:: Health Care Provider’s Tort Claims Preempted Under Fifth Circuit ERISA Jurisprudence

The Court did not suggest that all tort claims are completely preempted by ERISA wherever there is an assignment of patient benefits, only that Plaintiffs’ claims in this case were so preempted under controlling Fifth Circuit law. See Transitional Hosps. Corp. v. Blue Cross & Blue Shield of Tex., Inc., 164 F.3d 952, 954 (5th Cir. 1999).

Quality Dialysis One LP v. Aetna Life Ins. Co., 2009 U.S. Dist. LEXIS 115498 (S.D. Tex. Dec. 10, 2009)

In this opinion out of the Southern District of Texas, the Court finds the health care provider’s claims for reimbursement preempted where the provider sued the health plan asserting ”tort claims flowing from the direct communications and business relationship between the parties.” 

The presence of an assignment of benefits and the absence of claims based upon a managed care contract contributed largely to the plan’s successful defense.

The Facts

The facts are adequately summarized in the following excerpt:

Quality Dialysis is a home hemodialysis provider that serviced patients covered by health insurance and employee welfare benefit plans that Aetna administered. Beginning in September 2006, Plaintiffs allege that Aetna began to systematically deny Quality Dialysis’ claims for payment and demanded a refund for claims already paid in excess of one million dollars.

Quality Dialysis further contends that Aetna attempted to persuade patients using Quality Dialysis’ services to switch to a competitor’s home hemodialysis service. Finally, Quality Dialysis alleges that the unpaid insurance claims and Aetna’s request for a refund on past claims caused it to lose an opportunity to sell its business to an unnamed prospective purchaser.

 No Managed Care Contractual Claims

The case was first filed in state court and thereafter removed to federal court based upon ERISA complete preemption of the plaintiff’s claims.  The Court denied the plaintiff’s motion to remand, and in the opinion under discussion here, denied a motion for reconsideration.

The Court observes that:

In its motion for reconsideration, Quality Dialysis argues that the Court failed to “distinguish the true nature of the separate, independent tort causes of action raised by Plaintiffs[,] which only arise out of the independent business relationship between an insurer (Aetna) and medical provider (Quality Dialysis).” (Doc. 39 at 1.)  Quality Dialysis concedes that it “does not bring a breach of contract action arising out of a managed care agreement . . . .” (Id. at 2.) This is important because there was no managed care contract between the Plaintiffs and Defendants in this case.

Claims Based Upon Tort Theories

The Court viewed the plaintiff’s claims as essentially tort claims that emulated a claim for benefits under the plan.  Such claims are of course subject to ERISA complete preemption. 

The Court makes this point as follows:

. . . Quality Dialysis brings “tort claims flowing from the direct communications and business relationship between the parties.” (Id.) The Court, however, determined that it is precisely these tort claims that are preempted by the Employee Retirement Income Security Act of 1974 (”ERISA”), as amended, 29 U.S.C. §§ 1001-1461.

Effect Of Assignment

The plaintiffs claimed that the Court had overemphasized the effect of an assignment of benefits.

Plaintiffs further express concern that the Court’s ruling “would shield every insurance company from its  independent torts committed against medical providers, no matter how egregious, if the medical provider obtains an assignment of benefits from the patient.”

But the Court rejected this claim as fallacious, stating:

The Court did not suggest that all tort claims are completely preempted by ERISA wherever there is an assignment of patient benefits, only that Plaintiffs’ claims in this case were so preempted under controlling Fifth Circuit law. See Transitional Hosps. Corp. v. Blue Cross & Blue Shield of Tex., Inc., 164 F.3d 952, 954 (5th Cir. 1999).

Thus, the motion for reconsideration was denied.

Note:  This opinion is rather short.  It nonetheless provides a pithy distinction between provider cases brought outside of managed care agreements and those that may articulate an independent contractual duty that may potentially survive preemption.

Procedural Point – The Court notes that the Rule 60 motion is inferior to a timely Rule 59(e) motion.  That is a distinction also worth noting.

