Excerpt (§§ 87:1, 87:27 to 87:31) reprinted with permission from Haig, Business and Commercial
Litigation in Federal Courts, Fourth Edition §§ 87:1 et seq. © 2016 American Bar Association
For more information about this publication, please visit http://legalsolutions.thomsonreuters.com/.

Chapter 87
Health Care Institutions
by Thomas E. Birsic and Mary Beth F. Johnston*I.

INTRODUCTION§ 87:1

II.

Scope note

FEDERAL ADMINISTRATIVE LITIGATIONA.

§ 87:2§ 87:3§ 87:4§ 87:5§ 87:6§ 87:7§ 87:8§ 87:9§ 87:10B.
§ 87:11§ 87:12§ 87:13§ 87:14§ 87:15§ 87:16§ 87:17

LITIGATION BEFORE THE DEPARTMENT OFHEALTH AND HUMAN SERVICESDEPARTMENTAL APPEALS BOARD
Overview
Medicare certiﬁcation and conditions of participation
litigation—ALJ review—DAB review—District court review
Provider enrollment and termination litigation—CMS and ALJ review—DAB review—District court review

RECOVERY AUDIT CONTRACTOR (RAC)ADMINISTRATIVE APPEALS AND LITIGATION
Overview
The Medicare administrative contractor review
Qualiﬁed independent contractor review
Hearing before an ALJ—Prerequisites to ALJ review—The notice of hearing—Hearing participation by CMS or its contractors*The authors wish to thank Lauren Garraux for her hard work and significant contributions to this chapter. The authors also wish to extend their
gratitude to their colleagues at K&L Gates LLP for their important contributions and whose experience and expertise in this area made this chapter a reality.
691

BUSINESS AND COMMERCIAL LITIGATION 4TH§ 87:18§ 87:19§ 87:20§ 87:21§ 87:22—Availability of discovery—Hearing procedure—ALJ decision and the escalation option
DAB review
Judicial review

C.

RATE-SETTING AND OTHERREIMBURSEMENT LITIGATION§ 87:23§ 87:24§ 87:25§ 87:26III.

FEDERAL BUSINESS LITIGATIONA.

§ 87:27§ 87:28§ 87:29§ 87:30§ 87:31§ 87:32§ 87:33§ 87:34§ 87:35§ 87:36§ 87:37§ 87:38§ 87:39§ 87:40§ 87:41§ 87:42§ 87:43§ 87:44§ 87:45§ 87:46§ 87:47§ 87:48§ 87:49§ 87:50

B.
§ 87:51
692

Overview
Institutional reimbursement appeals
Medicare Part A and B reimbursement appeals—Judicial review

MANAGED CARE AND PAYOR-PROVIDER
LITIGATION
Overview
Distinction between in-network and out-of-network
providersPreliminary procedural considerations—Preemption— —Complete preemption— —Express preemption—Provider standing and assignments of beneﬁts— —Validity of assignments— —Anti-assignment clauses—Exhaustion of plan remedies—Pleading speciﬁcity
Potential claims—Provider ERISA claims— —Beneﬁts due under a plan
— —Breach of ﬁduciary duty
— —Full and fair review— —Failure to provide requested information— —“Catch-all” claims—Provider state law claims—Payor claims— —ERISA claims— —State law claims— —Payor RICO claims
Other managed care litigation

EMTALA LITIGATION
Overview

HEALTH CARE INSTITUTIONS§ 87:52§ 87:53§ 87:54§ 87:55§ 87:56§ 87:57§ 87:58

Government enforcement
Private enforcement
Elements of an EMTALA claim—Proof that plaintiff “came to the emergency
department”—Failure to perform an appropriate screening—Failure to stabilize
Discovery in an EMTALA caseC.

