Scott & White Memorial Hospital v. Coventry Health Care, Inc. et al

RESPONSE in Support

W.D. Tex.March 18, 2019

HOU:3915362.3 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS WACO DIVISION SCOTT & WHITE MEMORIAL HOSPITAL, Plaintiff, v. AETNA HEALTH HOLDINGS, LLC, AS SUCCESSOR BY MERGER TO COVENTRY HEALTH CARE, INC., COVENTRY HEALTH CARE NATIONAL NETWORK, INC., COVENTRY HEALTH AND LIFE INSURANCE COMPANY, FIRST HEALTH GROUP CORP., ARM LTD., RON PHILEMONOFF, AS TRUSTEE FOR THE TANADGUSIX CORPORATION HEALTH & WELFARE TRUST, JULIANNA SHANE, AS TRUSTEE FOR THE TANADGUSIX CORPORATION HEALTH & WELFARE TRUST, and ROBERT DEAN HUGHES, AS TRUSTEE FOR THE TANADGUSIX CORPORATION HEALTH & WELFARE TRUST, Defendants. § § § § § § § § § § § § § § § § § § § § § § § § § § § Civil Action No. 6:17-cv-00075-RP- JCM _____________________________________________________________________ COVENTRY’S RESPONSE TO PLAINTIFF’S OBJECTION TO THE REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE ON THE PARTIES’ MOTIONS FOR SUMMARY JUDGMENT _____________________________________________________________________ Case 6:17-cv-00075-ADA-JCM Document 234 Filed 03/18/19 Page 1 of 7 HOU:3915362.3 Coventry1 files this response to Scott & White’s Objection to the Magis- trate Judge’s Report and Recommendation (the “Report”) on the parties’ competing motions for summary judgment. RESPONSE ARGUMENTS Scott & White’s Objection is an attempt to play both sides of the fence. In relevant part, the Magistrate Judge has recommended that Coventry’s motion for summary judgment should be granted and Scott & White’s motion for summary judgment against Coventry be denied. See Report (Doc. No. 219) at 2. Scott & White objects to the Magistrate Judge’s recommendation only “in the event” that the Report’s findings against ARM and the Trust “are not adopted in full by [this] Court.” Objection (Doc. No. 222) at 2. But regardless of whether or not the Court adopts the Report’s findings against ARM and the Trust, the Court should overrule Scott & White’s objections regarding Coventry and adopt the Magistrate Judge’s recommendation that summary judgment be granted for Coventry in all respects. Scott & White’s objections relevant to Coventry are that the Report allegedly: (1) “misconstrues Scott & White’s claims against Coventry”; and (2) “reaches incorrect conclusions regarding the nature of Coventry’s contrac- tual obligations to Scott & White, and Coventry’s compliance therewith.” Id. at 2–3. Neither of Scott & White’s objections has any merit. The Magistrate Judge did not misconstrue anything, nor did he reach incorrect conclusions regarding Coventry’s obligations. The Magistrate Judge considered all of Scott 1 Capitalized terms used herein are as defined by the Magistrate Judge in his Report. Case 6:17-cv-00075-ADA-JCM Document 234 Filed 03/18/19 Page 2 of 7 – 2 – HOU:3915362.3 & White’s arguments in detail and at length in his 54-page Report, and correctly rejected all of them. As the Magistrate Judge recounts, Scott & White entered into a Hospital Agreement with Coventry to participate in Coventry’s network of healthcare providers. See Report (Doc. No. 219) at 1–2. “[T]he clear intent of the parties [to the Hospital Agreement] is that Coventry is not liable for and does not guarantee payment of disputed claims when it is not the Payor.” Id. at 16–17 (emphasis added). It is undisputed that Coventry is not the Payor for any of the claims at issue in this litigation.2 The Payors are ARM and the Trust. See id. at 2–5. ARM is a third-party administrator for self-funded health plans, including the Trust. Id. at 4. Section 3.2 of the Hospital Agreement in part obliges Coventry “to require each Payor to comply with the relevant terms and conditions of the Hospital Agreement.” Id. at 26. “Section 3.1.1 of the Hospital Agreement also requires Coventry’s contracts with subsequent Payors to make payment to [Scott & White] within thirty days and Scott & White shall be paid ‘according to the terms set forth in the Product Attachments and associated Rate Exhibits.’” Id. Scott & White alleges that Coventry breached sections 3.1.1 and 3.2 of the Hospital Agreement because ARM and the Trust will not pay Scott & White for its care of a Trust member. The Magistrate Judge rightly rejected Scott & White’s arguments. 