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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Smallwood v. Central Peninsula General Hospital (11/17/2006) sp-6074
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| JOHN L. SMALLWOOD, | ) |
| ) Supreme Court Nos. S- 11406/11585 | |
| Appellant/Cross-Appellee, | ) |
| ) Superior Court No. 3KN-01-00971 CI | |
| v. | ) |
| ) O P I N I O N | |
| CENTRAL PENINSULA | ) |
| GENERAL HOSPITAL, | ) No. 6074 - November 17, 2006 |
| ) | |
| Appellee/Cross-Appellant. | ) |
| ) | |
Appeal from the Superior Court of the State
of Alaska, Third Judicial District, Kenai,
Charles T. Huguelet, Judge.
Appearances: Nikole Nelson, Alaska Legal
Services Corporation, Anchorage, for
Appellant/Cross-Appellee. Robert J. Molloy,
Kenai, and Kristine A. Schmidt, Kenai, for
Appellee/Cross-Appellant.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
EASTAUGH, Justice.
I. INTRODUCTION
The main question here is whether John L. Smallwood, a
Medicaid recipient treated at Central Peninsula General Hospital,
can sue the hospital to enforce Medicaid billing standards,
particularly the balance billing prohibition that prevents
billing for amounts (apart from authorized copayments) exceeding
those reimbursable under Medicaid. We conclude that Smallwood is
a third-party beneficiary of the provider agreement between the
hospital and the state; he can therefore sue to enforce the
balance billing prohibition. We also conclude that he has a
viable Unfair Trade Practices Act claim. And we conclude that
the hospitals counterclaim for unpaid services is not time-
barred. We therefore affirm some of the superior courts rulings
and vacate others.
II. FACTS AND PROCEEDINGS
John L. Smallwood is a Medicaid recipient who receives
medical care from Central Peninsula General Hospital. The
hospital is operated by Central Peninsula General Hospital, Inc.,
a nonprofit Alaska corporation. The hospital provides medical
care to Medicaid recipients under a provider agreement with the
State of Alaska.1 The state, through its contractor, First
Health Services Corporation (First Health), reimburses providers
like the hospital for some of the costs of the services provided
to Medicaid recipients.2
Smallwood received medical services and supplies at the
hospital on multiple occasions between September 1998 and April
2000. As of January 2004 Smallwood continued to receive services
from the hospital. Smallwood is expected to need frequent
medical care from the hospital in the future.
The hospital sent Smallwood bills with a statement of
balances due on his hospital accounts. Those balances totaled
$743.46. The balances included both First Health-approved copay
amounts and unauthorized charges. Smallwood did not pay the
balances. In February 2001 the hospital assigned its claim for
debt on Smallwoods accounts to Alaska Financial Services, Inc.
(AFS). AFS filed a small claims action against Smallwood on May
3, 2001.
After being informed of the small claims action,
Smallwood, through counsel, notified the hospital that he
believed the hospital was balance billing him in violation of
state and federal law. Smallwood also alleged that because the
charges were not itemized, he could not ascertain whether the
charges [were] legitimate and whether or not they [were] payable
under Medicaid.
In December 2001, while the small claims action was
pending, Smallwood sued the hospital and AFS. Smallwoods
complaint alleged that the hospital had violated state and
federal law and breached its provider agreement with the state by
charging inappropriate cost-sharing amounts to Medicaid
recipients. His complaint also alleged that the hospitals
billing practices violated the Alaska Unfair Trade Practices Act
(UTPA). It also asserted procedural due process claims under the
federal and state constitutions. Smallwoods complaint requested:
(1) a declaratory judgment holding that the hospitals billing
practices violated state and federal Medicaid law, the UTPA, and
the Alaska and United States Constitutions; (2) an order
enjoining the hospital from overcharging Medicaid recipients and
using a billing method that creates confusion and
misunderstanding; (3) an order enjoining AFS from further
attempts to collect Smallwoods debt; and (4) damages.
After Smallwood filed suit, Smallwood and AFS agreed to
dismiss AFSs small claims action. On or about March 8, 2002 AFS
assigned its claim back to the hospital. The district court
dismissed the small claims action on March 18, 2002.
The hospital answered Smallwoods complaint, denying
Smallwoods claims, and counterclaimed for the unpaid balance on
Smallwoods hospital account. The hospitals counterclaim adjusted
the hospitals calculation of the balance due, reducing it from
$743.46 to $483.63.3 Both parties moved for summary judgment.
The superior court denied both parties motions.
Superior Court Judge Charles T. Huguelet presided over
a bench trial in January 2004. At trial, Smallwood asked the
court to order the hospital to change its billing statement
format to include itemization or notices of the authorized
copayments to ensure that Medicaid recipients not be billed in
excess of the authorized copayments in the future. In its
February 2004 memorandum decision and order, the superior court
found Smallwood liable for the authorized copayments, but
enjoined the hospital from overcharging Smallwood in the future.
As to Smallwoods specific claims, the superior court first denied
Smallwood relief under the UTPA, reasoning that balance billing
is already prohibited under state and federal Medicaid law.
Next, the court denied Smallwoods request that the hospital be
required to modify its billing procedures because the court
thought it doubtful that Smallwood has a private right of action
for such a claim. The court also thought it doubtful that the
hospital had violated Smallwoods procedural due process rights.
The court did not address Smallwoods statute of limitations
defense and did not decide Smallwoods claims for declaratory
relief.
