Reg'l Med. Ctr. of San Jose v. WH Adm'rs, Inc.

ORDER GRANTING BAS'S AND PHIA GROUP'S MOTIONS TO DISMISS; GRANTING IN PART RHC'S MOTION TO DISMISS

RE: DKT. NOS. 118, 119, 121

EDWARD J. DAVILA, UNITED STATES DISTRICT JUDGE

Plaintiff Regional Medical Center of San Jose (“Plaintiff”) sues RHC Management Co., LLC (“RHC Management”) and RHC Management Health & Welfare Trust (the “Plan”) (together, “RHC”), WH Administrators, Inc., the Phia Group, LLC (“Phia Group”), and Benefit Administrative Systems (“BAS”) (collectively, “Defendants”), asserting causes of action arising from Defendants' alleged failure to pay for all of the medical care Plaintiff provided to a beneficiary of the Plan. See Complaint (“Compl.”), Dkt. No. 1. In essence, Plaintiff contends that the Plan had a $6, 350 annual maximum out-of-pocket (“MOOP”) provision, and therefore Defendants were required to pay all of the beneficiary's medical expenses above this amount. Defendants contend that pursuant to the Plan, they are required to pay no more than 120% of Medicare rates, which they contend have already been paid. Before the Court are three separate motions to dismiss brought by RHC, BAS, and Phia Group. Dkt. Nos. 118, 119, 121. Having considered the submissions of the parties, the relevant law, and the record in this case, the Court GRANTS BAS's and Phia Group's motions and GRANTS in part RHC's motion to dismiss.

I. BACKGROUND

A. Factual Background

Plaintiff is an acute care hospital located in Santa Clara County, California. Compl. ¶ 6.

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The Plan is a self-funded ERISA health benefits plan. Id. ¶ 7. Plaintiff alleges that WH Administrators is the Plan's designated Plan Administrator, and RHC Management, which owns and operates McDonald's franchise restaurants, is the Plan's sponsor and a “de facto Plan Administrator.” Id. ¶ 11.^[1] Plaintiff alleges that BAS is the claims administrator for the Plan and “acted in some respects in the capacity of a de facto Plan Administrator.” Id. ¶ 9. Lastly, Plaintiff alleges that Phia Group “has been working behind the scenes to encourage Defendants to improperly interpret the terms of the Plan, ” while the “complete facts regarding the relationship between the Defendants remain unclear at this time.” Id. ¶ 10.

In February 2015, Plaintiff admitted a very ill woman (the “Patient”) after she had an accident for what became nearly a one-month hospital stay. Id. ¶ 1. At that time, the Patient was a beneficiary of the Plan. Id. In early March 2015, when the Patient was still being treated, Plaintiff called to verify the Patient's benefits under the Plan. Id. ¶ 57. Plaintiff alleges that “a Plan representative named ‘Genevieve'” confirmed that (1) the Patient's coverage with the Plan was active, and that the Patient was eligible from January 1, 2015, “through the present”; (2) the Plan “would cover 80% of Patient's inpatient hospital stay”; and (3) “there was a $3, 000 deductible that had not been met, and a [Maximum Out-of-Pocket] of $6, 350 that had not yet been met.” Id. ¶ 57. Plaintiff also alleges that the Plan provided a specific authorization number for the Patient's inpatient care, which Plaintiff recorded as “508668.” Id.

Relying on these representations, Plaintiff provided inpatient care to the Patient. Plaintiff's bill for the Patient's care totaled $892, 269.79. Id. ¶ 1. However, the “Plan and/or its representatives” paid just $73, 043.32, which is 8% of the total bill. Id. Plaintiff asserts that the Plan arrived at this figure by relying on “the unsupported assumption that they never have to pay more than 120% of the rates that the federal government pays under the Medicare program.” Id. ¶ 26. Thus, instead of paying percentages of Plaintiff's actual charges, the Plan paid only percentages of 120% of the Medicare rates for those services. See id. ¶ 32. For example, instead

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of paying 100% of Plaintiff's charges for services rendered after the Plan's MOOP threshold was met, the Plan paid 100% of 120% of the Medicare rates for those services. Id. Plaintiff alleges that 120% of Medicare rates is “just a fraction of the standard charges by [Plaintiff] and all other hospitals in this geographic area (as well as many others).” Id. ¶ 26. Because Plaintiff's charges were above 120% of Medicare rates, the Plan's refusal to pay any more than 100% of 120% of Medicare rates for services provided “left the Patient on the hook for the bill's remainder, which is far more exposure” than the stated MOOP limit. Id. ¶ 17.

