Raymond v. Avectus Healthcare Solutions, LLC

• Decision Date: 12 June 2017
• Docket Number: No. 16-4172,16-4172
• Citation: 859 F.3d 381
• Parties: Keith RAYMOND; Timothy Strunk, individually and on behalf of all others similarly situated, Plaintiffs–Appellants, v. AVECTUS HEALTHCARE SOLUTIONS, LLC ; Mercy Health, Defendants–Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

859 F.3d 381

Keith RAYMOND; Timothy Strunk, individually and on behalf of all others similarly situated, Plaintiffs–Appellants,

v.AVECTUS HEALTHCARE SOLUTIONS, LLC ; Mercy Health, Defendants–Appellees.

No. 16-4172

United States Court of Appeals, Sixth Circuit.

Argued: April 27, 2017

Decided and Filed: June 12, 2017

ARGUED: Gary F. Franke, GARY F. FRANKE CO. LPA, Cincinnati, Ohio, for Appellants. Ronald D. Holman II, TAFT STETTINIUS & HOLLISTER LLP, Cleveland, Ohio, for Appellee Avectus. Kris M. Dawley, ICE MILLER LLP, Columbus, Ohio, for Appellee Mercy. ON BRIEF: Gary F. Franke, Michael D. O'Neill, GARY F. FRANKE CO. LPA, Cincinnati, Ohio, C. David Ewing, EWING & WILLIS, PLLC, Louisville, Kentucky, for Appellants. Ronald D. Holman II, Michael J. Zbiegien, Jr.,TAFT STETTINIUS & HOLLISTER LLP, Cleveland, Ohio, Chad R. Ziepfel, TAFT STETTINIUS & HOLLISTER LLP, Cincinnati, Ohio, for Appellee Avectus. Kris M. Dawley, John P. Gilligan, Mary F. Geswein, ICE MILLER LLP, Columbus, Ohio, for Appellee Mercy.

Before: MERRITT, BATCHELDER, and CLAY, Circuit Judges.

OPINION

ALICE M. BATCHELDER, Circuit Judge.

Appellants and purported class plaintiffs, Keith Raymond and Timothy Strunk, were injured in separate accidents and were both treated by Appellee Mercy Health. Even though Raymond and Strunk have health insurance, Mercy Health did not submit their medical bills to their respective health insurance carriers. Instead, Mercy Health and its debt collector, Appellee Avectus Healthcare Solutions, sought payment from any tort settlement or award Raymond and Strunk would receive. The district court determined that this conduct did not violate Ohio Revised Code § 1751.60. Because we disagree, we REVERSE and REMAND for further proceedings not inconsistent with this opinion.

I.

In February 2015, Raymond was injured in a slip-and-fall accident, and he received medical treatment at Mercy Health Anderson Hospital. In June 2013, Strunk was injured in a car accident, and he received medical treatment at Mercy Health Clermont Hospital. Raymond and Strunk both have health insurance, and each of their health insurance carriers has an agreement with Mercy Health for the provision of services.¹ Raymond and Strunk provided to Mercy Health all relevant information necessary for the hospital to submit claims for coverage. Mercy Health, however, did not submit the claims to Raymond's and Strunk's health insurance providers.

Instead, Avectus, on behalf of Mercy Health, sent letters² to Raymond's and Strunk's attorneys stating the balance due for medical services and requesting that, in order to prevent collection efforts against their respective clients, the attorneys sign a "letter of protection" against any settlement or judgment. Both letters also included a place for the relevant attorney's signature and the following language:

I agree to immediately notify Avectus Healthcare Solutions of any settlement, judgment, or dismissal of this claim and, further, agree to withhold and pay directly to Mercy Health [ ] the balance of any unpaid charges owed by the above individual on this claim should my firm obtain any settlement or judgment for this patient.

These letters, Raymond and Strunk assert, demonstrate that Mercy Health and Avectus sought compensation from them for their medical expenses, in violation of Ohio Revised Code § 1751.60. Raymond and Strunk filed suit in the U.S. District Court for the Southern District of Ohio, alleging eight claims, each of which the parties agree depends on Mercy Health and Avectus's violation of § 1751.60. The district court dismissed the complaint for failure to state a claim, finding that § 1751.60 did not apply and Mercy Health and Avectus did not violate the statute. This timely appeal followed.

II.

"We review de novo a district court's decision to grant a motion to dismiss for failure to state a claim under Rule 12(b)(6)." Jackson v. Ford Motor Co. , 842 F.3d 902, 906 (6th Cir. 2016) (citation omitted). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Id. (quoting Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ). "The defendant has the burden of showing that the plaintiff has failed to state a claim for relief." Directv, Inc. v. Treesh , 487 F.3d 471, 476 (6th Cir. 2007).

