Opinion
11 Civ. 8517(BSJ)(AJP)
09-24-2012
NEUROAXIS NEUROSURGICAL ASSOCIATES, PC, Plaintiff, v. CIGNA HEALTHCARE OF NEW YORK, INC., Defendant.
Memorandum & Order
On July 25, 2011, Plaintiff, Neuroaxis Neurosurgical Associates, PC, brought this lawsuit in the Supreme Court of the State of New York to recover for underpayment of health insurance claims made to Defendant, CIGNA Healthcare of New York, Inc. Plaintiff claims that this underpayment resulted in a breach of Plaintiff's rights as a third party beneficiary of those health insurance claims, a breach of a quasi-contract between the parties, and Defendant's unjust enrichment.
On November 23, 2011, Defendant removed these claims to this Court on the basis that they were preempted by ERISA and, on November 30, 2011, moved to dismiss it. On January 13, 2012, Plaintiff moved to remand this action back to state court. On July 5, 2012, the Court held oral argument on Plaintiff's motion to remand and directed the parties to submit supplemental briefing.
The Court requested that Defendant identify several benefits claims providing the best bases for jurisdiction under ERISA. In its supplemental briefing, Defendant selected three beneficiaries and described why their claims were preempted.
For the following reasons, Plaintiff's motion to remand is DENIED.
Background
Plaintiff is a group of neurological surgeons. Defendant is a health insurance company that administers ERISA plans through which beneficiaries may seek services from healthcare providers such as Plaintiff. From October 2004 to October 2010, Plaintiff provided neurological surgical services to numerous beneficiaries of Defendant's ERISA plans. Haskel Decl., Burch Aff. ¶ 5. Defendant paid Plaintiff directly for the surgical services but did not pay the full amount billed by Plaintiff for those surgeries, which led to this lawsuit.
Plan provisions vary based on a beneficiary's employer, but most plans share the same basic characteristics. Defendant's plans generally cover a beneficiary's eligibility for health insurance coverage, the type of benefits available, and the requirements to qualify for benefits. Plans also classify providers as either "in-network" or "out-of-network," which affects the method and amount of reimbursement. While insurers often enter into a separate "provider agreement" with providers to specify reimbursement rates, Plaintiff and Defendant never negotiated a provider agreement. This left the terms of Plaintiff's reimbursement uncertain. The plans at issue here also do not establish the specific procedures used by Defendant in administering benefits claims.
After Plaintiff's doctors performed a surgical service, it would submit a claim for benefits to Defendant. Each service was itemized into Current Procedural Terminology ("CPT") codes, which are universal signifiers published by the American Medical Association to identify component expenses of a service. According to one of Defendant's Claims Specialists, Sheryl Burch, those CPT codes are then compiled into one claim, submitted under one claim form and assigned one claim number, for a benefits determination. (Cometti Supp. Decl., Burch Dep. 25:16-23, 26:9-15, 57:2-5.)
For instance, each individual procedure comprising the surgical service carries its own expense and will have its own CPT code.
If a service required both a surgeon and assistant surgeon, each would submit a separate claim form. (See, e.g., Haskel Supp. Decl. Exs. C, D, H.)
Once a claim form was submitted, Defendant's claims administration process proceeded in two steps. Hr'g Tr. 18:24-19:4, 23:6-12. The first step entailed making a coverage or benefits determination for each claim as to whether the surgical service was "medically necessary." (See, e.g., Haskel Supp. Decl. Ex. B, at 29.) The second step involved calculating the amount of reimbursement for the surgical service. Plan language governs the benefits determination, while the reimbursement calculation is governed by other sources extrinsic to the plan, including a provider agreement (when available), the CPT code manual, and rate databases.
Once these two steps were completed, Defendant sent an Explanation of Benefit form to beneficiaries and an Explanation of Payment form to providers, both of which explain the amount of reimbursement for each CPT code and why payment was denied for any CPT code. In Defendant's calculation, reimbursement was typically capped at a "maximum reimbursable charge" ("MRC"), which is a percentage of the "usual, customary, and reasonable" ("UCR") rate for a particular CPT code procedure in the relevant geographic region. The MCR is set by the employer sponsoring the plan, while the UCR rates are found in extrinsic sources. In this case, the UCR rates were taken from a third-party database.
