Cnty. of Monterey v. Blue Cross

COUNTY OF MONTEREY, Plaintiff, v. BLUE CROSS OF CALIFORNIA, et al., Defendants.

Case No. 17-CV-04260-LHK

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

February 12, 2020

Re: Dkt. Nos. 91, 95

Plaintiff County of Monterey dba Natividad Medical Center ("Natividad") brings the instant lawsuit against Defendants Blue Cross of California dba Anthem Blue Cross, and Anthem Blue Cross Life and Health Insurance Company (collectively, "Anthem") for improper denial of benefits under 29 U.S.C. § 1132(a)(1)(B). Before the Court is Natividad's motion for summary judgment and Anthem's motion for summary judgment. Having considered the parties' briefs, the relevant law, and the record in this case, the Court GRANTS Anthem's motion for summary judgment, and the Court DENIES Natividad's motion for summary judgment.

I. BACKGROUND

A. Factual Background

Natividad is a 172-bed acute care hospital owned and operated by the County of Monterey. ECF No. 57 (First Amended Complaint, hereinafter "FAC") ¶ 3. On or about July 23, 2012, Anthem and Natividad entered into a Facility Agreement pursuant to which Natividad agreed to provide certain healthcare services to Anthem members and Anthem agreed to pay Natividad certain rates for those services. ECF No. 95-4 ("Leon Decl.") ¶ 3.

The Facility Agreement governs not only claims for Anthem's insureds, but also services claims for members of "Other Payors" for whom Anthem provides claims processing services and who have access to Anthem's network. ECF No. 91 at 4. Natividad alleges that these "Other Payors" include 32 ERISA Plans that Natividad has identified in its FAC. FAC ¶¶ 7, 15. The FAC alleges that these ERISA Plans entered into contracts with Anthem that required the ERISA Plans to comply with the terms of Anthem's contracts with providers in Anthem's Managed Care Network, including the Facility Agreement between Anthem and Natividad. Id. ¶ 18. Natividad also alleges that Anthem functions as the de facto plan administrator for the ERISA Plans. Id. ¶ 10.

At the time Natividad and Anthem entered into the Facility Agreement, Natividad did not have its certification to provide trauma services to patients. Leon Decl. ¶ 4. Therefore, the parties did not agree on a permanent rate at which Anthem would reimburse Natividad for trauma services. Id. ¶ 5; ECF No. 94-8 Ex. 1 ("Facility Agreement") at Plan Compensation Schedule ¶ 10. Instead, the Facility Agreement contemplated that the parties would negotiate new trauma rates once Natividad obtained its certification. Id. On January 5, 2015, Natividad received its certification to provide trauma services and began providing trauma services to patients. Leon Decl. ¶ 7. In 2014, 2015, and 2016, the parties attempted to negotiate a trauma services rate but could not come to an agreement. Id. ¶ 9. In the interim, Anthem interpreted the Facility Agreement to apply the emergency services rate contained within the Facility Agreement to the trauma claims. Id. ¶ 10. The emergency services rate represents 64.5% of charges, with a cap of $5,000 for outpatient services. Id. According to Natividad, "[b]ased on Anthem's processing ofthe claims and appeals, the self-insured payers that access Anthem's network, including the ERISA plans at issue here, only paid the 64.5% rate to Natividad for inpatient trauma claims, and 64.5% of charges with a cap of $5,000 for outpatient trauma claims." Id. ¶ 11. The FAC alleges that the total difference between Natividad's billed charges and the amounts that the ERISA Plans are paying for the trauma claims exceeds $18 million. FAC ¶ 29.

Natividad brings the instant claims as an assignee of its patients' benefits under the ERISA Plans. Indeed, because "[a]s a policy, Natividad requires that each patient admitted, including ERISA plan members, assigns his or her insurance benefits to Natividad. Each prospective patient signs a document entitled Conditions of Admission Financial Agreement. The Conditions of Admission form includes a provision in which the patients assign the right to payment of benefits to Natividad. Leon Decl. ¶ 16. The assignment of insurance benefits provision states as follows:

I assign and authorize direct payment to the hospital of all insurance benefits payable for this hospitalization or for these outpatient services. I agree that the insurance company's payment to the hospital pursuant to this authorization shall discharge the insurance company's obligations to the extent of such payment. I understand that I am financially responsible for charges not paid according to this assignment.

ECF No. 92 ¶ 35, Ex. HH; id. ¶ 47, Ex. TT; id. ¶ 39, Ex. LL; id. ¶ 43, Ex. PP; id. ¶ 33, Ex. FF; id. 17, Ex. P; id. ¶ 13, Ex. L. Natividad informed Anthem that Natividad was operating as an assignee of the patients because every claim submission to Anthem included a UB-04 form, which indicates on Box 54 that the provider, Natividad, had an assignment of benefits from the member. Leon Decl. ¶¶ 17-18.

