Lab. Corp. of Am. v. McMahon

LABORATORY CORPORATION OF AMERICA, INC., Plaintiff, v. SCOTT McMAHON, M.D. and WHOLE WORLD HEALTH CARE, P.C., Defendants.

No. 19-cv-0495 SMV/KRS

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

December 4, 2020

MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

This is an action to collect on two billing accounts. Plaintiff Laboratory Corporation of America, Inc. ("LabCorp") offers laboratory medical services in several states, including New Mexico. When a patient lacks insurance or is otherwise self-pay, the most typical way for a business such as LabCorp to bill is with a "pass-through" arrangement. The laboratory bills the physician who ordered the results. The physician pays the bill and then seeks reimbursement from the patient. Thus, the charges "pass through" the physician to the patient. Defendant Dr. McMahon held two accounts with LabCorp. LabCorp contends that these were pass-through accounts and that Dr. McMahon is liable for $117,210.00 of unpaid charges on the accounts. Dr. McMahon disagrees. He contends that the accounts were set up solely to facilitate billing for insured patients and that he never agreed to pay for any services rendered to uninsured patients.

Defendants filed a Motion for Summary Judgment on July 24, 2020. [Doc. 60]. LabCorp responded on August 7, 2020. [Doc. 61].¹ Defendants replied on August 21, 2020. [Doc. 63].² The Court held oral argument on October 21, 2020. [Doc. 69] (clerk's minutes). Viewing the facts in the light most favorable to LabCorp, there appears to be a genuine factual dispute as to whether Dr. McMahon agreed to be liable on the accounts for uninsured patients. Accordingly, Defendants' Motion for Summary Judgment will be DENIED.

Background

Dr. McMahon is a physician practicing in Roswell, New Mexico. [Doc. 60] at 4, ¶ 1. Defendant Whole World Health Care, P.C. ("WWHC") is his private medical practice. Id. at 5, ¶ 2. Plaintiff LabCorp operates a healthcare diagnostics business offering various medical laboratory services to medical providers. Id. at ¶ 5. Dr. McMahon opened two accounts with LabCorp to provide laboratory services for his patients. The first, opened in his name only, was account number 30490765 (hereinafter referred to as "the McMahon account"). Id. at ¶ 6. The second, opened in the name of WWHC, was account number 30001260 (hereinafter referred to as "the WWHC account"). Id. at 6, ¶ 12.

In addition to his medical practice, Dr. McMahon serves as an expert witness in litigation involving persons with chronic inflammatory response syndrome. [Doc. 60] at 5, ¶ 4. In early 2018, Dr. McMahon agreed to serve as a consultant on potential class-action litigation for Brian Gormley, an attorney in the Washington D.C. area. See id. at 7. For this consultation work, Dr. McMahon created requisition forms that would allow Mr. Gormley to order lab work for hispotential clients. Id. Dr. McMahon's assistant sent 200 of these requisition forms, which were blank other than Dr. McMahon's signature, to Mr. Gormley so that he could get blood tests for his potential clients. Id. Dr. McMahon assumed that the phlebotomist who ultimately did the blood draws would collect insurance information to cover the cost of the labs. Id. The requisition forms did not include either of his LabCorp account numbers when they left his office. Id.

Mr. Gormley hired an independent phlebotomist, Cris Digamo, to draw the blood for the tests. Id. at 8; [Doc. 60-1] at 23-24. In March 2018, Digamo approached LabCorp to obtain the necessary supplies for the tests. See [Doc. 61-6]. Digamo presented the McMahon account number and the forms with Dr. McMahon's signatures to the LabCorp employee.³ See id. at 3-4. The LabCorp employee provided the supplies. Id. Although Dr. McMahon had instructed Mr. Gormley that the phlebotomist would need to collect insurance information from each patient when drawing blood, [Doc. 60-1] at 32, Digamo failed to do so and submitted specimens to LabCorp without any insurance information in March 2018, see [Doc. 63-2] at 3, McMahon Dep. 242:2-6. LabCorp processed the tests and began sending invoices to Dr. McMahon's office. See [Doc. 6] at 3, ¶ 17; [Doc. 70-1]. Dr. McMahon refused to pay the invoices.

Legal Standard for Summary Judgment

"The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A dispute is genuine "if there is sufficient evidence on each side so that a rationaltrier of fact could resolve the issue either way." Becker v. Bateman, 709 F.3d 1019, 1022 (10th Cir. 2013) (citation omitted). The issue is "not whether [the court] thinks the evidence unmistakably favors one side or the other but whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). In answering that question, the Court must view the evidence and draw all reasonable inferences from the underlying facts in the light most favorable to the party opposing the motion. Becker, 709 F.3d at 1022. Nevertheless, "[t]he mere existence of a scintilla of evidence in support of the nonmovant's position is insufficient to create a dispute of fact that is 'genuine.'" Lawmaster v. Ward, 125 F.3d 1341, 1347 (10th Cir. 1997). "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 252.

