NO. 92-450
IN THE SUPREME COURT OF THE STATE OF MONTANA
1993
SAINT VINCENT HOSPITAL
AND HEALTH CENTER, INC. ,
plaintiff and Appellant,
BLUE CROSS AND BLUE SHIELD
OF MONTANA,
Defendant and Respondent.
-.--.
APPEAL FROM: District Court of the First Judicial District,
In and for the County of Lewis and Clark,
The Honorable Thomas C. Honzel, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Gregory G . Murphy; Moulton, Bellingham,
Longo & Mather, ~illings, Montana
For Respondent:
John Alke (argued) and Mike McCarter; Hughes,
Kellner, Sullivan & Alke, Helena, Montana
Submitted: April 28, 1993
Decided: October 12, 1993
F i f ed :
Justice William E. Hunt, Sr., delivered the opinion of the Court.
Plaintiff Saint Vincent Hospital and Health Center, Inc., of
Billings appeals an order of the First Judicial District Court,
Lewis and Clark County, denying its request to compel a health care
provider contract with Defendant Blue Cross and Blue Shield of
Montana, Inc. (BC/BS). The District Court granted summary judgment
for BC/BS.
We affirm.
Appellant raises two issues.
1. Did the District Court err in finding that application of
the amended statute required a retroactive application of law?
2. Did the Legislature intend the amendment to apply to
established agreements generally, and to Saint Vincent's desired
agreement with BC/BS in particular?
BC/BS raises three issues.
1. Did the District Court correctly determine that the
amendment did not apply in this case?
2. Is the amendment preempted by the Employee Retirement
Income Security Act of 1984, P.L. 93-406, 29 U.S.C. 1001, et sea.
(ERISA), because it relates to ERISA plans and is not saved from
preemption as the "regulation of insurance?"
3. In the alternative, does application of the amendment
unconstitutionally impair BC/BS1s obligation of contract?
We determine the sole issue to be whether the District Court
was correct when it decided that the amendment could not be
retroactively applied in this case.
In 1987, the Montana Legislature enacted the Preferred
Provider Agreements Act, ch. 638, 1987 Mont. Laws 1756 (codified at
§§ 33-22-1701 through -1707, MCA). The Act authorizes preferred
provider agreements (PPAs) between health care insurers and health
care providers. The Act defines a "preferred provider" as an
individual or entity licensed or legally authorized to provide
health care services or services covered within Title 33,
chapter 22, part 7, who have contracted to provide specified health
care services. Section 33-22-1703 (6) and (8), MCA. The purpose of
the Act is to permit health care insurers providing disability
insurance benefits to its insureds or subscribers to contract with
health care providers for reduced or negotiated fees. Section
33-22-1702, MCA. The preferred providers may accept negotiated and
discounted fees as payment for services to insured patients for
which the insurer is required to pay under the health benefit plan.
Section 33-22-1702(2), MCA.
According to the 1987 Act, in exchange for acceptance of
discounted fees, a preferred provider could receive an exclusive
arrangement that steered insureds to the preferred provider. The
arrangement assured the preferred provider substantial patient
volume. As originally adopted, the Act contained a freedom of
choice provision which stated: "This part does not require that an
3
insurer negotiate or enter into agreements with any specific
provider or class of providers." Section 33-22-1704(3), MCA
(1987).
Based on affidavits in the record, on May 1, 1990, BC/BS
entered into an exclusive "HealthLink" agreement with Deaconess
Medical Center of Billings, Inc. The agreement established a
preferred provider organization (PPO) known as "Montana HealthLink"
in Yellowstone County. The agreement was to extend for a period of
three years, beginning July 1, 1990. Montana HealthLink is one of
many PPOs established throughout the United States by health care
insurers. PPOs are cost containment devices which have been
adopted by employers throughout the country. The HealthLink
agreement contained confidentiality provisions concerning business
records and pricing. The agreement also contained a provision
granting Deaconess the option to terminate the contract if BC/BS
entered into a PPA with another hospital in Yellowstone County.
Saint Vincent is in Yellowstone County.
On April 29, 1991, while the agreement between BC/BS and
Deaconess was in force, the Montana Legislature amended the Act
creating the Willing Provider Amendment. See ch. 714, 1991 Mont.
