North Cypress Medical Center Operating Co. v. Cigna Healthcare
781 F.3d 182
| 5th Cir. | 2015Background
- North Cypress (out-of-network hospital) provided care to Cigna-insured patients and received assignments of patients’ ERISA plan benefits; it ran a “prompt-pay discount” reducing patients’ coinsurance if paid quickly while still submitting full Chargemaster charges to Cigna.
- Cigna initially paid on Chargemaster charges but, upon learning of the discount practice, implemented a “fee-forgiving protocol,” drastically reducing reimbursements by treating patients as billed far lower amounts and paying only a pro rata share.
- Dispute centers on whether plan language excluding coverage for “charges which you are not obligated to pay or for which you are not billed” permits Cigna to deny benefits when a provider discounts patient coinsurance.
- Procedural posture: North Cypress sued for ERISA benefit underpayments, breach of contract (including hundreds of "Discount Agreements"), RICO claims, and Texas Insurance Code violations; district court dismissed or granted summary judgment on many claims and found North Cypress lacked Article III standing for ERISA claims; both parties appealed.
- Fifth Circuit held North Cypress has Article III and statutory ERISA standing as an assignee of plan beneficiaries, vacated summary judgment on ERISA and contract claims and remanded for merits, affirmed dismissal of RICO claims and preemption of Texas prompt-payment statutes, and held Cigna’s counterclaims are governed by a two-year limitations period (unjust enrichment); compulsory affirmative counterclaims are not tolled.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III / ERISA standing of provider suing as assignee | North Cypress: assignments give it derivative standing to sue to recover plan benefits; patients were injured when Cigna refused payment. | Cigna: no injury because patients were not billed the amounts Cigna refused to pay; thus no standing. | Court: Provider has standing as assignee; patients had concrete injury at time of assignment; vacated dismissal for lack of standing. |
| Interpretation of plan exclusion for "charges you are not obligated to pay or for which you are not billed" | North Cypress: clause does not nullify coverage when provider discounts patient coinsurance; plans still obligate insurer to pay. | Cigna: clause means no coverage for charges patients are not billed/obligated to pay; justified reduced payments. | Court: Merits unresolved on record; noted Cigna’s reading likely not the only fair reading; remanded for full merits (including discretion/conflict analysis). |
| Preemption of state-law prompt-payment statutes and Texas Insurance Code claims | North Cypress: prompt-payment statutes govern insurer/provider payment timing and are not preempted; Discount Agreement claims not preempted. | Cigna: ERISA preempts these state-law claims. | Court: Texas prompt-payment provisions are preempted (do not substantially affect the insurer–insured risk-pool as required by Miller); remanded to reconsider preemption of Discount Agreement claims in light of standing. |
| RICO claims adequacy | North Cypress: alleged pattern of racketeering connected to enterprise and injuries from scheme. | Cigna: RICO elements not adequately pleaded—no investment/use of racketeering income, no nexus, no distinct person/enterprise. | Court: Affirmed dismissal—North Cypress failed to state claims under §§1962(a),(b),(c),(d). |
| Statute of limitations and tolling for Cigna counterclaims | Cigna: counterclaims analogous to fraud (longer limitations) and tolled by North Cypress’s suit. | North Cypress: counterclaims barred or governed by shorter period; tolling applies. | Court: Counterclaims more akin to unjust enrichment (two-year limit); compulsory affirmative counterclaims are not tolled—dismissal as time-barred was correct. |
Key Cases Cited
- Spinedex Physical Therapy USA, Inc. v. United Healthcare of Arizona, Inc., 770 F.3d 1282 (9th Cir. 2014) (provider assignee standing to sue ERISA plan for benefits)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (U.S. 1989) (ERISA standard for review of fiduciary decisions)
- Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (U.S. 1985) (ERISA protects contractually defined benefits)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (U.S. 1992) (Article III injury-in-fact requirement)
- Kentucky Ass'n of Health Plans, Inc. v. Miller, 538 U.S. 329 (U.S. 2003) (test for when state laws "regulate insurance" and escape ERISA preemption)
- Ellis v. Liberty Life Assur. Co. of Boston, 394 F.3d 262 (5th Cir. 2004) (applying Miller and defining "risk-pooling" in ERISA preemption analysis)
- Harris Methodist Fort Worth v. Sales Support Servs., 426 F.3d 330 (5th Cir. 2005) (healthcare provider may have standing as assignee under ERISA)
- Tango Transport v. Healthcare Financial Services, LLC, 322 F.3d 888 (5th Cir. 2003) (assignment principles and provider standing under ERISA)