Chasing Payments: District Court Holds that Providers Lack Standing to Sue ERISA Plans for Benefits if the Patients Remain Liable to the Provider in the Event of Non-Payment

Seyfarth Shaw LLP
Contact

A district court in Tennessee recently rejected ERISA claims by healthcare providers against a plan insurer, holding that the providers lacked standing to sue under ERISA as their patients’ assignees.  Brown v. Blue Cross Blue Shield of Tennessee, Inc., 2015 WL 3622338, Case No. 1:14-CV-00223 (E.D. Tenn. June 9, 2015).  In essence, the district court ruled that the risk of non-payment is a burden that must run with the right to collect Plan benefits.

The relevant facts are these: Plaintiff Harrogate Family Practice is a medical provider owned by Plaintiff Amanda Brown that treats patients under Defendant Blue Cross Blue Shield Tennessee (BCBST) plans as a contracted, in-network provider.  Under the contract between Plaintiffs and BCBST, Plaintiffs submit bills on behalf of their patients to BCBST and receive payment directly.  Thereafter, BCBST audited Plaintiffs’ reimbursement claims and discovered that Plaintiffs had allegedly improperly billed and received payment for non-covered investigational procedures.  BCBST promptly notified Plaintiffs of the overpayments.  Eventually, BCBST began to recoup the overpayments by offsetting them against new reimbursement claims.  Plaintiff then filed suit seeking relief under ERISA §§ 502(a)(3) and 502(a)(1)(B), urging that the recoupments violated ERISA.

BCBST moved to dismiss Plaintiffs’ claims for lack of subject matter jurisdiction.  The district court granted the motion, holding that it lacked subject matter jurisdiction because Plaintiffs lack standing to sue under ERISA.

Among other things, Plaintiffs argued that they had derivative standing to sue as assignees of patients covered by the plan, relying on another recent Tennessee case, Productive MD, LLC.  Aetna Health, Inc., 969 F. Supp. 2d 901 (M.D. Tenn. 2013), which held that an out-of-network provider received a valid assignment where its patient agreements authorized payment of medical benefits to the provider for services rendered.

In Brown, under the Plaintiffs’ patient agreements, each patient requested that payment of authorized insurance benefits be made on the patient’s behalf to plaintiffs for medical services provided.  Each patient also agreed that he or she would remain financially responsible for any charges not covered by health benefits.  The court concluded that Plaintiffs’ patient agreements did not constitute assignments of the right to sue under ERISA because: (1) mere agreement for direct payment to a provider, without more, is not a valid assignment; (2) Plaintiffs’ patient agreements did not manifest an intent to assign ERISA rights, and (3) the risk of non-performance did not run with right to receive payment.

“A right to receive payment does not constitute an assignment without a concurrent transfer of the risk of nonpayment,” the court wrote.  Distinguishing Productive MD, the Brown court reasoned that the agreement in Productive MD constituted a valid assignment because Productive MD sought “payment on its patient’s behalf and acknowledged that it would have no recourse against the patient if [the insurer] did not pay.”

In contrast, under the agreement in Brown, Plaintiffs retained the right to sue the patients for unpaid benefits.  Under Brown, providers cannot have their cake and eat it too.  Providers can either retain the right to sue their patients for unpaid benefits or receive the right to sue the plan—but they cannot seek payments from both.

This case is significant because claims by providers under ERISA are now percolating in courts throughout the country.  These cases often present questions of standing, participant assignments, plan anti-assignment provisions, and challenges to enforcement of anti-assignment provisions.  We expect to see many more of these types of cases and claims in the near future.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Seyfarth Shaw LLP | Attorney Advertising

Written by:

Seyfarth Shaw LLP
Contact
more
less

Seyfarth Shaw LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide