                           RECOMMENDED FOR FULL-TEXT PUBLICATION
                                Pursuant to Sixth Circuit Rule 206
                                      File Name: 06a0105p.06

                    UNITED STATES COURT OF APPEALS
                                  FOR THE SIXTH CIRCUIT
                                    _________________


                                                     X
                               Plaintiff-Appellee, -
 UNIVERSITY HOSPITALS OF CLEVELAND,
                                                      -
                                                      -
                                                      -
                                                          No. 04-4067
          v.
                                                      ,
                                                       >
 SOUTH LORAIN MERCHANTS ASSOCIATION HEALTH            -
                                                      -
                             Defendant-Appellant. -
 & WELFARE BENEFIT PLAN AND TRUST,

                                                      -
                                                     N
                      Appeal from the United States District Court
                     for the Northern District of Ohio at Cleveland.
                      No. 02-00428—Paul R. Matia, District Judge.
                                   Argued: December 7, 2005
                              Decided and Filed: March 21, 2006
                   Before: MARTIN, COLE, and GILMAN, Circuit Judges.
                                      _________________
                                          COUNSEL
ARGUED: Paul L. Jackson, ROETZEL & ANDRESS, Akron, Ohio, for Appellant. Daniel W.
Dreyfuss, DANIEL W. DREYFUSS CO. L.P.A., Cleveland, Ohio, for Appellee. ON BRIEF: Paul
L. Jackson, Karen D. Adinolfi, ROETZEL & ANDRESS, Akron, Ohio, for Appellant. Daniel W.
Dreyfuss, DANIEL W. DREYFUSS CO. L.P.A., Cleveland, Ohio, for Appellee.
                                      _________________
                                          OPINION
                                      _________________
        BOYCE F. MARTIN, JR., Circuit Judge. This case involves an appeal by South Lorain
Merchants Association Health & Welfare Benefit Plan and Trust ordering it to pay to the University
Hospitals of Cleveland the full amount billed for services rendered to the son of a participant in
South Lorain Merchants Association’s benefit plan. For the reasons discussed below, we REVERSE
the district court’s judgment and remand the case for further proceedings consistent with this
opinion.
                                                I.
        Dylan Ranallo was admitted to University Hospital for medical treatment on June 6, 2000.
Dylan is the son of Robert Ranallo, who is a participant in South Lorain Merchants Association’s
benefit plan. On June 6, 2000, Robert Ranallo executed a document entitled “University Hospitals

                                                1
No. 04-4067           Univ. Hosp. of Clev. v. South Lorain Merchants Ass’n                      Page 2


of Cleveland Consent Form” that purported to assign to University Hospital the insurance rights and
benefits relating to Dylan’s care. On July 6, 2000, University Hospital sent a bill totaling
$195,132.98 for services provided as part of Dylan’s care to Commerce Benefits Group, the
company that South Lorain Merchants Association employed to serve as its third-party
administrator. On November 30, 2000, Commerce issued a document entitled Explanation of
Benefits. The Explanation of Benefits contained a section entitled “Charge Amount” which listed
charges submitted by University Hospital totaling $195,132.98 along with a deduction of
$48,783.25, pursuant to a Preferred Provider Organization discount. Private Healthcare Systems, a
nonparty here, was the source of the discount.
        South Lorain Merchants Association, through its agent Cardinal Utilization Management,
another nonparty, conducted an audit of the University Hospital bill. The audit was conducted
without prior notice to University Hospital and without a University Hospital representative in
attendance. The numeric summary of Cardinal’s audit was provided to Commerce on September
11, 2001. The audit was finally completed on October 30, 2001. On November 15, 2001, an
Explanation of Benefits for the services was sent to University Hospital along with a check for
$106,769.79. The Explanation of Benefits included the original deduction of $48,783.25 based on
a Preferred Provider Organization discount. The Explanation of Benefits also contained a deduction
of $39,579.94 based on charges which the audit concluded were not covered under the Plan because
they were in excess of usual, customary, and reasonable amounts authorized under the coverage.
       On December 4, 2001, University Hospital filed an appeal from the partial denial of benefits.
This appeal was not addressed by either South Lorain Merchants Association or its agents. South
Lorain Merchants Association also later determined that its Preferred Provider Organization
discount was under the Buckeye Preferred Network Preferred Provider Organization Contract, rather
than the Private Healthcare Systems Contract noted above. As a result, South Lorain Merchants
Association concluded that it was entitled to only a twenty-two percent Preferred Provider
Organization discount rather than a twenty-five percent discount. South Lorain Merchants
Association therefore sent University Hospital an additional payment of $14,561.34 on August 30,
2002, in order to remedy the discrepancy but still stood by its decision to refuse payment of
$39,579.94, the amount allegedly not authorized under the plan.
         University Hospital then brought suit in the United States district court seeking to be paid
for the charges that South Lorain Merchants Association had declined to pay. The court concluded
that the factual record was incomplete. It therefore dismissed the case and remanded the matter to
the South Lorain Merchants Association administrator for further factual finding citing our decision
in Sanford v. Harvard Indus., Inc., 262 F.3d 590, 598 (6th Cir. 2001) in support of its remand order.
The South Lorain Merchants Association administrator made the required findings of facts and
decided that South Lorain Merchants Association had already paid the proper amount to University
Hospital. The Plan Administrator then sent its decision, along with the materials it used to reach that
decision, to the district court and the district court reinstated the case. Without a hearing and acting
summarily, the district court concluded that South Lorain Merchants Association owed University
Hospital $73,801.85. The district court’s decision was based on several alleged factors. First, the
district court concluded that South Lorain Merchants Association’s failure to provide University
Hospital with an appeal violated due process. Additionally, the district court concluded that South
Lorain Merchants Association had likely miscalculated the Preferred Provider Organization discount
it was due because the proper discount under the Buckeye Preferred Network Contract was twenty
percent. The district court concluded, however, that this error was immaterial because South Lorain
Merchants Association was not entitled to any discount or any deduction because it had failed to
follow procedural requirements of its plan. Specifically, South Lorain Merchants Association had
failed to comply with the Buckeye Preferred Network Contract that states that any discount is not
available unless a hospital is paid within sixty days from receipt of a clean claim. As a result, the
district court concluded, South Lorain Merchants Association was not entitled to any Preferred
No. 04-4067           Univ. Hosp. of Clev. v. South Lorain Merchants Ass’n                       Page 3


