Stephen Pitell v. Evergreen Health ( 2018 )

IN THE COURT OF APPEALS FOR THE STATE OF WASHINGTON
STEPHEN PITELL, on behalf of )
himself and all others similarly situated, )
) No. 76720-8-1
Appellant, )
) DIVISION ONE
v. )
) PUBLISHED OPINION
KING COUNTY PUBLIC HOSPITAL )
DISTRICT NO. 2, d/b/a )
EVERGREENHEALTH; and DOES 1 )
through 25, inclusive, )
)
Respondent. ) FILED: August 13, 2018
)
DWYER, J. — Stephen Pitell sought emergency medical care at
EvergreenHealth. He signed a consent to care form in which he agreed to pay
the balance due on his account. But instead of paying, he filed a lawsuit against
EvergreenHealth, claiming that the consent to care agreement lacked a definite
price term and was therefore unenforceable. As have courts across the country,
we hold that the contract price term is supplied by EvergreenHealth's standard
list of charges (its "chargemaster"). Because the price term is definite, the
consent to care agreement is enforceable. Accordingly, we affirm.
1
Stephen Pitell was admitted to EvergreenHealth with abdominal pain on
January 2, 2015. At the time, he was uninsured and did not qualify for Medicare
No. 76720-8-1/2
or Medicaid. Upon his arrival at the hospital, Pitell signed a consent to care form
that stated, in pertinent part:
I agree, whether I sign as representative or as patient, that in
consideration of the services to be rendered to the patient, I agree
to be personally responsible for the balance due after any
applicable insurance payment(s).
The consent form went on to state,"You are responsible for payment of your
account" and "At my request, staff will provide me with an estimate of the billed
charges for services I am likely to receive." Pitell did not request an estimate of
charges.
Following his treatment and discharge, EvergreenHealth billed Pitell
$32,324. Given that he had over $50,000 in his bank account, Pitell's request for
charity care status was denied. The hospital did, however, reduce the charge by
20 percent because Pitell was uninsured, which lowered the amount due to
$25,859.20. For the same services, four of the five largest commercial insurers
would pay more: $27,632, $28,157, $28,228, or $33,138.
EvergreenHealth billed Pitell based on the hospital's list of charges, which
is generally referred to as a "chargemaster." Pitell did not pay the balance due
on his account. Instead, he filed suit against EvergreenHealth on behalf of a
class of similarly situated individuals. In his suit, he requested a declaratory
judgment that the consent form is unenforceable. He also alleged causes of
action for negligent and intentional concealment. EvergreenHealth
counterclaimed to seek collection of the unpaid bill as well as for the expenses of
defending a frivolous action. The trial court granted EvergreenHealth's motion
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No. 76720-8-1/3
for summary judgment, dismissing the case and ordering Pitell to pay the amount
of the discounted bill plus costs and fees.1 Pitell appeals.
II
A
We review summary judgment de novo. Hearst Commc'ns, Inc. v. Seattle
Times Co., 154 Wn.2d 493, 501, 115 P.3d 262(2005). Summary judgment is
proper where there are no genuine issues of material fact and the moving party is
entitled to judgment as a matter of law. Hertog v. City of Seattle, 138 Wn.2d 265,
275, 979 P.2d 400(1999). We engage in the same inquiry as the trial court and
consider the facts and reasonable inferences therefrom in the light most
favorable to the nonmoving party. Hertoq, 138 Wn.2d at 275.
The purpose of contract interpretation is to ascertain the intent of the
parties. Roats v. Blakely Island Maint. Comm'n, Inc., 169 Wn. App. 263, 274,
279 P.3d 943(2012). Washington courts "follow the objective manifestation
theory of contracts." Hearst Commc'ns, Inc., 154 Wn.2d at 503. When
interpreting an agreement, we focus on its objective manifestations to determine
the parties' intent. Martin v. Smith, 192 Wn. App. 527, 532, 368 P.3d 227, review
denied, 186 Wn.2d 1011, 380 P.3d 501 (2016). "We impute an intention
corresponding to the reasonable meaning of the words used." Hearst
1 Pitell claims that he was charged an unreasonable amount for the services received.
However, in the trial court, he provided no evidence as to what amount would be reasonable. In
addition, it is worth noting that, while he admits that he owes a reasonable amount, Pitell has
never paid a dime for the services rendered—either to EvergreenHealth or into the registry of the
court. At all times, he has had the ability to pay.
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No. 76720-8-1/4
Commc'ns, Inc., 154 Wn.2d at 503 (citing Lvnott v. Nat'l Union Fire Ins. Co. of
Pittsburgh, 123 Wn.2d 678, 684, 871 P.2d 146 (1994)).
