GPA HOLDING, INC. v. BAYLOR HEALTH CARE SYSTEM
“This case is a simple contract dispute prompted by GPA’s failure to timely process and pay claims under the agreements with Baylor, and does not require review by this Court.”
GPA vs Baylor Health Care System has been working it’s way though the legal system for several years. The impact of the case weighs heavily among TPA’s.( http://blog.riskmanagers.us/?p=7286)
GPA lost the case, but is in the process of appeal. Recent court filings includes a petition filed on November 2, 2011. The Court requested full merits briefing on March 9, 2012.
The Court denied review of the petition on December 14, 2012.
Part of the filings includes a pleading from the Texas Hospital Association (THA) which provides the reader with some insight as to the nature of the case (from THA’s perspective) and the role/impact of managed care contracts. The THA pleading follows:
__________________________
No. 11-0723
IN THE SUPREME COURT OF TEXAS
AUSTIN, TEXAS
________________________
GPA Holding, Inc.,
Petitioner,
v.
Baylor Health Care System,
Respondent.
_______________________
B
RIEF OF AMICUS CURIAE
T
EXAS HOSPITAL ASSOCIATION
I
N SUPPORT OF RESPONDENT’S BRIEF ON THE MERITS
[
PETITION NOT GRANTED]
Charles W. Bailey
Attorney for
Texas Hospital Association
As
Amicus Curiae
1108 Lavaca, Suite 700
Austin, Texas 78701
(512) 465-1038
Facsimile (512) 692-2800
FILED
IN THE SUPREME COURT
OF TEXAS
12 August 30 P1:05
BLAKE. A. HAWTHORNE
CLERK
ii
No. 11-0723
IN THE SUPREME COURT OF TEXAS
AUSTIN, TEXAS
________________________
GPA Holding, Inc.,
Petitioner,
v.
Baylor Health Care System,
Respondent.
_______________________
MOTION TO ACCEPT AND CONSIDER
AMICUS CURIAE BRIEF IN SUPPORT
OF
RESPONDENT’S BRIEF ON THE MERITS
_______________________
TO THE HONORABLE SUPREME COURT OF TEXAS
Pursuant to Tex. R. App. P. 11, the Texas Hospital Association respectfully
requests that the Supreme Court of Texas, Austin, Texas, receive and consider this
Amicus Curiae
brief in the above styled and numbered case in support of the Brief of
Respondent, Baylor Health Care System.
iii
IDENTITY OF PARTIES AND COUNSEL
PLAINTIFF:
Baylor Health Care System
PLAINTIFF COUNSEL:
Jeff Cody
Ben Taylor
Fulbright & Jaworski L.L.P.
2200 Ross Avenue, Suite 2800
Dallas, Texas 75201-2784
DEFENDANT:
GPA Holding, Inc.
DEFENDANT COUNSEL
Thomas R. Phillips
Baker Botts L.L.P.
98 San Jacinto Blvd., Suite 1500
Austin, Texas 78701
Robert M. Hoffman
Stacy R. Obenhaus
Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas 75201
David M. Walsh IV
Chamblee Ryan Kershaw & Anderson PC
2777 N. Stemmons Frwy, Suite 1157
Dallas, Texas 75207
iv
TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL ………………………………………………………….. iii
