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Hospital & Healthsystem Association of Pennsylvania v. Commonwealth

April 15, 2010

THE HOSPITAL & HEALTHSYSTEM ASSOCIATION OF PENNSYLVANIA, GEISINGER HEALTH SYSTEM, ST. VINCENT HEALTH CENTER AND ABINGTON MEMORIAL HOSPITAL, PETITIONERS
v.
THE COMMONWEALTH OF PENNSYLVANIA, THE DEPARTMENT OF INSURANCE, THE TREASURY DEPARTMENT, AND THE OFFICE OF THE BUDGET OF THE COMMONWEALTH OF PENNSYLVANIA, RESPONDENTS
THE PENNSYLVANIA MEDICAL SOCIETY, ON BEHALF OF ITSELF AND ALL OF ITS MEMBERS, PETITIONERS
v.
THE COMMONWEALTH OF PENNSYLVANIA; THE DEPARTMENT OF INSURANCE, THE TREASURY DEPARTMENT, AND THE OFFICE OF THE BUDGET OF THE COMMONWEALTH OF PENNSYLVANIA, RESPONDENTS



The opinion of the court was delivered by: Judge Butler

Argued: February 10, 2010

BEFORE: HONORABLE DAN PELLEGRINI, Judge, HONORABLE RENÉE COHN JUBELIRER, Judge, HONORABLE ROBERT SIMPSON, Judge, HONORABLE PATRICIA A. McCULLOUGH, Judge, HONORABLE JOHNNY J. BUTLER, Judge.

OPINION

The Hospital & Healthsystem Association of Pennsylvania, Geisinger Health System, St. Vincent Health Center, Abington Memorial Hospital, and the Pennsylvania Medical Society, on behalf of itself and all of its members (Petitioners) filed an application for summary relief. The Pennsylvania Osteopathic Medical Association (POMA) filed a brief as amicus curiae in support of Petitioners' application. For the reasons that follow, we grant Petitioners' application for summary relief.

This case arises from a dispute over funds appropriated pursuant to the Medical Care Availability and Reduction of Error (MCARE) Act.*fn1 Under the MCARE Act, health care providers are, with certain exceptions, required to maintain minimum medical professional liability coverage. The MCARE Act establishes a medical professional liability fund commonly known as the MCARE Fund. The MCARE Fund is used to pay claims against providers for losses or damages awarded in medical professional liability actions in excess of their basic insurance coverage. The MCARE Fund is unlike an insurance carrier, in that there is no risk transfer in exchange for "premiums," and the MCARE Fund does not maintain reserves for reported but unresolved claims, or claims incurred but not yet reported. Instead, it operates on a pay-as-it-goes basis. It is undisputed, therefore, that at any point in time, there may be unfunded liability arising from unreported and unresolved claims.

The MCARE Fund is funded by an "assessment" on each participating health care provider, in such a manner as to have funds available to cover claims and expenses for the assessment year.*fn2 The amount of each "assessment" is determined by the provider's prior claim history and private medical malpractice insurance premiums. In order to be licensed to practice in Pennsylvania, health care providers must maintain both private professional liability insurance and contribute to the MCARE Fund.

In 2003, the General Assembly enacted the Health Care Provider Retention (HCPR) Program*fn3 (Abatement Law) to alleviate the threat that many physicians would leave Pennsylvania if the exorbitant cost of professional liability insurance was not addressed. The Abatement Law provided abatements to physicians and other participating MCARE providers (excluding hospitals) to reduce MCARE providers' annual MCARE assessments. The abatements were intended to recruit physicians and to provide incentive for physicians to stay in Pennsylvania. The Abatement Law provided eligible physicians in high risk practices 100% abatement of their annual assessment, and other eligible health care providers 50% of their annual MCARE assessment. When originally enacted, the Abatement Law was limited to the 2003-2004 MCARE assessments. Subsequent legislation, however, extended the abatement program to the 2005, 2006, and 2007 MCARE assessments.*fn4

Sections 711(d)(3)-(4), 712(c)(2)(ii)-(iii), and 745 of the MCARE Act*fn5 contemplated that the MCARE Fund's coverage would be phased out and replaced with primary coverage. When that occurred, pursuant to Section 712(k) of the MCARE Act,*fn6 any surplus funds were to be returned to the participating health care providers. It is undisputed that, as of December 31, 2008, the MCARE Fund balance was $104,351,436.72.

