S. Broward Hosp. Dist. v. Elap Servs.

SOUTH BROWARD HOSPITAL DISTRICT, d/b/a/ Memorial Healthcare System,on its own behalf and on behalf of other similarly situated healthcare facilities, Plaintiff, v. ELAP SERVICES, LLC and GROUP & PENSION ADMINISTRATORS, INC., Defendants.

Case No.: 20-cv-61007-SINGHAL

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

December 3, 2020

ORDER

THIS CAUSE is before the Court on Defendants' Joint Motion to Dismiss Plaintiff's Amended Complaint, or Alternatively, to Dismiss or Strike the Class Allegations ("Motion") (DE [29]). Plaintiff South Broward Hospital District ("The District") brings this putative class action to recover additional payments for hospital services it provided to patients covered by certain ERISA¹ plans ("ERISA Plans"). The District brings claims under Florida's Deceptive and Unfair Trade Practices Act ("FDUTPA"), see Fla. Stat. §§ 501.201-.203, and for unjust enrichment, against Defendant ELAP Services, LLC ("ELAP"), a co-fiduciary and designated decisionmaker of the ERISA Plans, and Defendant Group & Pension Administrators, Inc. ("GPA"), the ERISA Plans' third-party administrator (collectively, "Defendants"). The District alleges that Defendants deceivedit into treating patients by deliberately withholding information about each patient's health plan. It seeks to recover a yet-to-be determined millions of dollars that it contends Defendants have "stolen" from healthcare facilities and providers, and to enjoin Defendants from continuing their unfair and deceptive practices.

The Court has reviewed the Motion, Plaintiff's Response in Opposition ("Response") (DE [31]), Defendants' Reply in Support ("Reply") (DE [32]), a notice of supplemental authority filed by the District (DE [33]) and Defendants' response (DE [36]), as well as the relevant case law. Because the District has alleged sufficient allegations at this point of the proceeding, and for the following reasons explored below, the Motion is DENIED.

I. BACKGROUND

A. The Parties and Reference-Based Pricing

The District is an independent special tax district, operating as a large, public healthcare system in Broward County, Florida. Am. Compl. ¶ 22 (DE [24]). It consists of several healthcare providers and facilities, including hospitals, physicians, and outpatient clinics. Id. ELAP holds itself out as providing claim auditing, repricing, and legal services to self-funded ERISA plans. Id. ¶ 29. In short, ELAP touts itself as a corporation that offers businesses assistance in saving money on healthcare by, what it represents as, "fighting excessive hospital bills." Id. ¶¶ 58-60. ELAP becomes the administrator of the self-funded ERISA plans, which gives it authority to make decisions on how each employee's healthcare claim will be paid. Id. ¶ 1. ELAP, in turn, contracts with GPA to provide third-party administrator services for ELAP-designed self-funded plans. Id. ¶ 31.

Together, ELAP and GPA market themselves as "leaders and co-founders of metric-based pricing," more commonly known as "Reference-Based Pricing." Id. ¶ 32. According to the District, this Reference-Based Pricing is an "arbitrary, uniform, and unilateral" reimbursement model that Defendants use systematically to underpay healthcare providers in Florida and around the country. Id. ¶¶ 33-34. This Reference-Based Pricing model serves as part of the allegations against Defendants in this case.

B. A (Quick) Primer on ERISA Self-Funded Plans

Before diving deep into the specifics of the allegations of deceptive and unfair practices by Defendants, however, it is prudent to establish some basics regarding ERISA and the District's remuneration model. ERISA's purpose is to "establish a uniform administrative scheme [with] standard procedures to guide processing of claims and disbursement of benefits." Kennedy v. Plan Adm'r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 300 (2009) (internal quotations omitted). ERISA affords certain employers the opportunity to "self-fund" their employees' health insurance. Am.'s Health Ins. Plans v. Hudgens, 742 F.3d 1319, 1324 (11th Cir. 2014). A self-funded ERISA plan is a healthcare plan where an employer assumes the financial risk of providing healthcare benefits to its employees. Id. ("[I]n this model, it [is] . . . the employer . . . that endures the financial risk associated with being responsible for paying health care charges incurred by its employees."). Because employers typically lack the knowledge and resources to determine how to process and pay their employees' health-insurance claims, they often outsource claims-handling functions to third-party administrators. Am. Compl. ¶ 30. Self-funded ERISA plans are each governed by the "Plan Document,"² id. ¶ 57; see also Ex. 8 to 2d Decl. of J.W. Dewbre (DE [30-8]), which establish the terms for administering the plan, including reimbursement limits. See Am. Compl. ¶ 57.

