COURT OF APPEALS OF VIRGINIA
Present: Judges Frank, Huff and Senior Judge Coleman
PUBLISHED
Argued at Richmond, Virginia
RESTON SURGERY CENTER
OPINION BY
v. Record No. 0022-13-2 JUDGE GLEN A. HUFF
NOVEMBER 19, 2013
CITY OF ALEXANDRIA AND PMA
MANAGEMENT CORP.
FROM THE VIRGINIA WORKERS’ COMPENSATION COMMISSION
W. Edgar Spivey (Mark C. Shuford; Kaufman & Canoles, P.C., on
briefs), for appellant.
Katharina Kreye Alcorn (Angela F. Gibbs; Midkiff, Muncie &
Ross, P.C., on brief), for appellees.
Reston Surgery Center (“appellant”), a medical provider, appeals the decision of the
Virginia Workers’ Compensation Commission (“commission”) denying a claim for full
reimbursement from the City of Alexandria (“employer”) and PMA Management Corp.
(“PMA”) (collectively “appellee”) for medical treatment rendered to David Woodson, a police
officer with employer, pursuant to a workers’ compensation claim. On appeal, appellant
contends that the commission erred as follows:
1) in concluding that there was sufficient evidence to support the
deputy commissioner’s finding that appellant had been properly
enrolled as a participating provider in the Aetna Workers’
Compensation Access (“AWCA”) program;
2) in affirming the findings of fact and conclusions of law
regarding notice and waiver contained in the deputy
commissioner’s opinion, and in holding that appellant had
accepted, acquiesced in, or waived any right to object to, its
inclusion in the AWCA program; and
3) in affirming the findings of fact and conclusions of law
contained in the deputy commissioner’s opinion as to whether
PMA or employer were intended third-party beneficiaries of any
agreement between appellant and Aetna, such that they would be
entitled to apply reductions to the charges submitted by appellant.
For the following reasons, this Court reverses the decision of the commission and remands the
case to the commission to enter judgment consistent with this holding.
I. BACKGROUND
“On appeal from a decision of the Workers’ Compensation Commission, the evidence
and all reasonable inferences that may be drawn from that evidence are viewed in the light most
favorable to the party prevailing below.” Artis v. Ottenberg’s Bakers, Inc., 45 Va. App. 72, 83,
608 S.E.2d 512, 517 (2005) (en banc) (citing Clinchfield Coal Co. v. Reed, 40 Va. App. 69, 72,
577 S.E.2d 538, 539 (2003); Tomes v. James City (County of) Fire, 39 Va. App. 424, 429, 573
S.E.2d 312, 315 (2002)). So viewed, the evidence is as follows.
On July 6, 2011, appellant provided medical treatment to David Woodson (“Woodson”),
a police officer with employer, for a compensable injury sustained during his employment.
When the injury occurred, employer was self-insured for its workers’ compensation coverage
and used a third-party administrator, PMA, to administer its workers’ compensation claims.
After providing the necessary treatment, appellant sent a medical bill to employer in the amount
of $27,937. Employer paid only $5,687.25 of the bill, stating that it had applied reductions to
appellant’s charges pursuant to a contract between appellant and healthcare network company
AWCA.1 The purpose of the contract was to allow workers’ compensation claimants to access a
broad range of providers to obtain medical care at a reduced rate.
1
In its brief, appellee defined AWCA as:
an Aetna affiliate that, since 2003, has been providing workers’
compensation carriers, third-party administrators, and self-insured
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On November 14, 2011, appellant applied for a hearing, seeking full reimbursement for
its charges. Appellant asserted that it had never entered into a contract with AWCA or any
Aetna affiliate to provide workers’ compensation care at a reduced rate. In response, appellee
referenced a Facilities Service Agreement (“FSA”) that appellant had entered into with Aetna
Health, Inc. (“Aetna”). Section 2.5 of the FSA stated the following, in pertinent part, with regard
to the introduction of new programs:
Facility [Reston Surgery Center] agrees to participate in the Plans
and other health benefit products listed on the Product
Participation Schedule attached hereto and made a part hereof.
Company reserves the right to introduce and designate Facility’s
participation in new Plans, Specialty Programs and products during
the term of this Agreement and will provide Facility with written
notice of such new Plans, Specialty Programs and products and the
associated compensation.
