Opinion ID: 78513
Heading Depth: 2
Heading Rank: 2

Heading: Rutt and Egan's Complaint

Text: Before turning to the preemption analysis of Rutt and Egan's complaint, we make some general observations regarding complete preemption of healthcare provider claims under ERISA. First, healthcare provider claims are usually not subject to complete preemption because [h]ealthcare providers... generally are not considered `beneficiaries' or `participants' under ERISA. [6] Hobbs v. Blue Cross Blue Shield of Ala., 276 F.3d 1236, 1241 (11th Cir.2001) (citing Cagle v. Bruner, 112 F.3d 1510, 1514 (11th Cir.1997)); see also Pascack Valley Hosp., 388 F.3d at 400 (We conclude that the Hospital could not have brought its claims under § 502(a) because the Hospital does not have standing to sue under that statute.); In re Managed Care Litig., 298 F.Supp.2d 1259 (S.D.Fla.2003) (noting that only two categories of individualsparticipants and beneficiariesare authorized to sue for benefits under § 502(a)(1)(B)). Moreover, such claims often are not the type of claims that could be brought under § 502(a) because they do not duplicate[ ], supplement[ ], or supplant[] the ERISA civil enforcement remedy. Davila, 542 U.S. at 209, 124 S.Ct. at 2495. For example, a healthcare provider's claims of negligent misrepresentation and estoppel based on a plan's oral misrepresentations are not ERISA claims because they do not arise from the plan or its terms. [7] Franciscan Skemp, 538 F.3d at 597. Second, it is well-established in this and most other circuits that a healthcare provider may acquire derivative standing to sue under ERISA by obtaining a written assignment from a participant or beneficiary of his right to payment of medical benefits. Hobbs, 276 F.3d at 1241 (citing Cagle, 112 F.3d at 1512-16). Claims for benefits by healthcare providers pursuant to an assignment are thus within the scope of § 502(a). Finally, a provider that has received an assignment of benefits and has a state law claim independent of the claim arising under the assignment holds two separate claims. In such a case, the provider may assert a claim for benefits under ERISA, the state law claim, or both. See Franciscan Skemp, 538 F.3d at 598 (Franciscan Skemp could bring ERISA claims in Romine's shoes as a beneficiary for the denial of benefits under the plan; but it has not .... Franciscan Skemp is basing its claims on a conversation to which Romine was not even a party.) (emphasis in original); Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 947 (9th Cir.2009) (noting that the plaintiff-hospital's instant claim was based on a telephone conversation in which the plan had agreed to pay 90% of the patient's charges and that the hospital had already been paid part of the charges pursuant to an assignment from the patient). Thus, so long as the provider's state law claim does not fall within § 502(a), the existence of the assignment is irrelevant to complete preemption if the provider asserts no claim under the assignment. Sheridan Healthcorp., Inc. v. Neighborhood Health P'ship, Inc., 459 F.Supp.2d 1269, 1274 (S.D.Fla.2006). The Third, Fifth, and Ninth Circuits have applied these principals to determine the line of demarcation between ERISA and state law claims in actions brought by healthcare providers. In Blue Cross of California v. Anesthesia Care Associates Medical Group, Inc., 187 F.3d 1045 (9th Cir.1999), the Ninth Circuit held that healthcare providers' claims for breach of their provider agreements with Blue Cross were not completely preempted, even though they had received assignments from patients who were beneficiaries of ERISA plans. The providers' agreements with Blue Cross required Blue Cross to identify providers in the information it distributed to members of the plan and to direct members to those providers. Id. at 1048. In return, the providers agreed to accept payment from Blue Cross for the services they rendered pursuant to specified fee schedules. Id. After Blue Cross changed the fee schedules, the providers filed a class action in state court alleging that Blue Cross breached the provider agreements by improperly amending the fee schedules and by violating its implied duty of good faith and fair dealing under California law. Blue Cross thereafter removed the case to federal court. The federal district court remanded the case to state court. On appeal, the Ninth Circuit held that the providers' breach of contract claims were not within the scope of § 502(a)(1)(B) because the providers' breach of contract claims arose solely out of their provider agreements. In other words, the