IN THE SUPREME COURT OF FLORIDA. Case No. SC DCA Case No. 3D Lower Tribunal Case No CA-09 HEALTH OPTIONS, INC.

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1 IN THE SUPREME COURT OF FLORIDA Case No. SC DCA Case No. 3D Lower Tribunal Case No CA-09 HEALTH OPTIONS, INC., Petitioner/Defendant, vs. PALMETTO PATHOLOGY SERVICES, P.A. d/b/a Florida Pathology Services, Respondent/Plaintiff. PETITIONER S CORRECTED JURISDICTIONAL BRIEF On Review from the Third District Court of Appeals Steven E. Siff (FBN ) ssiff@mwe.com Michael G. Austin (FBN ) maustin@mwe.com Justin B. Uhlemann (FBN ) juhlemann@mwe.com McDERMOTT WILL & EMERY LLP 201 S. Biscayne Blvd., Ste Miami, Florida Tel Fax Counsel for Petitioner Health Options, Inc.

2 TABLE OF CONTENTS Page TABLE OF CONTENTS... i TABLE OF AUTHORITIES... ii STATEMENT OF THE CASE AND FACTS... 1 SUMMARY OF ARGUMENT... 3 ARGUMENT... 4 A. This Court has Jurisdiction to Review this Case Standard for Conflict Jurisdiction Direct And Express Conflict With Central States... 5 B. This Court Should Exercise its Discretion to Review this Case... 9 CONCLUSION CERTIFICATE OF SERVICE CERTIFICATE OF COMPLIANCE APPENDIX Palmetto Pathology Services, P.A. v. Health Options, Inc., Case No. 3D (Fla. 3d DCA Apr. 16, 2008) - i -

3 TABLE OF AUTHORITIES Case Under Review Page(s) Palmetto Pathology Services, P.A. v. Health Options, Inc., Case No. 3D (Fla. 3d DCA Apr. 16, 2008)...passim Conflict Case Central States, Southeast & Southwest v. Florida Society of Pathologists, 824 So. 2d 935 (Fla. 5th DCA 2002)...passim Other Cases Fasig v. Florida Society of Pathologists, 769 So. 2d 1151 (Fla. 5th DCA 2000)... 8 Ford Motor Co. v. Kikis, 401 So. 2d 1341 (Fla. 1981)... 5 The Florida Star v. B.J.F., 530 So. 2d 286 (Fla. 1988)... 5 Constitutional Provisions and Statutes Art. V, 3(b)(3), FLA. CONST...3, 4 - ii -

4 STATEMENT OF THE CASE AND FACTS The issue presented for review is whether or not a health maintenance organization ( HMO ) is legally obligated to directly and separately pay hospitalbased pathologists for certain hands-off, non-patient specific services sometimes referred to as the professional component of clinical pathology. Health Options, Inc. ( HOI ) is a Florida-licensed HMO that provides health insurance benefits to its members throughout the State of Florida. Palmetto Pathology Services, P.A. ( PPS ) is a hospital-based pathology group that provides pathology services 1 at two hospitals on an exclusive basis. 2 The pathology services provided by PPS at these hospitals include: (i) anatomical pathology services; (ii) hands-on, patient specific aspects of clinical pathology services; and (iii) hands-off, non-patient specific professional component of clinical pathology services. 3 The only services at issue in this case are the hands-off, non-patient 1 There are two major types of pathology services: anatomical pathology, which involves examination of human tissue, and clinical pathology, which involves examination of human fluid. 2 Given its exclusive arrangement with these two hospitals, PPS has a captive patient base consisting of all patients admitted to those hospitals in need of any pathology services. 3 The hands-off, non-patient specific professional component services are provided by PPS in accordance with PPS direct contracts with the hospitals to enable the hospitals to maintain fully functioning and accredited clinical pathology laboratories. In exchange for providing these services, PPS receives the exclusive right to practice pathology at the hospitals, free use of the hospitals laboratory and equipment, and free use of the hospitals laboratory personnel and employees

