Kettering Health Network v. Caresource
2017 Ohio 1193
Ohio Ct. App.2017Background
- Kettering Health Network (KHN) and CareSource (managed Medicaid payer) had provider contracts from 1987 (replacement in 2005) governing payment for unlisted outpatient surgical procedures (UOSPs).
- The 1987 Agreement promised compensation "equivalent" to what the hospital would have received from state Medicaid; the 2005 Agreement provided payment at "100% of the current prevailing Ohio Medicaid fee schedule," which treated unlisted services as "69% of Charges."
- Kettering billed UOSPs with multiple line items (procedure + related services); CareSource paid only the UOSP line item. Kettering alleged 588 underpayments (2001–2011) under both agreements and sought arbitration.
- The trial court compelled arbitration under AHLA rules; the arbitrator issued an Interim Award (June 29, 2015) awarding damages and later a Final Award (Aug. 27, 2015) adding prejudgment interest. CareSource sought vacatur, claiming procedural and substantive defects.
- The trial court denied vacatur and confirmed the awards; CareSource appealed. The appellate court reviewed whether the arbitrator exceeded his powers under R.C. 2711.10(D) and whether procedural or legal errors warranted vacatur.
Issues
| Issue | Kettering's Argument | CareSource's Argument | Held |
|---|---|---|---|
| Timeliness under AHLA rules (Rule 7.1, 6.8(b)) | Arbitrator acted within AHLA authority; Interim Award satisfied 30-day rule and Final Award addressed deferred interest | Final Award untimely; arbitrator lost jurisdiction and AHLA rules were violated | Court upheld arbitrator's reasonable interpretation of AHLA rules; no vacatur for alleged untimeliness |
| Compliance with contract terms (integration, limitations, grievance) | Arbitration proper; arbitrator may interpret which older terms remain for merits | 2005 integration/Article 7.6 and Article 4.7 bar/limit most claims and supersede 1987 terms | Arbitrator’s contract constructions were within his powers; appellate court will not substitute its judgment for arbitrator's interpretation |
| Course-of-performance under Ohio law (knowledge vs. constructive knowledge) | Kettering lacked knowing acquiescence; long payment history did not alter contract terms | CareSource: constructive knowledge sufficient to establish course of performance | Arbitrator’s application of Ohio course-of-performance law was within his authority; courts will not vacate for legal error by arbitrator |
| Prejudgment interest / Prompt Pay Act | Interest is allowable: 1987 Agreement interest clause and Ohio law/R.C. 1343.03 permit interest; AHLA Rule 7.5 allows equitable relief | Prompt Pay Act (and contract language) precludes interest on Medicaid claims | Arbitrator permissibly awarded interest; awards not contrary to agreements or law and fall within arbitrator’s remedial authority |
Key Cases Cited
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (federal standard: no special review rule; factual findings reviewed for clear error, legal questions de novo)
- Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 559 U.S. 662 (arbitrator error alone is insufficient to vacate award)
- Eastern Associated Coal Corp. v. Mine Workers, 531 U.S. 57 (courts should not correct arbitrator mistakes absent exceeding powers)
- Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (arbitrator’s interpretation stands if he was "arguably construing" the contract)
- Cedar Fair, L.P. v. Falfas, 140 Ohio St.3d 447 (Ohio: arbitrator exceeds power only by going beyond bargained-for authority)
- Queen City Lodge No. 69 v. Cincinnati, 63 Ohio St.3d 403 (arbitrators have broad remedial authority)
- Southwest Ohio Regional Transit Auth. v. Amalgamated Transit Union, 91 Ohio St.3d 108 (courts do not rehear claims of arbitrator legal or factual error)
- Piqua v. Fraternal Order of Police, 185 Ohio App.3d 496 (parties grant arbitrator certain powers by selecting institutional rules)