NORTH CYPRESS MEDICAL CENTER OPERATING COMPANY, LIMITED; NORTH CYPRESS MEDICAL CENTER OPERATING COMPANY GP, L.L.C., Plaintiffs - Appellants v. CIGNA HEALTHCARE; CONNECTICUT GENERAL LIFE INSURANCE COMPANY; CIGNA HEALTHCARE OF TEXAS, INCORPORATED, Defendants - Appellees
No. 18-20576
United States Court of Appeals for the Fifth Circuit
March 19, 2020
IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
No. 18-20576
Appeals from the United States District Court for the Southern District of Texas
Before KING, JONES, and DENNIS, Circuit Judges.
North Cypress Medical Center Operating Co., Ltd., and North Cypress Medical Center Operating Co. GP, L.L.C., appeal the adverse judgment rendered by the district court on ERISA claims assigned by Cigna-insured patients. They contend that substantively and procedurally flawed insurer decisions resulted in underpayment of more than $40 million in benefit claims. Because the district court correctly applied this court‘s decision in Connecticut General Life Insurance Co. v. Humble Surgical Hospital, L.L.C., which construed an identical provision, 878 F.3d 478, 485 (5th Cir. 2017), North Cypress‘s arguments cannot be sustained. We AFFIRM.
BACKGROUND
In 2007, the Plaintiff-Appellants (collectively, “North Cypress“) opened a general acute care hospital. With the help of a third-party consultant, North Cypress developed a master schedule of fees for each service. When North Cypress provided services covered by a patient‘s insurance, it reported the scheduled fee for the services to the patient‘s insurance company. The insurance company was expected to pay most of the fee, while the patient, still nominally responsible for the entire cost, would be billed for a smaller percentage as coinsurance and possibly a deductible.
North Cypress decided to give its patients a break on coinsurance. The hospital offered to limit the patient‘s coinsurance obligation if the patient paid a certain amount of what he owed within 120 days. To calculate this “Prompt Pay Discount,” North Cypress started from Medicare‘s reimbursement schedule, which provided fees far lower than North Cypress‘s master schedule for non-Medicare patients. North Cypress multiplied the Medicare fee by 125 percent, and it then applied the
The Defendant-Appellees (collectively, “Cigna“) administer, and sometimes fund, health insurance plans. All the plans at issue in this case provide Cigna with discretionary authority to interpret the plans, and all “specifically exclude” from coverage:
Charges for which you are not obligated to pay or for which you are not billed or would not have been billed except that you were covered under this Agreement.3
Cigna interpreted this language as its refusal to countenance a provider‘s “fee forgiveness,” on the ground that such practices desensitize insureds to the higher cost of out-of-network medical care.
Throughout the period relevant to this lawsuit, Cigna insured North Cypress patients at out-of-network rates.4 In a 2007 letter when it opened for business, North Cypress acknowledged its out-of-network status but noted that Cigna members would still be eligible for its Prompt Pay Discount. North Cypress did not explain how it calculated that discount, and Cigna replied with concern that North Cypress proposed to engage in fee-forgiveness. Cigna emphasized that it would recognize charges only insofar as beneficiaries were legally liable for them, adding that it might delay or deny payment until it had “assurance that the charges shown on claim forms are your actual charges to the patient and that patients will be required to pay amounts such as out-of-network co-insurance and deductibles.” North Cypress replied that the Prompt Pay Discount “does not waive any portion of North Cypress‘s charges for a service.” North Cypress did not explain to Cigna that the Prompt Pay Discount was based on an entirely different fee schedule, the assumption of an in-network coinsurance
Until early November 2008, Cigna accepted claims proffered by North Cypress, paying approximately 80% of the hospital‘s bill based on its master fee schedule. Prompted by complaints from its insureds about extraordinary out-of-network payments, Cigna became suspicious of fee forgiveness by North Cypress and launched an investigation. It sent 34 survey letters to Cigna plan members and received 19 responses. It received a range of answers and concluded that North Cypress generally collected $100 from a Cigna-insured patient, if anything.