5 specific professional component of clinical pathology services. These services include certain enumerated categories of overhead type activity such as: (i) quality control; (ii) record keeping; (iii) the establishment of protocols and test methodologies; (iv) the assurance of compliance with regulatory requirements; and (v) supervision of hospital technicians and other staff. HOI s members are regularly admitted as patients in the hospitals where PPS serves as the exclusive pathology group, and from time to time, these members have blood/urine tests performed at the hospitals laboratories, and may receive certain pathology services from PPS. Whenever PPS physicians provide actual patient specific anatomical or clinical services 4 for an HOI member (or any other patient at the hospitals), it is undisputed that HOI (or the patient or other responsible payor) directly and separately pays PPS for those hands-on patient specific pathology services. However, with respect to the hands-off, non-patient specific professional component services, HOI does not make separate and direct payments to PPS. 5 Notwithstanding the substantial monies that PPS already receives for the patient specific pathology services actually rendered to identifiable patients, PPS 4 Such as examining a specimen, interpreting a test result, or issuing a report. 5 HOI has separate contractual relationships with the two hospitals, whereby HOI makes certain per diem payments to the hospitals, and the hospitals are contractually obligated to provide the full array of hospital services, including a fully functioning and accredited clinical pathology laboratory

6 filed suit seeking a windfall of additional payments from HOI for the non-patient specific professional component services allegedly performed at the hospitals. The trial court entered a directed verdict as to liability in favor of PPS, and the jury thereafter returned a damages verdict in the amount of $1,546, HOI appealed to the Third District Court of Appeals, and on April 16, 2008, the Third District affirmed the lower court s decision in all respects, holding that HOI is legally obligated to separately and directly make payments to PPS for the handsoff, non-patient specific professional component services. The Third District s decision directly and expressly conflicts with the Fifth District s decision in Central States, Southeast & Southwest v. Florida Society of Pathologists, 824 So. 2d 935 (Fla. 5th DCA 2002). SUMMARY OF ARGUMENT This Court has jurisdiction to review the decision of the Third District, because it expressly and directly conflicts with the Fifth District s decision in Central States. 6 The issue decided by the Third District was whether or not HOI was legally obligated to directly and separately pay PPS for hands-off non-patient specific professional component services. The Third District held that the nonpatient specific professional component services constituted physician care rendered to patients (see 3DCA Op. at 10), and that HOI was liable and legally 6 See Art. V, 3(b)(3), FLA. CONST

7 obligated to pay PPS directly for all of these services. See 3DCA Op. at In framing the identical issue in Central States, the Fifth District explained that the question here [is]: whether a patient who has received no direct, hands-on services from the pathologist legally is obligated to pay a bill for the professional component. Central States, 824 So. 2d at 939. After carefully analyzing the issues, the Fifth District reached the exact opposite conclusion from the Third District, holding that no professional relationship existed between the patients and the pathologists, and that we see nothing that obliges a patient to pay for what might be characterized as the pathologists overhead and/or a pro rata share of hands-on pathology services performed for another patient. Id. at 939, 940. This results in a direct and express conflict between the two decisions, which will cause uncertainty and have a continuing negative impact until resolved. It is vitally important for this Court to exercise its discretion to review this case, not only because of its direct impact on twelve (12) related cases, but also because of its significant and broad implications for the healthcare industry in Florida. ARGUMENT A. This Court has Jurisdiction to Review this Case The decision of the Third District directly and expressly conflicts with the Fifth District s decision in Central States. This Court has jurisdiction to review the case pursuant to Article V, Section 3(b)(3) of the Florida Constitution

8 1. Standard for Conflict Jurisdiction With respect to conflict jurisdiction, this Court has explained that it in the broadest sense has subject-matter jurisdiction... over any decision of a district court that expressly addresses a question of law within the four corners of the opinion itself. The Florida Star v. B.J.F., 530 So. 2d 286, 288 (Fla. 1988). While the Third District appears to have made efforts to insulate itself from review, 7 this Court has made it clear that conflict jurisdiction still exists even where the underlying district court opinion does not explicitly reference the conflicting district court decision. Ford Motor Co. v. Kikis, 401 So. 2d 1341, 1342 (Fla. 1981). 8 A review of the four corners of the Third District s opinion illustrates that the decision directly and expressly conflicts with the Fifth District s Central States decision, and conflict jurisdiction exists. 2. Direct And Express Conflict With Central States The Third District s decision directly and expressly conflicts with the Fifth District s Central States decision regarding payment liability for the exact type of 7 For instance, despite HOI s primary reliance on Central States, both in the trial court and in its appellate briefing, in the opinion (and in its order denying rehearing), the Third District failed to address, distinguish or otherwise mention the strikingly similar Central States case. 8 Ford Motor Co., 401 So. 2d at 1342 (explaining that [i]t is not necessary that a district court explicitly identify conflicting district court or supreme court decisions in its opinion in order to create an express conflict under section 3(b)(3) )