The superior court noted that the hospital changed its
computerized billing system twice after Smallwood was
overcharged. It also noted that the hospital admitted that its
system will continue to automatically bill Medicaid recipients
for charges rejected by the state.
In February 2004 the superior court entered judgment
for the hospital and against Smallwood for the $483.63 in charges
authorized by First Health. The court also ordered the hospital
to ensure that its invoices to Mr. Smallwood do not exceed the
Medicaid authorized copays as designated by First Health.
On March 18, 2004 the hospital filed proposed final
judgments in the superior court. On the same day, Smallwood
filed this appeal. After the parties disagreed about whether the
superior court had issued a final judgment, we issued an order
holding the appeal in abeyance until a final judgment was
entered. In June 2004 the superior court entered a separate
final judgment that (1) awarded the hospital $585.06 ($483.63
plus five percent annual interest) against Smallwood; (2) denied
Smallwoods request for injunctive and declaratory relief; (3)
renewed its prior order that the hospital ensure that its future
invoices to Smallwood not exceed the Medicaid-authorized
copayments; and (4) concluded that neither party had prevailed on
the issues of injunctive and declaratory relief. In a subsequent
order, the superior court awarded the hospital attorneys fees of
$96.73 against Smallwood.
Smallwood appeals, arguing that he, as a Medicaid
recipient, has a private right of action to sue Medicaid
providers for over-billing him. He maintains that the superior
court should have ordered the hospital to change its billing
practices so that it would no longer overcharge Medicaid
recipients. He argues that the superior court erred in rejecting
his UTPA claim. And he renews his statute of limitations defense
to the hospitals counterclaim.4
The hospital cross-appeals, arguing that the superior
court erred by refusing to declare that Smallwood has no private
right of action to enforce the balance billing prohibition in the
Medicaid laws. The hospital also argues that it was error not to
declare one of the parties the prevailing party and that its
attorneys fee award was too small.
III. DISCUSSION
A. Standard of Review
We review a trial courts denial of injunctive and
declaratory relief for abuse of discretion,5 but apply our
independent judgment to those aspects of its ruling that involve
questions of law.6
A trial courts determination regarding the applicable
statute of limitations resolves a question of law that we review
de novo.7 But a determination regarding the dates applicable to
a statute of limitations issue may turn on factual findings,
which we review for clear error.8
B. Federal and State Medicaid Program
The Medicaid program, codified at Title XIX of the
Social Security Act, 42 U.S.C. 1396-1396v, is a voluntary
federal-state partnership through which the federal government
gives participating states funds to assist them in providing
health care to eligible needy individuals.9 Participating states
must comply with the statutory provisions of the Medicaid act as
well as regulations promulgated by the Secretary of Health and
Human Services.10 Alaska participates in the Medicaid program.11
The Department of Health and Social Services (DHSS) administers
the program in Alaska.12
DHSS contracts with health care providers for Medicaid
services.13 Under these provider agreements, providers agree to
furnish medical care to eligible individuals in exchange for
reimbursement from the state.14 Even though the Medicaid rates
for services are often lower than a providers typical fees,
providers must accept the state-approved Medicaid payment as
payment in full for the services rendered.15 The only exception
is that providers may charge recipients authorized cost-sharing
including copayment amounts.16 The prohibition on charging a
recipient for any amount exceeding the authorized cost-sharing
charges is commonly referred to as the prohibition against
balance billing.17
A provider may not deny services to an eligible
individual based on the individuals inability to pay the
copayment.18 But an individuals inability to pay does not
eliminate his liability for copayment charges.19
DHSS has contracted with First Health to process
Medicaid claims. First Health reviews charges submitted by
medical providers and determines how much Medicaid will pay for
the services rendered. After First Health makes its
determination, it gives the provider a remittance advice that
lists the approved payment amount, any denials, and any copay
amount that the provider may charge the Medicaid recipient. The
state does not provide the Medicaid recipient with a copy of the
remittance advice. The bills Smallwood received from the
hospital did not list First Health-approved copay amounts.
C. Smallwood Has a Private Right of Action To Enforce the
Balance Billing Prohibition.
Although it did not decide whether Smallwood has a
private right of action to enforce the balance billing
prohibition, the superior court stated that it is doubtful
Smallwood has such a right of action. We consider here whether,
as Smallwood argues, he has a private right of action to
affirmatively enforce the balance billing prohibition.
The pertinent federal and state statutory provisions do
not explicitly create private rights of action.20 Smallwood
nonetheless maintains that he has a private right of action to
enforce the balance billing prohibition (a) under the federal
Medicaid act, (b) under the state Medicaid act, and (c) as a
third-party beneficiary of the hospitals provider agreement with
the state. The hospital disagrees with Smallwoods interpretation
of the jurisprudence surrounding implied rights of action and
enforcement of contracts by third-party beneficiaries. It
contends that it would be inappropriate for us to create a right
of action in this situation because compliance with the
applicable statutes and provider agreement is better enforced by
the responsible federal and state agencies, not through ad hoc
litigation against provider hospitals.
Smallwood gives us no reason to think that his right to
relief or the extent of any relief depends on the source of the
private right of action. We therefore assume, without deciding,
that Smallwood could obtain the same relief regardless of whether
his right of action arises under federal law, state law, or the
provider agreement. Because we conclude that Smallwood has a
right of action as a third-party beneficiary of the provider
agreement between the hospital and the state, we do not need to
decide whether there may be other viable state or federal bases
for a right of action.
1. Smallwood has a right of action as a third-party
beneficiary of the hospitals provider agreement.
