Brushy Creek Family Hosp. v. Blue Cross Blue Shield of Tex.

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BRUSHY CREEK FAMILY HOSPITAL, LLC, Plaintiff v. BLUE CROSS BLUE SHIELD OF TEXAS, A DIVISION OF HEALTH CARE SERVICE CORPORATION Defendant

No. 1:22-CV-00464-JRN

United States District Court, W.D. Texas, Austin Division

May 30, 2024

REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

SUSAN HIGHTOWER UNITED STATES MAGISTRATE JUDGE

TO: THE HONORABLE JAMES R. NOWLIN UNITED STATES DISTRICT JUDGE

Before the Court are Defendant Blue Cross Blue Shield of Texas' Amended Opening Brief and Motion for Summary Judgment, filed November 30, 2023 (Dkt. 52); Plaintiff Brushy Creek Family Hospital, LLC's Response, filed January 22, 2024 (Dkt 60); and Defendant's Reply, filed February 2, 2024 (Dkt 66).^[1]

I. Background

On January 22, 2021, Plaintiff Brushy Creek Family Hospital, LLC (“Brushy Creek”) treated Frank Lucero, who was enrolled in a group health insurance policy issued to his employer (“the Plan”) by Defendant Blue Cross Blue Shield of Texas (“BCBSTX”), a Division of Health Care Service Corporation. Dkt. 52 at 6. After Lucero was discharged, Brushy Creek submitted to BCBSTX claims for treatment totaling $51,419. Id. at 9. BCBSTX determined that Brushy Creek requested reimbursement under an inapplicable billing code and double-billed for services, calculating that it was responsible for only $197.44 under the Plan. Id. at 10, 12, 256.

After BCBSTX informed Lucero of its adjudication of Brushy Creek's claims, Brushy Creek submitted a “Claim Review Form” to BCBSTX requesting reconsideration. Id. at 14, 191. BCBSTX informed Brushy Creek that it would not change the payment and stated that Brushy Creek could request mediation of the decision with the Texas Department of Insurance. Id. at 15, 213. After unsuccessful mediation, Brushy Creek sued BCBSTX in Texas state court, asserting claims for violating the Texas Insurance Code and breach of implied contract. Id. at 15; Plaintiff's Original Petition, Dkt. 1-5.

BCBSTX removed the case to this Court, asserting that the Employee Retirement Income Security Act of 1974 (“ERISA”) completely preempted Brushy Creek's claims. Dkt. 1 at 2. After the Court denied Brushy Creek's motion to remand, Dkt. 21, Brushy Creek amended its Complaint to add claims for benefits due and breach of fiduciary duty under an ERISA plan. First Amended Complaint, Dkt. 25. Brushy Creek later dropped all claims except its claim for benefits due under 29 U.S.C. § 1132(a)(1)(B) (ERISA Section 502(a)(1)(B)). Second Amended Complaint, Dkt. 36.

In its summary judgment motion, BCBSTX argues that (1) Brushy Creek failed to exhaust administrative remedies, and (2) it correctly adjudicated Brushy Creek's claim. Because the Court finds BCBSTX's first argument dispositive, it need not reach the second.

II. Legal Standards

ERISA “permits a person denied benefits under an employee benefit plan to challenge that denial in federal court.” Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 108 (2008). Under 29 U.S.C. § 1133(2), every ERISA plan must “afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.” Before a claimant may sue to receive benefits from an ERISA plan, the claimant “must first exhaust available administrative remedies under the plan.” Bourgeois v. Pension Plan for Emps. of Santa Fe Int'l Corps., 215 F.3d 475, 479 (5th Cir. 2000). Because the exhaustion requirement is an affirmative defense, the defendant has the burden of proof. Mission Toxicology, LLC v. UnitedHealthcare Ins., 499 F.Supp.3d 338, 347 (W.D. Tex. 2020). After the defendant carries its burden, the plaintiff has the burden to show an applicable exception. Id. A plaintiff need not exhaust administrative remedies when attempting to do so would be futile or for another valid reason, including when “a claimant relies to his detriment on the words and actions of high-ranking company officers who purport to negotiate benefit decisions without actual authority.” Bourgeois, 215 F.3d at 481-82.

Standard summary judgment rules control in ERISA cases. Miller v. Reliance Standard Life Ins., 999 F.3d 280, 282 (5th Cir. 2021). Summary judgment shall be rendered when the pleadings, the discovery and disclosure materials, and any affidavits on file show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Washburn v. Harvey, 504 F.3d 505, 508 (5th Cir. 2007). When ruling on a motion for summary judgment, the court must view all inferences drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Washburn, 504 F.3d at 508. A court “may not make credibility determinations or weigh the evidence” in ruling on a motion for summary judgment. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000). If the nonmoving party fails to make a showing sufficient to establish an element essential to its case and on which it will bear the burden of proof at trial, summary judgment must be granted. Celotex, 477 U.S. at 322-23.