Upon receiving the claim submissions from Natividad, Anthem provided explanations of benefit ("EOBs") that indicated that Anthem priced the claims at the emergency services rate. Id. ¶¶ 23, 31, 38, 45, 50, 57, 64, 71, 80. The ERISA Plans reimbursed Natividad in accordance with the emergency services rate. Id. After Natividad received the improper emergency services rate for the trauma claims, Natividad sent Anthem appeal letters. Id. ¶¶ 24-26, 32-33, 39-40, 51-52, 58-59, 65-66, 72-75, 81-84. Anthem responded to the letters by explaining that the claims wereprocessed correctly in accordance with the Facility Agreement and that the appeal process had been exhausted. Id.

In light of the dispute about the appropriate rate included in the Facility Agreement, Natividad filed a demand for JAMS arbitration on August 6, 2016. See generally ECF No. 117-4 ("Demand for Arbitration"). In Natividad's demand for arbitration, Natividad alleged that Anthem violated an implied contract, and Natividad also sought recovery under quantum meruit and a declaratory judgment regarding the reasonable value of the trauma services that Natividad provided. Id. On August 30, 2018, the arbitrator issued the Final Arbitration Award. ECF No. 95-1 ("Tooch Decl.") ¶ 30. In the Final Arbitration Award, the arbitrator concluded that Anthem and Natividad did not agree to reimburse Natividad's trauma claims at the emergency services rate. Id. Instead, the arbitrator concluded that the parties impliedly agreed to reimburse Natividad for trauma claims at reasonable value, which the arbitrator declared to be 80% of the billed charges. Id. Anthem and Natividad have since executed an amendment to the Facility Agreement with an effective date of May 1, 2019, which requires Anthem to pay a rate 80% of billed charges for trauma claims with a date of service from April 21, 2018 onward. Leon Decl. ¶¶ 12-15.

In its capacity as an assignee of its patients' benefits, Natividad now asserts one claim against Anthem for failure to pay plan benefits under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(1)(B). FAC ¶¶ 183-194. Specifically, Natividad "believes that ERISA Plans at issue in this case required Anthem and the ERISA Plans to pay Natividad customary and reasonable rates for the inpatient and outpatient trauma services that Natividad has provided to the ERISA Plan members." Id. ¶ 192.

Therefore, Natividad seeks compensatory damages and declaratory relief. Id. at 39. Specifically, Natividad seeks a declaration that it is "entitled to be paid a reasonable and customary amount for the trauma services it has provided, and is providing to the ERISA Plans," and that Anthem's "practice of pricing, processing, and paying Natividad's trauma claims at the emergency services rate in the Facility Agreement is improper." Id.

B. Procedural History

Natividad filed its initial complaint on July 27, 2017. See ECF No. 1. On November 11, 2017, the Court stayed the case pending the parties' arbitration, which concerned breach of implied contract and the issue of the reasonable value of trauma services Natividad provided to Anthem members. ECF No. 29; FAC ¶¶ 33-35. However, because the arbitration concerned only Anthem's fully-insured members, it did not directly encompass the ERISA Plan claims at issue in this litigation. FAC ¶ 34.

On August 10, 2018, the arbitrator issued the Final Arbitration award. Tooch Decl. ¶ 30. In the Final Arbitration Award, the arbitrator concluded that Anthem and Natividad did not agree to reimburse Natividad's trauma claims at the emergency services rate. Id. Instead, the arbitrator concluded that the parties impliedly agreed to reimburse Natividad for trauma claims at reasonable value, which the arbitrator declared to be 80% of the billed charges. Id.

On October 8, 2018, Anthem filed a motion to dismiss the initial complaint. ECF No. 37. Natividad opposed on October 22, 2018. ECF No. 41. Anthem replied on October 29, 2018. ECF No. 42.

On January 24, 2019, at the initial case management conference, the Court lifted the stay and directed the Clerk to reopen the case file. ECF No. 50.

On January 28, 2019, the Court granted Anthem's motion to dismiss the initial complaint without prejudice. ECF No. 52. Specifically, the Court found that Natividad's complaint failed to plead factual allegations with specificity and that factual allegations were missing from the complaint, "including the specific claims, dates, explanations of benefits, and the ERISA Plan provisions at issue." Id. at 8. The Court further requested that "the parties meet and confer to assess whether claim numbers, patients numbers, or some other claim or patient identifiers could be used in public filings that would protect patient privacy, but enable the parties to identify the relevant claim or patient without sealing" and that "[u]sing such identifiers would minimize the sealing burdens on the parties and the Court in this case." Id. at...