This case involves the broad but sometimes hard to define scope of jurisdiction under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (“ERISA”). The central question: is this case a simple payment dispute, unworthy of federal jurisdiction, or are Plaintiffs, even though they are providers, properly raising an issue as to the scope of patients’ coverage, giving rise to interests protected by ERISA?
Plaintiffs are Dr. Howard Bloom, a chiropractor, and his practice, Weather Vane Chiropractic, P.C. Defendants are insurance providers, Independence Blue Cross, Inc. (“IBC”), QCC Insurance Company, Keystone Health Plan East, Inc., and Am-eriHealth HMO, Inc. From May 2005 until October 2013, Dr. Bloom was a participating- provider in Defendants’ network of health care providers. Together, Defendants and Dr. Bloom, as an in-network provider, offered medical services to plan beneficiaries under the terms of their health care plans (“IBC Plans”). During the course of his business relationship with Defendants, Dr. Bloom’s individual rights and duties as an in-network provider were separately governed by a Professional Provider Agreement (“Provider Agreement”).
Plaintiffs assert that IBC rescinded coverage for certain medical procedures, after allegedly covering those same, services for years, and have brought suit to enforce what they contend are their individual and derivative rights under the relevant IBC plans governed by ERISA. Specifically, Plaintiffs allege that Defendants’ retroactive denial of covered benefits amounted to an “Adverse Benefits Determination” under ERISA, triggering the notice and appeal process afforded to plan beneficiaries by the statute. In addition, Plaintiffs directly bring supplemental state law claims, including breach of the Provider Agreement, fraud, negligent misrepresentation, and malicious prosecution. Defendants have moved to dismiss ' the entirety of Plaintiffs’ First Amended Complaint, arguing Plaintiffs fail to state plausible ERISA claims, depriving this Court of subject matter jurisdiction. Because I am persuaded that Plaintiffs allege an ERISA coverage dispute under the IBC Plans via a valid assignment of rights from the plan participants, as opposed to a simple payment dispute under the Provider' Agreement, Defendants’ Motion to Dismiss will be denied.
I. Relevant Facts Alleged in Plaintiffs’ First Amended Complaint
Plaintiffs’ First Amended Complaint includes various details of the dispute that are not essential to resolving the instant Motion to Dismiss. In the description- of the facts below, I focus only on those allegations that are particularly relevant to the current Motion.
Dr. Howard Bloom is a licensed chiropractor in Pennsylvania who conducts his professional practice through Plaintiff Weather Vane Chiropractic,, P.C. (‘Weather Vane”). First Amended Complaint ¶ 15. Including its subsidiaries, Plaintiff identifies Defendant IBC as the leading health insurer in southeastern Pennsylvania, , administering health. insurance benefits of more than 2.2 million Pennsylvanians. Id, at ¶ 21.
“Pursuant to the terms of the applicable IBC Plans, IBC is required to provide IBC Plan Beneficiaries-with payment or reimbursement for- specified covered, health care services (‘Covered Services’).” Id. at ¶ 22. “IBC Plan Beneficiaries” include direct plan participants, as well as their eligible spouses and children. Id. at ¶ 5. In order to receive the full extent of benefits under the IBC- Plans, beneficiaries are often required to obtain Covered Services by
In May 2005, Dr. Bloom signed a Professional Provider Agreement with Defendants QCC, Keystone, and AmeriHealth (together, “Independence”). Id. at ¶37. The purpose of the Agreement is readily apparent on the first page: “Independence and [Dr. Bloom] mutually desire to enter into this Agreement whereby [Dr. Bloom] shall render Covered Services to Beneficiaries of the various Benefit Programs and ' shall be compensated by Independence therefor, as more explicitly described hereafter.” Memorandum of Law In ■ Support of Defendants’ Motion to Dismiss, Exhibit A at 1. “Covered Services” are defined in the Provider Agreement as “Medically Necessary health care services and supplies that are to be provided by [Dr. Bloom] to Beneficiaries for which a Beneficiary has coverage pursuant to the applicable Benefit...Program or Benefit Program Agreement.” Id. at ¶ 1.10.