Laws 2567 (amending 5 33-22-1704, MCA). The Legislature deleted
the freedom of choice provision in 5 33-22-1704(3), MCA (l987), and
added the following provision:
(2) A health care insurer shall establish terms and
conditions to be met by providers wishing to enter into
an agreement with the health care insurer under
subsection (1)(a). These terms and conditions may not
discriminate against or among providers. Forthe purposes
of this subsection, price differences among hospitals or
other institutional providers produced by a process of
individual negotiation or by price differences among
different geographical areas or different specialties do
not constitute discrimination. A health care insurer mav
not denv a provider the rioht to enter into an aareement
under 'ubsection (1)(a) if the ~rovideris willinq to
meet the terms and conditions established in that
aareement. [Emphasis added.]
Section 33-22-1704(2), MCA (1991).
The parties do not dispute the facts.
On May 6, 1991, Saint Vincent requested from BC/BS that it
participate in HealthLink. BC/BS declined the request. Saint
Vincent filed an action in the District Court against BC/BS and
requested production of the HealthLink contract. BC/BS responded
with a motion for a protective order and for summary judgment.
Saint Vincent initially resisted answering the motion for summary
judgment, stating that it could not proceed without seeing the
HealthLink contract. On April 24, 1992, the District Court
determined that the lawsuit was predicated on whether the Willing
Provider Amendment applied to HealthLink.
On September 9, 1992, the District Court granted BC/BS1s
motion for summary judgment, finding that the Willing Provider
Amendment did not compel BC/BS to offer HealthLink to Saint
Vincent. The District Court reasoned that the Willing Provider
Amendment could not be applied retroactively because doing so would
entail a substantive change in law, rather than merely a procedural
change. Further, the District Court reasoned that the Legislature
did not specifically declare the amendment to take effect
retroactively. The court concluded that the 1991 amendment created
a new obligation and imposed a new duty on BC/BS that did not exist
when it entered into the agreement with Deaconess.
The only issue we address is whether the District Court erred
in finding that application of the Willing Provider Amendment of
1991 to Saint Vincent's proposed and compelled contract with BC/BS
would result in retroactive application of law?
This Court's standard of review when reviewing conclusions of
law by a trial court "is whether the tribunal's interpretation of
the law is correct." steer, Inc. v. Department of Revenue (1990),
245 Mont. 470, 474-75, 803 P.2d 601, 603.
Retroactive laws include both retrospective and ex post facto
laws; the former technically applying only to civil laws. We have
defined a retrospective law as one "which takes away or impairs
vested rights acquired under existing laws or creates a new
obligation, imposes a new duty, or attaches a new disability in
respect to transactions already passed." City of Harlem v. State
Highway Comm'n. (1967), 149 Mont. 281, 284, 425 P.2d 718, 720. A
retrospective law gives a transaction a different legal effect from
that which it had under the law when it occurred.
The United States and Montana Constitutions dictate that if a
retrospective law impairs a vested right acquired under an existing
law, or creates a new obligation or attaches a new disability with
6
respect to past transactions, the law is objectionable. Article I,
Section 10, of the United States Constitution provides: "No State
shall . . . pass any . . . ex post facto Law . . . ." Similarly,
Article 11, Section 31, of the Montana Constitution provides: "No
ex post facto law ... shall be passed by the legislature."
We have said that "retrospective laws are looked upon with
disfa~or.~!Sullivan v. City of Butte (1922), 65 Mont. 495, 498,
211 P. 301, 303. Montana's "retroactive law" statute provides:
"No law contained in any of the statutes of Montana is retroactive
unless expressly so declared." Section 1-2-109, MCA. Previously,
this Court has construed Montana's retroactive law statute. In
Dunham v. Southside National Bank (1976), 169 Mont. 466, 471, 548
P.2d 1383, 1385, we held that "[tlhere is a presumption in Montana
against construing a statute retroactively, unless specifically
declared retroactive." Further, this Court has determined that
"[tlhe legislative intent must be gathered from the act itself and
no other source." Nee1 v. First Federal Savings & Loan Assln.
(1984), 207 Mont. 376, 386, 675 P.2d 96, 102.
Although the general rule of law is that a statute is not to
be applied retroactively, an exception to that rule is change in a
law that is merely procedural rather than substantive. State v.