TABLE OF AUTHORITIES …………………………………………………………………………………..v
STATEMENT OF INTEREST AND CONCERN …………………………………………………… vi
STATEMENT OF JURISDICTION…………………………………………………………………….. viii
SUMMARY OF ARGUMENT …………………………………………………………………………….. ix
ARGUMENT ………………………………………………………………………………………………………..1
I. THE COURT OF APPEALS
’ DECISION DOES NOT CHANGE THE ROLE
OR LIABILITIES OF THIRD PARTY ADMINISTRATORS ……………………………1
II. THE AGREEMENTS IN THIS CASE DO NOT INCLUDE A LIQUIDATED
DAMAGES PROVISION ………………………………………………………………………………3
III. HOSPITALS AND OTHER HEALTH CARE PROVIDERS SHOULD BE
ALLOWED TO CONTRACT WITH PREFERRED PROVIDER
ORGANIZATIONS AND THIRD PARTY PAYORS, INCLUDING TPAs, ON
TERMS AND CONDITIONS AGREED TO BY THE PARTIES ……………………….5
CONCLUSION AND PRAYER ……………………………………………………………………………..7
CERTIFICATE OF SERVICE ………………………………………………………………………………..8
v
TABLE OF AUTHORITIES
CASES
CF & I Steel Corp. v. Pete Subl3ett & Co.,
623 S.W.2d 709, 713-715 (Tex. Civ. App.
– Houston
[1
st Dist.] 1981, writ ref’d n.r.e.) ……………………………………………………………………4
Valence Operating Co. v. Dorsett,
164 S.W.3d 656, 664 (Tex. 2005) ………………………………………………………………….3
Watson v. Cargill, Inc., Nutrena Feed Div’n ,
573 S.W.2d 35, 39-40 (Tex. Civ. App.
– Waco 1978, writ ref’d n.r.e.) ……………..4
STATUTES
Tex. Ins. Code § 4151.001(1) (West Supp. 2012) ………………………………………………………1
Tex. Ins. Code § 4151.102 (West Supp. 2012) …………………………………………………………..1
Tex. Ins. Code, Chapter 843, Subchapter C, and Chapter 1301, Subchapter C-1(West
Supp. 2012)
………………………………………………………………………….…..4
OTHER AUTHORITY
Tex. R. App. P. 11………………………………………………………………………………………………… ii
vi
STATEMENT OF INTEREST AND CONCERN
The Texas Hospital Association (“THA”) is a nonprofit trade assoc
iation that
represents 444 hospitals across the state. As a representative of its member hospitals,
THA is vitally interested in and concerned about the matters before this Court, which will
affect the finances of Texas hospitals and their contractual relationships with preferred
provider organizations and third party payors.
This case involves the review and enforcement of certain contracts entered into by
Baylor Health Care System (“Baylor”) and GPA Holding, Inc. (“GPA”). While
Petitioner, GPA, and amicus curiae, Texas Association of Benefit Administrators and
Self Insurance Institute of America, argue that the court of appeals’ decision
fundamentally alters the role and liability exposure of all third party administrators
(“TPAs”),
1 THA respectfully suggests that the court of appeals’ opinion cannot not be
read to impact any TPA, with the exception of GPA. As correctly determined by the court
of appeals, GPA could be viewed as a payor only under the specific terms and obligations
contained in the Subscriber Services Agreement and Subscriber Acknowledgment.
Of greater concern is GPA’s and the amicus curiae’s attempt to have this Court
impose limits upon health care providers’ ability to contract with TPAs within the state.
Hospitals and other health care providers that have entered into agreements with
preferred provider organizations and third party payors, including TPAs, for the provision
of health care services to patients must be able to rely on payor compliance with these
agreements. Should the Court grant review in this case, THA urges the Court to uphold
the court of appeals’
decision. Otherwise, GPA will be allowed to gain the benefits of the
1
It is noteworthy that the amici, Texas Association of Benefit Administrators and Self Insurance Institute
of America
, suggest that the court of appeals’ decision threatens the financial integrity and future operation
of all TPAs; however, the cases cited by amici that have changed the role of TPAs, including
Baylor Health
Care System v. Epoch Group, L.C.,
340 F. Supp.749 (N.D. Tex. 2004) was published more than eight years
ago and the TPA industry has continued to operate.
vii
agreements without being required to fulfill its obligations under the agreements.
Further, it is important for the Court to uphold the right of parties to enter into and
enforce contracts based on terms and conditions agreed to by the parties.
THA has paid all fees associated with the submission of this amicus brief.
viii
STATEMENT OF JURISDICTION
THA believes that the Court has discretionary jurisdiction of this case pursuant to Tex.
Gov’t Code Ann. § 22.201 (
a). This is an appeal from the decision of the Fifth Court of
Appeals.
ix
SUMMARY OF ARGUMENT
In the case, the court of appeals concluded that GPA was bound by the
agreements in question and that GPA was required to pay Baylor in accordance with the
agreements. While the court of appeals decision determined that GPA was a payor under
the terms of the agreements and obligated to pay for health care services provided by
Baylor, the court’s decision did not change the role or liability of third party
administrators. The court of appeals was merely upholding the trial court’s determination
that GPA had breached the agreement and was obligated to pay Baylor based on a twotier
pricing structure that would be followed if GPA did not pay claims within the
specified time frame. The two-tier pricing structure included in the agreement was not a
liquidated damages provision and does not constitute a penalty.
This case is a simple contract dispute prompted by GPA’s failure to timely
process and pay claims under the agreements with Baylor, and does not require review by
this Court. Should the Court grant review in this case, THA urges the Court to uphold
the court of
appeals’ decision. Otherwise, GPA will be allowed to realize the benefits of
the agreements with without meeting its obligation to process and pay claims by in a
timely manner. Further, it is important for the Court to uphold the right of parties to enter
into and enforce contracts based on terms and conditions agreed to by the parties.
1
ARGUMENT
I. The court of appeals
’ decision does not change the role or liabilities of third
party administrators.
Petitioner, GPA, and amici curiae, Texas Association of Benefit Administrators
and Self Insurance Institute of America, argue that the court of appeals’ decision
fundamentally alters the role and financial exposure of TPAs and, if upheld, will
increase dramatically the administrative costs charged to self-funded benefit plans for
claim processing provided by TPAs or will force TPAs from the market entirely.
