Pain Ctr. of Se Ind., LLC v. Origin Healthcare Solutions LLC

PAIN CENTER OF SE INDIANA, LLC; INDIANA PAIN MEDICINE AND REHABILITATION CENTER, P.C.;and ANTHONY ALEXANDER, M.D., Plaintiffs, v. ORIGIN HEALTHCARE SOLUTIONS LLC; SSIMED (d/b/a SSIMED Holding, LLC); ORIGIN HOLDINGS, INC.,a Delaware Corporation; JOHN DOES (1-50) inclusive; and JOHN DOES (1-100) inclusive, Defendants.

1:13-cv-00133-RLY-DKL

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF INDIANA INDIANAPOLIS DIVISION

January 24, 2017

ENTRY ON CROSS MOTIONS FOR SUMMARY JUDGMENT

This matter comes before the court on the parties' cross motions for summary judgment. Plaintiffs, Pain Center of SE Indiana, LLC ("Pain Center"), the Indiana Pain Medicine and Rehabilitation Center, P.C. ("PMRC"), and Anthony Alexander, M.D. ("Dr. Alexander"), brought this action asserting twelve claims against Defendants, SSIMED; Origin Healthcare Solutions, LLC; and Origin Holdings, Inc. (collectively, "SSIMED"). Plaintiffs' claims arise out of two licensing contracts for practice management and electronic medical records software from SSIMED. Plaintiffs seek summary judgment on their breach of contract claim, their theory of joint and several liability under the corporate alter ego doctrine, and Defendants' affirmative defenses of waiver, statute of limitations, laches, and judicial estoppel. Origin moves for summary judgment on each of Plaintiffs' claims. For reasons set forth below, the court GRANTS summary judgment in favor of SSIMED and DENIES Plaintiffs' motion for partial summary judgment.¹

I. Standard

On summary judgment, the court should "pierce the pleadings and . . . assess the proof in order to see whether there is a genuine need for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986). The moving party must show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). To survive the motion, the nonmoving party must present specific facts showing the existence of a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). "A genuine issue of material fact arises only if sufficient evidence favoring the nonmoving party exists to permit a jury to return a verdict for that party." Springer v. Durflinger, 518 F.3d 479, 483 (7th Cir. 2008) (internal quotation marks omitted). At the summary judgment stage, the evidence put before the court need not be admissible in form, but it must be admissible in content. Wheatley v. Factory Card & Party Outlet, 826 F.3d 412, 420 (7th Cir. 2016) (citing Winskunas v. Birnbaum,23 F.3d 1264, 1267-68 (7th Cir. 1994)); see also Gunville v. Walker, 583 F.3d 979, 985 (7th Cir. 2009) ("Admissibility is the threshold question because a court may consider only admissible evidence in assessing a motion for summary judgment.").

II. Factual Background²

SSIMED provides full-service billing to health care providers using its proprietary software, Practice Manager. (Filing Nos. 324-1, 338-15, 328-5, and 333-1 ("McMahon Dep.") at 26:18-24, 29:1-11).³ Full-service clients leave the billing and revenue collection aspects of their practices to SSIMED to manage. (Id.). SSIMED also licenses Practice Manager to "systems clients" who opt to manage their own billing and collection operations. (Id. at 29:1-11; Filing No. 324-3 ("Defs.' Suppl. Answers to Pls.' Interrog.") at 7-8). In addition to Practice Manager, SSIMED also licenses its medical records management software, known as EMRge, to practices that use electronic medical records. (Filing Nos. 324-4, 338-5, 327-5, 333-4, and 346-1 ("Pls.' 30(b)(6) Dep.") at 82:3-6).

In 2005, a group of investors acquired SSIMED and other companies that provided technology products and services to medical providers. (Filing Nos. 324-5, 338-13, 328-3, and 333-5 ("Kvam Dep.") at 21:8-17). The investors formed OriginHealthcare Solutions, LLC to provide financial, marketing, and management support for the acquired companies. (Id. at 26:2-27:19, 31:2-20). Origin Holdings, Inc. indirectly owns Origin Healthcare Solutions LLC. (See Filing No. 25).

Dr. Alexander founded Pain Center in 2001 to provide clinical services to patients suffering from chronic pain. (Pls.' 30(b)(6) Dep. at 22:18-21). Pain Center reorganized itself as PMRC in 2008.⁴ (Id. at 30:8-11). PMRC assumed all contracts executed by Pain Center, including the licensing agreements at issue in this matter. (Id. at 31:23-32:5).

A. SSIMED licenses Practice Manager and EMRge to Pain Center

In 2003, Joy Deckard, a representative of SSIMED, contacted Pain Center's billing specialist and office manager, Rhonda Mellencamp, about converting to Practice Manager as its billing software. (Filing Nos. 324-7, 338-17, 328-7, and 333-7 ("Mellencamp Dep.") at 70:9-25; Pls.' 30(b)(6) Dep. at 128:6-8). Pain Center and SSIMED executed a licensing agreement for Practice Manager on June 18, 2003. (Pls.' 30(b)(6) Dep. at 129:23-130:10). On June 28, 2006, the parties executed a separate licensing agreement for EMRge. (Id. at 143:21-144:13). Deckard represented SSIMED during the sale of each software package. (Id. at 144:1-7).

