Encompass Office Solutions, Inc. v. La. Health Serv. & Indem. Co.

• Decision Date: 19 March 2019
• Docket Number: No. 17-10736,17-10736
• Citation: 919 F.3d 266
• Parties: ENCOMPASS OFFICE SOLUTIONS, INCORPORATED, Plaintiff–Appellee, v. LOUISIANA HEALTH SERVICE & INDEMNITY COMPANY, doing business as BlueCross BlueShield of Louisiana. Defendant–Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

919 F.3d 266

ENCOMPASS OFFICE SOLUTIONS, INCORPORATED, Plaintiff–Appellee,

v.LOUISIANA HEALTH SERVICE & INDEMNITY COMPANY, doing business as BlueCross BlueShield of Louisiana. Defendant–Appellant.

No. 17-10736

United States Court of Appeals, Fifth Circuit.

FILED March 19, 2019

Jennifer R. Ecklund, Esq., William Lowell Banowsky, Andrew Christian Cookingham, Richard Barrett Phillips, Jr., Reed Cullen Randel, Attorney, Thompson & Knight, L.L.P., Dallas, TX, for Plaintiff-Appellee.

Jonathan M. Herman, Charles Wilson Hill, Herman Law Firm, Dallas, TX, Allison Lee Nunley Pham, Charles Andrew O'Brien, Senior Attorney, Elizabeth Pugh Odom, Blue Cross & Blue Shield of Louisiana, Baton Rouge, LA, for Defendant-Appellant.

Before JONES, BARKSDALE, and WILLETT, Circuit Judges.

DON R. WILLETT, Circuit Judge:

Encompass Office Solutions, Inc. provided equipment and staffing for doctors to perform surgery in their own offices. Doctors and patients took to this service; insurers did not. Blue Cross and Blue Shield of Louisiana (BCBSLA) began denying Encompass's claims for in-office surgery support. BCBSLA instead paid a "Global Fee" to the doctor who performed the surgery, as compensation for all related services.

Encompass sued BCBSLA for ERISA violations, breach of contract, defamation, and tortious interference with business relations. BCBSLA largely prevailed at trial. But the district court granted a new trial because of error in the jury charge. At the second trial, Encompass won on all claims and obtained a judgment in its favor. On appeal BCBSLA says that the new trial should never have been granted, that no reasonable jury could have answered the contra non valentem (discovery rule) issue in favor of Encompass, and that BCBSLA did not abuse its discretion in denying Encompass's claims.

We AFFIRM the judgment of the district court.

I. BACKGROUND

A. Factual

Encompass provided the equipment, drugs, supplies, and nursing staff necessary for a doctor to perform outpatient surgery in his own office, rather than in a hospital or ambulatory surgical center (ASC). This was a novel arrangement—at the time, neither Texas nor Louisiana licensed such mobile providers of ambulatory surgical care.

Generally, when a doctor performs surgery at a hospital or ASC, an insurer like BCBSLA receives three claims: one from the doctor for doing the actual surgery; one from the anesthesiologist, if used; and one from the hospital or ASC for services provided to assist the doctor. When a doctor performs surgery in his office, however, there is no facility claim because there is no separate facility. Instead, BCBSLA pays doctors a Global Fee for these in-office surgeries. The Global Fee is greater than the fee paid to doctors for performing surgery at a hospital or ASC and is intended to compensate for all overhead costs of an in-office procedure.

When Encompass entered the market, it expanded doctors' ability to perform in-office surgeries. Encompass sought compensation from insurers by filing separate claims for its services. At all relevant times, Encompass was an out-of-network service provider for BCBSLA members.

Because of this, Encompass obtained an assignment of benefits from each of its BCBSLA-insured patients. BCBSLA paid Encompass's claims for several months after Encompass entered the Louisiana market.

But in June 2010, BCBSLA received a tip that Encompass was submitting claims for services it had not provided. On investigation, BCBSLA found that Encompass was submitting claims, and being paid, for the same in-office surgeries as the performing doctors. BCBSLA's billing system would normally reject "duplicate" claims for surgery at a doctor's office. But it had been processing Encompass's claims because they used a code modifier. Encompass was using the "TC Modifier," which stands for "technical component" and covers the equipment, staff, and services necessary for surgery.

BCBSLA began denying Encompass's claims. BCBSLA also learned that other insurance companies were doing the same. In August 2010, BCBSLA Vice President Dawn Cantrell sent a letter to in-network providers directing them not to use Encompass's services. Because this letter is the basis for Encompass's defamation and tortious interference claims, we quote it at length:

Encompass is not eligible to participate in the BlueCross networks and is considered an out-of-network provider. Please do not use Encompass for services provided to BlueCross or [HMO Louisiana, Inc.] members since the facility fees charged by Encompass are not covered, even when they are billed by a network physician. Encompass would have to be a Louisiana licensed [Department of Health and Hospitals]-approved ambulatory surgery facility in order to be eligible for payment of these facility charges.