9 non-patient specific professional component services at issue in this case. In describing the type of services at issue, the Third District stated: PPS provides professional anatomic and clinical pathology services, including laboratory analysis, to HOI s members in two area hospitals... HOI refused to continue paying for one component of such services. HOI refers to that component as non-patient specific services, characterizing it essentially as an element of overhead, while PPS refers to these services as the professional component of clinical pathology or PC-CP. We refer to such services as the disputed services, because the lawsuit below turns on whether HOI must compensate PPS for them. 3DCA Op. at 3 (emphasis added). The Third District further defined the disputed services to include nine specific and enumerated categories of activity, including quality control, record keeping, the establishment of protocols and test methodologies, supervision, the assurance of compliance with regulatory requirements, and supervision of technicians and other staff. Id. at 3-4, n.3. Similarly, in framing the primary issue in Central States, the Fifth District explained that the question here [is]: whether a patient who has received no direct, hands-on services from the pathologist legally is obligated to pay a bill for the professional component. 9 Central States, 824 So. 2d at 939. In describing the disputed services in Central States, the Fifth District explained that the 9 Central States, 824 So. 2d at 937 (explaining that the insurance company denied payment for the pathologists professional component in the absence of evidence that the pathologist performed a specific, identifiable service for the individual patient who was charged for the professional component )

10 professional component of clinical pathology includes deciding whether to offer, modify, or discontinue a clinical test, evaluating or designing protocols for new procedures, evaluating the normal range of test results in light of the specific patient population, overseeing calibration of the equipment, and teaching treating physicians how to evaluate test results. 10 Id. at 936. Thus, the face of the two opinions establish that the disputed services are the exact same type of non-patient specific professional component services at issue. Notwithstanding the absence of actual patient specific pathology services, the Third District held that the hands-off, non-patient specific professional component services constituted physician care rendered to patients (see 3DCA Op. at 10) and that HOI was therefore liable and legally obligated to pay PPS directly and separately for all of these services. See 3DCA Op. at The Fifth District in Central States, however, reached the exact opposite conclusion, finding that no professional relationship existed between the patients and the pathologists, and that we see nothing that obliges a patient to pay for what might be characterized as the pathologists overhead and/or a pro rata share of hands-on pathology services performed for another patient. Central States, 824 So. 2d at 10 The Fifth District also explained that hospital patients who had pathology services received a bill... from the pathologist associated with the hospital, even if the pathologist never examined or analyzed the patient s blood, cells, tissue or other specimens, and even if the pathologist never reviewed the results of the testing, which is done for the most part by a machine and technician. Id. at

11 939, 940. Thus, under the Central States decision, the Fifth District held that the underlying patient 11 was not liable to pay the pathologists for the exact type of nonpatient specific professional component services at issue in the instant case. If the underlying patient is not liable for payments to the pathologist because no physician care was rendered to the patient giving rise to an obligation to pay, then how can the patient s HMO be liable? This conflict is direct, express and irreconcilable. 12 Based upon the Third District s opinion, a patient and/or the patient s managed care company located in Miami-Dade or Monroe County would be legally obligated to pay non-participating pathologists directly for the nonpatient specific professional component services, while a patient and/or the 11 With respect to the impact of the professional component charges on the underlying patients, in an instructive dissenting opinion, Judge Harris of the Fifth District framed the issue as follows: May a doctor bill directly a patient he has never met and with whom he has no contractual relationship for services he has not performed for that patient on tests performed by a machine and read by a hospital employee for which the patient has been billed by the hospital and which has been paid either by the patient or his insurance company? It seems to me that fairness, even if we totally ignore due process, requires that the patient be heard on this issue before the doctor is judicially permitted to bill the hospital s (not the pathologist s) patient. Fasig v. Florida Society of Pathologists, 769 So. 2d 1151, (Fla. 5th DCA 2000) (acknowledging that the professional component bill indeed does not represent medical care recognized by Medicare ). 12 The Fifth District noted that if the pathologists want to be paid for the professional component, they should seek payment from the hospitals at which they perform their oversight of the laboratory. Central States, 824 So. 2d at 937. Similarly, in this case, PPS already receives full compensation from the hospitals for oversight of the laboratory (and other non-patient specific professional component services) under PPS contracts with the hospitals

