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

United States District Court, D. Hawaii

September 12, 2019

LIBERTY DIALYSIS - HAWAII LLC, Plaintiff,
v.
KAISER FOUNDATION HEALTH PLAN, INC., and KAISER FOUNDATION HOSPITALS, Defendants.

         ORDER (1) AFFIRMING MAGISTRATE JUDGE'S ORDER AS TO THREE DISCOVERY MOTIONS, ECF NO. 182; AND (2) DENYING PLAINTIFF'S REQUEST FOR PRE-TRIAL CONFERENCE AND MOTION TO CONVERT TRIAL DATE TO ASSESSMENT OF DAMAGES HEARING AND TO SET ISSUES TO BE TRIED, ECF NO. 177

          J. MICHAEL SEABRIGHT, CHIEF UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         Before the court are (1) Defendants Kaiser Foundation Hospitals' (“KFH”) and Kaiser Foundation Health Plan, Inc.'s (collectively “Kaiser”) Appeal of Magistrate Judge Wes Reber Porter's July 1, 2019 “Order as to Three Discovery Motions” (“Discovery Order”), ECF No. 189, and (2) Plaintiff Liberty Dialysis-Hawaii LLC's (“Liberty”) Request for Pre-Trial Conference and Motion to Covert Trial Date to Assessment of Damages Hearing and to Set Issues to be Tried, ECF No. 177 (“Motion for Damages Hearing”). For the reasons set forth below, the court AFFIRMS the Discovery Order and DENIES the Motion for Damages Hearing.

         II. BACKGROUND

         In 2007, Kaiser and Liberty entered an agreement, titled “Letter of Agreement For Outpatient Renal Dialysis Services” (“LOA”), for Liberty to provide outpatient renal dialysis and related services to Kaiser patients. The LOA provides that Kaiser agreed to pay Liberty for dialysis treatment and related services[1] based on rates set forth in Exhibit A to the LOA (“Agreement Rates”). More specifically, Exhibit A identifies two composite rates: (1) a contractual composite rate (which includes medications and services included in the Medicare composite rate); and (2) the Medicare composite rate used by the Centers for Medicare and Medicaid Services (“CMS”). See ECF No. 202-3 at PageID #3716. Exhibit A further specifies certain medications and services that are included in the composite rates and provides that medications and services “not specifically described [as being included in the composite rates] shall be separately reimbursable.” Id. at PageID #3716-17. Epogen, a drug commonly prescribed for dialysis patients, and unspecified “other covered services” (“OCS”) are not included in either of the composite rates and are separately compensable under all rate tables.[2]

         On January 1, 2011, CMS added Epogen to the Medicare composite rate. Liberty alleges that after January 2011, Kaiser stopped paying Liberty separately for Epogen and unspecified OCS in the amounts set forth in the Agreement Rates. Liberty also alleges that Kaiser later offset related and unrelated payments to Liberty for alleged prior overpayments for Epogen and OCS. Liberty filed the instant action in state court asserting claims for breach of contract, accounting, and declaratory judgment. ECF No. 1-2. Kaiser removed the action to this court on July 7, 2017. ECF No. 1.

         On December 26, 2017, Kaiser moved for summary judgment contending that when Epogen was added to the Medicare composite rate, it became included in the contractual composite rate and was therefore no longer separately compensable. ECF No. 42-1 at PageID #441-42. On February 16, 2018, Liberty cross-moved for summary judgment claiming that under the LOA, Kaiser must pay Liberty separately for Epogen and OSC. ECF No. 50 at PageID #614. On April 16, 2018, this court issued an Order granting summary judgment in favor of Liberty (the “MSJ Order”). ECF No. 73.

         Subsequent discovery disputes led to an August 29, 2018 status conference before Magistrate Judge Richard L. Puglisi. Observing that “it is clear that the only issue in the case is damages, ” and that a determination of the proper damages should be a mathematical exercise, [3] Magistrate Judge Puglisi ordered the parties to mediation. Tr. at 4:25-5:1, 5:13-15, ECF No. 124 at PageID #1772-73.

         After mediation failed, the parties filed three discovery motions- each party filed a motion to limit the topics noticed by the opposing party for Federal Rule of Civil Procedure 30(b)(6) depositions, and Liberty moved to compel Kaiser to answer certain interrogatories and produce additional documents. As the Discovery Order recognized, these discovery disputes arose largely from the parties' “fundamentally different interpretations of the . . . MSJ Order.” ECF No. 182 at PageID #3078. Kaiser asserted that the MSJ Order applied only to Epogen, and that liability for OCS remains in dispute. More specifically, Kaiser asserted that “Liberty still must show for every claim that the service was ordered by a Kaiser physician, was preauthorized under the applicable health plan, and was covered under the individual's membership agreement with the health plan.” Id. at PageID #3080. On the other hand, Liberty argued that the MSJ Order resolved the contract interpretation regarding payment for both Epogen and OCS, and therefore fully resolved liability.

         The Discovery Order found that the “MSJ Order applied to Epogen and OCS, ” and that it “resolved liability as to Epogen and OCS.” ECF No. 182 at PageID #3079, 3081. The Discovery Order further found, however, that “the parties may offer evidence about whether a medication or service constitutes Other Covered Services as part of the trial on damages only.” Id. at PageID #3082. In accordance with these findings, the Discovery Order ruled in part that:

• “Liberty is entitled to information and documents from Kaiser that would allow Liberty to make a calculation based on Kaiser's payment history for Epogen and Other Covered Services . . . during the business relationship of the parties [from] 2007 to the present”;
• “Liberty is entitled to discovery about the total amount of recoupment” by Kaiser;
• “Liberty is entitled to discover information as to Kaiser's prelawsuit communications regarding payments for Epogen and OCS, ” in particular a letter from a Kaiser vice-president seeking reimbursement from Liberty for alleged “‘overpaid claims' from 2008 through 2014” and stating that “for claims after December 2014, Kaiser will offset against future payments to Liberty, ” and other communications “between 2011 and 2014 regarding underpayments and calculation of underpayments”;
• “Kaiser is entitled to discovery, in the narrow damages case that remains, about Liberty's policies and practices for using and billing services and medications to Kaiser as Other Covered Services, according to the Agreement rates”; and
• “Kaiser is entitled to discover information about Liberty's policies and practices related to ‘Total Expected Reimbursements,' as the term was used on the spreadsheet Liberty produced to Kaiser.”

Id. at PageID #3083, 3085-90. More specifically, the Discovery Order allows Kaiser to depose “a [Liberty] representative who can explain LIBERTY's policies and practices for using and billing supplies to KAISER under HCPCS Codes A4657, A4913, and/or A6216, including determining and documenting whether these supplies were described on Exhibit A of the [LOA].” Id. n.11 at PageID #3088-89.

         The Discovery Order denied discovery of “Liberty's billing policies and practices that return to issues of liability, ” such as “information regarding whether certain services and medications were ordered by a Kaiser physician, was preauthorized under the applicable health plan, and was covered under the individual's membership agreement with the health plan.” Id. at PageID #3089.

         The Discovery Order required Kaiser, by July 9, 2019, to produce information, verified interrogatory responses, documents, and a letter to Liberty detailing specific documents already produced that satisfy the Discovery Order. Id. at PageID #3075.

         Meanwhile, on June 19, 2019, largely due to the same disputes regarding the scope of the MSJ Order and whether the MSJ Order resolved all liability issues, Liberty filed the instant Motion for Damages Hearing seeking an order converting the trial date to an assessment ...


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