Foley v. Southwest Texas Hmo, Inc.
| Decision Date | 19 July 2002 |
| Docket Number | No. CIV.A. 1:01-CV-56.,CIV.A. 1:01-CV-56. |
| Parties | Neal FOLEY and Associated Cardiovascular & Thoracic Surgeons, L.L.P., On Behalf of Themselves and All Others Similarly Situated, Plaintiffs, v. SOUTHWEST TEXAS HMO, INC., Humana HMO, Pacificare, Texas Health Network, Texas University Health Plan, Inc., Cigna Healthcare of Texas, Inc., Cigna Dental Health of Texas, Inc., and Cigna Behavioral Health, Inc. Defendants. |
| Court | U.S. District Court — Eastern District of Texas |
James A. Morris, Jr., Michael A. Havard, Mark C. Sparks, Provost & Umphrey, Beaumont, TX, for Plaintiffs.
J. Hoke Peacock III, Susman Godfrey, Houston, TX, John Barret Scott, Scott Yung, Dallas, TX, for Defendant Southwest Texas HMO.
Lawrence Joyhnson West, Andrew Scott Hanen, Hanen Alexander Johnson & Spalding, Houston, TX, J. Thad Heartafield Jr., Heartfield & McGinnis, Beaumont, TX, for Pacificare.
John Bruce Shely, Andrews Kurth Mayor Day Caldwell & Keeton, Houston, TX, for Aetna U.S. Healthcare.
Kevin Francis Lee, Jeff D. Otto, Austin, TX, for Texas University Health Plan.
Elizabeth D. Alvarado, Candice Eileen Sayre, Shannon Martin Finkelstein & Sayre, Houston, TX, Brian P. Brooks, O'Melveny & Myers, Washington DC, for Cigna.
Before the court is Defendants' Joint Motion for Judgment on the Pleadings [Dkt. # 25], and the court having reviewed the motion and the responses on file and having heard oral arguments on this motion is of the opinion that the motion be GRANTED in PART and DENIED in PART for the reasons set forth below.
The plaintiffs originally filed their petition in state court on January 5, 2001, asserting claims under the Texas Insurance Code and for unjust enrichment. The defendants timely removed the case to federal court on the basis of complete preemption under the Employee Retirement Income Security Act of 1974 (ERISA) and the Medicare Act. At no point during this case have the defendants claimed diversity jurisdiction exists. The plaintiffs filed a motion to remand, which this court denied on September 5, 2001. Following the denial of the plaintiffs' motion to remand, the defendants filed this motion for judgment on the pleadings.
According to the plaintiffs' First Amended Class Petition:
The plaintiffs, Dr. Neal Foley, Dr. Louis Roddy, and Associated Cardiovascular and Thoracic Surgeons, L.L.P., along with several other doctors and physician groups used North American Medical Management (NAMM) to negotiate contracts on their behalf with the defendants, various health maintenance organizations (HMOs). After the negotiations had been completed, NAMM acted as a third-party administrator processing medical claims and paying the various doctors and physician groups. In the late 1990s, NAMM began experiencing problems with its computer system that resulted in billing and payment problems. The plaintiffs allege that they have not been paid from either NAMM or the HMOs for work done on patients of the HMOs since January 1, 2000. The plaintiffs filed this suit under a provision of the Texas Insurance Code and for unjust enrichment against the HMOs to recover for services rendered.
The plaintiffs assert that they have provided services to the defendants or their enrollees through NAMM and have not been paid for these services since January 1, 2000. The plaintiffs looked to recoup payment for these services by filing suit in Texas state court against the defendants for violating Texas Insurance Code Article 20A.18B(c)(1), part of Texas's Health Maintenance Organization Act, which states:
Not later than the 45th day after the date that the health maintenance organization receives a clean claim from a physician or provider, the health maintenance organization shall:
(1) pay the total amount of the claim in accordance with the contract between the physician or provider and the health maintenance organization.
Texas Insurance Code Article 20A.18B(c)(1). The statute defines a "clean claim" as "a completed claim, as determined under Texas Department of Insurance rules, submitted by a physician or provider for medical care or health care services under a health care plan." Texas Insurance Code Article 20A.18B. The Texas Insurance Code continues:
A health maintenance organization that violates Subsection (c) or (e) of this section is liable to a physician or provider for the full amount of billed charges submitted on the claim or the amount payable under the contracted penalty rate, less any amount previously paid or any charge for service that is not covered by the health care plan.
