S. Coast Specialty Surgery Ctr. v. Blue Cross of Cal.

90 F.4th 953

SOUTH COAST SPECIALTY SURGERY CENTER, INC., Plaintiff-Appellant, v. BLUE CROSS OF CALIFORNIA, dba Anthem Blue Cross, Defendant-Appellee.

No. 22-55717

United States Court of Appeals, Ninth Circuit

Argued and Submitted October 3, 2023 Pasadena, California

Filed January 10, 2024

Appeal from the United States District Court for the Central District of California, Terry J. Hatter, Jr., District Judge, Presiding, D.C. No. 8:21-cv-01944-TJH-KES

Mina Hakakian (argued), Williams Wollitz Hakakian PC, Los Angeles, California; Steven M. Goldberg, David S. Markun, and Kevan T. Hunt, Markun Zusman & Compton LLP, Encino, California; for Plaintiff-Appellant.

David J. de Jesus (argued), Reed Smith LLP, San Francisco, California; Amir Shlesinger and Avraham E. Aizenman, Reed Smith LLP, Los Angeles, California; for Defendant-Appellee.

Before: Susan P. Graber, Salvador Mendoza, Jr., and Roopali H. Desai, Circuit Judges.

OPINION

MENDOZA, Circuit Judge:

OPINION

Plaintiff-appellant South Coast Specialty Surgery Center, Inc. ("South Coast") filed suit against defendant-appellee Blue Cross of California, d/b/a Anthem Blue Cross ("Anthem") under section 502(a) of the Employee Retirement Income Security Act of 1974 ("ERISA") for Anthem's alleged failure to fully reimburse the costs of medical services provided to South Coast's patients. Unlike its patients, South Coast cannot bring a direct enforcement action under ERISA; it is neither a plan participant nor a beneficiary within the meaning of that statute's civil enforcement provision. But South Coast argues that it may enforce ERISA's protections derivatively because its patients validly assigned it the right to sue for the non-payment of plan benefits via an "Assignment of Benefits" form. The district court disagreed, concluding that South Coast lacked authority to bring an ERISA claim and dismissing the healthcare provider's suit. South Coast's appeal thus raises two questions. First, does a healthcare provider have derivative authority to enforce ERISA's protections if it has received a valid assignment of rights? And second, did South Coast's patients effectuate such an assignment, permitting the medical provider to sue Anthem under ERISA? Longstanding precedent answers "yes" to the first question. And after construing South Coast's "Assignment of Benefits" form, we answer "yes" to the second. So we conclude that South Coast has authority to enforce ERISA's protections in federal court, reverse, and remand.

I. Procedural and Factual Background

South Coast operates an ambulatory surgery center, where it provides medical services to patients, some of whom are insured under ERISA-governed health benefits plans. As a condition of treatment, South Coast requires its patients to sign an "Assignment of Benefits" form. That form states:

Assignment of Benefits

I hereby authorize my Insurance Company to pay by check made payable and mailed directly to: [South Coast] for the medical and surgical benefits allowable, and otherwise payable to me under my current insurance policy, as payment toward the total charges for the services rendered. I understand that as a courtesy to me, the South Coast Specialty Surgery Center will file a claim with my insurance company on my behalf. However, I am financially responsible for, and hereby do agree to pay, in a current manner, any charges not covered by the insurance payment. If it is necessary to file a formal collection action, I agree to pay all costs, including reasonable attorney's fees incurred by the outpatient medical center in the collection of the outstanding fees.

Actual Plan Benefits cannot be determined until the claim is received by your insurance company and is based upon their determination of medical necessity. The information received from the above stated is not a guarantee of payment.¹

Per the terms of that assignment, South Coast submits claims to its patients' insurance companies and claim administrators, seeking payment of insurance benefits to cover the costs of its medical services.

According to South Coast, Blue Cross of California, d/b/a Anthem Blue Cross² is just such an insurer and claims administrator. Anthem, through a wide network of entities and affiliates, serves approximately 41 million medical member-insureds through its affiliated health plans. Relevant here, Anthem provides coverage under ERISA-governed insurance plans to many South Coast patients. Through its Blue Card Program, Anthem also administers plans and oversees and adjusts claims for South Coast's patients under ERISA-governed health plans. Since 2012, South Coast has submitted hundreds of claims on behalf of its patients to Anthem.

