Brown v. BlueCross BlueShield of Tenn., Inc.

Decision Date27 June 2016
Docket NumberNo. 15–5739,15–5739
Citation827 F.3d 543
PartiesAmanda G. Brown; Harrogate Family Practice LLC, Plaintiffs–Appellants, v. BlueCross BlueShield of Tennessee, Inc., Defendant–Appellee.
CourtU.S. Court of Appeals — Sixth Circuit

ARGUED: Hudson T. Ellis, Eric Buchanan & Associates, PLLC, Chattanooga, Tennessee, for Appellants. James T. Williams, Miller & Martin PLLC, Chattanooga, Tennessee, for Appellees. ON BRIEF: Hudson T. Ellis, Eric L. Buchanan, Eric Buchanan & Associates, PLLC, Chattanooga, Tennessee, for Appellants. James T. Williams, Donald J. Aho, Robert F. Parsley, Miller & Martin PLLC, Chattanooga, Tennessee, for Appellees.

Before: KETHLEDGE, DONALD, and ROTH* , Circuit Judges.


ROTH, Circuit Judge.

Healthcare provider Harrogate Family Practice, LLC, and its owner, Amanda Brown (collectively Harrogate), brought suit under Section 502 of the Employee Retirement Income Security Act of 1974 (ERISA) to inter alia , enjoin Blue Cross Blue Shield of Tennessee (Blue Cross) from recouping payments for services Harrogate provided to Blue Cross members. The district court dismissed for lack of subject matter jurisdiction, finding that Harrogate lacked standing under ERISA. On appeal, Harrogate argues that it has direct standing to sue as an ERISA beneficiary or, in the alternative, that it acquired derivative standing via an assignment of benefits from Blue Cross members. We conclude that while Harrogate does have derivative standing through an assignment of benefits, its claim regarding recoupments falls outside the scope of that assignment and therefore we affirm the judgment of the district court.

I. Background

Harrogate is a healthcare provider that participates in Blue Cross networks, regularly treating patients who are participants and beneficiaries under health-benefit plans administered by Blue Cross. Per industry practice, Harrogate's patients signed an “Assignment of Benefits Form,” allowing Harrogate to bill Blue Cross directly for payment of services.1 The arrangement between Harrogate and Blue Cross is governed by a Provider Agreement, which allows Blue Cross to perform post-payment audits and recoup overpayments from Harrogate in the event a payment error is detected.2 The Provider Agreement includes a clause requiring that disputes between Blue Cross and Providers be submitted to binding arbitration.

At issue are claims filed by Harrogate for antigen leukocyte

cellular antibody (ALCAT) tests, which purport to identify certain food allergies. Blue Cross claims that these tests are “unproven,” with “little or no scientific rationale,” and therefore categorizes the tests as “investigational.” Investigational treatments are not “covered, compensable services” under Blue Cross's Manual for Providers, which is incorporated by reference into the Provider Agreement. The Provider Agreement also specifies that Harrogate may not “back-bill patients for un-reimbursed, investigational treatments unless prior to rendering such services, “the Provider has entered into a procedure-specific written agreement with the Member, which has advised the Member of his/her payment responsibilities.”

In November 2013, Blue Cross conducted two audits of Harrogate's billings and found improper payments to Harrogate for ALCAT tests. Based on these findings, Blue Cross began recouping overpayments from Harrogate. Harrogate brought suit in the United States District Court for the Eastern District of Tennessee, seeking declaratory and injunctive relief to bar further recoupment by Blue Cross under ERISA §§ 502(a)(3) and 502(a)(1)(B), as well as compensatory relief for funds that had allegedly been wrongfully recouped. Blue Cross moved to dismiss the case under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6)

, arguing that Harrogate lacked standing under ERISA, and also moved to compel arbitration under the Provider Agreement. The district court granted Blue Cross's motion to dismiss, holding that Harrogate did not meet the statutory definition of “beneficiary” and that Harrogate had not received a valid assignment for the purpose of conferring derivative standing to bring suit under ERISA. Harrogate now appeals.

II.3 Direct Standing under ERISA

ERISA's civil enforcement provision empowers only plan participants and beneficiaries to bring suit to recover their benefits under a plan. 29 U.S.C. § 1132(a)(1)(b)

. A beneficiary is defined 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.” 29 U.S.C. § 1002(8). Harrogate argues that it meets the statutory definition of “beneficiary” because it is “designated by the applicable ERISA Plans to receive and [does] in fact receive Plan benefits in exchange for medical care provided to participants.”