District Court of Fourth Judicial District (1966), 149 Mont. 22,
417 P.2d 109. Here, however, the amendment of 1 33-22-1704, MCA,
affected the substantive rights of the parties. Therefore, the
exception does not apply.
7
We reject Saint Vincent's assertion that this Court has
effectively reversed the presumption against retroactive laws in
State Compensation Insurance Fund v. Sky Country, Inc. (1989), 239
Mont. 376, 780 P.2d 1135. There we looked beyond the statute
itself to legislative committee minutes to determine legislative
intent. The statute established a simplified procedure for
settling disputes over the status of workers as employees or
independent contractors for both unemployment compensation and
workers' compensation purposes. In that case, the law affected
only procedural matters not relating to substantive rights of the
parties. For that reason, Saint Vincent's application of Skv
Countrv to this case is misplaced.
If applied to BC/BS in this case, the Willing Provider
Amendment would impair BC/BS ' s vested rights, create new
obligations for BC/BS, and attach a new disability with respect to
its transactions with Deaconess. Effectively, the Amendment would
nullify the exclusivity and confidentiality provisions of the
BC/BS/Deaconess HealthLink contract. Such an alteration of the
contract would divest BC/BS of its right to an exclusive contract
with Deaconess and permit unanticipated access to the contract's
bidding figures and other confidential terms and conditions by
competitors, such as Saint Vincent. Further, the Amendment would
obligate BC/BS to offer a previously exclusive HealthLink contract
to Saint Vincent, a party with which it did not intend to contract
and was not required to do so under existing law. In turn, BC/BS
8
would incur a new disability as Deaconess would be free to exercise
its option to terminate the contract.
In sum, the Willing Provider Amendment would affect BC/BS1s
substantive rights. Thus, it is a substantive change in law, and
cannot be applied to HealthLink unless the Legislature expressly
had declared it to be retroactive in the Act itself; which it did
not. Chapter 714 of the 1991 Montana Session Laws contains no
express intent that the statute be applied retroactively. Instead,
the amendment is declared to be effective on passage and approval,
and was approved on April 29, 1991. Therefore, the Willing
Provider Amendment cannot be applied to a contract entered into
before that date.
Application of the Willing Provider Amendment would give
effect to a retrospective law; a result which the Laws of Montana
and this Court rejects. We hold that the District Court did not
err in finding that application of the Willing Provider Amendment
of 1991 to BC/BS, by compelling a BC/BS/Saint Vincent agreement,
would result in retroactive application of law.
We affirm.
We concur:
Chief Justice
Justices
District Court Judge John Warner specially concurring.
I concur in the opinion of Justice Hunt that Chapter 714, 1991
Mont. Laws 2567, must not be applied to the May 1, 1990, preferred
provider agreement between respondent Blue Cross and Deaconess
Medical Center of Billings. The amendment is substantive, enacting
a Itwillingprovider'l provision which profoundly affected preferred
provider agreements in Montana. As the Legislature did not express
its intention to make the amendment's application retrospective, it
must not be so construed by this Court. Section 1-2-109, MCA.
In my opinion, the argument of St. Vincent Hospital that this
Court must reverse because the District Court denied discovery of
a copy of the agreement at issue must also be addressed.
In the District Court, St. Vincent moved to produce the
preferred provider agreement, any correspondence relating thereto,
in-house notes concerning the agreement, lists of all participants
in the program, and complete financial information concerning the
agreement. Blue Cross objected on the grounds the contract was not
relevant, much of the requested information was proprietary, and
moved for a protective order. Blue Cross also moved for summary
judgment. St. Vincent moved to compel production of the demanded
information.
The District Court denied the requested discovery, including
the preferred provider agreement, until after it ruled on the
motion for summary judgment. As Blue Cross was granted summary
judgment, none of the information demanded was produced.
St. Vincent complained bitterly in the District Court, in its
briefs to this Court, on oral argument here, and even in a "Motion
to clarify Record" submitted after oral argument, that it was never
allowed to examine a copy of the preferred provider agreement at
issue, and thus was placed at an unfair disadvantage in arguing
that the 1991 statutory amendment applied to such agreement.
The rules concerning discovery are broad and liberal.
Parties may obtain discovery regarding any matter, not
privileged, which is relevant to the subject matter
involved in the pending action, whether it relates to the
claim or defense of the party seeking discovery or to the
claim or defense of any other party .... It is not
ground for objection that the information sought will be
inadmissible at the trial if the information sought
appears reasonably calculated to lead to the discovery of
admissible evidence.