Nothing herein shall require that Company identify, designate or
include Facility as a preferred participant in any specific Plan,
Specialty Program or product; provided, however, Facility shall
accept compensation in accordance with this Agreement for the
provision of any Covered Services to Members under a Plan,
Specialty Program or product in which Facility has agreed to
participate hereunder.
Company may sell, lease, transfer or otherwise convey to payers
(other than Plan Sponsors) which do not compete with Company’s
product offerings (e.g. workers’ compensation or automobile
insurers) in the geographic area where Facility provides Covered
Services, the benefits of this Agreement, including, without
limitation, the Services and Compensation Schedule attached
employers with access to an Aetna network of physicians,
hospitals, and other clinicians, including their contracted rates, for
services provided to injured workers. AWCA services the
workers’ compensation program by processing bills against
provider contracts, making pricing recommendations, credentialing
providers, assisting with dispute resolution between payers and
medical providers, reconsiderations, providing online tools,
identifying customers by state, including Coventry and its
sub-clients, and producing introduction packages to the
[p]articipating [p]roviders.
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hereto, under the terms and conditions which will be
communicated to Facility in each such case. For those programs
and products which are not health benefit products (e.g. worker’s
[sic] compensation or auto insurance), Facility shall have thirty
(30) days from receipt of the aforementioned notice from
Company to notify Company in writing if Facility elects not to
participate in such product(s).
Section 9.1 of the FSA, governing amendments to the contract, stated as follows:
This Agreement constitutes the entire understanding of the Parties
hereto and no changes, amendments or alterations shall be
effective unless signed by both Parties, except as expressly
provided herein. Notwithstanding the foregoing, at Company’s
discretion, Company may amend this Agreement upon written
notice, by letter, newsletter, electronic mail or other media, to
Facility to comply with applicable law or regulation, or any order
or directive of any governmental agency.
Section 9.2 of the FSA, governing waivers, stated as follows:
The waiver by either Party of a breach or violation of any
provision of this Agreement shall not operate as or be construed to
be a waiver of any subsequent breach thereof. To be effective, all
waivers must be in writing and signed by an authorized officer of
the Party to be charged. Facility waives any claims or cause of
action for fraud in the inducement or execution related hereto.
Appellee argued that Section 2.5 allowed Aetna to introduce new programs and notify
appellant of the opportunity to join such programs. To that end, appellee stated that Aetna had
sent appellant an invitation letter in May of 2005 in which Aetna introduced the new AWCA
program. The invitation letter informed appellant that it would automatically become enrolled as
a participating provider in the AWCA program unless appellant opted out of the program by
June 30, 2005. The letter was addressed to appellant’s treatment center in Reston, Virginia, and
contained the salutation “Dear Executive.” According to appellee, the invitation letter was
sufficient to notify appellant of its inclusion in the AWCA program, and appellant’s lack of
response to the invitation letter indicated that it assented to becoming a participating provider.
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Appellant countered that the invitation letter was inadequate to notify appellant of
enrollment in the AWCA program. Specifically, appellant referenced Section 9.8 of the FSA
governing notices, which stated the following in pertinent part:
Unless otherwise specified herein, any notice required to be given
pursuant to the terms and provisions hereof shall be effective only
if given in writing and sent by overnight delivery service with
proof of receipt, or by certified mail return receipt requested.
Notices shall be sent to the following addresses (which may be
changed by giving notice in conformity with this Section 9.8).
Appellant then had handwritten the following address in the space provided:
Managed Care
HCA Central Atlantic Division2
7300 Beaufort Springs Drive, Suite 101
Richmond, VA 23225-5551
Relying on the notice provision, appellant argued that Aetna had incorrectly sent the
invitation letter to the address of its treatment center in Reston instead of HCA’s Central Atlantic
Division address in Richmond. Appellant also argued that the invitation letter was not addressed
to the attention of “Managed Care,” but rather contained the generic salutation “Dear Executive.”
Furthermore, appellant argued that appellee had not proved the invitation letter was sent either
by overnight delivery service with proof of receipt or by certified mail return receipt requested.
Even further, appellant argued that the letter was insufficient in that it did not establish
“compensation[,] . . . an essential contract term.”