B
Pitell argues that the consent to care agreement is not enforceable
because the agreement's reference to a "balance due" is an open price term.2
EvergreenHealth argues that because the chargemaster supplies the price term
in the consent to care form, the contract is enforceable.
Like other hospitals around the country, EvergreenHealth maintains a
chargemaster that it uses to bill patients for the particular services received. It
includes over 16,000 line items that establish the standard charge for each
service. Deductions from these rates are common, resulting from negotiations
with insurers, set government rates, charity care, prompt pay discounts, or
uninsured discounts.
In the context of a contract for the provision of and payment for
medical services, a hospital's chargemaster rates serve as the
basis for its pricing. Each hospital sets its own chargemaster rates,
thus each hospital's chargemaster is unique. It is from these
chargemaster prices that insurance companies negotiate with
hospitals for discounts for their policyholders. And other
reimbursement schemes are based in part on hospital
chargemaster rates. Even the 2010 Federal Patient Protection and
Affordable Care Act recognized the centrality of chargemasters to
hospital billing practices. See Timothy D. Martin, The Impact of
2 Pitell was required by law to have health insurance at the time in question. He had the
means to purchase such insurance. Instead, he made an economic decision to forego
compliance with the law.
Pitell now argues that an equitable doctrine—quantum meruit—should govern the
determination of the amount he owes. By making an economic decision to be uninsured, in
violation of applicable law, Pitell clearly behaved inequitably. Whether equity can be invoked by
one who behaved inequitably is an issue that appears at the forefront of this dispute. However,
Pitell neither briefed nor even recognized this issue. Because we can decide this case on other
grounds, we need not discuss this issue further.
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No. 76720-8-1/5
Healthcare Reform on Revenue—Cycle Management and Claim
Coding, 4 J. Health & Life Sci. L. 159, 175(2011)(recognizing that
the Act requires hospitals to publish their chargemasters annually).
Allen v. Clarian Health Partners, Inc., 980 N.E.2d 306, 310(Ind. 2012)(citations
omitted). When billing a patient,
"[it is only after each individual is charged according to the
Chargemasters that this amount is decreased accordingly by any
health coverage program benefits. . . .[T]he base price is the same
for each individual pursuant to the Chargemasters. It is only the
deductions from the base price that may vary from patient to
patient."
Limberq v. Sanford Med. Ctr. Fargo, 881 N.W.2d 658,662(N.D. 2016)(second
alteration in original).
Many courts have entertained, and almost uniformly rejected, challenges
similar to those advanced here. These courts "recognize[] the uniqueness of the
market for health care services delivered by hospitals." Allen, 980 N.E.2d at 311.
They hold that a contract's reference to a hospital's "rates" or "charges" are
sufficiently definite to refer to a chargemaster list for the price term.3
3 In addition to the cases discussed in the text, the following cases have affirmed the
enforceability of contracts where a chargemaster supplies the price term: Harrison v. Christus St.
Patrick Hosp., 430 F.Supp.2d. 591, 595(W.D. La. 2006)(concluding "regular rates and terms" did
not create open-ended contract); Cox v. Athens Red'I Med. Ctr., Inc., 631 S.E.2d 792, 796(Ga.
Ct. App. 2006)(finding "in accordance with the rates and terms of the hospital" is a definite price
term); Morrell v. Wellstar Health Sys., Inc., 633 S.E.2d 68, 72(Ga. Ct. App. 2006)("[T]he
agreement in the contracts to pay for 'all charges' unambiguously referred to the written summary
of specific charges ... which established the price terms on which the parties intended to bind
themselves."); Satterfield v. S. Reg'l Health Sys., Inc., 634 S.E.2d 530, 531 (Ga. Ct. App. 2006);
Holland v. Trinity Health Care Corp., 791 N.W.2d 724, 730(Mich. Ct. App. 2010)(finding "usual
and customary charges" unambiguously referred to the chargemaster).
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No. 76720-8-1/6
For example, in DiCarlo v. St. Mary Hospital, 530 F.3d 255, 264(3d Cir.
2008), the court concluded that the contract term, "all charges" referred to the
chargemaster, and was therefore not an open price term.
The price term "all charges" is certainly less precise than [the] price
term of the ordinary contract for goods or services in that it does not
specify an exact amount to be paid. It is, however, the only
practical way in which the obligations of the patient to pay can be
set forth, given the fact that nobody yet knows just what condition
the patient has, and what treatments will be necessary to remedy
what ails him or her. Besides handing the patient an inches-high
stack of papers detailing the hospital's charges for each and every
conceivable service, which he or she could not possibly read and
understand before agreeing to treatment, the form contract
employed by St. Mary's is the only way to communicate to a patient
the nature of his or her financial obligations to the hospital.
