[J-34-2o18]
iN THE suPREME couRT oF PENNsYLvANlA
MlDDLE DlsTRicT

SAYLOR, C.J., BAER, TODD, DONOHUE, DOUGHERTY, WECHT, MUNDY, JJ.

CO|\/||\/IONWEALTH OF PENNSYLVAN|A, : No. 5 |\/|/-\P 2018
BY JOSH SHAP|RO, ATTORNEY '

GENERAL; PENNSYLVAN|A Appeal from the Order of the
DEPARTl\/|ENT OF lNSURANCE, BY : Commonwealth Court at No. 334 l\/lD

JESS|CA K. ALTl\/lAN, |NSURANCE : 2014 dated 1/29/18
CO'|\/||V||SS|ONER AND PENNSYLVAN|A '

DEPARTl\/|ENT OF HEALTH, BY RACHEL

LEV|NE, ACT|NG SECRETARY OF .

HEALTH : ARGUED: |\/|ay 16, 2018
, V. '

UP|\/lC, A NONPROF|T CORP.; UPE,
A/K/A HlGH|\/|ARK HEALTH, A
NONPROF|T CORP. AND H|GHN|ARK,
|NC., A NONPROF|T CORP.

APPEAL OF: UP|\/|C, A NONPROF|T
CORP.

Ql_=ml_o_.r\_\
CH|EF JUST|CE SAYLOR DEC|DED: July18, 2018

This case is a continuation of a longstanding dispute between a leading
healthcare insurer and a major health services provider operating in Western
Pennsylvania.

By Way of background UPE, a/k/a Highmark Health and Highrnark, lnc.

(collective|y, “Highmark”), and UPl\/lC separately entered into Consent Decrees with the

Comrnonwealth’s Office of Attorney General (“OAG”).1 The present controversy centers
on the obligations imposed by the Consent Decrees relative to UPl\/lC’s attempt to
terminate ten hospital l\/ledicare Acute Care Provider Agreements (“Provider
Agreements”) that it has with Highmark.

Pertinent to this matter, UPl\/lC’s Consent Decree requires it to treat Highmark’s
l\/ledicare Advantage P|an (“l\/lA Plan”) consumers as in-network through the end date of
the Consent Decree, June 30, 2019.2 That mandate derives from the "Vu|nerab|e

Popu|ations” provision of the Consent Decree, which provides as follows:

2. Vulnerable Popu|ations--[t] UPl\/lC and Highmark mutually agree that
vulnerable populations include: (i) consumers age 65 or older who are
eligible or covered by l\/ledicare, l\/ledicare Advantage, (ii) l\/ledigap health
plans, (iii) l\/ledicaid and/or (iv) CHlP. [2] With respect to Highmark's
covered vulnerable populations, UPl\/|C shall continue to contract with
Highmark at in-network rates for all of its hospita|, physician and
appropriate continuity of care services for CHIP, Highmark Signature 65,
l\/ledigap and commercial retiree carve out as long as Highmark does not
make unilateral material changes to these programs. [3] UP|\/lC shall treat
all l\/ledicare participating consumers as ln~Network regardless of whether
they have l\/ledicare as their primary or secondary insurance. [4] UPl\/|C
reserves the right to withdraw from these arrangements if Highmark
should take the position that it has the authority to revise the rates and
fees payable under those arrangements unilaterally and materia||y.

Consent Decree §|V(A)(Z).3

 

1 For a more detailed recitation of the circumstances leading to the Consent Decrees,
see Commonwea/th ex. rel. Kane v. UPMC, 634 Pa. 97, 129 A.3d 441 (Pa. 2015).

2 Although there are two separate Consent Decrees, signed by UPl\/lC and Highmark
respectively, that are identical in all material respects, further references herein will be
to the singular “Consent Decree” as both a stylistic matter and reflecting that it is the
enforcement of only the agreement signed by UP|V|C that is at issue.

3 Fol|owing the convention employed in Kane, each sentence of this provision has been
given a number and is referenced as “VP-1 “VP-2,” etc.

[J-34-201 81 _ 2

ln a previous dispute between these parties regarding the Consent Decree, see
Commonwealth ex. rel. Kane v. UPMC, 634 Pa. 97, 129 A.3d 441 (Pa. 2015)
(hereinafter, “Kane”), this Court held that VP-3 "ob|iges UPl\/lC to treat those participants
in Highmark [l\/lA P|ans] as ‘|n-Network,’ and, thus, requires it to have a contract with
Highmark that establishes negotiated rates for treatment of those in [lVlA P|ans] for
which Highmark currently has provider contracts with UP|V|C.” ld. at 143-44, 129 A.3d
at 469. The Court reasoned that, although l\/|A P|ans were not mentioned in VP-2,
which requires UPl\/lC to “continue to contract,” and VP-3 did not contain identical
language, the mandate to treat l\/ledicare participants as “ln-Network” indicated an on-
going contractual relationship. ld. at 141, 129 A.3d at 467 (quoting Consent Decree
§ll(l) (defining “ln-Network” as “contracted . . . to provide specified services for
reimbursement at a negotiated rate")). The Court also buttressed its view with the
broader perspective that the Consent Decree was developed to protect the vulnerable
populations outlined in VP-1.4 Additiona|ly, although the Court explained that VP-3 of
the Consent Decree did not require automatic annual renewal of the preexisting
Provider Agreements, it observed that UPl\/lC’s obligation to provide in-network access
to its facilities may be accomplished by such renewals or some alternative agreement
that ensured access.

