IMA, Inc. v. Columbia Hosp. Med. City at Dall.

1 F.4th 385

IMA, INCORPORATED, Plaintiff—Appellee,

v.COLUMBIA HOSPITAL MEDICAL CITY AT DALLAS, SUBSIDIARY L.P., doing business as Medical City Dallas Hospital, Defendant—Appellant.

No. 20-20032

United States Court of Appeals, Fifth Circuit.

FILED June 17, 2021

David Lacy Pybus, Preis, P.L.C., Houston, TX, for Plaintiff-Appellee.

Andrew Christian Cookingham, Richard Barrett Phillips, Jr., Thompson & Knight, L.L.P., Dallas, TX, for Defendant-Appellant.

Before Higginbotham, Jones, and Higginson, Circuit Judges.

Stephen A. Higginson, Circuit Judge:

Columbia Hospital Medical Center at Dallas, L.P., d/b/a Medical City Dallas Hospital ("Columbia Hospital") seeks to compel IMA, Inc., a health plan administrator, to arbitrate a dispute involving unreimbursed medical fees. The parties are connected by a series of intermediary agreements within a preferred provider organization ("PPO") network that allows patients in covered health plans to receive medical services from participating hospitals at discounted rates. One of those agreements contains an arbitration clause. The district court denied Columbia Hospital's motion to compel arbitration, holding that IMA is not a party to, and is not otherwise bound by, the agreement containing the arbitration provision. On appeal, Columbia Hospital argues that the district court erred in declining to compel arbitration under direct benefits estoppel, or alternatively to construe the series of agreements as a single, unified contract. We AFFIRM.

I.

IMA is the third-party administrator of the Central Management Company, LLC Employer Health Plan ("Health Plan"), which IMA maintains is covered by ERISA. In February 2016, T.S., a member of the Health Plan, received two spinal surgeries at Columbia Hospital. Prior to the surgeries, Columbia Hospital obtained authorization numbers confirming that T.S. was a member of an in-network health plan. Columbia Hospital subsequently sought reimbursement for the surgeries and spine implants from IMA.

It is undisputed that IMA, a plan administrator, and Columbia Hospital, a services provider, do not have a direct contract with one another. Instead, they are connected through a series of intermediary agreements entered into over approximately ten years that connect hospitals (like Columbia Hospital) with various PPO networks, then to plan administrators (like IMA), and finally to health plans and patients.

A. Relevant agreements

Effective April 2012, Columbia Hospital agreed to provide discounted services to HealthSmart Preferred Care II, L.L.C. ("HealthSmart"), a PPO network. The terms of this arrangement were entered in a "Hospital Agreement" between Hospital Corporation of America North Texas Division, Inc. ("HCA"), acting on behalf of Columbia Hospital and other hospitals, and HealthSmart. Pursuant to this agreement, Columbia Hospital would provide services as a "Participating Hospital" to the HealthSmart network and its "Groups,"¹ based on the discounted reimbursement rates specified in "Exhibit B," which was attached to the agreement. In turn, HealthSmart agreed to "ensure that any Group accessing [Columbia Hospital's] rates ... is contractually bound to [Columbia Hospital] to adhere to the terms and conditions of this Agreement," and that HealthSmart "shall require" the Group to pay the rates specified in Exhibit B. The Hospital Agreement also contains the following arbitration provision:

Dispute Resolution. Any dispute arising out of, relating to, involving the interpretation of, or in any other way pertaining to this Agreement shall be resolved using alternative dispute resolution mechanisms instead of litigation. Network, Group, and Participating Hospital agree and acknowledge that it is their mutual intention that this provision be construed broadly so as to provide for mediation and/or arbitration of all disputes arising out of this relationship.

IMA, as a plan administrator, similarly entered into agreements with PPO networks so that its members could access discounted medical services with "hundreds of providers." One of those agreements was a Preferred Provider Organization TPA Agreement with PPOplus, LLC, effective March 2003, so almost a decade earlier (the "IMA-PPOplus Agreement"). This contract allows IMA to access the "Participating Providers"² in the PPOplus network at the "PPO Contracted Rates," which are defined as the "rates or fees agreed upon by PPO and Participating Provider." Relevant here, IMA "agrees to pay claims of Participating Providers in accordance with the applicable Plan and the PPO Contracted Rates," and to pay PPOplus a "Network Access Fee." In exchange, PPOplus is required to "directly or indirectly arrange for, enter into, maintain, and enforce Provider Agreements with ... Participating Providers." This 2003 contract with IMA as a signatory does not include an arbitration clause.

