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Liberty Dialysis - Hawaii LLC v. Kaiser Foundation Health Plan Inc.

United States District Court, D. Hawaii

April 13, 2018

LIBERTY DIALYSIS - HAWAII LLC, Plaintiff,
v.
KAISER FOUNDATION HEALTH PLAN, INC, and KAISER FOUNDATION HOPSITALS, Defendants. Oahu Neighboring Islands Oahu Neighboring Islands Oahu Neighboring Islands Oahu Neighboring Islands

         ORDER (1) DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT, ECF NO. 42 (2) GRANTING PLAINTIFF'S CROSS MOTION FOR SUMMARY JUDGMENT, ECF NO. 50 (3) GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO DISMISS COUNT I OF DEFENDANTS' COUNTERCLAIM, ECF NO. 34, AND (4) DENYING PLAINTIFF'S MOTIONS TO STRIKE, ECF NOS. 48, 63; APPENDIX “A”

         I. INTRODUCTION

         Two principle issues are currently before the court: (1) the correct interpretation of the Letter of Agreement (“LOA” or “the Agreement”) between Plaintiff Liberty Dialysis - Hawaii LLC (“Liberty”) and Defendant Kaiser Foundation Hospitals (“KFH”), and (2) whether the statute of limitations on contract actions bars Count I of KFH and Defendant Kaiser Foundation Health Plan, Inc.'s (collectively “Kaiser”) Counterclaim against Liberty.

         Because the court finds that the LOA unambiguously supports Liberty's interpretation, Liberty's Motion for Summary Judgment is GRANTED, and Kaiser's Cross Motion is DENIED. Also DENIED are Liberty's Motions to Strike certain evidence that Kaiser submitted in support of its Summary Judgment Motion.

         Liberty's Motion to Dismiss is GRANTED in part and DENIED in part because the statute of limitations has run on some, but not all, of the overpayments asserted in Count I of the Counterclaim.

         II. BACKGROUND

         A. Factual Background

         Liberty and KFH entered into the LOA for Liberty to provide outpatient renal dialysis and related services to Kaiser's patients. LOA at 1, ¶ 1, ECF No. 41-2. The LOA became effective on August 1, 2007, and by its terms has been “automatically extend[ed] for additional one-year period[s]” since then. Id. at 1, ¶ 3; Compl. ¶ 16, ECF No. 1-2.

         The LOA incorporates “Exhibit A, ” which covers the services and reimbursement to be provided under the Agreement. LOA at 4, ¶ 14(a) and A-1 through A-5. Section I of Exhibit A includes a description of services. Id. at A-1. Section II includes rate tables for the various health plans, and it provides that “KFH shall pay to [Liberty] as payment in full the rates listed” therein. Id. at A-3 through A-5.

         Section I of Exhibit A also describes the first of two “composite rates” that govern Kaiser's payment obligations. For clarity, this composite rate, referred to in Section II as simply “the composite rate, ” will be referred to hereinafter as the “Contractual Composite Rate.” Section I.B of Exhibit A describes the services and medications to be included in the Contractual Composite Rate:

         The [Contractual Composite Rate] set forth in Section II, Reimbursement, shall only include the following drugs and services which shall not be separately reimbursable:

1. Any necessary staff services related to specimen collection, injections described in I.B.6 below, declotting of external shunts, and other routine, non-surgical services related to items, all of the above as covered under the Medicare composite rate.
2. Medically necessary dialysis equipment and support equipment as covered under the Medicare composite rate.
3 Purchase and delivery of all necessary dialysis supplies as covered under the Medicare composite rate.
4. Declotting supplies as covered under the Medicare composite rate.
5. Oxygen and its administration as covered under the Medicare composite rate 6. Medications, which are included in the Medicare composite rate, such as Heparin, Protamine, Mannitol, Saline, Glucose, Dextrose, and local anesthetics.
7. The following laboratory Services as covered under the Medicare composite rate.
. . .

Id. at A-1 (emphasis added).

         The second composite rate, the “Medicare Composite Rate” is the base composite rate used for dialysis services by the Centers for Medicare and Medicaid Services (“CMS”). See id. at A-4, rate table B. The parties agree that before 2011, the drug Epogen was not included in either the Contractual Composite Rate or the Medicare Composite Rate. See Compl. ¶ 18; Answer ¶ 18, ECF No. 27. The parties also agree that on January 1, 2011, CMS added Epogen to the list of drugs compensable under the Medicare Composite Rate. Compl 18; Answer 18. They disagree, however, about whether Epogen became included in the Contractual Composite Rate, by virtue of subsection 6 above, when it was added to the Medicare Composite Rate. Compl. ¶ 19; Answer ¶ 19.

         The rate tables in Section II of Exhibit A, which are reproduced and attached as “Appendix A” to this Order, refer to both the Contractual Composite Rate and the Medicare Composite Rate. See LOA at A-3 through A-5, rate tables A through D (referring in table B to the “Medicare composite base rate”). A separate table applies to each applicable health plan; and each table is divided according to location (either Oahu or “Neighboring Islands”), the service or medication provided, and the amount due. Id. For all plans, “Hemodialysis per visit” and “Peritoneal dialysis (CAPD, CCPD), per visit” are payable on Oahu at a specific Contractual Composite Rate, the dollar figure of which varies according to plan. Id. For all plans other than Medicare Advantage, those same services on Neighboring Islands are payable at a specific dollar amount not tied to any composite rate (referred to by the parties at oral argument as a “flat rate”).[1] Id. For Medicare Advantage members on Neighboring Islands, hemodialysis and peritoneal dialysis are payable at the Medicare Composite Rate “that is current at the time Services are provided.” Id. at A-4, table B.

         All of the rate tables include a separate section for Epogen. And under all plans for services on Oahu, Epogen is compensable at a specific dollar amount with no reference to a composite rate. Id. at A-3 through A-5, tables A through D. The same is true for Epogen administered on Neighboring Islands for all plans except Medicare Advantage. Id. For Medicare Advantage members on Neighboring Islands, Epogen is compensable at “[a]n amount equal to 100% of the Medicare eligible rate of reimbursement that is current at the time Services are provided.” Id. at A-4, table B.

         After January 2011, Kaiser stopped separately reimbursing Liberty for Epogen administered to at least some patients under some of the plans, and the parties have been engaged in a payment dispute ever since. See Compl. ¶¶ 17-40. According to the Complaint, the dispute involves not only Kaiser's failure to pay separately for Epogen, but also its failure to pay for unspecified “Other Covered Services, ” id. ¶¶ 17, 19, and it includes allegations regarding Kaiser's recoupment for alleged overpayments to Liberty, id. ¶¶ 23-40.

         B. Procedural Background

         Liberty filed its Complaint in state court on December 23, 2016, alleging claims for breach of contract, declaratory judgment, and an accounting, id. ¶¶ 41-56, to include “a strict and total explanation of the accounting of all payments, reimbursements, recoupments, and offsets by [Kaiser], and to provide ...


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