You should also accept your contracted allowable charge for any eligible in-office surgeries you normally perform to be counted as payment in full and not allow Encompass to submit claims to Blue Cross. Please ensure your Blue Cross patients are able to receive network benefits for the services they receive from you by using participating providers.

If we find that any network physician is repeatedly using Encompass to deliver facility and procedure services that are not eligible for benefits and our members are being billed for these facility charges, the network physician will be subject to termination from the Blue Cross networks.

Encompass obtained a copy of the Cantrell Letter and gave it to counsel. Encompass sought clarification from BCBSLA by calling Cantrell three times and leaving voicemail messages. It received no response. In October 2010, BCBSLA Audit Consultant Alan Lofton sent Encompass a separate letter demanding repayment of nearly $ 110,000 in paid claims. A few months later, Encompass sued.

B. Procedural

Encompass initially sued BCBSLA for payment on services provided to BCBSLA insureds.¹ Encompass alleged that BCBSLA had abused its discretion in denying Encompass's claims on ERISA-covered plans and breached its insurance contracts under state law by denying claims on non-ERISA plans.

In response, BCBSLA pleaded that under its policy a non-facility provider must seek payment from the site-of-service owner, usually the doctor who orders the services, and that Encompass knew this.

BCBSLA explained that for surgeries in a "non-facility setting," the doctor's (and any other professional's) reimbursement is all-inclusive. In other words, BCBSLA pleaded its Global Fee policy.

In February 2013, Encompass deposed Cantrell and Lofton. Cantrell and Lofton testified they were not aware of a BCBSLA policy or benefit plan that said Encompass's services were not covered. And they were similarly unaware of a policy or plan permitting BCBSLA to terminate a physician for partnering with Encompass. This led Encompass to believe that the Cantrell Letter contained false statements. Because the Cantrell Letter damaged Encompass's Louisiana business, Encompass in April 2013 amended its complaint to add claims for defamation and tortious interference with business relations.

Both parties moved for summary judgment. The district court at first granted summary judgment to BCBSLA on Encompass's defamation and tortious interference claims because it held they were barred by Louisiana's one-year prescriptive period.² But on a motion for reconsideration it reversed this decision. It held instead that a genuine dispute of material fact existed as to whether Encompass was entitled to the benefit of a discovery rule—contra non valentem —that would suspend the prescriptive period.³

Trial arrived. Encompass tried its tort claims and non-ERISA contract claims to a jury, and its ERISA claims to the district court. The jury found no liability on the contract claims, and found that Encompass was not entitled to the benefit of contra non valentem on the tort claims. Because it resolved the prescription issue in BCBSLA's favor, the jury did not reach the merits of Encompass's tort claims.

Encompass moved for a new trial based on error in the jury charge, and the district court granted the motion. It held that the jury charge had imposed an incorrect liability standard for the non-ERISA contract claims. The original charge for these claims required the jury to find that BCBSLA "capriciously and arbitrarily" denied Encompass's claims for benefits. But it should only have required them to find the elements for Louisiana breach of contract. And, citing the potential for confusion, the court held that Encompass's tort claims must also be retried: "A finding that no breach occurred would reasonably cause the jury to find that no tort liability existed because the breach of contract claim underpins the basis for the tort claims." The district court did not rule on Encompass's ERISA claims at this stage.

At the second trial the jury found for Encompass on both its contract and tort claims, including finding that contra non valentem suspended prescription. The district court also found for Encompass on its ERISA claims. BCBSLA renewed its motion for judgment as a matter of law, moved for reconsideration, and moved for a new trial—all of which the district court denied. The district court entered judgment for Encompass, and BCBSLA appealed.

II. JURISDICTION AND STANDARDS OF REVIEW

A. Jurisdiction

The district court had jurisdiction based on complete diversity, 28 U.S.C. § 1332 ; and under ERISA, 29 U.S.C. §§ 1001 et seq. This court has jurisdiction under 28 U.S.C. § 1291.

B. Standards of Review

1. Grant of a New Trial

"We review the district court's grant or denial of a new trial for abuse of discretion."⁴ "A greater degree of scrutiny, however, is given to the grant of a new trial."⁵ "[W]e exercise broad review of a court's grant of a new trial because of our respect for the jury as an institution and our concern that the party who persuaded the jury should not be stripped unfairly of a favorable decision."⁶

2. Judgment as a Matter of Law

"We review de novo the...