The sole issue on appeal is whether Mercy Health and Avectus's conduct is prohibited by Ohio Revised Code § 1751.60(A).³ Section 1751.60(A) states:

Except as provided for in divisions (E) and (F) of this section, every provider or health care facility that contracts with a health insuring corporation to provide health care services to the health insuring corporation's enrollees or subscribers shall seek compensation^{[4 ]} for covered services solely from the health insuring corporation and not, under any circumstances, from the enrollees or subscribers, except for approved copayments and deductibles.

Ohio Rev. Code Ann. § 1751.60(A).

The Ohio Supreme Court has held that this section "governs providers or health-care facilities, health-insuring corporations, and a health-insuring corporation's insured." King v. ProMedica Health Sys., Inc. , 129 Ohio St.3d 596, 955 N.E.2d 348, 350 (2011). The statute does not apply where a healthcare provider seeks compensation for services from a party other than a health-insuring corporation or a health-insuring corporation's insured. Id. at 351 ; see Hayberg v. Robinson Mem'l Hosp. Found. , 995 N.E.2d 888, 893 (Ohio Ct. App. 2013) ("[T]he King court emphasized that R.C. 1751.60(A) only refers to health-care providers and health insurers ... R.C. 1751.60(A) is not controlling as to the amount which a hospital can seek to recovery [sic] from an insurer other than the health insurer."). The statute's prohibition on seeking compensation does apply when "a health-care services contract is in place between a provider and a health-insuring corporation" and the provider seeks payment from a "health-insuring corporation's insured." King , 955 N.E.2d at 351.

III.

That is precisely the circumstance we are presented with in this case. Raymond and Strunk allege that they are insured and that the healthcare provider, Mercy Health, has a contract for services with their respective health-insurance providers. Raymond and Strunk further allege that Mercy Health, through Avectus, by requesting that Raymond's and Strunk's attorneys "withhold and pay directly to Mercy Health [ ] the balance of any unpaid charges owed" by Raymond and Strunk, "collect[ed] and attempt[ed] to collect monies directly from patients" for healthcare services. Mercy Health and Avectus thus sought payment "from a health-insuring corporation's insured" while in a healthcare services contract with Raymond's and Strunk's health-insurance providers. See King , 955 N.E.2d at 351. Therefore, not only does § 1751.60 apply, but according to the allegations in the complaint, Mercy Health and Avectus's conduct violated the statute.

Mercy Health and Avectus assert that they did not seek compensation from Raymond and Strunk, but attempted to collect the medical bills from the responsible third party. They argue that their conduct is comparable to that of the healthcare providers in King and Hayberg . But the conduct of Mercy Health and Avectus in this case is markedly different from that of the healthcare providers in King and Hayberg . In both of those cases, the healthcare providers sought and received payment from third-party insurers who did not have healthcare-services contracts with the providers. See King , 955 N.E.2d at 350–51 ; Hayberg , 995 N.E.2d at 893. As the Ohio Supreme Court explained in King , payment from a third-party insurer was not "compensation" from King because the payment was a fulfillment of the third-party's "contractual obligation to King to cover her medical costs in the event of an accident," and the healthcare provider received payment from the third-party insurer, not from King. 955 N.E.2d at 350–51. The Ohio Supreme Court therefore concluded that the healthcare provider did not violate § 1751.60"[b]ecause King was not asked to make any payment for the services she received." Id. at 351. In the present case, by contrast, the protection letter seeks to require Raymond's and Strunk's attorneys to withhold funds due to their clients from a tort settlement or judgment and use them to pay the outstanding account balances directly to Mercy Health. Therefore, unlike the healthcare providers in King and Hayberg , Mercy Health would receive compensation for its medical services from Raymond and Strunk.

Nonetheless, Mercy Health and Avectus assert that payment of the medical bills from a tort settlement or judgment is effectively payment by a third party. Mercy Health and Avectus are incorrect. First, money paid by the tortfeasor to Raymond and Strunk through settlement or judgment in a tort action belongs to Raymond and Strunk.⁵ Cf. Holeton v. Crouse Cartage Co. , 92 Ohio St.3d 115, 748 N.E.2d 1111, 1119 (2001) (stating, in the worker's compensation context, that "the claimant-plaintiff has a constitutionally protected [property] interest in his or her tort recovery"). Therefore, any withholding or payment from settlement or judgment received by Raymond and Strunk is payment from Raymond and Strunk.

Second, Avectus and Mercy Health's reliance on King and Hayberg in support of their argument that payment from a tort settlement or judgment is effectively payment by a third party is misplaced. Those courts were both presented with the argument that the medical-benefits insurance at issue was an asset belonging to King and Hayberg and that payment from the medical-benefits insurance settlement was essentially payment from King and Hayberg. Both cases, however, avoid the issue, instead finding that payment of medical bills by a third-party insurer was not compensation paid under the pertinent health...