While intended to gain this Court’s attention, these arguments
greatly overstate the
impact of the court of appeals’ decision.
Under Texas law, TPAs are regulated by Chapter 4151, Texas Insurance Code.
Under state law, a TPA is a legal entity that collects premiums or contributions and
adjusts or settles claims under an agreement with an insurer or plan sponsor that
offers health or other benefits to residents of this state.
2 The agreement must include
a statement of the duties of the administrator, including the claim processing to be
performed.
3 While an agreement between a TPA and an insurer or plan sponsor
must comply with the requirements of Chapter 4151, TPAs have the flexibility to
provide a range of services to meet the needs of their client insurers or plan sponsors.
TPAs also can and do enter into arrangements with preferred provider organizations
in order to provide their clients with access to services provided by hospitals and
other health care providers that participate in a preferred provider organization
network, like the one provided by Private Health Care Systems.
2
Section 4151.001(1), Texas Insurance Code.
3
Section 4151.102, Texas Insurance Code.
2
GPA and amici curiae, Texas Association of Benefit Administrators and Self
Insurance Institute of America, suggest that
a TPA’s legal responsibility should be
limited to clerical or administrative duties, such as the processing and adjudication of
claims. Otherwise, the cost of medical care will be shifted from health benefit plan
sponsors to the TPAs, and TPAs will become the insurers of the care provided to the
plan participants. But these legal arguments are not supported in fact.
The facts of this case clearly show that GPA agreed to provide additional, nonministerial
services to its clients, such as the establishment and maintenance of
discounted fee arrangements with health care providers, whereby the employees and
dependents of the self-funded employers could receive services from Baylor at a
discounted payment amount. It is undisputed that GPA signed a series of agreements
to benefit from the discounted fees offered by Baylor and that obligated GPA to pay
Baylor in accordance with the Hospital Services Agreement, including the
requirement to pay claims within 45 days. The record is clear also that only GPA, and
none of its clients, signed the agreements. GPA could have signed the agreements as
an agent or designee of its clients and inserted a provision into the agreements to
clarify that the self-funded benefit plans, and not GPA, would be responsible for
payment of Baylor’s normal billed charges if Baylor’s claims were not timely paid.
GPA did not do that. Yet, GPA now wants to hide behind the legal argument that it is
not a payor under the Hospital Services Agreement and should not have to pay the
claims under the terms of the agreement. Further, it is not factually correct to assert
that a TPA will become a fiduciary or insurer and financially responsible for payment
of the claims because the agreement between a TPA and a health benefit plan provide
that the insurer or employer sponsoring the plan is ultimately responsible for funding
3
and paying for the health benefits provided. In this case, the plan sponsors are still
responsible for funding the payment of the health care services provided by Baylor.
But there may be a question between GPA and the plan sponsors as to whether GPA
or the plan sponsors are responsible for late payment of Baylor claims and the
resulting loss of discount. It appears that GPA seeks to have Baylor bear this risk
rather than GPA or the plan sponsors.
In sum, this case is a simple contract dispute prompted by GPA’s failure to
process and pay claims timely under the agreements with Baylor, and the court of
appeals
’ decision does not change the role or liability exposure of TPAs generally.
Nor will it increase the administrative costs charged to self-funded benefit plans by
TPAs or force TPAs from the market. However, it may prompt GPA to change its
claim processing and other business practices so that it will meet its contractual
obligations in the future.
II. The agreements in this case do not include a liquidated damages provision.
As discussed in length in the Baylor brief, there is a three-part test to determine
whether a contract includes an unenforceable liquidated damages provision and the
initial inquiry is whether a contract term is a liquidated damages provision. As this
Court stated in
Valence Operating Co. v. Dorsett, “[l]iquidated damages clauses fix in
advance the compensation to party accruing from the failure to perform specified
contractual obligations…”
4
In this case, the provision in question provided that if a clean claim submitted by
Baylor was not paid within 45 calendar days of receipt that the payor would no longer
4
Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 664 (Tex. 2005).
4
be eligible for the discounted rates and would be obligated to pay Baylor its normal
billed charges. This provision was clearly designed as a financial incentive for the
payor, in this case GPA, to pay claims in a timely manner and may be included in
contracts between health care providers and payors. The provision does not establish
a damage or penalty amount in advance, but rather established a two-tiered pricing
structure that offers a substantial discount if claims are paid within 45 days. It is a
recognized business practice for companies to offer discounted pricing for goods or
services based upon the timing or form of payment, and the use of this two-tiered
pricing structure by Baylor is consistent with that business practice.