12 patient s managed care company located in the counties within the Fifth District would not be legally obligated to pay for such non-patient specific professional component services under the binding authority of the Central States case. This results in a direct and express conflict between the two decisions, which will cause uncertainty and have a continuing negative impact until resolved. B. This Court Should Exercise its Discretion to Review this Case This Court should exercise its discretion to review this case because the issues decided are of exceptional importance and because this case will have a significant negative impact on health care and managed care in Florida. In its sweeping decision, the Third District decided a decade long dispute between Florida pathologists, on the one hand, and HOI, patients and other third-party payors, on the other hand. 13 Not only will this decision will affect the twelve (12) pending cases brought by pathologists located in Miami-Dade, Duval and Hillsborough Counties, but the decision will also have an extremely detrimental effect on the provider contracting process, which is fundamental and necessary for the proper functioning of Florida s managed care system. This alone could result in hundreds of millions of dollars of increased health care costs for health plans 13 Recognizing the vital importance of this case, numerous prominent amicus curiae participated in the underlying appeal, and as reflected throughout the briefing, both parties and seven (7) amici agree that this case is exceptionally important to health care and managed care in Florida

13 and corresponding increased premiums for members. 14 There is also a significant risk that the Third District s flawed rationale will be extended beyond pathologists to other hospital-based providers, including emergency room physicians, radiologists, anesthesiologists, pathologists, OB-GYN physicians, surgeons and oncologists. 15 It therefore is evident that this case could have an extremely detrimental effect on the escalating and mounting costs of health care and health care services for residents in this community and throughout Florida. While the economic impact of the dispute is staggering even if it is limited to pathology, the slippery slope on which it rests threatens the very foundation of Florida s managed care regime. Because this case directly implicates these exceptionally important issues, this Court should exercise is discretion to take jurisdiction of this case. CONCLUSION This Court has jurisdiction to review this case based upon the express and direct conflict between the Third District s decision and the Fifth District s Central States decision, and review should be granted in light of the vital importance. 14 Based upon the Third District s decision, hospital-based physician groups now likely will terminate their existing contracts with HMOs in an effort to reap the windfall payments to non-participating providers mandated by the Third District s decision. 15 The Third District s overly broad definition of physician care could be construed to apply to all types of hospital-based physicians and to include bills for all types of overhead, supervisory duties, quality control efforts and other types of non-patient specific services

14 CERTIFICATE OF SERVICE WE HEREBY CERTIFY that a copy of the foregoing was served by first class U.S. mail on August 5, 2008, upon: Lauri Waldman Ross, Esq., ROSS & GIRTEN, Two Datran Center, Suite 1612, 9130 South Dadeland Boulevard, Miami, Florida 33156, Appellate Counsel for Respondent Palmetto Pathology Services, P.A.; Ervin A. Gonzalez, Esq. and Patrick S. Montoya, Esq., COLSON HICKS EIDSON ET AL., 255 Aragon Avenue, 2nd Floor, Coral Gables, Florida 33134, Trial Counsel for Respondent Palmetto Pathology Services, P.A.; Steven M. Ziegler, Esq., LAW OFFICES OF STEVEN M. ZIEGLER, P.A., 4000 Hollywood Boulevard, Suite 375 South, Hollywood, Florida 33021, Counsel for Amicus Curiae Florida Association of Health Plans; Steven R. Weinstein, Esq. and Robert C. Leitner, Esq., KIRKPATRICK & LOCKHART PRESTON GATES ELLIS LLP, Wachovia Financial Center, 20th Floor, 200 South Biscayne Boulevard, Miami, Florida 33131, Counsel for Amici Curiae The Florida Society of Pathologists, The American Pathology Foundation and the Florida Hospital Association; David L. Evans, Esq., MATEER & HARBERT, P.A., 225 East Robinson Street, Suite 600, Two Landmark Center, Orlando, Florida 32802, Counsel for Amici Curiae College of American Pathologists, American Medical Association and Florida Medical Association; and Jack R. Bierig, Esq. and Richard D. Raskin, Esq., SIDLEY AUSTIN LLP, One South Dearborn Street, Chicago, Illinois 60603, Counsel for Amici Curiae College of

15 American Pathologists, American Medical Association and Florida Medical Association. CERTIFICATE OF COMPLIANCE WE HEREBY CERTIFY that this Jurisdictional Brief complies with the font requirements of Rule 9.210(a)(2) of the Florida Rules of Appellate Procedure. MCDERMOTT WILL & EMERY LLP MIA By: /s/ Steven E. Siff Steven E. Siff (FBN ) Michael G. Austin (FBN ) Justin B. Uhlemann (FBN ) 201 S. Biscayne Blvd., Ste Miami, Florida Tel Fax Counsel for Petitioner Health Options, Inc