Mbody Minimally Invasive Surgery, P.C. v. United Healthcare Ins. Co., 14 Civ. 2495 (ER)
| Decision Date | 15 August 2016 |
| Docket Number | 14 Civ. 2495 (ER) |
| Parties | MBODY MINIMALLY INVASIVE SURGERY, P.C. and D.O. NICK GABRIEL, Plaintiffs, v. UNITED HEALTHCARE INSURANCE COMPANY, UNITED HEALTHCARE OF NEW YORK, UNITED HEALTHCARE SERVICE, LLC, and UNITED HEALTHCARE SERVICE, INC., Defendants. |
| Court | U.S. District Court — Southern District of New York |
Ramos, D.J.:
MBody Minimally Invasive Surgery, P.C. ("MMIS") and Nick Gabriel, D.O. ("Dr. Gabriel") (together, "Plaintiffs") bring this suit seeking recoupment of underpaid and denied health insurance claims against United HealthCare Insurance Company, United HealthCare of New York, United HealthCare Service, LLC, and United HealthCare Services, Inc. (together, "United"). United has filed a motion to dismiss the First Amended Complaint in its entirety pursuant to Federal Rule of Civil Procedure 12(b)(6). (Doc. 40). Plaintiffs have cross-moved for leave to file a second amended complaint pursuant to Rule 15(a)(2). (Doc. 48). As explained below, both motions are GRANTED in part and DENIED in part.
MMIS is a medical practice located in Southampton, New York, managed by Dr. Gabriel, a bariatric surgeon. Amended Complaint ("AC") (Doc. 21) ¶¶ 16-17. Plaintiffs provided medical services to individual patients enrolled in health insurance plans administered by United,including both plans subject to the Employee Retirement Income Security Act of 1974 ("ERISA") and its governing regulations ("ERISA Plans"), and plans that are not governed by ERISA ("non-ERISA Plans"). Id. ¶ 1. United administered all the plans at issue here, exercising discretion in making benefit determinations, and controlling the management and disposition of benefits under the terms of the plans. Id. ¶¶ 26-27.2
Plaintiffs allege that they have been out-of-network providers during all times relevant to this lawsuit. Id. ¶ 32. Unlike in-network "participating" providers who agree to charge patients rates pre-negotiated with insurance providers, out-of-network providers are free to charge higher rates, leaving patients to cover the gap between those higher rates and whatever coverage their insurance provides out-of-pocket. Id. ¶¶ 33-34.
Out-of-network providers are entitled to "balance bill" their patients for services rendered, i.e., to charge patients for the difference between what their insurance will cover for a particular procedure and what their out-of-network providers charge for that procedure. Id. ¶ 50. To avoid forcing their patients to pay the full costs of services on the spot, however, Plaintiffs "as a matter of course" obtained assignments from patients of the benefits owed to them under their health insurance plans. Id. ¶ 75. The terms of the standard form used by Plaintiffs assign "all applicable health insurance benefits and all rights and obligations" that each patient has under his or her health insurance plan to Plaintiffs, and authorizes Plaintiffs to serve as an authorized representative, to file medical claims, appeals, and grievances, and to institute any necessary litigation. Id.
The dispute at the heart of this lawsuit is whether United wrongly treated Plaintiffs as in-network providers and, consequently, wrongly under-paid or denied benefit insurance claims submitted by Plaintiffs on behalf of their patients. Dr. Gabriel alleges that while he was an in-network provider from 2006 to 2008 during his employment at Peninsula Hospital, he became out-of-network upon his leaving that hospital in 2008. Id. ¶ 36. For the following three years, Dr. Gabriel submitted assigned claims to United from his private practice, and while United "often paid such claims on an out-of-network basis," United also sometimes treated Dr. Gabriel as a participating provider. Id. ¶ 37. Despite "repeatedly" being told by Dr. Gabriel that he was out-of-network, United's inconsistent claims determinations continued unabated. Id.
On December 13, 2011, Dr. Gabriel's counsel sent a letter to United that reiterated Dr. Gabriel's belief that his in-network status terminated upon his leaving Peninsula Hospital in 2008, and explicitly informed United that Dr. Gabriel was terminating any participation agreements that United believed were in effect. Id. ¶ 38. A United Networking Manager responded three days later that Dr. Gabriel's notice served to terminate his in-network status as of September 1, 2012, and expressly stated in an email that Dr. Gabriel was "considered a non-participating provider as of September 1, 2012 from all lines of business under United Healthcare and Oxford." Id. ¶ 39. Dr. Gabriel's counsel responded with another email sometime thereafter reiterating the position that Dr. Gabriel was out-of-network from the time he left Peninsula Hospital. Id. ¶ 40. Despite these communications, Plaintiffs again received correspondence from United dated October 11, 2012, in which United said it was "approving" Dr. Gabriel for continued participation in the United HealthCare network. Id. ¶ 41. Dr. Gabriel's counsel once again wrote to United, restating that Dr. Gabriel was no longer in-network since he left Peninsula Hospital or, at latest, September 1, 2012. Id.
