Aetna Life Ins. Co. v. Huntingdon Valley Surgery Ctr.

129 F.Supp.3d 160

Aetna Life Insurance Company, Plaintiff,

v.Huntingdon Valley Surgery Center, et al., Defendants.

CIVIL ACTION No. 13–03101

United States District Court, E.D. Pennsylvania.

Signed September 15, 2015

James C. Crumlish, III, Gregory S. Voshell, John M. Elliott, John P. Elliott, Mark Joseph Schwemler, Elliott Greenleaf & Siedzikowski, P.C., Blue Bell, PA, for Plaintiff.

Richard M. Simins, Grace Dowell Greenhall, Robert J. Fitzgerald, Buchanan Ingersoll & Rooney PC, Gregory J. Wartman, Joseph Coleman Monahan, Saul Ewing

LLP, Philadelphia, PA, for Defendants.

MEMORANDUM

YOHN, District Judge

In 2013, Aetna Life Insurance Company sued Huntingdon Valley Surgery Center, Foundation Surgery Management, LLC (FSM), and Foundation Surgery Affiliates, LLC (FSA). Huntingdon Valley is an ambulatory surgery center largely owned by twenty-two physicians. It is outside of Aetna's network—that is, it has no direct contract with Aetna to provide services to Aetna members at reduced, negotiated prices. The physician-owners, however, all have separate provider agreements with Aetna governing their relationship with the insurer. FSM—which is wholly owned by FSA—manages Huntingdon Valley's day-to-day operations. Aetna has accused all three defendants of violating a Pennsylvania anti-kickback law, committing insurance fraud, and tortiously interfering with Aetna's provider contracts with Huntingdon Valley's physician-owners—all as part of a conspiracy to bilk it out of millions of dollars.

In August 2014, I denied the defendants' motion to dismiss on all claims except for unjust enrichment. Huntingdon Valley then fired back at Aetna, launching eight counterclaims, including breach of contract and unjust enrichment. In April 2015, I denied Aetna's motion to dismiss on all counterclaims except for Huntingdon Valley's counterclaim for ERISA benefits.

In June 2015, Huntingdon Valley, FSM, and FSA each moved for summary judgment on Aetna's remaining claims. Aetna cross moved on its insurance fraud claim (Count III) and also moved for summary judgment on Huntingdon Valley's counterclaims. Huntingdon Valley amicably settled with Aetna and is no longer a party, so its counterclaims are not at issue. Remaining as claims against FSM and FSA are Count I (violation of a Pennsylvania anti-kickback law); Count II (civil conspiracy); Count III (insurance fraud); Count IV (aiding and abetting insurance fraud); Count V (tortious interference with contract); Count VIII (equitable relief); and Count IX (equitable accounting).¹

Based on the undisputed record, I will grant summary judgment to FSM and FSA on all counts but Count II (civil conspiracy) and Count V (tortious interference with contract). Before trial, though, the court must decide through an evidentiary hearing whether it has personal jurisdiction over FSA. Given the genuine issues of material fact surrounding this question, I cannot resolve it on a summary judgment motion.

I. Background²

A. Aetna's Network

Aetna is a Connecticut corporation that provides health insurance and administrative services throughout the United States. Aetna's Resp. FSM/FSA's Joint Statement Facts ¶ 19. To that end, it has created a network of medical providers by contracting with physicians and facilities across the country. Id. ¶ 55. Under these provider contracts, the "in-network" providers—physicians and facilities—administer services to Aetna members at reduced rates negotiated between themselves and Aetna. Id. ¶¶ 55–56; Kleman Dep., Aetna Ex. 19, 21:24–22:21, Sept. 15, 2014. When a provider cannot agree on rates with Aetna, though, the provider is "out-of-network" with Aetna. Aetna's Resp. FSM/FSA's Joint Statement Facts ¶ 56.

Aetna members with out-of-network benefits usually pay much more money out-of-pocket when they are treated by providers outside of Aetna's network. Kleman Dep., Aetna Ex. 19, 67:1–68:12. Specifically, they tend to pay significantly higher co-payments, co-insurance, and deductibles. Id. ; Ottwell Dep., Aetna Ex. 10, 73:21–23, Nov. 6, 2014.

B. Huntingdon Valley Surgery Center and Its Physician–Owners

Huntingdon Valley is an ambulatory surgery center that is outside of Aetna's network. Aetna's Resp. FSM/FSA's Joint Statement Facts ¶¶ 1, 56. Twenty-two physicians serve as limited partners in the facility, owning 80% of it, and also perform procedures there. Id. ¶ 4.

These physician-owners all have provider contracts with Aetna even though Huntingdon Valley itself does not. Id. Each of them entered into his or her contract at a different time. Summary of Contracts, Aetna Ex. 22. The contracts with Aetna are not identical as to their provisions, but they all provide a version of the following: "Provider shall render services to Members only at those inpatient, extended care, and ancillary service facilities which have been approved in advance by [Aetna]." E.g., Barmat Provider Contract, Huntingdon Valley Ex. 16, ¶ 1.3 (emphases added).