claims were not claims for benefits that could be asserted by the patients-assignors. Id. at 1050. The Ninth Circuit differentiated the breach of provider contract claims from assignment-based ERISA claims as follows: [T]he Providers are asserting contractual breaches, and related violations of the implied duty of good faith and fair dealing, that their patient-assignors could not assert: the patients simply are not parties to the provider agreements between the Providers and Blue Cross. The dispute here is not over the right to payment, which might be said to depend on the patients' assignments to the Providers, but the amount, or level, of payment, which depends on the terms of the provider agreements. Id. at 1051 (emphasis in original). Because the providers' state law claims arose out of separate agreements with Blue Cross that governed their provision of goods and services to plan members, the assignments were irrelevant to preemption. Id. at 1052. The Third Circuit, in Pascack Valley Hospital, Inc. v. Local 464A UFCW Welfare Reimbursement Plan, 388 F.3d 393 (3d Cir.2004), a post- Davila case, found no preemption under facts similar to those in Anesthesia Care. In Pascack Valley, the plaintiff hospital entered into a Network Hospital Agreement with MagNet, an independent consultant that had organized a provider network to provide services at discounted rates to beneficiaries of group health plans in exchange for the plans' promises to encourage beneficiaries to use network providers. Id. at 396. There were two contracts, the agreement between the hospital and MagNet and the agreement between MagNet and the plan, or subscriber (Subscriber Agreement). The Subscriber Agreement required the plan to pay the hospital within a certain time, otherwise the plan would forfeit the discounted rate. The hospital submitted claims for services provided to two ERISA beneficiaries. The defendant plan paid the claims, but the hospital asserted that the payment was untimely and the plan had forfeited the discounted rate. Id. The hospital sued the plan in state court alleging that it was a third party beneficiary of the Subscriber Agreement, and the plan removed to federal court. Applying Davila, the Third Circuit concluded the hospital's claims were not completely preempted because the hospital lacked standing to sue under § 502(a). Id. at 400. More specifically, the court found that the plan, as the removing party, failed to meet its burden of showing that the hospital had obtained an assignmenta requisite of derivative standing. [8] Id. at 401. Although this conclusion was dispositive, the court went on to observe that even if the hospital had an assignment, its claims would not be preempted under Davila because they were based on a separate duty independent of ERISA. While it acknowledged that the hospital's claims existed only because of an ERISA plan, the court observed that claims at issue did not implicate the plan: Coverage and eligibility ... are not in dispute. Instead the resolution of this lawsuit requires interpretation of the Subscriber Agreement, not the Plan. The Hospital's right to recover, if it exists, depends entirely on the operation of third-party contracts executed by the Plan that are independent of the Plan itself. Id. at 403 (citing Caterpillar, Inc. v. Williams, 482 U.S. 386, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987)). The court also identified a number of compelling similarities between that case and Anesthesia Care: (1) the hospital's claims arose from an agreement independent of the plan; (2) participants and beneficiaries of the plan were apparently not parties to the Subscriber Agreement; and (3) the dispute was unrelated to assignments or the plan terms because it involved the amount of payment under the Subscriber Agreement, not the right to payment, which might require interpretation of the plan. Id. at 403-04 (quoting Anesthesia Care, 187 F.3d at 1051). In a recent decision, Lone Star OB/GYN Associates v. Aetna Health Inc., 579 F.3d 525 (5th Cir.2009), the Fifth Circuit adopted the Ninth Circuit's rate of payment versus right of payment test for distinguishing a provider's state law contract-based claims from a claim for benefits under ERISA. The plaintiff, Lone Star, entered into a provider agreement with Aetna, an insurer that administered ERISA plans. Lone Star sued Aetna in state court under the Texas Prompt Pay Act (TPPA), alleging that Aetna had not paid Lone Star's claims for services at the rates set forth in the provider agreement. Lone Star attached a list of the disputed claims to its complaint. Aetna