MEDICAL STAFF AND PEER REVIEWLITIGATION§ 87:59§ 87:60

Overview
Discoverability of peer review materials in federal
court litigationD.
§ 87:61§ 87:62§ 87:63§ 87:64§ 87:65E.
§ 87:66§ 87:67§ 87:68F.
§ 87:69§ 87:70§ 87:71§ 87:72§ 87:73§ 87:74§ 87:75§ 87:76§ 87:77

PRIVATE ANTITRUST LITIGATION
Overview
Price ﬁxing
Group boycotts
Monopolization
Challenges to mergers and acquisitions

SPECIAL ISSUES IN BANKRUPTCY CASES
Overview
Medicare and Medicaid provider agreements as
executory contracts
Setoff and recoupment of pre-petition overpayments

PRIVACY, HIPAA AND DATA SECURITY
BREACH LITIGATION
Overview
Matrix of federal and state privacy laws and ethicalobligations
Form of patient information
Choice of law
Federal preemption of state privacy laws
Using and disclosing patient information prior toinitiation of judicial proceedings
Using and disclosing patient information subsequent
to initiation of judicial proceedings under federal
law
Special circumstances for substance abuse treatment
information
Special circumstances for psychotherapy notes andother conﬁdential communications
693

BUSINESS AND COMMERCIAL LITIGATION 4TH§ 87:78

IV.

Special circumstances under state laws

GOVERNMENT ENFORCEMENT LITIGATIONA.

§ 87:79§ 87:80§ 87:81§ 87:82

FRAUD-RELATED LITIGATION§ 87:93

Overview
The False Claims Act—Pleading fraud with speciﬁcity—The public disclosure bar and original source
requirement—Types of claims— —False certiﬁcation— —Worthless services— —Reverse claims—State false claims statutes
The Physician Self-Referral Law or Stark Law—Key issues in Stark Law compliance litigation—Strategies to avoid or reduce Stark Law liability
The Medicare Anti-Kickback Statute—Strategies to avoid or reduce Anti-Kickback Statuteliability
The HHS-OIG self-disclosure protocol

B.

GOVERNMENT ANTITRUST LITIGATION§ 87:83§ 87:84§ 87:85§ 87:86§ 87:87§ 87:88§ 87:89§ 87:90§ 87:91§ 87:92§ 87:94§ 87:95§ 87:96§ 87:97§ 87:98

Overview
Mergers and acquisitions
Monopolization by providers
Cooperation between competitors
Group boycott

KeyCiteL: Cases and other legal materials listed in KeyCite Scope can beresearched through the KeyCite service on WestlawL. Use KeyCite to checkcitations for form, parallel references, prior and later history, and comprehensive citator information, including citations to other decisions and secondary
materials.

I.

INTRODUCTION§ 87:1

Scope noteThis chapter discusses federal court litigation relating to healthcare institutions and providers of health care services, whether
academic medical centers, health systems, physicians, physiciangroups or other facilities (collectively referred to in this chapter
as “providers” unless otherwise indicated). Litigation involving
providers generally falls into three distinct groupings: (i) federal
694

HEALTH CARE INSTITUTIONS§ 87:1administrative litigation; (ii) federal business litigation; and (iii)
government enforcement litigation. This chapter is organizedaccordingly.
Federal administrative litigation
Sections 87:2 to 87:26 of this chapter discuss federal administrative litigation involving providers and address three areasthat frequently draw providers into the administrative litigation
process and may result in judicial review by a federal court. While
the authors acknowledge that the focus of this treatise is federal
court litigation, the areas addressed in Sections 87:2 to 87:26 ofthis chapter each detail the administrative process preceding
federal court review for two reasons. First, navigating theadministrative process is a necessary prerequisite to seeking
judicial review in federal court and one which a provider mustpursue before commencing federal court litigation. Second, federal
court review of administrative decisions is limited and, therefore,
the administrative process is the means by which providers may
create and shape the record and identify the issues which thefederal court ultimately will review. Thus, the importance ofunderstanding the administrative process, and how to navigate
it, cannot be overstated.
In terms of substantive areas, Sections 87:2 to 87:10 of thischapter focus on administrative litigation before the U.S. Department of Health & Human Services Departmental Appeals Board(DAB) relating to provider certiﬁcation or participation1 in the
Medicare program and provider enrollment and termination litigation2 relating to the Medicare and Medicaid programs. Both areas can have far-reaching and signiﬁcant ﬁnancial implications
for providers, given that those programs, together, are generally
the largest payors of health care services for any provider.
In Sections 87:11 to 87:22 of this chapter, we explore Recovery
Audit Contractor (RAC) administrative appeals and litigation,
including: (i) the administrative process for appealing from an
unfavorable RAC audit determination;3 (ii) the current state of
the backlog at the administrative law judge (ALJ) level of appeals;4 (iii) the escalation process for avoiding delays at the Qualiﬁed Independent Contractor (QIC), ALJ or DAB levels;5 and (iv)
[Section 87:1]
1