Discussion
In deciding a motion to remand, it is the burden of the removing defendant to show that federal subject matter jurisdiction is proper. See 28 U.S.C. § 1441 (2012); Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 327 (2d Cir. 2011). Doubts about the propriety of removal are resolved against removal and in favor of remand. See In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., 488 F.3d 112, 124 (2d Cir. 2007).
Defendant removed this lawsuit on the ground that Plaintiff's state law claims are preempted by ERISA and must be brought under ERISA § 502(a)(1)(B), which conveys federal question jurisdiction. In general, ERISA § 502 permits a participant or beneficiary to enforce through civil litigation rights provided by the terms of his or her health insurance plan. See 29 U.S.C. § 1132 (2012).
Recently, in Montefiore Medical Center v. Teamsters Local 272, 642 F.3d 321 (2d Cir. 2011) ("Montefiore"), the Second Circuit clarified the scope of ERISA preemption for potential § 502(a)(1)(B) claims. It set forth three prerequisites required for preemption, namely (i) that the plaintiff have standing to bring a claim under § 502(a)(1)(B); (ii) that the claim be a colorable claim for benefits under § 502(a)(1)(B), and (iii) that there be no independent legal duty owed to the plaintiff by a defendant. Montefiore, 642 F.3d at 324-25, 327-32. While ERISA may completely preempt claims that qualify as § 502(a)(1)(B) claims, the import of the Circuit's holding is that not all claims related to ERISA plans can be brought under § 502(a)(1)(B) and, accordingly, are not all preempted.
Here, Defendants have demonstrated that at least one claim at issue in this litigation satisfies all three prongs of the Montefiore test. Accordingly, this court has federal question jurisdiction pursuant to 28 U.S.C. § 1331 over the claims preempted by ERISA, and supplemental jurisdiction pursuant to 28 U.S.C. § 1367(a) over the remaining state law claims.
I. Plaintiff Has Standing to Bring a Claim Under § 502(a)(1)(B)
The first requirement for ERISA preemption is that the Plaintiff must have standing to bring a claim under § 502(a)(1)(B). Montefiore, 642 F.3d at 324 (citing Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004)). ERISA § 502 empowers a beneficiary of an ERISA-governed plan to bring a civil lawsuit to recover benefits owed. 29 U.S.C. § 1132(a)(1) (2012). A healthcare provider may stand in place of the beneficiary to pursue an ERISA claim if the beneficiary has assigned his or her rights to the provider in exchange for medical care. Montefiore, 642 F.3d at at 329. Here, because Neuroaxis' patients assigned their rights to Neuroaxis in exchange for care (evidenced by Neuroaxis billing CIGNA for six years'-worth of claims) Neuroaxis has standing to bring an ERISA claim.
Neuroaxis, however, argues that the plans at issue in this case contain assignment-restricting language that precludes Neuroaxis from having standing under ERISA. Specifically, the plan language Neuroaxis relies on reads as follows:
Medical benefits are not assignable unless agreed to by [CIGNA]. [CIGNA] may at its option, make payment to you for the cost of any Covered Expenses received by you or your dependent from a Non-Participating Provider even if the benefits have been assigned.(Aff. of Sheryl Burch, Ex. B at 50-51; Ex. F at 52; Ex. I at 51.) Neuroaxis argues that because CIGNA has not offered any proof that CIGNA consented to the assignments, CIGNA cannot meet its burden of showing that Neuroaxis has standing under ERISA.
Neuroaxis also aptly points out that, on the one hand, CIGNA argues that Neuroaxis has standing for the purposes of ERISA preemption, but on the other hand, asserts that Neuroaxis lacks standing as an affirmative defense. While the Court notes this inconsistency in Defendant's pleadings, the Court relies on the facts in the record to make its determination on this motion. --------
This argument is unavailing. CIGNA's long-standing pattern and practice of direct payment to Neuroaxis is sufficient to show its consent to Neuroaxis' assignments. See Biomed Pharm., Inc. v. Oxford Health Plans (NY), Inc., No. 10 Civ. 7427 (JSR), 2011 WL 803097, at *5 (S.D.N.Y. Feb. 18, 2011) (plan's "long term pattern and practice of accepting and paying on [provider's] direct billing" showed assignment); Protocare of Metro N.Y., Inc. v. Mut. Ass'n, 866 F. Supp. 757, 761-62 (S.D.N.Y. 1994) (finding assignment through direct payment despite plan's anti-assignment language). Accordingly, Neuroaxis has standing to bring an ERISA claim and Defendants have thus satisfied the first prong of the Montefiore test.
