintiffs maintained the FFPM was non-mandatory,

and could be utilized prospectively by FairPay and their clients. Plaintiffs

contended the Settlement Agreement did not require FairPay or its clients to use

the FFPM, but noted Paragraph 11.5 of the Settlement Agreement clearly provided

if FairPay or its clients did not correctly utilize the FFPM, then neither would be

provided the protections of the Settlement Agreement.

FairPay maintained it complied with the FFPM in all respects, but in 2013,

counsel for Plaintiffs brought to FairPay’s attention numerous complaints from

class members that FairPay repriced bills were being reimbursed at an amount

below the target 72% of billed charges, which was the goal in utilizing the FFPM.

In accordance with the Settlement Agreement, Plaintiffs’ counsel forwarded the

disputed bills to FairPay and waited the requisite thirty days before filing any

workers’ compensation claims for underpayment.

At the request of Plaintiffs’ counsel, FairPay ran yearly reimbursements for

Louisiana and discovered the average reimbursements were at 69% of billed

charges, rather than the 72% set forth in the Settlement Agreement. FairPay

agreed to adjust the 95% multiplier in the FFPM to 98%, thereby increasing the

reimbursements due to the Settlement Class.

To attempt to determine how FairPay was repricing its bills, the Plaintiffs

sent fifty-three (53) bills to FairPay requesting a full analysis. FairPay complied

with this request. The results indicated seventeen (17) of the bills were repriced in

accordance with the FFPM, but thirty-six (36) were not. According to Plaintiffs,

the thirty-six (36) bills in question contained items that were not paid at all. These

non-paid items were primarily comprised of drug and radiology charges.

The Plaintiffs filed a Motion to Enforce Settlement Agreement based on its

belief that FairPay had consistently misapplied the agreed upon FFPM, which

resulted in improperly reduced payments and/or non-payments for specific billed

items. In response, FairPay filed a Motion to Enforce Settlement Agreement for

Contempt Citation, Injunctive Relief and Attorneys’ Fees. Specifically, Fairpay

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sought to stay over eighty claims being filed by Plaintiffs in workers’

compensation courts in Louisiana. Fairpay contends these claims should have

been barred by the Settlement Agreement. The matter proceeded to trial on

September 26, 2016.

At trial, FairPay’s representative, Amelia Vaughn, acknowledged FairPay

was recommending zero payment on the charges in question because they had a

“N” status indicator (which was a Medicare edit), and the FFPM was not being

applied to these zero payment charges because Fairpay classified them as non-

payable under Paragraph 1 of FFPM. Ms. Vaughn testified Medicare had

increased the number of its “N” edits. Plaintiffs’ counsel countered that the

Settlement Class had added language to Paragraph 1 which stated Paragraph 1 was

intended to identify improperly coded bills. Ms. Vaughn admitted they made no

changes in the computer program to reflect the addition of that language.

Plaintiffs argued at trial that the effect of improperly implementing the “N”

status indicator eliminated payment altogether for payable items and resulted in an

increasing number of zero payments. Plaintiffs maintained this was a primary

reason why the overall reimbursements under the FFPM continued to decline.

Following trial, the trial court took the matter under advisement. In its

written reasons for judgment, the trial court noted the purpose of the Settlement

Agreement was to benefit both the Settlement Class and FairPay by preventing

future disputes or litigation. The trial court noted it was admitted by FairPay that

Medicare edits and rules are being performed when the FFPM is applied. The trial

court specifically found “the interpretation of how the FFPM is understood to be

applied by FairPay is actually not the true intent of what the Plaintiff Class

expected in its application to actual bills.” The trial court found there was “an

error occurring in the performance of the FFPM . . ., regardless of how minor the

amount in actual payments that are not being made, and when looked at in totality

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of what is, there still remains the fact there are improper payments being made by

the Defendant.” The trial court specifically noted he found nothing to indicate

there was any “ill-intent” on FairPay’s part for the improper payments, but found

the continual decline in reimbursement payments thwarts the true intent of the

Settlement Agreement. The trial court concluded these “Medicare edits” were not

contemplated by the FFPM or Settlement Agreement, and the inclusion of these

edits continuously lowered reimbursements to the Settlement Class despite the

Settlement Agreement’s stated intent to keep payments static. Therefore, the trial

court rendered judgment granting Plaintiff’s Motion to Enforce Settlement

Agreement. FairPay’s Motion to Enforce Settlement Agreement for Contempt

Citation, Injunctive Relief and Attorneys Fees was denied.

