DICKINSON R. DEBEVOISE, District Judge.
This matter arises out of the methods by which Defendant UnitedHealth Group ("United") recoups benefit overpayments from healthcare providers. On January 24, 2011, Plaintiffs Premier Health Center, P.C. ("Premier"), Judson G. Sprandel, II, D.C., Brian S. Hicks, D.C., Tri3 Enterprises, LLC ("Tri3"), Beverly Hills Surgical Center ("BHSC"), and Jeremy Rogers, D.C.
On April 22, 2011, Plaintiffs filed an Amended Complaint with additional factual allegations in support of their claims. The Amended Complaint sets forth two proposed classes: the ERISA Recoupment Class and the ERISA Chiropractor Class. The ERISA Recoupment Class, whose named Plaintiffs are Tri3, BHSC, and Dr. Sprandel, is defined as:
(Amend. Compl. ¶ 135.) The ERISA Recoupment Class asks the Court "(1) to enjoin Defendants from continuing to compel return of prior payments of plan benefits; (2) to order Defendants to return to all Class members all funds, plus interest, that Defendants have withheld to offset the amounts demanded or that have been paid by Class members to Defendants in response to such demands; and (3) to declare that any future efforts to recoup payments for errors or mistakes in prior payments must comply with the specific requirements under ERISA for adverse benefit determinations." (
The ERISA Chiropractor Class, whose named Plaintiffs are Dr. Rodgers and Dr. O'Donnell, is defined as:
(Amend. Compl. ¶ 136.) The ERISA Chiropractor Class seeks "to enjoin Defendants from (1) tiering providers based on statistical parameters, (2) denying treatment plans without regard to patients' medical needs, (3) imposing pre-certification requirements on patient care without regard to the terms of the ERISA health care plans, and (4) threatening providers with being placed on a lower tier or potential loss of network participation if they do not defer to Optum's demands by limiting care to patients, and to compel United and Optum to replace them with policies and procedures which comply with ERISA." (
On June 21, 2011, Defendants moved to dismiss the Amended Complaint. On March 30, 2012, the Court issued an Opinion and Order denying the motion with respect to Plaintiffs' claims against United, UnitedHealthcare, and Optum, but granting the motion with respect to all of Plaintiffs' claims against HNNE and Plaintiffs' claim against HNNY for failure to provide a full and fair review under ERISA. The Court dismissed all of Plaintiffs' claims against HNNE, and their claim against HNNY for failure to provide a full and fair review, without prejudice.
On June 9, 2012, Plaintiffs moved to certify both the ERISA Chiropractor Class and the ERISA Recoupment Class. Defendants opposed the motion. In addition, on October 12, 2012, Defendants moved for summary judgment against the named Plaintiffs of the ERISA Chiropractor Class. On April 15, 2013, Plaintiffs filed a Second Amended Complaint ("SAC"), which set forth additional allegations in support of their claims. The SAC proposed the same classes as those set forth in the Amended Complaint. On August 1, 2013, the Court issued an Opinion and Order (1) granting Defendants' Motion for Summary Judgment against the ERISA Chiropractor Class; and (2) denying Plaintiffs' Motion to Certify the ERISA Recoupment Class.
On August 16, 2013, Plaintiffs filed a renewed Motion for Class Certification, which set forth two new proposed classes: the ONET Repayment Demand Class and the ONET Offset Class. The ONET Repayment Demand Class, whose named Plaintiffs are Dr. Sprandel, BHSC, and Tri3, is defined as:
The ONET Repayment Demand Class seeks "declaratory relief establishing that Defendants' policies, procedures and practices with respect to issuance of repayment demands to out-ofnetwork providers fail, as a matter of law, to substantially comply with" ERISA and 29 C.F.R. § 2560.503-1. (Buffalo Decl., Ex. 24.) The Class also "seeks a permanent injunction requiring Defendants to reform their policies, procedures and practices with respect to issuance of repayment demands to out-of-network providers." (
The ONET Offset Class, whose named Plaintiffs are BHSC and Tri3, is defined as:
In response, Defendants moved to strike Plaintiffs' renewed Motion for Class Certification. In addition, on September 27, 2013, Defendants filed a Motion for Summary Judgment against Dr. Sprandel as a named Plaintiff of the ONET Repayment Demand Class.
