Lifebrite Hosp. Grp. of Stokes, LLC v. Blue Cross & Blue Shield N.C.
| Decision Date | 30 March 2020 |
| Docket Number | 1:18CV293 |
| Court | U.S. District Court — Middle District of North Carolina |
| Parties | LIFEBRITE HOSPITAL GROUP OF STOKES, LLC, Plaintiff and Counter Defendant, v. BLUE CROSS AND BLUE SHIELD OF NORTH CAROLINA, Defendant and Counter Claimant. |
Currently before this court is Plaintiff's motion to remand this case to the Stokes County Superior Court. (Doc. 16.) Plaintiff has also moved to dismiss Defendant's first amended counterclaims pursuant to Fed. R. Civ. P. 9(b), 12(b)(1) and 12(b)(6). (Doc. 24.) For the reasons described herein, this court finds that Plaintiff's motion to remand should be granted and that Plaintiff's motion to dismiss the first amended counterclaims should be denied as moot.
Plaintiff LifeBrite Hospital Group of Stokes, LLC ("LifeBrite") is a healthcare company whose principal place of business is Danbury, North Carolina. (Complaint ("Compl.") (Doc. 5) ¶ 1.) Defendant Blue Cross and Blue Shield of North Carolina ("BCBSNC") "is the largest provider of private health insurance in North Carolina" and is affiliated with the national Blue Cross Blue Shield insurance network. (Id. ¶ 7.)
Defendant and Pioneer Health Services of Stokes County, Inc.1 entered into a Network Participation Agreement2 (the "NPA") on January 1, 2013, pursuant to which Pioneer Health agrees to provide "medically necessary covered services" to covered individuals (those properly enrolled in Blue Cross Blue Shield benefit plans) at Pioneer Health's facility in Danbury, North Carolina, and Defendant agrees to reimburse Pioneer Health for these services pursuant to the terms of the relevant benefit plan. (Id. ¶¶ 9-10; Network Participation Agreement (Doc. 17-7) at 4-5, 10, 17.) The agreement further provides that Defendantshall "be responsible for making judgments and decisions concerning whether certain services are Covered Services under the Benefit Plan and the extent to which payment may or may not be made thereunder." (NPA (Doc. 17-7) at 8.) The general NPA applies to benefit plans provided by PPOs, HMOs, and "Other Members." (Id. at 18.)
Defendant and Pioneer Health also entered into a Medicare Provider Agreement3 (the "MPA" and, collectively with the NPA, the "Provider Agreements"), effective August 1, 2011, to "govern the terms of Provider participation with BCBSNC for delivery of health care services to BCBSNC Members . . . under BCBSNC Medicare Advantage Plan." (Doc. 2-3 at 4.) Similar to the NPA, under this contract, Pioneer Health agrees to provide medically necessary covered services to participants in Defendant's Medicare plans, and Defendant agrees to compensate Pioneer Health pursuant to an attached reimbursement schedule. (Id. at 7, 10, 15, 28-34.) The MPA also attaches a list of participating providers. (Id. at 21-27.)
Plaintiff contends that, beginning in late 2017, Defendant breached the Provider Agreements by denying reimbursement for lab tests conducted by Plaintiff and "stating that the claimsshould be sent to the State where the lab specimen was drawn." (Compl. (Doc. 5) ¶ 11.) Plaintiff brings claims for breach of contract and unjust enrichment and alleges damages in excess of $25,000.00. (Id. ¶¶ 13-18.)
Plaintiff initially filed the Complaint in Stokes County Superior Court, after which Defendant removed the case to this court. (See Notice of Removal ("Removal Notice") (Doc. 1.)) Defendant answered the Complaint and asserted counterclaims against Plaintiff for fraudulent misrepresentation, negligent misrepresentation, breach of contract, breach of contract accompanied by a fraudulent act, tortious interference with contract, unfair or deceptive trade practices, restitution, declaratory and injunctive relief, constructive trust and equitable liens, and unjust enrichment. (Doc. 11.)
Plaintiff moved to dismiss the counterclaims, (Doc. 15), and to remand the case to state court, (Doc. 16). Plaintiff filed a memorandum in support of these motions. (Pl.'s Mem. of Law in Supp. of (1) Motion to Remand and (2) Motion to Dismiss Counterclaims ("Pl.'s Mem.") (Doc. 17).) Defendant then filed an amended answer and an amended set of counterclaims. Defendant also responded opposing Plaintiff's motion toremand.
