Hous. Methodist Hosp. v. Humana Ins. Co.

• Decision Date: 17 July 2017
• Docket Number: CIVIL ACTION NO. H–16–1469
• Citation: 266 F.Supp.3d 939
• Parties: HOUSTON METHODIST HOSPITAL, San Jacinto Methodist Hospital, Houston Methodist St. John Hospital, Houston Methodist St. Catherine Hospital, Methodist Health Centers d/b/a Houston Methodist Willowbrook Hospital, Houston Methodist West Hospital, and Houston Methodist Sugar Land Hospital, Plaintiffs, v. HUMANA INSURANCE COMPANY; Humana Military Healthcare Services, Inc. n/k/a Humana Government Business, Inc.; Humana Inc.; and Health Value Management, Inc. d/b/a Choicecare Network, Defendants.
• Court: U.S. District Court — Southern District of Texas

266 F.Supp.3d 939

HOUSTON METHODIST HOSPITAL, San Jacinto Methodist Hospital, Houston Methodist St. John Hospital, Houston Methodist St. Catherine Hospital, Methodist Health Centers d/b/a Houston Methodist Willowbrook Hospital, Houston Methodist West Hospital, and Houston Methodist Sugar Land Hospital, Plaintiffs,

v.HUMANA INSURANCE COMPANY; Humana Military Healthcare Services, Inc. n/k/a Humana Government Business, Inc.; Humana Inc.; and Health Value Management, Inc. d/b/a Choicecare Network, Defendants.

CIVIL ACTION NO. H–16–1469

United States District Court, S.D. Texas, Houston Division.

Signed July 17, 2017

Clay M Steely, Porter Hedges LLP, Houston, TX, for Plaintiff.

Daniel K Hedges, Porter & Hedges, Houston, TX, Richard Glenn Foster, Porter Rogers Dahlman & Gordon, P.C., San Antonio, TX.

MEMORANDUM OPINION AND ORDER

SIM LAKE, UNITED STATES DISTRICT JUDGE

Plaintiffs, Houston Methodist Hospital, San Jacinto Methodist Hospital, Houston Methodist St. John Hospital, Houston Methodist St. Catherine Hospital, Methodist Health Centers d/b/a Houston Methodist Willowbrook Hospital, Houston Methodist West Hospital, and Houston Methodist Sugar Land Hospital (collectively "Methodist"), bring this action against defendants, Humana Insurance Company ("HIC"), Humana Military Healthcare Services, Inc. n/k/a Humana Government Business, Inc. ("HGB"), Humana Inc., and Health Value Management, Inc. d/b/a Choicecare Network ("Choicecare") (collectively "Humana"), asserting claims for breach of contract, declaratory judgment pursuant to 28 U.S.C. §§ 2201 – 2202, and violations of the Texas Insurance Code, specifically provisions of the Texas Prompt Payment of Physicians and Providers Act (the "TPPA"), Texas Ins. Code Ann. Chapter 843 (relating to health maintenance organizations ("HMOs"), and Chapter 1301 (relating to preferred provider benefit plans ("PPBPs"). Methodist seeks to recover approximately $15,000,000.00 in statutory penalties from Humana for late payments of health care claims arising from Medicare Advantage,¹ fully-insured ERISA,² and individual commercial health plans.

Pending before the court is Defendants Humana Insurance Company, Humana Military Healthcare Services, Inc. n/k/a Humana Government Business, Inc., Humana Inc., and Health Value Management, Inc. d/b/a Choicecare Network's Motion for Partial Summary Judgment (Docket Entry No. 21). Humana seeks summary judgment that Methodist's TPPA claims arising from Medicare Advantage and fully-insured ERISA health plans are preempted by federal law. Defendants also seek summary judgment that Humana Inc. and HGB are not liable under the TPPA because none of the plaintiffs' claims arise from health insurance policies issued by those entities. For the reasons stated below, the motion for partial summary judgment will be granted.

I. Standard of Review

Summary judgment is authorized if the movant establishes that there is no genuine dispute about any material fact and the law entitles it to judgment. Fed. R. Civ. P. 56(a). Disputes about material facts are "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). The Supreme Court has interpreted the plain language of Rule 56 to mandate the entry of summary judgment "after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A party moving for summary judgment "must ‘demonstrate the absence of a genuine issue of material fact,’ but need not negate the elements of the nonmovant's case." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc ) (per curiam). If the moving party meets this burden, Rule 56 requires the nonmovant to go beyond the pleadings and show by admissible evidence that genuine issues of material fact exist for trial. Id. In reviewing the evidence "the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 120 S.Ct. 2097, 2110, 147 L.Ed.2d 105 (2000).

II. Factual and Procedural Background ³

Since at least March 1, 1999, Methodist and Humana have been parties to Hospital Participation Agreements ("Provider Agreements") and amendments thereto, in which Methodist agrees to provide health care services to enrollees and beneficiaries of Humana's health care plans in exchange for payment at a contractual rate. Humana has separate contracts with the enrollees and beneficiaries of its various health care plans including inter alia Medicare Advantage health care plans ("MA Plans") and fully insured ERISA health care plans ("ERISA Plans").