We will recognize a third-party right to enforce a
contract upon a showing that the parties to the contract intended
that at least one purpose of the contract was to benefit the
third party.21 In some of our cases, we have focused on whether
the promisee intended to benefit the third party.22 But in other
cases we have not differentiated between the intent of the
promisor and promisee.23 We now conclude that in third-party
beneficiary cases we should follow the approach of the
Restatement (Second) of Contracts to the extent it focuses on the
intent of the promisee.24
We have also never addressed whether we only need to
find an intent to benefit the third party, or whether we must
also find an intent to allow the third party to enforce the
contract. Our cases focus only on the intent to benefit the
third party.25 But the Restatement (Second) of Contracts
highlights both aspects of the contracting parties intentions.
Section 302 of the Restatement provides:
(1) Unless otherwise agreed between promisor
and promisee, a beneficiary of a promise is
an intended beneficiary if recognition of a
right to performance in the beneficiary is
appropriate to effectuate the intention of
the parties and either
(a) the performance of the promise will
satisfy an obligation of the promisee to pay
money to the beneficiary; or
(b) the circumstances indicate that the
promisee intends to give the beneficiary the
benefit of the promised performance.
(2) An incidental beneficiary is a
beneficiary who is not an intended
beneficiary.[26]
The parties do not address this subtlety in their briefing. We
therefore assume here, without deciding, that if the state, as
promisee, manifested an intention to benefit Medicaid recipients
like Smallwood, it also manifested an intention that Medicaid
recipients, as third-party beneficiaries, be able to enforce the
provider agreement.
Finally, government contracts may present particularly
difficult third-party beneficiary problems.27 For example,
government contracts create the risk of imposing liability that
is disproportionately burdensome in relation to the benefit
received.28 The Restatement addresses this potential problem by
providing an exception for private actors who contract with the
government; those contractors are not subject to liability for
consequential damages resulting from their performance or failure
to perform.29 But because Smallwood does not claim consequential
damages, that exception is inapplicable here.
By entering into a provider agreement with the state,
the hospital promised not to balance bill Medicaid recipients.
The state is the promisee of that agreement.
The language of the provider agreement and the
applicable state and federal Medicaid laws indicate that the
state intended that Medicaid recipients like Smallwood benefit
from providers promises not to balance bill. The standard
provider agreement states that providers must comply with federal
and state Medicaid regulations and must accept as payment in full
the amounts paid in accordance with Alaska statutes . . . and
make no additional charge to the recipient . . . . For other
services requiring recipient cost sharing, the provider shall
collect from the recipient the amount of cost sharing in
compliance with the [Alaska regulations].30 DHSS regulations
require that recipients not be charged for any additional
difference between the amount billed and the amount received in
payment from the division for those covered services provided.31
The applicable federal regulations require that all state plans
must provide that the Medicaid agency must limit participation in
the Medicaid program to providers who accept, as payment in full,
the amounts paid by the agency plus any deductible, coinsurance
or copayment required by the plan to be paid by the individual.32
Even when a third party is liable for the recipients medical
costs, the federal statute prohibits providers from collecting
any balance remaining from the recipient or the third party.33
Moreover, Medicaid legislation has been enacted to provide
medical care to needy persons. As we explained in State v.
Planned Parenthood of Alaska, Inc., the Medicaid programs purpose
is granting uniform and high quality medical care to all needy
persons of this state.34
At least one federal court has held that Medicaid
recipients are the intended beneficiaries of the prohibition on
balance billing. In Mallo v. Public Health Trust of Dade County,
the court concluded that the structure of 42 U.S.C.
1396a(a)(25)(C) creates a third-party beneficiary contractual
obligation on the part of the health care provider to collect
from the Medicaid patient no more than the amount of the Medicaid
payment.35 The court explained:
Capping the amount of money providers can
collect, the balance billing provisions
mandatory language creates the terms of a
third-party beneficiary contract to protect
the financial interests of indigent Medicaid
patients. The Court finds Plaintiff, as a
Medicaid recipient, is the intended, third-
party beneficiary to the contract established
by 1396a(a)(25)(C), in which (a) the federal
government promises Medicaid money to the
State in exchange for which the State will
provide medical care for the poor; (b)
private and public health care providers have
promised the State to provide medical care
for indigent patients, in exchange for which
the State will reimburse the provider with
Medicaid funds; and (c) the State will
disburse Medicaid funds at an amount it sets,
in exchange for which the health care
provider will not charge the patient more
than the amount of Medicaid funds that the
provider receives from the State. Medicaid
patients benefit from this contract by
receiving immediate, quality medical
attention, and paying a relatively affordable
medical bill. Thus . . . guaranteeing
payment to the hospital is the quid for which
the hospitals no additional payment promise
was in part the quo.[36]
We agree with the Mallo court that Medicaid recipients are the
intended beneficiaries of the prohibition on balance billing.
That intent is evident from the state and federal Medicaid
statutes and regulations and from the terms of the provider
agreement.
The hospital asserts that Smallwood has no rights as a
third-party beneficiary because he had an alternative
administrative remedy through the states fair hearing process and
because the state has the regulatory authority to enforce the
balance billing prohibition against providers. But potential
enforcement of the contract by the contracting parties or through
other enforcement mechanisms does not necessarily foreclose a
third-party beneficiarys right to enforce a contractual promise.37
Moreover, we are not convinced that there is an administrative
hearing process available to complainants like Smallwood.
