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

AETNA LIFE INSURANCE COMPANY, Appellant v. HUNTINGDON VALLEY SURGERY CENTER;FOUNDATION SURGERY AFFILIATES, LLC;FOUNDATION SURGERY MANAGEMENT, LLC

No. 16-1468

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Submitted: March 16, 2017

July 19, 2017

NOT PRECEDENTIAL

On Appeal from the United States District Court for the Eastern District of Pennsylvania

(D.C. No. 2:13-cv-03101)

District Judge: Honorable Nitza I. Quiñones Alejandro

Submitted Under Third Circuit LAR 34.1(a)

March 16, 2017

Before: SHWARTZ, GREENBERG, Circuit Judges, and SIMANDLE, Senior District Judge.^*

OPINION^**

SHWARTZ, Circuit Judge.

Aetna Life Insurance Company ("Aetna") sued Foundation Surgery Affiliates, LLC ("FSA"), and Foundation Surgery Management, LLC ("FSM") (collectively, "Defendants") for providing financial incentives, or kickbacks, to doctors to refer patients to Huntingdon Valley Surgery Center ("HVSC") and for engaging in fraudulent billing practices.¹ The District Court granted partial summary judgment in favor of Defendants, holding that Defendants' conduct did not violate the anti-kickback or fraud provisions of Pennsylvania's insurance fraud statute, 18 Pa. Cons. Stat. § 4117(a), (b)(2). Aetna Life Ins. Co. v. Huntingdon Valley Surgery Center, 129 F. Supp. 3d 160, 166-75 (E.D. Pa. 2015). While the District Court correctly concluded that Defendants are not licensed health care providers and thus cannot be held liable under the anti-kickback provision, a genuine dispute of material fact exists as to whether it was fraudulent for HVSC to bill Aetna for the total price of patients' care without disclosing the fact that HVSC waived the patients' obligations for a portion of the bills and thereby reduced the actual cost. Thus, we will affirm in part, vacate in part, and remand for further proceedings.

I

A

Aetna is a health insurance provider that contracts with physicians and facilities to pay for health care services Aetna members receive. When an Aetna member goes to a provider with whom Aetna has contracted (an "in-network" provider), the member pays a fixed fee, in the form of a co-payment or deductible, or a percentage of the totalnegotiated rate for the care, called "co-insurance." App. 585. When an Aetna member seeks care from a physician or facility that is outside of Aetna's network, the total cost of that care will generally be higher (since Aetna has not negotiated a price for it), and the member pays a higher fee.

Huntingdon Valley Surgery Center ("HVSC") is an outpatient surgical facility that is outside of Aetna's network. The twenty-two physicians who partly own HVSC are in Aetna's network. Thus, while the physicians' individual services are compensated at the in-network rates, the services HVSC provides are paid at the higher, out-of-network rates. Aetna asserts that the doctors receive a greater percentage of ownership based upon the number of surgeries they perform at HVSC, and that this gives the doctors an incentive to refer and treat their patients at HVSC as opposed to other facilities. Aetna contends that this arrangement violates Pennsylvania's anti-kickback provision under 18 Pa. Cons. Stat. § 4117(b)(2).

FSA also has an ownership interest in HVSC. FSA is a holding company that wholly owns FSM. FSM controls many of HVSC's daily operations through a chief administrator. Among other things, FSM recruits physicians, contracts with insurers, hires management staff, and obtains necessary licensing for HVSC.² FSM also maintains HVSC's "Chargemaster," which lists prices for all medical services offered there, regardless of who pays the bill.³ App. 4, 164.

Because Aetna and HVSC do not have an agreement governing billing, they use third-party companies to facilitate billing and payment for Aetna members who use HVSC. Almost all of the bills at issue in this case were processed through two "rental networks" named Beech Street Corporation and MultiPlan, Inc. App. 6. HVSC's contract with Beech Street states that, for bills processed through Beech Street's network, HVSC will be "reimbursed at 80% of usual billed charges, less applicable Copayments, Deductibles, and Coinsurance." App. 2253 ¶ I. The term "usual billed charges" is undefined. For bills processed through MultiPlan, HVSC will be reimbursed for 75% of "billed charges, less any Co-payment, Deductible, and/or Co-insurance, if any, specified in the Participant's Benefit Program." App. 823 ¶ 3.1. The term "billed charges" is defined as "the fees for a specified health care service or treatment routinely charged by [HVSC] regardless of payment source." App. 809 ¶ 1.2. The term "routinely charged" is not defined. On the other side of the transaction, Aetna entered into contracts with each rental network, agreeing to pay bills to out-of-network providers, discounted at the rates negotiated by the rental networks.

