Encompass Office Solutions Inc. v. Ingenix Inc.

Decision Date31 March 2011
Docket NumberCase No. 4:10–cv–00096.
Citation775 F.Supp.2d 938
PartiesENCOMPASS OFFICE SOLUTIONS, INC., Plaintiff,v.INGENIX, INC., Unitedhealth Group, Inc., and United Healthcare Services, Inc., Defendants.
CourtU.S. District Court — Eastern District of Texas

OPINION TEXT STARTS HERE

Gregory William Curry, Adrienne Elizabeth Dominguez, Jill Campbell Penn, William L. Banowsky, Thompson & Knight, Dallas, TX, for Plaintiff.

Kathy P. Josephson, Charles Chejfec, John W. Reale, Kathy L. Kottos, Katten Muchin Rosenman LLP, Chicago, IL, Christopher Shawn Cleveland, SNR Denton U.S. LLP, Dallas, TX, Matthew D. Orwig, Sonnenschein Nath & Rosenthal LLP, Dallas, TX, for Defendants.

ORDER DENYING IN PART AND GRANTING IN PART DEFENDANTS' MOTION TO DISMISS

RICHARD A. SCHELL, District Judge.

Before the court is the Defendants' Motion to Dismiss Plaintiff's Second Amended Complaint Pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6) (Dkt. 41). For the following reasons, the Defendants' motion is denied in part and granted in part.

I. BACKGROUND

This case arises out of a dispute between a medical provider, Plaintiff Encompass Office Solutions, Inc. (Encompass), and Defendants Ingenix, Inc. (Ingenix), UnitedHealth Group, Inc., and United Healthcare Services, Inc. (United) (collectively: Defendants) over claims for reimbursement of services that Encompass has provided to United's insureds.

Encompass provides equipment and nurses to assist physicians in performing surgical procedures in the physicians' own offices rather than in a traditional hospital or ambulatory surgery center (ASC). The physician and his or her patient make the choice of whether to perform the procedure in the physician's office and whether to use Encompass's services.

United provides health insurance policies to consumers and also administers health insurance plans offered by companies to their employees. Encompass's patients include those who have entered into contracts for health insurance coverage with United. Encompass receives an “Assignment of Benefits” from each of its patients and, pursuant to those assignments, Encompass has submitted hundreds of requests for reimbursement to United for services rendered to United's insureds.

United began reimbursing Encompass in 2007, but since June of 2009, United has stopped paying many of Encompass's claims. On July 27, 2009, Encompass received a letter from a representative of Ingenix, a wholly-owned subsidiary of United, demanding that Encompass return $2,051,896.22, which, according to Ingenix, was the amount United had paid Encompass for claims through June 1, 2009. Ingenix's stated reason for the refund request was that Encompass had misrepresented that it was an ASC on its reimbursement bills to United.

According to United, when a patient has a procedure performed at an ASC or hospital, or any facility other than the physician's office, United receives two bills, one from the physician for the professional component of the procedure, and the other from the facility for the technical component or facility fee. However, when a procedure is performed in the physician's own office, only the physician is eligible to bill United. This is because the physician's charges for in-office procedures are considered “global,” which means they include both the professional and technical components. United argues that Encompass's claims constitute double billing of services because, in addition to reimbursing Encompass, United has already paid the physicians for the global procedure.

According to Encompass, it is not an ASC and has never represented itself as such. Rather, Encompass claims that in setting up an account with United, it emphasized that its services are provided in a physician's office. In particular, Encompass claims that in May of 2007, Encompass's billing company, Oklahoma Medical Billing, spoke with a United provider relations representative over the phone and that in this call, the parties discussed that Encompass's services were performed in physicians' offices and that Encompass was not an ASC. Encompass further alleges that in this call, the United representative directed Encompass to bill United on a UB form with an SU modifier with the physician's name on the form to show the location of the service, which has been Encompass's practice ever since. This specific direction as to how Encompass was to bill United is significant because United claims that Encompass misrepresented itself as an ASC by the way it filled out reimbursement forms.

In August of 2009, Encompass responded to the July letter from Ingenix by sending a letter to Ingenix that described Encompass's efforts to properly bill for its services and stated that it had never represented itself as an ASC. In January of 2010, Ingenix again sent Encompass a letter claiming that it had misrepresented itself as an ASC and that United was entitled to reimbursement of all funds paid to Encompass based on the misrepresentation.