On April 22, 2016, Methodist asserted a demand for arbitration seeking over $15,000,000.00 in statutory penalties for alleged violations of the TPPA. The demand for arbitration included a spreadsheet with approximately 468 claims that Methodist alleged Humana paid late.⁴ Methodist has since refined its list of allegedly late paid claims and grouped them into three categories: (1) claims from MA Plans; (2) claims from individual plans; and (3) claims from fully insured ERISA Plans.⁵ Methodist seeks $13,450,376.42 for late payment of MA Plan claims, and $1,722,521.00 for late payment of fully insured ERISA Plan claims.⁶ On May 25, 2016, Humana filed its Original Complaint to Enjoin Arbitration and for Declaratory Judgment (Docket Entry No. 1), asserting that not all of Methodist's claims are subject to arbitration.

On June 15, 2016, Methodist filed an Answer and Counterclaim (Docket Entry No. 6) (1) stating that Humana's arbitration demand is moot because Methodist dismissed the previously filed arbitration proceeding in favor of asserting all of its claims in this action and (2) asserting counterclaims for (a) breach of contract, (b) violation of the Texas Insurance Code based on Humana's alleged failure to timely pay for services in violation of the TPPA, and (c) declaratory judgment that Methodist's TPPA claims were not preempted by federal law. Methodist's counterclaim also named two additional defendants: Humana Health Plan of Texas, Inc. f/k/a Memorial Sisters of Charity Insurance ("HHP Texas") and Health Value Management, Inc. d/b/a National Transplant Network ("NTN").

On July 18, 2016, Methodist filed (1) an Unopposed Motion to Dismiss Without Prejudice as to Claims and Causes of Action Against Humana Health Plan of Texas, Inc. f/k/a Memorial Sisters Of Charity Insurance And Health Value Management, Inc. d/b/a National Transplant Network, (2) an Unopposed Motion to Realign the Parties, and (3) an Unopposed Motion for Leave to File Amended Complaint (Docket Entry No. 10). The court granted Methodist's motion and dismissed Methodist's claims against HHP Texas and NTN without prejudice, realigned the parties so that the Methodist entities are now the plaintiffs and the Humana entities are now the defendants, and granted Methodist leave to file an amended complaint (Docket Entry No. 11).

On August 11, 2016, Methodist filed Plaintiffs' First Amended Complaint (Docket Entry No. 12), asserting claims for breach of contract, violation of the TPPA's timely pay requirements, and declaratory judgment that its TPPA claims are not preempted by federal law. On September 6, 2016, Humana filed Defendants' Answer to Plaintiffs' First Amended Complaint and Counterclaim (Docket Entry No. 15) seeking declaration that Methodist's TPPA claims are preempted by federal law; and on November 18, 2016, Humana filed the pending motion for partial summary judgment.

III. Analysis

Methodist's TPPA claims seek statutory penalties for Humana's failure to pay "clean claims" within time periods required by the Texas Insurance Code, i.e., Chapter 843 for claims from HMOs, and Chapter 1301 for claims from PPBPs. A "clean claim" is one that complies with the applicable sections of the Texas Insurance Code. See Tex. Ins. Code §§ 843.336(a) and 1301.101. Humana seeks summary judgment on Methodist's TPPA claims arising from MA Plans as expressly preempted under the Medicare Act, 42 U.S.C. § 1395, et seq., and on claims arising from fully insured ERISA Plans as preempted by ERISA's express preemption provision, 29 U.S.C. § 1144(a), and principles of conflict preemption. Defendants' MPSJ also seeks dismissal of the claims asserted against Humana Inc. and HGB because neither of these entities issued health insurance policies from which Methodist's TPPA claims arise.⁷ Asserting that the TPPA merely regulates the time for payment of clean claims, and does not involve provision of benefits, Methodist argues that its TPPA claims are not preempted.⁸

A. Applicable Law

1. Federal Preemption Law

Federal law recognizes both express and implied preemption. Gade v. National Solid Wastes Management Association, 505 U.S. 88, 112 S.Ct. 2374, 2383, 120 L.Ed.2d 73 (1992). "Express preemption requires Congress to explicitly state its intent to preempt relevant state laws." United States v. Zadeh, 820 F.3d 746, 751 (5th Cir. 2016) (citing Pacific Gas & Electric Co. v. State Energy Resources Conservation & Development Commission, 461 U.S. 190, 103 S.Ct. 1713, 1722, 75 L.Ed.2d 752 (1983), and Jones v. Rath Packing Co., 430 U.S. 519, 97 S.Ct. 1305, 1309, 51 L.Ed.2d 604 (1977) ). Absent explicit preemptive language, the Supreme Court has recognized at least two types of implied preemption: field preemption and conflict preemption. Id."Field preemption occurs when Congress intends to ‘occupy the field,’ taking over a field of law to the exclusion of state or local authority." Id. (quoting Sprietsma v. Mercury Marine, 537 U.S. 51, 123 S.Ct. 518, 527, 154 L.Ed.2d 466 (2002) ). "[...