Consequently, Cigna decided to change its payment process for North Cypress claims and notified the hospital of its new “Fee-Forgiving Protocol.” Going forward, it would assume that North Cypress charged patients $100, and based on this coinsurance payment, it would calculate the cost of the procedure. Then, it would pay what the patient‘s plan dictated for a procedure of that cost at an out-of-network hospital. This assumption would be revoked if the beneficiary (or assignee) showed that the amount submitted was actually the amount charged and that the Cigna participant had paid the applicable out-of-network coinsurance amount.
North Cypress protested implementation of the Protocol and, as its patients’ assignee, appealed claims in Cigna‘s multi-level appeals process. Consistently, North Cypress‘s first appeal would be met with a letter from Cigna conveying that the original decision was based on Cigna‘s policy of not paying charges that patients are not legally obliged to pay. The letter would explain the process for a second appeal. According to the letter, appeals were to be decided by a unit separate from the unit involved in the initial decision. The district court found that Cigna adjusted some claims in favor of North Cypress during the appeal process, but North Cypress refused to complete the appeals process for the vast majority of its claims.
In 2009, North Cypress sued in federal court seeking relief for claimed underpayments of insurance by Cigna under state law, RICO, and ERISA. The district court ruled, in relevant part, that North Cypress lacked standing to pursue ERISA claims.5 On appeal, this court reversed that ruling and remanded for consideration of the ERISA claims. North Cypress I, 781 F.3d at 192-95.
After further discovery, the district court responded to cross-motions for summary judgment by dismissing North Cypress‘s
An eight-day bench trial followed. At trial, the court refused to reconsider its ruling on exhaustion. Also, the court dismissed
STANDARD OF REVIEW
“On appeal from a bench trial, this court review[s] the factual findings of the trial court for clear error and conclusions of law de novo.” Humble, 878 F.3d at 483 (alteration in original) (quoting George v. Reliance Standard Life Ins. Co., 776 F.3d 349, 352 (5th Cir. 2015)). In reviewing de novo an administrator‘s ERISA plan interpretation, we apply the same standard as is appropriate for the district court. Id. “[W]hen an administrator has discretionary authority with respect to the decision at issue, the standard of review should be one of abuse of discretion.” Id. (alteration in original) (quoting Vega v. Nat‘l Life Ins. Servs., Inc., 188 F.3d 287, 295 (5th Cir. 1999) (en banc), overruled on other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 128 S. Ct. 2343 (2008)).
“This court reviews a grant of summary judgment de novo, applying the same standards as the district court. We therefore affirm the district court‘s grant of summary judgment ‘if, viewing the evidence in the light most favorable to the non-moving party, there is no genuine dispute [as] to any material fact and the movant is entitled to judgment as a matter of law.” LifeCare Mgmt. Servs. L.L.C. v. Ins. Mgmt. Adm‘rs Inc., 703 F.3d 835, 840–41 (5th Cir. 2013) (alteration in original) (citation omitted) (quoting U.S. ex. rel. Jamison v. McKesson Corp., 649 F.3d 322, 326 (5th Cir. 2011)).
Finally, this court reviews a denial of attorney‘s fees for abuse of discretion, reviewing factual findings for clear error and legal conclusions de novo. See Humble, 878 F.3d at 488; see also Dean v. Riser, 240 F.3d 505, 507 (5th Cir. 2001).
DISCUSSION
On appeal, North Cypress raises numerous issues, most of which are connected to the impact of our first appellate decision in this case and intervening case law. Thus, North Cypress contends the district court violated the law of the case by not considering the legal correctness of Cigna‘s plan interpretation. Second, in contravention of our earlier opinion, the court failed to find that Cigna had conflicts of interest, lacked good faith, and abused its discretion in denying claims under the hospital‘s Prompt Payment Discount policy. Next, the district court erred in relying on Connecticut General Life Insurance Co. v. Humble Surgical Hospital, L.L.C., the intervening decision of this court that interpreted the same language at issue in Cigna‘s policy here. Moving on, North Cypress alleges that futility excused its failure to exhaust administrative remedies for the vast majority of benefit claims at issue and that Cigna failed to provide fair and full review of the challenged benefit claims. Finally, the district court allegedly erred in denying damages and failing to award attorney‘s fees to North Cypress.
