Cross v. Formativ Health Mgmt., Inc.

• Court: U.S. District Court — Eastern District of North Carolina
• Writing for the Court: LOUISE W. FLANAGAN, United States District Judge
• Citation: Cross v. Formativ Health Mgmt., Inc., 439 F.Supp.3d 616 (E.D. N.C. 2020)
• Decision Date: 03 February 2020
• Docket Number: NO. 4:19-CV-8-FL,4:19-CV-8-FL
• Parties: Lakiesha CROSS, Joyce Fulford, Dorthea Edmond, Brianna Taylor, Vanity Benton, Frencesco West, Paris Taylor, Paris Taylor, parent and natural guardian of C.P., Jr., Matthew Woodruff, and Mamie Patterson, individually and on behalf of all those similarly situated, Plaintiffs, v. FORMATIV HEALTH MANAGEMENT, INC. and Etransmedia Technology, Inc., Defendants.

439 F.Supp.3d 616

Lakiesha CROSS, Joyce Fulford, Dorthea Edmond, Brianna Taylor, Vanity Benton, Frencesco West, Paris Taylor, Paris Taylor, parent and natural guardian of C.P., Jr., Matthew Woodruff, and Mamie Patterson, individually and on behalf of all those similarly situated, Plaintiffs,

v.FORMATIV HEALTH MANAGEMENT, INC. and Etransmedia Technology, Inc., Defendants.

NO. 4:19-CV-8-FL

United States District Court, E.D. North Carolina, Eastern Division.

Signed February 3, 2020

Eric N. Linsk, Robert K. Shelquist, Lockridge Grindal Nauen PLLP, Minneapolis, MN, J. Olin McDougall, II, McDougall Law Firm, LLC, Beaufort, SC, Christopher C. Kessler, The Kessler Law Firm, PLLC, Greenville, NC, for Plaintiffs.

Brian S. McCormac, Haley R. Van Loon, Brown, Winick, Graves, Gross, Baskerville & Schoenebaum, PLC, Des Moines, IA, Kelsey Kingsbery, Matthew Patrick McGuire, Sarah Russell Cansler, Alston & Bird LLP, Raleigh, NC, Patrick M. Aul, Tracy L. Eggleston, Cozen O'Connor, Charlotte, NC, for Defendants.

ORDER

LOUISE W. FLANAGAN, United States District Judge This matter is before the court upon defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b) (DE 38). The motion has been briefed fully and the issues raised are ripe for ruling. For the following reasons, defendants' motion is granted.

STATEMENT OF THE CASE

Plaintiffs commenced this putative class action on January 11, 2019, and filed the operative amended complaint on May 31, 2019, asserting claims under North Carolina law against defendants for overcharging them for their medical records in violation of standards set forth in the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), the Health Information Technology for Economic and Clinical Health Act ("HITECH"), 42 U.S.C. § 300jj-11, and their implementing regulations governing fees for provision of medical records. Plaintiffs assert claims under the North Carolina Unfair and Deceptive Trade Practices Act ("UDTPA"), N.C. Gen. Stat. § 75-1.1 et seq., as well as common law claims for negligent misrepresentation and unjust enrichment. Plaintiffs seek declaratory and injunctive relief, as well as damages, including trebled and punitive damages, on behalf of themselves and a proposed class, in an amount in excess of $5,000,000.00. Plaintiffs assert subject matter jurisdiction over this matter under the Class Action Fairness Act, 28 U.S.C. § 1332(d).

Defendants filed the instant motion to dismiss on June 27, 2019, seeking dismissal of plaintiffs' claims for failure to state a claim.¹ In support of their motion, defendants rely upon a declaration of Nicholas Stefanizzi ("Stefanizzi"), attaching invoices sent for plaintiffs' requested medical records.

Plaintiffs responded in opposition on August 1, 2019, relying upon an affidavit of Eric N. Linsk, one of plaintiffs' attorneys, attaching an order in a civil action in the Circuit Court for Hillsborough County, Florida, captioned Allen v. Healthport Technologies, LLC, No. 12-CA-013154 (Nov. 19, 2014). Defendants replied in support of their motion on August 29, 2019.

STATEMENT OF ALLEGED FACTS

The facts alleged in the operative complaint² may be summarized as follows. Plaintiffs are residents of this district. Defendant Formative Health Management, Inc. ("Formativ") is a Delaware corporation with its principal place of business in Florida. According to the complaint, defendant Formativ is "a technology-enabled health services company focused on transforming the patient-provider experience," whose services "help health systems respond to the rise of consumerism by combining powerful technology with an empathetic approach to customer service" and help clients "enhance their patients' experience." (Compl. ¶ 28). Shortly after Formativ's formation in 2017, it acquired defendant Etransmedia, "a medical billing and healthcare software company based in North Carolina" with a principal place of business in New York. (Id. ¶ 29). According to the complaint, both defendants "use each others' names interchangeably when fulfilling medical-record and medical-bill requests," and both have "responded to some of the same record requests from Plaintiffs." (Id. ¶ 31).

