Specialty Med. Equip. v. UnitedHealth Grp.

• Docket Number: 22-CV-12396
• Decision Date: 10 January 2023
• Parties: SPECIALITY MEDICAL EQUIPMENT, INC. Plaintiff, v. UNITEDHEALTH GROUP, INC., UNITED HEALTHCARE SERVICES, INC., UNITEDHEALTHCARE INSURANCE COMPANY, and UNITEDHEALTHCARE, INC. Defendants.
• Court: U.S. District Court — Eastern District of Michigan

SPECIALITY MEDICAL EQUIPMENT, INC. Plaintiff,
v.
UNITEDHEALTH GROUP, INC., UNITED HEALTHCARE SERVICES, INC., UNITEDHEALTHCARE INSURANCE COMPANY, and UNITEDHEALTHCARE, INC. Defendants.

No. 22-CV-12396

United States District Court, E.D. Michigan, Southern Division

January 10, 2023

OPINION AND ORDER DENYING PLAINITFF SPECIALITY MEDICAL EQUIPMENT, INC.'S MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION (ECF NO. 8)

Paul D. Borman, United States District Judge

Plaintiff Specialty Medical Equipment, Inc., a provider of durable medical equipment and other medical supplies, brings this action against Defendants, a group of health insurance companies, for Defendants' alleged refusal to process approximately 7,000 claims for healthcare items that Plaintiff provided to beneficiaries of health plans issued and administered by Defendants, pursuant to Defendants' alleged unilaterally imposed “prepayment review” process.

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Now before the Court is Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction (ECF No. 8), asking the Court to enter an order enjoining Defendants from implementing prepayment review against certain claims submitted by Plaintiff and requiring “prompt, good-faith processing of claims.” Defendants filed a Response in opposition to Plaintiff's motion (ECF No. 10), and Plaintiff filed a Reply (ECF No. 11). The Court held a hearing on Plaintiff's motion on Thursday, January 5, 2023, at which counsel for Plaintiff and Defendants appeared.

For the reasons set forth below, the Court DENIES Plaintiff's motion for temporary restraining order and preliminary injunction.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Relevant Facts

Plaintiff Specialty Medical Equipment, Inc. is a licensed provider of durable medical equipment and other medical supplies (DME), including wheelchairs, oxygen concentrators, CPAP and BiPAP machines, continuous glucose monitors (CGMs) and supplies, TENS units, and nebulizers. (ECF No. 8-1, Affidavit of David Soblick (Soblick Aff.), ¶ 6.)

Defendants UnitedHealth Group Incorporated, UnitedHealthcare Services, Inc., UnitedHealthcare Insurance Company, and UnitedHealthcare, Inc. (collectively, “Defendants”) are health insurance companies that insure and/or

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administer various health benefit plans for various members and insureds. (ECF No. 10-3, Affidavit of Dieynaba Knox (Knox Aff.), ¶ 5.)

Plaintiff does not have a participating provider agreement with any of the Defendants related to the products or services at issue in this matter, and thus Plaintiff is an “out-of-network provider” of DME to Defendants' beneficiaries. (Id. ¶ 4.) (ECF No. 8-1, Soblick Aff. ¶ 9.) Plaintiff contends that it is common practice in the healthcare industry for health insurers to pay out-of-network providers for services provided to the insurers' health plan beneficiaries, although the health plans may limit coverage for certain health services to only in-network or specialty providers, and may place other conditions and limitations on such coverage. (ECF No. 8-1, Soblick Aff. ¶¶ 10, 13.) Plaintiff states that it therefore has a custom and practice of not providing services to “out-of-network” health plan beneficiaries until it has communicated with the health insurer and verified coverage and the insurer's willingness to pay for DME from Plaintiff. (Id. ¶¶ 14-16.) Plaintiff also, if required by the insurance plan, obtains prior authorization from the insurer, which, if issued, approves the provider to provide the service - in this case, for Plaintiff to provide the DME. (Id. ¶¶ 20-21.) According to Plaintiff, a prior authorization is “not a guarantee that the insurer will pay for the services authorized as there are a number of reasons why payment may still be denied under the terms of the health plan,” but

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it “does serve as a promise that the insurer will process the claim for the authorized service according to the beneficiary's health plan[.]” (Id. ¶¶ 22-23.)

Plaintiff alleges that it has, since 2016 and until April 2021, submitted claims to Defendants for DME provided to Defendants' plan beneficiaries, and that Defendants have timely processed and paid Plaintiff's claims. (ECF No 8-1, Soblick Aff. ¶¶ 12, 28) (ECF No. 3, Compl. ¶ 4.)