From 2011 to 2014, Plaintiffs allege that United took part in a variety of actionable conduct. First, while United "historically" paid from 80% to 100% of the billed charges Plaintiffs submitted, United embarked on a "retaliatory campaign" following Dr. Gabriel's December 2011 communication to United, reimbursing Plaintiffs "drastically below" Plaintiffs' billed charges, below reimbursements to Plaintiffs from other insurers for the same services, and below the rates charged by comparable providers for the same services. Id. ¶¶ 56-57, 60.
Second, United "routinely" were inconsistent and arbitrary in reimbursing different amounts at different times for the same procedure codes under the same health insurance plans. Id. ¶¶ 58-61. For example, in response to the filing of this lawsuit, United took the position that Dr. Gabriel was still a participating provider in the Empire Plan, which is a United-administered health insurance plan for New York State employees. AC ¶ 42.3 But Plaintiffs allege that United's position with respect to the Empire Plan is belied by its own past conduct from 2011 to 2013, during which time United (i) "frequently adjudicated Dr. Gabriel's Empire Plan claims on an out-of-network basis," paying 100% of Dr. Gabriel's charges billed to Empire Plan enrollees, and (ii) submitted, "on numerous occasions," Dr. Gabriel's Empire Plan claims to an independent contractor for adjudication and re-pricing, submissions that would be unnecessary had United believed Dr. Gabriel was participating in-network. Id. ¶¶ 45-48.
Third, United wrongly told some of Dr. Gabriel's patients that he was in-network and that Plaintiffs' practice of balance billing was "improper," "fraudulent," and in at least one instance, a "crime." Id. ¶¶ 49-54. "Numerous" patients allegedly complained about the balance-billing tohospitals that Dr. Gabriel is associated with, "drastically curtail[ing]" those hospitals' referrals to Dr. Gabriel and depressing his revenues as a result. Id. ¶ 51.
Fourth, after United's payments of Plaintiffs' claims "slowed to a trickle, with no notice or explanation of any reason for the drastic reductions in payments," Plaintiffs' billing service contacted United on March 11, 2013 and was informed that Plaintiffs claims were being "audited" as of May 22, 2012. Id. ¶¶ 62-65. United's representative stated "that the 'audit' would remain in effect until all claims that were missing medical records had been 'cleared up,'" and the audit's imposition required blanket denial of all of Plaintiffs' claims unless and until Plaintiffs mailed copies of the claim denials and the supporting medical records to a third-party review company. Id. ¶¶ 63-67. Subsequently, Plaintiffs followed the new procedure and, while United paid some previously denied claims at low rates, it continued to deny others based on a purported lack of supporting medical records and also sought to recoup some purportedly "overpaid" claims. See id. ¶¶ 68-72. Throughout this process, Plaintiffs allege that United failed to provide adequate notice of any audit-related information, including the audit's initiation, the fact that United at one point hired a different third-party review company, the intermittent blanket denials all of Plaintiffs' submitted claims, and claim-specific justifications for benefit denials. See id. ¶¶ 64-73.
Fifth, with respect to every denied claim litigated in this suit, Plaintiffs allege that United violated a number of ERISA's statutory and regulatory provisions and non-ERISA contractual provisions by failing to provide in a timely fashion certain required notices, disclosures, and explanations of adverse benefit determinations, plan terms, review procedures, and appeal responses. See id. ¶¶ 83-90.
Plaintiff filed this lawsuit on April 9, 2014. Complaint (Doc. 2). The Amended Complaint at issue here was filed on November 10, 2014. (Doc. 21). Plaintiffs attached to the Amended Complaint a list of claims that they "contend were improperly denied or reimbursed at improperly low rates," some of which Plaintiffs already received assignments for ("Assigned Claims"), while others concededly were not assigned prior to the filing of this lawsuit ("Unassigned Claims"). See id. ¶ 74, App'x A (list of Assigned Claims), App'x B (list of Unassigned Claims).
The Amended Complaint asserts eleven causes of action. The first five claims arise under ERISA: (1) breach of ERISA Plan provisions based on the wrongful underpayment or denial of benefits pursuant to ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B); (2) appropriate equitable relief under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), for violation of ERISA § 503, 29 U.S.C. § 1133, and its implementing regulation, based on United's imposition of the "audit"; (3) civil penalties pursuant to ERISA § 502(c), 29...
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