Rule 26(b) (1), M.R.Civ.P.
That the preferred provider agreement is relevant to this
lawsuit cannot be gainsaid. The contract is the basis of the
lawsuit. Whether it exists, falls within the type of agreement
allowed by the statutes, or contains provisions which contemplate
the demand by St. Vincent to match its terms, are all relevant
considerations. Further, the provisions of the agreement could
suggest other avenues of attack on its validity, such as the
anti-trust laws. As the complaint prays for whatever relief may be
appropriate, the discovery demand forthe agreement's production is
reasonably calculated to lead to the discovery of admissible
evidence.
The District Court has the ability to protect proprietary
information that may be in the agreement.
Upon motion by a party or by the person from whom
discovery is sought, and for good cause shown, the court
in which the action is pending ... may make any order
which justice requires to protect a party or a person
from annoyance, embarrassment, oppression, or undue
burden or expense, including . . . (7) that a trade
secret or other confidential research development, or
commercial information not be disclosed or be disclosed
only in a designated way ....
Rule 26(c), M.R.Civ.P.
All information concerning the existence of the agreement, its
date, parties, term, provisions, and effect come from the
affidavits of employees of Blue Cross, which affidavits cannot be
cross-examined or disputed. What information Blue Cross chooses to
reveal comes into the record piecemeal, at the convenience of, and
in words chosen by, Blue Cross. On the surface, it appears
impossible for St. Vincent to dispute what is revealed, or to
compare and cross-reference such information with other parts of
the agreement, as the contract which is the very basis of the
lawsuit is not produced.
However, the record before this Court confirms the statement
of counsel for Blue Cross on oral argument that, in fact, St.
Vincent had available to it, without the necessity of court order,
a copy of the preferred provider agreement. Attachments to the
affidavit of a Blue Cross vice president, submitted to the ~istrict
Court, indicate that Blue Cross did seek and obtain the permission
of the other contracting party, Deaconess Medical Center, to
release to St. Vincent a complete copy of the preferred provider
agreement so it could determine what rights it might have under the
amended law. Blue Cross then informed St. Vincent that access to
an excerpted copy of the agreement was available.
Blue Cross did demand to withhold some pricing and other
information which could cause a competitive detriment.
The record is devoid of any indication that St. Vincent took
advantage of its opportunity to examine the agreement. It rather
continued in its demand that information with an allegedly
commercial value be provided along with the contract in question.
This leads to the conclusion that it was really commercially
valuable information which was sought.
Thus, while the District Court should have partially granted
the motion to compel, allowing St. Vincent to have a copy of the
preferred provider agreement, there was no substantial harm caused
by not doing so.
A further cause of serious concern not addressed in the
majority opinion is the information revealed by Blue Cross for the
first time in oral argument that the preferred provider agreement
is self-perpetuating. Apparently, if neither party gives notice to
terminate, the agreement is automatically renewed year after year.
However, the 1993 Legislature amended the applicable statute to
provide that any preferred provider agreement which is renewed
after March 26, 1993, must give all health care providers the
opportunity to participate on the basis of a competitive bid.
Section 33-22-1704(3), MCA.
Blue Cross conceded at oral argument that the agreement which
is the subject of this case is subject to the 1993 amendment.
Also, St. Vincent can demand the opportunity to bid, and litigate
the issue if it is denied that opportunity. Therefore, remand for
consideration of the new information is not required.
For these reasons, in addition to those statep by Justice
Hunt, I would affirm the District Court.
Justice Fred J. Weber concurs in the foregoing special concurrence.
/-5L dtice
Chief Justice J. A. Turnaqe:
I concur in the specially concurring opinion of Judge Warner.
October 12. 1993
CERTIFICATE OF SERVICE
I hereby certify that the following order was sent by United States mail, prepaid, to the
following named:
Gregory G. Murphy
Moulton, Bellingham, Longo & Mather
P.O. Box 2559
Billings, MT 59103-2559
John Alke and Mike McCarter
Hughes, Kellner, Sullivan & Alke
P.O. Box 1166
Helena, MT 59624
ED SMITH
CLERK OF THE SUPREME COURT
STATE OF MONTANA