In support of its contention, appellant referred to the affidavit of Barbara Sciro (“Sciro”),
an Aetna representative. Sciro, when asked how appellant was notified of its enrollment in the
AWCA program, confirmed that an invitation letter and a thank-you letter were both sent. Sciro
stated that the invitation letter was part of a mail merge sent to various companies. She further
2
Hospital Care Association (“HCA”) was the healthcare organization of which appellant
was an affiliate.
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stated that the thank-you letter was an “education[al] letter” and was not meant to serve as notice
of appellant’s enrollment as a provider in the AWCA program.
Appellee argued that, regardless of the invitation letter’s compliance with the notice
provisions of the FSA, AWCA had sent a thank-you letter on December 15, 2008 that was
sufficient to notify appellant of its enrollment. The thank-you letter provided details about the
terms of enrollment, reimbursement rates, and the entities that were able to access the FSA, as
well as informed appellant how to opt out of participating in the AWCA program. The thank-
you letter was addressed to appellant’s treatment center in Reston once again, and contained the
salutation “Dear Reston Surgery Center L.P. – Hca Affiliate.” It appeared to have been sent by
one of the two requested methods of mail delivery in the FSA.
Citing additional support for its argument that appellant had notice of its enrollment,
appellee referred to the 773 Explanations of Review (“EOR”) and Explanations of Benefits that
appellant had received since 2005. Appellee argued that each of those documents explained that
“any reduction is in accordance with discounts provided by Aetna workers’ compensation
access,” and provided a telephone contact number whereby appellant could follow up on any
questions pertaining to bills. Thus, appellee indicated that appellant was continually reminded of
its participation. Moreover, appellee stated that appellant had in fact followed up on payment
questions over the years but had never contradicted the validity of the reduction rates pursuant to
the AWCA. A corollary issue arose as to whether appellee was entitled to enforce the FSA.
Appellant argued that appellee was not an intended beneficiary of the agreement between
appellant and Aetna. Specifically, appellant maintained that it initially had contracted only with
Aetna and argued its relationship to appellee was too attenuated. The evidence established that
the relationship was as follows: PMA was a subsidiary of Pennsylvania Manufacturers’
Association Insurance Company, which contracted with Healthcare COMPARE Corp.
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(“COMPARE”) in order to access COMPARE’s network of healthcare providers. COMPARE
subsequently assumed the name First Health Network (“First Health,” a/k/a FOCUS). As a
result, PMA obtained access to the medical providers associated with First Health. First Health
later contracted with AWCA to obtain access to AWCA’s network of providers.
In a March 6, 2012 opinion, the deputy commissioner held that the actions taken by
Aetna were sufficient to notify appellant of its enrollment as a participating provider in the
AWCA program. In particular, the deputy commissioner noted that appellant did not deny
receiving either the invitation letter or the thank-you letter. Despite whether the letters complied
with the notice provisions of the FSA, the deputy commissioner found that “the employer
presented evidence that the medical provider had been paid based upon the AWCA modification
in numerous instances without protest or complaint,” and thus found “persuasive proof of
acquiescence through this course of dealing.” Next addressing the compliance of the letters with
the notice provision, the deputy commissioner found that “[a]ssuming, arguendo, that the first
letter was insufficient, the second letter appears to constitute a sufficient notification to the
medical provider. Moreover, both of these letters appear to sufficiently set forth the
‘compensation.’” The deputy commissioner further noted that the invitation letter referenced an
amendment which discussed compensation under the AWCA program.3
The deputy commissioner also found that appellee was an intended beneficiary of the
FSA, stating the following:
3
The amendment stated that reimbursement rates under the AWCA program would be
the lesser of:
a) the current PPO Compensation Schedule; b) Virginia’s
maximum mandated workers[’] compensation fee schedule; or
c) billed charges.
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[I]n the present matter, we must look to the manifest intent of the
parties’ agreement. We first note that even if we accept the
medical provider’s argument regarding Aetna’s responsibility to
notify it of the “terms and conditions[]” of any transfer of the
benefits of the contract, those terms and conditions are sufficiently
set forth in the two letters. The first letter references a web site
containing detailed information, per Sciro’s deposition testimony.
The second letter, and its attachment, similarly contains detailed
information. Significantly, this second letter specifically states that
AWCA makes its “network available to these other entities . . . .”
“These other entities” is a reference to, not only, “workers’
compensation insurers, [and] third-party administrators,” but also
“bill review companies and provider network organizations.”
