Texas Federal Judge Says Hospital Makes Plausible Claim To Recover Benefits

Mealey's (July 1, 2016, 2:19 PM EDT) -- DALLAS — A Texas federal judge on June 28 granted in part and denied in part United HealthCare Services Inc.’s motion to dismiss claims that it either did not pay or underpaid claims for services provided by a Texas hospital to United subscribers (Texas General Hospital LP, et al. v. United HealthCare Services Inc., et al., No. 3:15-CV-02096, N.D. Texas, Dallas Div.; 2016 U.S. Dist. LEXIS 84082). (Opinion available. Document #54-160713-051Z.) U.S. Judge Barbara M.G. Lynn of the Northern District of Texas ruled that plaintiffs Texas General Hospital LP and Texas General GP LL state a plausible claim for recovery of benefits under ERISA Section 502(a)(1)(B). The plaintiffs operate and manage Texas General Hospital (TGH), a general acute care hospital in Grand Prairie, Texas. TGH is a for-profit hospital and therefore is not eligible for tax exempt status and receives no federal or state subsidies. ‘Out-Of-Network’ Provider About 25 percent of TGH’s patients are privately insured; the remaining 75 percent are either uninsured or covered by Medicare or Medicaid. TGH is an “out-of-network” provider of medical services; as such, it does not have a contract with insurance carriers to accept discounted rates and sets it own fees. Defendants United HealthCare Services and United Healthcare Insurance Co. (collectively, United) provide health care insurance to consumers and also administer health insurance plans offered by companies to their employees. TGH’s patients include those who have subscribed to contracts for health insurance coverage with United, either through employer-sponsored health benefit plans (ERISA plans) or private insurance policies. In many cases, United charges its subscribers higher premiums to include “out-of-network” benefits in their plans. As a condition of providing treatment, TGH requires patients to execute an “Assignment of Benefits” form that is submitted for reimbursement for services TGH has provided to United subscribers. Between Feb. 11, 2012, and June 30, 2015, TGH provided medical services to about 1,969 United subscribers. Before rendering services, TGH received coverage verification and pre-certification that the services to be rendered by TGH were covered by a United policy or United-administered plan. Allegations The plaintiffs allege that the plans require reimbursement of medical expenses incurred by United subscribers using “out-of-network” medical providers or facilities at usual, customary and reasonable rates. For services provided to the 1,969 United subscribers from about Feb. 11, 2012, to June 30, 2015, TGH billed United $139,174,854.54, which the plaintiffs say are usual, customary and reasonable rates for the medical services provided at TGH to those subscribers. The plaintiffs claim that for certain billed services, United paid TGH nothing; for others, United paid substantially less than the amount billed. Often, they say, United failed to provide a written explanation for cases when it did not pay the full amounts billed, or it provided inaccurate reasons for nonpayment or reduction in payment. In other instances, United indicated that additional information was needed to process the claims. The plaintiffs allege that United received all information necessary to process the claims. To date, United has reimbursed TGH $30,089,439.27, a fraction of the total amount billed, the plaintiffs say. Factoring in amounts United contends are the patients’ responsibility under the plans, including co-payments, co-insurance and deductibles, the total payments approved by United are $35,056,562.19, equal to about 25 percent of TGH’s total bill charges, leaving an unpaid balance of at least $104,118,292.35 on the 1,969 claims, the plaintiffs say. They claim the payment amount is dramatically less than the usual, customary and reasonable reimbursement rates required under the plans. Suit Filed On June 19, 2015, the plaintiffs filed a lawsuit against United under ERISA and state law. They later filed a second amended complaint. The complaint is generally based on allegations that United led the plaintiffs to believe that the medical services provided to United subscribers would be covered under the plans, that United wrongfully denied or reduced coverage under the terms of these plans and that United’s calculations of benefits resulted in substantial underpayments to the plaintiffs. The plaintiffs are suing to recover benefits, for breach of fiduciary duty and for failure to provide a full and fair review of adverse benefits determinations and for violations of claims procedure regulations. They also bring state law claims for breach of contract, breach of the duty of good faith and fair dealing and promissory estoppel. They seek damages and injunctive relief. United moved to dismiss all