Medarc LLC v. Meritain Health Inc.
| Decision Date | 12 November 2021 |
| Docket Number | Civil Action 3:20-CV-3281-N-BH |
| Parties | MEDARC, LLC, as Collection Agent for Jeffrey H. Mims, Trustee of the Liquidating Trust of Revolution Monitoring, LLC, Revolution Monitoring Management, LLC, and Revolution Neuromonitoring, LLC, Plaintiff, v. MERITAIN HEALTH, INC., Defendant. |
| Court | U.S. District Court — Northern District of Texas |
MEDARC, LLC, as Collection Agent for Jeffrey H. Mims, Trustee of the Liquidating Trust of Revolution Monitoring, LLC, Revolution Monitoring Management, LLC, and Revolution Neuromonitoring, LLC, Plaintiff,
v.
MERITAIN HEALTH, INC., Defendant.
Civil Action No. 3:20-CV-3281-N-BH
United States District Court, N.D. Texas, Dallas Division
November 12, 2021
FINDINGS, CONCLUSIONS, AND RECOMMENDATION REFERRED TO U.S. MAGISTRATE JUDGE [1]
IRMA CARRILLO RAMIREZ UNITED STATES MAGISTRATE JUDGE
Before the Court is Defendant Meritain Health, Inc.'s Motion to Dismiss Plaintiff's First Amended Complaint and Brief in Support, filed June 23, 2021 (doc. 20). Based upon the relevant filings and applicable law, the motion should be GRANTED in part and DENIED in part.
I. BACKGROUND
On September 25, 2020, MedARC, LLC, as Collection Agent for Jeffrey H. Mims, Trustee of the Liquidating Trust of Revolution Monitoring, LLC, Revolution Monitoring Management, LLC, and Revolution Neuromonitoring, LLC (Plaintiff), sued Meritain Health, Inc. (Defendant) in state court, to recover payments for out-of-network medical services rendered to patients covered by health insurance plans governed by the Employee Retirement Income Security Act of 1974 (ERISA). (See doc. 1 at 18-33.)[2] Defendant removed the lawsuit to federal court on grounds of diversity jurisdiction and federal question jurisdiction on October 30, 2020. (See Id. at 1-6.)
A. Medical Services
Revolution Monitoring, LLC, Revolution Monitoring Management, LLC, and Revolution Neuromonitoring, LLC (collectively Revolution) were medical providers of intraoperative neurophysiological monitoring (IONM) medical services for operations around delicate parts of the nervous system. (doc. 17 at 4.) IONM technology provides “real-time” monitoring of the nervous system during surgery, which alerts surgeons of potential evolving neurologic injury to allow for corrective action to avoid permanent injury or death. (Id. at 4-5.) These medical services are primarily utilized in spinal, cranial, facial, throat, and peripheral surgeries. (Id.)
From between June 2014 and July 2016, Revolution provided IONM medical services to four patients covered by separate employer-sponsored health plans governed by ERISA (Insureds). (docs. 17 at 6.) The plans are self-insured, which means an employer acts as the insurer and assumes financial responsibility for payment of medical claims, and are administered in accordance with ERISA by a plan administrator with “discretionary authority over the management of the plans, the disposition of the plan assets, and the adjudication of claims.” (Id.) Under the terms of the plans, the plan administrator is obligated to pay in accordance with the participant's or beneficiary's rights to receive reimbursement for out-of-network care, and they establish an allowable amount to be paid for medical services provided by out-of-network providers like Revolution. (Id. at 9.) As an out-of-network provider, Revolution did not have pre-determined rates under the plans. (Id. at 5.) Defendant was retained by the plan administrator for each plan to provide third-party administrative services, including “certain claims processing and other ministerial services.” (docs. 21-2 at 1-2; 21-3 at 3-4; 21-4 at 3-4; 21-5 at 4-5.)
Revolution generally followed the same process before it provided out-of-network medical
services to Insureds. (doc. 17 at 7.) It received orders from physicians to schedule its IONM medical services in connection with Insureds' medical procedures to be performed at physicians' surgical facilities. (Id.) After receiving orders and before rendering medical services, Revolution obtained verification from Defendant that “each patient was covered by a health benefit plan that provided out-of-network benefits, ” that “the particular procedures were covered by the relevant health benefit plan, ” and that it “would be paid in accordance with the health benefit plan.” (Id. at 8.)[3] During the verification process, Defendant did not identify or rely on any exclusions, conditions, or other prerequisites within the relevant health benefit plans, including any anti-assignment provisions. (Id.) Plaintiff alleges that “Revolution would not have provided these services to these patients without first obtaining this verification from Defendant.” (Id.)