Neither the superior court nor the hospital identified the
specific regulatory provision that provides Smallwood with an
administrative remedy. The Alaska Administrative Code provides
Medicaid recipients an opportunity for an administrative hearing
when a request for an application is denied, when a claim for
assistance is denied, when the state intends to modify or
terminate the recipients benefits, or when a request for a
covered Medicaid service is denied.38 As Smallwood points out, it
is not clear that a claim that a provider balance billed a
recipient fits within this hearing process.
We recognize that the state may impose sanctions on
providers that balance bill.39 And we recognize that the superior
court stated that it would give a copy of its order to the Alaska
Attorney General and the Commissioner of Health and Social
Services so the state could resolve these issues. But the
hospital does not point to anything in the record bearing on
whether the state would initiate an inquiry into balance billing
or would respond to a Medicaid recipients inquiry or even whether
the state will respond to the superior courts notification in
this case. Smallwoods right of action is therefore not
foreclosed by these other potential sources of enforcement.
Intended third-party beneficiaries may enforce the
contract terms intended to benefit them.40 We therefore hold that
Smallwood may enforce the balance billing prohibition as a third-
party beneficiary of the provider agreement and that prohibition.
2. Smallwoods claims for declaratory and injunctive
relief must be reconsidered on remand in light of
our ruling that he has a private right of action
here.
Given our holding that Smallwood may enforce the
prohibition on balance billing as a third-party beneficiary of
the provider agreement, Smallwoods claims for declaratory and
injunctive relief must be reconsidered on remand. We address a
number of the concerns expressed by the parties and the superior
court to clarify the contours of the issues on remand.
In addition to stating that it is doubtful Smallwood
has a private right of action, the superior court denied the
broad relief he requested that the hospital be ordered to revise
its billing system. The court reasoned that: (1) the state is
partly responsible for Smallwoods injury because it does not
notify Medicaid recipients of copay decisions and does not
require medical providers to itemize copay amounts in their
bills, but the state was not joined as a party; (2) Smallwood did
not bring his claim as a class action on behalf of all adult
Medicaid recipients; and (3) resolution of the billing system
problems falls within the heavily regulated and complex Medicaid
program and should be resolved by the state with input from
providers. We reject these three factors as bases for denying
all relief, but recognize that the superior court may consider
the second and third factors in fashioning appropriate relief in
this case.
First, the superior court stated that the hospital is
only partly responsible for overcharging Smallwood and suggested
that the state is also partly responsible for the overcharges.
The state is not partly responsible for Smallwoods overcharges.
First Health, the states agent, authorized the hospital to bill
Smallwood a copay amount of $483.63. The hospital, in turn,
billed Smallwood $743.46. The superior court stated that the
state and First Health were partly at fault because if Smallwood
had received a copy of the [remittance advice] issued by First
Health or some other notice regarding his required copay, he
could have required [the hospital] to adjust his bills
accordingly. But whether the state or First Health notified
Smallwood of the copay amount does not affect the fact that the
hospital over-billed Smallwood; it only affects how Smallwood
could respond to the overcharge. The state did everything it
needed to do to inform the hospital of the allowable copayment.
The hospital cannot avoid its responsibility for overcharging
Smallwood by claiming that the state or First Health were partly
or wholly responsible.
The superior courts statement that the hospital is only
partly responsible implies that the state must be a party before
the court can order modification of the billing system. The laws
governing Medicaid provider billing do not require providers to
itemize copayments in their bills. But this fact does not
prohibit the trial court from fashioning such relief. The state
is not a necessary party under Alaska Civil Rule 19(a). As we
explain further below, however, it was reasonable for the court
to consider the broader regulatory context of the claim against
the hospital.
Second, the fact Smallwood did not bring his lawsuit as
a class action does not prevent him from obtaining appropriate
individualized declaratory or injunctive relief. Smallwood is
correct in asserting that a trial court may issue an injunction
even when a suit is brought on behalf of an individual.41
Nonetheless, we do not read the superior courts decision as
suggesting that the superior court thought that the non-class
nature of the action prevented it from granting necessary relief
to Smallwood. Indeed, the court effectively granted injunctive
relief to Smallwood when it required the hospital to ensure that
its invoices to Smallwood not exceed the Medicaid authorized
copays.
The individual nature of his claim remains relevant to
the extent Smallwoods third-party beneficiary claim may seek
relief broader than that strictly necessary to protect his
individual interests. In noting that Smallwood did not bring
his claim as a class action on behalf of all adult Medicaid
recipients, the superior court explained why it was not ordering
the hospital to modify its entire billing system. Of course, if
only an overhaul of the hospitals billing system would protect
Smallwood from balance billing, his status as an individual
litigant would not prevent the court from ordering that relief.42
But the availability here of narrowly tailored individualized
relief ordering the hospital to refrain from overcharging
Smallwood in the future supports the superior courts reasoning
that broader injunctive relief was not necessary, at least as to
Smallwoods third-party beneficiary claim.43
Finally, we recognize, as did the superior court, that
the Medicaid system is heavily regulated and complex and that the
state already regulates the relationship between providers and
Medicaid recipients. The superior court had these considerations
in mind when it refused to order the hospital to modify its
entire billing system, and instead ordered it not to overcharge
Smallwood in the future and sent a copy of its order to the
Alaska Attorney General and the Commissioner of Health and Social
Services. The state might choose to resolve the billing system
problems by, for example, requiring all providers to provide
notice of First Health-approved copay amounts. Or the state
could promulgate regulations requiring First Health to send a
copy of the remittance advice to the Medicaid recipient. But
because the state might choose to do nothing, in fashioning
relief on remand the superior court should only take into account
any actual plans the state has for resolving or preventing such
problems.