Patients at Dr. Bloom’s practice, Weather Vane, ordinarily signed a standard “Financial Policy” form, which included the following assignment clause: “THIS- IS A DIRECT ASSIGNMENT OF MY RIGHTS AND BENEFITS UNDER THIS POLICY.” . First Amended Complaint at ¶ 122. Weather Vane’s services included massage therapy provided by licensed massage therapists, known as “Delegated Adjunctive Therapeutic Massage Procedures” (“DATMP”). Id. Weather Vane provided DATMP to patients “for more than five years prior to 2006.” Id. at ¶47. During the pre-2006 time period, Defendants considered DATMP to qualify as a Covered Service under the relevant IBC plans and paid Dr. Bloom directly for those procedures. Id.
In 2006, IBC issued a billing guide supplement that informed participating providers that IBC would cover massage, but would not cover any services performed by a massage therapist. Id. at ¶¶ 49-51. The guide provided: “Note: IBC. does not provide reimbursement for services that are performed by a massage therapist. This applies to independently practicing massage therapists as well as those who are employed and supervised by an eligible health care professional.” Id. at ¶ 51. .
Dr. Bloom alleges the note- “was not incorporated or referenced in the Provider Agreement or, on information and belief, in the plan documents of IBC Plan Beneficiaries.” Id. at ¶53. Accordingly, Dr. Bloom submits that the billing note did not, and could not, preclude reimbursement for DATMP; Id. at ¶ 54. Moreover, Dr. Bloom alleges that despite the billing note, IBC continued to pay for DATMP services provided to beneficiaries who were covered for such procedures undér their applicable IBC plans. Id. at ¶ 55.
However, IBC . reversed course in 2007 and demanded reimbursement for “over-payments” made to Dr. Bloom and other Pennsylvania chiropractors by Keystone for massage services provided to their insureds from ,2006 to 2007, claiming those massage procedures were- not Covered Services under the applicable Keystone plans. Id. at ¶ 56. After receiving push-back regarding the legality of the over
In an alleged attempt to discourage other chiropractors from delegating activities to unlicensed support pérsohnel, IBC decided to refer accusations of insurance fraud against Dr. Bloom to thé state Attorney General'in or around 2009. Id. at ¶¶ 62-65. Nonetheless, IBC continued to pay for massage services reported by Weather Vane from 2008 until Dr. Bloom’s arrest in 2011. Id. at ¶ 66.
IBC issued a Medical Policy Bulletin effective June 18, 2008, which included a provision that specified IBC “does not provide reimbursement for services that are performed by someone other than an eligible health care provider..... This includes massage therapists.” Id. at ¶ 68. Subsequent 2009 and 2011 Bulletins contain the same or similar provisions. Id. at ¶¶ 70-71. However, despite these bulletins, Dr. Bloom contends that IBC has in fact continued to reimburse providers for services that the provider delegates to subordinates, such as physical therapists who delegate, to assistants. Id. at ¶72, ,85.
On January 4, 2013, Dr. Bloom was acquitted of all criminal charges. Id. at ¶ 91. Three days later, on January 7, 2013, IBC informed Dr. Bloom that IBC would require pre-payment review of all of his claims, requiring Plaintiffs to'attach supporting medical records for every patient’s claim(s). Id. at- ¶ 93. ■ By letter' dated April 4, 2013, IBC advised Dr. Bloom of its intent to terminate his Provider Agreement unless he “cured” various alleged breaches within 30 days. Id. at ¶ 97. The April 4, 2013 letter further advised Dr. Bloom that-in order to “cure” the.alleged breaches, he. would be required to repay $352,948 in overpayments, primarily for services rendered by massage therapists. Id. at ¶ 98. IBC subsequently began to unilaterally offset claims due to Dr. Bloom against the $352,948 in alleged overpay-ments. Id. at ¶ 99-100.
At IBC’s request, Dr. Bloom submitted a Certificate of Compliance to IBC in May 2013. Id. at ¶ 101. Dr. Bloom alleges that up to 2013, IBC repeatedly.confirmed that patients could. receive coverage for DATMP performed by a massage therapist when Weather Vane employees would call IBC for pre-certification and confirmation of coverage. Id. at ¶ 102-106. By letter dated September 26, 2013, IBC in formed Dr. Bloom that he had not cured the various material breaches of his Provider Agreement, and, as'a result, his-Provider Agreement would be terminated’ effective October 23, 2013. Id. at ¶ 107.
