Conn. Gen. Life Ins. Co. v. Sw. Surgery Ctr., LLC

• Decision Date: 03 October 2018
• Docket Number: Case No. 14 CV 08777
• Citation: 349 F.Supp.3d 718
• Parties: CONNECTICUT GENERAL LIFE INSURANCE COMPANY and Cigna Health and Life Insurance Company, Plaintiff, v. SOUTHWEST SURGERY CENTER, LLC, d/b/a Center for Minimally Invasive Surgery, Defendant.
• Court: U.S. District Court — Northern District of Illinois

349 F.Supp.3d 718

CONNECTICUT GENERAL LIFE INSURANCE COMPANY and Cigna Health and Life Insurance Company, Plaintiff,

v.SOUTHWEST SURGERY CENTER, LLC, d/b/a Center for Minimally Invasive Surgery, Defendant.

Case No. 14 CV 08777

United States District Court, N.D. Illinois, Eastern Division.

Signed October 3, 2018

Daniel Keenan Ryan, Peter E. Pederson, Jr., Leigh Christina Bonsall, Hinshaw & Culbertson LLP, Chicago, IL, for Plaintiffs.

Douglas L. Prochnow, John A. Roberts, Matthew Mark Garrett, Faegre Baker Daniels, LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

John Robert Blakey, United States District Judge

Plaintiff Connecticut General Life Insurance Company and Cigna Health and Life Insurance Company (Cigna), a managed care company responsible for administering health and welfare benefit plans, brings this action against Southwest Surgery Center, LLC (CMIS), an out-of-network health care provider. Cigna seeks a declaratory judgment that CMIS has engaged in fee-forgiving practices that have eliminated Cigna's obligation to pay or otherwise reimburse CMIS for services provided. Additionally, Cigna asserts claims of recoupment of overpayments received by CMIS; fraudulent misrepresentation; and negligent misrepresentation. CMIS counterclaims to recover more than $4 million in billed charges on reimbursement claims that Cigna denied, and asserts claims for promissory estoppel, fraud, and violations of the Illinois Consumer Fraud Act.

Cigna moves to dismiss Count III of CMIS' second amended counterclaim [159], and for summary judgment on all counts of CMIS' second amended counterclaim [143]. CMIS moves for partial summary judgment on Counts II, III, and IV of Cigna's Complaint [151], and for partial summary judgment on claims where there is no evidence of fee-forgiveness or Cigna is equitably estopped [154].

For the reasons explained below, this Court: (1) denies Cigna's motion to dismiss Count III of CMIS' second amended counterclaim; (2) grants summary judgment to Cigna on all counts of CMIS' second amended counterclaim; (3) grants in part, and denies in part, CMIS' motion for summary judgment on Counts II, III, and IV of Cigna's complaint; and (4) denies CMIS' motion for partial summary judgment on claims where there is no evidence of fee-forgiveness or Cigna is equitably estopped.

I. Background

The following facts come from Cigna's statement of facts [144]; CMIS' response to Cigna's statement of facts and additional facts [172]; Cigna's response to CMIS' statement of additional facts [197]; CMIS' statements of facts [153] [156]; Cigna's responses to CMIS' statements of facts and additional facts [175] [179]; and CMIS' responses to Cigna's statements of additional facts [192] [193].

A. The Parties

Cigna provides claims administration and insurance services for health benefit plans that employers sponsor to provide health care coverage to employees and their dependents. [144] ¶ 4. As part of the administration of these plans, Cigna provides coverage for both "in-network" and "out-of-network" health care providers. Id. ¶ 5. In-network providers often contract with Cigna to provide medical services to plan members for a negotiated set of fees as payment in full for covered services, while out-of-network providers set their own fees. Id. Cigna says that out-of-network providers generally charge higher amounts than in-network providers and that, under its plans, members generally pay a higher deductible and lower coinsurance when they select care from out-of-network providers. Id. ¶¶ 5, 7. CMIS, on the other hand, says that out-of-network providers may charge higher or lower amounts than in-network providers, and that whether a plan member pays higher or lower deductibles, coinsurance, and copayments depends upon a variety of factors. [172] ¶¶ 5, 7.

CMIS is an ambulatory surgical center located in Mokena, Illinois. [156] ¶ 5. CMIS was a contractual in-network provider for Cigna for many years. [197] ¶ 1. As an in-network provider, CMIS agreed to accept payment at negotiated contract rates that were often less than its usual billed or standard rates. [156] ¶ 9. In May 2010, Cigna and CMIS terminated their contract, and CMIS thereafter became an out-of-network provider with no direct contractual relationship with Cigna. Id. ¶¶ 19–20. As an out-of-network provider, CMIS was not required to accept discounted reimbursement rates and was free to bill patients for the balance between any amount Cigna paid and CMIS' charges. Id. ¶¶ 21–22.

