Opinion
Case No. 99 C 1659
July 10, 2000
MEMORANDUM OPINION AND ORDER
Plaintiff Case Mix Analysis, Inc. (CMA) has moved for entry of summary judgment on its breach of contract claim against defendant Doctors Hospital of Hyde Park, Inc. (Hospital). For the reasons that follow, the Court grants CMA's motion in part and denies it in part.
Summary judgment is appropriate only if the admissible evidence shows that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). In addressing CMA's motion, we construe the facts in the light most favorable to the Hospital, and draw reasonable inferences in the Hospital's favor. See Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The parties agree that CMA's claims are governed by Massachusetts law. See Cplt., Ex. A, ¶ XII.
A hospital that treats patients eligible for Medicare and Medicaid is required to file annual cost reports with the Health Care Financing Administration through a fiscal intermediary, identifying the reimbursements that the hospital is and was entitled to receive for treating such patients. As of early 1998, the Hospital had filed cost reports for a series of years reflecting that it had been overpaid by the government; it owed the government $2,677,000; and Medicare and Medicaid payments to the hospital had been suspended as a result of this.
In July 1998, the Hospital entered into a contract with CMA in which it retained CMA "to review [the Hospital's] Medicare audited and filed cost reports for the fiscal years ending 1994, 1995, 1996 and 1997 and recommend appropriate adjustments and changes in order to increase Medicare reimbursement from the Healthcare Services Corporation fiscal intermediary (FI)." Cplt., Ex. A, ¶ I. The contract provided that CMA would analyze and review cost reports and supporting documentation to identify opportunities for additional reimbursement through "reopening" or "refiling" the reports; obtain and review work papers for the cost reports; prepare work schedules for any adjustments; meet with the Hospital on completion of its review to discuss possible areas for reopening or refiling; prepare summaries of its proposed adjustments; and present these findings to the Hospital's designated representatives. Id. ¶ II. The Hospital agreed to provide CMA with copies of cost reports for years that are still open as well as years that could be reopened; make available supporting work papers used in preparation of the cost reports; provide access to patient billing records as needed for CMA's review; and provide work space for two CMA staff persons. Id. Ill. The contract provided that "[a]ll expenses shall be borne by CMA." Id. ¶ X.
The contract stated that "[i]n consideration of the services to be rendered by CMA, the [Hospital] agrees to pay CMA 33% (thirty-three percent) of additional reimbursements obtained, or of financial liability reduced, as a result of CMA's recommended cost report adjustments and as accepted by the Client and the fiscal intermediary." Id. ¶ VIII.
It is undisputed that CMA performed services pursuant to the contract, that it recommended adjustments to the cost reports, and that the Hospital obtained reimbursements from the government. Specifically, the Hospital obtained reimbursements in the following amounts for the years covered by the agreement:
Fiscal year 1994: $1,005,101
Fiscal year 1995: 908,373
Fiscal year 1996: 1,062,919
Fiscal year 1997: 622,380
TOTAL: $3,598,773
CMA billed the Hospital for $1,187,561 in fees based on these reimbursements.
The Hospital contends that CMA did not fully perform its obligations under the contract and that the Hospital had to undertake tasks that under the contract were to be performed by CMA. It also argues that the reimbursements were obtained largely through the Hospital's own efforts, not CMA's.
The Hospital claims that its employees ended up doing a significant amount of work that under the contract should have been done by CMA. Much of the Hospital's evidence in this regard consists of the statements of its chief financial officer, Nelson Vasquez — both an affidavit and answers to interrogatories, which Vasquez verified on the Hospital's behalf. See Dfdt. Ex. 4, Verification page. Vasquez, however, was not hired by the Hospital until April 1999. By that time the work on the contract was already done; CMA's last invoice to the Hospital is dated January 20, 1999. Vasquez cannot possibly have personal knowledge of the matters in his affidavit and the interrogatory answers; his statements are necessarily based on inadmissible hearsay. Evidence submitted in support of or in opposition to summary judgment must be admissible, or the Court cannot consider it. Fed.R.Civ.P. 56(e). Vasquez's affidavit is stricken.