Apparently at an impasse, Encompass filed its initial complaint on March 5, 2010 (Dkt. 1). After filing an amended complaint on March 9, 2010 (Dkt. 3), Encompass filed its “Second Amended Complaint” (SAC) on July 1, 2010 (Dkt. 30). The SAC requests a declaratory judgment that Encompass is not required to reimburse United any amounts that it has paid Encompass, and that United is required to reimburse Encompass on its outstanding unpaid claims. The SAC also alleges numerous claims for relief under Texas common and statutory law and federal law. The claims are based generally on allegations that United led Encompass to believe that its services would be covered, that United has wrongfully denied coverage under the relevant benefit plans, and that the method Defendants used to calculate reimbursement rates has resulted in substantial underpayments. On August 24, 2010, the Defendants collectively filed the instant motion to dismiss Encompass's SAC (Dkt. 41).

II. ANALYSISA. Standing

The Defendants first argue that Encompass has not alleged enough facts to establish that it has standing to bring this suit. Specifically, the Defendants argue that the assignments Encompass received from its patients only give Encompass the right to receive payment for medical services but not the right to sue on behalf of the patients. The court notes at the outset that the Defendants' standing argument is necessarily limited to whether Encompass has standing to make claims on behalf of patients, which, according to Encompass, include claims alleging breach of contract, violations of the Texas Insurance Code and the Texas Deceptive Trade Practices Act (DTPA), and violations of ERISA. Encompass need not rely on the assignments to establish standing for claims filed on its own behalf, claims alleging fraud or negligent misrepresentation, defamation and business disparagement, violations of the Texas Insurance Code and the DTPA, promissory estoppel, and quantum meruit.

The relevant language in the standard assignment of benefits form that Encompass obtained from its patients reads as follows:

For the medical benefits allowable and otherwise payable to me under my current insurance policy as payment toward the total charges for the services rendered. This is a direct assignment of my rights and benefits under this policy.

Dkt. 30–1.

Below the paragraph that contains the above language, the assignment also states:

I authorize Encompass Office Solutions, Inc. to initiate a complaint to the insurance Commissioner for any reason on my behalf.

Id.

It is well established in the Fifth Circuit that a healthcare provider may obtain derivative standing to enforce a beneficiary's claims by virtue of a valid assignment. Harris Methodist Fort Worth v. Sales Support Servs. Inc. Emp. Health Care Plan, 426 F.3d 330, 333–34 (5th Cir.2005).1 The Defendants argue that Encompass's assignments do not confer derivative standing because they do not expressly give Encompass the right to bring a lawsuit. They also argue that because the assignments grant Encompass the right “to initiate a complaint to the insurance Commissioner,” the principle of contract interpretation known as expressio unius est exclusio alterius, the expression of one thing is the exclusion of another, bars Encompass from filing lawsuits on behalf of its patients.

The Defendants cite three United States district court cases and one Florida state court in support of its argument that the assignment must “expressly transfer[ ] the specific right to bring the various causes of action alleged in the [complaint]:” Barix Clinics of Ohio, Inc. v. Longaberger Family of Cos. Grp. Med. Plan, 459 F.Supp.2d 617, 624 (S.D.Ohio 2005); Cooper Hosp. Univ. Med. Ctr. v. Seafarers Health & Benefits Plan, No. 05–5941, 2007 WL 2793372, at *3 (D.N.J. Sept. 25, 2007); Touro Infirmary v. Am. Maritime Officer, No. 07–1441, 2007 WL 4181506, at *5–6 (E.D.La. Nov. 21, 2007); and Health Care Ctr. Tampa, Inc. v. Allstate Ins. Co., No. 03–5567, 2004 WL 1301917, at *1 (Fla.Cir.Ct. Jan. 30, 2004). The court finds these cases unpersuasive and respectfully declines to follow them.2

Instead, the court chooses to follow a recent decision by the United States Court of Appeals for the Eleventh Circuit in which the court held that derivative standing does not require express authorization to sue and that an “assignment of the right to payment is enough to create standing.” Conn. State Dental v. Anthem Health Plans, 591 F.3d 1337, 1352 (11th Cir.2009). This is because [a]n assignment to receive payment of benefits necessarily incorporates the right to seek payment. [T]he right to receive benefits would be hollow without such enforcement capabilities.’ Id. at 1353 (quoting I.V. Servs. of Am., Inc. v. Inn Dev. & Mgmt., Inc., 7 F.Supp.2d 79, 84 (D.Mass.1998)). Conn. State Dental's holding has been cited with approval by a district court within the Fifth Circuit. See Spring E.R. LLC v. Aetna Life Insurance Co., No. H–09–2001, 2010 WL...

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