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Wayne County Hospital, Inc. v. Wellcare Health Insurance Company of Kentucky, Inc.

Court of Appeals of Kentucky

November 16, 2018

WAYNE COUNTY HOSPITAL, INC. D/B/A WAYNE COUNTY HOSPITAL APPELLANT
v.
WELLCARE HEALTH INSURANCE COMPANY OF KENTUCKY, INC. D/B/A WELLCARE OF KENTUCKY, INC. APPELLEE

          APPEAL FROM JEFFERSON CIRCUIT COURT HONORABLE JUDITH E. MCDONALD-BURKMAN, JUDGE ACTION NO. 16-CI-001550

          BRIEF FOR APPELLANT: Stephen R. Price, Sr. John W. Woodard, Jr. Louisville, Kentucky

          BRIEF FOR APPELLEE: Pierre H. Bergeron F. Maximilian Czernin Cincinnati, Ohio

          BEFORE: CHIEF JUDGE CLAYTON; DIXON AND JONES, JUDGES.

          OPINION AFFIRMING

          CLAYTON, CHIEF JUDGE.

         Wayne County Hospital, Inc. ("Hospital") appeals the Jefferson Circuit Court's order granting WellCare Insurance Company of Kentucky, Inc. d/b/a WellCare of Kentucky's ("WellCare") Kentucky Rules of Civil Procedure (CR) 12.02 motion dismissing its complaint. The trial court held that the Hospital failed to exhaust its administrative remedies when it did not avail itself of WellCare's internal procedures to file a grievance or appeal a payment issue.

         After careful consideration, we affirm.

         BACKGROUND

         This case is a breach of contract case wherein the Hospital claimed that WellCare had not reimbursed the Hospital for medical services provided in the emergency room. According to the Hospital, these services, which were provided to members of WellCare's Medicaid managed care program, were not being properly reimbursed in contravention of the Provider Agreement and applicable law. The Hospital's complaint alleged breach of contract, failure to pay the minimum rates required by Kentucky Revised Statutes (KRS) 216.380(13), and violations of Kentucky's Prompt Pay and Unfair Claims Settlement statutes. The complaint also sought declaratory and injunctive relief.

         The Hospital is a 25-bed facility in Monticello, Kentucky, that provides inpatient and outpatient services to Medicaid beneficiaries. Under federal and state law, the hospital has been designated as a "Critical Access Hospital" ("CAH") because it is located in a rural area where access to health care services is limited.

         On November 1, 2011, the Kentucky Medicaid program transitioned from a traditional "fee-for-service" to a managed care model throughout the entire state. WellCare successfully bid to be one of three Managed-Care Organizations ("MCO") and entered into a contract with the Commonwealth to manage care for Kentucky Medicaid beneficiaries. Administered jointly by the federal and state governments, the Medicaid program provides healthcare benefits to low income individuals and families. To receive Medicaid funding, participating states must comply with federal statutory and regulatory requirements. See 42 U.S.C. §§ 1396a(a) and (b).

         WellCare set up its network of provider hospitals and arranged to pay the Hospital an agreed-upon percentage of the rates paid under Medicaid's "fee-for-service" plan. WellCare paid the Hospital for outpatient services provided in the emergency room at agreed upon contract rates and in compliance with statutory minimums for CAHs under KRS 216.380(13). The dispute began after one year elapsed when emergency room services provided to WellCare members at the Hospital were no longer reimbursed in this manner.

         In September 2012, whenever the Hospital submitted emergency room claims to WellCare, it no longer paid all the claims 101 percent of costs as allegedly required by the contract and Kentucky law. Instead, WellCare used a "proprietary algorithm" to decide whether services were "medical necessary," and covered under its plan. Sometimes WellCare paid a $50 triage fee, and sometimes it paid nothing.

         The Hospital filed its complaint on April 4, 2016. WellCare filed a motion to dismiss the complaint which the trial court granted on December 8, 2016, on the grounds the Hospital failed to exhaust WellCare's internal grievance process prior to filing the lawsuit. Thereafter, the Hospital filed a motion to alter, amend or vacate the trial court's order. The trial court summarily denied this motion on July 12, 2017, because the Hospital did not raise any facts or arguments that were not previously argued.

         The Hospital now appeals both orders.

         STANDARD OF REVIEW

         A trial court should grant a motion to dismiss for failure to state a claim upon which relief can be granted only if it "appears the pleading party would not be entitled to relief under any set of facts which could be proved in support of [the] claim." Pari-Mutuel Clerks' Union of Kentucky, Local 541, SEIU, AFL-CIO v. Kentucky Jockey Club, 551 S.W.2d 801, 803 (Ky. 1977). "In making this decision, the circuit court is not required to make any factual determination; rather, the question is purely a matter of law." James v. Wilson, 95 S.W.3d 875, 883-84 (Ky. App. 2002). Further, under CR 12.02, a reviewing court owes no deference to a trial court's determination; instead, an appellate court reviews the issue de novo. Fox v. Grayson, 317 S.W.3d 1, 7 (Ky. 2010) (footnotes omitted).

         With this standard in mind, we turn ...


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