Generally, Defendant alleges that Plaintiff fraudulently billed Defendant for over $76 million of "urine toxicology testing that it did not perform." (Def.'s Countercls. (Doc. 20) at 11, 38.) Specifically, Defendant asserts that LifeBrite Laboratories, LLC ("LifeBrite Labs"), Plaintiff's sister company, improperly solicited doctors to use its laboratories for urinalysis testing and to overprescribe urinalysis tests by falsely representing that LifeBrite Labs was an in-network Blue Cross provider and could receive favorable reimbursement rates. (Id. at 11-13, 33.) Defendant contends that these arrangements typically provided a standard authorization4 for lab testing, without a determination of whether the tests were medically necessary and that Plaintiff paid kickbacks to certain providers consisting of a portion of the reimbursement received for urine tests. (Id. at 33-35.) Defendant further alleges that Plaintiff failed to collect member co-pays for the relevant lab testing, which might have alerted Defendant to the ongoing scheme becausemembers were likely to dispute charges from hospitals or health institutions other than those where they actually received testing or treatment. (Id. at 37.)
In summary, Defendant alleges that Plaintiff engaged in a far-reaching scheme to channel outside lab tests performed on patients across the country through its own Blue Cross North Carolina network agreement, obtain reimbursements to which Plaintiff was not entitled, and share this reimbursement money with the providers who prescribed the tests. Defendant asserts these actions breached the Provider Agreements because Plaintiff was permitted to submit only claims for services performed directly by Plaintiff at the designated site of service in North Carolina and that, in the process, Plaintiff misrepresented who was conducting the tests, on which patients the tests were conducted, whether the tests were medically necessary, and what codes the tests were conducted under. (Id. at 38-41.)
Plaintiff moved to dismiss the amended counterclaims, (Doc. 24), and filed a memorandum in support of this motion, (Doc. 25). Defendant responded, (Doc. 27), and Plaintiff replied, (Doc. 28). Plaintiff also filed a reply brief in regarding its motion to remand. (Doc. 26.) This court, by text order dated March 12, 2019, denied Plaintiff's motion to dismiss, (Doc. 15),Defendant's original counterclaims as moot. (Docket Entry 3/12/2019.)
This court ordered supplemental briefing on the issue of the Employee Retirement Income Security Act ("ERISA") § 502(a) standing, (Doc. 31), to which both parties responded. ( ) ( ) The court then ordered a second round of supplemental briefing on the issue of ERISA standing, (Doc. 38), to which both parties responded, (Def.'s Supplemental Brief ( ) (Doc. 39); Pl.'s Supplemental Brief ( ) (Doc. 40.)
This court will first evaluate Plaintiff's motion to remand, because the motion to dismiss counterclaims requires an analysis of the merits that is appropriate only if this court has jurisdiction over the case. See generally Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 98 (1998) ().
Defendant asserts that this case was properly removed to federal court on two alternative grounds. First, Defendantargues that "portions of Plaintiff's claims are completely preempted by Employment Retirement Income Security Act of 1974 ('ERISA')" because Defendant looks to the underlying ERISA plan to determine whether services are "medically necessary" under the Provider Agreements. (Removal Notice (Doc. 1) ¶¶ 6, 13.) Second, Defendant contends that the case is removable under the federal officer removal statute, 28 U.S.C. § 1442(a)(1). (Id. ¶ 7.) Because certain contested lab test claims were provided to federal employees (or their family members or other beneficiaries) with health insurance under the Federal Employee Health Benefits Act ("FEHBA"), Defendant argues that it "acts under a federal officer" in administering these plans for the Office of Personnel Management ("OPM") and that Plaintiff's claims turn on interpreting the underlying FEHBA plans.5 (Id. ¶¶ 19-25.) Defendant further asserts that certain of the contested lab test claims were provided to Medicare beneficiaries and that the case is removable under § 1442(a)(1) because Defendant acts under a federal officer when it is directed and employed by the Centers for Medicare and MedicaidServices ("CMS") to administer the underlying benefit plans. (Id. ¶¶ 30-34.)
In response, Plaintiff contends that this case is solely "a contractual dispute regarding the parties' obligations under the" Provider Agreements that does not implicate ERISA or directly involve the administration of any federal health insurance plan. (Pl.'s Mem. (Doc. 17) at 15-18.)6 Specifically, Plaintiff asserts that this case involves only the refusal to process claims and not any scope-of-coverage determinations that might implicate ERISA or Medicare. (Doc. 26 at 8-9.) Further, Plaintiff argues that there is no "direct connection" in this case between Defendant and the federal government because Defendant...
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