The Sixth Circuit has long rejected this theory of ERISA standing. “The fact that [a healthcare provider] may be entitled to payment from [an insurance company] as a result of her clients' participation in an employee plan does not make her a beneficiary for the purpose of ERISA standing.” Ward v. Alternative Health Delivery Sys., Inc. , 261 F.3d 624, 627 (6th Cir.2001)

. This position is consistent with every other circuit that has considered the issue. See

Pa. Chiropractic Ass'n v. Independence Hosp. Indem. Plan, Inc. , 802 F.3d 926, 930 (7th Cir. 2015) (holding that healthcare providers “are not ‘beneficiaries' as ERISA uses that term.”); Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc. , 770 F.3d 1282, 1289 (9th Cir.2014) (holding that a health care provider “cannot bring claims for benefits on its own behalf” under ERISA); Pascack Valley Hosp., Inc. v. Local 464A UFCW Welfare Reimbursement Plan , 388 F.3d 393, 400 (3d Cir.2004) ( We conclude that the Hospital could not have brought its claims under § 502(a) because the Hospital does not have standing to sue under that statute.”); Hobbs v. Blue Cross Blue Shield of Ala. , 276 F.3d 1236, 1241 (11th Cir.2001) (“Healthcare providers ... are not considered ‘beneficiaries' or ‘participants' under ERISA.”). The Second Circuit provided an excellent summary of the logic behind these holdings in its recent Rojas decision, in which it concluded that:

“Beneficiary,” as it is used in ERISA, does not without more encompass healthcare providers. Although the term “benefit” is not defined in ERISA, we are persuaded that Congress did not intend to include doctors in the category of “beneficiaries.” Benefits to which a beneficiary is entitled are bargained-for goods, such as “medical, surgical or hospital care,” rather than a right to payment for medical services rendered.... While [the Provider] may indeed be entitled to a benefit qua benefit through operation of the plan—i.e. , payment for its medical services—[the Provider] confuses the issue. The “benefit” the plan provides belongs to [the Provider's] patients; [the Provider's] claim to payment for covered services is a function of how [the insurer] reimburses healthcare providers under the Benefit Plan. That right to payment does not a beneficiary make.

Rojas v. Cigna Health and Life Ins. Co. , 793 F.3d 253, 257–58 (2d Cir.2015)

(internal citations omitted).

Harrogate has offered no persuasive reasoning to disturb our previous holding or contradict those of the other circuits. Thus, consistent with our previous decision in Ward

, we hold that a healthcare provider does not qualify as a statutory beneficiary under ERISA and therefore affirm the district court's finding that Harrogate lacks direct standing to bring its claims.

III. Derivative Standing under ERISA

Harrogate asserts that even if it lacks standing as a statutory beneficiary, it can still pursue its claims under a theory of derivative standing, based on the “Assignment of Benefits Forms” its patients signed. Derivative standing confers upon the holder of a valid assignment “standing to sue in place of the assignor.” Misic v. Bldg. Serv. Emps. Health and Welfare Trust , 789 F.2d 1374, 1378 (9th Cir.1986)

. As we previously held, a provider obtains derivative standing to sue under ERISA only when the patient “actually convey[s] a “valid assignment of benefits” under the plan. Cromwell v. Equicor–Equitable HCA Corp. , 944 F.2d 1272, 1277 (6th Cir.1991). Blue Cross argues that Harrogate's “Assignment of Benefits Forms” provide only for direct payment and are therefore insufficient to grant an assignment of rights for purposes of derivative standing. The district court agreed, finding “no consensus among the federal courts regarding whether language that provided for direct payment of benefits constitutes an assignment for purposes of ERISA.”

However, there is now a broad consensus that “when a patient assigns payment of insurance benefits to a healthcare provider, that provider gains standing to sue for that payment under ERISA § 502(a).” North Jersey Brain and Spine Ctr. v. Aetna, Inc. , 801 F.3d 369, 372 (3d Cir.2015)

; see also

Rojas , 793 F.3d at 258 (2d Cir.2015) ; Spinedex , 770 F.3d at 1289 (9th Cir.2014) ; Tango Transp. v. Healthcare Fin. Servs. LLC , 322 F.3d 888, 889 (5th Cir.2003) ; I.V. Servs. of Am. v. Inn Dev. & Mgmt. , 182 F.3d 51, 54 n.3 (1st Cir.1999) ; Kennedy v. Conn. General Life Ins. Co. , 924 F.2d 698, 701 (7th Cir.1991). Indeed, the case that the district court relied most heavily upon for rejecting Harrogate's claim of derivative standing was recently overturned on appeal by the Third Circuit in American Chiropractic, which found that an assignment of benefits was effective to grant the healthcare provider derivative standing under ERISA. Am. Chiropractic Ass'n. v. Am. Specialty Health Inc. , 625 Fed.Appx. 169, 174–75 (3d Cir.2015). In that case, the Third Circuit recognized that an assignment of the right to payment—with language virtually identical to that in Harrogate's “Assignment of Benefits” form4 —necessarily included the ability to enforce that right by bringing suit...

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