Fol|owing Kane, UPl\/|C allowed the Provider Agreements with Highmark to

renew annually in satisfaction of its in-network obligation.5 Of relevance here, those

 

4 Pertinent to the present controversy, one of the primary motivations for the Consent
Decree was the protection of vulnerable populations from the consequences of the
sudden and then-impending loss of UPl\/lC as a provider to Highmark’s customers. See
Kane, 634 Pa. at 105, 129 A.3d at 445-46.

5 Subsequent to the Kane decision, Highmark developed and marketed an l\/lA Plan that

completely excluded UPl\/lC as an in-network provider. See Highmark’s Answer to the
Petition to Enforce 1146.

[J-34-2018] - 3

agreements, which pertain exclusively to l\/ledicare consumers, establish the terms for
the provision and payment of healthcare services for Highmark’s l\/|A Plan subscribers
at UPl\/lC facilities. They also permit one-calendar-year renewals, which align with the
calendar year that all l\/ledicare Advantage plans employ, including Highmark’s MA
P|ans. However, the Provider Agreements allow UPl\/lC to terminate the annual renewal
via timely notice. Upon termination of the agreements, Section 16.3, referred to as the
“runout” provision, requires UPl\/lC to continue to abide by the same terms and
conditions of the Provider Agreement for six months following the end of the final annual
renewal period.6

Turning to the present controversy, on September 26, 2017, UPl\/lC informed
Highmark, in accordance with the notice provisions, that it would terminate the Provider
Agreements on December 31, 2018, but wou|d, nonetheless, continue to comply with all
terms and obligations of those agreements through June 30, 2019, pursuant to the

runout provision. Highmark responded the next day by filing a motion for an expedited

 

6 Section 16.3 of the Provider Agreements provides, as follows:

|n the event of termination of this Agreement for any reason other than
default by [Ul:'l\/lC]l [UP|V|C] shall be obligated to continue to comply with
the terms and conditions of this Agreement and continue to provide
services to [Highmark’s] l\/lembers for six (6) months after the date on
which the termination becomes effective. For services rendered during
this six (6) month period, [UPl\/lC] shall accept [Highmark’s] P|an’s rates in
effect on the termination date.

ln addition to the rights stated herein, the non-defaulting party shall have
any and all remedies otherwise available at law or in equity, including,
without limitation, specific performance

Provider Agreement §16.3 (a|terations added). This clause was added to the Provider
Agreements by amendment dated January 4, 2002.

[J-34-2018] - 4

special injunction and contempt with the Commonwealth Court.7 Highmark asserted
that UPl\/lC’s termination of the Provider Agreements violated its obligation to continue
to contract for vulnerable population services for the full period of the Consent Decree.
Ultimately, Highmark withdrew its motion, but OAG, representing the interests of the
Commonwealth and aligning with Highmark’s position, filed a Petition to Enforce.8 OAG
asserted that LJPl\/lC’s proposed termination of the Provider Agreements and reliance on
the runout provision failed to comply with the terms of the Consent Decrees. Thus, it
sought an order requiring UPl\/lC to continue to contract with Highmark.

Thereafter, Senior Judge Pellegrini held a hearing at which no evidence was
taken, since the parties agreed that the case hinged solely on a legal determination of
the meaning of the text of the Consent Decree and Provider Agreements9 UPl\/lC
argued that it was permitted to terminate the Provider Agreements and that, in accord
with the runout provision, it would continue to provide in-network access to its facilities
until the end of the Consent Decree on June 30, 2019, thus satisfying its obligation.
OAG disagreed, contending that the Provider Agreements could not be terminated until
June 30, 2019, and that the runout provision did not constitute a continuation of the

contractual relationship. Further, since the Provider Agreements renew annually on a

 

7 The Commonwealth Court, by the terms of the Consent Decree, retains jurisdiction for
any necessary and appropriate interpretation, modification, or enforcement See
Consent Decree §lV(C)(11).

8 The Pennsy|vania Departments of insurance and Health, although named parties here
and involved with negotiating aspects of Highmark and UPl\/lC’s relationship, have
chosen not to take any position in this matter.

9 Although no evidence was taken, the parties submitted a voluminous record for the
court to review, including, inter alia7 the testimony from the Kane case, affidavits
supporting and responding to OAG’s Petition to Enforce, and attachments to the
affidavits that reflected advertising and relevant federal rules and regulations. These
documents constitute the present reproduced record.

[J-34-201s] - 5

calendar basis, OAG asserted that they must be maintained through 2019.
Consequently, OAG posited that UPl\/lC could only terminate the agreements on
December 31l 2019, in turn making the runout provision operative through June 30,
2020. Highmark joined OAG’s view.10

ln an order filed January 29, 2018, the Commonwealth Court granted OAG’s
Petition to Enforce. ln the accompanying unpublished opinion, Judge Pellegrini began
by noting that the Consent Decree was designed to “|essen the anxiety of Highmark
subscribers by providing certainty as to what would occur during transitional periods," as
well as offering them the opportunity to make informed decisions. Commonwealth v.
UPMC, No. 334 l\/|.D. 2014, at 2-3 (Pa. melth. filed Jan. 29, 2018) (sing|e-judge
opinion). As to the dispute in this case the court framed it as centering on “what is
meant by UPl\/lC’s obligation [under VP-2 of the Consent Decree] to ‘continue to
contract’ with Highmark until June 30, 2019, to provide in-network access to Highmark
l\/|A Plan subscribers.” ld. at 5 (quoting Consent Decree §lV(A)(2)). The court deemed
the Provider Agreements between UPl\/lC and Highmark as the contracts referenced by
the “continue to contract” language