removed the case, citing certain payment claims it argued were preempted because coverage had been denied. The district court granted Lone Star leave to amend its pleadings to remove the claims that were denied for lack of coverage and then granted Lone Star's motion to remand on the basis that all of the remaining claims had been partially paid. Id. at 528. Because Lone Star's standing was not at issue, the Fifth Circuit's preemption analysis under Davila turned on whether Lone Star's allegation that Aetna failed to pay claims at the rate established in the provider agreement was based on a duty independent of the ERISA plan at issue. While acknowledging that the provider agreement and the plan cross-referenced each other and it might be necessary to refer to the plan in order to determine the correct payment rate, the court held that Lone Star's claims arose independently of the plan: Though the plan and the Provider Agreement cross-reference each other, the terms of the planin particular, those related to coverageare not at issue in a dispute over whether Aetna paid the correct rate for covered services as set out in the Provider Agreement. While Aetna is correct that any determination of benefits under the terms of a plani.e., what is medically necessary or a Covered Service does fall within ERISA, Lone Star's claims are entirely separate from coverage and arise out of the independent legal duty contained in the contract and the TPPA. Id. at 530-31. Notwithstanding this conclusion, the court recognized that Lone Star's claims may still be at least partially preempted because Aetna asserted that some of the partially paid claims actually reflected partial denials of services that were not covered. Lone Star disputed this characterization, but the record was insufficient to allow the court to resolve the factual issue. In order to guide the district court on remand, the Fifth Circuit held that while claims involving only underpayment are not preempted, claims that were partially denied because coverage was not afforded for all the submitted procedures may be preempted. Id. at 533. We agree with these courts that the rate of payment and right of payment distinction is a useful means for assessing preemption of healthcare provider claims based upon a breach of an agreement separate from an ERISA plan and thus apply it in considering Rutt and Egan's claims.
The first inquiry is whether Rutt and Egan, at some point in time, could have brought [their] claim under ERISA § 502(b)(1)(B). Davila, 542 U.S. at 210, 124 S.Ct. at 2496. This part of the test is satisfied if two requirements are met: (1) the plaintiff's claim must fall within the scope of ERISA; and (2) the plaintiff must have standing to sue under ERISA. Id. at 211-12, 124 S.Ct. at 2496-97; Marin Gen. Hosp., 581 F.3d at 947-49. We first consider whether the claims are within the scope of § 502(a)(1)(B), because if they are not, standing to assert them is irrelevant. Rutt and Egan argue that their claims are not cognizable under § 502(a) because the relief they seek is unavailable under ERISA. They stress that they are not seeking benefits under an ERISA plan, but instead seek to collect unpaid amounts they are owed under their Provider Agreements as a result of Anthem's use of improper payment methods, such as downcoding and bundling, under the guise of utilization review. Moreover, they assert, their state law claims are the types of claims federal courts have consistently held are not even defensively preempted under ERISA § 514. The Court emphasized in Davila, however, that merely referring to labels affixed to claims to distinguish between preempted and non-preempted claims is not helpful because doing so would `elevate form over substance and allow parties to evade' the pre-emptive scope of ERISA. Davila, 542 U.S. at 214, 124 S.Ct. at 2498 (quoting Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 211, 105 S.Ct. 1904, 1911, 85 L.Ed.2d 206 (1985)). The factual allegations of the complaint do support Rutt and Egan's argument that their claims involve the rate of payment under their Provider Agreements. [9] Yet, a closer look discloses more. Plaintiffs' allegations implicate not only the rate of payment under their Provider Agreements, but also the right of payment. For example, in paragraph 10(a) under Class Allegations, Rutt and Egan allege that Anthem breached its contractual obligations by engaging in various acts, including systematically denying and/or reducing Dentists' reimbursement for medically necessary services through (i) improper denials. And, in paragraph 