Texas Insurance Code Article 20A.18B(f). For further ammunition against the defendants, the plaintiffs then ask the court to look to Article 21 of the Texas Insurance Code, which contains general provisions for the Insurance Code. Article 21.07-6, sec. 12(a), entitled Third Party Administrators, states:
If an insurer, plan, or plan sponsor uses the services of an administrator under a written agreement as required by Section 11 of this article, the payment of premiums or contributions to the administrator by or on behalf of an insured or plan participant is considered to have been received by the insurer, plan, or plan sponsor, and payment of return premium, contribution, or claims by the insurer, plan, or plan sponsor to the administrator are not considered payment to the insured, plan participant, or claimant until the payments are received by the insured, plan participant, or claimant.
Texas Insurance Code Article 21.07-6, sec. 12(a). Section 12(b) of this provision states that section 12(a) does not limit the right of an insurer, plan, or plan sponsor to bring a claim against the administrator for the administrator's failure to make payments to the insured, plan participant, or claimant. Texas Insurance Code Article 21.07-6, sec. 12(b).
On September 5, 2001, the court denied the plaintiffs' motion to remand. For that motion, the defendants argued that remand was improper because ERISA and the Medicare Act preempted the plaintiffs' state law claims. Because the court found ERISA preempted the plaintiffs' claims, the court did not review Medicare preemption.
In the September 5, 2001 opinion, the court found that the plaintiffs failed to establish the existence of an independent contractual relationship between themselves and the HMOs from whom they sought to recover for services rendered. The court, thus concluded that the plaintiffs must be attempting to recover from these defendants based on the plaintiffs' position as assignees of the HMOs' enrollees' benefits. As some of the enrollees were covered by ERISA-governed plans and as Fifth Circuit precedent established that ERISA preempts state law claims seeking "to recover benefits owed under [a] plan to a plan participant who has assigned her right to benefits to [her health care provider]," Transitional Hosp. Corp. v. Blue Cross and Blue Shield of Texas, Inc., 164 F.3d 952, 954 (5th Cir. 1999), the court found ERISA preemption existed, and therefore, that it could properly exercise jurisdiction over this case. After reviewing the briefing in this case and hearing oral arguments regarding the defendants' motion for judgment on the pleadings, the court finds that it was in error when it concluded that the plaintiffs were attempting to recover from the HMOs as assignees of their enrollees' benefits.
Article 20A.18B requires the HMO to pay the total amount of a claim in accordance with the contract between the physician or provider and the HMO within forty-five days of receiving a clean claim from the physician or provider. Because the plaintiffs did not allege the existence of a contract between themselves and the HMOs, the defendants argued that the plaintiffs' claims were premised on the existence of an assignment and the court agreed. At oral arguments, the attorney for the plaintiffs made clear that the plaintiffs were not seeking payment as assignees of the enrollees' benefits, but rather he argued that the Texas statutes listed above provided the plaintiffs with an independent cause of action against the HMOs that is separate and distinct from any position they may occupy as assignees of the enrollees' benefits.
The defendants countered by arguing that Article 20A.18B requires payment in accordance with the contract between the physician or provider and the HMO, and that the plaintiffs never alleged such a contract exists. The defendants argued that without a contractual relationship, the plaintiffs' right to payment must flow through an assignment of benefits, and as such, the plaintiffs' claim is preempted. The plaintiffs' counsel during oral argument and in his briefing to the court did not dispute that no contractual relationship exists between the parties, but he did dispute, however, what effect the lack of contractual privity has on his clients' Article 20A.18B(f) claim. In the end, the lack of contractual privity may mean that the plaintiffs are unable to recover under this statute, but it does not necessarily mean that they are attempting to recover as assignees of enrollees' benefits.
The issue, therefore, is whether this court still has jurisdiction to hear this case. The defendants rest jurisdiction on complete federal preemption of the plaintiffs' state law claims. The plaintiffs' actual ability to recover under the facts of this case as applied to the state law through which they attempt to recover is irrelevant to the issue of preemption. All that really matters is whether this statute creates an independent cause of action against the defendants that for the purposes of ERISA preemption does not "relate to" an ERISA plan and for Medicare purposes does not "arise under" the Medicare Act.
Because the court's rationale as...
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