Saginaw Chippewa Indian Tribe of Mich. v. Blue Cross Blue Shield of Mich.

683 F.Supp.3d 645

SAGINAW CHIPPEWA INDIAN TRIBE OF MICHIGAN and Welfare Benefit Plan, Plaintiffs, v. BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendant.

Case No. 1:16-cv-10317

United States District Court, E.D. Michigan, Northern Division

Signed July 19, 2023

Aaron M. Phelps, Bryan R. Walters, Perrin Rynders, Varnum, Riddering, Grand Rapids, MI, Herman D. Hofman, Varnum Attorneys at Law, Grand Rapids, MI, Jeffrey D. Koelzer, John Joseph Rolecki, Kyle Patrick Konwinski, Varnum LLP, Grand Rapids, MI, for Plaintiffs.

Aimee R. Gibbs, Dickinson Wright PLLC, Ann Arbor, MI, Brandon C. Hubbard, Nolan John Moody, Samantha A. Pattwell, Scott R. Knapp, Dickinson Wright PLLC, Lansing, MI, Carmen Dorris, Kathleen A. Lang, Phillip J. DeRosier, Salina M. Hamilton, Dickinson Wright PLLC, Detroit, MI, Farayha J. Arrine, Dickinson Wright PLLC, Troy, MI, Randall L. Tatem, Horizon Global Corporation, Troy, MI, Rebecca D. O'Reilly, Auburn Hills, MI, for Defendant.

OPINION AND ORDER OVERRULING DEFENDANT'S OBJECTIONS TO SANCTIONS ORDER, OVERRULING DEFENDANT'S OBJECTION TO BILL OF COSTS, DENYING WITHOUT PREJUDICE PLAINTIFFS' MOTION FOR DEFAULT JUDGMENT, AND DIRECTING COMPLETION OF DISCOVERY

THOMAS L. LUDINGTON, United States District Judge

For nearly a year, the parties have sought to learn what the difference was between the healthcare prices that Blue Cross negotiated and the prices that are charged to Medicare patients. The process has not gone smoothly. The source of the problem is at least significantly attributable to the lack of a meeting of the minds between counsel when they cowrote a single-page stipulation governing their respective discovery obligations in identifying nearly 100,000 insurance claims.

The parties' initial point of contention? Whether Blue Cross was obliged to produce insurance-claims forms for the covered healthcare received by members and employees of the Saginaw Chippewa Indian Tribe. The Tribe alleged that Blue Cross willfully violated court orders by producing physical forms but not the electronic versions, leading to sanctions issued by Judge Morris. Blue Cross countered that the sanctions and the associated costs were issued in error because the electronic version has a different name than the physical version that it was directed to produce. Their objections, however, find little traction; the distinction between physical and electronic format is of little significance. As a result of additional motion practice, Judge Morris also resolved that the Tribe was to furnish Blue Cross with the birthdates of beneficiaries and to identify the beneficiaries' dependents.

Yet, the story doesn't end there. The Tribe's motion for default judgment, stemming from the very same stipulation, will be denied.

I.

A.

The two health-insurance plans at issue in this case are governed by two contracts between the Saginaw Chippewa Indian Tribe of Michigan (SCIT) and Blue Cross Blue Shield of Michigan. SCIT has a plan for its members ("Member Plan") and a policy for its employees¹ ("Employee Plan"). See SCIT v. BCBSM, 32 F.4th 548, 554 (6th Cir. 2022). These plans operate within the complex tapestry of federal-healthcare law.

American Indians² access federally funded healthcare through the Indian Health Service (IHS), a wing of the United States Department of Health and Human Services. The IHS funds and operates healthcare facilities for tribes. 42 C.F.R. § 136.23. The IHS separately funds programs for Contract Health Services³ (CHS), administered by SCIT. Id. § 136.21; 25 U.S.C. § 1603(5), (12). The CHS programs are the focus of this case.

The CHS programs are essentially safety nets, providing access to health services that are not available at the IHS facilities. 42 C.F.R. § 136.23(a). Such services come from "public or private medical or hospital facilities other than those of the IHS." Id. § 136.21. Before receiving CHS care in nonemergency situations, the regulations require a preapproval process: the person's medical provider or representative must inform an ordering official that the services are necessary, providing relevant information to determine the medical necessity and the person's eligibility. Id. § 136.24(b). If approved, then the CHS program issues a referral or purchase order, which authorizes the eligible person to receive the requested medical services from a third-party provider. Id. § 136.24(a).

Each tribe plays the crucial role of administering, funding, and providing healthcare to its members. Congress, with concern for the tribes' sovereignty, enacted the Indian Self-Determination and Education Assistance Act of 1975, 25 U.S.C. § 5301 et seq. Under this law, tribes may opt to receive money from the federal government for managing their own IHS facilities, contracting private insurers for healthcare, and operating their own CHS programs. See FGS Constructors, Inc. v. Carlow, 64 F.3d 1230, 1234 (8th Cir. 1995).

