Mem'l Hermann Health Sys. v. Coastal Drilling Co.

• Decision Date: 31 March 2014
• Docket Number: Civil Action No. H–13–1280.
• Citation: 12 F.Supp.3d 1001
• Parties: MEMORIAL HERMANN HEALTH SYSTEM, Plaintiff, v. COASTAL DRILLING COMPANY, LLC EMPLOYEE BENEFIT TRUST and Coastal Drilling, Defendants.
• Court: U.S. District Court — Southern District of Texas

12 F.Supp.3d 1001

MEMORIAL HERMANN HEALTH SYSTEM, Plaintiff,
v.
COASTAL DRILLING COMPANY, LLC EMPLOYEE BENEFIT TRUST and Coastal Drilling, Defendants.

Civil Action No. H–13–1280.

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

Signed March 31, 2014.

[12 F.Supp.3d 1003]

Lynne Ellen Sassi, Sullin Johnston et al., Houston, TX, for Plaintiff.

Kristopher Robert Alderman, Lewis Brisbois Bisgaard Smith LLP, Atlanta, GA, Sarah Marie Davis, Lewis Brisbois Bisgaard & Smith, LLP, Houston, TX, for Defendants.

MEMORANDUM AND ORDER
NANCY F. ATLAS, District Judge.

This ERISA case is before the Court on the parties' cross-motions for summary judgment. Defendants Coastal Drilling Company, LLC Employee Benefit Trust and Coastal Drilling (collectively, “Coastal Drilling” or “Defendants”) filed a Motion for Summary Judgment [Doc. # 35] (“Defendants' Motion”) and Plaintiff Memorial Hermann Health System (“MHHS” or “Plaintiff”) filed a Response and its own Motion for Summary Judgment [Doc. # 39] (“Plaintiff's Motion”).¹ These motions are ripe for consideration. Having reviewed the parties' briefing, the applicable legal authorities, and all matters of record, the Court denies Plaintiff's Motion for Summary Judgment and grants Defendants' Motion for Summary Judgment. This case is dismissed with prejudice.

I. BACKGROUND

MHHS instituted this action to collect money it claims it is owed by Coastal

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Drilling. The Court first summarizes the agreements relevant to this case. Next, the Court discusses the particular circumstances that prompted this lawsuit. Finally, the Court concludes this background section by detailing the procedural posture of this case and the claims MHHS asserts against Coastal Drilling.

A. Relevant Agreements

There are five agreements pertinent to the parties' dispute. Pertinent provisions in each are summarized below.²

1. Coastal Drilling's ERISA Plan

Defendant Coastal Drilling is an employer doing business in Texas. Coastal Drilling provides its employees with medical insurance benefits through a self-funded insurance plan, as defined under the Employee Retirement Income Security Act (“ERISA”), known as the Coastal Drilling Company, LLC Employee Benefit Trust (the “ERISA Plan” or “Plan”). The ERISA Plan is essentially an agreement between Coastal Drilling and the Plan's beneficiaries.³ The Plan provides that Coastal Drilling will cover the “Usual and Reasonable Charges, or for claims under the Claim Review and Audit Program, [charges] within the Applicable Plan Limits, that are incurred for” certain services and supplies. ⁴ The term “Applicable Plan Limits” (“APL”) is further defined as “the charges for services and supplies ... which are Medically Necessary for the care and treatment of Illness or Injury, but only to the extent such fees are within the Applicable Plan Limits.” ⁵ Coastal Drilling, which is the Plan Administrator, has discretionary authority to determine whether a charge falls within the ERISA Plan's APL.⁶

The ERISA Plan also excludes certain payments to providers and limits the total amount of charges available under the Plan. For example, the Plan prohibits payments for “Excess Charges,” ⁷ defined as “[t]he part of an expense for care and treatment of an Injury or Sickness that is in excess of the Usual and Reasonable Charge or ... that is in excess of the Applicable Plan Limits.” ⁸ Furthermore, the ERISA Plan specifically states that:

Notwithstanding any conflicting contracts or agreements, the Plan may consider the Applicable Plan Limits as the maximum amount of Covered Medical Expense that may be considered for reimbursement under the Plan, and may apply this determination in lieu of any PPO network provider hospitals' per diem, DRG rates or PPO discounted rates as the amount considered for reimbursement under the Plan. Additionally, in the event that a determination of an Applicable Plan limit exceeds the actual charge billed for the service or supply, the Plan will consider the lesser of the actual billed charge or the Applicable Plan Limit determination.⁹

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2. Administrative Services Agreement

