Conn. Gen. Life Ins. Co. v. Humble Surgical Hosp., LLC
| Decision Date | 01 June 2016 |
| Docket Number | CIVIL ACTION NO. 4:13-CV-3291 |
| Parties | CONNECTICUT GENERAL LIFE INSURANCE COMPANY, et al., Plaintiffs, v. HUMBLE SURGICAL HOSPITAL, LLC, Defendant. |
| Court | U.S. District Court — Southern District of Texas |
This suit was brought by Connecticut General Life Insurance Company and Cigna Health and Life Insurance Company (collectively, "Cigna") against Humble Surgical Hospital, LLC ("Humble"), to recover alleged overpayments made to Humble for out-of-network healthcare services rendered at its facility to members/patients of healthcare benefit plans administered and/or insured by Cigna. According to Cigna, the overpayments are a result of Humble's fraudulent billing practices and/or scheme to defraud private payors, such as Cigna, by engaging in prohibited practices, namely routinely waiving members' financial responsibility under the terms of their plans and paying kickbacks to hospital physician-owners for their unlawful patient referrals. As a result of Humble's alleged scheme to defraud, Cigna has commenced the instant suit against it, pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., and state common law, seeking reimbursement of all overpayments allegedly made to Humble.
Specifically, Cigna asserts causes of action against Humble for fraud, money had and received, negligent misrepresentation, unjust enrichment, equitable relief under ERISA § 502(a)(3), injunctive relief, declaratory relief, exemplary damages and attorneys' fees. With respect to its claim for declaratory relief, Cigna seeks a declaratory judgment that Humble has violated various Texas statutes relative to its billing of medical services, entitling it to recoup all overpayments paid to Humble. With regard to its claim for injunctive relief, Cigna requests that Humble be enjoined from: (a) charging unreasonably excessive fees and waiving patient responsibility for its out-of-network services or making other promises to induce Cigna's members to use its facilities; (b) balance billing Cigna's members for unreasonable fees; and (c) fee-splitting its hospital facility fees with its physicians, especially those having an ownership interest in Humble, for their referral of patients to Humble for surgery.
Cigna maintains that since August 2010, Humble has employed a billing scheme that has caused it to pay more than its member/participant/insured's required share under the various benefit plans, while permitting plan members to pay virtually nothing at all or, at best, nominal amounts. As such, Cigna intimates that it is also entitled to equitable restitution under state common law, given Humble's "excessively" large claim amounts and fraudulent fee-splitting practice. Therefore, Cigna contends that its claim for equitable relief should be granted, including imposing a constructive trust on physicians' fees improperly obtained and levying an injunction precluding the disposition or transfer of identifiable funds. Cigna points out that, at all times material hereto, certain physicians, who participated in Humble's alleged fraudulent billing scheme, were "in-network" physicians under contract with it. Nevertheless, and in spite of their contractual obligations to Cigna, these physicians referred their patients to Humble, despite being well aware that Humble was an "out-of-network" facility.
Humble denies that Cigna is entitled to reimbursement of the overpayments alleged relative to its assigned benefit claims. Humble further asserts that Cigna failed to timely provide plan documents necessary for it to properly process and/or appeal its claims. As a consequence,it asserts counterclaims against Cigna for, inter alia: (a) nonpayment of current member/patient's claims, underpayment of certain claims, and delayed payment of all claims in violation of ERISA § 502(a)(1)(B); (b) failure to provide a full and fair review under ERISA; (c) breach of fiduciary duties of loyalty and care under ERISA; and (d) penalties pursuant to ERISA § 502(c).
On January 11, 2016, this Court presided over a bifurcated bench trial addressing only the ERISA claims and defenses presented by the parties in this case over a span of nine days. During this time, the Court received testimonial evidence, documentary evidence, written briefs and arguments of counsel. On February 3, 2016, the parties presented their closing arguments to the Court. After a conclusion of the trial and after having carefully reviewed the parties' submissions, the record, the evidence admitted, the arguments of counsel and the applicable law, the Court sets forth its findings of fact, legal analysis, and conclusions of law in this Memorandum Opinion and Order. The Court will also address Humble's motion for judgment brought pursuant to Rule 52(c) of the Federal Rules of Civil Procedure.