  Although Plaintiffs fails to expressly invoke the provision governing motions for reconsideration, such motions are generally considered cognizable under either Federal Rule of Civil Procedure 59(e), as motions “to alter or amend judgment,” or under Rule 60(b), as motions for “relief from judgment.” Lavespere v. Niagara Mach. & Tool Works, 910 F.2d 167, 173 (5th Cir. 1990). “Under which Rule the motion falls turns on the time at which the motion is served.

 If the motion is served within ten days of the rendition of judgment, the motion falls under Rule 59(e); if it is served after that time, it falls under Rule 60(b).” Id. (citing Harcon Barge Co. v. D & G Boat Rentals, 784 F.2d 665, 667 (5th Cir.1986) (en banc)). Because Plaintiffs brought their motion for reconsideration more than ten days from entry of judgment, reconsideration can only be given within the stricter limitations of Rule 60(b).

Earlier Opinion – As noted above, the present opinion was in the context of a motion for reconsideration.  More insight on the Court’s reasoning may be gleaned from this excerpt from the prior opinion:

Finally, Quality Dialysis alleges the common law torts of negligence, negligent misrepresentation, and interference with existing contracts and business relations. Quality Dialysis argues that it is a third-party health care provider and therefore that Memorial Hosp. Sys. v. Northbrook, 904 F.2d 236 (5th Cir. 1990) controls. In that case, the Fifth Circuit held that a claim of deceptive practice under Texas Insurance Code for misrepresentation of the coverage status of an employee’s spouse was not preempted by ERISA, where the hospital providing treatment was a third-party health care provider. While “ERISA does not preempt state law when the state-law claim is brought by an independent, third-party health care provider . . . against an insurer for its negligent misrepresentation regarding the existence of health care coverage[,] . . . state-law claims for breach of fiduciary duty, negligence, equitable estoppel, breach of contract, and fraud are preempted by ERISA when the [health care provider] seeks to recover benefits owed under the plan to a plan participant   who has assigned her right to benefits to the [health care provider].” Transitional Hosps. Corp. v. Blue Cross & Blue Shield of Tex., Inc., 164 F.3d 952, 954 (5th Cir. 1999) Hosps. Corp. v. Blue Cross & Blue Shield of Tex., Inc., 164 F.3d 952, 954 (5th Cir. 1999) (internal citations omitted). Here, Quality Dialysis is a health care provider holding an assignment of ERISA plan benefits.

In Davila, the Supreme Court confronted state claims against HMOs for negligence “in the handling of coverage decisions” under their benefit plans. 542 U.S. at 204. The Court held that such claims were completely preempted by ERISA despite any violation of state law because “interpretation of the terms of [plaintiffs’] benefit plans form[ed] an essential part of their [state law] claim.” Id. at 213. Quality Dialysis, as an assignee of patients’ plan benefits, could have brought suit under ERISA § 502(a). Because Plaintiffs’ state law causes of action and common law torts arising from unpaid and underpaid insurance claims in plans administered by Aetna are preempted by ERISA, the Court finds federal question jurisdiction present as to these claims.

Quality Dialysis One LP v. Aetna Life Ins. Co., 2009 U.S. Dist. LEXIS 89672 (S.D. Tex. Sept. 29, 2009)

Other Fifth Circuit Authority –  The provider reimbursement case law in the Fifth Circuit has been quite influential.  Here are some important cases in Fifth Circuit jurisprudence in this context:

Hermann Hosp. v. MEBA Medical & Benefits Plan, 845 F.2d 1286, 1290 (5th Cir. 1988)(Hermann I).

Memorial Hosp. System. V. Northbrook Life Ins. Co., 904 F.2d 236, 243-46 (5th Cir. 1990).

Hermann Hosp. v. MEBA Medical & Benefits Plan, 959 F.2d 569 (5th Cir.1992) (Hermann II ).

Cypress Fairbanks Med. Center, Inc. v. Pan-American Life Ins. Co., 110 F.3d 280 (5th Cir.), cert. denied, 139 L. Ed. 2d 110, 118 S. Ct. 167 (1997).

Transitional Hosps. Corp. v. Blue Cross & Blue Shield, Inc., 164 F.3d 952 (5th Cir. Tex. 1999).

Abilene Reg’l Med. Ctr. v. United Indus. Workers Health & Benefits Plan, 41 Employee Benefits Cas. (BNA) 1098 (5th Cir. Tex. Mar. 6, 2007)