Provider Organization discount. The district court also concluded that the results of the audit could
not be used because South Lorain Merchants Association violated the Preferred Provider
Organization contract with Buckeye Preferred Network, which stated that any audit had to take place
upon ten days prior written notice to University Hospital. The district court thus decided that South
Lorain Merchants Association owed University Hospital the full amount requested by University
Hospital. South Lorain Merchants Association then filed this timely appeal.
                                                   II.
        Following remand to the Plan Administrator, the district court considered all the evidence
before it and concluded that South Lorain Merchants Association was liable to University Hospital
for the full amount University Hospital submitted to South Lorain Merchants Association. We
review for clear error the district court’s findings of fact and we review de novo the district court’s
conclusions of law. Anderson v. International Union, United Plant Guard Workers of America, 370
F.3d 542, 551 (6th Cir. 2004).
        The South Lorain Merchants Association raises three claimed errors on appeal. First, the
Association claims that the district court erred in reviewing the Plan Administrator’s decision de
novo rather than under an abuse of discretion standard. Second, South Lorain Merchants Association
claims that the district erred in denying it a Preferred Planned Organization Discount based on the
University Hospital contract with the Buckeye Preferred Network. Finally, South Lorain Merchants
Association claims that the district court erred by requiring South Lorain Merchants Association to
pay University Hospital in excess of the amount covered by the Plan’s terms.
                                                   A.
        Before the case was sent back to the Plan Administrator for further factual findings, both
parties and the district court agreed that de novo review of the denial of reimbursement was proper.
Following the Plan Administrator’s findings of facts and conclusion that South Lorain Merchants
Association had properly reimbursed University Hospital, however, South Lorain Merchants
Association asserted that the proper standard of review was arbitrary and capricious. South Lorain
Merchants Association’s assertions were based on the Supreme Court’s holding in Firestone Tire
& Rubber Co. v. Bruch, 489 U.S. 101 (1989), declaring that while de novo review of a Plan
Administrator’s decision is the ordinary standard, the proper standard of review may be arbitrary
and capricious where the benefit plan gives the administrator or the fiduciary discretionary authority
to determine eligibility or construe the terms of the plan. Here the language clearly vests the Plan
Administrator with such discretionary authority and thus the arbitrary and capricious standard of
review would normally apply as it should here.
        The district court, however, did not apply the arbitrary and capricious standard of review on
the grounds that “the SAR [Stipulated Administrative Record] lacks documentation required under
VanderKlok v. Provident Life & Acc. Ins. Co., 956 F.2d 610, 615 (6th Cir. 1992), and therefore, the
decision of the South Lorain Merchants Association plan administrator, on appeal filed by the
plaintiff, violated plaintiff’s due process rights.” While the district court failed to elaborate on this
proposition, we read the district court’s opinion as suggesting that the Plan Administrator’s failure
to provide University Hospital with an appeal, prior to the district court’s remand of the case to the
Plan Administrator, violated VanderKlok. De novo review of the case was thus appropriate. We are
unconvinced that the district court’s analysis of the standard of review issue was proper.
       29 U.S.C. § 1133 requires that when a Plan denies a claimant’s benefits, the administrator
must provide the claimant written notice along with a reasonable opportunity for a full and thorough
review of the denial by the plan administrator. In VanderKlok, we considered the proper remedy
where the procedural right to a reasonable opportunity for a full and thorough review was violated.
No. 04-4067               Univ. Hosp. of Clev. v. South Lorain Merchants Ass’n                                  Page 4