Thus, it is clear that the parties contemplated that the benefits of
the contract could be assigned to or funneled through entities such
as FOCUS, and that there need not be a direct agreement between
Aetna and the employer or carrier.
In a December 20, 2012 opinion, the commission affirmed the holding of the deputy
commissioner. Specifically, the commission noted that appellant did not object to its enrollment
in the AWCA program, but rather accepted payments pursuant to such program on a continual
basis. On that basis, the commission found that appellant “acquiesced to the provisions,
including that the third[-]party administrator was an intended beneficiary of the medical
provider’s agreement with Aetna.” This appeal followed.
II. ANALYSIS
A. Proper Enrollment
On appeal, appellant first contends that the commission erred in concluding that there
was sufficient evidence to support the deputy commissioner’s finding that appellant had been
properly enrolled as a participating provider in the AWCA program. Specifically, appellant
points to appellee’s failure to comply with the notice provisions of the FSA in informing
appellant of the introduction of new programs. In response, appellee asserts the notice provided
was adequate to comply with the FSA, and alternately relies on its argument under the second
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assignment of error that appellant waived its right to receive notice in accordance with the terms
of the FSA.
“‘The interpretation of a contract presents a question of law subject to de novo review.’”
Orthopaedic & Spine Ctr. v. Muller Martini Mfg. Corp., 61 Va. App. 482, 490, 737 S.E.2d 544,
547 (2013) (quoting PBM Nutritionals, LLC v. Lexington Ins. Co., 283 Va. 624, 633, 724 S.E.2d
707, 712-13 (2012)). “‘[O]n appeal [this Court is not] bound by the [commission]’s
interpretation of the contract provision at issue; rather, [this Court has] an equal opportunity to
consider the words of the contract within the four corners of the instrument itself.’” Id. (first,
second, and fourth alterations in original) (quoting PBM Nutritionals, 283 Va. at 633, 724 S.E.2d
at 712-13).
“Basic contract interpretation principles dictate that ‘[w]hen the terms in a contract are
clear and unambiguous, the contract is construed according to its plain meaning.’” Id. at 490,
737 S.E.2d at 548 (alteration in original) (quoting Envtl. Staffing Acquisition Corp. v. B & R
Constr. Mgmt., 283 Va. 787, 793, 725 S.E.2d 550, 554 (2012)). Under this principle, the
“‘[w]ords that the parties used are normally given their usual, ordinary, and popular meaning,’
and ‘[n]o words or clause in the contract will be treated as meaningless if a reasonable meaning
can be given to it . . . .’” Id. at 491, 737 S.E.2d at 548 (alterations in original) (quoting Preferred
Sys. Solutions, Inc. v. GP Consulting, LLC, 284 Va. 382, 392, 732 S.E.2d 676, 681 (2012)).
Moreover, “‘there is a presumption that the parties have not used words needlessly.’” Id.
(quoting Preferred Sys. Solutions, 284 Va. at 392, 732 S.E.2d at 681).
Pursuant to Section 2.5 of the FSA, Aetna was permitted to introduce “new Plans,
Specialty Programs and products” throughout the duration of the contract relationship. A notice
provision contained in Section 9.8 of the FSA, however, required Aetna to notify appellant in
writing if it planned to introduce a new program and give appellant thirty days to opt out of
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participating in the program. The notice provision necessitated that Aetna send such
communications either by overnight delivery service with proof of receipt or by certified mail
with return receipt requested. The notice provision also required that Aetna mail any
communications to an address specifically provided by appellant in the FSA. As appellant was
an affiliate of HCA, it requested in the FSA that all communications regarding new programs be
addressed to HCA’s Central Atlantic Division located in Richmond. Appellant had its individual
office in Reston.
In the present case, two separate letters served as the basis for appellee’s claim that
appellant received proper notice of its enrollment as a participating provider in the AWCA
program: the invitation letter and the thank-you letter. Appellee, however, failed to introduce
evidence that either letter complied with the express notice provision of the FSA. The parties do
not know how the invitation letter was sent, and there is no documentation in the record showing
proof of receipt. The invitation letter was mailed to appellant’s individual office in Reston as
opposed to HCA’s Central Atlantic Division in Richmond, where the FSA required
communications be sent. Furthermore, the invitation letter was addressed, “Dear Executive,” as
opposed to the required recipient, “Managed Care.”