Acknowledging that the Settlement Agreement does not require FairPay or

its clients to use the FFPM for any bills, the trial court entered Judgment tracking

the language of the FFPM and Paragraph 11.5 of the Settlement Agreement and

ordered that FairPay either:

1. Discontinue applying edits under Paragraph 1 of the Future
FairPay Pricing Methodology for correctly coded bills and
apply the formula contained in Paragraph 3 for all services
where CMS mean cost data is available (and return to
utilizing the .95 multiplier contained in the formula), or, in
the alternative,

2. Indicate on the explanation of review (EOR’s) that the bill is
not being repriced utilizing the Future FairPay Pricing
Methodology.

This judgment requires FairPay to follow the FFPM or state clearly on the EOR’s

that they are not using the FFPM.

This appeal followed. FairPay asserts the following assignments of error:

1. The trial court legally erred by altering and amending entire
provisions of the Settlement Agreement when: (i) the court made no
finding that the Settlement Agreement was ambiguous; (ii) all parties
averred that the Settlement Agreement was unambiguous at the
hearing; (iii) the court sustained an objection to the parol evidence
rule agreeing to stay within the four corners of the Settlement

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Agreement; and (iv) neither the law nor the evidence support the trial
court’s actions;

2. The trial court legally erred by entering a Judgment altering,
modifying and completely disregarding material terms of the FFPM of
the Settlement Agreement when the appellee had a clear remedy for
dispute resolution under the existing terms of the Settlement
Agreement, thereby making any need to modify the Settlement
Agreement a nullity;

3. The trial court legally erred by interpreting provisions of the
Settlement Agreement in favor of the drafter and against the obligor,
in violation of La.Civ.Code art. 2056 and La.Civ.Code art. 2057;

4. The trial court legally erred by entering Judgment against
FairPay when it is impossible for FairPay to perform said Judgment
and still comply with the unmodified provisions of the Settlement
Agreement;

5. The trial court legally erred when, after determining that the
Settlement Agreement was clear and unambiguous, construed the
terms of the Settlement Agreement in a manner that leads to absurd
consequences, namely, the elimination of entire contractual provisions
contrary to La.Civ.Code art. 2046;

6. The trial court legally erred by entering Judgment when
Plaintiffs failed to offer any evidence to support the relief obtained in
the Judgment; or

7. Alternatively, to assignment of error 6, the trial court manifestly
erred when entering Judgment modifying the Settlement Agreement
when Plaintiffs failed to meet their burden of proof and failed to offer
any evidence regarding the application of the relevant provisions of
the Settlement Agreement, specifically the FFPM and Section 11.7 of
the Settlement Agreement (dispute resolution procedures) and failed
to offer any evidence that the modifications to the Settlement
Agreement made by the trial court in its Judgment would actually cure
and alleged defects in the FFPM.

ANALYSIS

I. Standard of Review.

In this case, the trial court was tasked with interpreting a Settlement

Agreement the parties had agreed upon and the trial court had approved.

Specifically, the trial court evaluated whether FairPay’s payment of bills

complied with the provisions of the Settlement Agreement.

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Whether the language of a contract is ambiguous is a question of law that

subjects the judgment to a de novo standard of review on appeal. Cluse v. H & E

Equip. Servs., Inc., 09-574 (La.App. 3 Cir. 3/31/10), 34 So.3d 959, writ denied,

10-994 (La. 9/17/10), 45 So.3d 1043. In the interpretation of contracts, the trial

court’s interpretation of the contract is a finding of fact subject to the manifest

error rule. Dore Energy Corp. v. Carter-Langham, Inc., 08-645 (La.App. 3 Cir.