On October 9, 2009, Pennsylvania's Governor signed Act No. 2009-50 (Act 50) in an effort to resolve the ongoing budget crisis in the Commonwealth. Section 5 of Act 50 added Section 1717.1-K of the Fiscal Code.*fn7 Section 1717.1-K(1) of the Fiscal Code authorized the transfer of $100 million from the MCARE Fund to the General Fund.

On October 13, 2009, Petitioners filed petitions for review in the nature of complaints for declaratory judgment and injunctive relief in this Court's original jurisdiction seeking a declaration that the transfer by the Department of Public Welfare (DPW) and the Office of the Budget (Budget) of the Commonwealth of Pennsylvania (collectively, the Commonwealth) of $100 million from the MCARE Fund to the General Fund was unlawful, and requesting an order preventing the transfer, or requiring the Commonwealth to restore those monies to the MCARE Fund.*fn8 On that same date, Petitioners, Hospital & Healthsystem Association, et al., filed an application for special relief in the nature of a preliminary injunction to enjoin the transfer of the $100 million pending final resolution of that case, so that the monies would be available to satisfy any judgment entered by the Court. (522 M.D. 2009). The application was denied by this Court on October 19, 2009, on the basis that Petitioners' concerns were speculative, and failed to demonstrate that the public interest would not be harmed by issuance of the preliminary injunction. A hearing scheduled on the application was cancelled when Petitioners withdrew their application based upon this Court's representations that, if it is determined that the Commonwealth owes the money, it will be paid. On or about October 30, 2009, the Treasury Department effectuated the transfer of the $100 million from the MCARE Fund to the General Fund. On November 12, 2009, Petitioners filed this application for summary relief.

In ruling on an application for summary relief we must "view the evidence of record in the light most favorable to the non-moving party and enter judgment only if there are no genuine issues as to any material facts and the right to judgment is clear as a matter of law." McSpadden v. Dep't of Corrs., 886 A.2d 321, 325 (Pa. Cmwlth. 2005). "The moving party has the burden of proving that there is no genuine issue of material fact." Bigansky v. Thomas Jefferson Univ. Hosp., 658 A.2d 423, 425 (Pa. Super. 1995). "A material fact is one that directly affects the outcome of the case." Kuney v. Benjamin Franklin Clinic, 751 A.2d 662, 664 (Pa. Super. 2000) (citing Stevens Painton Corp. v. First State Ins. Co., 746 A.2d 649, 653 (Pa. Super. 2000)).

The Commonwealth claims that there are numerous additional material facts in dispute in this litigation, and there is discovery yet to be conducted. In particular, the Commonwealth provides several witnesses' declarations in an attempt to show, inter alia: Petitioners' involvement in the budget negotiation process; the critical role the challenged transfer played in the budget compromise; the Fund's unbroken record of paying all claims and expenses; the Fund's continued ability to pay all claims and expenses notwithstanding the challenged transfer; the relationship between assessments and similar coverage in the open market; and the lack of effect of the challenged transfer on the assessments paid by participating providers.*fn9

However, those facts and others cited by the Commonwealth do not appear to directly affect the outcome of this case.

The question of whether the transfer of the $100 million from the MCARE Fund to the General Fund was lawful is a pure question of law. Further, because this case involves a pure question of law, the fact that the Commonwealth wishes to provide additional facts, or to proceed with discovery is not a basis on which this Court should deny summary relief. See Meier v. Maleski, 670 A.2d 755 (Pa. Cmwlth. 1996), aff'd, 549 Pa. 171, 700 A.2d 1262 (1997). We hold, therefore, that there are no genuine issues of material fact.

Petitioners further argue that based on the record, they are entitled to judgment as a matter of law. The Commonwealth asserts that Petitioners have no clear right to relief on the bases that: Petitioners lack standing to bring this action, so injunctive relief is not available to them under Pennsylvania law; that Petitioners have no vested legal right to the money in the MCARE Fund since Section 712(a) of the MCARE Act created no vested right, providers received professional liability coverage as fair value exchange for their assessments, a substantial portion of the funds transferred came from the taxpayers, and the transfer did not impair any vested right to a cause of action; and the MCARE assessments do not represent a nonuniform tax in violation of the Constitution, but rather should be analyzed as license fees.

The Commonwealth incorrectly argues that Petitioners do not have standing to bring this ...


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