See §§ 87:3 to 87:6.
See §§ 87:7 to 87:10.
3
See § 87:12.
4
Sec. § 87:14.
5
See § 87:20.
2695

§ 87:1

BUSINESS AND COMMERCIAL LITIGATION 4TH

the law governing federal court review of such decisions.6
Finally, Sections 87:23 to 87:26 of this chapter address ratesetting and other reimbursement litigation at an administrative
level, such as litigation arising from Medicaid State Plan Amendments or the assumptions or calculations included in regularly
promulgated fee schedules or other rate-setting methodologies by
the Centers of Medicare and Medicaid Services for Medicare
reimbursement. Disputes in this area run a wide and diverse
gamut and may include cost report appeals and decisions on allowable costs, Medicare and Medicaid coverage determinations,and claim denials for particular beneﬁciary services.
Federal business litigation
Sections 87:27 to 87:78 of this chapter address federal businesslitigation involving providers. In Sections 87:27 to 87:50, we address perhaps the most frequently litigated area of business litigation involving providers at present: payor-provider and managed care litigation. Section 87:28 begins with a brief discussionof the distinction between in-network and out-of-network providers and how that distinction can affect the types of claims suchproviders may assert as a plaintiff or face as a defendant. This
portion of this chapter continues with a discussion of frequently
litigated issues—namely, preemption,7 provider standing,8 andexhaustion of payor appeals processes.9 Sections 87:38 to 87:49
then move to address speciﬁc causes of action available to providers as well as claims that may be asserted against providers.
Finally, Section 87:50 discusses litigation arising from governmental sequestration as applied to Medicare payments, an issue
which may be litigated in federal court depending on the terms of
the relevant contract between the provider and payor.
Sections 87:51 to 87:58 discuss litigation relating to the Emergency Medical Treatment and Active Labor Act (EMTALA), a
federal statute intended to prevent hospitals from “patient dumping” high-risk or indigent patients by refusing to provide themwith emergency medical care or inappropriately transferring
them to another facility in an unstable condition. To this end,
Section 87:51 summarizes the requirements which EMTALA
imposes on all Medicare-participating hospitals, Sections 87:52 to
87:58 address litigation alleging EMTALA violations, and offers
practical guidance for handling such cases.
Sections 87:59 to 87:60 of this chapter focus on medical staff
6

See § 87:22.
See §§ 87:30 to 87:32.
8
See §§ 87:33 to 87:35.
9
See § 87:36.
7696

HEALTH CARE INSTITUTIONS§ 87:1and peer review litigation. The Health Care Quality Improvement Act (HCQIA) mandates that providers with organized medical staffs afford certain due process and fair hearing rights for
professional review actions that may relate to a practitioner’s
clinical competence or professional conduct. As a result, decisions
to grant, curtail or revoke medical staff privileges or to takeother types of corrective actions are subject to intense legal challenge and may give rise to constitutional, discrimination,
antitrust, and contract claims, among others. Sections 87:59 to
87:60 provide a case law analysis of the most common litigation
pitfalls and tactics to avoid them.
The focus of Sections 87:61 to 87:65 is private antitrust litigation involving providers. These Sections include a discussion of
the range of contexts in which private antitrust litigation has
arisen, including class action lawsuits against providers—namely,
health systems—seeking damages for consummated mergers.10
These Sections also cover conspiracy and monopolization claims
alleged between providers and payors for a variety of price-ﬁxing
conspiracies and refusals to deal, both unilateral andmultilateral.11
Sections 87:66 to 87:68 follow with a discussion of two uniquehealth care issues in bankruptcy cases involving providers: (i) thetreatment of Medicare and Medicaid provider agreements as executory contracts;12 and (ii) the ability of the government, as acreditor of a provider which has ﬁled for bankruptcy protection,
to assert setoff or recoupment rights with respect to alleged
Medicare and Medicaid overpayments made prior to the bankruptcy ﬁling.13
Finally, Sections 87:69 to 87:78 of this chapter address issues
affecting providers when information about their patients may be
relevant to proceedings in commercial litigation. In particular,
those Sections discuss the procedural prerequisites to any use or
disclosure of patient information, up to and potentially including
the health care provider’s obligation to seek a protective order forsensitive patient information. Those Sections also explain how
obligations may differ depending on whether the health careprovider is a party to the underlying commercial litigation or
merely a source of discovery.
Government Enforcement Litigation
Sections 87:79 to 87:98 of this chapter focus on government10