To bill Aetna, HVSC submits an industry-standard form that is also used for Medicaid and Medicare billing. The form only asks a provider to list "total charges" but does not define that term. App. 1121. Once Aetna receives a bill from HVSC, it multiplies the total charge by the discount rate negotiated by the rental agreement—80% for Beech Street and 75% for MultiPlan—and then subtracts the member's co-payment, deductible, or co-insurance obligations. Aetna then pays HVSC the remainder.

As part of its business plan, HVSC generally waives (or greatly reduces) Aetna members' co-payment, co-insurance, or deductible obligations. Because the patients' financial obligations are greater when they use an out-of-network provider, by waiving these amounts, Aetna members can obtain care at HVSC and pay approximately the same out-of-pocket fee they would pay at an in-network facility. Nonetheless, FSM sends bills to Aetna listing the full Chargemaster price for care provided to Aetna members, without informing Aetna that the patients' payment obligations have been waived.

B

Aetna sued Defendants alleging, among other things, that Defendants provided illegal kickbacks to the physician-owners, in violation of 18 Pa. Cons. Stat. § 4117(b)(2) (Count I), and that Defendants committed or aided and abetted the commission of insurance fraud in violation of § 4117(a) (Counts III and IV).⁴ The District Court entered summary judgment in favor of Defendants on those claims. The District Court reasoned that Defendants could not be liable for providing illegal kickbacks under § 4117(b)(2) because they are not health care providers licensed by the Commonwealth of Pennsylvania, and that HVSC's billing practices were not fraudulent since it accurately listed its total charges on its bills to Aetna. We granted the request to consider on interlocutory appeal whether the District Court correctly ruled that (1) Defendants are not"health care providers" under the anti-kickback provision and (2) HVSC's billing practices are not fraudulent.

II⁵

A

The anti-kickback provision of Pennsylvania's insurance fraud statute, § 4117(b)(2), applies only to a "health care provider."⁶ The question before us is whether Defendants are "health care providers" under the statute.⁷

Because the Pennsylvania courts have not addressed the meaning of the term "health care provider," we turn to the Pennsylvania rules of statutory construction. Pursuant to the rules, the object of interpreting the statute is to effectuate the intent of the General Assembly. 1 Pa. Cons. Stat. § 1921(a). To glean the legislature's intent, we must start with the text. The rules of construction specifically state that "[w]hen the words of a statute are clear and free from all ambiguity, the letter of it is not to be disregarded." Id. § 1921(b); see also Commonwealth v. Jarowecki, 985 A.2d 955, 959 (Pa. 2009). When the language in question does not include technical phrases, we construe it "according to [its] common and approved usage," 1 Pa. Cons. Stat. § 1903(a), and in a manner that avoids surplusage, id. § 1922(2).

The insurance fraud statute describes different types of wrongful conduct and identifies actors whose conduct is covered. It addresses insurance fraud by any "person," including an "insurer" or "owner, administrator, or employee of any health care facility." 18 Pa. Cons. Stat. § 4117(a). It also prohibits "health care providers" from giving anything of value, or kickbacks, to a person to persuade a patient to use a particular service. Id. § 4117(b). By specifically identifying health care providers in one provision and administrators in another, the Pennsylvania legislature recognized the distinction between providers and administrators. An administrator differs from and thus does not qualify as a "health care provider" under the statute.

The plain language definition of the term "health care provider" also shows that it is different from an administrator or manager. In ordinary usage, a "health care provider" is a person or entity that is qualified to render medical care to patients.⁸ Because an administrator or manager does not render medical care, she is not, by plain definition, a provider.

The statute's language further identifies a characteristic of a "health care provider." The final sentence of the anti-kickback provision envisions that a health care provider is licensed as reflected by the fact that it mandates that its licensing board be notified of a conviction under this statute. 18 Pa. Cons. Stat. § 4117(b)(2) ("Upon a conviction of an offense provided for by this paragraph, the prosecutor shall certify such conviction to the appropriate licensing board in the Department of State which shall suspend or revoke the health care provider's license."). This sentence reflects the limited category of actors to which the provision applies.⁹ Thus, by its text, the anti-kickback provision applies only to licensed health care providers.¹⁰, ¹¹ Applying these rules of construction,¹² we conclude that a "health care provider" under § 4117(b)(2) is limited to persons or entities licensed to perform health care services. Defendants...