On November 20, 2013, the Court issued an Opinion and Order granting Defendants' Motion to Strike with respect to the ONET Offset Class and denying it with respect to the ONET Repayment Demand Class. On December 2, 2013, the Court issued an Opinion and Order denying Defendants' Motion for Summary Judgment against Dr. Sprandel.
Defendants now move for reconsideration of the Court's ruling denying summary judgment against Dr. Sprandel as a named plaintiff of the ONET Repayment Demand Class. Plaintiffs now move for certification of the ONET Repayment Demand Class. For the reasons set forth below, Defendants' Motion for Reconsideration is GRANTED. Plaintiffs' Motion to Certify the ONET Repayment Demand Class is GRANTED, subject to Plaintiffs' ability to cure a defect in at least one of the class's named plaintiffs.
The facts of this case are fully set forth in
United is a major health insurer that operates nationally through its wholly owned subsidiaries, including UnitedHealthcare, Optum, HNNE, and HNNY. As a national insurer, United processes an enormous number of claims for benefits from a wide variety of healthcare providers on a regular basis.
To be sure, processing claims in this manner results in erroneous payments to healthcare providers. Therefore, United regularly conducts post-payment audits to ferret out coding errors and improper claims. In doing so, United typically requests a provider's clinical records and compares the services indicated in the records with those noted in the provider's claim for payment.
These post-payment audits are also intended to discern errors on United's part, such as (1) paying the same claim twice; (2) incorrectly coordinating benefits with another insurance plan; and (3) paying a claim incorrectly under the terms of a provider's contract with United. These audits may result in either a determination of underpayment, in which case United will remit further payment to a provider, or one of overpayment, in which case United will seek remittance from the provider for the amount that was overpaid.
Three separate divisions within United conduct post-payment audits: (1) Benefits Operations, which processes benefits claims, regularly performs manual quality control audits that incidentally identify both underpayments and overpayments; (2) Audit & Recovery Operations ("ARO"), which employs algorithms and other auditing techniques, including review of clinical records, to identify overpayments;
United engages in a multistep process to recover benefit overpayments. First, United sends a letter to the provider identifying (1) the specific claim that was overpaid; (2) the amount that United overpaid on that claim; and (3) the reason for overpayment. These letters further (1) request a check from the provider for the amount overpaid; (2) note that the provider may appeal United's assessment
United will send follow up letters to providers in an effort to secure voluntary repayment, and those letters will always note that the provider may appeal United's determination. (Price Decl. ¶ 3.) United, at times, outsources overpayment recovery operations to outside vendors that "employ the same basic process[.]" (
To the extent United decides that an overpayment determination changes a member's paid benefits under his or her health insurance policy, United will issue a revised Explanation of Benefits ("EOB") to the member and a similar document known as a Provider Remittance Advice ("PRA") to the provider. The revised EOB notes the member's formal remedies under ERISA to contest United's reassessment. If the overpayment is identified by Benefits Operations, the revised EOB and PRA are sent at the same time as the initial letter seeking reimbursement. If the overpayment is identified by ARO, United issues the revised EOB and PRA at the time the provider makes voluntary repayment or when the time in which to make voluntary repayment expires, whichever occurs first.
In 2011, United recovered approximately $430 million in overpayments to providers. 58% of the $430 million was recovered as a result of providers' voluntarily sending a check to United, while 42% was recovered through offsets.
Provider appeals are considered by a group of ten to twelve members of the ARO Appeals Team.
If a provider prevails in an appeal, United sends the provider a letter stating that United will no longer seek remittance. If an appeal is resolved against a provider, United sends a letter to the provider stating that the provider has sixty days in which to file a subsequent appeal before United will offset a given overpayment against future benefit claims by that provider.