The hospital overcharged Smallwood. The hospital
admitted that its billing system will continue to charge Medicaid
recipients for amounts rejected by First Health and so will
likely continue to overcharge Medicaid recipients like Smallwood.
The hospital is solely responsible for those overcharges.
Smallwood may assert the balance billing prohibition as a defense
to claims brought by the hospital against him. He may also
affirmatively sue for relief as a third-party beneficiary of the
provider agreement. We remand for determination of the
appropriate relief in light of our holding here.
D. It Was Error To Reject Smallwoods UTPA Claim.
The superior court concluded that Smallwoods UTPA claim
was exempted from the UTPA because balance billing is already
prohibited under Medicaid law. Smallwood argues on appeal that
the superior court failed to address his actual UTPA claim that
the hospitals bills are confusing. The hospital admits that the
superior court did not address Smallwoods billing format claim,
but urges us to affirm the superior courts decision regardless.
It argues that the UTPA claim fails because Smallwood did not
suffer actual damages or show that the billing format confused
him in the sale of medical services, and because his claim is
time-barred.
1. Smallwoods claim is not exempted from the UTPA.
Count IV of Smallwoods complaint alleged that the
hospitals billing practices violate AS 45.50.471(b)(11)44 because
they create the likelihood of confusion or misunderstanding and
have in fact misled Mr. Smallwood in connection with the sale of
medical services.45 Alaska Statute 45.50.471(a) declares that
unfair methods of competition and unfair or deceptive acts or
practices in the conduct of trade or commerce are unlawful.
Subsection .471(b)(11) defines unfair methods of competition and
unfair or deceptive acts or practices as including engaging in
any other conduct creating a likelihood of confusion or of
misunderstanding and which misleads, deceives or damages a buyer
or a competitor in connection with the sale or advertisement of
goods or services.46 But AS 45.50.481(a)(1) exempts from the UTPA
any acts or transactions regulated under laws administered by the
state, [or] by a regulatory board or commission . . . unless the
law regulating the act or transaction does not prohibit the
practices declared unlawful in AS 45.50.471.
We apply a two-part test to determine whether an act or
practice is exempt under AS 45.50.481(a)(1). In State v. ONeill
Investigations, Inc., we explained that subsection .481(a)(1)
exempts unfair acts and practices from the purview of the UTPA
only where the business is both regulated elsewhere and the
unfair acts and practices are therein prohibited.47 In this case,
provider billing is regulated by federal and state Medicaid laws
and regulations.48 But none of those statutory provisions or
regulations governs the form of the provider billing statement or
prohibits billing practices that creat[e] [a] likelihood of
confusion or misunderstanding.49 Smallwoods claim is therefore
not exempted from the UTPA by AS 45.50.481(a)(1).
2. Smallwoods claims for injunctive and declaratory
relief are not time-barred.
The hospital argues here, as it did below, that
Smallwoods UTPA claim is time-barred by AS 45.50.531(f). The
superior court did not address the statute of limitations issue.
Alaska Statute 45.50.531(f) bars UTPA damages claims
filed more than two years after the person discovers or
reasonably should have discovered that the loss resulted from an
act or practice declared unlawful by AS 45.50.471. There is no
corollary time bar in the UTPA for claims for declaratory or
injunctive relief.50
Smallwoods complaint pleaded a claim for damages, but
his briefing on summary judgment explained that he had not
alleged actual damages against the hospital.51 On appeal
Smallwood has waived any claim for monetary damages by conceding
in his reply brief that he did not seek actual damages in the
superior court. We therefore do not need to consider whether any
damages claim by Smallwood would have been time-barred under AS
45.50.531(f).52 And because AS 45.50.535 the provision through
which a plaintiff may pursue injunctive relief for violations of
the UTPA does not provide a time limitation, we hold that
Smallwoods UTPA claim for injunctive relief is not time-barred.53
3. Smallwood may still pursue injunctive relief even
though he did not allege actual damages.
The hospital also argues that Smallwood cannot assert a
UTPA claim because he did not suffer actual damages. Although
Smallwood admits he never alleged actual damages, he contends
that he may still seek injunctive relief.
A plaintiff may seek injunctive relief under the UTPA
even if he has not suffered actual damages. Alaska Statute
45.50.535 states that any person who was the victim of the
unlawful act, whether or not the person suffered actual damages,
may bring an action to obtain an injunction prohibiting a seller
or lessor from continuing to engage in an act or practice
declared unlawful under AS 45.50.471.54 The hospital and
Smallwood disagree whether, in the words of AS 45.50.471(11), the
billing format creat[ed] a likelihood of confusion or of
misunderstanding and misle[d], deceive[d] or damage[d]
[Smallwood] in connection with the sale or advertisement of goods
or services.55 We remand this issue for determination whether
injunctive relief is appropriate given our holding that the
alleged violation is not exempted or time-barred.56
E. The Hospitals Counterclaim Is Not Time-Barred.
Smallwood argues that any debt to the hospital accruing
before November 1, 1999 is time-barred.57 The superior court did
not decide the issue when Smallwood raised it below.
The parties stipulation of facts at trial establishes
the following applicable dates: the balances due on Smallwoods
accounts accrued between September 11, 1998 and March 24, 2000.