11/5/08), 997 So.2d 826, writs denied, 08-2863, 08-2938 (La. 3/13/09), 5 So.3d

118, 119; Grabert v. Greco, 95-1781, (La.App. 4 Cir. 2/29/96), 670 So.2d 571.

In applying the manifest error rule to the trial court’s interpretation, an appellate

court may not simply substitute its own view of the evidence for the trial court’s

view, nor may it disturb the trial court’s finding of fact so long as it is reasonable.

Syrie v. Schilhab, 96-1027 (La. 5/20/97), 693 So.2d 1173. The trial court did not

find the Settlement Agreement or the FFPM ambiguous, therefore the manifest

error standard of review is applicable to the trial court’s interpretation of

FairPay’s compliance with the Settlement Agreement and the FFPM.

II. Assignments of Error.

In its first assignment of error, FairPay asserts the trial court erred in altering

the provisions of the Settlement Agreement. We disagree with the contention that

the trial court altered or modified the Settlement Agreement. The trial court in its

judgment used the precise wording found in the FFPM and Settlement

Agreement. Thus, we find the trial court enforced the Settlement Agreement as

written and did not alter in any way what was written by the parties, agreed to by

the parties, and approved by the trial court in 2012. The judgment requires

FairPay to either follow the FFPM as written, or refrain from claiming on the

EOR’s that they are following the FFPM.

FairPay also alleges the trial court incorrectly determined the intent of the

parties as it relates to Paragraph 1 of the FFPM. However, Paragraph 1 clearly

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provides the intention of the parties is to identify “improperly coded bills.” Thus,

the trial court’s judgment which orders FairPay to “[d]iscontinue applying edits

under Paragraph 1 of the Future FairPay Pricing Methodology for correctly coded

bills” enforces the stated intent of the parties. As the Settlement Class notes,

where the parties’ intent is stated in the contract, courts are bound to uphold this

stated intent under La.Civ.Code art. 1971. Waller Oil Co. v. Brown, 528 So.2d

584 (La.App. 2 Cir. 1988). This assignment of error lacks merit.

In its second assignment of error, FairPay appears to argue the dispute

resolution procedure set forth in Section 11 of the Settlement Agreement

precludes the motion filed herein by the Settlement Class. Paragraph 11 requires

that on any disputes the Class or Class member send the bill or EOR in question

to FairPay for resolution prior to the filing of a 1008 claim form.

Chelle Rankin testified that thirty days prior to the filing of any 1008 claims

with the Office of Workers’ Compensation, the bills and EOR’s in question were

sent to FairPay. This testimony was uncontroverted. The trial court accepted this

testimony and found there was no violation or breach of the Settlement

Agreement by the Settlement Class. Thus, the trial court denied FairPay’s

motion. We find no error in that ruling.

FairPay’s third assignment of error asserts the trial court erred “by

interpreting provisions of the Settlement Agreement in favor of the drafter and

against the obligor.” However, the Settlement Agreement specifically provides in

Paragraph 14.7 as follows:

None of the Parties shall be considered to be the drafter of the
Settlement Agreement or any provision hereof for the purpose of any
statute, jurisprudential rule, or rule of contractual interpretation or
construction that might cause any provision to be construed against
the drafter.

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Therefore, it is clear both parties agreed that neither party will be deemed the

drafter of any provision found in the Settlement Agreement. Thus, this assignment

of error lacks merit.

In its next assignment of error, FairPay maintains it is “impossible for

[FairPay] to perform said Judgment and still comply with the unmodified

provisions of the Settlement Agreement.” We disagree.