According to United, in 2011, approximately 2.25% of its overpayment determinations were appealed. (Price Decl. ¶ 5.) Of that 2.25%, roughly two-thirds were resolved against the provider. (
Tri3 is a healthcare facility that provides durable medical equipment through its subsidiaries, Wabash Medical Company, LLC ("Wabash") and Orthoflex Inc., d/b/a Integrated Orthopedics ("Orthoflex"), to many United plan members, on an out of network basis,
Tri3 offers several examples where United issued notices adjusting payments for claims downward based on past overpayments. These notices fail to indicate the basis for the overpayment or how to appeal United's determination. In addition, a Tri3 corporate representative testified that in many instances Tri3 would not receive any prior letters from United notifying Tri3 of an overpayment determination.
United, however, offers examples of letters sent to Tri3, dated March 26, 2010 and July 2, 2009, respectively, (1) stating that Tri3 had been overpaid on one or more particular claims; (2) setting forth the nature of the claims and the reasons why United believed they overpaid on those claims; and (3) noting that Tri3 could appeal United's determination.
In addition, United notes an instance where Tri3 submitted two appeals in response to a letter from United seeking reimbursement for overpayment on a claim and in fact won the second level appeal.
BHSC is a licensed surgical center that offers health care services on an out of network basis to United subscribers. Although BHSC has received multiple repayment demands from United,
United issued a revised EOB to the plan member on August 13, 2010, and sent a PRA to BHSC on August 16. 2010.
Dr. Sprandel, a licensed Doctor of Chiropractic, provides chiropractic services to United subscribers on an out of network basis.
On November 4, 2009, Dr. Sprandel submitted a formal appeal of United's determinations. United subsequently issued letters denying the appeal and finding the initial overpayment determinations to be valid.
Defendants now move for reconsideration of the Court's December 2, 2013 ruling denying Defendants' Motion for Summary Judgment against Dr. Sprandel as a named plaintiff of the ONET Repayment Demand Class. In doing so, Defendants argue that (1) the Court's failure to address certain material facts merits reconsideration; and (2) under controlling law, patientassignor's cannot have standing in the absence of an actual or certainly impending injury. Plaintiffs argue that neither the facts nor the controlling law that Defendants point to warrant reconsideration of the Court's prior ruling.
In addition, Plaintiffs move for certification of the ONET Repayment Demand Class. In doing so, Plaintiffs argue that the redefined ONET Repayment Demand Class cures the defects noted by the Court, in its August 1, 2013 Opinion, in the previously proposed ERISA Recoupment Class, and otherwise satisfies the requirements of Rule 23(a). Plaintiffs further argue that the ONET Repayment Demand Class should be certified pursuant to Rule 23(b)(1)(A) and (b)(2).
Defendants argue that the proposed ONET Repayment Demand Class fails to satisfy the requirements of Rule 23 because the class (1) cannot be ascertained without extensive individualized inquires and/or in an administratively feasible manner; (2) fails to satisfy the commonality, typicality, and adequacy requirement of Rule 23(a), among others; and (3) cannot be certified under either Rule 21(b)(1)(A) or Rule 21(b)(2).
"[I]t is well-established in this district that a motion for reconsideration is an extremely limited procedural vehicle."
Since the evidence relied upon in seeking reconsideration must be "newly discovered," a motion for reconsideration may not be premised on legal theories that could have been adjudicated or evidence which was available but not presented prior to the earlier ruling.
A decision suffers from "clear error" only if the record cannot support the findings that led to that ruling.
The Court's December 2, 2013 Opinion addressed whether the fact that Dr. Sprandel's three purported patient-assignors are no longer enrolled in United-serviced ERISA plans deprives Dr. Sprandel of standing to seek prospective relief under ERISA, based on those patient assignments, on behalf of the ONET Repayment Demand Class. The Court noted that (1) "healthcare providers may obtain derivative standing to assert ERISA claims on behalf of their patients by virtue of an assignment"; (2) "through a patient assignment, a healthcare provider has standing to assert only those claims that its patient-assignor has standing to assert"; and (3) "for a healthcare provider to maintain derivative standing to assert ERISA claims on behalf of a patient, the patient-assignor must have standing at all stages of litigation to assert those claims."
