Select Specialty Hosp. - Sioux Falls, Inc. v. Brentwood Hutterian, Brethren, Inc.

577 F.Supp.3d 1067

SELECT SPECIALTY HOSPITAL - SIOUX FALLS, INC., a Missouri business corporation, Plaintiff,

v.BRENTWOOD HUTTERIAN, BRETHREN, INC., a South Dakota non-profit corporation; South Dakota Medical Holding Company, Inc., a South Dakota Corporation, d/b/a Dakotacare; Hutterian Brethren General Medical Fund, a South Dakota non-profit corporation, Defendants.

South Dakota Medical Holding Company, Inc., a South Dakota corporation, d/b/a Dakotacare, Cross-Claimant,

v.Hutterian Brethren General Medical Fund, a South Dakota non-profit corporation, Cross-Defendant.

4:19-CV-04171-KES

United States District Court, D. South Dakota, Southern Division.

Signed December 28, 2021

Brett A. Lovrien, Alex M. Hagen, Cadwell, Sanford, Deibert & Garry, LLP, Sioux Falls, SD, for Plaintiff.

Roger A. Sudbeck, Boyce Law Firm, LLP, Sioux Falls, SD, for Cross-Claimant.

Reed A. Rasmussen, Jeffrey T. Sveen, Siegel, Barnett & Schutz, L.L.P., Aberdeen, SD, for Defendant Brentwood Hutterian, Brethren, Inc.

Roger A. Sudbeck, Matthew D. Murphy, Boyce Law Firm, LLP, Sioux Falls, SD, for Defendant South Dakota Medical Holding Company, Inc.

Reed A. Rasmussen, Siegel, Barnett & Schutz, L.L.P., Aberdeen, SD, for Cross-Defendant.

ORDER GRANTING IN PART AND DENYING IN PART BRENTWOOD'S AND THE FUND'S MOTION FOR SUMMARY JUDGMENT, GRANTING DAKOTACARE'S MOTION FOR SUMMARY JUDGMENT, AND DENYING SELECT SPECIALTY'S MOTION FOR PARTIAL SUMMARY JUDGMENT

KAREN E. SCHREIER, UNITED STATES DISTRICT JUDGE

Plaintiff, Select Specialty Hospital, filed an amended complaint against the defendants — Brentwood Hutterian Brethren, Inc. (Brentwood), Hutterian Brethren General Medical Fund (the Fund), and South Dakota Medical Holding Company, Inc. (Dakotacare) — alleging breach of contract, unjust enrichment, and civil conspiracy. Docket 25 at 6, 10. Select Specialty also brings claims against Brentwood and the Fund for quantum meruit and for fraud and deceit and against Dakotacare for negligence. Id. at 7-8. Select Specialty also seeks declaratory relief. Id. at 11-13. Dakotacare cross-claims against the Fund seeking indemnification. Docket 31. The defendants each move for summary judgment as to all claims. Dockets 35, 40. Select Specialty opposes defendants’ motions, and moves for partial summary judgment as to its breach of contract claim against the Fund. Dockets 44, 54, 61.

FACTUAL BACKGROUND

This dispute arises out of treatment Select Specialty provided to Mary, a member of the Brentwood Hutterite Colony, during four periods between March 14, 2018, and December 10, 2018. Docket 56 ¶¶ 1, 31-32. The Fund is a consortium of Hutterite Colonies, including Brentwood, that established the self-funded Hutterian Brethren General Medical Plan to provide medical coverage to Hutterite Colony members. Id. ¶¶ 1-2. Jared Wollman is Brentwood's Secretary/Treasurer and a director of the Fund, and he was authorized to act on behalf of the Fund. Docket 53 ¶ 10. At all times that Select Specialty provided care to Mary in 2018, she was covered by the Plan. Docket 56 ¶ 30. The Fund contracted with Dakotacare to administer the Plan. Docket 60 ¶ 5. Dakotacare had a Participation Agreement with Select Specialty. Docket 63-3. Before Select Specialty provided care to Mary, it obtained preauthorization from Dakotacare for those services. Docket 56 ¶ 33.

Mary's medical team determined that she would need to be transferred to another facility where she could be on a ventilator for continued rehabilitation. Id. ¶ 38. One such facility is located at Avera Prince of Peace, but that facility only serves patients eligible for South Dakota Medicaid. Docket 63-4 at 2. In April 2018, Karilynn Berndt, a Select Specialty employee, assisted Wollman and Mary's family in attempting to obtain Medicaid coverage for Mary through a Long-Term Care Benefits application. Docket 60 ¶ 29; see Docket 43-1 at 4-6. Berndt completed part of this application, and then connected Wollman and Mary's family to MedData, a third-party vendor, who assisted in the completion and submission of the application. Docket 60 ¶ 29. The South Dakota Department of Social Services denied this application, effective April 18, 2018. Docket 49-5 at 1. The denial notice stated that "[i]f approved for SSI [Supplemental Security Income], you will be eligible for SD Medicaid." Id.