See § 87:65.
See §§ 87:62 to 87:64.
12
See § 87:67.
13
See § 87:68.
11697

§ 87:1

BUSINESS AND COMMERCIAL LITIGATION 4TH

enforcement litigation involving providers. In Section 87:79, we
present an overview of heightened government enforcement efforts in recent years to address fraud, waste, and abuse in healthcare, including the creation of the Health Care Fraud Prevention
and Enforcement Action Team (HEAT) and the substantial recoveries obtained under the federal government’s three principal
tools for health care fraud prevention and enforcement: (i) the
False Claims Act (FCA);14 (ii) the Stark Law;15 and (iii) the AntiKickback Statute (AKS).16
In Sections 87:80 to 87:87, for example, we discuss FCA actions
against providers, with reference to the treatment of FCA litigation generally, addressing the types of conduct on which FCA
claims against health care institutions have traditionally been
based, signiﬁcant case law speciﬁc to the health care area, andpractical considerations and litigation strategies unique to healthcare institutions.
Sections 87:88 to 87:93 turn to the Stark Law17 and the AKS,18
and provide an overview of the elements, penalties and exceptions under those statues, a summary of signiﬁcant case law
interpreting recent amendments to and accompanying regulations of both laws, and a discussion of the Self-Disclosure Protocols,19 designed to allow entities to self-report under the Stark
Law and the AKS, as well as the beneﬁts and risks associatedwith self-disclosure in the context of developing a comprehensive
litigation strategy.
Sections 87:94 to 87:98 conclude with a discussion of the various governmental antitrust challenges to health care providers
and payors. Buoyed by a string of victories in federal court, theFederal Trade Commission (FTC) and State Attorneys General
have grown increasingly aggressive in challenges under Section 7of the Clayton Act to combinations between hospitals.20 The
Department of Justice has continued to press monopolization
claims21 against both hospitals and private payors for efforts toleverage local market power to secure more favorable reimbursement rates or most-favored-nations status, while FTC continues
to closely scrutinize efforts by physician groups to combine. In amarket increasingly driven by the Affordable Care Act’s mandate
14

See §§ 87:80 to 87:87.
See §§ 87:88 to 87:90.
16
See §§ 87:91 to 87:93.
17
See §§ 87:88 to 87:90.
18
See §§ 87:91 to 87:93.
19
See §§ 87:90, 87:92.
20
See § 87:95.
21
See § 87:96.
15

698

HEALTH CARE INSTITUTIONS§ 87:2

to lower overall costs through capitation and other risk-sharing
mechanisms, health care providers, payors and the antitrust
authorities are seeking a balance between achieving cost savingsand the mandates of the antitrust laws. In addition, the FTC
continues to push back on what it views as expansions of thestate action doctrine, which immunizes many actions undertaken
by or overseen by state governments, and it has aggressively andsuccessfully campaigned to halt the use of reverse-payment patent litigation settlements (so-called “pay for delay”) between
pharmaceutical brand owners and generics.
One ﬁnal note regarding this chapter is worth mentioning.
Speciﬁcally, this chapter is not intended to be, nor is it, acomprehensive treatise on health care litigation in federal courts.
Rather, the authors wrote this chapter to give the practitioner an
introduction to this area and to highlight salient issues anddevelopments. In this regard, the chapter should be a starting
point for guidance in this area, but should not be the only place
one looks.

II

FEDERAL ADMINISTRATIVE LITIGATIONA.

§ 87:2

LITIGATION BEFORE THE DEPARTMENT OFHEALTH AND HUMAN SERVICESDEPARTMENTAL APPEALS BOARD
Overview

Providers are frequently drawn into administrative litigation1
before the Department of Health and Human Services (HHS)
Departmental Appeals Board (DAB), an entity which provides“impartial, independent review of disputed decisions in a wide
range of [HHS] programs under more than 60 statutory
provisions.”2 The DAB’s jurisdiction covers disputes involving
Medicare, Medicaid and other large public assistance grant
programs and discretionary federal grant programs, as well as
enforcement cases brought by the Centers for Medicare andMedicaid Services (CMS).3 Although the DAB’s decisions are
subject to federal court review, the federal district court applies adeferential review standard and generally does not allow the[Section 87:2]
1