counts of the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) and to dismiss certain claims under Federal Rule of Civil Procedure 12(b)(2), arguing that the court does not have subject matter jurisdiction because the plaintiffs lack standing. Judge Lynn rejected United’s argument that the plaintiffs claims under ERISA Section 502(a)(1)(B) fail because the complaint does not specifically identify the provisions of the ERISA plans that United allegedly breached. ‘Enough Facts’ “Plaintiffs’ allegations contain enough facts about the provisions of the ERISA plans to make their ERISA § 502(a)(1)(B) claims plausible, and to give United adequate notice as to which provisions they allegedly breached,” Judge Linn wrote. Among other things, Judge Linn noted, the plaintiffs alleged that United breached the terms of the plans by refusing to make proper out-of-network reimbursements for charges covered by the plans, that United only paid a fraction of the amount billed for services provided to the 1,969 United subscribers from about Feb. 11, 2012, to June 30, 2015, and that payment of roughly 25 percent of the total bill charges falls far short of the usual, customary and reasonable reimbursement rates required under the plans. “These allegations are sufficient to state a plausible claim for recovery of benefits under ERISA § 502(a)(1)(B),” Judge Linn write. The defendants argued that count one of the complaint, alleging a claim for benefits under ERISA Section 502(a)(1)(B), should be dismissed because United didn’t exhaust all administrative remedies. Judge Linn said the plaintiffs have sufficiently alleged that exhaustion should be excused based on United’s alleged failure to provide meaningful access to administrative remedies. Count 2 Dismissed Judge Linn dismissed count two of the complaint, a claim for breach of fiduciary duty under ERISA Section 502(a)(3), saying the plaintiffs lacked standing because the assignments of benefits to TGH executive by patients, including United subscribers, are ineffective to assign any right to pursue non-benefits ERISA claims, including claims for breach of fiduciary duty. Judge Linn denied United’s motion to dismiss count three of the complaint, denial of full and fair review of adverse benefits determinations, failure to disclose information relevant to appeals and failure to comply with applicable claims procedure regulations, in violation of ERISA Section 503. “Viewing these pleadings in the light most favorable to Plaintiffs, the Court concludes that the allegations are sufficiently broad to defeat Defendants’ motion to dismiss,” Judge Linn wrote. The judge also denied United’s motion to dismiss count four, breach of contract for alleged failure to pay claims for benefits owing under private health care plans, rather than employer-sponsored ERISA plans. Non-ERISA Plans “Plaintiffs allege that the non-ERISA plans are valid and enforceable contracts that provided for reimbursement of medical expenses incurred by United subscribers at ‘usual, customary and reasonable rate,’” Judge Linn wrote. “Plaintiffs further allege that as a result of defendants’ failure to comply with the terms of the non-ERISA plans, Plaintiffs, as assignees, have suffered damages and lost benefits, for which they are entitled to damages from Defendants, including unpaid benefits, restitution, interest, and other contractual damages they sustained. “These allegations adequately identify the contract terms that Plaintiffs allege were breached by Defendants.” Denying United’s motion to dismiss count five, breach of duty of good faith and fair dealing related to the non-ERISA plans, Judge Linn said this claim is inseparable from the breach of contract claim. The plaintiffs conceded that state law claims in counts six and seven, for common law breach of fiduciary duty and quantum meruit, “should be withdrawn,” Judge Linn wrote in dismissing those claims. Promissory Estoppel Viewing all allegations in the complaint as true, Judge Linn concluded that the plaintiffs’ allegations adequately state a promissory estoppel claim under Texas law. “Plaintiffs allege a promise, foreseeability of reliance by TGH, and it reliance on United’s promises, to TGH’s detriment,” the judge wrote. “Accordingly, the Court denies Defendants’ Motion to Dismiss County Eight of the Complaint.” TGH is represented by Edward L. Vishnevetsky and Thomas K. Schroeter of K&L Gates LLP in Dallas and Anthony La Rocco and George Peter Barbatsuly of K&L Gates in Newark, N.J. UHS is represented by Raymond Earl Walker of Figari & Davenport LLP in Dallas and Brian D. Boyle and Meaghan VerGow of O’Melveny & Myers LLP in Washington, D.C. (Additional documents available:  Amended complaint.  Document #54-160713-052C.  UHC amended counterclaim.  Document #54-160713-053C.  Answer to counterclaim.  Document #54-160713-054W.  UHC Motion to dismiss.  Document #54-160713-055M.)...