Furthermore, "it is incongruous to assert that[a hospital] breached
the contract by fully performing its obligation to provide medical
treatment to the plaintiff[]and then sending [him][an] invoice[]for
charges not covered by insurance."
DiCarlo, 530 F.3d at 264 (footnote omitted)(quoting Burton v. William Beaumont
Hosp., 373 F.Supp.2d 707, 719(E.D. Mich. 2005)).
Similarly, in Shelton v. Duke University Health System, Inc., 633 S.E.2d
113, 116(N.C. Ct. App. 2006), the court held that the contract term "regular
rates" did not leave the price term open. Rather, it was "'definite and certain or
capable of being made so" by reference to the chargemaster. Shelton, 633
S.E.2d at 116(2006)(quoting Elliott v. Duke Univ., Inc., 311 S.E.2d 632,636
(N.C. Ct. App. 1984)). The court reasoned that
[i]t is common, almost expected, that a course of treatment
embarked upon will, through unforeseen circumstances, be
amended, altered, enhanced, or terminated altogether, and a
completely new course of treatment begun. In light of this, it would
be impossible for a hospital to fully and accurately estimate all of
the treatments and costs for every patient before treatment has
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No. 76720-8-1/7
begun. It would be cumbersome, and against patients' interests, to
require hospitals to seek new authorization from a patient whenever
some medical circumstance requires a new course of treatment.
For this reason, it is entirely reasonable and predictable that
patients would agree to pay the hospital's regular rates for
whatever services might be necessary in treating their particular
ailments or afflictions.
Shelton, 633 S.E.2d at 116.
In Allen v. Clarian Health Partners, Inc., hospital patients challenged their
medical bills, arguing that the contract they signed had an indefinite price term.
The contract in question stated, "In consideration of services delivered by
Clarian North Medical Center and/or the physicians, the undersigned guarantees
payment of the account, and agrees to pay the same upon discharge." Allen
980 N.E.2d at 309. In holding that "the account" impliedly referenced the
chargemaster, the court reasoned,
A contract need not declare a specific. .. dollar amount for goods
or services in order to be enforceable. See ... Restatement
(Second) Contracts § 4, illus. 1 ("A telephones to his grocer,'Send
me a ten-pound bag of flour.' The grocer sends it. A has thereby
promised to pay the grocer's current price therefor."). In the context
of contracts providing for health care services precision concerning
price is close to impossible. . .. [O]mitting a specific dollar figure is
"the only practical way in which the obligations of the patient to pay
can be set forth, given the fact that nobody yet knows just what
condition the patient has, and what treatments will be necessary to
remedy what ails him or her."
Allen, 980 N.E.2d at 310 (quoting DiCarlo, 530 F.3d at 264).
In so holding, the court aligned itself with numerous similar opinions.
Patients contend their promise to pay "the account" for treatment is
indefinite and therefore cannot constitute a price term for the
hospital's services. We disagree. Many courts have addressed
contracts similar to those of Patients' and most have held that price
terms in these contracts, while imprecise, are not sufficiently
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No. 76720-8-1/8
indefinite to justify imposition of a "reasonable" price standard. For
example, the Third Circuit held that a patient's promise to pay "all
charges and collection costs for services rendered" was not
indefinite, and "can only refer to [the hospital's] uniform charges set
forth in its Chargemaster." DiCarlo, 530 F.3d at 264. Other courts
have reached similar conclusions. See, e.g., Banner Health v.
Med. Say. Ins. Co., 216 Ariz. 146, 163 P.3d 1096, 1101 (Ariz. Ct.
App. 2007)(finding that patients who agreed to "pay the account"
agreed to pay charges billed in accordance with the hospital's
chargemaster that was filed with the state health department
pursuant to statute); Holland v. Trinity Health Care Corp., 287 Mich.
App. 524, 791 N.W.2d 724, 730(2010)(concluding the phrase
"usual and customary charges" in hospital's contract with a patient
"unambiguously refers to the 'Charge Master"); Shelton v. Duke
Univ. Health Sys. Inc., 179 N.C. App. 120, 633 S.E.2d 113, 114,
116-17(2006)(finding the language "regular rates and terms of the
Hospital" not to be an open price term where the prices were set
forth in the hospital's chargemaster), review denied; Nygaard v.
Sioux Valley Hosp. & Health Sys., 731 N.W.2d 184, 188-89, 191
(S.D. 2007)(interpreting as definite a price term requiring patient to
pay "unspecified and undiscounted charges for medical care" which
were "pre-set by [the hospital] in its sole discretion").
Allen, 980 N.E.2d at 310-11.
