Mem'l Hermann Health Sys. v. Blue Cross Blue Shield Texas
| Decision Date | 17 November 2017 |
| Docket Number | CIVIL ACTION NO. H-17-2661 |
| Parties | MEMORIAL HERMANN HEALTH SYSTEM, Plaintiff, v. BLUE CROSS BLUE SHIELD OF TEXAS, Defendant. |
| Court | U.S. District Court — Southern District of Texas |
Plaintiff, Memorial Hermann Health System, initiated this action on August 1, 2017, by filing a petition in the 133rd State District Court of Harris County, Texas, Cause No. 2017-50855, against defendant, Blue Cross Blue Shield of Texas ("BCBSTx"), for breach of contract, quantum meruit/unjust enrichment, and declaratory judgment under the Texas Declaratory Judgment Act, Tex. Civ. Prac. & Rem. Code § 37.003.1 On September 3, 2017, defendant removed plaintiff's action to this court based on diversity jurisdiction.2 Pending before the court is Defendant Health Care Service Corporation's Motion to Dismiss Pursuant to Rule 12(b)(3) for Improper Venue and Motion to Compel Arbitration ("Defendant's MD," Docket Entry No. 8). For the reasons set forth below, Defendant's MD will be denied.
Plaintiff is a non-profit, charitable healthcare system. Defendant offers, issues, and administers insurance plans that provide access to healthcare services. Persons covered by policies issued and administered by the defendant ("insureds") receive health care services from the plaintiff. The benefits that the defendant's insureds receive are governed by a number of different types of agreements between individual insureds and the defendant or an employer health plan administered by the defendant. Separate and apart from the agreements between the defendant and its insureds, the defendant and the plaintiff have entered into agreements that govern compensation and billing for services that plaintiff provides to insureds covered by defendant's various types of health insurance plans, e.g., Health Maintenance Organization ("HMO"), Preferred Provider Organization ("PPO"), and Traditional Indemnity Business ("Traditional Indemnity") plans.4 These agreements provide defendant a contractual discount from the plaintiff's usual and customary charges when its insureds receive health care services at plaintiff's facilities.
One of the agreements that plaintiff and defendant entered into is the "Hospital Contract for Traditional Indemnity Business" ("Indemnity Contract" or "Traditional Contract") executed in 2005. The Traditional Contract provides a discounted rate, i.e., the PAR rate, for insureds covered by defendant's Traditional Indemnity plans. Plaintiff alleges that when the Traditional Contract was negotiated and signed, it was contemplated and agreed that it would cover reimbursement only for medical services provided to members of defendant's Traditional Indemnity plans. Plaintiff alleges that the PAR rate has consistently been applied to claims for all services provided by plaintiff to defendant's insureds covered by a Traditional Indemnity plan. Plaintiff alleges that in 2005 the PAR rate was 80% of billed charges for all inpatient and outpatient claims, excluding co-pays, coinsurance, and non-covered claims. Since 2005, through a series of amendments, the discount increased for the defendant's benefit such that by January 1, 2014, the PAR rate was down to 65% of billed charges, decreasing to 63.6% effective November 1, 2014, 63.2% effective October 15, 2015, 53% effective January 1, 2016, and 52.6% effective August 1, 2016.
In late 2013 defendant began offering health insurance plans over exchanges created under the Affordable Care Act ("ACA"), with effective start dates of January 1, 2014. One of the ACA plans that defendant offered was the Blue Advantage HMO plan ("BAV HMO Plan"). Plaintiff alleges that because defendant wanted to reimburse plaintiff for care provided to BAV HMO Plan members at rates to which the plaintiff did not agree, defendant excluded the BAV HMO Plan from the parties' HMO contract, and designated the plaintiff as an "out-of-network" provider for BAV HMO Plan members.