Acknowledging that interpretation of the Consent Decree required application of
general contract precepts, see lnt’/ Org. Master, Mates & Pilots of Am., Local No. 2 v.
lnt’/ Org. Masters, Mates & Pilots of Am., lr)c., 497 Pa. 102, 108~09, 439 A.2d 621, 624
(1981), the Commonwealth Court opined that “[t]he difficulty in ascertaining the intent of
the parties is that they seem not to have taken into consideration when entering into the
Consent Decree that it expires mid-year while l\/lA P|ans run for a full calendar year.”

UPMC, No. 334 M.D. 2014, at 10. lf UP|\/lC was correct that it could terminate in-

 

10 During this underlying |itigation, UPl\/lC fon/varded an offer to contract for in-network
coverage of Highmark’s l\/lA Plan subscribers between January 1, 2019, and June 30,
2019. Highmark did not accept the offer.

[J-34-2018] - 6

network access on June 30, 2019, then, the court reasoned, Highmark could not offer
l\/|A P|ans that included UPl\/lC access for any part of 2019, since such plans must be
offered on a calendar-year basis.11 ln this regard, the court explained that the Center
for l\/ledicaid and l\/ledicare Services (“Cl\/lS”), which oversees and approves l\/ledicare
Advantage programming, pays a set fee for an eligible person’s care for an entire year, '
corresponding to the year-long coverage provided by a l\/ledicare Advantage plan.
Further, the court posited that, even if a partial-year plan would be permissible,
subscribers to that plan would not have access to UPl\/lC hospitals after June 30, 2019,
“and whether they could obtain another l\/lA Plan is problematic.” ld. at 11.

The Commonwealth Court rejected UPl\/lC’s contention that the six-month runout
provision of the Provider Agreements satisfied its obligation to remain in “contract" with
Highmark. lnstead, the court explained that the “continue to contract” language of VP-2
implicated extension of the entire Provider Agreements. Further, the court observed,
Section 16.3’s runout only begins once the Provider Agreements are terminated Thus,
the Commonwealth Court reasoned that, since the continue-to-contract provision
applied to the entirety of the Provider Agreements, they could not be terminated until
June 30, 2019, pursuant to the Consent Decree’s terms.

Based on the above rationale, the court prohibited "UPl\/lC from terminating the
Provider Agreement for the calendar year 2019, [and instructed] that Highmark . . .`not .
. . represent that UP|\/lC is in-network for any part of 2020 based on Section 16.3’s run-

out clause.” ld. at 12 (alterations added). The court explained that “[t]his resolution is

 

11 The Commonwealth Court also indicated that “agreements that provide access to
providers are . . . for the [fu|| calendar] year." ld. at 10 (citing 42 U.S.C. §1395VV-27(c)).
To the degree that the court is referencing provider agreements, the cited statutory
provision does not support that assertion, as it pertains only to l\/ledicare Advantage
plans. See 42 U.S.C. §1395W-27(a) (explaining that this section pertains to contracts
between l\/ledicare Advantage-offering insurers and the federal government).

[J-34-2018] - 7

the same as fixing a June 30, 2019 date for termination of the Provider Agreement, then

activating Section 16.3’s runout provision with the obligations expiring December 30,

2019.” ld. ln the court’s view, doing so provided certainty to lVlA Plan subscribers, as

well as Highmark and UPl\/lCl by ending all obligations on a date certain.

Commonwealth Court then entered, in relevant part, the following order:

Commonwealth v. UPMC, 334 l\/l.D. 2014 (Pa. me|th. filed Jan. 29, 2018) (order).

lt is ordered that the l\/ledicare Acute Care Provider Agreement and its
amendments shall remain in effect until December 30, 2019. Highmark
Health and Highmark, lnc. are ordered not to represent in any manner that
UPl\/lC is in-network for any part of 2020.

The

UPl\/lC appealed to this Court, which undertook the matter on an expedited

schedule for briefing and oral argument.12 UPl\/lC presents the following issues for

review:

1 .

Did the Commonwealth Court err by wrongly construing the term “continue
to contract” in the second sentence of Paragraph lV(A)(2) of the UPMC
Consent Decree (“VP-2") to require UP|V|C to renew the MA Agreements
with Highmark for all of 2019 where: (1) the Consent Decree governs
UP|V|C's obligations and expires by its terms on June 30, 2019; (2) this
Court in its 2015 Opinion recognized that the existing l\/lA Agreements
might properly terminate prior to the end of the Consent Decree so long as
there was “a contract” under which Highmark members would receive in-
network services at UPl\/|C through the term of the Consent Decree; (3)
the parties all agree and this Court has unanimously recognized that VP-2
does not apply to l\/ledicare Advantage; and (4) the Consent Decree itself
forecloses involuntary renewal of those same agreements?

