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Abbott v. Banner Health Network

Court of Appeals of Arizona, First Division

December 23, 2014

JACKIE ABBOTT; ROBERT BERGANSKY; RAYMOND BROWN; NICHOLAS BIGLER; RICHARD CAMPUZANO; DALTON GORMEY; TRACY JAMES; STEPHANIE KRUEGER; ZAINAB MOHAMED; ROBERT PIERSON; LUCAS SMITH; ROBERT VAN STEENBURGH; AMBER WINTERS; CHRISTINA YERKEY; and STEVEN YOUNG, Plaintiffs/Appellants,
v.
BANNER HEALTH NETWORK fna Banner Health, Inc., an Arizona corporation; DIGNITY HEALTH fka Catholic Healthcare West, a California corporation; SCOTTSDALE HEALTHCARE CORP., an Arizona corporation; NORTHWEST HOSPITAL LLC, a Delaware corporation; NORTHERN ARIZONA HEALTHCARE CORP., an Arizona corporation; JOHN C. LINCOLN HEALTH NETWORK, an Arizona corporation; UNIVERSITY MEDICAL CENTER CORP., an Arizona corporation; CARONDELET HEALTH NETWORK, an Arizona corporation; TUCSON MEDICAL CENTER, an Arizona corporation; ORO VALLEY HOSPITAL, LLC, a Delaware corporation, Defendants/Appellees

Appeal from the Superior Court in Maricopa County. No. CV2012-007665. The Honorable J. Richard Gama, Judge.

Page 479

For Plaintiffs/Appellants: David L. Abney, Knapp & Roberts, P.C., Scottsdale; Geoffrey M. Trachtenberg, Levenbaum Trachtenberg, PLC, Phoenix; B. Lance Entrekin, The Entrekin Law Firm, Phoenix.

For Defendant/Appellee: Cameron C. Artigue and Christopher L. Hering, Gammage & Burnham, P.L.C., Phoenix.

Presiding Judge Donn Kessler delivered the decision of the Court, in which Judge Patricia K. Norris and Judge Maurice Portley joined.

OPINION

KESSLER, Presiding Judge:

Page 480

[236 Ariz. 438] [¶1] This appeal addresses whether hospitals who accept payment from the Arizona Health Care Cost Containment System (" AHCCCS" ) for services rendered to AHCCCS patients (" Patients" ) can later seek to impose and enforce liens on funds the Patients have obtained from third-party tortfeasors related to the Hospital services provided. In this case, the Hospitals claim and the superior court held that by entering into accord and satisfaction agreements, the Patients cannot now seek to declare the liens unenforceable. We hold the accord and satisfaction agreements are void because, as the Patients argue, federal law preempts Arizona law to the extent state law allows the liens. Since the liens themselves are void under federal law, the accord and satisfaction agreements are also unenforceable. Accordingly, we reverse the judgment and remand this matter to the superior court for further proceedings consistent with this decision.[1]

FACTUAL AND PROCEDURAL HISTORY

[¶2] The Hospitals accepted payments from AHCCCS for treating the Patients. Pursuant to Arizona Revised Statutes (" A.R.S." ) sections 33-931 (2014) and 36-2903.01 (Supp. 2013), the Hospitals then recorded liens for the difference in the amount billed for services and the amount paid by AHCCCS. The Patients obtained personal injury settlements from third parties that related to the medical care provided. To access their settlement funds, the Patients, with the assistance of counsel, agreed with the Hospitals to have the persons holding the settlement funds pay the Hospitals reduced amounts in return for the Hospitals releasing their liens. These Patients as well as other patients who had not settled hospital liens brought this putative class action against the Hospitals on a number of theories, including a request for declaratory relief, that federal law preempted the liens.[2] The Patients also argued that federal law prohibited any accord and satisfaction of such liens. Each claim was premised on the theory that the liens were invalid under federal law.[3] The Patients requested in part that the Hospitals be ordered to refund to the Patients the amounts paid to the Hospitals to release the liens. As an exhibit to their complaint the Patients attached " Provider Participation Agreements" between the Hospitals and AHCCCS in which the Hospitals agreed to comply with federal law: " The Provider shall comply with all federal, State and local laws, regulations, standards, and executive orders governing performance of duties under this Agreement . . . ." Many of those agreements also specifically stated that " [t]he Provider agrees to abide by Arizona Administrative Code R9-22-702 prohibiting the Provider from charging,

Page 481

[236 Ariz. 439]collecting, or attempting to collect payment from an AHCCCS eligible person."