In early 2003, Coastal Drilling entered into a contract with Insurance Systems, Inc. (“ISI”), under which ISI provides administration and coordination services for the ERISA Plan (the “Administrative Services Agreement”). ¹⁰ Under the Administrative Services Agreement, ISI is required to “[u]se that degree of ordinary care and reasonable diligence in the exercise of its power and duties hereunder that a supervisor of claims under an insured or uninsured employee benefit plan would use acting in like circumstances and familiar with such matters.” ¹¹ ISI must also “[d]etermine, in accordance with the Benefit Plan and the administration procedure and practices, the qualifications of claims submitted, making, as required, such investigation as may be necessary.” ¹²

3. TPA Agreement

On December 30, 2003, ISI entered into a contract with PPOplus, LLC (“PPOplus”) (the “TPA Agreement”).¹³ ISI entered into the TPA Agreement “as an entity providing services to self-funded welfare benefit Plans and wish[ing] to make available a provider network for the provision of medical, hospital and other health services available to Groups.” ¹⁴ Under the contract, PPOplus makes a network of healthcare providers available to ISI and ISI's clients.¹⁵ In exchange, ISI agrees to compensate providers under the terms of the TPA Agreement, including that:

TPA [ i.e., ISI] agrees to pay claims of Participating Providers in accordance with the applicable Plan and the PPO Contracted Rates. TPA shall be required within thirty (30) days after receipt of a non-electronic Complete Claim or twenty-five (25) days of submission of an electronic Complete Claim for Covered Services to (i) insure that Group makes payment for a Complete Claim for Covered Services provided to a Beneficiary, (ii) determine that a claim is not a Complete Claim and request any information necessary to make such claim a Complete Claim, (iii) notify Participating Providers of the status of any such claim, and (iv) endeavor to resolve promptly any claim that is determined not to be a Complete Claim. Failure of Group to provide payment to Participating Providers within thirty (30) days of submission of a non-electronic Complete Claim or within twenty-five (25) days of submission of an electronic Complete Claim shall, absent agreement between the parties of there being reasonable cause for such failure, constitute a waiver by Group of its right to make payments in accordance with PPO Contracted Rates. Group shall then be required to reimburse Participating Provider's billed charges for those Covered Services.¹⁶

4. Network Access Agreement

Prior to the TPA Agreement, on January 1, 2002, PPOplus and Healthsmart

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Preferred Care, Inc. (“HSPC”) entered into a contract pursuant to which HSPC gained access to PPOplus's network of healthcare providers (the “Network Access Agreement”). The Network Access Agreement refers to “Clients,” which are defined as “insurers, payors and third party administrators.” ¹⁷ With regard to compensation of PPOplus's providers, the Network Access Agreement provides:

HSPC shall require Client to pay claims of Participating Providers in accordance with the applicable Plan and the PPOplus Contracted Rates, which are the rates or fees agreed upon by PPOplus and Participating Provider. Client shall be required within thirty (30) days after receipt of a non-electronic Complete Claim or twenty-five (25) days of submission of an electronic Complete Claim to (i) make payment for a Complete Claim for covered services provided to a Beneficiary, (ii) determine that a claim is not a Complete Claim and request any information necessary to make such claim a Complete Claim, (iii) notify Participating Providers of the status of any such claim, and (iv) endeavor to resolve promptly any claim that is determined not to be a Complete Claim. Failure of Client to provide payment to Participating Providers within thirty (30) days of submission of a non-electronic Complete Claim or within twenty-five (25) days of submission of an electronic Complete Claim shall, absent agreement between the parties of there being reasonable cause for such failure, constitute a waiver by Client of its right to make payments in accordance with PPOplus Contracted Rates. Client shall then be required to reimburse Participating Provider's billed charges for those Covered Services.¹⁸

A later amendment to the Network Access Agreement grants PPOplus and its clients reciprocal access to HSPC's network of providers.¹⁹ Under that amendment, PPOplus must require its clients “to pay the claims of [HSPC's] Participating Providers in accordance with the applicable Plan and [HSPC's] Contracted Rates and within the delays and under the terms set forth in the January 1, 2002, Network Access Agreement.” ²⁰

5. Hospital Service Agreement

MHHS is a healthcare provider located in Houston, Texas. On September 1, 2001, MHHS entered into an agreement with HSPC (the “Hospital Service Agreement”). HSPC entered into the agreement as an agent of its clients “to negotiate, monitor and control the purchase of health care services.” ²¹ Under the Hospital Service Agreement, MHHS agrees to furnish “Hospital Services”—that is, “inpatient, outpatient and emergency room services”—to covered individuals according to a “Fee Schedule.” ²² The amended fee schedule (entered into on March 11, 2008)

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establishes that, effective March 1, 2009, MHHS agreed to provide a 20% discount off of its billed charges to HSPC's clients.²³ Thus, HSPC clients seeking medical services from MHHS pursuant to the Hospital Service Agreement are required to pay only 80% of MHHS's billed charges for those hospital services.

B. Claims and Benefits at Issue

Between April 26, 2011, and May 12, 2011, MHHS provided healthcare services to “MF.” ²⁴ During the period of treatment,...