Rightchoice Managed Care, Inc. v. Hosp. Partners, Inc.

RIGHTCHOICE MANAGED CARE, INC., et al., Plaintiffs, v. HOSPITAL PARTNERS, INC., et al., Defendants.

No. 5:18-cv-06037-DGK

UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MISSOURI ST. JOSEPH DIVISION

January 23, 2019

ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS

This action arises out of an alleged pass-through billing scheme for laboratory tests at a rural Missouri hospital. Plaintiffs RightCHOICE Managed Care, Inc. ("RightCHOICE"), and Blue Cross Blue Shield insurance plans ("BCBS Plans") claim that Defendants contrived to bill them for lab tests through the Missouri hospital even though the tests were performed at outside labs throughout the country. Now before the Court is Defendants Hospital Partners, Inc., Empower H.I.S., LLC, David Byrns, and Jorge Perez's motion to dismiss or, in the alternative, for a more definite statement (Doc. 77). Also before the Court is Defendant James Porter, Jr.'s motion to dismiss (Doc. 124). The Court DENIES both motions.

Background

Putnam County Memorial Hospital (the "Hospital") is a struggling fifteen-bed hospital in Unionville, Missouri. In 2008, the Hospital entered into a participating-provider agreement with RightCHOICE. Health-insurance companies frequently reimburse rural hospitals at higher rates than is typical to account for their precarious financial footing. RightCHOICE's "in-network" contract is no exception. It binds the Hospital to provide medical services to BCBS Plan members in exchange for reimbursement from RightCHOICE at favorable agreed-upon rates. The contract states that the Hospital "shall bill only for Hospital Services performed by, or under the direction and personal supervision of, [the Hospital]." Doc. 60 § 4.1(b). The contract also appears to limit reimbursable services to those deemed medically necessary. Id. §§ 1.13, 1.18, 4.4(a).

The BCBS Plans are independently owned BCBS licensees or subsidiaries of licensees that provide health insurance in limited service areas. The BCBS Plans also provide insurance and administrative support for employer-sponsored health plans governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461. The BCBS "BlueCard" program allows members of one BCBS Plan to obtain medical treatment in another Plan's service area. Thus, if an outside BCBS Plan member obtains treatment at the Hospital, RightCHOICE would reimburse the Hospital at the Hospital's negotiated rates. RightCHOICE would then reconcile such reimbursements with the treated member's applicable home plan.

Notwithstanding this arrangement, the Hospital faced growing financial troubles and began searching for new leadership. In September 2016, the Hospital contracted with Hospital Partners, helmed by David Byrns and Jorge Perez, to take over the Hospital. Byrns became the Hospital's president and chief executive officer. Upon assuming control, Hospital Partners engaged Empower H.I.S., also managed by Perez, to handle the Hospital's claim billing and recordkeeping. Hospital Partners additionally engaged Defendant Hospital Lab Partners, LLC, managed by Perez and James Porter, Jr., to engage and coordinate with Defendant laboratories in Florida, Georgia, Texas, and Colorado. One such laboratory was Defendant RAJ Enterprises of Central Florida, LLC, doing business as Pinnacle Laboratory Services, which Porter managed.¹

Plaintiffs describe Defendants' billing arrangement as follows. First, out-of-state laboratories generated test orders from out-of-state healthcare providers. The vast majority ofthese orders were for urine drug tests. The rest were for blood tests and general health panels. The providers mailed their patients' specimens to the labs, where they were analyzed. The labs sent the results back to the providers and the patients' insurance information to the Defendants in control of the Hospital. Empower H.I.S. then billed RightCHOICE for the tests as if they had been performed at the Hospital, despite the patients never having been there. This enabled Defendants to avail themselves of the Hospital's high reimbursement rates; had the labs billed RightCHOICE directly, they would have received much less.²

Plaintiffs state that the number of urine drug test claims the Hospital billed to RightCHOICE jumped 43,000% in the first six months of 2017 over the same period the prior year. Plaintiffs add that many of these tests were not medically necessary, and were ordered purely to maximize Defendants' revenue. RightCHOICE broached these issues with Byrns, who reportedly responded that the Hospital occasionally experienced operational failures requiring it to work with outside associates to provide patients with physician-ordered medical services. Plaintiffs claim this statement was false. Plaintiffs also claim that Byrns refused to expound upon Hospital Lab Partners' relationship with the Hospital, telling them only that the company assisted the Hospital with its own lab services.