AFS filed its small claims action against Smallwood on May 3,
2001. The district court dismissed the small claims action with
prejudice on March 18, 2002. Because that action should not have
been dismissed with prejudice, on November 20, 2002 the court
vacated the earlier dismissal and entered a dismissal of the
small claims action without prejudice. The hospital refiled its
claims against Smallwood by supplemental pleading entitled
Counterclaim on July 25, 2002. The superior court granted the
hospitals motion for permission to file its counterclaim on
November 1, 2002, accepting the counterclaim as filed July 25,
2002.
The applicable statute of limitations, AS 09.10.053,
requires that actions upon a contract or liability be brought
within three years. The hospital argues that the statute of
limitations was tolled while the suit between Smallwood and AFS
was pending, and that the Alaska savings statute provided an
additional year within which the hospital could file its
counterclaim. Smallwood responds that the hospitals assertions
regarding tolling and the savings statute are without merit
because the hospital was not a plaintiff in the small claims
action brought by AFS.
Whether an assignees conduct in filing suit on the
assigned claims may toll the applicable statute of limitations
for the assignor is an issue of first impression in Alaska. We
conclude that an assignees conduct may toll the statute of
limitations. Statutes of limitation are intended to promote
timely and efficient litigation of claims and to protect
defendants from the burden of litigating stale claims by putting
defendants on notice of the claims against them so they may
prepare for litigation while evidence is still fresh.58 Neither
of these purposes would be served by not allowing an assignees
acts to toll the statute of limitations. AFS tolled the statute
of limitations by filing its complaint.59 Smallwood was on notice
of the claims against him when AFS served its complaint. And it
was per the settlement between AFS and Smallwood that the claim
was assigned back to the hospital. Per that settlement, the
hospital stood in AFSs shoes as AFSs successor in interest. The
statute of limitations was therefore tolled during the pendency
of AFSs small claims action against Smallwood.
The hospital also argues that the savings statute, AS
09.10.240, provided an additional year within which the hospital
could file its counterclaim. We agree. Alaska Statute 09.10.240
provides:
If an action is commenced within the time
prescribed and is dismissed upon the trial or
upon appeal after the time limited for
bringing a new action, the plaintiff, or, if
the plaintiff dies and the cause of action in
favor the plaintiff survives, the heirs or
representatives may commence a new action
upon the cause of action within one year
after the dismissal or reversal on appeal.
For the same reasons that we concluded AFSs suit tolled the
statute of limitations, we conclude that the hospital and AFS are
a single plaintiff under AS 09.10.240. Smallwood points to two
Ohio decisions that held that distinct parties cannot act as a
single plaintiff for the purposes of Ohios savings statute.60 But
those decisions are not binding on us, and other courts have
applied savings statutes similar to Alaskas to allow the renewal
of an action by an assignee or a transferee of the original
plaintiffs rights.61
We therefore conclude that AFSs suit tolled the statute
of limitations and that the hospital and AFS are a single
plaintiff for purposes of AS 09.10.240.
The parties disagree about the date on which the
hospital filed its counterclaim. There is also potential
disagreement about the date the AFS suit was dismissed. But we
do not need to remand the issue because even if we accepted the
dates most favorable to Smallwood, the hospitals entire
counterclaim was still timely filed.62 We therefore conclude that
the statute of limitations did not bar any part of the hospitals
counterclaim for authorized charges accrued between September 11,
1998 and March 24, 2000.
F. Other Issues Raised by the Parties Must Be Considered
on Remand.
The parties raise other arguments regarding prevailing
party status, public interest litigant status, and attorneys
fees. Because the rulings underlying these issues may change on
remand, we do not address these issues here.
IV. CONCLUSION
We conclude that Smallwood is a third-party beneficiary
of the provider agreement and that he therefore has a right of
action to enforce the prohibition on balance billing. We
consequently AFFIRM that part of the final judgment that ordered
the hospital to ensure that its invoices to Smallwood do not
exceed the Medicaid authorized copays. And because we conclude
that the hospitals counterclaim was not time-barred, we AFFIRM
that part of the final judgment regarding the hospitals
counterclaim and requiring Smallwood to pay the principal amount
of $483.63 plus applicable interest. But we VACATE that part of
the final judgment that denied Smallwoods claims for injunctive
and declaratory relief and REMAND for consideration of those
claims. We also VACATE that part of the February 13, 2004 order
that rejected Smallwoods UTPA claim and REMAND for
reconsideration of that claim. Finally, we VACATE the order for
attorneys fees and REMAND the issues concerning attorneys fees.
_______________________________
1 See 7 Alaska Administrative Code (AAC) 43.065 (2004).
2 See 7 AAC 43.040(b).
3 An audit by hospital employees during this period
revealed that the hospital had overbilled Smallwood $259.83.
The superior court explained that the overcharges were caused by
a number of factors: hospital employees use of incorrect revenue
codes for supplies and services billed to Medicaid, failure of
the hospital to ask for reimbursement from Medicaid within
applicable time limits, and a computerized billing system that
treated Medicaid recipients like patients with private insurance.
The superior court found that the overcharges were not
deliberate.
4 Smallwood argues that part of the hospitals
counterclaim is time-barred but does not otherwise challenge the
amount of the counterclaim.
5 See Lowell v. Hayes, 117 P.3d 745, 750 (Alaska 2005)
(declaratory relief); N. Kenai Peninsula Rd. Maint. Serv. Area v.
Kenai Peninsula Borough, 850 P.2d 636, 639 (Alaska 1993)
(injunctive relief).