The thank-you letter suffered from similar defects. Although the record shows that Aetna
sent the thank-you letter by certified mail with return receipt requested, it likewise shows that the
thank-you letter was sent to the same incorrect address in Reston.4 Like the invitation letter, the
thank-you letter also was not addressed to “Managed Care.” Thus, we can infer that both letters
were received by a treatment center that lacked the institutional knowledge to respond to such an
4
Appellee asserts that appellant did not raise this point below, and thus has not preserved
the argument for appeal. Appellee’s Br. at 16. We note, however, that this argument is merely a
subset of the issue of inadequate notice, which appellant did preserve in its request for review.
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invitation, rather than the managed care section of HCA that specifically handled matters
pertaining to the managed care network.
Appellant also notes that while the thank-you letter was not intended to serve as notice of
appellant’s enrollment in the AWCA program, appellee now asserts that the thank-you letter
covers any deficiencies in notice that occurred by way of the invitation letter. In rebutting this
point, appellant points first to its argument, as discussed above, that Aetna failed to comply with
the notice provision for the thank-you letter as well as for the invitation letter. Second, appellant
asserts that the purpose of the thank-you letter was not to inform appellant of its automatic
enrollment in the AWCA program. The letter stated, “Thanks for treating injured workers[.] We
appreciate your being part of the Aetna Workers’ Comp Access (AWCA) network.” Thus,
appellant indicates that the thank-you letter is misleading because it never extended an invitation
for appellant to join the AWCA program, but rather presumed that appellant had already joined.5
This Court agrees, noting that the thank-you letter did not constitute proper notice of
appellant’s enrollment in the AWCA program. As appellant stated in its opening brief, “the
purpose of the two communications is completely different.” While the invitation letter
informed appellant of its selection for participation in the program and provided details about the
program, the thank-you letter merely served as an “education[al] mailing.” It did not include the
30-day opt-out clause, proscribed in the FSA , but instead listed an email and phone number by
which the recipient could contact Aetna if it “wishe[d] to terminate . . . participation in the
AWCA network.”
5
Appellant further argues that Aetna’s own representative, Sciro, testified that the
thank-you letter was not intended to serve as notice. We do not assign great weight to this
evidence, however, as Sciro also testified that she believed the initial invitation letter served as
proper notice of enrollment. Relying on such belief, Sciro testified that the thank-you letter did
not constitute notice because notice had already been given.
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Based on the foregoing, appellee failed to prove that appellant was properly enrolled as a
participating provider in the AWCA program. The plain language of the contract required Aetna
to take specific steps to notify Managed Care at HCA of appellant’s participation in new network
plans, and Aetna failed to comply with those terms. Rather, notification was sent to an incorrect
address and sent by a mail delivery method which was contrary to the plain meaning of the
FSA’s terms. This Court has interpreted similarly the identical terms of Aetna’s contract in
Orthopaedic & Spine Ctr. and the commission has applied that interpretation in recent rulings
under identical facts.6 Thus, this Court holds that the commission erred in concluding that there
was sufficient evidence to support the deputy commissioner’s finding that appellant had been
properly enrolled as a participating provider in the AWCA program.
B. Waiver
Appellant also contends that the commission erred in affirming the findings of fact and
conclusions of law regarding notice and waiver contained in the deputy commissioner’s opinion,
and in holding that appellant had accepted, acquiesced in, or waived any right to object to, its
inclusion in the AWCA program. Specifically, appellant argues that none of its actions
evidenced an intent to waive the notice terms of the FSA. In response, appellee asserts that
appellant modified the terms of the FSA through a series of communications spanning a number
of years, all in which appellant failed to indicate its wish for strict adherence to the notice
provision.
6
Relying on Orthopaedic & Spine Ctr., the commission released two opinions on July 1,
2013, finding the identical May 2005 invitation letter, December 15, 2005 thank-you letter, and
773 explanations of benefits of reimbursements sent between 2005 and 2012, as noncompliant
with the requisite contractual language and insufficient evidence of waiver. See Shade v. City of
Alexandria, No. JCNVA 00000239966, 2013 VA Wrk. Comp. LEXIS 566; Sandra Kay Hein v.