[¶3] The Hospitals moved to dismiss the complaint based on accord and satisfaction. The Hospitals argued that the Patients obtained the lien releases after the Hospitals agreed to and accepted lower amounts in satisfaction of the liens and the accord and satisfaction agreements were enforceable regardless of the merits of any underlying claim or dispute over the liens. In negotiating the releases with attorneys for the Patients, the Hospitals documented with some of the Patients that: " The payment will constitute an accord and satisfaction, compromise and release of any claim as to the validity of the hospital's claim or the manner of its assertion." The Patients do not argue that the language of any of the agreements reserved any rights to challenge the legality of the liens.

[¶4] The Patients opposed the motion, arguing that any such agreement was void because the liens, and thus, any accord and satisfaction agreements premised on the liens, are prohibited by federal law. The Patients argued that because the Hospitals accepted payments in full from AHCCCS, both placing a lien on an AHCCCS patient's personal injury recovery and any accord and satisfaction of such liens are unenforceable.[4]

[¶5] The superior court granted the Hospitals' motion and dismissed the Patients' claims. The court cited A.R.S. § § 33-931 and 36-2903.01, authorizing the liens, and framed the issue as whether the Patients failed to state a claim because they settled the liens in question. The court determined " it [was] irrelevant whether federal law preempts Arizona law and prohibits hospitals from enforcing statutory liens on AHCCCS accounts. . . . [because] [a]ccord and satisfaction does not turn on whether Plaintiffs would have prevailed on the merits of the dispute that was settled." Accordingly, the court concluded the lien accord and satisfaction agreements were " final and binding regardless of the validity of the underlying claims."

[¶6] The court then entered a judgment pursuant to Arizona Rule of Civil Procedure 54(b) from which the Patients timely appealed. We have jurisdiction pursuant to A.R.S. § 12-2101(A)(1) (Supp. 2013).[5]

DISCUSSION

[¶7] " We review de novo a trial court's grant of a motion to dismiss for failure to state a claim." Canyon Ambulatory Surgery Ctr. v. SCF Ariz., 225 Ariz. 414, 417, ¶ 7, 239 P.3d 733, 736 (App. 2010). In doing so, " [w]e assume the allegations in the complaint are true, and will 'uphold dismissal only if the plaintiff [ ] would not be entitled to relief under any facts susceptible of proof in the statement of the claim.'" Id. (alteration in original) (citation omitted). In such review, we assume as true only the well-pleaded facts. Jeter v. Mayo Clinic Ariz., 211 Ariz. 386, 389, ¶ 4, 121 P.3d 1256, 1259 (App. 2005).

[¶8] The Patients argue the accord and satisfaction agreements with the Hospitals cannot be enforced because two elements of a valid accord and satisfaction are missing--proper subject matter and consideration. Both assertions are based on federal law governing Medicaid prohibiting these types of liens and any accord and satisfaction agreements based on such liens. The Patients contend that since these agreements were based on balance billing and liens prohibited by federal law governing Medicaid or violated public policy, there was not a proper subject matter for an enforceable accord and satisfaction. They also contend that because the Hospitals could not seek payments in excess of the amounts they received through AHCCCS, any consideration for the accord and satisfaction agreements was illusory.

Page 482

[236 Ariz. 440] [¶9] The Hospitals argue the only issue before us is whether the accord and satisfaction agreements are valid and not whether the liens were enforceable. More specifically, the Hospitals contend the accord and satisfaction agreements: (1) cannot be successfully attacked based on alleged " illegality" of the liens under federal law; (2) were supported by adequate consideration because the parties " exchange[d] promises to forbear from disputing a claim any further" ; and (3) cannot be challenged on the basis of illegality after entry into the agreements and the release of the liens.

[¶10] We agree with the Patients. Their challenges to the liens and attempts to obtain relief from the accord and satisfaction agreements are not barred because the liens and the accord and satisfaction agreements based thereon are prohibited under federal ...


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