Plaintiffs allege that Defendants' scheme defrauded them of over $73 million. Plaintiffs further allege that Defendants each received a portion of the proceeds. Plaintiffs' third amended complaint (Doc. 57) brings nine counts: Fraud and Fraudulent Concealment (Count I), Negligent Misrepresentation (Count II), Restitution under ERISA Section 502(a)(3) (Count III), Declaratoryand Injunctive Relief under ERISA Section 502(a)(3) and 28 U.S.C. §§ 2201 and 2202 (Count IV), Tortious Interference with Contract (Count V), Civil Conspiracy (Count VI), Aiding and Abetting a Tort (Count VII), Unjust Enrichment (Count VIII), and Money Had and Received (Count IX).

Discussion

Hospital Partners, Empower H.I.S., Byrns, and Perez advance a number of arguments in their motion to dismiss Plaintiffs' third amended complaint. They claim that the Court lacks subject-matter and personal jurisdiction; that venue does not lie in this district; that the complaint fails to join indispensable parties; and that the complaint impermissibly lumps Defendants together and fails to plead fraud, fraudulent concealment, and negligent misrepresentation with sufficient particularity. They also contend that Plaintiffs fail to state claims of unjust enrichment and money had and received and fail to address conditions precedent. They finally maintain that the economic loss doctrine bars Plaintiffs' tort claims. Porter's motion includes many of the same arguments, but adds that ERISA preempts Plaintiffs' state-law claims; that Plaintiffs' seek impermissible relief under ERISA; that Plaintiffs fail to state claims of tortious interference with contract, civil conspiracy, and aiding and abetting a tort; and that Plaintiffs fail to pierce the corporate veil.

I. The Court has subject-matter jurisdiction over Defendants.

A district court must have both subject-matter and personal jurisdiction to hear a case. Crawford v. F. Hoffman-La Roche, Ltd., 267 F.3d 760, 764 (8th Cir. 2001); Fed. R. Civ. P. 12(b)(1)-(b)(2). Plaintiffs plead subject-matter jurisdiction under 28 U.S.C. § 1331, which grants district courts the power to hear cases presenting a federal question. To properly allege federal-question jurisdiction, a party must plead a "colorable claim arising under the Federal Constitution or laws." Arbaugh v. Y&H Corp., 546 U.S. 500, 501 (2006) (internal quotations and citation omitted).

Plaintiffs assert claims under section 502(a)(3) of ERISA, 29 U.S.C. § 1132(a)(3), a remedial provision authorizing fiduciaries³ of ERISA-governed health-insurance plans to sue to "enjoin any act or practice" that violates the plans' terms. Section 502(a)(3) also permits fiduciaries to obtain equitable relief redressing any such violations. Id.; Great-West Life & Ann. Ins. Co. v. Knudson, 534 U.S. 204, 213-14 (2002) (discussing the remedies available under section 502(a)(3)). Plaintiffs invoke section 502(a)(3) in seeking equitable restitution of reimbursement overpayments, a constructive trust on these payments, a declaration as to the lawfulness of Defendants' actions, and an injunction halting the same.

Defendants contend that the ERISA claims are not colorable because Defendants have no contractual relationship with Plaintiffs or their plans. They argue the Court lacks subject-matter jurisdiction as a result. This argument fails. ERISA does not require privity to maintain an action under section 502(a)(3). Indeed, section 502(a)(3) "admits of no limit . . . on the universe of possible defendants." Harris Tr. & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 239 (2000); see also Lyons v. Philip Morris Inc., 225 F.3d 909, 913 (8th Cir. 2000) (concluding that suing third parties under section 502(a)(3) "does not eliminate § 502(a)(3) jurisdiction over . . . claims to recover health care benefits paid by the plans"). "[T]he focus, instead, is on redressing the 'act or practice which violates any provision of [ERISA Title I or an ERISA plan].'" Harris Tr., 530 U.S. at 239 (quoting 29 U.S.C. § 1132(a)(3)). For purposes of establishing subject-matter jurisdiction, then, it is sufficient that Plaintiffs seek appropriate relief under ERISA.

II. The Court has personal jurisdiction over Defendants.

The Court likewise has personal jurisdiction over Defendants. Section 502(e)(2) of ERISA, 29 U.S.C. § 1132(e)(2), provides that "process may be served in any . . . district where a defendant resides or may be found." Courts of appeals widely interpret this provision as conferring personal jurisdiction over distant defendants. See, e.g., Denny's, Inc. v. Cake, 364 F.3d 521, 525 (4th Cir. 2004); Bellaire Gen. Hosp. v. BCBS, 97 F.3d 822, 826 (5th Cir. 1996); Med. Mut. of Ohio v. DeSoto, 245 F.3d 561, 567 (6th Cir. 2001); Bd. of Trustees v. Elite Erectors, Inc., 212 F.3d 1031, 1035-36 (7th Cir. 2000); see also Rep. of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 948 (11th Cir. 1997) ("Where . . . Congress has provided for nationwide service of process, courts should presume that nationwide personal...