The physician-owners do not all enjoy equal interests in their combined 80% stake of Huntingdon Valley. Partner List, Aetna Ex. 7. Each month, the physician-owners receive cash distributions based on their respective ownership interests. For example, in November 2013, physician-owners with a 4.16% interest (four shares) each earned a distribution of $3,992.38. November Distribution List, Aetna Ex. 16. Moreover, that month, the physician-owners' interests ranged from 2.08% (two shares) to 5.19% (five shares). Id. The physician-owners can buy more shares in Huntingdon Valley if their productivity (i.e., use of the facility for their patients) warrants the increased equity. Email, Aetna Ex. 11. But they can also be forced to sell their shares if their productivity falls short of expectations. Emails, Aetna Exs. 12–15.

C. Foundation Management Affiliates, LLC and Foundation Surgery Affiliates, LLC

Since 2002, Huntingdon Valley has operated under a "Management Agreement" with FSM. Aetna's Resp. FSM/FSA's Joint Statement Facts ¶ 6. The agreement "vest [s] in [FSM] the authority for all ‘day to day’ management decisions, ... [but Huntingdon Valley] retain[s] the right to make final policy decisions that [it] feels will impact the overall performance and/or the financial value of the Center." Management Agreement, Aetna Ex. 1, § 2.1. In exchange for its services, FSM collects 6% of Huntingdon Valley's "net monthly collected revenues." Id. § 7.3.

FSM's responsibilities are wide and varied. For example, it developed and modifies Huntingdon Valley's "Surgical Procedure Fee Schedule." Id. § 5.5. Known as a "chargemaster," this schedule comprises the routine charges for all procedures performed at Huntingdon Valley during a calendar year. Aetna's Resp. FSM/FSA's Joint Statement Facts ¶ 62. FSM also identifies, recruits, and profiles potential physician-owners. Management Agreement, Aetna Ex. 1, § 3.1.1. In addition, it negotiates all provider contracts with insurers. Id. § 5.8. Overseeing all of these responsibilities is a chief administrator, provided by FSM. Id. § 5.1; Puglisi Dep., Aetna Ex. 5, 20:13–23, Oct. 7, 2014. FSM, however, is not licensed to provide health care in Pennsylvania. Aetna's Resp. FSM/FSA's Joint Statement Facts ¶ 49.

FSA wholly owns FSM. FSM/FSA's Reply to Aetna's Resp. Ex. A, ¶ 26. It also wholly owns Foundation Surgery Holdings, LLC, which, as a limited partner, owns the remaining 20% of Huntingdon Valley. (The physician-owners own the other 80%.) Id. ¶ 21, 24; Aetna's Resp. FSM/FSA's Joint Statement Facts ¶ 5. Foundation Surgery Holdings, LLC also owns at least part of Foundation Surgery Affiliate General of Huntingdon Valley, LLC, which is the general partner of Huntingdon Valley. FSM/FSA's Reply to Aetna's Resp. Ex. A, ¶ 25; Aetna's Resp. FSM/FSA's Joint Statement Facts ¶ 21. Like FSM, FSA is not licensed to provide health care in Pennsylvania. Aetna's Resp. FSM/FSA's Joint Statement Facts ¶ 37.

D. Huntingdon Valley's Waiver and Billing Practices

As part of a practice implemented by FSM, Huntingdon Valley waived most of the high out-of-pocket payments for Aetna members during the relevant time period in this case. Patient Financial Policy, Aetna Ex. 30; Mannherz Dep., Aetna Ex. 4, 175:3–10, June 27, 2014. Indeed, FSM made "every attempt" to limit Aetna members' out-of-pocket costs to what they would have paid out-of-pocket at an in-network facility. Patient Financial Policy, Aetna Ex. 30.³

Although it waived these member payments, FSM sent bills to Aetna for the full chargemaster prices. Aetna's Resp. FSM/FSA's Joint Statement Facts ¶ 62, 64; Mannherz Dep., Aetna Ex. 4, 86:4–17. Again, these prices were the routine charges set by FSM for all procedures performed at Huntingdon Valley. For any given procedure, FSM sent bills for the same price from this list—regardless of the insurer being billed. Aetna's Resp. FSM/FSA's Joint Statement Facts ¶ 64

E. The Beech Street and MultiPlan Networks

For most if not all of Huntingdon Valley's bills to Aetna at issue in this case, Aetna paid Huntingdon Valley through the so-called "rental networks" of Beech Street and MultiPlan. Kleman Dep., Aetna Ex. 19, 17:2–18:21; Aetna's Reply 5. Beech Street and MultiPlan were companies that created their own networks composed of providers like Huntingdon Valley that agreed to accept discounted rates for their services. HVSC's MultiPlan/Beech Street Contracts, Aetna Exs. 36–37. In exchange for access to these networks, Aetna paid Beech Street and MultiPlan a fee for every transaction. Aetna's MultiPlan/Beech Street Contracts, Exs. 34–35.

This arrangement was created by two agreements. First, Beech Street and MultiPlan entered into agreements with Huntingdon Valley memorializing the discounted rates at which Huntingdon Valley was willing to be reimbursed by insurers like Aetna. HVSC's MultiPlan/Beech Street Contracts, Aetna Exs. 36–37. For Beech Street, Huntingdon Valley agreed to "be reimbursed 80% of usual billed charges, less applicable Copayments, Deductibles and...