II. Plaintiffs’ Claims/
Tn their First Amended Complaint, Plaintiffs bring ten' clhims against Defendants challenging their condüct. The first four counts arise under the federal Employee Retirement Income Security Act (“ERISA”). The remaining counts allege violations of state law. •
Plaintiffs’ first count alleges Defendants violated ERISA based On the terms of the IBC ERISA Plans, claiming that Defendants’ denial of benefits and efforts to retroactively rescind coverage through the recoup of payments: constituted Adverse Benefits Determinations. Accordingly
Plaintiffs’ second count alleges that ERISA entitled them to a review of claims denials, and further that Defendants did not provide Plaintiffs with the review. Plaintiffs claim that Defendants’ failure to provide the required process entitles them to injunctive and declaratory relief as well as unpaid benefits.
Count Three of Plaintiffs’ First Amended Complaint seeks clarification of “Plaintiffs’ rights to future benefits under the terms of IBC ERISA Plans.” Id. at ¶ 178. Specifically, Plaintiffs request a declaratory judgment establishing they are entitled to direct payments from IBC for DATMP.
Count Four asks the Court for an injunction to prevent Defendants from denying claims for DATMP in the future.
Plaintiffs’ fifth count alleges a state law breach of contract claim. Specifically, Plaintiffs assert IBC violated the Provider Agreement between Dr. Bloom and IBC.
Count Six asserts a claim of promissory estoppel against Defendants. According to Plaintiffs, Defendants repeatedly confirmed to Plaintiffs’ employees that patients could receive “therapeutic massage •vyhen performed by a licensed massage therapist.” Id. at ¶ 194. Plaintiffs acted on those confirmations and provided the service, and Plaintiffs argue that Defendants should be estopped from now claiming those services were not covered.
Count Seven alleges IBC intentionally interfered with Plaintiffs’ contractual relations with their patients who have IBC insurance plans.
Count Eight brings a' claim of common law fraud against IBC. Plaintiffs allege that IBC defrauded Plaintiffs by pre-certi-fying DATMP when IBC knew that it would not reimburse Plaintiffs for the services.
Plaintiffs’ ninth count alleges IBC negligently misrepresented its policies by pre-certifying DATMP.
Count Ten asserts a claim of malicious prosecution against Defendants. Plaintiffs claim Defendants misled the Pennsylvania Office of the Attorney General into filing criminal charges against Dr. Bloom.
III. Defendants’ Motion to Dismiss
Defendants argue that Plaintiffs lack standing to bring their federal claims, depriving this Court of jurisdiction. Defendants contend that the ERISA statute under which Plaintiffs’ claims arise does not authorize Plaintiffs to bring those claims, and that the dispute in this case does not implicate ERISA at all, characterizing the issue as a simple matter of contract under the Provider Agreement. Defendants conclude by arguing that because Plaintiffs’ federal claims should be dismissed, this Court should decline to retain supplemental jurisdiction over Plaintiffs’ state law claims.
a. Standard of Review
Defendants’ Motion to Dismiss, brought pursuant to Fed. R. of Civ. P. 12(b)(1) and (6), challenges Plaintiffs’ standing and thus this Court’s jurisdiction to hear Plaintiffs’ claims. Ballentine v. United States,
Plaintiffs assert several grounds for standing. They first argue that they have standing to bring ERISA claims because they are directly “beneficiaries” of the insurance plans at issue in this case. Alternatively, Plaintiffs argue that even if they are not directly “beneficiaries,” then they have standing via a valid assignment, allowing them to stand in the shoes of their patients, who would unquestionably have standing to bring an ERISA action as plan participants.
i. Whether Plaintiffs Have Direct Standing under ERISA as Beneficiaries '
ERISA authorizes only certain categories of persons to bring civil actions to enforce ERISA’s requirements: “participants,” “beneficiaries,” “fiduciaries,” and the Secretary of Labor. 29‘ U.S.C. § 1132(a). The statute also defines which classes of persons may bring which civil actions. Of relevance here, the statute provides, that a “participant or beneficiary” may bring an action to obtain certain information from a plan administrator, “to recover benefits due to him ... to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” Id. A participant or beneficiary may also bring a suit to enjoin “any act or practice which violates any provision of this subchapter or the terms of the plan.” Id. at (a)(3). 29 U.S.C. § 1002(8) defines “beneficiary” as “a person designated by a participant, or by the terms of an employee benefit- plan, who is or may become entitled to a benefit thereunder.”