I. Law of the Case
Reviewing Cigna‘s disposition of the challenged benefit claims, the district court “skipped the legal correctness analysis” and proceeded to the “functional equivalent of arbitrary and capricious review.” According to North Cypress, this procedure violated the law of the case because, in North Cypress I, this court allegedly ordered the trial court on remand to decide whether Cigna‘s plan interpretation was legally correct. In fact, the law of the case stated no such imperative.
In North Cypress I, Cigna requested that this court “affirm the grant of summary judgment against North Cypress‘s benefit underpayment claims on the merits.” 781 F.3d at 195. The panel chose instead to “vacate and remand to allow the district court a full opportunity to consider all of North Cypress‘s claims for underpayment of benefits and its other closely related ERISA claims with a fully developed record.” Id. at 197. To explain the remand, the North Cypress I panel identified “the many issues Cigna asks us to decide.” Id. at 196. For this reason, the panel stated,
Analysis of Cigna‘s plan interpretation proceeds in two steps. The first question is whether Cigna‘s reading of the plans is “legally correct.” ... On a finding that the plans, read correctly, do not condition coverage on collection of coinsurance, the question would be whether Cigna nevertheless had discretion to absolve itself of responsibility for payment of the greater part of thousands of claims. At this stage of the analysis, the inquiry would include among other factors, whether Cigna had a conflict of interest, as well as the “internal consistency of the plan” and “the factual background of the determination and any inferences of lack of good faith.”
Id. at 195–96 (quoting Threadgill v. Prudential Secs. Grp., Inc., 145 F.3d 286, 293 (5th Cir. 1998)).
This general statement of the law, expressed in terms of the facts of the case, is no mandate at all. Nor is it a statement of the whole law regarding review of ERISA benefit decisions. The court‘s summary omits mention of Duhon v. Texaco, Inc., 15 F.3d 1302, 1307 n.3 (5th Cir. 1994) and Holland v. International Paper Co. Retirement Plan, 576 F.3d 240, 246 n.2 (5th Cir. 2009) (cited in North Cypress I, 781 F.3d at 195 n.57), in which this court established that a party may skip the legal correctness inquiry and proceed to consider whether the plan administrator abused its discretion, as outlined in North Cypress I. The North Cypress I panel did not deny the authority of Duhon or of Holland (nor could it).
Accordingly, the district court properly relied on Holland, as well as on Humble, 878 F.3d at 483–84, in skipping the legal correctness analysis. In so doing, the court did not violate the law of the case and committed no error.