A year earlier in 2002, PPOplus entered into a "Network Cross Access Agreement" with HealthSmart.³ This agreement provides "reciprocal access" between PPOplus and HealthCare's network of providers. In return, both networks "shall require their respective Clients to pay the claims of the other party's Participating Providers in accordance with the applicable Plan and the other party's Contracted Rates." This agreement similarly does not have an arbitration clause.

In sum, Columbia Hospital contracted with HealthSmart, which separately contracted with PPOplus, which had contracted almost a decade earlier with IMA, which administered T.S.’s health plan. Only the 2012 Hospital Agreement between Columbia Hospital and HealthSmart contains an arbitration provision.

B. Claim reimbursement dispute

This dispute arises from Columbia Hospital's attempt to collect over $2.7 million for T.S.’s surgeries, including inpatient care and implants in his back and spine. Columbia Hospital's "billed charges" were $1,165,116.80 for the first surgery and $1,548,885.57 for the second surgery, totaling $2,714.002.37. IMA at first declined to pay and requested further records to explain the cost of the implants. In October 2016, HCA's senior counsel sent a letter on behalf of Columbia Hospital to HealthSmart related to these unreimbursed claims "pursuant to [Columbia Hospital's] agreement with HealthSmart." This letter further sought "HealthSmart's position regarding [IMA's] refusal to process or pay claims until and unless the facility provides cost invoicing for implants," and stated that "[a]ction must be taken to address the existing gap in understanding between [HealthSmart's] client and the facilities who serve their members." A copy of this letter was sent to IMA's legal department.

In March 2018, IMA subsequently paid Columbia Hospital $1,014,161.97. This payment did not cover any of the costs of the implants—totaling an additional $1,361,786.46—which IMA deemed "ineligible" and "exceed[ing] the maximum allowed based on the reasonable and customary amount" under its plan. For the services IMA did reimburse, it paid a discounted amount of 75% of the billed costs. Specifically, IMA's explanation of benefits indicated that the discount code, "2226," was pursuant to the "PPO Plus/HealthSmart/PHCS/1st Health ... discount." This discount rate matches the discount stated in Exhibit B of the Hospital Agreement for the "stop loss" provision of 75% of billed costs. Columbia Hospital maintains, however, that IMA was required to further reimburse it for the implants, at the same 75% discounted rate, totaling an additional $1,021,339.85.

C. Procedural history

In July 2019, Columbia Hospital filed a demand for arbitration against IMA in Houston, Texas, alleging breach of contract for the unreimbursed amount of T.S.’s surgery implants. In response, IMA initiated this lawsuit in the Southern District of Texas seeking declaratory and injunctive relief that it is not obligated to arbitrate the dispute because it is not a signatory to the Hospital Agreement and that it is not obligated to pay the disputed amount.

Columbia Hospital moved to stay the district court proceedings and compel arbitration. It argued that IMA was bound by the 2012 arbitration clause in the Hospital Agreement because the series of agreements between Columbia Hospital, HealthSmart, PPOplus, and IMA form a "single, unified contract." Alternatively, Columbia Hospital argued that even as a non-signatory to the Hospital Agreement, IMA was bound by the arbitration clause because it knowingly received the benefits of the discounted services provided in the agreement.

The district court disagreed on both grounds and denied the motion to compel arbitration. IMA, Inc. v. Columbia Hosp. Med. City at Dallas, Subsidiary, L.P. , No. CV H-19-3500, 2019 WL 7168099, at *4 (S.D. Tex. Dec. 23, 2019). Columbia Hospital timely appealed.

II.

A district court's denial of a motion to compel arbitration is reviewed de novo. Bowles v. OneMain Fin. Grp., L.L.C. , 954 F.3d 722, 725 (5th Cir. 2020). We review the district court's findings of fact for clear error. Crawford Prof'l Drugs, Inc. v. CVS Caremark Corp. , 748 F.3d 249, 256 (5th Cir. 2014).

The district court's application of direct benefits estoppel is reviewed for an abuse of discretion. Noble Drilling Servs., Inc. v. Certex USA, Inc. , 620 F.3d 469, 472–73 (5th Cir. 2010). "To constitute an abuse of discretion, the district court's decision must be either premised on an application of the law that is erroneous, or on an assessment of the evidence that is clearly erroneous.’ " Id. at 473 (quoting Grigson v. Creative Artists Agency L.L.C. , 210 F.3d 524, 528 (5th Cir. 2000) ).

III.

Whether IMA is compelled to arbitrate this reimbursement dispute turns on the threshold question of "whether the parties entered into any arbitration agreement at all." Kubala v. Supreme Prod. Servs., Inc. , 830 F.3d 199, 201 (5th Cir. 2016) (emphasis omitted); see also Will-Drill Res., Inc. v. Samson Res. Co. , 352 F.3d 211, 218 (5th Cir. 2003) ("[B]ecause arbitration is a matter of contract, where a...