This leaves the Hospital with only statements from Michael Nelson, the chief financial officer who preceded Vasquez, to support its claim that it had to do work that CMA was obligated to perform. Nelson testified that he had to download, provide, and verify information with regard to the 1996 cost report. But none of this was that the contract expressly assigned to CMA. The Hospital has offered no evidence that CMA failed to perform any of the tasks that the contract obligated it to do.
The Hospital contends that before the parties signed the contract, it was understood that Hospital staff would not be called upon to assist in CMA's work, as the Hospital did not have staff with the time available to assign to that task. The problem with this is that this alleged understanding was not made part of the contract. Massachusetts follows the parol evidence rule, which precludes evidence of earlier or contemporaneous discussions varying the terms of a later integrated agreement. See, e.g., Nelson v. Hamlin, 258 Mass. 331, 334, 115 N.B.2d 18, 21 (1927); New England Financial Resources, Inc. v. Coulouras, 30 Mass. App. Ct. 140, 145, 566 N.E.2d 1136, 1139 (1991).
In sum, there is no genuine issue of fact as to whether CMA failed to perform duties assigned to it under the parties' contract.
As noted earlier, under the contract CMA is entitled to payment for reimbursements obtained or liabilities reduced "as a result of CMA's recommended cost report adjustments" accepted by the financial intermediary. The Hospital argues that the reimbursements it received for 1995 and 1996 came as a result of the Hospital's own efforts or would have been given by the financial intermediary in any event. Nelson testified that he was the first to identify a particular deficiency in the 1995 and 1996 reports which could increase the reimbursements due — certain patient days had been omitted. He testified that he passed this information on to CMA, which located the data to support the claim and then submitted it to the financial intermediary. The Court believes that this evidence is sufficient to raise a genuine issue of fact as to whether the 1995 and 1996 reimbursements, in their entirety, were obtained "as a result of CMA's recommended cost report adjustments" or instead were obtained as a result of Nelson's suggestions.
The Hospital also argues that the 1996 report was not reopened by the financial intermediary until after it had received a particular verification from Nelson; it argues that the reimbursement might not have been given without this verification. Under the contract, however, that is not the issue; the question is whether the reimbursement was obtained as a result of recommended adjustments by CMA. The fact that Nelson provided a verification to the intermediary does not give rise to a genuine issue of material fact on this score.
The Hospital contends that the reimbursement it obtained for 1997 resulted from the discovery of a mathematical miscalculation and that the financial intermediary would have caught this on its own even if CMA had not. The contract, however, does not exclude from CMA's fee reimbursements resulting from mathematical miscalculations by the Hospital; if the Hospital had wished to exclude such things it would have been easy for it to do so in the contract. There is no "inevitable discovery" exception to the contract; the Hospital's evidence on this point does not give rise to a genuine issue of material fact.
Finally, the Hospital contends that in the course of CMA's work, services had to be performed by an outside contractor for which the Hospital had to pay; the contract required all expenses to be borne by CMA. The problem with the Hospital's argument is that it has no competent evidence that it paid this expense, such as a copy of a check or the testimony of a person with knowledge of the events. Rather, its sole support for its claim is its answers to interrogatories, which were prepared by Vasquez, who lacks personal knowledge of the matter. Nelson, who does have personal knowledge, testified that CMA paid the vendor's bill. The Hospital has failed to show a genuine issue of material fact on this point.
CMA also seeks to recover prejudgment interest. The Hospital disputes CMA's entitlement to interest for the period preceding the filing of this action, but in its reply CMA states that it is limiting its demand for prejudgment interest to the period following the filing of the complaint in this case. Under the governing statute, CMA will be entitled to 12% interest from the date the complaint was filed, March 12, 1999. Mass. Gen. L. ch. 231, § 6C. The Court will expect CMA to provide the necessary calculations upon conclusion of this action.
Conclusion
CMA's motion for summary judgment is granted in part and denied in part. The Court grants summary judgment in CMA's favor with regard to its entitlement to its fees for the reimbursements the Hospital received for 1994 and 1997, plus 12% simple interest from March 12, 1999. With regard to 1995 and 1996, however, the Court denies CMA's motion for summary judgment. Thus case is set for a report on status on August 8, 2000 at 9:30 a.m.