Conformis, Inc. v. Aetna, Inc.

Conformis, Inc., and John M. Schaub, Plaintiffs, v. Aetna, Inc., and Aetna Life Insurance Company, Defendants.

Civil Action No. 1:20-cv-10890-IT

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

March 31, 2021

MEMORANDUM & ORDER

TALWANI, D.J.

Plaintiffs Conformis, Inc. ("Conformis") and John M. Schaub brought this action against Defendants Aetna, Inc., and Aetna Life Insurance Company (collectively "Aetna") after Aetna categorized customized knee replacements as "experimental" and "investigational" and denied Schaub insurance coverage for the use of Conformis' customized knee replacement.

Presently before the court is Defendants' Motion to Dismiss Plaintiffs' Amended Complaint [#26] pursuant to Fed. R. Civ. P. 12(b)(6). For the reasons explained below, Defendants' motion is GRANTED as to all claims brought by Conformis and DENIED as to all claims brought by Schaub.

I. Facts As Alleged

The following facts are drawn from the First Amended Complaint ("Am. Compl.") [#17], the well-pleaded allegations of which are taken as true for the purposes of evaluating the motion to dismiss. See Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014).

Conformis is a medical device company that manufactures a customized knee replacement called the Conformis iTotal Knee Replacement System ("Conformis System" or "Conformis knee replacement"). Am. Compl. ¶ 1 [#17]. The Conformis System "uses computed tomographic imagery generated by a CT scan to create an 'individualized solution' for patients in four key areas: (1) individualized fit; (2) individualized shape; (3) simplified surgical technique; and (4) improved operating room efficiencies." Id. at ¶ 22. Because Conformis knee replacements are shaped to a patient's body, recipients may avoid pain and feelings of a foreign object in their body that may be caused by off-the-shelf knee replacements that do not fit as well. Id. at ¶¶ 22-26. The upfront cost of the Conformis System is higher than off-the-shelf knee replacements, but the Conformis System may lead to fewer complications and attendant costs later. Id. at ¶¶ 30, 64-73.

The Conformis System received Food and Drug Administration ("FDA") clearance in February 2011, and since then, over 100,000 patients have received Conformis knee replacements. Id. at ¶¶ 5, 16, 33. The Conformis System is covered by over 90% of commercial payors, including United HealthCare, Cigna, and Anthem Blue Cross and Blue Shield; it is also covered by the Centers for Medicare and Medicaid Services. Id. at ¶¶ 16, 34-34, 38.

Aetna provides healthcare insurance, administration, and/or benefits to policy holders or plan participants pursuant to a variety of healthcare benefit plans and insurance policies. Id. at ¶ 3. Aetna has guidelines in place precluding coverage for experimental and investigative medical treatments. Id. at ¶¶ 39, 46, 50-51. Aetna defines experimental services and procedures as "often newer drugs, treatments or tests [that] are not yet accepted by doctors or by insurance plans as standard treatment. They may not be proven as effective or safe for most people." Id. at ¶ 48. Aetna uses the same definition for investigational services. Id. at ¶ 49.

Between February 2011 and September 21, 2018, Aetna covered Conformis kneereplacements under its policy on Uni-compartmental, Bi-compartmental, and Bi-unicompartmental Knee Arthroplasties, numbered 0660 ("Policy No. 0660"). Id. at ¶ 38. During this time, Aetna did not label the Conformis System as experimental or investigative, id. at ¶ 40, and approximately 5,000 Aetna patients received Conformis knee replacements. Id. at ¶ 98.

On September 21, 2018, Aetna amended Policy No. 0660, in relevant part, to say: "Aetna considers customized total knee implant experimental and investigational because its effectiveness has not been established." Policy No. 0660, Ex. 1 to Mem. of Law in Support of Defendants' Motion to Dismiss Plaintiffs' Amended Complaint ("Mem. Mot. Dismiss") 6 [#27-1].¹ Studies cited by Aetna to support the amendment show instead that the Conformis knee replacement is a safe, proven, and effective medical device. Am. Compl. ¶¶ 43-44 [#17]. Aetna published amended Policy No. 0660 to its website. Id. at ¶ 59.

Since September 21, 2018, Aetna has uniformly followed Policy No. 0660 and has denied coverage for the Conformis System. Id. at ¶ 4. Conformis sent multiple letters, including a cease-and-desist letter, to Aetna asking it to recategorize the Conformis System to no avail. Id. at ¶¶ 76-79, 85-90. Since September 21, 2018, "Conformis has seen a significant drop-off in Aetna patients who have received the Conformis System." Id. at ¶ 99. Many orthopedic surgeons have moved away from prescribing Conformis knee replacements to Aetna and non-Aetna patients because it is unclear whether they will be covered by insurance. Id. at ¶ 92.