The Court concluded that "[a]lthough Dr. Sprandel's three patient-assignors are no longer enrolled in United healthcare plans, they still have a personal stake in Dr. Sprandel's challenge to United's procedures to recoup overpayments on their benefit claims."
Defendants argue that "the factual predicate of the Court's ruling is incorrect because United has publicly declared that, pursuant to its long-standing policy to mirror state law limitations on overpayment recoveries, the years-old repayment demands that Sprandel now seeks to challenge have no further operative effect." (Def.'s Br. Reconsid. 1.) Specifically, Defendants point to a letter submitted by Defendants, on November 26, 2013, along with the Declaration of Jeff Bonneville (the "Bonneville Declaration").
Thus, according to Defendants, the Bonneville Declaration, which the Court failed to address in its prior ruling, "makes it clear that the years-stale letters that Sprandel seeks to challenge have not had and will never have any impact on his patient-assignors," (Def.'s Br. Reconsid. 2), and, in turn, Dr. Sprandel cannot satisfy the "actual or imminent" requirement of Article III standing. Defendants are correct.
"To establish Article III standing, an injury must be "concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling."
The Bonneville Declaration indeed makes clear that there is no actual or imminent injury to any of any of Dr. Sprandel's three patient-assignors. None those patient-assignors is currently a United-insured, and United will not pursue any of the outstanding repayment demands against them.
Plaintiffs contend that Defendants' submission of the Bonneville Declaration constitutes a failed attempt to render moot Dr. Sprandel's claims through voluntary cessation. According to Plaintiffs, the Bonneville Declaration fails to satisfy the voluntary cessation standard — which requires a showing that "it is absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur,"
Plaintiffs are mistaken. Mootness under the doctrine of voluntary cessation requires that the defendant stop engaging in "a challenged practice."
Plaintiffs further argue that Dr. Sprandel has derivative standing under ERISA to challenge Defendants' overpayment recoupment procedures because Dr. Sprandel currently treats a number of United-insureds who may very well be subject to those procedures in the future. Be that as it may, there is no indication whatsoever that Defendants have or will issue an overpayment notification letter to Dr. Sprandel in conjunction with a claim made on behalf of one or more of his current United-insured patients.
Class certification is proper if the Court finds that Plaintiffs satisfy all of the requirements of Federal Rule of Civil Procedure 23(a) and one of the provisions of Federal Rule of Civil Procedure 23(b).
Fed. R. Civ. P. 23(a).
With respect to Rule 23(b), Plaintiffs seek certification under either Rule 23(b)(1)(A) or (b)(2). Plaintiffs may satisfy Rule 23(b)(1)(A) by showing that "prosecuting separate actions by or against individual class members would create a risk of . . . inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class." Fed. R. Civ. P. 23(b)(1)(A). Plaintiffs may satisfy Rule 23(b)(2) by showing that "the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole." Fed. R. Civ. P. 23(b)(2).
Plaintiffs contend that the ONET Repayment Demand Class satisfies the numerosity requirement of Rule 23(a) because it is only somewhat less numerous than the previously proposed ERISA Recoupment Class, which the Court found to have the requisite numerosity. Defendants do not dispute this contention. Consequently, the proposed ONET Repayment Demand Class satisfies Rule 23(a)(1).
Plaintiffs argue that the ONET Repayment Demand Class satisfies the commonality requirement of Rule 23(a) for the same reasons that the Court found the previously proposed ERISA Recoupment Class to have commonality. Thus, according to Plaintiffs, all members of the ONET Repayment Demand Class, like the ERISA Recoupment Class share (1) standing to pursue ERISA claims via patient assignments; (2) the contention that United's actions to recoup overpayments amount to an adverse benefit determination under ERISA; and (3) the contention that those actions are not in substantial compliance with ERISA.