III. Analysis

A. Brushy Creek Failed to Exhaust Administrative Remedies

BCBSTX argues that Brushy Creek failed to exhaust its administrative remedies because it never appealed the claim determination using the procedure authorized by the Plan. Dkt. 52 at 18. The Plan states:

An appeal of an Adverse Benefit Determination may be filed by You or a person authorized to act on Your behalf. In some circumstances, a health care provider may appeal on his/her own behalf. Your designation of a representative must be in writing as it is necessary to protect against disclosure of information about You except to Your authorized representative.

Dkt. 52 at 140. The Plan sets out the process for obtaining an Authorized Representative Form and for an appeal by the insured or the insured's authorized representative. Id. The Plan also instructs that before “You or Your authorized representative may bring any action to recover benefits the claimant must exhaust the appeal process.” Id.

BCBSTX argues that Brushy Creek did not start the appeals process for Lucero's claim because it failed to submit Lucero's designation of it as his representative in writing. Id. at 18. It states that Brushy Creek instead “chose to submit a Claim Review request, a procedure available to providers like Brushy Creek,” which is not an appeal under the Plan. Id. Unlike an ERISA claim, the claim review request does not require any authorization from a plan member. Id.

Brushy Creek does not dispute that it did not submit an appeal through the process available to Lucero, but argues that the claim review it submitted was “not specifically excluded by the Plan as an appeal.” Dkt. 60 at 12. Brushy Creek also cites the Plan's language that in “some circumstances, a health care provider may appeal on his/her own behalf,” and argues that because the Plan provides no other instructions for a health care provider appealing on its own behalf, BCBSTX should not be allowed to “impose additional steps in the appeal.” Id. at 10. Brushy Creek points out that BCBSTX does not cite Plan language stating that the claim review process for providers is not an appeal under the Plan. Id. at 13.^[2]

The exhaustion requirement is not excused when a plaintiff argues that the Plan's information is incomplete because the plaintiff has a “duty to seek the necessary information even if it has not been made available.” Bourgeois, 215 F.3d at 480. When an ERISA plan sets out a specific process for appealing a claim, “‘informal attempts to substitute for the formal claims procedure,' such as filing appeals to the wrong body, do not satisfy the exhaustion requirement.” Angelina Emergency Med. Assocs. P.A. v. Health Care Serv. Corp., No. 3:18-CV-0425-X, 2024 WL 102666, at *11 (N.D. Tex. Jan. 9, 2024) (citation omitted). The Plan required Lucero or his authorized representative to exhaust the appeals process. Dkt. 52 at 140. Brushy Creek's reliance on the claim review submitted through BCBSTX's alternative process, which is not listed in the Plan, is “insufficient to show that [it] pursued any claim or appeal on behalf of [Lucero].” Mission Toxicology, 499 F.Supp.3d at 349.

Also, Brushy Creek's ERISA claim is not brought on its own behalf. Standing to bring an ERISA claim under § 1132(a) for benefits under a plan “is limited to participants, beneficiaries, the Secretary [of Labor], or fiduciaries.” Tango Transp. v. Healthcare Fin. Servs. LLC, 322 F.3d 888, 891 (5th Cir. 2003). Healthcare providers may not sue to collect benefits under ERISA in their own right, but providers that obtain an assignment of rights from plan beneficiaries “may bring ERISA suits standing in the shoes of their patients.” N. Cypress Med. Ctr. Operating Co. v. Cigna Healthcare, 781 F.3d 182, 191 (5th Cir. 2015).

Brushy Creek was required to exhaust the benefits available to Lucero under the Plan. Mission Toxicology, 499 F.Supp.3d at 350. BCBSTX has shown that while Brushy Creek pursued another way to resolve the claim dispute, it did not follow the procedure set out in the Plan. Because Brushy Creek did not appeal BCBSTX's adjudication of Lucero's benefits through the available procedure, it failed to exhaust its administrative remedies.

B. Blue Cross Blue Shield Is Not Estopped From Asserting Failure to Exhaust

Brushy Creek does not argue that exhaustion was futile, but that it should be excused from the exhaustion requirement because it relied on BCBSTX's representations that “the benefits at issue fell under Texas law.” Dkt. 60 at 4....