As a systems client of SSIMED, Pain Center used Practice Manager to generate its own claims for payment. (Filing No. 324-10, 338-18, 328-8, and 333-10 ("Harmon Dep.") at 144:19-145:11). The staff at Pain Center, including Mellencamp, received aweek of on-site training on the software from SSIMED trainer, Amy Kiernan. (Filing Nos. 324-9, 338-9, 327-9, and 333-9 ("Kiernan Dep.") at 87:1-7). Kiernan trained the staff Monday through Thursday and then "shadowed" them on Friday as they used a demo version of Practice Manager. (Id. at 87:1-7, 76:17-24). Kiernan also briefly shadowed Dr. Alexander on Practice Manager, but testified that he did not attend the majority of the training. (Id. at 88:2-10). Kiernan testified that she showed Dr. Alexander how to use the software to schedule appointments, run billing reports, and how to obtain product support from SSIMED. (Id. at 90:1-11). Kiernan returned to Pain Center's office in 2006 to train its staff on the EMRge software. (Id. at 95:20-22, 129:12-15; Pls.' 30(b)(6) Dep. at 85:15-17).

B. Pain Center experiences problems with Practice Manager and EMRge

Although systems clients must use Practice Manager to generate their own claims, SSIMED directs the claims to insurers and provides pertinent information regarding the status of claims. (Filing Nos. 328-1 and 338-11 ("Burke Dep.") at 104:5-24; Filing Nos. 327-7 and 338-7 ("Defs.' 30(b)(6) Dep.") at 229:16-22, 232:18-25). The claim submission process begins with the client's transmission of daily "closing files" to SSIMED. (Defs.' 30(b)(6) Dep. 229:16-22). SSIMED then takes successfully transmitted closing files and generates claims files to send to insurers through its clearinghouse. (Burke Dep. at 105:10-16). Insurers may take two to three days to process the claims. (Id. at 104:18-24, 105:17-19). Once processed, claims reports appear in a tool in Practice Manager known as the "Client Center." (Id. at 105:3-19). The claims reports inform the client whether claims successfully transmitted to insurersand, if so, whether an insurer paid a particular claim. (McMahon Dep. 115:6-23, 213:5-13).

Claim processing may fail at any stage of the submission process. (Burke Dep. at 94:21-95:15). Certain data-entry errors, such as incorrect diagnosis codes or patient birthdates, may prevent successful transmission of daily closing files to SSIMED, requiring the client to correct the errors. (McMahon Dep. at 115:8-23; Filing No. 324-11, 338-16, 328-6, and 333-11 ("Pierce Dep.") at 44:8-14, 50:18-25, 52:10-17; Harmon Dep. at 38:22-39:12). Some claims might transmit to the insurer but nonetheless "error out." (Burke Dep. at 95:12-15). When a claim fails, a report is generated in the Client Center that informs the client of the claim's status and any submission errors requiring corrections. (Id. at 104:18-105:16; McMahon Dep. at 115:15-19). Corrupt files in SSIMED's internal software might also prevent a claim file from generating properly. (Burke Dep. at 10:16-11:3, 16:13-24). Unlike submission errors, glitches from corrupt files require SSIMED—not the client—to troubleshoot the problem. (Id. at 11:4-10). Claims with submission errors (i.e., errors on the client's end) remain in the Client Center and unpaid unless they are corrected and resubmitted. (Id. at 16:2-12; Harmon Dep. 38:22-39:5, 47:4-48:8).⁵

Pain Center (and later, PMRC) used Practice Manager from 2003 to 2012 and, according to Plaintiffs, experienced problems with the software from the beginning. (Pls.' 30(b)(6) Dep. at 82:11-23). Specifically, Dr. Alexander testified that his entities experienced transmission problems between Pain Center and SSIMED, missing claims, and errors in patient data and billing amounts. (Id.). Revenue shortfalls from unpaid claims regularly compelled Plaintiffs to call SSIMED to inquire about the status of claims. (Id. at 196:11-24). Dr. Alexander testified that SSIMED repeatedly blamed unpaid claims on the failure or refusal of insurers to pay. (Id. at 222:2-6). He further testified that his staff routinely followed up with insurers who, "on numerous occasions, too numerous to even talk about," reported that they had not received claims. (Id. at 221:10-222:25).

Another former billing specialist, Demetria Hilton Pierce, joined PMRC in October 2011 and immediately noticed that insurers were not paying all submitted claims. (Pierce Dep. at 242:2-14). When Pierce inquired about the disparity between collections and claims billed, SSIMED directed her to the Client Center where she discovered approximately three thousand unattended claims containing submission errors. (Id. at 44:3-14, 44:24-45:4, 49:3-11). SSIMED informed Pierce that no one from PMRC had logged into the Client Center in approximately eighteen months. (Id. at 45:16-21). This backlog of uncorrected...