On April 27, 2018, Wollman and Mary's daughter, Lorraine, applied for SSI disability benefits on Mary's behalf. Docket 56 ¶¶ 51-52. In a letter dated May 22, 2018, Social Services informed Lorraine that Mary's application for SSI benefits was approved, effective May 1, 2018, and that due to Mary's SSI eligibility, Mary was automatically eligible for Medicaid and may qualify for retroactive Medicaid coverage. Docket 47-6 at 1. In his deposition, Wollman stated that at the time this letter was received, he did not understand what retroactive eligibility meant, but that it was explained to him by Mary's primary care providers in October 2018. Docket 43-2 at 6-7.

On October 10, 2018, Wollman emailed Dakotacare requesting that Mary's coverage through the Plan be retroactively terminated, effective April 30, 2018, which coincided with Mary's Medicaid start date. Docket 37-19; see Docket 47-6 at 1. Five days later, Dakotacare received the first claim from Select Specialty seeking reimbursement for Mary's care. Docket 60 ¶ 38. The next day, Wollman informed Select Specialty that he was "working on terminating Mary" from her Plan coverage, and that he "was trying to determine her cancelation date to figure out where Medicaid will take over." Docket 37-21. Christine Thompson of Dakotacare emailed Wollman twice in November 2018 inquiring about Mary's termination date, noting in one email that Select Specialty had contacted Dakotacare about a payment timeframe for the more than $1.6 million in billed charges. Docket 48-4 at 1-2. Wollman responded to both emails, indicating that he was still waiting for a final decision from Medicaid. Id. at 1-2.

On November 27, 2018, Social Services notified Wollman that Mary's application for retroactive Medicaid eligibility was approved, effective March 1, 2018. Docket 56 ¶ 69. On December 7, 2018, the new start date for Mary's Medicaid coverage was communicated to Select Specialty, as was the Plan's intent to retroactively terminate her Plan coverage to coincide with this new effective Medicaid date. See Docket 37-23. Wollman explained to Dakotacare that he wanted to wait until he "ha[d] the official letter from Medicaid stating her acceptance on [his] desk" before officially terminating Mary from the Plan. Docket 48-8 at 1. On December 18, 2018, Wollman sent Mary's Plan termination form to Dakotacare. Docket 48-6 at 1.

On December 7, 2018, the same day Select Specialty learned of Mary's new Medicaid start date, a Select Specialty employee indicated that she would begin the process of submitting claims for Mary's care to Medicaid. Docket 37-23. On April 30, 2019, Emily Burnett, Select Specialty's Corporate Director of Managed Care, instructed other Select Specialty staff in an email to "hold off on seeking authorization from Medicaid." Docket 37-25 at 5. About half an hour later, she changed course, stating that Select Specialty should be seeking such authorization. Id. at 4. Select Specialty's Business Office Manager elaborated that they "are moving forward with [South Dakota Medicaid] in the event [they] are not successful" in obtaining reimbursement from Dakotacare. Id. Select Specialty sought retroactive authorization from Medicaid for all of Mary's care on May 2, 2019, which Medicaid approved on May 30, 2019. Id. at 1, 3.

The total charges incurred for Mary's treatment are $1,979,378.40. Docket 56 ¶ 36. Select Specialty claims that under the terms of the Participation Agreement, it is entitled to no less than $1,484,714.09 in compensation. Id. ¶ 37. Select Specialty accepted payment from Medicaid for Mary's care in the sum of $297,746.24. Id. ¶ 109.

LEGAL STANDARD

Summary judgment is appropriate if the movant "shows 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). The moving party can meet its burden by presenting evidence that there is no dispute of material fact or that the nonmoving party has not presented evidence to support an element of its case on which it bears the ultimate burden of proof. Celotex Corp. v. Catrett , 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The moving party must inform the court of the basis for its motion and identify the portions of the record that show there is no genuine issue in dispute. Hartnagel v. Norman , 953 F.2d 394, 395 (8th Cir. 1992) (citation omitted).

To avoid summary judgment, "[t]he nonmoving party may not ‘rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial.’ " Mosley v. City of Northwoods , 415 F.3d 908, 910 (8th Cir. 2005) (quoting Krenik v. Cnty. of Le Sueur , 47 F.3d 953, 957 (8th Cir. 1995) ). Summary judgment is precluded if there is a genuine dispute of fact that could affect the outcome of the case. Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When considering a summary judgment motion, the court views the facts and the inferences drawn from such facts "in the light most favorable to the party opposing the motion." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting United States v. Diebold, Inc. , 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) ).

DISCUSSION

I. Brentwood's and the Fund's Motion for Summary Judgment and Select Specialty's Motion for Partial Summary Judgment

In their motion for summary judgment, Brentwood and the Fund argue that because Select Specialty accepted Medicaid reimbursement for the services it provided to Mary, it is barred under 42. C.F.R. § 447.15...