Opening Brief for Appellant/Cross-Appellee - Appellate.net

of whom were elderly and frail. Marjorie Tomes, Sunrise’s executive director for
the Prospect Park facility, thought that the therapists “did an outstanding job” and
were good for the facility. JA336. Michael Gasiewski, the head Prospect Park
therapist, confirmed that “a close knit family-type environment existed between the
patients and the [CGB] therapists.” 1/12/05 Tr. 100.
In 1998, however, changes to the federal Medicare system altered RHA’s
business dramatically. RHA’s CFO, John West, testified that under the old
regulations, Medicare had simply reimbursed RHA for its costs. Under the new
system, however, the government would “give us a flat rate for a specific type of
service and what they deem [an appropriate] level of care at which point, whatever
we spent on that level of service was our problem or our benefit. *** Based on
our review of the PPS Regulations it appeared there was going to be a tighter
payment schedule for overall nursing services including the therapy component.”
JA340-342; see also JA207-208. RHA believed that CGB’s per-hour pricing
structure was incompatible with the new regulations. Ibid. CGB, however, was
unable or unwilling to modify its business practices or rates in light of the new
regulations. JA210-211. Accordingly, on June 30, 1998, at RHA’s direction
Sunrise notified CGB in writing that RHA had decided to terminate the Pembrooke
and Prospect Park contracts effective September 30, 1998. JA446. The letter
attributed the decision to “changes in the [Medicare reimbursement] system.” Id.
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