Plaintiffs contend that they have standing as beneficiaries for the purposes of 29 U.S.C. § 1132, arguing that once Dr. Bloom provided services to insured patients, Dr. Bloom became “entitled to a benefit” — specifically, payment for the covered services he provided patients. According to Plaintiffs, this entitlement also empowers Dr. Bloom with the right to bring a civil action pursuant to 29 U.S.C. § 1132 if- IBC fails to comply with ERISA’s requirements.
ERISA does not, on its face, explicitly reject the possibility that a provider of medical services could become a beneficiary with standing to sue, but most cases have rejected such an interpretation. See, e.g., Chiropractic Nutritional Assoc., Inc. v. Empire Blue Cross and Blue Shield,
Furthermore, other cases have considered the rights of medical services providers to sue insurance companies and found they may sue with indirect standing after receiving an assignment of the right to sue
Plaintiffs rely on what may be the only case to have accepted medical providers as beneficiaries with direct standing to , sue. In Pa. Chiropractic Ass’n v. Blue Cross Blue Shield Ass’n,
Plaintiffs contend that res judicata or collateral estoppel require this court to accept the decision of Pa. Chiropractic in this case. I disagree. In their First Amended Complaint, Plaintiffs argue that the question of whether participating providers who provided medical services to patients insured by Defendants “was actually litigated by IBC” > in Pa. Chiropractic, the issue was adjudicated - against IBC, IBC was fully represented in the case, and the “determination of the issue was a necessary part of the decision against IBC.” First Amended Complaint ¶ 127. •
Res Judicata does not apply here because Plaintiffs were not parties in Pa. Chiropractic. The Third Circuit recently recited the requirements for res judicata:
[c]laim preclusion, formerly referred to as res judicata, gives dispositive effect to a prior judgment if a particular issue, although not litigated, could have been raised in the earlier proceeding. , Claim preclusion requires: (1) a final judgment on the, merits in á prior suit involving; (2) the same parties or their privities [sic]; and (3) a subsequent suit based on the same cause of action.
Blunt v. Lower Merion School Dist.,
Nor does collateral estoppel apply. In general courts may find a party is estopped from re-litigating an issue when:
“(1) the issue sought to be precluded [is] the same as that involved in the prior action; (2) that issue [was] actually litigated; (3) it [was] determined by a final and valid judgment; and (4) the determination [was] essential to. the prior judgment.”
National R.R. Passenger Corp. v. Pennsylvania Public Utility Com’n,
I conclude that Plaintiffs are not beneficiaries with direct standing to bring their claims under ERISA. Next I must consider Plaintiffs’ alternative theory for standing: derivative standing after an .assignment of benefits from Plaintiffs’ patients as plan participants,
ii. Whether Plaintiffs have Derivative Standing under ERISA '■
As a general matter, providers of medical services can acquire derivative standing through an assignment of rights from their patients. In CardioNet, the Third Circuit adopted the “majority position that health care providers may obtain standing to sue by assignment from a plan participant.” CardioNet,
Recognizing that a valid assignment of rights from patients to a provider can confer standing, Defendants argue that any assignment from Dr. Bloom’s patients is invalid because of an anti-assignment provision in the relevant insurance plans. The anti-assignment clause that appears in all the relevant plans states:
The right of a Covered Person to receive benefit payments under this coverage is personal to the Covered Person and is not assignable in whole or in part to any person, Hospital or other entity nor may benefits of this coverage be transferred, either before or after Covered Services are rendered
Memorandum of Law in Support of Defendants’ Motion at 8.
