Sarasota Cnty. Pub. Hosp. Bd. v. Blue Cross & Blue Shield of Fla., Inc.

• Decision Date: 05 January 2021
• Docket Number: Case No. 8:18-cv-2873-T-23SPF
• Parties: SARASOTA COUNTY PUBLIC HOSPITAL BOARD, Plaintiff, v. BLUE CROSS AND BLUE SHIELD OF FLORIDA, INC., et al., Defendant.
• Court: U.S. District Court — Middle District of Florida

511 F.Supp.3d 1240

SARASOTA COUNTY PUBLIC HOSPITAL BOARD, Plaintiff,

v.BLUE CROSS AND BLUE SHIELD OF FLORIDA, INC., et al., Defendant.

Case No. 8:18-cv-2873-T-23SPF

United States District Court, M.D. Florida, Tampa Division.

Signed January 5, 2021

Joseph Ignacio Zumpano, Leon N. Patricios, Zumpano, Patricios & Winker, PA, Coral Gables, FL, for Plaintiff.

Daniel Balmori, Allen Paige Pegg, Hogan Lovells US LLP, Miami, FL, for Defendant.

ORDER

Steven D. Merryday, UNITED STATES DISTRICT JUDGE

A June 21, 2019 order (1) determines that ERISA completely preempts this action, (2) denies the motion to remand, and (3) dismisses the complaint. An April 7, 2020 order dismisses the amended complaint. Although the plaintiff again amends (Doc. 64) the complaint, the defendants again move (Doc. 68) to dismiss because "a discernable number of federally-governed plans continue to pervade Plaintiff's causes of action, which thus remain preempted." (Doc. 68 at 4) Resolution of the motion requires another slog through the law of Employee Retirement Income and Security Act, 29 U.S.C. § 1001 (ERISA) ; the Federal Employee Health Benefits Act, 5 U.S.C §§ 8901 – 14 (FEHBA) ; and the Social Security Act, 42 U.S.C. § 1395 (Medicare).

BACKGROUND

As recounted in both the June 21, 2019 order and the April 7, 2020 order, the defendants administer health insurance and some of the defendants’ insureds are enrolled in health benefit plans regulated by ERISA, FEHBA, or Medicare. The plaintiff entered into a "Preferred Patient Care Hospital Agreement" (PPC Agreement) with one defendant, Florida Blue, and a "Hospital Services Agreement" (HO Agreement) with the other defendant, Health Options. These "Provider Agreements," which the parties frequently renew and amend, establish both the terms under which the plaintiff provides "hospital services" to the defendants’ members and the terms under which the defendants pay for those services. The plaintiff alleges, among other things, that the defendants breached the Provider Agreements by using improper methods of payment.

Count I asserts that Florida Blue improperly paid for hospital services provided to Blue Select Members by, for example, implementing a "split-billing" policy that allegedly violates the PPC Agreement. Count II alternatively alleges that if the Blue Select plan "is not payable under the PPC Agreement," the defendants violated Section 641.513, Florida Statutes, and Section 627.64194, Florida Statutes. In Counts III and IV, the plaintiff alleges that the defendants breached the "anti-steerage" provisions of the Provider Agreements by "advising, steering, and providing incentives to [plan] members to seek hospital services from other hospital providers" and by excluding from the defendants’ directories "certain of Hospital's facilities." (Doc. 64 at 23–4)

Counts IV and V allege that the defendants breached the Provider Agreements by underpaying the contractually required amount to the plaintiff either for services provided after the receipt of an authorization or for services provided when no authorization was required. Counts VII and VIII assert that the defendants breached the Provider Agreements by employing third parties to deny claims for payment.¹ In Count IX, the plaintiff alleges that Florida Blue breached the PPC Agreement by underpaying for hospital services provided to Medicare Advantage Blue Card members. And finally, Counts X and XI allege that the defendants underpaid for emergency services by failing to apply the "prudent layperson standard" and by "retrospectively denying payment of the contractually required amount ... for reasons not permitted by the P[rovider] Agreement[s]." (Doc. 64 at 47)

DISCUSSION

In each count (except Count II, alleging a violation of Florida statutory law), the plaintiff alleges a breach of at least one of the Provider Agreements, and the plaintiff insists that the defendants’ underpayments are "not due to benefit plan determinations." (Doc. 64 at 43) Further, the plaintiff includes examples of the alleged breaches and appends to the amended complaint several exhibits intended to corroborate the alleged underpayments. The defendants posit four reasons for dismissal, and the plaintiff responds to each. The parties re-visit whether the plaintiff satisfies Rule 8, Federal Rules of Civil Procedure ; whether federal law preempts the plaintiff's breach of contract claims; and whether the plaintiff states a claim under Florida statutory law.