Defendants argue that the ONET Repayment Demand Class fails to satisfy the commonality requirement because there is substantial variation among class members regarding the extent to which (1) they have enforceable patient assignments to challenge United's overpayment recoupment procedures;
"Commonality requires the plaintiff to demonstrate that the class members have suffered the same injury" based upon "a common contention" that "is capable of classwide resolution — which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke."
To be sure, "Rule 23(a)(2)'s commonality requirement does not require identical claims or facts among class member[s]."
In its prior opinion on Plaintiffs' Motion to Certify the ERISA Recoupment Class, the Court found that members of that class "have standing to pursue ERISA claims challenging United's procedures to recover overpayments of benefits that were assigned to the class members by their patients."
Defendants now argue that this conclusion was clearly erroneous. In doing so, they cite to a document published by the United States Department of Labor ("DOL"), entitled Compliance Assistance, Group Health and Disability Plans, Benefit Claims Procedure Regulation (29 CFR 2560.503-1) (the "DOL Document"). The document purports to provide guidance regarding processing benefit claims in accordance with ERISA in a question and answer format.
Defendants specifically point to a question asking: "Does an `assignment of benefits' by a claimant to a healthcare provider constitute the designation of an `authorized representative?'" (Buffaloe Decl., Ex. 27.) The DOL document answers: "No. An assignment of benefits by a claimant is generally limited to assignment of the claimant's right to receive a benefit payment under the terms of the plan. Typically, assignments are not a grant of authority to act on a claimant's behalf in pursuing and appealing a benefit determination under a plan." (
Defendants then cite to the following language:
Based on this language, Defendants contend that, according to the DOL, "ERISA distinguishes between assignment of the right to receive payment for services rendered, on the one hand, and assignment of the right to pursue ERISA remedies, on the other." (Def.'s Br. Opp. Mot. Cert. 22.) Defendants further contend that "DOL guidance suggests that any assignment of the right to sue should be limited to particular designated claims, and that their scope must be clearly understood by both the member and the plan." (
While this may be an accurate characterization of the DOL's position, it is nonetheless contrary to the Court's interpretation of the ERISA statute.
Defendants point to two recent decisions from this Court,
In doing so, this Court noted "compelling reasons for requiring a more comprehensive assignment to establish ERISA jurisdiction," namely that, as a general matter, under New Jersey law, "[o]nly an assignment that clearly reflects the assignor's intent to transfer his rights will be effective," and that, "as a result of a valid assignment, the assignor loses all control over the subject matter of the assignment and all interest in the right assigned."
This reasoning does not persuade the Court here. It is true that, under the Court's interpretation, a patient who assigns his right to receive benefits for a given claim to a healthcare provider loses his right to press ERISA claims regarding those benefits, and that it is therefore theoretically possible that a healthcare provider that receives a repayment demand from an insurer on a given claim that was assigned to that healthcare provider would simply balance bill the patient who is then left without recourse under ERISA. However, such a scenario is unlikely, as it would only serve to poison the relationship between the patient and healthcare provider and ultimately drive patients away.
The more likely scenario, as in this case, is that providers would dispute overpayment determinations or seek relief under ERISA regarding claims assigned to them by their patients, because "providers . . . are better situated and financed to pursue an action for benefits owed for their services."
This is why, as the Court of Appeals has noted, that "[a]lmost every circuit to have considered the question has held that a health care provider can assert a claim under § 502(a) where a beneficiary or participant has assigned to the provider that individual's right to benefits under the plan."