I. DEFENDANTS ARE NOT ENTITLED TO SUMMARY JUDGMENT ON PLAINTIFF'S CLAIMS FOR COLLECTION ON OPEN ACCOUNTS.

There is no dispute that open accounts between laboratories and physicians often take the form of pass-through billings arrangements. See [Doc. 61] at 7, Plaintiff's Additional Material Fact ("AMF") No. 2; [Doc. 63] at 5, Defendant's Response to AMF No. 2. In light of this, the Court finds it prudent to focus the inquiry on whether the parties agreed to a pass-through billing arrangement.⁴ Because there is a genuine issue of material fact regarding whether Dr. McMahon agreed to be held liable for any charges under either account, summary judgment is not appropriate.

A. A Brief Background of the McMahon Account

The McMahon account was established in 2011. [Doc. 61-1] at 3, ¶ 9. The only evidence of the creation of this account is LabCorp's internal account set-up form. See id. at 18. That form says nothing about the actual terms of the agreement. See id. Nor is there any evidence of record regarding discussions between the parties at the time they entered into the agreement. Generally, Dr. McMahon used this account to get lab results for patients he was treating, and LabCorp billed the patients' insurance companies. [Doc. 60-1] at 10; [Doc. 61-1] at 5, ¶ 17. No charges were ever billed directly to Dr. McMahon on the account until LabCorp sent him three invoices in March 2017. [Doc. 60-2] at 1; [Doc. 60-3] at 2. The invoices were for services rendered in 2015 and 2016. [Doc. 60-2]. LabCorp records indicate that it had tried to reach Dr. McMahon multiple times about these invoices, as early as September 2016, but was unable to contact him prior to March 2017. [Doc. 61-1] at 24-29. Dr. McMahon responded to these three invoices by stating that he did not think his account was set up for billing directly to him, and that he never agreed to any arrangement under which he would be liable for the cost of lab work. [Doc. 60-2] at 3. "I just order them (as a physician); I don't pay them." Id. Dr. McMahon never heard back from LabCorp about why the charges were billed to him. See [Doc. 61-3] at 3-4, McMahon Dep. 76:5-77:2. LabCorpwrote off the charges and made no further effort to collect on them. Id. LabCorp's Assistant Vice President for Revenue Cycle Management, Michele Mittelman Smith, testified that the write-offs were a "one-time courtesy" to Dr. McMahon. [Doc. 61-1] at 6, ¶ 19. But there is no evidence that this reasoning was ever communicated to Dr. McMahon. See [Doc. 61-3] at 3-4, McMahon Dep. 76:5-77:2.

LabCorp contends that its standard practice when setting up accounts includes explaining to account holders that they will be held liable for any charges not paid by insurance. [Doc. 61-1] at 3-4. LabCorp offers a standard checklist to show that its practice is to make sure its clients understand the terms of their accounts. See id. at 4, 19-20. LabCorp further contends that its policies require periodic "in-services" for account holders to review billing terms. Id. at 4-5. LabCorp asserts that it performed such an in-service with Dr. McMahon as recently as November 2, 2015, not long before the first set of disputed charges were incurred. Id. at 4-5, 21.⁵ From this evidence, LabCorp argues that Dr. McMahon was aware that if labs were submitted via his account without insurance-billing information, he would be responsible for the charges. See [Doc. 61-1] at 4.

B. When Viewed in the Light Most Favorable to LabCorp, There Is Sufficient Evidence To Create a Genuine Issue of Material Fact As To Whether Dr. McMahon Agreed To Be Held Liable Under the McMahon Account.

Although LabCorp produced no evidence of a written or oral contract under which Dr. McMahon agreed to be held personally liable for charges under the account, the evidence it did present creates a genuine dispute of material fact. LabCorp's Assistant Vice President,Ms. Smith, testified regarding LabCorp's standard policies and procedures. [Doc. 61-1]. She explained that it is LabCorp's practice to review the terms of the pass-through agreement both when an account is initially created and during every periodic in-service. Id. at 3-4, ¶¶ 10-14. To support Ms. Smith's testimony, LabCorp submitted its standard account creation checklist and a record of the in-service Dr. McMahon received in November 2015. Id. at 19-21. On the in-service checklist from November 2015, the following items are checked off under "Review Billing...