MedARC, LLC v. UnitedHealth Grp.
| Decision Date | 25 October 2021 |
| Docket Number | Civil Action 3:21-CV-0159-N-BH |
| Parties | MEDARC, LLC, as Collection Agent for Jeffrey H. Minis, Trustee of the Liquidating Trust of Revolution Monitoring, LLC, Revolution Monitoring Management, LLC, and Revolution Neuromonitoring, LLC, Plaintiff, v. UNITEDHEALTH GROUP INCORPORATED, et al., Defendants. |
| Court | U.S. District Court — Northern District of Texas |
Referred to U.S. Magistrate Judge.[1]
FINDINGS, CONCLUSIONS, AND RECOMMENDATION
Before the Court are Defendants' Motion to Dismiss Plaintiff's Second Amended Complaint, filed April 12, 2021 (doc. 26), and Plaintiff's Motion for Leave to File a Surreply, filed June 14, 2021 (doc. 37). Based upon the relevant filings and applicable law, the motion to dismiss should be GRANTED in part and DENIED in part. The motion for leave to file a sur-reply is DENIED as moot.
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), brings this action against UnitedHealthcare Inc., Care Improvement Plus Group Management, LLC, Sierra Health and Life Insurance Company, Inc., and UMR, Inc. (collectively Defendants), to recover payments for out-of-network medical services rendered to patients covered by health insurance plans. (See doc. 18.)[2]
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. (Id. at 4-5.) 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 5.) These medical services are primarily utilized in spinal, cranial, facial, throat, and peripheral surgeries. (Id.)
Defendants are businesses that provide, underwrite, and administer health insurance benefits of Texas residents, including patients who received Revolution's IONM medical services (Insureds). (Id. at 6.) Most of the Insureds are covered by private employee welfare benefit plans governed by the Employee Retirement Income Security Act of 1974 (ERISA), but some of them are covered by non-ERISA health benefit plans categorized either as "government plans," by which "state or local government entities contract with Defendants to administer health benefits to their employees," or as "private plans," by which "individuals contract with Defendants to administer health benefits." (Id. at 6-7, 21.) The health insurance plans are either fully-insured plans in which an insurance company assumes financial responsibility for paying medical claims and administrative costs, or self-insured plans in which an employer acts as the insurer and assumes financial responsibility for payment of medical claims. (Id. at 6.) Generally, insurance companies like Defendants are retained to administer self-insured plans and are provided "discretionary authority over the management of the plans, the disposition of the plan assets, and the adjudication of claims." (Id.) The plans obligate Defendants to pay in accordance with the Insureds' 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 12.) As an out-of-network provider, Revolution did not have pre-determined rates under the plans. (Id. at 5, 12.)
From between June 2014 and July 2017, Revolution provided out-of-network medical services to Insureds and followed the same process. (Id. at 8.) 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 Defendants 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.) During the verification process, Defendants 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 Defendants." (Id. at 8-9.)
"As a matter of policy," each Insured also executed an "assignment of benefits" form (AOB), assigning to Revolution, in relevant part, "(1) the rights and interest to collect and be reimbursed for the medical service(s) performed for the patient; (2) the rights and interest to obtain plan documents and other related documentation and information by both provider and its attorney; (3) the rights and interest to any legal or administrative claims and causes of action; (4) the right to bring legal action, if needed, against the insurer or health benefits plan to recover costs or enforce coverage; and (5) the reasonable assistance of the patient in pursuing third-party payments." (Id. at 9.)
After medical services were performed, Plaintiff or Revolution submitted claims for payment through Defendants' designated claims-handling channels, but the claims were either denied or drastically underpaid. (Id. at 10.) Appeals of the non-payment or underpayment of the claims via Defendants' designated appeals channels were also denied. (Id. at 11.) "Defendants 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.) They maintained that "(1) the claim was paid in accordance with the Allowable Amount; (2) the administrator maintained the prior decision; or (3) the claim was processed correctly." (Id.) Revolution billed Defendants more than $60, 000, 000 for services rendered to Insureds but was paid less than $1, 000, 000; this was less than 2% of the amount billed. (Id. at 12.)
Between September 27, 2018 and October 5, 2018, Revolution filed for Chapter 11 bankruptcy in the Northern District of Texas, (doc. 18 at 18.) 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.) 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.)
Under the Bankruptcy Plan, Plaintiff also entered into a payout agreement with Xynergy Healthcare Capital II LLC (Xynergy). (Id. at 28.) Prior to bankruptcy, Revolution had entered into a Healthcare Receivables Master Purchase and Sales Agreement with Xynergy, providing its accounts receivable as security, and Xynergy had sued to enforce the agreement. (Id. at 27.) On May 18, 2018, it obtained a favorable judgment against Revolution in the principal amount of $1, 681, 767.57 (Judgment). (Id.) In the payout agreement under the Bankruptcy Plan, Xynergy assigned Plaintiff "all right, title, and interest to any and all: Financing Agreements, UCC Liens, Lawsuits, Judgment, and Claims in Bankruptcy, as well as any and all documents claims, causes of action whether or not filed, pending or resolved, judgments, orders, contracts, contract interests, contract positions, security agreements, security interests, security positions, liens whether or not perfected, collateral, all legal and equitable rights or interests, debts, bills, receivables, proofs of claim, and any other rights or interests appurtenant thereto, arising out of or...
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