City of Alexandria, No. JCNVA 00000455911, 2013 VA Wrk. Comp. LEXIS 563.
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“At the trial or adjudicatory hearing level, the ‘burden rests on the party relying on a
waiver . . . to prove the essentials of such waiver . . . by clear, precise and unequivocal
evidence.’” Orthopaedic & Spine Ctr., 61 Va. App. at 492, 737 S.E.2d at 548 (quoting Stanley’s
Cafeteria, Inc. v. Abramson, 226 Va. 68, 74, 306 S.E.2d 870, 873 (1983)). “‘[P]roof of waiver is
a question for the trier of fact.’” Id. (alteration in original) (quoting Management Enterprises,
Inc. v. Thorncroft Co., 243 Va. 469, 474, 416 S.E.2d 229, 232 (1992)). While this Court is
“bound by the factual findings of the commission,”
“such findings of fact are conclusive and binding only to the extent
that they are predicated upon evidence introduced or appearing in
the proceedings. In other words, [i]f . . . there is no credible
evidence on which the Commission’s findings of fact are based, its
findings [of fact] are not binding and the question presented
becomes one of law.”
Id. (alterations in original) (quoting Uninsured Employer’s Fund v. Gabriel, 272 Va. 659, 664,
636 S.E.2d 408, 411 (2006)).
“‘[W]aiver is an intentional relinquishment of a known right. In waiver, both knowledge
of the facts basic to the exercise of the right and the intent to relinquish that right are essential
elements.’” Id. (alteration in original) (quoting Stanley’s Cafeteria, 226 Va. at 74, 306 S.E.2d at
873). In the present case, we can reasonably infer that appellant did not intentionally relinquish
its right to receive notice of enrollment in new plans because the FSA contained a provision
pertaining to waiver. Section 9.2 stated that “[t]he waiver by either Party of a breach or violation
of any provision of this Agreement shall not operate as or be construed to be a waiver of any
subsequent breach thereof.” It also stated that “[t]o be effective, all waivers must be in writing
and signed by an authorized officer of the Party to be charged.” In addition, Section 9.1 of the
FSA stated that “[t]his Agreement constitutes the entire understanding of the Parties hereto and
no changes, amendments or alterations shall be effective unless signed by both Parties, except as
expressly provided herein.”
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The record, however, does not contain any written waivers signed by the authorized
officer of appellant allowing for notice to be given by any other method than that stated in the
FSA. Nor do the parties suggest that such an express waiver occurred in keeping with the plain
language of the FSA. Rather, appellee, relying on common law contract principles, asserts that
appellant acquiesced to a modification of the FSA through its course of dealing with Aetna, and
thus waived its contractual right to enforce the notice provision.
Accordingly, we address whether to apply these contract principles despite the plain
language of the FSA requiring amendments to be in writing. “‘A contract in writing, but not
required to be so by the statute of frauds, may be dissolved or varied by a new oral contract,
which may or may not adopt as part of its terms some or all of the provisions of the original
written contract . . . .’” Orthopaedic & Spine Ctr., 61 Va. App. at 493, 737 S.E.2d at 549
(quoting Reid v. Boyle, 259 Va. 356, 369-70, 527 S.E.2d 137, 144-45 (2000)). “[A]s with
waiver, a ‘modification of a contract must be shown by clear, unequivocal and convincing
evidence, direct or implied.’” Id. (quoting Reid, 259 Va. at 370, 527 S.E.2d at 145).
“‘In certain circumstances written contracts, even those that contain prohibitions against
unwritten modifications, may be modified by parol agreement.’” Id. (quoting Lindsay v.
McEnearney Assocs., 260 Va. 48, 53, 531 S.E.2d 573, 576 (2000)). In such cases, it is of no
moment “that the original written contract provided that it should not be substantially varied
except by writing. This stipulation itself may be rescinded by parol and any oral variation of the
writing which may be agreed upon and which is supported by a sufficient consideration . . . .”
Zurich General Accident & Liability Ins. Co. v. Baum, 159 Va. 404, 409, 165 S.E. 518, 519
(1932); see Gov’t Employees Ins. Co. v. Hall, 260 Va. 349, 356, 533 S.E.2d 615, 618 (2000)
(noting that “‘a course of dealing by contracting parties, considered in light of all the
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circumstances, may evince mutual intent to modify the terms in their contract’” (quoting
Stanley’s Cafeteria, 226 Va. at 73, 306 S.E.2d at 873)).