Plaintiff alleges that the “Plan Document and Summary Plan Description for RHC Management Health and Welfare Trust, PPACA Bronze Plan” (“SPD”) did not disclose the fact that the Plan would pay at most only 120% of Medicare rates for covered services or that the Plan had a “purported limitation buried in the undisclosed documents based on an amorphous Medicare-based limitation that supplanted for hospital services the broader definition in the Plan of the term ‘Reasonable and Customary.'” Id. ¶ 59.^[2] Plaintiff also alleges that at no time during the authorization and verification phone call with the Plan's representative did the representative disclose that “the Plan would not pay more than 120% of Medicare [rates] for hospital services.” Id. Plaintiff “pursued all internal appeals available under the Plan and exhausted all appeal remedies, ” but the Plan has allegedly “refused to pay a cent more” than the $73, 043.32 it has already paid. Id. ¶¶ 2, 68. Plaintiff contends that “Defendants caused this substantial underpayment” through a calculated scheme that “circumvent[s]” both the [MOOP] limitation in the Plan, “[t]he MOOP limit that the federal Affordable Care Act (“ACA”) imposed upon the Plan

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in 2015, ” and the “substitution of the Reasonable and Customary level of payment called for under the Plan with payment at 120% of Medicare [rates].” Id. ¶¶ 3, 74.

B. Procedural History

On June 6, 2017, Plaintiff filed suit seeking, inter alia, to enforce rights under the Employment Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (“ERISA”). Id. ¶ 4. The complaint alleges four causes of action: (1) a claim for benefits under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), id. ¶¶ 65-79; (2) a claim for enforcement of ACA § 2707(b) “via ERISA § 502(a)(1)(B), ” id. ¶¶ 80-86; (3) intentional misrepresentation, id. ¶¶ 87-93; (4) negligent misrepresentation, id. ¶¶ 94-100; and (5) intentional interference with contractual relations, id. ¶¶ 101-109.

Thereafter, Defendants filed separate motions to dismiss. In December of 2017, the Court dismissed the suit on the grounds that the Plaintiff lacked standing to bring suit. See Dkt. No. 69. Plaintiff appealed and the Ninth Circuit reversed, holding that Plaintiff's right to receive Plan benefits gave it the limited right to sue for additional benefits. See Dkt. No. 94. However, the Ninth Circuit interpreted the SPD's “anti-assignment” provision as forbidding assignment of the right to sue for anything other than benefits payable under the terms of the Plan. Id. at 3.

After the case was remanded, Defendants filed their respective motions seeking dismissal of Plaintiff's complaint. See Dkt. Nos. 118 (“Phia Mot.”), 119 (“BAS Mot.”), 121 (“RHC Mot.”). Plaintiff filed oppositions, see Dkt. Nos. 125 (“Opp'n to Phia Mot.”), 126 (“Opp'n to BAS Mot.”), 127 (“Opp'n to RHC”), and Defendants filed replies (see Dkt. Nos. 128 (“BAS Reply”), 129 (“Phia Reply”), 130 (“RHC Reply”)).

II. LEGAL STANDARD

A. Motion to Dismiss under Rule 12(b)(6)

Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief[.]” A defendant may move to dismiss a complaint for failing to state a claim upon which relief can be granted under Federal

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Rule of Civil Procedure 12(b)(6). “Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory.” Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). To survive a Rule 12(b)(6) motion, a plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when a 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).

In reviewing the plausibility of a complaint, courts “accept factual allegations in the complaint as true and construe the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). Nonetheless, courts do not “accept as true allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008). And even where facts are accepted as true, “a plaintiff may plead herself out of court” if she “plead[s] facts which establish that [s]he cannot prevail on [her] . . . claim.” Weisbuch v. Cty. of Los Angeles, 119 F.3d 778, 783 n.1 (9th Cir. 1997) (quotation marks and citation omitted).

B. Leave to Amend

If the Court determines that a complaint should be dismissed, it must then decide whether to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend “shall be freely given when justice so requires, ” bearing in mind “the underlying purpose of Rule 15 to facilitate decisions on the merits, rather than on the pleadings or technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (alterations and...