B. Fee-Forgiveness

Cigna asserts that some out-of-network providers engage in fee-forgiveness schemes, where they do not bill patients for deductibles, copayments, or coinsurance. [144] ¶ 9. Cigna says fee-forgiving, while lowering the out-of-pocket expenses for plan members, inflates the overall cost of healthcare for plans and their plan members because it annuls members' incentives to use in-network services. Id.

Cigna says that its plans discourage fee-forgiving practices by: (1) excluding coverage for "charges which [the patient is] not obligated to pay or for which [the patient is] not billed or for which [the patient] would not have been billed except that [the patient] were covered under this plan"; and (2) limiting coverage to "Covered Expenses," which are expenses actually incurred by the patient after he becomes insured. Id. ¶ 10.

C. CMIS' Claims Submissions to Cigna

Cigna alleges that, since 2009, CMIS engaged in a fee-forgiveness scheme, pursuant to which it filed claims with Cigna for inflated and inaccurate charges while waiving patient cost shares to gain an unfair advantage over Cigna's in-network providers. See [1].

CMIS says that it submitted each of its claims at issue to Cigna on a "UB04 form," which asks for CMIS' total charges for each of the billing codes related to one of CMIS' services. [153] ¶¶ 10, 13. CMIS says that it truthfully and accurately listed its total charges on each UB04 form, and sent each form to Cigna, who then adjudicated the claim, notified the patient of the patient's cost share, and sent payment to CMIS for Cigna's share. Id. ¶¶ 14–15.

Cigna says, however, that CMIS submitted its reimbursement claims to Cigna via electronic transmissions to Cigna's claims processing platforms, not UB04 forms. [175] ¶¶ 10, 15, 21. The claims processing platform required CMIS to list, among other things, patient demographic data, billed charges corresponding to each service code, and the total amount of billed charges. [175-2] ¶ 5.

D. Cigna's Investigation Into CMIS' Billing Practices

Around May 2011, Cigna's Special Investigation Unit (SIU) began investigating CMIS' billing practices. [144] ¶ 11. In June 2012, Cigna sent to CMIS an audit letter requesting CMIS' out-of-network billing policies and ledgers on 10 Cigna members treated at CMIS' facility. Id. ¶ 14. CMIS did not respond to this letter, so Cigna sent a second audit letter in July 2012, asking how CMIS collects payments from Cigna members, and whether, as a non-contracted facility, CMIS collects payments on members' full out-of-network cost shares. Id. ¶ 15. CMIS does not dispute that Cigna sent these audit letters, but says that, as an out-of-network provider, it had no obligation to provide Cigna with any information regarding its billing policies or patient payments ledgers. [172] ¶¶ 14–15.

Cigna says that, because CMIS did not provide any information in response to Cigna's audit letters, in August 2012, SIU flagged CMIS and began denying CMIS' claims. [144] ¶ 18. Between August 1, 2012 and February 28, 2013, Cigna denied over $600,000 of CMIS' billed charges; between March 1, 2013 and December 31, 2013, Cigna denied over $1.4 million of CMIS' billed charges. Id. ¶¶ 18–19.

E. CMIS' Insurance Verification Calls to Cigna

CMIS bases its counterclaims upon pre-service communications with Cigna, primarily insurance verification calls CMIS' employees made to Cigna's customer service number. [144] ¶ 26. CMIS alleges that, during the verification calls, Cigna's representatives promised to pay the billed charges that CMIS would submit after it provided services to plan members. Id.

CMIS employees Vikki Thomas, Jennifer Cook Szoldatits, Angela Bazan, and Isadora Sevilla made the verification calls to Cigna. Id. ¶ 27. Szoldatits, Bazan, and Sevilla testified that Cigna never promised or guaranteed that Cigna would pay CMIS for its services during these calls. [145-26] at 16; [145-27] at 21; [145-28] at 15. Thomas testified that she did not recall whether Cigna's representatives promised or guaranteed payment for CMIS' services. [145-29] at 17.

Between 2005 and February 2013, the following disclaimer played at the beginning of every call that CMIS made to Cigna:

The following information does not guarantee coverage or payment. The governing document for a patient's coverage is their Summary Plan Description. Payment for services will be based on medical necessity, plan provisions, and eligibility at the time of service.

[144] ¶¶ 21, 23. And, since February 2013, the following disclaimer played at the beginning of every call that CMIS made to Cigna:

By continuing with this call, you understand, accept and agree that the following covered services information does not guarantee coverage or payment and is subject to all benefit plan provisions. Please refer to the Summary Plan Description for coverage. Payment for services will be based on medical necessity, plan provisions, including limitations and exclusions, and eligibility at the time of service.

Id. ¶¶ 22, 23.

F. Procedural History

Cigna filed its complaint against CMIS in November 2014 seeking, among other things: (1) a declaratory judgment that it need not reimburse CMIS under the Cigna plans because CMIS waived patients' cost shares, making its claims subject to the plans' fee-forgiveness exclusion; and (2) recovery of $800,000 it paid to CMS before August 2012. [1]. The complaint additionally asserts claims for recoupment; fraudulent misrepresentation; negligent...