Plaintiff Schaub, a Colorado resident, developed osteoarthritis in his knee and hisorthopedic surgeon recommended a total knee replacement. Id. at ¶¶ 103-05. Schaub began preparations for a knee replacement surgery in February 2020. Id. at ¶¶ 110-12. At the time, he was covered by the "Genesis Plan," a health plan provided by his employer, Genesis HCC, and administered by Aetna. Id. at ¶¶ 100-01.

The Genesis Plan covers reconstructive surgery and related supplies where a surgery is "to implant or attach a covered prosthetic device," that a physician orders and administers, where the prosthetic device is defined as "[a] device that temporarily or permanently replaces all or part of an external body part lost or impaired as a result of illness or injury or congenital defects." Genesis Plan 28, 41 [#27-2]. The Genesis Plan does not cover "[e]xperimental or investigational drugs, treatments or procedures unless otherwise covered under clinical trial therapies (experimental or investigational) or covered under clinical trials (routine patient costs)." Id. at 45. The Genesis Plan also contains the following provision regarding "Assignment of Benefits":

When you see a network provider they will usually bill us directly. When you see an out-of-network provider, we may choose to pay you or to pay the provider directly. Unless we have agreed to do so in writing and to the extent allowed by law, we will not accept any assignment to an out-of-network provider or facility under this plan. This may include:

? The benefits due

? The right to receive payments or

? Any claim that you make for damages resulting from a breach, or alleged breach, of the terms of this plan.

Id. at 76 (emphasis in original). Schaub's pre-surgery CT scan was authorized by the Genesis Plan claim administrator; a CT scan was required for the Conformis knee replacement, but would not have been required for an off-the-shelf knee replacement. Am. Compl. ¶¶ 101-02, 113-14 [#17]. Schaub's surgeon, the hospital staff, and an Aetna benefits advisor told Schaub that his insurance authorizations were complete, and his surgery would proceed. Id. at ¶ 118. However, a few days prior to the scheduled surgery, the surgeon told Schaub that the authorization had beenreversed based on his choice of knee replacement, and that Aetna was denying coverage. Id. at ¶¶ 124-25.

In March 2020, Schaub contacted Aetna multiple times over the phone and by mail, id. at ¶¶ 125-27, 133; eventually he confirmed that coverage was denied because he chose the Conformis knee replacement. Id. at ¶ 129. After completing the formal appeal process, Schaub received his first written denial on March 16, 2020. Id. at ¶¶ 136-27, 141.

On March 19, 2020, having reached the point where he could not work or live without significant pain, Schaub had knee replacement surgery, using the Conformis System. Id. at ¶ 144.

On April 20, 2020, Schaub signed an "Assignment of Insurance Benefits" stating that he assigned his rights and benefits under the Genesis Plan to Conformis. Id. at ¶ 204; Assignment Agreement [#17-1].

II. Legal Standard

To evaluate a motion to dismiss for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, the court must accept as true all well-pleaded facts, analyze those facts in the light most favorable to the plaintiff's theory, and draw all reasonable inferences from those facts in favor of the plaintiff. U.S. ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377, 383 (1st Cir. 2011). To avoid dismissal, a complaint must set forth "'factual allegations, either direct or inferential, respecting each material element necessary to sustain recovery under some actionable legal theory.'" Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir. 2008) (citation omitted). The plaintiff's obligation to articulate the basis of his claims "requires more than labels and conclusions." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). The facts alleged, when taken together, must be sufficient to "state a claim to relief that is plausible on its face." A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013)(quoting Twombly, 550 U.S. at 570). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted).

III. Discussion

A. ERISA Claims, Counts IV-VI

Conformis asserts claims for Schaub's benefits under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, based on his assignment of such claims to Conformis. To the extent that assignment is prohibited or invalid, Schaub asserts those ERISA claims directly. The court addresses each Plaintiff's ERISA claims in turn.

1. Conformis' ERISA Claims

Defendants contend that Conformis may not bring claims under the ERISA plan. ERISA specifically enumerates the parties with standing to sue to enforce ERISA's provisions: participants, beneficiaries, fiduciaries, and the Secretary of Labor. 29 U.S.C. § 1132. A "participant" under ERISA is ...