This Court ruled that the proper remedy for a failure to provide appropriate administrative review
is to have the district court “reconsider [the denial of benefits] after the [claimant] has been given
the opportunity to submit additional evidence” rather than remanding the case to the Plan for further
consideration. Id. at 617.
       Based on this Court’s instructions in VanderKlok, the district court made the curious decision
to remand the case to the Plan Administrator after South Lorain Merchants Association failed to
provide University Hospital with an adequate opportunity for review. Under VanderKlok, rather than
remand the case, the district court should have conducted the review of the case itself and permitted
University Hospital to introduce additional evidence as to its reasonable and medically needed
additional charges. The district court, however, did not do this. Instead the district court improperly
remanded the case to the Plan Administrator for further fact finding, at which point the Plan
Administrator conducted further findings and ruled on the merits of University Hospital’s claims.
The district court then decided, even after the Plan Administrator conducted a review of University
Hospital’s claims, that University Hospital’s procedural rights were still violated, and that the proper
remedy was to alter the standard of review.
        We find this decision perplexing and inconsistent with prior precedent. First, we are
unconvinced that once the Plan Administrator reviewed the claims, that University Hospital’s rights
were still violated. There is no suggestion that the review conducted by the Plan Administrator,
while perhaps delayed, was not full or fair. Nowhere does University Hospital suggest that
additional evidence ought to have been considered that was ignored by the Plan Administrator
during its review of University Hospital’s claim. If there is no violation of University Hospital’s
procedural rights, then VanderKlok is not implicated and the district court’s reliance on it in altering
the standard of review was unwarranted.
         Most importantly, however, even if the Plan Administrator’s delayed review of the case
violated University Hospital’s procedural rights under 29 U.S.C. § 1133, the district court remedied
this violation, albeit improperly. VanderKlok indicates that the proper remedy for the procedural
violation presented would be to allow University Hospital to present additional evidence before the
district court. VanderKlok does not suggest that changing the standard of review, however, is the
proper means of remedying a violation of a claimant’s procedural rights. The district court’s reading
of VanderKlok was erroneous, and it had no basis for concluding that de novo review of University1
Hospital’s claims were warranted. Thus, the proper standard of review is an abuse of discretion.
                                                           B.
         South Lorain Merchants Association’s second claim is that the district court erred in denying
it a Preferred Provider Organization discount. The district court concluded that despite the fact that
South Lorain Merchants Association had entered into a contract with the Buckeye Preferred
Network that entitled it to discount University Hospital medical bills, it had failed to follow the
requirements of the Buckeye Preferred Network Contract. The contract stipulates that
“predetermined Rates will not be available unless Hospital Bills are paid within sixty (60) days from
receipt of a clean claim. A clean claim is one void of any omissions of pertinent information,
coordination of benefits issues and any liability issues.” The district court concluded that “[b]y
waiting sixty (60) days from the date South Lorain Merchants Association received the repriced bill


         1
           University Hospital argues that in addition to VanderKlok, the “law of the case” doctrine requires that the
district court apply de novo review as it decided, prior to remanding the case to the Plan Adminstrator, that de novo
review was appropriate. See United States v. Thomas, 167 F.3d 299, 306 (6th Cir. 1999). Considering the change in
factual scenario between the district court’s initial ruling that the de novo review applied and its second consideration
of the issue (namely the review of the case by the Plan Administrator), we find the law of the case doctrine inapplicable
in this case.
No. 04-4067           Univ. Hosp. of Clev. v. South Lorain Merchants Ass’n                      Page 5