To secure particular reimbursement rates, the District enters into participation agreements with preferred provider organizations ("PPOs") that are comprised of insurance companies, third-party administrators, and so-called "rental networks." See Am. Compl. ¶¶ 44-45, 95. Pursuant to "PPO Participation Agreements," the District agrees to provide services to members of health plans that have contracted with the PPO at pre-negotiated reimbursement rates. See id. ¶¶ 44-45, 95. For such plans, the District's facilities are considered "in-network," and the District accepts payment at these pre-negotiated, bargained-for rates. Id. ¶ 78.

However, here, from the face of the Amended Complaint (though not entirely clear from any of the pleadings), it appears the ERISA Plans at issue in this action do not have such contracts with the District for pre-negotiated reimbursement rates. E.g., id. ¶ 140. Accordingly, rather than being "in-network," the ERISA Plans are considered "out-of-network." See id. And for out-of-network plans—those with no express contract governing reimbursement rates—the District is entitled to the reasonable value of its services. Id. Under the terms of the Plan Documents, the allowable claim limit is the amount that the plans will reimburse an out-of-network provider for covered services, less any amounts owed by the member. Id. ¶ 34.

C. The Alleged Scheme

The District accuses Defendants of the following "comprehensive scheme": ELAP directs its plan members to contract with GPA. Am. Compl. ¶¶ 8, 31. GPA, in turn, contracts with another established healthcare company, MultiPlan. Id. ¶ 9. MultiPlan appears to be referred to also as Private Health Care Systems, Inc., or "PHCS." Id. ¶¶ 96-97.

The District and many other healthcare providers are familiar with MultiPlan, as it operates a well-known health insurance network with contracts and pre-negotiated rates with many of them. Id. In ELAP's case, GPA's contracts with MultiPlan are only for physician services, not facility services. Id. ¶ 99.

ELAP's insurance cards omit any reference to its identity or application of Reference-Based Pricing. Id. ¶ 9. Rather, the insurance cards bear the logos only for both GPA and MultiPlan. Id. No reference to, indication of, or representation that: ELAP is the administrator of the plan; the plan would be subject to Reference-Based Pricing; or that the pre-negotiated agreement to pay is only for physician services, not facility services. Id. The following depicts a typical ELAP insurance card provided to the insured:

Image materials not available for display.

Id. ¶ 96 (markup in original).

The District contends that this scheme dupes healthcare providers into providing treatment to ELAP plan members under the belief that they will be reimbursed at their otherwise contracted-for rates with MultiPlan. Id. ¶ 10. In fact, however, Defendants provide a fraction of those otherwise contracted-for rates because, again, they remit payment only for physician services, not facility services. Id. ¶ 99. ELAP does all of this knowing that providers like the District also have contracts with MultiPlan—except that those contracts do not permit MultiPlan to carve out physician-only plans. Id. ¶¶ 94, 102-03. Further, ELAP pays the provider based on the application of its Reference-Based Pricing. Id. ¶¶ 104-05.

According to the District, it is impossible for providers to realize the scheme until the healthcare services have already been provided and billed, and only after ELAP has "unilaterally and arbitrarily" decided that the provider will be paid at a fraction of the reasonable value of the provider's services. Id. ¶¶ 117-23. When a provider tries to combat ELAP's deceit by appealing the arbitrary payment, ELAP announces its involvement and replies with a generic template response that does not address the provider's specific arguments in its appeal. Id. ¶¶ 123-24. If a provider ends up seeking reimbursement from the patient, ELAP attorneys, purporting to act on behalf of ELAP planmembers, send intimidating and threatening letters designed to deter the facility from obtaining full payment for its services. Id. ¶ 130.

D. The Putative Class and Procedural Posture

The District brings two counts against Defendants: (1) violation of FDUTPA; and (2) unjust enrichment. According to the Amended Complaint, the District seeks to certify and maintain this action as a class action with the following classes and subclasses:

The Nationwide Emergent Class:

All healthcare facility providers in the United States with underpaid emergent claims for healthcare services provided to ELAP plan members.

The Nationwide Nonemergent Class:

All healthcare facility providers in the United States with underpaid non-emergent claims for healthcare services provided to ELAP plan members.

The Florida Emergent Subclass:

All healthcare facility providers in Florida with underpaid emergent claims for healthcare services provided to ELAP plan members.

The Florida Nonemergent Subclass:

All healthcare facility providers in Florida with underpaid nonemergent claims for healthcare services provided to

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