The judgment allows FairPay, if it continues to take discounts not

contemplated by the FFPM, to simply ‘[i]ndicate on the explanation of review

(EOR’s) that the bill is not being repriced utilizing the [FFPM].” Moreover, the

testimony by Angela Vaughn, indicates it was not impossible for FairPay to

comply with the judgment rendered by the trial court:

Q. If these edits are intended to identify improperly coded bills, you
can certainly write in a software program – I know you could write it
yourself probably, couldn’t you? To have it where Paragraph 1 only
applies to bills that are improperly coded just like we put in here.

A. So if it’s that straight forward, from your perspective –

Q. You could do it.

A. It could be done. . . .

This assignment of error lacks merit.

In its fifth assignment of error, FairPay contends the trial court’s

interpretation of the FFPM would lead to absurd consequences. We do not agree,

and find FairPay’s proposed reading of the FFPM would allow it to make no

payment whatsoever for properly coded charges. We find this result would lead to

absurd results not contemplated or intended by the parties when confecting the

Settlement Agreement. The trial court specifically noted at trial, to allow FairPay

to interpret the Settlement Agreement as it desires, would result in reimbursements

to the Settlement Class below the 72% average which was contemplated by the

Settlement Agreement and approved by all parties.

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FairPay also argues to restrict Paragraph 1 to improperly coded bills would

result in certain footnotes to Paragraph 1 being rendered meaningless. As the

Settlement Class notes, the footnotes to Paragraph 1 deal with items that are not

payable and should not be billed. Thus, if any of these charges were to appear on

any bill, it would be improperly coded and subject to being rejected by FairPay.

Thus, the footnotes to Paragraph 1 are not rendered meaningless, but simply do not

apply to bills that are properly coded and billed. We find no merit in this

assignment of error.

In its last two assignments of error, FairPay argues the trial court’s granting

of the Plaintiffs’ Motion to Enforce the Settlement Agreement is based solely on

“an equity argument” and Plaintiffs “failed to offer any evidence to support the

relief obtained in the Judgment.” We disagree.

FairPay argues the testimony of Chelle Rankin, who was an employee in the

firm of Plaintiffs’ counsel, indicated she was not familiar with how FairPay was

repricing its bills. Plaintiffs acknowledged Ms. Rankin was not aware of how

FairPay was repricing its bills, because she had no access to FairPay’s computer

system or code. Plaintiffs maintained Ms. Rankin was called simply to document

that the Plaintiffs complied with their obligations under the Settlement Agreement,

not necessarily what FairPay did or did not do. This was why Plaintiffs relied on

the testimony of FairPay’s corporate representative, Amelia Vaughn, who

Plaintiffs called to the stand. Ms. Vaughn acknowledged when questioned that the

bills in question were not improperly coded, but were instead properly coded bills.

She also admitted, even though the wording of Paragraph 1 of the FFPM was

changed to add the reference to improperly coded bills, there was no corresponding

change made to the computer program to put that charge into effect. The trial

court specifically noted this in its reasons for judgment, stating “the formula/code

that is embedded in the Methodology pre-existed the document which represents

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the FFPM, indicative of the fact that any additions made to the FFPM through

actual language is nonetheless not reflected in a code change.”

Contrary to FairPay’s assertion, the Plaintiffs introduced numerous exhibits

to establish FairPay was not following the agreed-upon FFPM. In one exhibit

involving a FairPay analysis of a bill from Iberia Medical Center, despite three x-

rays which totaled $263.21 in costs, FairPay paid only $119.26, which was the

mean cost for the emergency room visit. FairPay disallowed the costs of the x-rays

by giving it a “N” status indicator and arguing the x-rays were already included in

the visit, which it billed for $119.26. Plaintiffs argued, and the trial court agreed,

that such absurd repricing was never the agreed upon intent of the FFPM.

We find the Plaintiffs submitted ample evidence to support its position that

FairPay’s practice of disallowing payments for certain items that were properly

billed, coded and payable was not contemplated anywhere in the Settlement

Agreement or FFPM, and has resulted in continuously declining reimbursements.

DECREE

For the foregoing reasons, the judgment of the trial court is affirmed. All

costs of this appeal are assessed against appellant.

AFFIRMED.

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