from its auditing agent, Cardinal, to pay the bill, South Lorain Merchants Association violated the
Buckeye Preferred Network Preferred Provider Organization contract timeliness provision, and
therefore South Lorain Merchants Association is not entitled to discount.” The district court again
failed to provide a thorough explanation of this conclusion, and it is difficult to determine from the
record the grounds the district court relied upon for its ruling. Nonetheless, we interpret the district
court’s opinion as concluding that the numeric summary of the audit that South Lorain Merchants
Association received on September 11, 2001, was a clean claim for the purpose of the Buckeye
Preferred Network Contract. Thus, the court found South Lorain Merchants Association had
violated the terms by delaying the sending of a check until November 15, 2001, which was over
sixty days after South Lorain Merchants Association received a clean claim.
        Given the contract’s definition of a clean claim as one void of any omissions of pertinent
information, coordination of benefits issues and any liability issues, we conclude that the district
court’s conclusion that a clean claim was submitted to South Lorain Merchants Association on
September 11, 2001 was in error. South Lorain Merchants Association received a tentative
summary of the audit’s results on September 11, 2001, but the audit was not actually completed until
October 30, 2001. We conclude that it was not until this later date that the result of the audit could
be truly considered a clean claim. Until that date, South Lorain Merchants Association was missing
a pertinent piece of information --- namely, the knowledge that the audit was complete and that the
numeric summary the auditor had provided to South Lorain Merchants Association on September
11th represented the final amount owed to University Hospital. If October 30, 2001 is considered
the date on which there existed a clean claim, then South Lorain Merchants Association would not
have violated the timeliness provision of the Preferred Provider Organization contract. Its payment
to University Hospital on November 15, 2001 would fall well within the contract mandate that South
Lorain Merchants Association provide payment to University Hospital within sixty days of receiving
a clean claim. Given that the audit was not actually completed until October 30th, a clean claim did
not exist until that date. No proof was offered to show any other industry standard other than this
interpretation.
        University Hospital argues also argues that South Lorain Merchants Association should not
receive a Preferred Provider Organization discount because payment of the bill was untimely given
that $14,561.58 of the claim was not paid within sixty days of a receipt of a clean claim. Here, the
record indicates that the failure to pay the $14,561.58 was merely the result of a calculation error.
Nothing in the record suggests, nor does either party argue, that this error was the result of an
attempt by South Lorain Merchant Association to withhold the properly owed amount from
University Hospital. Given the complexity of the bill in this case and that nothing in the record
indicates this delay in payment was anything but a good-faith mistake, we do no interpret this delay
as being sufficient under the contract to prevent the Plan from receiving a Preferred Provider
Organization discount.
         Although we have decided that the district court improperly denied South Lorain Merchants
Association a Preferred Provider Organization discount based on the contract’s timeliness provision,
it is unclear from the record the proper percentage discount that is owed to South Lorain Merchants
Association under the contract. South Lorain Merchants Association contends that the contract
entitles it to a 22% discount, while University Hospital contends that the proper discount under the
contract is 20%. The district court did not reach this issue because of its decision that no discount
was owed. Nevertheless, the district court did express confusion over the discrepancy regarding the
proper discount and indicated that South Lorain Merchants Association’s assertion of the 22%
discount was perplexing. Based on this factual discrepancy, we remand the case to the district court
for determination as to the proper Preferred Provider Organization discount that South Lorain
Merchants Association was entitled to under its contract.
No. 04-4067           Univ. Hosp. of Clev. v. South Lorain Merchants Ass’n                     Page 6