10(b), Rutt and Egan allege that Anthem denied medically necessary claims through the use of so-called `guidelines' which do not comply with accepted medical/dental treatment standards. As the Fifth Circuit observed in Lone Star, such allegations concern coverage issues that fall within ERISA. Lone Star, 579 F.3d at 531. Finally, paragraphs 10(g) and (h) complain that Anthem committed ERISA procedural violations by failing to provide an adequate explanation for the denial of claims for reimbursement and failing to ensure that procedures exist to properly consider plaintiffs' and members of the class' claims for reimbursement, both initially and in the appeals process. Significantly, the Provider Agreements say nothing about Anthem's obligations to provide an explanation when it denies a claim for reimbursement or to provide procedures for reviewing claims for reimbursement. Rather, ERISA § 503 imposes those obligations. 29 U.S.C. § 1133(1) and (2) (requiring every ERISA plan to provide adequate notice in writing to any participant or beneficiary whose claim for benefits ... has been denied and to afford a reasonable opportunity ... for a full and fair review of denied claims). Rutt and Egan repeated these same allegations in paragraphs 21(a), (g) and (h) as part of their general Factual Allegations and again in paragraphs 26(a), (g) and (h) as part of their breach of contract claim. [10] What we have, then, is really a hybrid claim, part of which is within § 502(a) and part of which is beyond the scope of ERISA. Because Rutt and Egan complain, at least in part, about denials of benefits and other ERISA violations, their breach of contract claim implicates ERISA. Rutt and Egan must have had standing to assert ERISA claims, and because they are providers, they could only have derivative standing through assignments. Thus, unlike Anesthesia Care, supra, the existence of assignments does matter in this case. In the district court, Anthem presented claim forms that Rutt and Egan submitted to Anthem for reimbursement for dental services. Lynn Appicelli, a Project Manager in Anthem's Government Programs division, confirmed in an affidavit that the attached forms were typical of claim forms that Anthem receives from Connecticut dentists. The claim forms contain the following language: I hereby authorize payment of the dental benefits otherwise payable to me directly to the below named dental entity. Anthem contends that these claim forms suffice to show an assignment of benefits by Rutt's and Egan's patients. We agree. Rutt and Egan contend that the claim forms cannot be valid assignments for two reasons, both of which we reject. [11] First, they point out that each of the three sample plan documents Anthem submitted preclude assignments. For example, they note that the first plan states: The Member or Covered Person may not assign benefits to a provider, except when parents are divorced. Citing Physicians Multispecialty Group v. Health Care Plan of Horton Homes, Inc., 371 F.3d 1291 (11th Cir.2004), in which this Court held that an unambiguous anti-assignment provision renders an assignment ineffective, Rutt and Egan contend that any purported assignment by their patients was invalid. As Anthem notes, however, each of the sample plans also contains an exception specifically permitting the assignment of dental benefits: Notwithstanding the terms of any provision regarding the payment of benefits ... a Member may assign the benefits to a Dentist or oral surgeon... in accordance with the Connecticut Laws concerning Assignment of Benefits to a Dentist or oral surgeon. Thus, the plans specifically authorized the assignments to Rutt and Egan. Rutt and Egan also contend that the claim forms are ineffective to create standing because they convey only the right to receive payment of benefits and not the patient's right to file an action under § 502(a). They cite a number of unreported district court cases holding that an assignment of the right to payment of benefits that does not include the right to pursue litigation is not an unequivocal assignment that creates derivative ERISA standing. See North Jersey Ctr. for Surgery, P.A. v. Horizon Blue Cross Blue Shield of N.J., Inc., No. 07-4812(HAA), 2008 WL 4371754, at  (D.N.J. Sept. 18, 2008) (The scope of the assignment is essential to establishing derivative standing as courts have made distinctions between assignments that only give the provider the right to reimbursement for medical serviceswhich are not ERISA claimsand assignments that give the provider a full assignment of benefits, which are ERISA claims.) (citing