Alaska Supreme Court Opinions made Available byTouch N' Go Systems and Bright Solutions


Touch N' Go
, the DeskTop In-and-Out Board makes your office run smoother.

  This site is possible because of the following site sponsors. Please support them with your business.
www.gottsteinLaw.com

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

Smallwood v. Central Peninsula General Hospital (11/17/2006) sp-6074, 151 P3d 319

     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.

This site is possible because of the following site sponsors. Please support them with your business.
www.gottsteinLaw.com
Case Law
Statutes, Regs & Rules
Constitutions
Miscellaneous


IT Advice, Support, Data Recovery & Computer Forensics.
(907) 338-8188

Please help us support these and other worthy organizations:
Law Project for Psychiatraic Rights
Soteria-alaska
Choices
AWAIC