                                                 C.
        South Lorain Merchants Association’s final claim is that the district court’s decision
improperly requires it to pay University Hospital for charges that fall outside the Plan’s terms. As
part of its audit, South Lorain Merchants Association concluded that $39,579.94 of University
Hospital’s claims did not qualify as usual, customary or reasonable medical charges under South
Lorain Merchants Association’s contract and thus were not due. The district court concluded that
South Lorain Merchants Association was required to pay University Hospital this sum, but failed
to provide a clear reasoning for its conclusion. The only plausible reason for this decision that can
be gleaned from the record is the district court’s conclusion that the audit that produced South
Lorain Merchants Association’s decision not to pay $39,579.94 of the bill was conducted without
prior notice to University Hospital and without the attendance of a University Hospital
representative. University Hospital alleges that the district court’s ruling was proper because the
Buckeye Preferred Network’s contract with University Hospital indicates that:
               Hospital agrees that BPN [Buckeye Preferred Network], and its employees
               or authorized representatives shall have reasonable access during the term of
               this Agreement to audit and copy all files and records relevant to the
               execution of this Agreement, as jointly agreed upon. The right to have access
               to Hospital’s records shall be subject to all applicable laws and regulations
               concerning confidentiality of records. Such audits and copying shall be
               conducted during regular hours, upon ten (10) working days written notice.
               Copying charges shall be at Hospital’s then current rate of reimbursement
               and shall be paid by BPN or applicable Payor no later than the date upon
               which the requested copies are made.
(Emphasis added). University Hospital alleges that South Lorain Merchants Association failed to
provide it with ten days notice prior to conducting an audit. Therefore, University Hospital asserts,
South Lorain Merchants Association should be denied the benefit of that audit, namely, the
$39,579.94 deduction from their bill. In response, South Lorain Merchants Association argues that
the audit provision in the Buckeye Preferred Network contract does not apply to its audit of
University Hospital’s bill of services. We conclude that the district court erred in denying South
Lorain Merchants Association’s $39,579.94 deduction because the ten-day Buckeye Preferred
Network contract audit provision is not applicable to this case.
         “Because the Plan is governed by ERISA, we apply federal common law rules of contract
interpretation in making our determination.” Perez v. Aetna Life Insurance Co., 150 F.3d 550, 556
(6th Cir. 1998). “The general principles of contract law dictates that [this Court] interprets the
Plan’s provisions according to their plain meaning, in an ordinary and popular sense.” Id. Based on
this plain meaning analysis, this Court gives effect to the unambiguous terms of the contract. Id. The
plain meaning of the Buckeye Preferred Network contract indicates that the audit provision does
not apply to the audit conducted by South Lorain Merchants Association.
        First, the terms of the provision appear to apply only to Buckeye Preferred Network and not
South Lorain Merchants Association. The audit provision specifically indicates that the provision
applies only where the audit is conducted by “BPN [Buckeye Preferred Network] and its employees
or authorized representatives.” Under the contract South Lorain Merchants Association is defined
as a “payor” and not as Buckeye Preferred Network, Buckeye Preferred Network’s employee or
Buckeye Preferred Network’s authorized representative. Had the parties intended the audit
provision to apply to network members like South Lorain Merchants Association, they could have
done so by stating both Buckeye Preferred Network and Payors were required to comply with the
provision, as the contractors did in other provisions of the contract. This, however, did not occur.
Instead the provision terms indicate that only Buckeye Preferred Network is required to comply with
No. 04-4067           Univ. Hosp. of Clev. v. South Lorain Merchants Ass’n                      Page 7


the audit provision. Therefore, the plain language of the contract indicates that the audit provision
does not apply to an audit conduct by South Lorain Merchants Association.
         Additionally, even if the provision were read to apply to South Lorain Merchants
Association, it is unclear that it would have required South Lorain Merchants Association to provide
University Hospital ten days notice in this case. The audit provision we are considering concerns
those audits where the auditor requires access to the hospital’s records or files. Thus, the provision
focuses on how an auditor may access those files, who will be charged a copying fee for copies of
the files, and when the auditor may access those files and records. Thus, the audit provision seems
concerned with outside access to Hospital records and files. Viewed in this light, the notice
provision is meant to prevent auditors from attempting to access hospital records or files without
providing notice to the hospital; it has nothing to with the need to provide notice to the hospital that
an audit is going to be conducted. This reading of the notice requirement makes sense when
examined in concert with the other requirements of audit provision. The notice provision does not
apply to all audits, and only applies to “such audits” that require access to hospital records or files.
It does not therefore apply to audits such as the one that occurred in this case, where the “audit” was
only a review of the hospital bill provided to South Lorain Merchants Association and did not
require access to any of University Hospital’s records or files. Thus, we conclude that even if the
audit provision applied to South Lorain Merchants Association, South Lorain Merchants Association
would still not have violated it by failing to provide University Hospital with ten days notice prior
to the audit.
        The lack of notice is therefore an insufficient ground upon which to ignore South Lorain
Merchants Association’s conclusion that $39,579.94 of the billed charges were properly deducted
as not medically necessary. Nonetheless, it is unclear whether the Plan Administrator properly
determined that these charges were in excess of the usual, reasonable, and customary charges that
South Lorain Merchants Association is required to pay as required by the Plan. We therefore remand
this case to the district court for consideration as to whether the Plan Administrator abused its
decision by concluding that all $39,579.94 of the billed charges were not properly payable under the
Plan.
                                                  III.
         For the reasons discussed above, we REVERSE the district court’s decision and REMAND
the case to the district court for further consideration consistent with this opinion. Upon remand, the
district court needs to consider whether the Plan Administrator abused its discretion in determining
the amount properly payable to University Hospital.