Until relatively recently, Anthem processed and paid those claims without dispute. But in 2019, Anthem formally instituted a "pre-payment review" process, which significantly curtailed its coverage for the costs of South Coast's procedures. According to South Coast, Anthem (1) ignored ERISA-governed insurance plan documents and benefits coverage requirements, implementing its own "Local Plan Pricing" to determine appropriate medical costs; (2) began requiring "full medical records" to evaluate the "appropriateness," "accuracy," and "correctness" of submitted claims; and (3) started rejecting South Coast's submitted claims without proper reference to the terms and conditions of the controlling ERISA plan. In sum, South Coast maintains that Anthem failed to follow ERISA plan requirements and failed to provide appropriate benefits for approximately 150 medical claims, resulting in a potential shortfall exceeding $5.4 million.

So South Coast sued Anthem under section 502(a) of ERISA, 29 U.S.C. § 1132(a)(1)(B), alleging that Anthem "failed to follow [p]lan terms and conditions with respect to the processing and payment of [submitted] claims." Recognizing that healthcare providers generally lack direct authority to sue under ERISA, South Coast asserts that its "Assignment of Benefits" form, signed by its patients, gives South Coast both the right to seek payment of these benefits and to sue for non-payment. The district court disagreed. Granting with prejudice Anthem's motion to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), the district court reasoned that (1) South Coast's "Assignment of Benefits" form conveyed only "the right to receive direct payment from Anthem," and not the right to sue for non-payment of plan benefits; and (2) under our precedent, South Coast lacked authority to sue under ERISA. This timely appeal followed.

II. Standard of Review

Some ERISA cases raise Article III standing issues, and we examine whether the plaintiff has suffered a cognizable injury, redressable by a court. See, e.g., Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282, 1289 (9th Cir. 2014) (addressing whether plaintiff suffered " 'injury in fact' necessary for Article III standing" to assert ERISA claims). When a plaintiff has Article III standing, a defendant may challenge the authority of the plaintiff to sue under ERISA, and we examine "whether Congress has granted a private right of action to a particular plaintiff[.]" DB Healthcare, LLC v. Blue Cross Blue Shield of Ariz., Inc., 852 F.3d 868, 873 (9th Cir. 2017). Notably, we formerly characterized whether a plaintiff may sue under ERISA as a "standing" inquiry. See, e.g., Harris v. Amgen, Inc., 573 F.3d 728, 732 (9th Cir. 2009) (examining whether a plaintiff had "standing under ERISA"); Davidowitz v. Delta Dental Plan of Cal., Inc., 946 F.2d 1476, 1477 (9th Cir. 1991) ("Under ERISA, a beneficiary has standing to bring a civil action for non-payment."). But that label is a "misnomer" when considering whether Congress has authorized a plaintiff to bring suit. Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 125-27, 134 S.Ct. 1377, 188 L.Ed.2d 392 (2014) (quoting Ass'n of Battery Recyclers, Inc. v. EPA, 716 F.3d 667, 675-76 (D.C. Cir. 2013) (Silberman, J., concurring)). "For clarity on this point, we avoid in this opinion references to [South Coast's] 'standing.' " DB Healthcare, 852 F.3d at 873.

The district court here ruled that South Coast lacked authority under ERISA to file suit seeking to recover payments due for services rendered. We see no Article III concerns in South Coast's suit, and none are raised by the parties, so we cabin our analysis to South Coast's authority to sue under ERISA. Whether the district court dismissed South Coast's complaint under Rule 12(b)(1) or Rule 12(b)(6), we have jurisdiction under 28 U.S.C. § 1291, and we review the district court's dismissal order de novo. Vaughn v. Bay Env't Mgmt., Inc., 567 F.3d 1021, 1024 (9th Cir. 2009).

III. Discussion

A.

The Employee Retirement Income Security Act of 1974 sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for plan members. See Aetna Health Inc. v. Davila, 542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (citing 29 U.S.C. § 1001(b)). Significantly, ERISA gives plan participants the right to sue insurers and claim administrators for plan benefits and breaches of fiduciary duty. 29 U.S.C. § 1132(a)(1), (3); see also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). By enacting ERISA, Congress "intended that a body of [f]ederal substantive law will be developed by the courts to deal with issues involving rights and obligations under private welfare and pension plans." Amato v. Bernard, 618 F.2d 559, 567 (9th Cir. 1980) (quoting 120 Cong. Rec. 29942 (1974) (remarks of Senator Javits)). ERISA thus effectuates "a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans." Pilot Life, 481 U.S. at 54, 107 S.Ct. 1549. And it establishes a federal cause of action to remedy failures to follow plan terms and conditions and to...