Did the Commonwealth Court err by granting relief against UPl\/lC
because UPl\/lC at all times has met its obligations under the Consent
Decree and has cured any alleged non-compliance and because that
court was without the authority either to abrogate UPl\/lC’s preexisting

 

12 This Court has jurisdiction over appeals from final orders of matters originally
commenced in the Commonwealth Court. See 42 Pa.C.S. §723(a).

[J-34-2018] - 8

contract rights or to impose obligations on UPl\/lC that extend beyond the
expiration of the Consent Decree?

3. Did the Commonwealth Court err by wrongly deciding preempted federal
questions and interfering with the exclusive authority of the federal
Centers for l\/|edicare & l\/ledicaid Services (“Cl\/lS”) to (i) determine
whether and when an insurer can market l\/ledicare Advantage plans, (ii)
assess the level of impact of midyear provider terminations on
subscribers, and (iii) take steps to ameliorate any adverse impact? `

Brief for UPl\/lC at 4-5.

UPl\/lC argues that it did not violate the Consent Decree and that the
Commonwealth Court’s decision is predicated on several errors. lnitia|ly, UPl\/lC
contends that the court’s reasoning materially conflicts with the Kane Court’s recognition
that the “continue to contract” language in VP-2 does not apply to l\/ledicare Advantage
UPl\/lC further develops that, pursuant to Kane, the Consent Decree does not affect
separate preexisting contract rights and, to the contrary, forecloses the coerced
renewal of the Provider Agreements that the Commonwealth Court ordered here See
Kane, 634 Pa. at 144, 129 A.3d at 469 (explaining that the Consent Decree “forec|oses
the automatic renewa|” of the Provider Agreements).

lnstead, UPl\/lC advances that VP-3 was interpreted as allowing termination of
the existing Provider Agreements, in accord with the terms therein, so long as UPl\/lC
maintained some form of in-network access for Highmark’s l\/lA consumers through the
end of the Consent Decree See id. at 143-44, 129 A.3d at 469 (explaining that the use
of the term *“ln-Network” obliged UPl\/lC to “have a contract with Highmark that
establishes negotiated rates for . . . those in l\/ledicare Advantage programs” (emphasis
added)). UPl\/lC finds additional support in that the Consent Decree explicitly
admonishes that it is “not a contract extension and shall not be characterized as such.”

Consent Decree §I(A); see Kane, 634 Pa. at 144, 129 A.3d at 469 (“That [the Consent

[J-34-201 81 - 9

Decree] is not a contract extension must be understood as only pertaining to , . . the
l\/ledicare Advantage provider agreements in effect at the time of entry of the Consent
Decree.”). UP|V|C proffers that the Commonwealth Court was bound to follow this
Court’s prior explication of the Consent Decree and therefore that it erred in mandating
that UPl\/lC renew the Provider Agreements for an additiona|, year-long term, beyond
the end date of the Consent Decree. l\/loreover, UPl\/lC contends that the court could
not, consistent with contract principles, alter its contractual rights solely on the basis that
the changes may better fit the circumstances See Steuart v. ll/lcChensey, 498 Pa. 45,
50-51, 444 A.2d 659, 662 (1982) (“The court may not rewrite the contract for the
purpose of accomplishing that which . . . may appear proper . . . because it later
appears that a different agreement should have been consummated in the first
instance.” (quoting 17A C.J.S. Contracts §296(3))). Thus, although acknowledging the
certainty and security purposes of the Consent Decree UPl\/lC posits that it is not an
unlimited guarantee and efforts to protect l\/ledicare Advantage consumers cannot
override the plain language of the contract.

UPl\/lC also maintains that it is, and will remainl in full compliance with the
Consent Decree From UPl\/lC’s perspective pursuant to the terms of the Provider
Agreements and following its notice of termination, the annual renewals will end on
December 31, 2018, at which time the six-month runout under Section 16.3 is triggered
and will provide in-network access under the same terms, conditions, and rates through
June 30, 2019. UPl\/lC argues that there is no divergence between what the Consent
Decree requires of UPl\/lC and the contract-based obligations that UPl\/lC already
possesses.

Further, UPl\/lC asserts that the runout provision satisfies the mandate for a

contract, since post-termination obligations are regularly treated as contracts under

[J-34-2018] - 10

Pennsy|vania law, with enforcement pursuant to contract-breach precepts, citing, inter
alia, non-compete provisions of employment contracts as an example See, e.g., Hayes
v. A/tman, 424 Pa. 23, 28-29, 225 A.2d 670, 672 (1967); Se/igman & Latz of Piftsburgh,
/nc. v. Vern/'//o, 382 Pa. 161, 166, 114 A.2d 672, 673-74 (1955). Additionallyl UPl\/lC
criticizes GAG for failing to specify which terms it believes do not carry fon/vard via the
runout provision, or what makes the 6-month runout insufficient to satisfy UPl\/lC’s
obligations under Kane lnstead, UPl\/lC observes that the runout clause mandates that
all of the obligations of the Provider Agreements remain. UPl\/IC levels similar criticism
at Highmark’s arguments with respect to the runout provision, disputing the notion that
interpretation of Section 16.3 of the Provider Agreements is a matter of fact, rather than
law. l\/loreover, UPl\/lC claims that it has cured any alleged non-compliance by
proposing an additional written agreement confirming that it will continue to accept
patients on an in-network basis through June 30, 2019, regardless of Highmark's
position. See supra note 10.