Based on the analysis and reasoning set forth herein, the Court determines that Cigna's claim(s) for reimbursement of overpayments made pursuant to ERISA and/or common law fail, as a matter of law; therefore, Humble's Rule 52 motion for judgment should be GRANTED. The Court further concludes that Cigna's defenses to Humble's ERISA claims fail and Humble is entitled to recover damages under § 502(a)(1)(B)1 and penalties under § 502(c)(1)(B).
Cigna is a managed healthcare company and, as a fiduciary, manages both ERISA welfare benefit plans and private policies for health insurance. Its management responsibilities include providing third-party administrative claims review services for self-funded plans, including government entities, Health Maintenance Organizations ("HMOs") and group insurance policies maintained by private employers for the benefit of their employees and their dependents, generally pursuant to Administrative Services Only Agreements ("ASO Agreements"). Cigna distinguishes the services that it provides as claims administrator to plan sponsors pursuant to ASO Agreements from those it provides as plan administrator under non-ERISA plans.
The facts demonstrate that Cigna generally enters into private agreements with physicians and healthcare facilities thereby extending to them "in-network"2 provider status. According to Cigna, this status means that healthcare providers and facilities are permitted to engage in the practice of "steerage." Steerage, according to Cigna, is a method by which physicians and facilities that maintain in-network status may refer patients to each other pursuant to in-network agreements. Therefore, according to Cigna, referrals to and amongst physicians and facilities within the in-network community are permitted without fear of reprisal by state regulatory commissions that prohibit patient referrals for a fee. According to Cigna, in-network status also protects members/patients from incurring excessive physician/facility charges that are oftenimposed when a member/patient uses an out-of-network physician or facility. Cigna's stated objective in offering in-network status is to keep the cost of healthcare at a minimum.
In addition to the services provided to in-network members, Cigna provides claim processing, on a limited benefits basis, for "out-of-network" facilities when a member/patient's plan permits "open access" to medical services. Such plans inform the member/patient that he/she may be required to pay a larger portion of the expenses, i.e., higher deductibles, coinsurance and/or co-payments, when obtaining healthcare services or supplies at out-of-network facilities. Cigna's plan members, however, are generally incentivized to receive services from in-network providers because they are subject to paying lower coinsurance, deductibles and copayments for their services.
In August 2010, Humble, a physician-owned hospital, opened for business as an out-of-network facility. This meant that self-funded health benefit plan providers and certain providers of private policies of insurance could limit their member/patient reimbursement benefits to those covered by their respective plans if the member/patient chose to receive healthcare services at a facility like Humble. In this circumstance, a member/patient would be exposed to a "balance bill", i.e., the balance remaining after the allowed amount has been paid under the plan. Such circumstances were not likely to occur where the member/patient received the same or similar healthcare services at an in-network facility. For this reason, Humble customarily obtained an "assignment of benefits" and a "personal guarantee" to cover any balance due for healthcare services. Specifically, its admissions form included both an irrevocable assignment and an assignment of insurance benefits to physician. (See Humble Ex. Nos. 300 - 816; see also 2591). The irrevocable assignment provides, in relevant part, as follows:
I irrevocably assign and transfer to the hospital all rights, title, and interest in any benefits payable and all causes of action against all insurance companies, benefits, services or products provided by the hospital, and I hereby appoint the hospital as my attorney in fact, with the power of substitution to sue or otherwise obtain payment of benefits from the responsible parties. This irrevocable assignment and transfer shall be for the purpose of granting the hospital an independent legal right of recovery against such responsible parties, but shall not be construed to be an obligation of the hospital to pursue any such right of recovery.
Id. at 2591. The assignment of insurance benefits to physician states:
I hereby assign all my rights, title, and interest in and to the basic and major medical benefits specified herein, that would otherwise be payable to me, to my physician(s) (including, but not limited to, my anesthesiologist(s), radiologist(s), pathologist(s) and emergency room physician/s and any other...
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