Canyon Ambulatory Surgery Center v. SCF Arizona (CA1 9/16/10)

This is mostly an argument over workers compensation bills but contains a few practice pointers.

Canyon treated workers’ compensation patients. In March 2003 SCF, the state workers’ compensation carrier, hired as a cost-cutting measure an outside company, Qmedtrix, to review bills submitted to it and determine whether they were reasonable, according to a formula Qmedtrix had worked out. This resulted in less money to Canyon, which sued. In various ways the trial court threw out all its allegations and this opinion affirms each result.

Canyon argued that the workers’ compensation statutes, by implication, require SCF to pay for the medical services they require it to provide injured workers. This claim was dismissed. Paying less than a provider asks for is not a violation. Well, maybe not. There is a statute that requires payment but Canyon didn’t cite it to the trial court. The Court of Appeals decides, in a footnote, that this was an issue not raised below and therefore refuses to consider it. This actually seems more analogous to citing additional cases on appeal than to raising a new issue; the moral, in any event, is to make sure you’ve found all the statutes to begin with.

Canyon argued that by not paying it SCF violated the insurance policies it issued, from whose beneficiaries (the injured workers) Canyon had assignments. SCF raised a number of arguments against this, which the appellate court finessed by pointing out that the trial court’s dismissal of this claim had been without prejudice and was therefore not appealable. (The lower court had also finessed it, using a play out of the classic trial-judge playbook: when in doubt about dismissal, dismiss without prejudice. He was concerned that some new evidence about to be produced might change things; in that situation, though, the answer is to deny dismissal and let the defendant try again later.)

Canyon argued that the Qmedtrix formula constituted a “rule” that SCF, as a State agency, couldn’t use without going through the Administrative Procedures Act. The trial court granted summary judgment on this. The Court of Appeals decides that the formula isn’t a “rule” – which “implements, interprets or prescribes law or policy,” according to the APA – but is instead more of an “internal guideline,” which the APA doesn’t cover. Qmedtrix merely ”recommended” paying less than the billed charges, which SCF proved by inveigling Canyon’s lawyer into signing a Joint Pretrial Statement which used that word. It is even more surely proved, though, by the fact that once, when Canyon complained, Qmedtrix actually changed its mind; the fact that it didn’t “the vast majority” of the time “does not change” the court’s opinion. So, a one-in-a-million occurrence proves, as a matter of law (this is a summary judgment analysis, remember), that it’s a guideline, not a rule.

The court also pointed out that under the statutes, substantive rules for workers compensation are issued by the Industrial Commission; SCF merely has authority to adopt rules for the conduct of its business, a type of rule that isn’t covered by the APA. Therefore, since SCF adopted the “rule” that means that it isn’t a substantive, APA-type “rule.”  Get it? The guy who stole your car must have had authority to take it, otherwise he wouldn’t have taken it. SCF couldn’t have exceeded is authority and adopted a substantive rule because, well, it didn’t have the authority.

Canyon’s restitution claim went to trial; the advisory jury ruled for it but the trial court, after SCF filed a “post-trial renewed motion for JMOL,” rejected the advice and ruled against it. Nobody asked the trial court to make findings of fact (people, an advisory jury could be a bench trial; always ask for findings and conclusions in equity unless you have good reason not to). The Court of Appeals therefore assumed that it had found all facts necessary to support its judgment. The question was whether SCF paid reasonable value for Canyon’s services. The jury voted to award Canyon 70% of its billed charges. The trial court observed that this meant that the billed charges weren’t reasonable. Canyon accepts 30% or less of its bills from 80+% of its patient’s insurers. Whether 70% or some other, similar percentage is reasonable, that’s more than 30%.

SCF had made an offer of judgment. The trial court therefore awarded it Rule 68 sanctions. Canyon objected. The opinion does not state its position with crystal clarity but it seems to have argued that sanctions weren’t proper because other, unlitigated claims may exist between the parties. The court rejects this.

In a footnote, the court seems to say that SCF shouldn’t have called its renewed motion for JMOL a renewed motion for JMOL because the jury was advisory. But Rule 50 makes no distinction for equity. What it  means to say is that the motion’s timing was wrong because it was brought before the court entered judgment. The problem was that SCF needed to file something before then in order to convince the judge not to accept the jury’s verdict but apparently hadn’t talked to the judge about filing post-trial memoranda; it, too, wasn’t thinking in terms of a bench trial. It probably should have called it a “post-trial memorandum” anyway, which could have averted a minor argument – that the judge was not really acting as a trier of fact – that Canyon made at oral argument and that the court dismissed because Canyon hadn’t make an issue of this before then.

(link to opinion)