Lastly, UPl\/lC forwards that federal law preempts state courts from regulating
l\/ledicare Advantage plans, see 42 Ll.S.C. §1395w-26(b)(3), and that the
Commonwealth Court erroneously interfered with and misconstrued the federal
program. ln contrast to the court’s concern that midyear termination of a provider
contract would be “problematic,” UPMC, No. 334 l\/l.D. 2014, at 11, UPl\/lC observes that
Cl\/lS permits such arrangements, even with respect to major providers, see l\/lEchARE
l\/lANAcED CARE l\/lANuAL §110.1.2.1 (Significant Changes to Networks--Genera|)
(acknow|edging that “significant network changes could result from no-cause provider
terminations that are effective at any point during the contract year, whether it is mid-

year or on January 1”), and has criteria and procedures to inform and protect

[J-34-2018] _ 11

consumers when major provider network changes occur.13 Additionally, UPl\/|C argues
that, by ordering it to maintain the Provider Agreements with Highmark through 2019,
UPl\/lC would also be obligated to honor the runout provision into 2020. According to
UPl\/lC, the court’s order prohibiting Highmark from advertising such coverage intrudes
upon Cl\/lS’s exclusive province

Along this same line UPl\/lC asserts that by rewriting the UPl\/lC-Highmark
provider contracts and deciding how l\/ledicare Advantage should operate the
Commonwealth Court improperly substituted its judgment for that of Cl\/lS. ln so doing,
UP|\/|C opines, the court has transformed the orderly transition that the Consent Decree
was designed to ensure and that Cl\/lS regulations contemplate into a confusing and
uncertain process that will prejudice enrollees. UPl\/lC contends that the practical effect
of the court’s order is to merely delay for one year what is already going to occur, but in
a manner that further muddles matters. Accordingly, UPl\/lC asks for reversal of the
Commonwealth Court’s order.

Highmark responds that the Commonwealth Court’s decision reflects an
appropriate remedy to account for the mismatch between the Consent Decree’s June
30, 2019 end date and the calendar year employed for l\/ledicare Advantage plansl all in
consideration of the terms of the agreementsl the legal landscape surrounding the
dispute and the parties’ course of dealing. Highmark proffers that the court’s order
eliminates the risk and uncertainty associated with UPl\/lC's proposed 6-month contract,
avoids potential Cl\/lS issues, and averts forcing the parties back to highly contentious

negotiations in the final months of the Consent Decree.

 

13 UPl\/lC also contests as erroneous the apparent conclusion by the Commonwealth
Court that provider agreements must be “for the entire year.” UPMC, No. 334 M.D.
2014, at 10. As noted above see supra note 10, to the degree the court relied on 42
U.S.C. §1395w-27(c) for this propositionl doing so was in error.

[J-34-2018] - 12

Highmark argues that the Vulnerable Populations clause obligates UPl\/lC to
“have a contract” to provide in-network coverage to Highmark’s MA consumers pursuant
to VP-3 and the definition of “ln-Network.” Kane 634 Pa. at 143-44, 129 A.3d at 469.
ln this respect, Highmark opines that the Commonwealth Court’s reliance on the
“continue to contract” language of VP-2 is irrelevant, since VP-3 has already been
interpreted by the Kane Court as mandating the same on-going contractual obligations
with respect to Highmark’s l\/lA consumers See id. Highmark contends that UPl\/lC
cannot now relitigate its obligations to remain a l\/ledicare provider through the end of
the Consent Decree

As to the ordered continuation of the Provider Agreements, although Highmark
acknowledges that the Consent Decree does not dictate the terms of those agreements,
it notes that the parties have consistently employed roll-overs of the Provider
Agreements for full calendar years since at least 1999. Highmark posits that the
Commonwealth Court’s consideration of that fact in fashioning a remedy was entirely
proper to ensure certainty and prevent chaos. ln this respect, Highmark emphasizes
that the overriding intention to protect consumers appropriately controls the
understanding of the Consent Decree since subject to contract precepts, the document
must be “read as a whole . . . to give effect to its true purpose.” Kane 634 Pa. at 135,
129 A.3d at 463-64 (citing Pr/'tchard v. l/l/ick, 406 Pa. 598, 601, 178 A.2d 725, 727
(1962)).

Highmark further challenges UPl\/lC’s claim that the six-month runout provision
contained in the Provider Agreements satisfies its obligation under the Consent Decree
to be “in a contract” through June 30, 2019. Highmark notes that the runout provision,
by its own terms, applies only after the Provider Agreements are terminated, whichl as a

finding of fact, is entitled deference Thus, it views this clause as devised to allow the

[J-34-2018] - 13

parties to “wrap up their affairs such as audit rights return of documents and other
housekeeping matters after the contract has ended.” Brief for Highmark at 41
(emphasis in original). Highmark distinguishes this post-termination period with the
enrollment of new patients or the creation of new obligations. Highmark further
contrasts contractual agreements insofar as Pennsylvania courts have refused to
recognize contract-based legal theories in the context of post-termination obligations
See e.g., l/l/ilson Area Sch. Dist. v. Skepton, 586 Pa. 513, 520, 895 A.2d 1250, 1254
(2006) (opinion announcing the judgment of the Court) (refusing to apply unjust
enrichment principles when there is an underlying contract). Thus, Highmark suggests
that it defies logic to treat such a provision as a “contract” as required under the
Consent Decree and insists that “something else was needed to fully enforce the
Consent Decrees and realize their objectives." Brief for Highmark at 43.

