State Of Iowa, Department Of Human Services, Ex Rel. Palmer v. Unisys Corporation

Facts

P sued D and a subsidiary corporation named Paramax Systems Corporation for breach of contract and breach of implied warranty. D filed a cross-petition against Heritage National Health Plan and Care Choices, Inc. for contribution, indemnity, and unjust enrichment. Heritage and Care Choices moved for summary judgment. The organization was set up so that instead of paying a separate fee for each medical service rendered by the HMOs, P agreed to pay the HMOs a predetermined monthly fee for each Medicaid recipient enrolled in the HMO in return for providing the recipient any and all medical services needed during the month. This was called the 'capitation rate' and was paid whether or not a recipient actually received medical services during the month. The monthly capitation rate for each enrollee category was specified in an addendum to the contract. A new 'capitation rate' was determined at the beginning of each fiscal year using statistics and data on the actual medical costs of Medicaid recipients who received medical care on a fee-for-service basis during the preceding fiscal year, and was essentially the quotient of the number of months an individual was eligible for Medicaid services and the amount expended during those months on the individual. P was to be the final arbitrator of HMO membership and reserved the right to recover an inappropriate capitation payment. Prior to 1994, P determined the capitation rates used to reimburse HMOs for providing medical services. However, it contracted with D in the fiscal years 1994 and 1995 to assemble the necessary data to make the calculations and determine the capitation rates. During 1994 and 1995, P entered into written contracts with Heritage and other HMOs to provide medical care to Medicaid recipients based on the capitation rates calculated by D. P later determined that D miscalculated the capitation rates used in the contracts. P overpaid the HMOs between $15 million and $17.5 million in 1994 and 1995. Heritage and Care Choices received most of the overpayments. P sought to recover this amount from D based on its mistakes. D filed its cross-petition against Heritage and Care Choices based on the theories of unjust enrichment, indemnity, and contribution. D claimed Heritage and Care Choices were not entitled to retain the alleged overpayments because the fundamental understanding of the contract between the State and the HMOs was that the HMOs would be reimbursed at a fixed rate based upon the actual cost the State had experienced in the previous year, and a mistake in calculating those costs would entitle the State to recover overpayments from the HMOs resulting from the mistake. Heritage submitted evidence that P did not believe Heritage was liable for the overpayments, and that it had no intention of pursuing any action against Heritage. The district court determined unjust enrichment was not available because the claim was governed by a written contract. It also rejected the indemnification and contribution because D had no standing as a nonparty to the contract to assert that the contract between P and the HMOs was a product of a mistake. It found the parties to the contract did not intend to permit P to recover excessive payments to HMOs based on the miscalculation of the capitation rates. D appealed. D dismissed its claims against Care Choices and dismissed its indemnity claim against Heritage. D argues that it has viable claims against Heritage for contribution and unjust enrichment

Issues

Rule of Law

Holding and Decision

Legal Analysis

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