The Third Circuit has not conclusively answered the question of whether an anti-assignment provision in an ERISA Plan can invalidate a patient’s assignment to an in-network provider such as Dr. Bloom. Similar anti-assignment provisions have been enforced in other circuits. Physicians Multispecialty Group v. Health Care Plan of Horton Homes, Inc.,
Plaintiffs argue that this matter is distinguishable from the line of cases referenced above for two reasons. First, they claim that the anti-assignment provision bans only the assignment of the'right to receive benefit payments, and does not
Plaintiffs support their contention that IBC’s anti-assignment provision applies to benefits payments but not coverage disputes in several ways. First, they argue that Pennsylvania state courts “have recognized that the right to assign a cause of action is separate and distinct from the right to assign benefits.” Plaintiffs’ Opposition at 11. Defendants’ anti-assignment clause only discusses the right to receive benefit payments, and so, by its literal terms, does not prevent patients from assigning their rights to bring ERISA lawsuits.
Second, Plaintiffs argue that the purpose of the anti-assignment provision cannot have been intended to prevent patients from assigning their rights to medical providers who provided covered services. Specifically, Plaintiffs maintain that although anti-assignment clauses might validly be used to prevent assignments of benefits to unrelated third-parties, such as creditors or out-of-network providers, the purpose of an anti-assignment clause in an ERISA plan cannot logically extend to prohibiting assignments to the providers who form the network through which the benefits protected by ERISA are provided. Moreover, “[d]enying standing to in-network health care providers to bring claims as assignees of plan participants undermines ERISA’s goal of improving benefit coverage for employees.” Plaintiffs’ Opposition at 12 (citing Lutheran Med. Ctr. of Omaha, Neb. v. Contractors, Laborers, Teamsters & Engineers Health & Welfare Plan,
Cases have recognized' that different rights can be independently assignable. The Pennsylvania Superior Court in Chiro
Defendants rely heavily on Cohen v. Independence Blue Cross,
Aside from these distinctions, I find it important that the Cohen and Brig-lia decisions pre-dated CardioNet where, in deciding an . issue of arbitrability, the Court of Appeals concluded that the key question was whether the dispute involved payment under the provider agreement or coverage for services • under the benefit plans. CardioNet,
It has taken me a great deal of reflection to reach a somewhat unsatisfying conclusion: at a minimum, the anti-assignment clause is ambiguous. “Contractual language is ambiguous ‘if it is reasonably susceptible of different constructions and capable of being undérstood in more than one sense.’” Madison Const. Co. v. Harleysville Mut. Ins. Co.,
Perhaps even more instructive, the Third Circuit took pains in CardioNet to emphasize the difference between a claim seeking payment or reimbursement for coverage provided under a provider agreement, as compared to claims seeking coverage under a benefit plan — the very distinction that controls my interpretation of the anti-assignment clause in this case.
As the Providers correctly note, CIG-NA’s argument to the contrary rests on a conflation.of claims, such as this one, seeking coverage under a benefit plan, and claims seeking reimbursement for coverage provided. The distinction is key. As we explained in Pascack Valley [Hosp. v. Local 464A UFCW Welfare Reimbursement Plan], a provider may bring a contract action for an insurer’s failure to reimburse the provider pursuant to the terms of the agreement, while a claim seeking coverage of a service may only be brought under ERISA. 388 F.3d [393] at 403-04 [ (3d Cir.2004) ] (holding that a hospital had an independent breach of contract action against the insurer because “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” (emphasis in original; quotation marks and alterations omitted)); see. also Blue Cross of Cal. v. Anesthesia Care Assocs. Med. Grp., Inc.,187 F.3d 1045 , 1051 (9th Cir.1999) (providers’ claim not preempted by ERISA where they “arise from [insurer’s] alleged breach of the provider agreements’ provisions regarding fee schedules, and the procedure for setting them, not what charges are ‘covered’ under the [] Plan”)., Here, the Providers’ claims do not concern the amount of payment to which they are entitled under the Agreement; but the right- to payment under the terms of the relevant plans.