See generally Chapter 139 “Administrative Agencies” (§§ 139:1 et seq.)
for discussion of administrative agency adjudication and federal court review of
those determinations.
2
U.S. Dep’t of Health & Human Servs., About DAB, available at http://www.hhs.gov/dab/about/index.html.
3
U.S. Dep’t of Health & Human Servs., About DAB, available at http://www.hhs.gov/dab/about/index.html.
699

§ 87:26

BUSINESS AND COMMERCIAL LITIGATION 4TH

more than $1,000.3
Venue is proper in the district court for the judicial district “inwhich the party resides or where such individual, institution, or
agency has its principal place of business” or the United States
District Court of the District of Columbia if the party does notreside within any judicial district, or if the individual, institution
or agency does not have its principal place of business within any
such judicial district.4
The regulations also set forth rules relating to timing for theﬁling of a civil action and permit the appellant to request an
extension of time to ﬁle such an action, provided that such request
meets certain criteria.5
Under the regulations, a court may not review a regulation or
instruction that relates to a method of payment under Medicare
Part B if the regulation was published, or the instructions issued,
before January 1, 1991.6 The regulations set forth a standard ofreview to be applied by the district courts which does not permit
review or reversal of ﬁndings of fact supported by substantial evidence, which are deemed to be conclusive.7 Finally, when the
Secretary’s decision is adverse to a party due to a party’s failure
to submit proof in conformity with a regulation prescribed under
Section 205(a) pertaining to the type of proof a party must offer
to establish entitlement to payment, the court will review only
whether the proof conﬁrms with the regulation and the validityof the regulation.8
III.

FEDERAL BUSINESS LITIGATIONA.

§ 87:27

MANAGED CARE AND PAYOR-PROVIDER
LITIGATION
Overview

Federal court litigation involving providers and commercial
payors, namely, insurance companies, has become increasingly
common in recent years. Litigation of this type frequently arises
as a result of insurer reimbursement, or failure to reimburse(whether in whole or in part), for services that a provider has
rendered to a group health insurance plan member, provider billing practices and Medicare payment reductions due to federal
342 C.F.R. § 405.1006(c)(1).
42 C.F.R. § 405.1136(b)(1) to (2).
542 C.F.R. § 405.1136(c); see also 42 C.F.R. §§ 405.1130, 1132, 1134.
642 C.F.R. § 405.1136(e).
742 C.F.R. § 405.1136(f)(1).
842 C.F.R. § 405.1136(f)(2).
4

724

HEALTH CARE INSTITUTIONS§ 87:28

sequestration.
Provider claims relating to insurer reimbursement can begrouped into three broad categories: (i) “rate of payment” claims,
which generally relate to the computation of payments made pursuant to a contract between the provider and insurer or the correct execution of such payment; (ii) “right to payment” claims,
which implicate coverage and beneﬁts established by the terms ofa plan without regard to a provider agreement; and (iii) “hybrid
claims,” which challenge both the rate of and the right topayment.1§ 87:28

Distinction between in-network and out-ofnetwork providers
A threshold consideration with respect to reimbursement
claims, from a provider perspective, is whether the provider is“in-network”?that is, has contracted with the insurer to provide
services to members (insured patients) at pre-negotiated rates as
set by contract—or “out-of-network”—that is, has not contractedwith the insurer and, therefore, is not contractually guaranteed
payment for services provided to members.
A provider’s in- or out-of-network status may impact the typesof claims that the provider may bring, the court in which theprovider may bring them, and the body of law which will apply tothose claims. For example, an in-network provider may look tocontract law as a basis for actions challenging an insurer’s failure to reimburse the provider because the provider’s relationshipwith the insurer and its rights and obligations are governed anddeﬁned by the provider agreement.1 Depending on the citizenshipof the parties and the amount in controversy, such a claim could
be brought in state or federal court in the ﬁrst instance, or, if
brought in state court, removed by the defendant-insurer.2
For years, out-of-network providers have also looked to statelaw (both common law and statutes) to challenge insurer conduct
with respect to services rendered to health insurance plan
[Section 87:27]
1Monteﬁore Medical Center v. Teamsters Local 272, 642 F.3d 321, 325, 50
Employee Beneﬁts Cas. (BNA) 2496 (2d Cir. 2011); Borrero v. United Healthcareof New York, Inc., 610 F.3d 1296, 1302, 49 Employee Beneﬁts Cas. (BNA) 1642
(11th Cir. 2010); Merrick v. UnitedHealth Group Inc., 127 F. Supp. 3d 138, 148(S.D. N.Y. 2015).