II. Conflicts of Interest and Lack of Good Faith
Law of the case aside, North Cypress contends also that the district court erred in its evaluation of the conflicts of interest and inferences of lack of good faith that North Cypress raised. Under Humble, however, the abuse-of-discretion inquiry was obviated by the existence of prior legal authority supporting Cigna‘s interpretation of identical or nearly identical language concerning insureds’ coinsurance obligations. Humble explained that “[o]ther courts have held that, where an administrator‘s interpretation is supported by prior case law, it cannot be an abuse of discretion—even if the interpretation is legally incorrect.” Humble, 878 F.3d at 484. Because, as North Cypress itself has acknowledged, the circumstances of this case match those in Humble, Cigna‘s alleged conflicting interests and lack of good faith are immaterial.7
If a benefit claimant (or, as here, assignee) challenges the disposition of a claim, and the court makes no finding of legal correctness to end the inquiry, then it must ordinarily consider whether the plan administrator‘s interpretation was arbitrary and capricious. Humble, 878 F.3d at 483. The inquiry may generally include reviewing whether the plan administrator “had a conflict of interest, as well as the ‘internal consistency of the plan’ and ‘the factual background of the determination and any inferences of lack of good faith.‘” North Cypress I, 781 F.3d at 195–96 (quoting Threadgill, 145 F.3d at 293). Under Humble, however, it may not be necessary to review these factors, at least “under the present circumstances,” where two other courts “effectively or explicitly concluded that the [insurer‘s interpretation of the] provision at issue here was legally correct.” 878 F.3d at 485.8
For some of the benefit decisions in Humble, one relevant and longstanding prior case, decided in 1991, was Kennedy v. Connecticut General Life Insurance Co., 924 F.2d 698 (7th Cir. 1991). Id. at 485. The Kennedy court ruled that Cigna‘s interpretation of a “nearly-identical” provision as imposing a fee forgiveness restriction was legally correct. Kennedy, 924 F.2d at 701. The Humble court also relied on the district court‘s first decision in this case, which although vacated in North Cypress I, was controlling during most of the period covering Cigna‘s dealings with Humble Surgical Hospital and had also ruled Cigna‘s interpretation to be correct. Thus, as in Humble, so it must be here: this court must adhere to the same reasoning and result concerning the same policy language. Cigna‘s interpretation, having relevant legal support, could not in these circumstances be an abuse of discretion.
III. Applying Humble
To avoid the dispositive effect of Humble, North Cypress proposes four critiques: Humble contradicts North Cypress I and
First, it is simply incorrect to claim that ”Humble came to a different conclusion than did N. Cypress finding that Cigna‘s Exclusion interpretation is ‘legally correct.‘” Humble came to no such conclusion. Instead, the court “skip[ped]” consideration of the issue because “even if [Cigna‘s] construction of the plans’ exclusionary language was legally incorrect, its interpretation still fell within its broad discretion.” Humble, 878 F.3d at 484. Moreover, North Cypress I made no final determination about the legal correctness of Cigna‘s interpretation, as it merely “suggested (without deciding) that this reading might be legally incorrect.”9 Id. Humble remains binding.
North Cypress contends that here, unlike in Kennedy, North Cypress left patients legally responsible for co-payments. True or not, that contention is irrelevant for present purposes. Humble relied on Kennedy, not to determine whether patients actually were responsible for co-payments, but rather to determine whether Cigna reasonably required that patients be legally responsible for co-payments. Humble, 878 F.3d at 484–85. As North Cypress admits, the relevant interpretation in this case is the same as the interpretation in Humble. Kennedy was reasonably invoked in Humble in determining whether Cigna‘s interpretation was an abuse of discretion, and it is reasonably applicable here.
North Cypress counters that, even if Kennedy applies to this case, Cigna did not rely on Kennedy. Indeed, a series of “facts here not present in Humble”10 constitute Cigna‘s alleged conflicts of interest and lack of good faith. As previously explained, however, they are immaterial.
Finally, North Cypress does not adequately brief a challenge to the existence of substantial evidence supporting Cigna‘s decisions.11 Even if a plan interpretation
IV. Remaining Issues
North Cypress also raised the alleged “futility” of exhausting Cigna‘s appeal process for denied claims, but this process claim is moot because the administrator‘s decisions were no abuses of discretion. North Cypress‘s other process argument on appeal—against summary dismissal of its
CONCLUSION
For the foregoing reasons, the district court‘s judgment is AFFIRMED.
An argument not included in a statement of issues nor addressed in the body of the brief must be deemed waived. United States v. Thames, 214 F.3d 608, 612 (5th Cir. 2000). North Cypress could not undo this waiver by raising the issue in its reply brief. Depree v. Saunders, 588 F.3d 282, 290 (5th Cir. 2009) (“This court will not consider a claim raised for the first time in a reply brief.“). Thus, North Cypress waived the issue of whether Cigna had substantial evidence for its decision, and the district court‘s finding of substantial evidence stands undisputed.