I. Whether the second amended complaint satisfies Rule 8

First, the defendants contend that the second amended complaint, like the first amended complaint, fails to satisfy Rule 8. (Doc. 68 at 9–14) To this end, the defendants argue that the second amended complaint constitutes a "shotgun pleading" (1) because the complaint includes "conclusory allegations" and (2) because the plaintiff combines two or more claims in the same count. (Doc. 68 at 10–11, 14) Further, the defendants challenge the plaintiff's use of exhibits (such as the attached claims for payment) because the exhibits fail to "provide adequate data points to allow Defendants or the Court to test the nature of the claims at issue to determine [ ] which are federally-preempted and which are not." (Doc. 68 at 12)

In response to the defendants’ Rule 8 challenges, the plaintiff notes the impracticability of listing in separate counts "thousands of breaches by" the defendants. (Doc. 71 at 2) "Each count contains one cause of action under the applicable Provider Agreement," explains the plaintiff, "and one claim for breach of specific provisions of the [ ] agreement, which is proven by multiple different instances of breach." (Doc. 71 at 3) Accordingly, the plaintiff insists that the second amended complaint complies with Rule 8.

The second amended complaint pleads "enough [facts] to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The second amended complaint distills the prolix and repetitious amended complaint, and the second amended complaint is a noticeable improvement. The defendants cannot reasonably argue that the defendants lack "fair notice of what the ... claim is and the grounds upon which it rests." Twombly , 550 U.S. at 555, 127 S.Ct. 1955.

II. Whether federal law preempts the plaintiff's state law claims

Next, the defendants argue that, despite the plaintiff's attempt to identify the claims at issue, the second amended complaint "continues to assert preempted claims and should be dismissed." (Doc. 68 at 16) In addition to re-visiting ERISA preemption, the defendants argue that the FEHBA and Medicare defensively preempt the plaintiff's claims. Also, the defendants argue that the plaintiff fails to allege administrative exhaustion required by the FEHBA and Medicare. (Doc. 68 at 16–22)

The plaintiff denies that the complaint alleges either "causes of action related to benefit determinations" or "causes of action [that] are [ ] governed or preempted by ERISA, FEHBA, or the Medicare Act." (Doc. 71 at 2) A resolution of the parties’ preemption dispute depends on whether a claim that purports to derive solely from a contract between a medical provider and an insurer "relates to" ERISA and, consequently, is preempted.

A. ERISA Preemption

Regarding ERISA preemption, the defendants argue that the plaintiff "continues to assert preempted claims." In support, the defendants cite a payment claim from Count X. In the payment claim, Blue Cross denied coverage because the "benefit plan requires preauthorization of this service and [the] records show it was not received." (Doc. 68 at 15) The defendants argue that "as expressly stated in the denial reason, those coverage determinations were explicitly based on interpretations" of a plan governed by ERISA. (Doc. 68 at 15)

The plaintiff responds that "ERISA's express preemption provision does not defensively preempt the Hospital's independent state law causes of action in the Second Amended Complaint because none of the causes of action therein ‘relate to’ ERISA." (Doc. 71 at 5) In support, the plaintiff argues that determining whether the Blue Select plan constitutes a participating plan under the Provider Agreements "does not require the review or interpretation of an ERISA health benefit plan." (Doc. 71 at 8) And similarly, the plaintiff argues that the plaintiff's challenge to the defendants’ "split-billing" policy "does not implicate an ERISA health benefit plan, [but] rather implicates and challenges obligations and duties set forth in the Provider Agreements." (Doc. 71 at 9)

Further disputing ERISA preemption, the plaintiff draws a temporal distinction between when the insurer determined coverage and when the insurer denied payment. The plaintiff asserts that "the Provider Agreements, not ERISA, determine[ ] when the Parties agreed ... coverage decisions must be made." (Doc. 71 at 11) And because under the Provider Agreements a payment obligation attaches when the defendants determine coverage and provide authorization, the plaintiff contends that the defendants breached the Provider Agreements by refusing payment after the defendants determined coverage. As the plaintiff explains, "once a Hospital Service was authorized, Defendants were contractually obligated to pay the contracted rates, and contractually prohibited from retroactively disputing their own coverage determination." (Doc 71 at 12)

Next the plaintiff argues that the claims related to Medicare Advantage Blue Card members "do not implicate ERISA," and the plaintiff argues that the claims related to emergency services fail to implicate ERISA because emergency services require no pre-authorization under either Florida law or the Provider Agreements. (Doc. 71 at 13–5) Finally, assuming one count warrants preemption, the plaintiff argues that "preemption of some counts does not require dismissal of non-ERISA related counts." (Doc. 71 at 16)

Section 514(a) provides that ERI...