After medical services were performed, Plaintiff or Revolution submitted claims for payment through Defendant's designated claims-handling channels, but the claims were either denied or drastically underpaid. (Id. at 9.) Appeals of the non-payment or underpayment of the claims via Defendant's designated appeals channels were also denied. (Id.) “Defendant failed to provide a specific reason or reasons for the adverse determination, failed to reference the specific plan provisions on which the determination was based, failed to identify, allege, assert, or rely on any exclusions, conditions, or other prerequisites within the health benefit plans, including but not limited to any anti-assignment provisions, and failed to identify and provide a copy of the internal rule, guideline, protocol or other similar criterion that was relied upon in making the adverse
determination.” (Id.) The amounts Defendant paid for the medical services Revolution rendered to Insureds “were drastically lower than any other recognizable third-party commercial or government payor in the health insurance industry.” (Id. at 10.)
B. Bankruptcy
Between September 27 and October 5, 2018, Revolution filed for Chapter 11 bankruptcy in the Northern District of Texas. (doc. 17 at 15-16.) On July 23, 2019, the bankruptcy court entered an order confirming the Debtors' Second Joint Plan of Reorganization (Bankruptcy Plan), which among other things, provided for the creation of a Liquidating Trust, the appointment of Jeffrey H. Mims as Liquidating Trustee, and the appointment of Plaintiff to serve as Collection Agent. (Id. at 16.) On August 5, 2019, the Liquidating Trust Agreement (LTA) was filed in accordance with the Bankruptcy Plan. See In re Revolution Monitoring, LLC, et al., No. 18-33730-hdh-11 (N.D. Tex. Bank.) (Revolution Bankr., doc. 146).
Under the Bankruptcy Plan, “all assets of the Debtors, including all cash, accounts receivable, patient medical records, billing records, banking records, billing ID's, billing numbers, medicare ID's, software licenses, passwords, and any other documents, licensure, or information that Debtors have previously used and relied upon, or that is necessary to effect the billing and collection of the Accounts Receivable, shall be transferred, granted, assigned, conveyed, set over, and delivered to the Liquidating Trust . . . .” (Id., doc. 139 at 16.) As Collection Agent, Plaintiff had “full authority regarding the Accounts Receivable to: (i) bill, rebill, and collect the Medical Receivables; (ii) bring lawsuits and settle lawsuits; (iii) negotiate, bring, enforce and settle claims, together with all lawful actions necessary for collection thereof; (iv) enter into collection agreements with third-party collection agencies; (v) enter into engagement agreements with law firms to
commence legal adjudication of collections, on behalf of the Debtors and the Liquidating Trustee.” (Id. at 17-18.) The net proceeds collected were to be used to pay creditors. (Id. at 18.)
C. Claims for Benefits
Plaintiff's first amended complaint asserts claims for benefits under ERISA, Sections 502(a)(1)(B) and 502(a)(3), for breach of fiduciary duties of loyalty and care under ERISA, Section 502(a)(2), and for attorneys' fees under ERISA, Section 502(g)(1), as well as state law claims for breach of contract and for promissory estoppel. (doc. 17 at 16-24.) It alleges that Defendant was the “claim administrator” and the “de facto plan administrator for each and every claim at issue in this lawsuit, ” and it functioned as a fiduciary as defined under ERISA. (Id. at 6, 12-13.) It also alleges that the IONM medical services Revolution provided to Insureds “were medically appropriate and necessary, covered by the applicable plan terms, and the claims should have been paid to Revolution as the Insureds' lawful assignee, ” but Defendant “indiscriminately denied payment for most claims and services based on an unsupported and erroneous assertions” and its “treatment of Revolution's appeals of adverse benefits determinations was contrary to ERISA, applicable regulations, and the terms of applicable health benefit plans.” (Id. at 15.) Plaintiff asserts that it has standing to pursue the ERISA and breach of contract claims because Revolution received valid assignments of all the benefits provided to Insureds under the plans, which were subsequently assigned to it. (Id. at 16-17, 19, 22.) It also asserts a cause of action for promissory estoppel “on behalf of the Liquidating Trustee of Revolution's estate, separate and apart from any assignment of benefits.” (Id. at 23.)
One of the unpaid claims for which Plaintiff seeks payment relates to medical services Revolution provided on July 19, 2016, to an Insured covered by a self-funded benefit plan sponsored by Furniture Row Companies (Furniture Row Plan), for which Defendant continues to provide third-
party administrative services. (docs. 21-2 at 2; 21-3.) Two claims relate to services provided on June 18, 2014 and July 24, 2015, to Insureds covered by a self-funded benefit plan sponsored by Texas Health MedSynergies, LLC (Texas Health Plan), for which Defendant ceased providing administrative services on December 31, 2016. (docs. 21-2 at 2; 21-4; 21-6 at 2.) The remaining claim relates to services provided on February 25, 2015, to an Insured covered by a self-funded benefit plan sponsored by Patterson Auto Center (Patterson Auto Plan), for which Defendant also no longer provides administrative services as of March 31, 2016. (docs. 21-2 at 2; 21-5; 21-6 at 2.)
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