:: How to Enforce Oral Contractual Arrangements For Health Care Provider Reimbursement

Defendants next argue that, even if Sigma Delta was authorized to enter into contracts with Defendants on behalf of Plaintiffs, Plaintiffs’ cause of action fails as a matter of law because Plaintiffs cannot establish the elements required to prove the existence of an oral contract of which the value exceeds $500.

Ctr. for Restorative Breast Surgery, L.L.C. v. Blue Cross Blue Shield of Louisiana, No. CV 11-806, 2016 WL 4208479, at *11 (E.D. La. Aug. 10, 2016)
In this case, the plaintiffs were out-of-network health care providers who provided services to patients covered under the defendants’ plans and policies.  The plaintiffs alleged that they received preauthorization from the defendants.   Among other things, the plaintiffs argued that these agreements constituted enforceable oral contracts.

So,are oral contracts enforceable?  Any first year law student knows the answer.  Of course they are.  But . . .

The practical problem is – how do you prove the terms?
The situation here is not unusual in the context of health care provider reimbursement.  Many times the terms and conditions of payment are reached telephonically – so this issue is important.

Let’s return to the case at bar before discussing the issue further.
The defendants raised a defense based on statute but that goes back to the English common law.

 It is undisputed that the value of the alleged oral contracts exceed $500. Louisiana Civil Code article 1846 requires that, when the plaintiff alleges the existence of an oral contract of which “the price or value is in excess of five hundred dollars, the contract must be proved by at least one witness and other corroborating circumstances.”

For those interested in history, the law dates back to the 1600’s.  The law is generally known as the the “Statute of Frauds” and is based on a 1677 act passed by the English Parliament, originally known as “An Act for the Prevention of Frauds and Perjuries.”

And in this case, this defense was fatal to the plaintiffs’ claims:

Plaintiffs do not offer any evidence from another source to establish corroborating circumstances of the alleged contract. “[W]ithout the necessary corroborating evidence, a claimant’s testimony, standing alone, is insufficient to prove the existence or amendment of an oral contract.” Defendants’ motion for summary judgment on Plaintiffs’ state-law cause of action for breach of contract in Count VI is granted.

So are oral contracts of any value at all?  It would seem not.  But that would be a premature judgment.

In fact many exceptions can be found to the statute of frauds.  Given the frequency of this issue in provider reimbursement cases, these are exceptions worth exploring.
Exceptions include contracts that can be performed within one year, contracts which are partially performed, and equitable estoppel.   (e.g., see, http://www.vsb.org/docs/conferences/young-lawyers/dc_spr2013.pdf).  And see, 2 Wm. & Mary Bus. L. Rev. 73 (2011).

Note – An example of a successful pleading and proof of an oral contract may be found in Queen’s Med. Ctr. v. Kaiser Found. Health Plan, Inc., 948 F. Supp. 2d 1131, 1144 (D. Haw. 2013):

Plaintiff sufficiently pleads an oral contract based on the following allegations: (1) the offer – Plaintiff offered to continue to provide healthcare services in exchange for Kaiser’s agreement to reimburse Plaintiff for 100% of the billed charges (Compl. at 18 ¶ 58), (2) acceptance – Kaiser acknowledged that it would need to pay 100% of the billed charges for services provided by Plaintiff (Compl. at 7, ¶¶ 15, 18, 19), and (3) consideration – Plaintiff would provide services in exchange for Kaiser’s payment (Compl. at 7, ¶ 15).