Lastly, Highmark posits that the court's remedy of mandating full-year coverage
of l\/lA Plan enrollees in 2019 avoids the potential problems associated with Cl\/|S’s
approval of a plan offering only six months of in-network access Highmark observes
that no party offered evidence from Cl\/IS as to whether or on what terms Cl\/lS would
approve a six-month contract like the one UPl\/lC proposes Given this, Highmark
develops that the Commonwealth Court removed uncertainty from the equation by
requiring UPl\/lC to remain for all of 2019 using the Provider Agreements that Cl\/lS had
approved every year since 1999. Highmark opines that this remedy was furtherjustified
by the parties’ longstanding practice of having calendar-year agreements Highmark
contends that, in contrast, UPl\/lC’s six-month runout-contract position injects confusion
and disorder. Accordingly, Highmark urges this Court to affirm the Commonwealth

Court’s order.

[J-34-201s] - 14

OAG’s view largely aligns with that of Highmark in support of the Commonwealth
Court’s decision, particularly regarding the notion that the court’s order avoids the
uncertainty resulting from the midyear loss of UPl\/lC as a provider for Highmark’s l\/lA
P|ans OAG similarly contests the propriety of treating the runout provision as a
contract, observing that the Provider Agreement lists twenty-four obligations of UPl\/lC
as provider, “some of which are beyond the scope of providing services and accepting
payment." Brief for OAG at 14-15. Additionally, although OAG does not defend the
Commonwealth Court’s reliance on the “continue to contract” language of VP-2, it
argues that VP-3 mandates essentially the same conclusion. ln this regard, OAG posits
that the order requiring that UPl\/lC continue to provide in-network coverage until the
end of 2019 reflects the “nature of the contract agreed to by the parties." Brief for O/-\G
at 18. For this reason, it finds the challenged order distinguishable from a contract
extension that may violate the Consent D_ecree’s introductory paragraph

Further, although acknowledging that contracts between insurers and providers
are not required to align with the calendar year, OAG contends that the sophisticated
and experienced parties involved here negotiated for year-to-year agreements rather
than entering into shorter term ones With respect to C|\/lS, the OAG adds to
Highmark’s perspective by observing that Cl\/lS has interpreted its preemption provision,
see 42 U.S.C. §1395w-26(b)(3), as not impacting general state contract principles
developed via case law. See l\/ledicare Program; Establishment of the l\/ledicare
Advantage Program, 69 FED. REG. 46866-01, 46913-14 (Aug. 3, 2004). Thus, OAG
also advocates for affirmance of the Commonwealth Court,

To begin, we reiterate the precepts relevant to this matter as outlined in Kane A
consent decree is a judicially sanctioned contract that is interpreted in accordance with

the principles governing all contracts; our primary objective is ascertaining the intent of

[J-34-201s] - 15

the parties See Kane 634 Pa. at 133-34, 129 A.3d at 463 (citing lnt’l Org. Master,
Mafes & Pi/ofs of Am., 497 Pa. at 108, 439 A.2d at 624-25; Lesko v. Frankford Hos,o.-
Bucks Cnty., 609 Pa. 115, 123, 15 A.3d 337, 342 (2011)). Where the terms of the
contract are unambiguous they are deemed to reflect the intent of the parties See id.
at 134, 129 A.3d at 463 (citing Kripp v. Kr/'pp, 578 Pa. 82, 90, 849 A.2d 1159, 1163
(2004)). Additionally, in determining intent, we are mindful to examine “the entire
contract . . ., taking into consideration the surrounding circumstances the situation of
the parties when the contract was made and the objects they apparently had in view
and the nature of the subject matter.” Lower Frederick Twp. v. Clemmer, 518 Pa. 313,
329, 543 A.2d 502, 510 (1988) (quoting Mather Estate, 410 Pa. 361, 366-67, 189 A.2d
586, 589 (1963)).

However, “in the absence of fraud, accident or mistake [courts have] neither the
power nor the authority to modify or vary the terms set forth.” Universal Bui/ders
Supp/y, /r)c. v. Sha/er Highlands Corp., 405 Pa. 259, 265, 175 A.2d 58, 61 (1961) (citing
Buff/'ngtor) v. Buffr`ngton, 378 Pa. 149, 106 A.2d 229 (1954)). Extrinsic evidence may be
employed to ascertain the meaning of contractual terms only when they are ambiguous
i.e, subject to more than one reasonable interpretation. Murphy v. Duquesne Univ. of
the Holy Ghost, 565 Pa. 571, 591, 777 A.2d 418, 429-30 (2001) (citation omitted).
interpreting the terms of a contract is a question of iaw, thus implicating a de novo
standard of review and a plenary scope of review. McMu//en v. Kutz, 603 Pa. 602, 609,
985 A.2d 769, 773 (2009) (citation omitted).