Cooper Hosp. Univ. Med. Ctr. v. Seafarers Health & Benefits Plan, No. 05-5941, 2007 WL 2793372, at  (D.N.J. Sept. 25, 2007), and Touro Infirmary v. Am. Mar. Officer, No. 07-1441, 2007 WL 4181506, at -6 (E.D.La. Nov. 21, 2007)); Somerset Orthopedic Assocs., P.A. v. Aetna Life Ins. Co., No. 06-867(MLC), 2007 WL 432986, at  (D.N.J. Feb. 2, 2007) (holding that the defendant failed to show an assignment sufficient for ERISA preemption purposes, as the assignment authorizes nothing more than direct payment to the plaintiff). We find these cases unpersuasive and decline to follow them. Our own cases confirm that assignment of the right to payment is enough to create standing. Healthcare providers may acquire derivative standing ... by obtaining a written assignment from a `beneficiary' or `participant' of his right to payment of benefits under an ERISA-governed plan. Physicians Multispecialty Group, 371 F.3d at 1294 (citing Hobbs, 276 F.3d at 1241); see also HCA Health Servs. of Ga., Inc. v. Employers Health Ins. Co., 240 F.3d 982, 989, 991 (11th Cir.2001) (recognizing standing based on an assignment authorizing payment of insurance benefits directly to the provider). Moreover, as noted in Cagle v. Bruner, 112 F.3d 1510 (11th Cir. 1997), in which this Court first recognized derivative standing, an assignment furthers ERISA's purposes only if the provider can enforce the right to payment. Of course, an assignment will not facilitate a plan participant's or beneficiary's receipt of benefits if the plan does not pay the benefits it owes, and provider-assignees are not permitted to sue on the participant's or beneficiary's behalf. If provider-assignees cannot sue the ERISA plan for payment, they will bill the participant or beneficiary directly for the insured medical bills, and the participant or beneficiary will be required to bring suit against the benefit plan when claims go unpaid. On the other hand, if provider-assignees can sue for payment of benefits, an assignment will transfer the burden of bringing suit from plan participants and beneficiaries to providers[, who] are better situated and financed to pursue an action for benefits owed for their services. Id. at 1515 (citations omitted) (alteration in original). See also I.V. Servs. of Am., Inc. v. Inn Dev. & Mgmt., Inc., 7 F.Supp.2d 79, 84 (D.Mass.1998) (An assignment to receive payment of benefits necessarily incorporates the right to seek payment. As Plaintiff argues, the right to receive benefits would be hollow without such enforcement capabilities.). Finally, as the Seventh Circuit observed in Kennedy v. Connecticut General Life Insurance Co., 924 F.2d 698 (7th Cir.1991), cited with approval in Cagle, all one needs for standing under ERISA is a colorable claim for benefits, and [t]he possibility of direct payment is enough to establish subject matter jurisdiction. Id. at 700-01. Rutt's and Egan's rights to direct payment of benefits are thus sufficient to confer standing. We conclude that Anthem has carried its burden of showing that Rutt and Egan received valid assignments from their ERISA patients. Furthermore, although Anthem did not link any particular assignment to a particular ERISA plan, the Appicelli affidavit sufficiently demonstrates that the submitted assignments in the claim forms are representative of assignments Rutt and Egan received for services they rendered, which would necessarily include patients covered by ERISA plans administered by Anthem.
The second inquiry is whether Rutt's and Egan's claims are predicated on a legal duty that is independent of ERISA. Our analysis above answers this question. Rutt and Egan argue that their claims are based on a separate legal duty arising from their Provider Agreements. This is true to the extent their claims implicate only the amount they were owed under their Provider Agreements. But, as noted, their claims stray from the boundaries of their Provider Agreements into ERISA territory by asserting improper denials of medically necessary claims and violations of ERISA procedural requirements. Consequently, portions of their claims arise solely under ERISA or ERISA plans and not from any independent legal duty. As for the remaining claims, where removal jurisdiction exists over a completely preempted claim, the district court has jurisdiction over any claims joined with the preempted claim. Butero, 174 F.3d at 1215 (citing 28 U.S.C. § 1441(c)). Therefore, the district court may exercise jurisdiction over Rutt's and Egan's non-preempted state law claims, including those claims for payment in connection with non-ERISA patients.