[Section 87:28]
1

CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 177-78, 58 Employee
Beneﬁts Cas. (BNA) 1001 (3d Cir. 2014).
2
See generally Chapter 1 “Subject Matter Jurisdiction” (§§ 1:1 et seq.) and
Chapter 12 “Removal to Federal Court” (§§ 12:1 et seq.).
725

§ 87:28

BUSINESS AND COMMERCIAL LITIGATION 4TH

members. In recent years, however, courts increasingly have heldthat such suits are preempted by, and must be brought under,
the Employee Retirement Income Security Act of 1974 (ERISA), a
federal statute which was enacted primarily to address publicconcerns of mismanagement and abuse relating to private pension plans, but which also regulates other employee beneﬁts
plans, including employer-sponsored health plans.3 As a result of
this growing body of caselaw, providers should consider ERISA
as a potential vehicle to seek reimbursement from or challenge
reimbursement decisions by insurers. Likewise, insurers facedwith a claim relating to provider reimbursement should consider
whether such a claim is preempted by ERISA.
§ 87:29

Preliminary procedural considerations

Four procedural issues are commonly litigated in connection
with provider reimbursement claims under the Employee Retirement Income Security Act of 1974 (ERISA):1 (i) preemption;2 (ii)provider standing;3 (iii) exhaustion of plan remedies or appeals
processes; 4 and (iv) pleading speciﬁcity. 5 These issues are
frequently raised by defendant-insurers in the context of removal
petitions and/or motions to remand and motions to dismiss and,
therefore, can either short-circuit a plaintiff-provider’s lawsuit
early on or result in protracted and expensive motions practice,delaying adjudication on the merits. As a result and due to theirimportance, we have placed our discussion of these issues at the
beginning of our discussion of provider reimbursement claims, as
they should be considered by practitioners representing providers
before suit is ﬁled. At the same time, practitioners representing
insurers should consider whether these issues can be raised as
afﬁrmative defenses to complaints ﬁled by providers seeking
reimbursement for services rendered.
§ 87:30

Preliminary procedural considerations—
Preemption

Preemption affects the types of claims which a provider may
assert against an insurer, as well as the claims or counterclaims
which an insurer may assert against a provider. Therefore,3

See generally Chapter 106 “ERISA” (§§ 106:1 et seq.).

[Section 87:29]
1

See generally Chapter 106 “ERISA” (§§ 106:1 et seq.).
See §§ 87:30 to 87:32.
3
See §§ 87:33 to 87:35.
4
See § 87:36.
5
See § 87:37.
2

726

HEALTH CARE INSTITUTIONS§ 87:31

whether state common law and statutory claims are preemptedby the Employee Retirement Income Security Act of 1974
(ERISA)1 is a frequently litigated issue among providers andinsurers in connection with reimbursement claims.2
There are two primary forms of ERISA preemption — “complete” preemption3 and “express” preemption.4 Complete preemption occurs when a claim ostensibly arising under state law isrecast as a federal claim because it seeks to recover beneﬁts orenforce rights under an ERISA-covered plan and, therefore, isdeemed to fall within the scope of the civil enforcement provisionof Section 502(a) of ERISA.5 Express preemption, also known as“defensive preemption” or “conﬂict preemption,” arises under Section 514(a) of ERISA, which generally preempts any state lawthat “relate[s] to any employee beneﬁt plan.”6 Both preemption
concepts should be considered because they have the potential toaffect a provider’s choice of forum and choice of remedies.
§ 87:31

Preliminary procedural considerations—
Preemption—Complete preemption
The complete preemption analysis as applied to provider
reimbursement claims bears mention. Speciﬁcally, under the
U.S. Supreme Court’s decision in Metropolitan Life Insurance Co.
v. Taylor, a state law claim is completely preempted if it falls
within the scope of Section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 (ERISA),1 which authorizes aparticipant or beneﬁciary to bring a civil action to “recover
beneﬁts due to him under the terms of his plan, to enforce hisrights under the terms of the plan, or to clarify his rights tofuture beneﬁts under the terms of the plan.”2 Where a state law
complaint brought in state court is subject to complete preemp[Section 87:30]
1