According to the complaint, defendants "contract to manage the process of responding to a medical-records and/or medical bills request for its hospital and clinic clients, including receiving the request, locating responsive documents, providing a response to the patient, invoicing the patient, and collecting payment." (Id. ¶ 56). "Ordinarily, [d]efendants require advance payment in full for delivery of medical records and/or medical bills, and will not provide the requested medical records and/or medical bills unless the invoiced amount is paid in full and in advance." (Id. ¶ 58).

According to the complaint, defendants "routinely impose an improper and unlawful series of charges, including a ‘Base Rate’ of $10.00 and per-page copy charges even when no paper copies were requested." (Id. ¶ 59).

Plaintiffs allege that defendants are aware that a federal law "Privacy Rule" "permits covered entities and their business associates to impose only reasonable, cost-based fees to provide individuals (or their designated recipient) with copies of their medical records and/or medical bills." (Id. ¶ 60). According to plaintiffs, the "Privacy Rule" is a "privacy standard[ ] for health information" published by the United States Department of Health and Human Services ("HHS") in 2000, "in accordance with instructions from Congress flowing from HIPAA." (Id. ¶ 45) (citing Standards for Privacy of Individually Identifiable Health Information – Final Rule, 65 Fed. Reg. 82462 (Dec. 28, 2000) ).

According to the complaint, "the Privacy Rule addressed how consumers could obtain their PHI and how much they could be charged for copies of it," (Compl. ¶ 47), and HITECH "clarified the procedures under which a consumer would obtain their PHI," including by "capp[ing] the fee that a provider could charge" for copies of PHI in electronic format. (Id. ¶ 49) (citing 45 C.F.R. § 164.524(c)(4) ). Plaintiffs allege that in 2013, HHS "published amendments to the Privacy Rule," and, in 2016, "issued a guidance document clarifying" "limits on what patients or their designated recipients may be charged for healthcare information," (id. ¶¶ 50, 52), including allowance to "charge the requester a flat fee of $6.50" to provide records. (Id. ¶ 53).

According to the complaint, defendants are "aware that the [Privacy Rule] as interpreted by HHS allows them to charge individuals only on the basis of its actual costs, or an average of their actual costs." (Id. ¶ 61). Plaintiffs allege that "[d]espite knowing that federal law allows them to charge individuals only on the basis of their actual costs, or an average of their actual costs," defendants "overcharge patients and their agents for their records." (Id. ¶ 62).

As detailed in the complaint, "[p]laintiffs properly requested [PHI] from their medical providers or [d]efendants as an agent of their medical providers, and directed that the records be sent to their lawyer." (Id. ¶ 63). "The medical providers did not fulfill the requests, instead referring" them to defendants, but defendants allegedly "did not follow the HITECH cost rule in responding." ( Id. ). In particular, plaintiffs allege a similar pattern of activity related to each named plaintiff. For example:

In a written request dated May 15, 2018 and signed by her, Plaintiff Lakiesha Cross ["Cross"] requested copies of her medical records and/or medical bills from Eastern Radiologists, Inc., care of Formativ Health in Charlotte, North Carolina. In her request, Cross requested copies of her medical records and/or medical bills in electronic format only. Cross's request was headlined, "PATIENT DIRECTIVE TO HEALTHCARE PROVIDER PURSUANT TO HITECH RECORDS REQUEST." Cross needed her medical records for a personal-injury matter. Cross directed the recipient of this request to send the records to her attorney, Christopher C. Kessler ["Kessler"], The Kessler Law Firm P.L.L.C., P.O. Box 8064, Greenville, NC 27835. Cross's request was accompanied by documents from The Kessler Law Firm P.L.L.C. which asserted that the HITECH Act, 42 U.S.C. § 17935(e)(1), and the statute's implementing regulation at 45 C.F.R. § 164.524(c)(4), applied to the request. [Defendant] Etransmedia responded by sending a bill for $12.25 to The Kessler Law Firm. Etransmedia did not notify the Kessler Law Firm that it handled requests to the medical provider in question instead of Formativ or that it was a different entity than Formativ. In its response to Cross's request, Etransmedia did not state that these charges reflected its actual costs, or that these charges reflected an average of its actual costs. Neither [d]efendant revealed that these charges are unlawful under the HITECH act. On behalf of and as agent of Cross, Cross's attorney paid the expense. Cross's attorney was required to pay the expense in order to obtain the medical records for Cross's personal-injury matter.... The expense was deducted from Cross's net settlement in her personal-injury matter.

(Id. ¶¶ 65-73, 75).

Similarly, plaintiffs Joyce Fulford ("Fulford"), Dorthea Edmond ("Edmond"), Brianna Taylor ("Brianna Taylor"), Vanity Benton ("Benton"), Frencesco West ("West"), Paris Taylor ("Paris Taylor"), C.P., Jr. ("C.P."), Matthew Woodruff ("Woodruff"), and Mamie Patterson ("Patterson"), requested copies of their medical records from a medical provider for a personal injury matter. They directed the recipient to send the records to Kessler. Defendants sent bills for each plaintiff to Kessler, totaling $12.25, $10.75, $12.25, $10.75, $13.00, $10.75, $11.50, $10.75, and $10.75, respectively. Kessler paid the bills on behalf of and as agent for plaintiffs Fulford, Edmond, Benton, West, Paris Taylor, C.P., Woodruff, and Patterson.

With respect to plaintiff Brianna Taylor, Kessler paid only "$6.50 to Etransmedia...