II. Plaintiffs Have Made At Least One Colorable Claim for Benefits Under § 502(a)(1)(B)
In order for a claim to be colorable under § 502(a)(1)(B) - the second prong of the Montefiore test - the actual claims asserted must be claims for benefits. Montefiore, 642 F.3d at 328. The Circuit clarified this standard by adopting a distinction between "right to payment" claims and "amount of payment" claims. Id. at 330-332. Only the former are considered actual claims for benefits and can be preempted. Id.
"Right to payment" claims involve challenges to benefits determinations, depend on the interpretation of plan language, and often become an issue when benefits have been denied. Id. "Amount of payment" claims involve the calculation and execution of reimbursement payments, depend on the extrinsic sources used for the calculation, and are commonly tied to the rate schedules and arrangements included in provider agreements. See id. at 331; see also Lone Star OB/GYN Assocs. v. Aetna Health Inc., 579 F. 3d 525, 530-31 (5th Cir. 2009). The need to reference plan language does not turn an amount of payment claim into a right to payment claim unless the meaning of the plan language is disputed and requires the Court's interpretation. See Lone Star OB/GYN Assocs., 579 F.3d at 530-31 (citing Blue Cross of California v. Anesthesia Care Assocs. Med. Grp., Inc., 187 F.3d 1045, 1051 (9th Cir. 1999)).
According to the supplemental briefing provided by the parties, Plaintiff's claims contemplate four different forms of underpayment. First, some CPT codes were not fully reimbursed because the billed amount exceeded Defendant's MRC calculations. Second, other CPT codes were not fully reimbursed because Defendant "bundled" those CPT codes together with other CPT codes. Third, payment was denied for some CPT codes because an assistant surgeon was not required for some procedures. Fourth, Plaintiff asserts it was underpaid because Defendant did not obey an internal policy specifically used for calculating reimbursement rates with out-of-network providers when no provider agreement had been negotiated. Because, at the very least, the third form of alleged underpayment contemplates a right to payment issue rather than an amount of payment issue, Defendants have shown that the second prong of the Montefiore test is satisfied.
The third form of underpayment, denial of payment for an assistant surgeon, is a right to payment issue. An internal appeals letter, submitted by Defendant, upheld Defendant's decision to "deny coverage of the assistant surgeon fee" for two CPT codes because an assistant surgeon was not a "medical necessity." (Haskel Second Supp. Decl. Ex. A.)
"Medical necessity" is defined by the plan. To resolve this claim of underpayment, the Court must look to the plan to determine (a) what is "medical necessity" and (b) whether it encompasses the need for an assistant surgeon with respect to the billed procedures. This is a classic "right to payment" - not "amount of payment" - determination. See Lone Star OB/GYN Assocs., 579 F.3d at 531 ("any determination of benefits under the plan - i.e., what is 'medically necessary' or a 'Covered Service'- does fall within ERISA . . ."). Accordingly, this claim satisfies the second prong of the Montefiore test.
III. Defendant Owes No Independent Duty to Plaintiff
The third and final prong of the Montefiore test is that the Defendant must not owe an independent legal duty to the Plaintiff. Montefiore, 642 F.3d at 332. This prong turns on whether the provider agreement between the insurance company and the provider creates a separate legal duty independent of the ERISA plan. See Lone Star OB/GYN Assocs., 579 F.3d at 530 (citing Davila, 542 U.S. at 210). Here, because there is no provider agreement - or any other agreement, for that matter - between the parties, there is no independent legal duty owed to Plaintiff by Defendant.
Conclusion
The Defendant has demonstrated satisfaction of all three of the Montifiore prongs, establishing ERISA preemption. Accordingly, this court has federal question jurisdiction over the claims preempted by ERISA pursuant to 28 U.S.C. § 1331, and supplemental jurisdiction over the remaining state law claims pursuant to 28 U.S.C. § 1367(a).
For the foregoing reasons, Plaintiff's motion to remand (Dkt. No. 13) is DENIED. In accordance with this Court's order of January 12, 2012 (Dkt. No. 12), Defendant's motion to dismiss dated November, 30, 2011 (Dkt. No. 4) is no longer held in abeyance, and Plaintiff shall respond to it within fourteen days of the date of this order.
The Clerk of the Court is directed to terminate motion number 13 on the ECF docket.
SO ORDERED:
/s/ _________
BARBARA S. JONES
UNITED STATES DISTRICT JUDGE Dated: New York, New York
September 24, 2012