Defendants argue that, even if an assignment of benefits allows a healthcare provider to bring ERISA claims for the benefits that it was assigned, "that principle does not help Plaintiffs establish standing across the proposed class because Plaintiffs seek (among other things) declaratory and injunctive relief related to future claims for benefits that have not yet been assigned." (Def.'s Br. Opp. Mot. Cert. 23.) In doing so, Defendants point to the Court's previous holding that evidence of a direct payment of benefits to a healthcare provider "only creates the inference that the patient assigned to [the provider] the right to receive reimbursement for the care rendered [by the provider], not the right to assert a full array of ERISA claims."
This ruling, however, was specific to where providers sought injunctive relief regarding conduct to which their patient-assignors were not subject and might encounter only when seeking treatment from other providers in the future.
Here, however, the ONET Repayment Demand Class members' patient-assignors were subject to Defendants' overpayment recoupment procedures. Therefore, as the Court previously held, a "challenge to the procedures used to recover overpayments of benefits assigned to [healthcare providers] is a logical extension of their right to receive those benefits."
Defendants further argue that there is no commonality in provider standing because the ERISA plans of the ONET Repayment Demand Class members' patient-assignors contain antiassignment clauses with varying language that would have to be scrutinized individually. In its prior ruling on Plaintiffs' Motion for Class Certification, the Court found that Defendants had "waived any right to enforce [an] anti-assignment provision" because . . . there was evidence of "a course of conduct beyond direct reimbursement for medical services.
Defendants now argue that, even accepting this prior ruling, one would nonetheless have to "scrutinize the language of each plan to determine whether United's conduct was actually inconsistent" with a given anti-assignment provision. (Def.'s Opp. Mot. Cert. 24.) In doing so, Defendants point to anti-assignment provisions that, in their view, "both expressly bar members from assigning their benefits to non-network providers, and simultaneously state that United reserves the right to pay non-network providers directly as a matter of convenience." (
Defendants are correct that a direct payment of benefits to a non-network provider and a subsequent repayment demand for all or some of those benefits is completely consistent with the language of United's anti-assignment provisions in this case. Unfortunately, it adds nothing to their position. The relevant language of the anti-assignment provisions reads as follows: "You may not assign your Benefits under the Policy to a non-Network provider without our consent. We may, however, in our discretion, pay a non-Network provider directly for services rendered to you." (ECF No. 146-50 at 91-92.)
This language merely makes clear that United may, in its discretion, unilaterally waive the anti-assignment provision and pay benefits directly to the provider. Thus, whether United, in accordance with, or in spite of, an anti-assignment provision, (1) issued a direct payment to a provider in response to a claim for benefits; and (2) issued one or more subsequent repayment demands directly to the provider regarding that claim for benefits, the contention that United waived its right to assert an anti-assignment provision is subject to common proof.
Finally, Defendants argue that the subscriber status of the ONET Repayment Demand Class members' patient-assignors creates individual standing issues because the class seeks declaratory and injunctive relief regarding future repayment demands on benefit claims that have yet to be submitted on behalf of other United-insureds in the future. Therefore, according to Defendants, the Court would have to examine the subscriber status of the class members' patient-assignors because "[p]atients who are not currently members of plans insured or administered by United . . . do not have statutory or constitutional standing to bring claims against United seeking forward-looking relief." (Def.'s Br. Opp. Cert. 25.)
This argument is a red herring. While the patient-assignors who are no longer Unitedinsureds may not submit future benefit claims to United that would be subject to future repayment demands, the fact remains that there are pending repayment demands regarding claims while they were United-insureds. Thus, in challenging United's overpayment recoupment procedures, those patient-assignors would necessarily seek prospective relief because the repayment demands on their claims have yet to be resolved.
Under ERISA, an `"adverse benefit determination' means any of the following: a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit . . ." 29 C.F.R. § 2560.503-1(m)(4). If an insurer makes an adverse benefit determination ("ABD") under an ERISA plan, a member or beneficiary of that plan is entitled to certain rights under ERISA, including (1) sufficient notice of the ABD; (2) the right to an appeal the ABD; and (3) a full and fair review of the appeal.