6 See Alderman v. Iditarod Props., Inc., 32 P.3d 373, 380
(Alaska 2001); Alaska Marine Pilots v. Hendsch, 950 P.2d 98, 104
(Alaska 1997).
7 Sengupta v. Wickwire, 124 P.3d 748, 752 (Alaska 2005);
Alderman v. Iditarod Props., Inc. (Alderman II), 104 P.3d 136,
140 (Alaska 2004).
8 See Sengupta, 124 P.3d at 752; Alderman II, 104 P.3d at
140.
9 Alaska Dept of Health & Soc. Servs. v. Ctrs. for
Medicare & Medicaid Servs., 424 F.3d 931, 93435 (9th Cir. 2005)
(citing Wilder v. Va. Hosp. Assn, 496 U.S. 498, 502 (1990));
Garner v. State, Dept of Health & Soc. Servs., Div. of Med.
Assistance, 63 P.3d 264, 268 (Alaska 2003).
10 Ctrs. for Medicare & Medicaid Servs., 424 F.3d at 935
(citing Wilder, 496 U.S. at 502); Garner, 63 P.3d at 268.
11 AS 47.07.010 et seq.
12 AS 47.07.040.
13 7 AAC 43.040, .065 (2004 & Supp. 2006).
14 7 AAC 43.065 (2004); see Social Security Act 1902, 42
U.S.C. 1396a(a)(27) (2000).
15 See Spectrum Health Continuing Care Group v. Anna Marie
Bowling Irrevocable Trust, 410 F.3d 304, 313 (6th Cir. 2005); 42
C.F.R. 447.15 (2005) (A State plan must provide that the
Medicaid agency must limit participation in the Medicaid program
to providers who accept, as payment in full, the amounts paid by
the agency plus any deductible, coinsurance or copayment required
by the plan to be paid by the individual.); 7 AAC 43.050 (Payment
provided by the division will be reduced by the amount of cost-
sharing required under 7 AAC 43.052, and represents full and
total reimbursement from the division for those covered services
authorized under Medicaid.).
16 42 C.F.R. 447.15; 7 AAC 43.050, .052.
17 Spectrum Health, 410 F.3d at 314; see also Mallo v.
Public Health Trust of Dade County, Fla., 88 F. Supp. 2d 1376,
1377 (S.D. Fla. 2000).
18 AS 47.07.042(a).
19 42 U.S.C. 1396b(a); AS 47.07.042(a).
20 See 42 U.S.C. 1396 et seq.; AS 47.07.010 et seq.; see
also Mallo, 88 F. Supp. 2d at 1378 (noting that there is no
explicit right of action for Medicaid beneficiaries to sue
providers for balance billing in federal Medicaid legislation).
21 Howell v. Ketchikan Pulp Co., 943 P.2d 1205, 1207
(Alaska 1997); Neal & Co. v. Assn of Vill. Council Presidents
Regl Hous. Auth., 895 P.2d 497, 505 (Alaska 1995); Kodiak Elec.
Assn v. DeLaval Turbine, Inc., 694 P.2d 150, 154 (Alaska 1984);
State v. Osborne, 607 P.2d 369, 371 (Alaska 1980).
22 Kodiak Elec., 694 P.2d at 154; Osborne, 607 P.2d at 371
(Ordinarily, only the promisees . . . motives are relevant.).
23 Howell, 943 P.2d at 120708 (The motives of the parties,
including those of the promisee, are determinative.); Neal, 895
P.2d at 505; see also Holbrook v. Pitt, 643 F.2d 1261, 1271 n.17
(7th Cir. 1981) (rejecting position that only intentions of
promisee are relevant to determination of third-party
beneficiarys rights).
24 See Restatement (Second) of Contracts 302 (1981).
25 See Howell, 943 P.2d at 1207; Neal, 895 P.2d at 505;
Kodiak Elec., 694 P.2d at 154; Osborne, 607 P.2d at 371.
26 Restatement (Second) of Contracts 302 (1981) (emphasis
added).
27 See Melvin Aron Eisenberg, Third-Party Beneficiaries,
92 Colum. L. Rev. 1358, 140612 (1992).
28 See id. at 1407; see also Zigas v. Super. Ct., 174 Cal.
Rptr. 806, 811 n.3 (Cal. App. 1981).
29 Restatement (Second) of Contracts 313 (1981).
30 See also 7 AAC 43.065(b) (Providing medical or
medically-related services to recipients or billing the division
for those services constitutes agreement by the provider . . .
(2) to comply with applicable state and federal Medicaid law.).
31 7 AAC 43.050.
32 42 C.F.R. 447.15.
33 42 U.S.C. 1396a(a)(25)(C).
34 State, Dept of Health & Soc. Servs. v. Planned
Parenthood of Alaska, Inc., 28 P.3d 904, 911 (Alaska 2001); see
also AS 47.07.010 (It is declared by the legislature as a matter
of public concern that the needy persons of this state . . .
should seek only uniform and high quality care that is
appropriate to their condition and cost-effective to the state
and receive that care, regardless of race, age, national origin,
or economic standing.); Spectrum Health Continuing Care Group v.
Anna Marie Bowling Irrevocable Trust, 410 F.3d 304, 313 (6th Cir.
2005) (stating that Congress established Medicaid . . . to
provide medical care to low-income families and individuals).
35 Mallo v. Pub. Health Trust of Dade County, Fla., 88 F.
Supp. 2d 1376, 1385 (S.D. Fla. 2000).