See generally Chapter 106 “ERISA” (§§ 106:1 et seq.).
See Chapter 106 “ERISA” (§§ 106:1 et seq.) for discussion of ERISA
preemption. See Chapter 1 “Subject Matter Jurisdiction” (§§ 1:1 et seq.) for
discussion of preemption generally.
3
See § 87:31.
4
See § 87:32.
5
29 U.S.C.A. § 1132(a).
6
29 U.S.C.A. § 1144(a).
2[Section 87:31]
1

See generally Chapter 106 “ERISA” (§§ 106:1 et seq.).
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 60 n.1, 107 S. Ct. 1542,
95 L. Ed. 2d 55, 8 Employee Beneﬁts Cas. (BNA) 1417 (1987); see also Borrero,
610 F.3d at 1301 (Section 502(a) “deﬁnitively converts an ordinary state common law complaint into one stating a federal claim for purposes of the well2727

§ 87:31

BUSINESS AND COMMERCIAL LITIGATION 4TH

tion, it provides a basis for federal question jurisdiction and may
be removed to federal court.3
The two-part Davila test determines whether a claim falls
within the scope of Section 502(a) and, therefore, is completely
preempted by ERISA. The Davila test requires two inquiries: (i)whether the plaintiff could have brought its claim under § 502(a);and (ii) whether no other legal duty supports the plaintiff’s claim.4
Both prongs must be satisﬁed for complete preemption to exist.5
With respect to the ﬁrst Davila prong, courts have held that
two requirements must be met: (i) the plaintiff’s claim must fallwithin the scope of ERISA; and (ii) the plaintiff must have standing to sue under ERISA.6 Courts have generally held that a “rateof payment” claim does not necessarily implicate an ERISA plan
pleaded complaint rule”). Additionally, “ERISA creates a comprehensive civil
enforcement scheme that completely preempts any state-law cause of actionthat duplicates, supplements, or supplants an ERISA remedy.” Monteﬁore Med.
Ctr., 642 F.3d at 327 (internal quotation omitted).
3
See Chapter 1 “Subject Matter Jurisdiction” (§§ 1:1 et seq.) for discussionof federal question jurisdiction. See also Aetna Health Inc. v. Davila, 542 U.S.
200, 204, 124 S. Ct. 2488, 159 L. Ed. 2d 312, 32 Employee Beneﬁts Cas. (BNA)
2569 (2004).
4
Davila, 542 U.S. at 210; Connecticut State Dental Ass’n v. Anthem HealthPlans, Inc., 591 F.3d 1337, 1345, 48 Employee Beneﬁts Cas. (BNA) 1674 (11thCir. 2009). See also Gardner v. Heartland Indus. Partners, LP, 715 F.3d 609,
613, 55 Employee Beneﬁts Cas. (BNA) 2018 (6th Cir. 2013); Treasurer, Trusteesof Drury Industries, Inc. Health Care Plan and Trust v. Goding, 692 F.3d 888,
897, 54 Employee Beneﬁts Cas. (BNA) 1064, 83 Fed. R. Serv. 3d 743 (8th Cir.
2012); Monteﬁore Med. Ctr., 642 F.3d at 328; Hansen v. Harper Excavating,Inc., 641 F.3d 1216, 1221-23, 51 Employee Beneﬁts Cas. (BNA) 1449 (10th Cir.
2011); Borrero, 610 F.3d at 1301; Lone Star OB/GYN Associates v. Aetna HealthInc., 579 F.3d 525, 530, 47 Employee Beneﬁts Cas. (BNA) 2090 (5th Cir. 2009);
Marin General Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 946, 47
Employee Beneﬁts Cas. (BNA) 2310 (9th Cir. 2009); Negron-Fuentes v. UPS
Supply Chain Solutions, 532 F.3d 1, 7, 44 Employee Beneﬁts Cas. (BNA) 1848
(1st Cir. 2008) (analyzing whether the plaintiff’s claims are “in substance
duplicated or supplanted by the ERISA cause of action . . . or instead whether
all are directed at violation of a legal duty . . . independent of ERISA or theplan terms”); Franciscan Skemp Healthcare, Inc. v. Central States Joint Bd.
Health and Welfare Trust Fund, 538 F.3d 594, 597, 44 Employee Beneﬁts Cas.
(BNA) 1609 (7th Cir. 2008); Pascack Valley Hosp. v. Local 464A UFCW Welfare
Reimbursement Plan, 388 F.3d 393, 400, 33 Employee Beneﬁts Cas. (BNA)
2575, 65 Fed. R. Evid. Serv. 859 (3d Cir. 2004), as amended, (Dec. 23, 2004).
5
Gonzalez v. Wells Fargo Bank, N.A., 28 A.D. Cas. (BNA) 1602, 57
Employee Beneﬁts Cas. (BNA) 1085, 21 Wage & Hour Cas. 2d (BNA) 535, 2013
WL 5435789, at *10 (S.D. Fla. 2013).
6
Conn. State Dental, 591 F.3d at 1350; see related discussion regarding
standing to bring suit under ERISA in §§ 87:31 to 87:33 and Chapter 106“ERISA” (§§ 106:1 et seq.).