Plaintiff alleges that it has a statutory duty under the federal Emergency Medical Treatment and Active Labor Act ("EMTALA"), 42 U.S.C. § 1395dd et seq., to treat BAV HMO Plan insureds who present to one of its facilities with an emergency medical condition. Plaintiff alleges that under the Texas Insurance Code, defendant must "pay for emergency care performed by non-network physicians or providers at the usual and customary rate or at an agreed rate," Tex. Ins. Code § 1271.155(a), and must "approve or deny coverage of poststabilization care as requested by a treating physician or provider within . . . one hour from the time of the request." Tex. Ins. Code § 1271.155 (c). Plaintiff alleges that when a BAV HMO Plan insured seeks emergency treatment it verifies the insured's coverage and eligibility electronically with the defendant. Plaintiff alleges that if there is a subsequent change in status, such as if the insured is admitted to the hospital, the plaintiff notifies the defendant and requests authorization for treatment. Plaintiff alleges that the defendant typically responds that authorization for treatment is "pending," but neither refuses nor objects to continued treatment, and does not coordinate, facilitate, or provide instructions to transfer the patient to an in-network facility. Because the defendant does not deny such requests for authorization within one hour as required by the Texas Insurance Code, plaintiff alleges that the defendant must pay for all care, whether emergency or post-stabilization, that plaintiff provides to BAV HMO Plan insureds. Plaintiff alleges that denial of authorization for post-stabilization treatment would require the defendant to coordinate transfer of the patient to an in-network facility and provide transfer instructions to the plaintiff.
Plaintiff alleges that through negotiation in late 2013 conducted via oral and written communications, the parties agreed that the defendant could use the Traditional Contract's PAR rate to pay for healthcare services that plaintiff provided to BAV HMO Plan insureds when they presented with an emergency condition.5 Plaintiff alleges that for approximately 18 months, from January 2014 through mid-2015, the defendant generally paid the plaintiff the PAR rate for healthcare services provided to BAV HMO Plan insureds both in the emergency room and in the hospital upon admission for continuing care. Plaintiff alleges that contrary to the parties' agreement and practice for 2014 and the first half of 2015, in mid-2015 the defendant took the position that plaintiff was required to transfer BAV HMO Plan insureds to a different, in-network facility once the patient's condition had — in the defendant's post-hoc opinion — stabilized, even if the insured did not want to be transferred.6 Plaintiff alleges that it has provided emergency healthcare services to over 700 BAV HMO Plan insureds but that despite repeated demands for payment, defendant has not paid for those services.7
Plaintiff's Petition asserts claims for breach of contract, quantum meruit/unjust enrichment, and declaratory judgment under the Texas Declaratory Judgment Act, Tex. Civ. Prac. & Rem. Code § 37.003.8
Asserting that "[t]he operative" contract is the "Traditional Contract"9 that "contains a mandatory arbitration agreement requiring that 'any Contract interpretation or claim issue' be resolved 'by arbitration under the commercial rules and regulations of the American Arbitration [("AAA")],'"10 defendant moves the court to dismiss this action pursuant to Federal Rule of Civil Procedure 12(b)(3) for improper venue and to compel arbitration pursuant to the Federal Arbitration Act ("FAA"), 9 U.S.C. §§ 1 et seq., and/or the Texas General Arbitration Act ("TGAA"), Tex. Civ. Prac. & Rem. Code § 171.021(a).11 Alternatively, the defendant moves the court to stay this action pending arbitration.12
Asserting that it is not suing because defendant breached the Traditional Contract but, instead, because defendant "breached (and continues to breach) a verbal and email-based contract to pay [plaintiff] a particular rate for its treatment of patients covered by the . . . BAV HMO plan . . . (the 'BAV HMO Agreement'),"13 plaintiff urges the court to deny Defendant's MD because the arbitration clause in the Traditional Contract does not apply to the BAV HMO Agreement.14
Defendant's motion to dismiss and to compel arbitration is a challenge to venue based on Federal Rule of Civil Procedure 12(b)(3) and the FAA or, alternatively, the TGAA.15 The FAA, 9 U.S.C. §§ 1 et seq., creates "a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act." Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 103 S. Ct. 927, 941 (1983) (citing Prima Paint Corp. v. Flood & Conklin Manufacturing Corp., 87 S. Ct. 1801 (1967)). Section 2 of the FAA states that a written arbitration agreement in any contract involving interstate commerce is valid, irrevocable, and enforceable except on grounds that would permit the revocation of a contract in law or equity. 9 U.S.C. § 2.
Section 3 of the FAA requires federal courts, on a party's motion, to stay litigation of claims subject to arbitration. 9 U.S.C. § 3. District courts may, in their discretion, dismiss an action instead of staying it when the entire controversy between the parties will be resolved by arbitration. See Fedmet Corp. v. M/V Buyalyk, 194 F.3d 674, 678 (5th Cir. 1999) () (citing Alford v. Dean Witter Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992)). The Fifth Circuit has explained that dismissal is appropriate in such circumstances because "[a]ny post-arbitration remedies sought by the parties will not entail renewed consideration and adjudication of the...
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