36 Id. at 1385 (citations omitted).
37 See Zigas v. Super. Ct., 174 Cal. Rptr. 806, 83940
(Cal. App. 1981) (holding that tenants were entitled to maintain
third-party cause of action to enforce financing agreement
between landlords and Department of Housing and Urban Development
even though federal agency also had enforcement powers).
38 7 AAC 49.020 (2004).
39 See 7 AAC 43.950 (Sanctions may be imposed [on
providers] for any of the following reasons: . . . (7) breaching
the term of the Medicaid provider agreement . . . (10) violating
any provision of AS 47.07 or any regulation adopted under it; . .
. (16) following a documented practice of charging recipients for
services an amount above payment made by the division.).
40 Howell, 943 P.2d at 1207; Neal, 895 P.2d at 505; Kodiak
Elec., 694 P.2d at 154; Osborne, 607 P.2d at 371.
41 See Alaska R.R. Corp. v. Native Vill. of Eklutna, 43
P.3d 588, 59798 (Alaska 2002) (holding that trial court did not
abuse its discretion when it enjoined companys quarrying
activities in suit brought by native village, residents, and
Municipality of Anchorage).
42 Cf. Easyriders Freedom F.I.G.H.T. v. Hannigan, 92 F.3d
1486, 1501 (9th Cir. 1996) (affirming in non-class action
statewide injunction on enforcement of motorcycle helmet law
because plaintiffs could only be protected by statewide relief).
43 We assume, without deciding, that the scope of
available injunctive relief may be broader if on remand Smallwood
prevails on his Unfair Trade Practices Act claim discussed below
in Part III.D. Cf. Dee Prigdon, Consumer Protection and the Law
6:9 (2005) (noting that some states allow an individual plaintiff
who wishes to act as a private attorney general [to] seek to
obtain not only damages for his or her own injuries, but also to
enjoin any future violations of the state consumer protection act
by the same defendant).
44 Smallwoods complaint cited the statutory provision as
AS 45.50.471(b)(10).
45 See AS 45.50.471(b)(11).
46 Id.
47 State v. ONeill Investigations, Inc., 609 P.2d 520, 528
(Alaska 1980); see also Matanuska Maid, Inc. v. State, 620 P.2d
182, 186 (Alaska 1980) (quoting ONeill Investigations).
48 See 42 U.S.C. 1396a(a)(25)(C); 42 C.F.R. 447.15; AS
47.07.042; 7 AAC 43.050.
49 See AS 45.50.471(b)(11).
50 See AS 45.50.535.
51 Smallwoods complaint requested [d]amages against AFS
and CPGH. In his response to the hospitals first set of
interrogatories, Smallwood stated that he was seeking statutory
damages available under the Alaska Consumer Protection Act. But
as the hospital explained in its motion for summary judgment,
Smallwood never alleged in his complaint that he had suffered any
actual damages and did not itemize in his answers to the
interrogatories any actual damages or ascertainable loss of
money.
52 Smallwood argues on appeal that his claim is not time-
barred because the hospitals violations were ongoing and
continued into the period of the statute of limitations. Because
Smallwood is not pursuing any claim for damages, we do not need
to decide whether such a claim would have been timely under the
continuing violation doctrine. See Alakayak v. British Columbia
Packers, Ltd., 48 P.3d 432, 462 (Alaska 2002) (The effect . . .
of a continuing violation, is to provide a new, and perhaps
perpetually rolling, date from which the statute of limitations
may begin.).
53 The hospital points to no other statute of limitations
that arguably bars Smallwoods UTPA claim.
54 AS 45.50.535(a) (emphasis added).
55 See AS 45.50.471(11).
56 The superior court may also consider whether to grant
declaratory relief; we express no opinion whether such relief
would be appropriate at this stage of the controversy between the
parties. See Lowell v. Hayes, 117 P.3d 745, 75556 (Alaska 2005)
([D]eclaratory relief is generally used to settle a controversy
that has yet to ripen into violations of law.) (internal
quotation marks omitted).
57 $355.47 of the $483.63 the hospital sought accrued
before November 1, 1999.
58 See 51 Am. Jur. 2d Limitations of Actions 13 (2000).
59 See Silverton v. Marler, 389 P.2d 3, 5 (Alaska 1964)
(holding that filing of complaint interrupts running of statute
of limitations).
60 See Natl Fire Ins. v. Joslyn Mfg., 265 N.E.2d 791 (Ohio
App. 1971) (rejecting insurance companys attempt to use savings
statute to bring claim against lessee after previous claim
brought by insured lessor had been dismissed because insured and
insurance company were not same plaintiffs); see also Childrens
Hosp. v. Ohio Dept of Pub. Welfare, 433 N.E.2d 187 (Ohio 1982)
(holding that savings statute does not apply when parties in
original action differ from those in new action).
61 See Dressler v. Carpenter, 155 S.W. 108, 109 (Ark.
1913); Van der Stegen v. Neuss, H. & Co., 200 N.E. 577 (N.Y.
1936); see also C.P. Jhong, Annotation, Applicability, as
Affected by Change in Parties, of Statute Permitting Commencement
of New Action Within Specified Time After Failure of Prior Action
Not on Merits, 13 A.L.R.3d 848, 8 (2006).
62 Even if we assume that the AFS suit was dismissed on
March 18, 2002, and that the counterclaim was not filed until
November 2, 2002, the counterclaim was filed before the end of
the extra year provided by the savings statute.
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