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HEALTH CARE INSTITUTIONS§ 87:31

and, therefore, would not fall within the scope of ERISA.7 On theother hand, courts have held that a “right to payment” claim does
implicate an ERISA plan and, as such, would fall within ERISA’s
scope.8 Finally, courts have held that hybrid claims that challenge both the right to payment and rate of payment fall within
the scope of ERISA.9 As an example, if the payor only paid theprovider half of the amount due for a surgical procedure, thatwould be a “rate of payment claim”; by contrast, if the payor
denied that the provider has any right to reimbursement at all,that would be a “right to payment” claim.
With respect to the second Davila prong, a court must
determine whether the provider is suing the insurer based on an
independent legal duty that is separate from the ERISA plan.10“If a party is suing under obligations created by the plan itself,
instead of under obligations independent of the plan and the plan
member, the alleged obligations implicate legal duties which are
not entirely independent of ERISA, and thus are subject tocomplete preemption.”11 Thus, determination of beneﬁts under
the plan, including what is “medically necessary” or a “Covered
Service,” and whether there is coverage for the full amount of aprovider’s submitted charges, has been held to fall within
ERISA.12
7
Borrero, 610 F.3d at 1302; Conn. State Dental, 591 F.3d at 1350; Omnibus
Order, Jacobs v. Highmark Health, 1:14-cv-24725-UU at *5 (S.D. Fla. Mar. 12,2015); Innova Hosp. San Antonio, L.P. v. Humana Ins. Co., 25 F. Supp. 3d 951,
963-64 (W.D. Tex. 2014). See § 87:27 for discussion of rate of payment claims.
8
Borrero, 610 F.3d at 1302; Conn. State Dental, 591 F.3d at 1350; Omnibus
Order, Jacobs v. Highmark Health, 1:14-cv-24725-UU at *5 (S.D. Fla. Mar. 12,2015); Innova Hosp. San Antonio, L.P. v. Humana Ins. Co., 25 F. Supp. 3d 951,
963-64 (W.D. Tex. 2014). See § 87:27 for discussion of right of payment claims.
9Conn. State Dental, 591 F.3d at 1351. See § 87:27 for discussion of hybrid
claims.
10
Omnibus Order, 1:14-cv-24725-UU, at *5.
11
Gables Ins. Recovery v. United Healthcare Ins. Co., 39 F. Supp. 3d 1377,
1388 (S.D. Fla. 2013) (internal quotations and citations omitted) (“If the right topayment derives from the ERISA beneﬁt plan as opposed to another independent obligation, the resolution of a right to payment dispute requires an interpretation of the plan . . .. Thus, any determination of beneﬁts under the termsof an ERISA plan, even regarding a seeming independent breach of oral or
implied contract based on veriﬁcation of those beneﬁts, falls under ERISA andis a legal duty dependent on, not independent of, the ERISA plan.”); see alsoMonteﬁore Med. Ctr., 642 F.3d at 332; South Broward Hosp. Dist. v. Coventry
Health and Life Ins. Co., 2014 WL 6387264, at *7 (S.D. Fla. 2014).
12
Lone Star OB/GYN Assocs., 579 F.3d at 531; Omnibus Order, 1:14-cv24725-UU, at *5; Innova Hosp., 25 F. Supp. 3d at 963-64.

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