Applying these contract principles to the present case, this Court holds that appellee
nonetheless failed to prove by clear and unequivocal evidence that appellant impliedly modified
the FSA to 1) allow notice of enrollment to be sent to its treatment center in Reston, instead of
sending such notices to the Managed Care office of HCA, and 2) allowing notice to be sent by
any means of mail delivery service. Appellee points to the 773 EOR letters that were sent to
appellant’s office in Reston since its automatic enrollment in the AWCA program, asserting each
EOR letter contained language explaining that the reimbursement rates were reduced pursuant to
the AWCA program. Appellee argues that, as a result, appellant had 773 reminders of its
participation in the AWCA program and could have opted out at any time. Appellee further
asserts that not only did appellant fail to opt out, but also that appellant corresponded with Aetna
regarding some of the reimbursement rates and in doing so acknowledged that it was a
participating provider in the AWCA program.7
Despite this course of conduct, appellant never acquiesced to Aetna’s noncompliance
with the notice provisions because the party that was authorized to accept enrollment on behalf
of appellant was not contacted at any point. In considering the entire organization of HCA and
its subsidiary, appellant, we can reasonably infer that the person receiving EOR letters at
appellant’s treatment center in Reston was different than the person handling managed care
communications at HCA’s centralized division in Richmond. This fact amplified the need to
7
In support of its contention, appellee references an ARTS database that contains records
of appellant’s communications with Aetna about reimbursement rates under the AWCA
program.
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have communications regarding enrollment sent to the correct party and address, particularly
where affirmative action was required in order to opt out.
Addressing a similar set of circumstances in Orthopaedic & Spine Ctr., this Court held
that the medical provider’s “silence and acceptance of . . . checks” was insufficient to modify the
terms of the contract requiring written waivers. 61 Va. App. at 494, 737 S.E.2d at 549 (noting
that, “‘standing alone, an obligee’s acceptance of less than full performance by the obligor does
not prove intent to relinquish the right to enforce full performance’” (quoting Stanley’s Cafeteria,
226 Va. at 74, 306 S.E.2d at 873)). In Stanley’s Cafeteria, the Supreme Court held that no
waiver had occurred even where a “lessor accepted smaller monthly payments than those the
lessee was obligated by the lease to make” over a span of eighteen years. 226 Va. at 74, 306
S.E.2d at 873.
Based on the foregoing, appellee failed to meet its burden of establishing by clear,
unequivocal, and convincing evidence that appellant intended to relinquish its notice rights under
the FSA. Appellee also failed to show that an implied modification of the FSA occurred as a
result of appellant’s receipt of EOR letters that referenced the AWCA reimbursement rates.
Thus, this Court holds that the commission erred in affirming the deputy commissioner’s
findings with regard to waiver, and in holding that appellant accepted, acquiesced in, or waived
any right to object to, its inclusion in the AWCA program.
C. Intended Beneficiary
Lastly, appellant contends that the commission erred in affirming the findings of fact and
conclusions of law contained in the deputy commissioner’s opinion concluding that appellee was
an intended beneficiary of the agreement between appellant and Aetna. Specifically, appellant
challenges appellee’s entitlement to apply reductions to the medical charges submitted by
appellant. In response, appellee asserts that the FSA “did not require a direct contract between
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Aetna and PMA” and that privity of contract was established such that appellee was entitled to
benefit from the FSA. Because of the aforementioned rulings on waiver and notice, this Court
need not reach the question of whether the employer was an intended beneficiary. Therefore,
this Court holds that the commission erred in affirming the deputy commissioner’s opinion
concluding that appellee was an intended beneficiary of the agreement between appellant and
Aetna as the issue is rendered moot.
III. CONCLUSION
For the foregoing reasons, this Court holds that the commission erred in concluding:
1) that appellant was properly enrolled as a participating provider in the AWCA program; 2) that
appellant waived its contractual right to enforce the notice provision of the FSA; and 3) that
appellee was an intended third-party beneficiary of the FSA entered into between appellant and
Aetna. Accordingly, this Court reverses the decision of the commission and remands the case to
the commission to enter judgment consistent with this holding.
Reversed and remanded.
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