Yet there remain difficulties in providing accessible and fully funded healthcare to American Indians. Rancheria v. Hargan, 296 F. Supp. 3d 256, 259 (D.D.C. 2017). To overcome these financial barriers, the CHS programs are deemed the "payer of last resort" for healthcare costs, 25 U.S.C. § 1623. Medicare, Medicaid, or private insurance may furnish funding first. 42 C.F.R. §§ 136.30, 136.61.

Significant financial constraints on CHS funds have led to amendments to federal law and regulations. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 authorized the United States Department of Health and Human Services to demand Medicare pricing from hospitals that provide services to tribes under the CHS program. Pub. L. No. 108-173. And it did so by setting a ceiling on payments that Medicare-participating providers may seek for providing CHS-authorized care. 42 C.F.R. § 136.30.

SCIT operates its CHS program through the Nimkee Medical Clinic. See SAGINAW CHIPPEWA INDIAN TRIBE OF MICH., Nimkee Memorial Wellness Center (2023), http://www.sagchip.org/nimkee/medicalclinic/index.aspx [https://perma.cc/22EW-D9M9]. If the Nimkee Clinic cannot provide certain care, then it authorizes third-party care, which SCIT must approve with a purchase order that refers the patient to a third-party provider. See 42 C.F.R. § 136.24. Blue Cross's only involvement in this part of the process is issuing insurance cards for patients to present to third-party providers. See ECF No. 173 at PageID.8901.

SCIT funds the two healthcare plans from several sources. SCIT v. BCBSM, 32 F.4th 548, 554 (6th Cir. 2022). In addition to the availability of CHS funds, SCIT covers some expenses with funds from the Soaring Eagle Casino & Resort. Id. And SCIT has arranged a Medigap⁴ insurance policy to fund expenses for other eligible beneficiaries.

Both healthcare plans are administered by Blue Cross under separate contracts. Id. at 555. The contracts limit Blue Cross's responsibilities "to providing administrative services for the processing and payment of claims." Id. Such services included Blue Cross receiving a "claim" from a third-party provider for any services provided to the plan member,⁵ paying the bill from one of two SCIT-funded accounts, and providing quarterly or monthly reports of the remaining account balances to SCIT, which SCIT would use to determine how much additional funds to deposit into the accounts for future medical services. See id. at 567-68 (Rogers, J., concurring the judgment).

B.

In January 2016, SCIT and its Welfare Benefit Plan ("Plaintiffs") sued Blue Cross under federal and state law, alleging it breached its fiduciary duty under Employee Retirement Income Security Act (ERISA) by paying excess claim amounts to Medicare-participating hospitals for authorized services, violated the Michigan Health Care False Claims Act by not seeking Medicare-like rates for eligible claims under the Member Plan, and breached its common-law fiduciary duty by not seeking Medicare-like rates for eligible claims under the Member Plan.

On its most recent trip to the Sixth Circuit, the case was reversed and remanded based on an interpretation of the applicable regulations. SCIT v. BCBSM, 32 F.4th 548 (6th Cir. 2022) (holding that Medicare-participating healthcare providers must accept Medicare-like rates as full payment for any care authorized by an American Indian tribe that is "carrying out" a CHS program), en banc reh'g denied, No. 21-1226, 2022 WL 2286404, at *1 (6th Cir. June 7, 2022). Based on numerous "legal and factual disputes" that were either "not address[ed]" or "not fully consider[ed]" the majority opinion instructed this Court to determine (1) whether SCIT's CHS program authorized the care that it asserts was subject to Medicare-like rates; (2) whether Blue Cross breached its fiduciary duty by not seeking Medicare-like rates; (3) whether Blue Cross violated the Michigan Health Care False Claim Act; and (4) whether the claims are barred by the statute of limitations based on when the Tribe had actual knowledge of the breach and whether Blue Cross's actions amounted to fraud or concealment. Id. at 563-65. And the concurring opinion instructed this Court to determine "whether Blue Cross undertook the administration of CHS-authorized coverage, and if so, whether Blue Cross applied [Medicare-like rates] to that coverage." Id. at 568 (Rogers, J., concurring the judgment).

On remand, the parties decided to conduct discovery on nearly 100,000 insurance claims. Their goals were to assess the scope of the CHS services that SCIT carried out and to quantify the monetary difference between Medicare-like rates and the rates that Blue Cross negotiated and paid to the third-party providers. To that end, the Parties entered the following "Stipulation as to Certain Discovery" in August 2022:

Under the Parties' Stipulation, through their counsel of record, and consistent with the issues addressed during the July 20, 2022 Status Conference, the Parties agree to an Order recognizing that:

(i) BCBSM will make best efforts to produce

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