CardioNet,
Furthermore, even if I interpreted the anti-assignment provision in Defendants’ favor, I would find that Plaintiffs have at least plausibly alleged facts, showing IBC waived the provision. Paragraph 125 of Plaintiffs First Amended Complaint states that IBC:
repeatedly and routinely provid[ed] Plaintiffs with written benefit summaries and telephone confirmation indicating that patients insured under IBC ERISA Plans had coverage for chiropractic care, specifically including confirmation of coverage for therapeutic massage when performed by a licensed massage therapist, and reported using CPT code 97124
Amended Complaint ¶ 125. According to Plaintiffs, Defendants’ decisions to pay Plaintiffs for covered- services for which Plaintiffs had received assignments of benefits waived Defendants’, right to deny the validity of'those assignments.
“It is well settled that waiver may be established by conduct inconsistent with claiming the waived right or any action or failure to act evincing an intent not to claim the right.” Evcco Leasing Corp. v. Ace Trucking Co.,
Defendants counter that its conduct paying Dr. Bloom directly for services could
However, Plaintiffs have pleaded explicit confirmations of coverage beyond mere compliance with the Provider Agreement, amounting to waiver of the anti-assignment clause. Proving waiver is a separate challenge, but, even if the anti-assignment provision against Plaintiffs were enforceable, they have plausibly alleged waiver.
Defendants’ final challenge to standing asserts that Plaintiffs cannot claim injury because the patients from whom Plaintiffs received their right to sue suffered no injury themselves. Therefore, by Defendants’ logic, Plaintiffs have no “injury-in-fact” and no standing. See Lujan v. Defenders of Wildlife,
For these reasons, I find that Plaintiffs have derivative standing to pursue their ERISA claims as assignees of plan participants.
c. Declaratory and Injunctive Relief
Defendants next challenge Plaintiffs’ ability to seek injunctive or declaratory relief under ERISA. Defendants take the position that even if the assignment of rights were valid and Plaintiffs had standing to sue, the remedies of injunctive and declaratory relief would not be available. These remedies would be “outside the logical scope of an assignment.” Defendants’ Memorandum in Support of their Motion to Dismiss at 22.
I reject Defendants’ argument. The assignment clause at issue here specifically included patients’ rights and benefits. First Amended Complaint at ¶ 122. It is a commonly applied principle of contract law that “an assignee stands in the shoes of the assignor,” and “an assignment will ordinarily be construed in accordance with the rules governing contract interpretation and the circumstances surrounding the execution of the assignment document.” Crawford Cent. School Dist. v. Com., 585
d. ■ Supplemental Jurisdiction • Over State Law Claims
Defendants ask me to decline to exercise supplemental jurisdiction over Plaintiffs’ state law claims if I find that Plaintiffs lack standing for their ERISA claims. • As I have found that Plaintiffs do have standing to bring their federal claims, I reject this argument as moot.
IV. Conclusion
. For the foregoing reasons, Defendants’ Motion will be denied. An appropriate Order follows.
ORDER
This 31st day July, 2015, for the reasons stated in my accompanying memorandum opinion, Defendants’ Motion to Dismiss Plaintiffs’ First Amended Complaint is DENIED.
Notes
, I note that this reading of the anti-assignment clause appears consistent with a distinction drawn by the U.S. Department of Labor’s (“DOL”) in its interpretation of "an assignment of benefits.” While not dispositive, the DOL’s website includes an instructive section titled “FAQs About The Benefit Claims Procedure Regulation” that specifically distinguishes an assignment of the right to receive benefit payments with an assignment of the right pursue a coverage dispute and appeal a benefit determination, as follows:
B-2: Does an assignment of benefits by a claimant to a health care provider constitute the designation of an authorized representative?
No. An assignment of benefits by a claimant is generally limited to assignment of the claimant’s right to receive a benefit payment under the terms of the plan. Typically, assignments are not a grant of authority to act on a claimant’s behalf in pursuing and appealing a benefit determination under a plan.
United State' Department of Labor; Employee Benefits Security Administration, FAQs About The Benefit Claims Procedure Regulation, http://www,dol.gov/ebsa/faqs/faq_claims_ pfoc_reg.html (last visited 7/27/15) (emphasis added)!
. Defendants’ Memorandum of Law in Sup-port of Their Motion at 17.