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Reid Hospital & Health Care Services, Inc. v. Conifer Health Solutions, LLC

United States District Court, S.D. Indiana, Indianapolis Division

August 30, 2017

REID HOSPITAL & HEALTH CARE SERVICES, INC., Plaintiff,
v.
CONIFER HEALTH SOLUTIONS, LLC, and CONIFER REVENUE CYCLE SOLUTIONS, LLC, Defendants.

          ORDER ON DEFENDANTS' MOTION TO DISMISS

          LARRY J. McKINNEY, JUDGE.

         This matter is before the Court on Defendants', Conifer Health Solutions, LLC and Conifer Revenue Cycle Solutions, LLC (collectively “Conifer's”), Motion to Dismiss. Dkt. 26. Pursuant to Federal Rule of Civil Procedure 12(b)(6) (“Rule 12(b)(6)”), Conifer moves to dismiss three counts of Plaintiff's, Reid Hospital & Health Care Services, Inc. (“Reid's”), Amended Complaint. Dkt. 8. For the reasons set forth below, Conifer's Motion to Dismiss is GRANTED.

         I. BACKGROUND

         Reid is an Indiana not-for-profit corporation that operates a hospital in Wayne County, Indiana. Dkt. 8, ¶ 1. Reid manages a 233-bed regional referral center and is in the business of providing healthcare and hospital services. Dkt. 8, ¶ 2.

         Conifer provides comprehensive revenue cycle management and collection services to hospitals and other healthcare providers. Dkt. 8, ¶ 9. Conifer holds itself out as the number one hospital revenue cycle management and collection outsourcing vendor. Dkt. 8, ¶ 10.

         On April 28, 2011, Reid outsourced its entire revenue cycle management to Dell Marketing, LP (“Dell”), pursuant to a 77-page Master Agreement for Revenue Cycle Outsourcing (the “Agreement”). Dkt. 8, ¶ 21.[1] Section 18.10 of the Agreement provides that it “shall be governed according to the laws of Indiana without giving effect to any rule or conflicts of law.” Dkt. 8, ¶ 22.

         On November 5, 2012, Conifer assumed all of Dell's duties and obligations under the Agreement, which made it responsible for Reid's entire revenue cycle management. Dkt. 8, ¶¶ 23, 24. Specifically, Conifer was responsible for the following: prequalifying patients, case management services, accurate coding, medical records, timely billing for Reid's services, timely responding to requests for additional information from third party payors (i.e. insurers, Medicaid, and Medicare), timely appealing and pursuing denials, and, ultimately, collecting all sums due Reid for its services. Dkt. 8, ¶ 26.

         Section 12.4 of the Agreement states that Conifer “[w]arrants that the service shall be performed in a manner consistent with best practices of providers of the types of services specified in this Agreement.” Dkt. 8, ¶ 27. In Section 1.1 of the Agreement, Conifer represented that it “has the skill, personnel, knowledge and management expertise to provide the services in compliance with all applicable laws and payor contracts.” Dkt. 8, ¶ 28.

         Section 10.1(B) of the Agreement states: “Incentive Fees. Commencing with the Second Contract Year of the Term … Conifer will deliver an invoice to Reid for the incentive fees, if any, earned by Conifer during the prior Measurement Period. … Reid will pay each such invoice in accordance with Section 10.5.” Dkt. 8, ¶ 32. The Agreement also specified “that except with the express written consent of Reid, all Base Service functions shall be performed at a facility that is located within a 20 mile radius of the address of Reid's offices stated in the opening paragraph of this Agreement.” (hereinafter “Locality Clause”). Dkt. 8, ¶ 33.

         Section 14.1(B) of the Agreement is titled “Limitation of Liability” and states, in relevant part:

Limitation on Types of Damages. Except with respect to claims resulting from the willful misconduct of [Conifer], its employees and agents, breach by [Conifer], its employees or agents of its confidentiality obligations under Section 11.2 or (iii) claims from [Conifer's] indemnification obligations and Section 20 of Schedule E, but with respect to all other claims, actions and causes of action arising out of, under or in connection with this Agreement (except for Reid's obligations to make payments under this Agreement), regardless of the form of action, whether in contract or tort (including negligence, strict liability or otherwise) and whether or not such damages are foreseen, neither Party will be liable for, any amounts for indirect, incident[al], special, consequential (including without limitation, loss profits, lost revenue, or damages for the loss of data) or punitive damages of the other Party or any third parties.

         Dkt. 8, ¶ 35 (some modification in original; some by the Court).

         Section 14.1(C) of the Agreement further provides, in relevant part:

Limitation on Direct Damages. Except with respect to Reid's payment obligations under this Agreement and with respect to claims, actions or causes of action arising from (1) [sic] [Conifer's] indemnification obligations set forth in Article 13, (ii) the willful misconduct or Gross Negligence of [Conifer], its employees and agents, (iii) a breach by [Conifer], its employees or agents of its obligation of confidentiality Section 11.2, or (iv) claims from [Conifer's] indemnification obligations set forth in Section 20 of Schedule E, but with respect to all other claims, actions and causes of action arising out of, under or in connection with this Agreement, regardless of the form of action, whether in contract or tort (including negligence, strict liability or otherwise) and whether or not such damages are foreseen, neither party's liability will exceed the total amount actually paid or payable to [Conifer] by Reid for Services provided under this Agreement (excluding amounts paid as reimbursement of expenses or taxes) during the 12 month period immediately preceding the date on which the claim, action, or cause of action arose.

         Dkt. 8, ¶ 36 (modification in original).

         In August 2012, shortly before Conifer assumed responsibility under the Agreement from Dell, Dell submitted a survey to its employees working on the Reid project, which revealed staffing shortages at Reid in the revenue cycle management operations managed by Dell. Dkt. 8, ¶¶ 40-41. The results of the survey were known by Conifer at the time it assumed Dell's responsibilities under the Agreement. Dkt. 8, ¶ 43. The director of Dell's ...


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