With these precepts in mind, we turn first to the obligations that the Consent
Decree places on UPl\/lC with regard to treating all Highmark i\/lA Plan subscribers as
“|n-Network.” The parties agree that it is VP-3, rather than VP-2, that is operative with

respect to i\/lA P|ans Accordingly, the Commonwealth Court’s particularized focus on

[J-34-2018] - 16

the “continue to contract” language from VP-2 was in error. Nevertheless, as Highmark
and OAG develop, the obligation outlined by the Commonwealth Court in this matter is
similar to the burden that the Kane Court found applicable to UPl\/lC based on VP-3, i.e,
that VP-3 “obliges UPi\/lC . . . to have a contract with Highmark that establishes
negotiated rates for treatment of those in [i\/|A P|ans] for which Highmark currently has
provider contracts with UPl\/lC.” Kane 634 Pa. at 143, 129 A.3d at 469. Although
UPl\/lC challenged the Commonwealth Court’s reliance on VP-2, it expressly recognizes
that it is bound to provide in-network coverage pursuant to VP-3.

Additionally, the parties appear to generally agree that, with respect to the VP-3
obligation, the Consent Decree does not mandate the renewal of the Provider
Agreements or require any particular contract terms contrary to the Commonwealth
Court’s rationale See Kane 634 Pa. at 144-45, 129 A.3d at 469. There is also no
dispute that the Consent Decree by its terms expires on June 30, 2019.

As to the parties’ divergent views regarding UPi\/|C satisfying its obligation under
the Consent Decree we largely agree with the perspective advocated by UPl\/lC. As
UPi\/iC observes in construing the Consent Decree’s introductory language that it was
not a contract extension and “foreclos[ing] the automatic renewal” of the Provider
Agreements the Kane Court recognized the permissibility of terminating the Provider
Agreements Kane 634 Pa. at 144, 129 A.3d at 469.14 Although Highmark and OAG
do not defend this forced renewal as being required by the Consent Decree they argue
that the Commonwealth Court’s order was an appropriate and reasonable means of
remedying the mismatch between the midyear end date of the Consent Decree and the

calendar year upon which the Provider Agreements had previously been employed and

 

14 lndeed, UPl\/iC’s intended termination of the Provider Agreements as of December
31, 2015, formed a central part of the controversy in Kane See id.

[J-34-201s] - 17

l\/lA P|ans are required to operate Gur primary hesitation with this is approach is that it
alters an unambiguous and material term of the Consent Decree -- the June 30, 2019
end date The Commonwealth Court, along with Highmark and OAG, nonetheless
rationalize this reformation predicated on the belief that a midyear termination would
cause such confusion to l\/lA Plan consumers so as to substantively disrupt the primary
goal of the Consent Decree and/or be precluded altogether by Cl\/lS’s disapproval of l\/lA
P|ans that enjoy UPl\/lC access for only six months

Regarding Cl\/lS, Highmark notes that no party advanced evidence as to how
Cl\/lS may specifically view a l\/lA Plan that only provides six months of access to UPl\/lC
facilities However, as UPl\/lC emphasizes Cl\/lS rules and regulations are expressly
designed to address midyear losses of providers while also providing consumers with
prompt and accurate information to deal with such circumstances.15 Further, Highmark
already has l\/lA P|ans that do not include UPl\/lC as a provider, which suggests that a
six-month-UPl\/lC-inclusive plan could be supplemented in such a manner as to provide
the requisite provider coverage to receive CiViS approval. See supra note 5. Thus,

while there may be a colorable belief that the loss of UPl\/lC as a provider for Highmark

 

15 See e.g., 42 C.F.R. §422.111(e) (mandating notification at least 30-days in advance
of any termination of a provider serving patients on a regular basis); l\/lEDrcARE iViANAGED
CARE l\/lANuAL §110.1.2.1 (Significant Changes to Network--General) (“CMS recognizes
that significant no-cause network changes may occur during the contract year.”);
§110.1.2.2. (Notification to Ci\/iS) (“C|VlS would like to ensure that appropriate
contingency planning is in place prior to an [i\/ledicare Advantage Organization] making
any significant network change.”); id. (requiring i\/lA insurers to provide notice to Cl\/|S of
any significant network change and requiring them to ensure affected enrollees are able
to locate new providers and contract with additional providers if needed); §110.1.2.3
(Notification to Enrollees) (mandating that consumers be informed of provider
terminations with 30-day advance notice); §110.1.2.5 (Significant Network Change
Special Election Period) (permitting enrollees who are substantially affected by a
significant network termination to change l\/ledicare Advantage plans outside the usual
election period).

[J-34-2018] - 18

plans may be disruptive conjecture of this nature is insufficient to alter the
unambiguous termination date of the Consent Decree

Regarding the potential confusion caused by midyear termination, although this
concern may also be described as somewhat speculative given the lack of record
evidence to substantiate it, the submitted documentation with respect to Cl\/lS, including
Cl\/lS’s website as well as the relevant regulations rules and statutes lends some
credence to the notion that the loss of a provider, particularly one the size of UPl\/lC,
may be disruptive However, Cl\/lS’s anticipation of, and well-developed contingencies
for, these instances diminish the proffered potential impacts of chaos and confusion,
even in the case of significant network changes midyear. See, e.g., 42 C.F.R.
§110.1.2.5 (Significant Network Change Special Election Period). l\/ioreover,
Highmark’s MA Plan documents reflect its acknowledgment of the June 2019 cutoff of
UPl\/lC provider obligations and marks efforts by Highmark to apprise enrollees of this
change which appear aimed at reducing any confusion in the first instance See, e.g.,
Highmark 2017 Frequently Asked Questions (“UPl\/lC providers will remain [in-network]
through June 2019.”); HlGHl\/rARk, Know Your Options for Care - Access for Seniors,
http://discoverhighmark.com/employer/provider-search/consent-decree/?region
=westernpa (last visited Oct. 3, 2017) (“Highmark members . . . will have access to most
UPl\/lC providers on an in-network benefit level through June 2019.”).16