While these cases examined somewhat different contract language than
that in EvergreenHealth's contract, their reasoning is instructive. Pitell agreed to
pay "the balance due" and was informed that he was "responsible for payment of
[his] account." This reference to an "account" reflects that the parties understood
that Pitell would be charged for the services received, and that the amount
charged would be determined by an extant set list of prices. In addition, the
contract notified Pitell that he could request an estimate of charges, which further
acknowledged the existence of a list of prices from which an estimate could be
constructed. The contract language demonstrates the parties' mutual
understanding that the amount owed by Pitell was definite or capable of being
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No. 76720-8-1/9
made so by reference to an extant list of charges—in this case, the
chargemaster.
Pitell cites to a few cases in support of his argument that the contract's
price term is indefinite and therefore unenforceable. None are persuasive. In
Washington Chocolate Co. v. Canterbury Candy Makers, Inc., 18 Wn.2d 79, 138
P.2d 195 (1943), the sale price in a contract varied by buyer and was not tied to
market rates. The court concluded that the price was left to the unrestricted and
arbitrary determination of the seller, and was therefore indefinite. But here,
EvergreenHealth does not have unlimited discretion to charge patients for
services received. It does so based on the chargemaster, with departures from
those rates set in advance by negotiation or regulation. Pitell also cites to
Heaton v. Imus, 21 Wn. App. 914, 587 P.2d 602(1978), reversed on other
grounds, 93 Wn.2d 249,608 P.2d 631 (1980), but that case merely states that
the absence of a price term requires a quantum meruit analysis. These cases
are not helpful.
Additionally, Pitell cites to Western Washington Corp. of Seventh-Day
Adventists v. Ferrellgas, Inc., 102 Wn. App. 488, 7 P.3d 861 (2000), for the
proposition that external provisions to an agreement must be incorporated by
clear and unequivocal reference. But here, the parties did not attempt to
incorporate a list of charges by reference. Rather, as set forth above, the
contract's reference to an "account" refers to EvergreenHealth's uniform charges,
as set forth in its chargemaster. It was not necessary to incorporate the
chargemaster by further reference.
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No. 76720-8-1/10
C
Were we to resort to extrinsic evidence, the result here would be the
same. The available evidence plainly supports that the parties mutually assented
to a price term supplied by the chargemaster.
We may consider extrinsic evidence to assist in ascertaining the intent of
the parties in entering into a contract, regardless of whether the language used in
the writings is deemed ambiguous. Hearst Commc'ns, Inc., 154 Wn.2d at 502
(citing Berg v. Hudesman, 115 Wn.2d 657, 672, 801 P.2d 222(1990)).
The court may consider (1)the subject matter and objective of the
contract,(2)the circumstances surrounding the making of the
contract,(3)the subsequent conduct of the parties to the contract,
(4) the reasonableness of the parties' respective interpretations,(5)
statements made by the parties in preliminary negotiations,(6)
usages of trade, and (7)the course of dealing between the parties.
Spectrum Glass Co. v. Pub. Util. Dist. No. 1 of Snohomish County, 129 Wn. App.
303, 311, 119 P.3d 854(2005)(citing Bern, 115 Wn.2d at 666-68). However, we
may not consider "(1) leividence of a party's unilateral or subjective intent as to
the meaning of a contract word or term;'(2) leividence that would show an
intention independent of the instrument; or'(3) le]vidence that would vary,
contradict or modify the written word." Kelley v. Tonda, 198 Wn. App. 303, 312,
393 P.3d 824(2017)(alterations in original)(quoting Hollis v. Garwall, Inc., 137
Wn.2d 683, 695, 974 P.2d 836 (1999)).
Pitell testified that he understood how hospitals bill patients. Before his
treatment at EvergreenHealth, Pitell was generally aware that hospitals billed
uninsured patients at different rates than insured patients. After reading an
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No. 76720-8-1/11
article in Time magazine and seeing a documentary, Pitell understood that
hospitals used a set list of prices to calculate charges to their patients. He
understood that uninsured patients did not benefit from lower rates negotiated by
insurers, given that they had no insurer. At deposition, Pitell testified:
So when you went in there as an uninsured patient, you
understood that it was likely that you were going to be charged by
the hospital using a chargemaster for the services you were
receiving, correct?
A: Correct.
This testimony demonstrates the parties' mutual intent that, after
accepting health care services, Pitell would be charged from an extant list of
charges that provided the prices. Extrinsic evidence supports the enforceability
of the consent to care agreement between Pitell and Evergreen Health.
111
Pitell argues that the trial court erred in dismissing his causes of action for
"negligent and intentional concealment" because EvergreenHealth had a duty to
disclose the nature of its rates. These are recognized concepts in constructiork, tog
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law, but not in the circumstances of this case. We therefore affirm their 33...
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Affirmed.
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WE CONCUR:
11