2 See, e.g., Objection (Doc. No. 222) at 4–5 (“Scott & White has never contested that Coventry is not financially obligated to Scott & White as a guarantor for services rendered to a non-Coventry Payor’s members.”) (emphasis in original). Case 6:17-cv-00075-ADA-JCM Document 234 Filed 03/18/19 Page 3 of 7 – 3 – HOU:3915362.3 Coventry entered into an agreement with ARM (the “TPA Agreement”) that allowed ARM to access Coventry’s provider network on behalf of its customers, including the Trust. See Report (Doc. No. 219) at 2. Section 3.2 of the TPA Agreement between ARM and Coventry “provides that ARM ‘shall, and shall cause Payor to, pay Participating Providers in accordance with the terms and conditions of the applicable Participation Agreement’ and ‘shall cause [its customers] to pay claims within thirty (30) calendar days following receipt.’ ” Id. at 26. As the Magistrate Judge held, “[c]reating such a contractual obligation is all that section 3.2 of the Hospital Agreement requires of Coventry—it cannot force ARM (or the Trust) to pay Scott & White if ARM believes a claim is not covered.” Id. “[S]ection 3.2 of the TPA Agreement, together with the Hospital Agreement, collectively bind ARM to the terms and conditions of the Hospital Agreement and provide adequate language to fulfill Coventry’s obligations under the Hospital Agreement.” Id. Nor did Coventry breach section 3.1.1 of the Hospital Agreement. “[I]t is undisputed that the Trust ‘empowered and authorized’ ARM to enter the TPA Agreement on its behalf. Furthermore, section 3.1.1 of the TPA Agreement states that ‘[e]ach Payor shall be liable for all claims of Covered Individuals.’ ” Id. at 28 (italics in original). As the Magistrate Judge found, “[t]his provision, Case 6:17-cv-00075-ADA-JCM Document 234 Filed 03/18/19 Page 4 of 7 – 4 – HOU:3915362.3 especially when combined with the requirement in section 3.2 [of the TPA Agreement] that ARM ‘shall cause payor to’ pay Participating Providers, provides the adequate assurance that the Hospital Agreement demands of Coventry.” Id. “It is hard to imagine what more Coventry could do, absent twisting a corporate representative’s arm, to make ARM and/or the Trust pay a disputed claim.” Id. at 26. Scott & White objects that the Report “misconstrues [its] claims against Coventry,” which arise from Coventry’s alleged failure to perform its “contractual obligation” to “effectively” bind ARM and the Trust “to pay for healthcare services provided by Scott & White.” Id. at 2, 6 (emphasis added). But as the Magistrate Judge recognized, “[t]he TPA Agreement is not rendered ‘inadequate’ merely because ARM and the Trust have a different opinion than Scott & White as to whether the underlying claims are covered by the Hospital Agreement.” Id. at 32. “Coventry completed its contractual obligations in accordance with the Hospital Agreement by entering into binding agreements with ARM and the Trust.” Id. CONCLUSION Coventry therefore respectfully requests that the Court adopt the Report and Recommendation of the United States Magistrate Judge that (1) summary judgment be granted for Coventry in all respects, and (2) Scott & White’s motion for summary judgment against Coventry be denied in its entirety. Case 6:17-cv-00075-ADA-JCM Document 234 Filed 03/18/19 Page 5 of 7 – 5 – HOU:3915362.3 OF COUNSEL: John B. Shely Texas Bar No. 18215300 jshely@HuntonAK.com Jeffrey D. Migit Texas Bar No. 00794306 jmigit@HuntonAK.com HUNTON ANDREWS KURTH LLP 600 Travis, Suite 4200 Houston, Texas 77002 (713) 220-4200 (713) 220-4285 (Fax) Respectfully submitted, By: /s/ Dimitri Zgourides Dimitri Zgourides Texas Bar No. 00785309 dzgourides@HuntonAK.com HUNTON ANDREWS KURTH LLP 600 Travis, Suite 4200 Houston, Texas 77002 (713) 220-4200 (713) 220-4285 (Fax) COUNSEL FOR DEFENDANTS AETNA HEALTH HOLDINGS, LLC; COVENTRY HEALTH CARE NATIONAL NETWORK, INC.; COVENTRY HEALTH AND LIFE INSURANCE COMPANY; and FIRST HEALTH GROUP CORP. Case 6:17-cv-00075-ADA-JCM Document 234 Filed 03/18/19 Page 6 of 7 – 6 – HOU:3915362.3 CERTIFICATE OF SERVICE I hereby certify that on March 18, 2019, I electronically filed the forego- ing document with the clerk of the court for the U.S. District Court, Western District of Texas, using the electronic case filing system of the Court. The electronic case filing system sent a “Notice of Electronic Filing” to the attorneys of record who have consented in writing to accept this Notice as service of this document by electronic means. I further certify that the foregoing document was served by electronic mail as follows: Jeff Cody jeff.cody@nortonrosefulbright.com Shea R. Haass shea.haass@nortonrosefulbright.com NORTON ROSE FULBRIGHT US LLP 2200 Ross Avenue, Suite 3600 Dallas, TX 75201 Steven R. Rogovin srogovin@mpslaw.com MELTZER, PURTILL & STELLE LLC 300 South Wacker Drive, Suite 2300 Chicago, IL 60606 Christopher J. Schwegmann cschwegmann@lynnllp.com Joshua M. Sandler jsandler@lynnllp.com LYNN PINKER COX & HURST LLP 2100 Ross Avenue, Suite 2700 Dallas, TX 75201 /s/ Dimitri Zgourides Dimitri Zgourides Case 6:17-cv-00075-ADA-JCM Document 234 Filed 03/18/19 Page 7 of 7