Further, as highlighted by OAG, the parties that negotiated and entered into the

Consent Decree are highly sophisticated and experienced in matters pertaining to

 

16 Additionally, there is arguably some concern with the uncertainty that may result from
the Provider Agreements ending on December 30, 2019, leaving l\/lA Plan subscribers
without access to UPl\/iC facilities for only one day, i.e., December 31, 2019. This
situation would be particularly accentuated if enrollees needed to join another lVlA
program for only one day pursuant to a special election period

[J-34-2018] - 19

i\/ledicare. See Brief for OAG at 18-19. This seems to belle the Commonwealth Court’s
view that the parties failed to consider the midyear end date when agreeing to the
Consent Decree’s terms See UPMC, No. 334 l\/l.D. 2014, at 10. Rather, it appears on
this record just as likely that the end date was set midyear to align with the six-month
runout provision of the Provider Agreement, which itself was adopted prior to the
circumstances leading to the Consent Decree. See supra note 6. Thus, we remain
unpersuaded that the combination of the Provider Agreements and the'Consent Decree
created some ambiguity or problem that necessitated a “remedy."

in accord with the above reasoning, we conclude that UPMC’s obligations
pursuant to VP-3 of the Consent Decree requires it to contract to provide in-network
coverage to Highmark’s l\/lA Plan consumers through June 30, 2019, l:urtherl we find
no basis upon which to alter this unambiguous date to which the parties agreed and
correspondingly, no foundation for ordering the renewal of the Provider Agreements for
the entirety of the 2019 calendar year. However, that does not conclude our inquiry, as
there remains unresolved the matter of access to UPl\/lC facilities on an in-network
basis for the first six months of 2019, as required by the Consent Decrees.

As to those first six months we disagree with OAG and Highmark that the runout
clause of the Provider Agreements fails to constitute a contract that satisfies UPl\/lC’s
obligation to remain in-network. |n this regard OAG and Highmark implicitly concede
that the Provider Agreements suffice as a contract, since they advocate in favor of an
extension of those agreements through 2019 in satisfaction of UPl\/lC’s obligation. The
runout provision, which is a term of those contracts provides that UPi\/lC will continue to
be “obligated” by all of the same terms of the Provider Agreements that were applicable
during the annual renewal periods Provider Agreements §16.3 (as amended). Thus, it

seems self-evident that UPi\/lC is in a contract to provide in-network access during the

[J_34~201 81 - 20

first six months of 2019, Stated more directly, there is a presently existing contract (i.e.,
the Provider Agreements), to which the parties have assented and which delineates the
essential terms supported by consideration, that obliges UPl\/lC to provide in-network
access through June 30, 2019. See Shove/ Transfer & Storage, lnc. v. Pa. Liquor
Contro/ Bd., 559 Pa. 56, 62-63, 739 A.2d 133, 136 (1999) (explaining that a contract is
created when there is mutual assent to the essential terms by the parties which they
intend to be binding (citations omitted)). i\/loreover, it appears that if UPl\/lC failed to
fulfill its obligations pursuant to the runout clause a breach-of-contract cause of action
would be cognizable in this sense the “termination” referred to in the runout provision
may be more accurately considered an end to the annual renewal provision of the
Provider Agreements which then triggers a new, one-time six-month contract period
that continues the operative provisions of the contract

Accordingly, we reject Highmark’s claim that “something else" was needed to
constitute a contract Brief for Highmark at 43. Nor do we agree with the attempts to
minimize the import of the runout provision, or divorce it from the Provider Agreements
by characterizing that clause as a mere “term” of the contract Rather, as discussed
above the Provider Agreements in foto, mandate in-network access to UPMC facilities
through the first half of 2019, thus satisfying the substantive requirement of the Consent
Decree that UPi\/iC “treat those participants in Highmark [l\/lA P|ans] as ‘|n-Network.”’
Kane, 634 Pa. at 143, 129 A.3d at 469. Further, OAG’s generalized assertion that the
runout provision differs from the relevant obligations of UPi\/lC in some manner, see
Brief for OAG at 14-15, facially conflicts with the terms of that clausel See Provider
Agreement §16.3 (“[UPl\/lC] shall be obligated to continue to comply with the terms and
conditions of this Agreement and continue to provide services to [Highmark’s] l\/lembers

. . (alteration added)).

[J-34-201sj - 21

in summary, we conclude that the runout provision of the Provider Agreement
satisfies UPl\/iC’s obligation to contract for in-network access to its facilities for

Highmark’s l\/lA Plan subscribers through June 30, 2019. Accordinglyl we reverse the

order of the Commonwealth Court.17

Justices Baer, Todd, Donohue Dougherty and Wecht join the opinion.

Justice l\/lundy did not participate in the consideration or decision ofthis case

 

17 Since we conclude that the current Provider Agreements satisfy UPi\/lC’s obligations
we need not address the effect of UPl\/|C’s attempt to cure As to UPi\/lC’s Cl\/lS-reiated
claims although we disagree with the Commonwealth Court’s analysis with respect to
the impact of midyear terminations as already discussed the disposition of this matter
renders the marketing/advertising issue effectively moot

[J-34-201 81 - 22