5
The use of this type of two-tiered pricing structure also is consistent with the
public policy established by the Texas Legislature with passage of the House Bill
610
6 in 1999, which required health maintenance organizations (“HMOs”) and
preferred provider organizations (
“PPOs”) to pay health care providers the full billed
charge amount if a provider claim was not paid within 45 days of receipt of the claim
by the HMO or PPO. Prior to this time, HMOs and PPOs were not required to pay
health care providers within a specified period of time and many health care providers
were facing very significant delays in payment of their claims. In enacting House
Bill 610 the Legislature recognized the importance of prompt payments to health care
providers and determined that requiring HMOs and PPOs to pay a provider its normal
billed charge amount if the claim was not paid timely would provide an appropriate
incentive for the HMO or PPO to pay claims within the statutory timeframe. In
5
CF& I Steel Corp. v. Pete Sublett & Co., 623 S.W. 2d 709, 713-715 (Tex. Civ. App. – Houston [1st Dist.],
1981
writ ref’d n.r.e.); Watson v. Cargill, Inc., Nutrena Feed Div’n, 573 S.W. 2d 35, 39-40 (Tex. Civ. App.
–
Waco 1978, writ ref’d n.r.e.).
6
Act of May 29, 1999, 76th Leg., R.S., ch. 1343, 1999 Tex. Gen. Laws, 4556-4559 (codified as amended in
Chapter 843, Subchapter C, and Chapter 1301, Subchapter C-1, Insurance Code).
5
adopting the billed charge amount as the required payment amount if HMOs or PPOs
did not pay health care providers in a timely manner, the Legislature also determined
that requiring HMOs or PPOs to pay this amount was not an unreasonable penalty.
While the Texas Legislature does not have statutory authority to regulate self-funded
health care plans that are subject only to federal regulation under the Employee
Retirement Income Security Act of 1974 (“ERISA”), the Legislature by adopting the
prompt payment requirements on state-regulated health plans has clearly suggested
that recovery of full billed charges by health care providers if not timely paid by a
TPA processing claims for self-funded health care plans is not an unlawful penalty.
III. Hospitals and other health care providers should be allowed to contract with
preferred provider organizations and third party payors, including TPAs, on
terms and conditions agreed to by the parties.
The delivery and financing of private health care in this country is based on a
competitive model, and hospitals and other health care providers are expected to
compete based on the cost and quality of health care services they provide. Within
this competitive system, hospitals and other health care providers negotiate with
various types of private third party payors on payment amounts and other conditions
or requirements associated with the delivery of services to patients. The payment
amount, which is typically a discount from a provider’s normal or standard charge, is
a key issue to be negotiated and will be influenced by a number of factors, including
the types and volume of services that are anticipated to be provided to individuals
covered by a particular health benefit plan. However, other terms and requirements
of these contracts, such as the timing of payment, are important and will influence the
willingness of the parties to enter into these arrangements. A two-tiered pricing
6
structure, similar to what is in dispute in this case, may be proposed by a hospital or
other health care provider as a part of the negotiation process and is intended to be an
incentive for prompt payment of claims. Whether a particular payor is willing to
accept two-tiered pricing also may influence the level of payment discount the
hospital or health care provider is willing to accept. If, as argued by GPA, two-tiered
pricing should be prohibited as a penalty provision, future negotiation of these types
of contracts will be impacted and hospitals and other health care providers may be
less willing to accept greater discounted payment rates. If that occurs third party
payors may be asked to pay more for health care services, thus, increasing the cost of
health care coverage generally.
THA respectfully suggests that this Court should maintain the ability of hospitals
and other health care providers to negotiate and enter into contracts with preferred
provider organizations and third party payors, including TPAs, based on the terms
and conditions that meet the needs and requirements of the parties. To prohibit
certain types of payment arrangements will reduce competitive options available to
the parties and may increase health care costs.
7
CONCLUSION AND PRAYER
Based on the legal and policy arguments presented in this brief,
amici curiae
respectfully requests
that this Court deny GPA’s petition for review or affirm the
judgment of the Fifth Court of Appeals.
Respectfully submitted,
___________________________________
Charles W. Bailey
State Bar No. 01517100
Attorney for Texas Hospital Association,
Amicus Curiae
8
CERTIFICATE OF SERVICE
I hereby certify that on this 30th day of August, 2012, a true and correct copy of the
foregoing instrument was mailed by United States mail to:
Jeff Cody
Ben Taylor
Fulbright & Jaworski LLP
2200 Ross Avenue, Suite 2800
Dallas, Texas 75201-2784
Thomas R. Phillips
Baker Botts L.L.P.
98 San Jacinto Blvd., Suite 1500
Austin, Texas 78701
Robert M. Hoffman
Stacy R. Obenhaus
Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas 75201
David M. Walsh IV
Chamblee Ryan Kershaw
& Anderson PC
2777 N. Stemmons Frwy, Suite 1157
Dallas, Texas 75207
___________________________
Charles W. Bailey
Editor’s Note: This is an important case with tremendous implications. We hope GPA prevails.