Plaintiff alleges that, starting in or about April 2021, Defendants stopped paying claims submitted for DME Plaintiff provided to Defendants' plan beneficiaries, and instead implemented prepayment review of all of Plaintiff's claims, demanding extensive medical records and other documentation and information as a precondition to adjudicating and paying any of Plaintiff's claims. (ECF No. 8-1, Soblick Aff. ¶¶ 29-30) (ECF No. 3, Compl. ¶ 5.) Plaintiff contends that Defendants are the only payor that has implemented prepayment review of Plaintiff's claims, and that Plaintiff submits identical claims for DME to other plans and programs and those claims are processed timely and without prepayment review. (ECF No. 3, Compl. ¶¶ 9-10.)

Defendants generally assert that there have been significant concerns regarding fraud, waste, and abuse among DME suppliers in recent years, and that Plaintiff was placed on prepayment review for certain claims due to payment

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integrity concerns, including allegations of billing for services not ordered and misrepresentations of services and diagnoses. (ECF No. 10-3, Knox Aff. ¶¶ 9-10.) Defendants describe prepayment review as a process used to detect and prevent provider fraud, waste, and abuse, and they state that it is limited to determining whether the records submitted by the provider support the benefit claims billed by the provider. (Id. ¶ 11.)^[1] Specifically, when a provider is placed on prepayment review, for each benefit claim the provider submits for review, a letter requesting records supporting the claims is automatically generated by the Defendant insurer. (Id. ¶ 12.) If the provider submits records and the review shows that the records support the benefit claims that were billed, then the claims are directed to UnitedHealthcare for processing for payment pursuant to the applicable benefit plan terms. (Id.) But, if no records are submitted in a timely manner, or if the records do

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not support the claims billed, the claims are denied and an explanation of the denial is provided to the provider. (Id.)

Plaintiff contends that over 80% of the claims for which Plaintiff has responded to prepayment review and provided medical records have been determined to be appropriate and payable by Defendants. (ECF No. 8-1, Soblick Aff. ¶ 37.) Plaintiff further states that, starting in or about July 2022, Defendants began processing non-CGM related claims without prepayment review, but that Defendants continue to refuse to process CGM-related claims without prepayment review, and that many prior non-CGM and CGM claims remain unprocessed. (ECF No. 3, Compl. ¶¶ 106-08.)

Defendants contend, however, that Plaintiff has failed to submit any records on approximately 40% of the claims subject to prepayment review. (ECF No. 10-3, Knox Aff. ¶ 13.) As a result, those claims were denied for failure to submit records. (Id.) Defendants assert that if Plaintiff had submitted the requested records on those claims, those records would have been reviewed and the claims would have been processed in accordance with the findings and pursuant to the applicable plan terms. (Id.)

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B. Procedural History

On September 23, 2022, Plaintiff commenced this action in the Macomb County Circuit Court, seeking injunctive relief. Defendants timely removed this matter to this Court on October 7, 2022. (ECF No. 1, Notice of Removal.)^[2]

On October 17, 2022, Plaintiff filed a “corrected” Complaint in this Court, alleging four claims against Defendants based on Defendants' prepayment review requirement of claims submitted by Plaintiff: (1) breach of contract; (2) implied contract; (3) declaratory judgment; and (4) injunctive relief. (ECF No. 3, Compl.)

Defendants filed an Answer on October 20, 2022. (ECF No. 5, Answer.)

On November 3, 2022, Plaintiff filed the instant Motion for Temporary Restraining Order and Preliminary Injunction. (ECF No. 8, Pl.'s Mot.) Plaintiff argues that Defendants have refused to process approximately 7,000 claims for items/services Plaintiff has supplied to Defendants' health plan beneficiaries,

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because it is relying on a pretextual prepayment review and dilatory claims processing practice, causing irreparable injury to Plaintiff's business.

On November 23, 2022, Defendants filed their Response in opposition to Plaintiff's motion. Defendants argue that Plaintiff has failed to meet the standard required for preliminary injunctive relief, and that Plaintiff's motion therefore must be denied. (ECF No. 10, Defs.' Resp.)

Plaintiff filed a Reply on November 30, 2022 (ECF No. 11), and this Court held a hearing on Plaintiff's motion on January 5, 2023.

II. LEGAL STANDARD

Preliminary injunctions are extraordinary remedies designed to protect the status quo pending final resolution of a lawsuit. See University of Texas v. Camenisch, 451 U.S. 390 (1981). A plaintiff bears the burden of demonstrating entitlement to preliminary injunctive relief, Leary v. Daeschner, 228 F.3d 729, 739 (6th Cir. 2000), and such relief will only be granted where “the movant carries his or her burden of proving that the circumstances clearly demand it.” Overstreet v. Lexington-Fayette Urban Cnty. Gov't, 305 F.3d 566, 573 (6th Cir. 2002). Whether to grant such relief is a matter within the discretion of the district court. Certified Restoration Dry Cleaning Network, L.L.C. v. Tenke Corp., 511 F.3d 535, 540 (6th Cir. 2007).

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When considering a motion for injunctive relief, the Court must balance the following four factors: (1) whether the movant has a strong likelihood of success on the merits; (2) whether the movant would suffer irreparable injury absent...