Plaintiffs argue that, as a matter of law, an overpayment determination on a claim for benefits, on an out of network basis, amounts to an ABD under ERISA. Consequently, according to Plaintiffs, whether United's overpayment determinations against members of the ONET Repayment Demand Class merit ERISA protections in challenging those determinations is a common question. Defendants, on the other hand, contend that an overpayment determination amounts to an ABD only if the determination requires an application of ERISA plan terms. Thus, according to Defendants, whether an overpayment determination constitutes an ABD under ERISA is not a common question because many class members are subject to third-party wrap or leased network contracts that determine the terms of a provider's reimbursement.
As the Court previously held, "ERISA does not extend to overpayment determinations against providers for services rendered on an in network basis because payment for those services is determined by the terms of the contract between United and the provider, not the terms of the patient's ERISA plan."
Defendants further argue that many overpayment disputes regarding whether a provider in fact performed a service for which it billed an insurer arise under state law fraud, as opposed to ERISA. The Court addressed and rejected this precise argument when it was asserted against the ERISA Recoupment Class. In doing so, the Court found that "[w]hile an insurer's cause of action against a provider in court for fraud often does not implicate ERISA . . . the administrative procedure by which an insurer attempts to recoup overpayments based on what it believes to be fraudulent activity must allow the provider the opportunity to challenge that determination in accordance with ERISA procedures, lest the determination be accepted at face value."
Defendants contend that this finding was incorrect because "[i]t cannot be the case that a letter United sent to the provider prior to filing the lawsuit attempting to resolve the very same dispute would have any greater ERISA implications." (Def.'s Br. Opp. Cert. 28 n.16) (emphasis omitted). Oh, but it can! The letter alleging fraud as the basis for an overpayment determination implicates ERISA because the basis for such a demand cannot be accepted at face value,
On the other hand, a lawsuit alleging that a provider submitted one or more fraudulent claims to an insurer gives the provider the opportunity to challenge those allegations in court, according to the federal or applicable state rules of civil procedure. And in doing so, the provider has the opportunity to show that the alleged fraud claim is, as a matter of law, an ERISA claim that is preempted by the statute.
Defendants similarly argue that resolution of many overpayment disputes other than fraud also do not require application of ERISA plan terms, including "where a benefit payment was erroneously sent to the wrong provider, or where United erroneously sent a duplicate payment for the full amount submitted on a single claim." (Def.'s Opp. Mot. Cert., 28.) The Court also addressed and rejected this argument when Defendants asserted it against certification of the ERISA Recoupment Class.
In doing so, the Court found that "requiring a threshold level of plan interpretation" would "undermine ERISA's goal of providing a uniform source of law," and "prove unwieldy because it is often difficult to determine early on how much plan interpretation is required to resolve a benefits dispute."
Defendants next argue that only those overpayment determinations that adversely affect a submitted claim amounts to an ABD. In doing so, they note that ERISA "claims regulation applies only to
As Plaintiff's point out, "[t]his argument is just a different version of Defendants' `overpayment reason' argument and fails for the same reason, i.e., it would require accept[ing] the insurer's overpayment determination at face value." (Pl.'s Rep. Br. Cert. 21) (quotation omitted). Furthermore, the Court finds Defendants' interpretation of the provisions they reference to be strained. 29 C.F.R. § 2560-503.1(m)(2) and (3) merely define pre and postservice claims, respectively. In no way do those provisions suggest that an adverse benefit determination must be tied to a pre or post-service claim. Indeed, an ABD is defined as "a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit," 29 C.F.R. § 2560-503.1(m)(4), not a denial, reduction, or termination of a claim for benefits. Therefore, while a repayment demand based on a mistaken payment for a claim that was never submitted may not technically be in response to a claim for benefits, it is nonetheless a denial or termination of a previously paid benefit.
Finally, Defendants argue that ERISA does not apply to overpayment determinations that do not have an adverse financial impact on the plan member. Defendants cite to a section of the aforementioned DOL Document stating that ERISA claims procedures do "not apply to requests by health care providers for payments due them — rather than due the claimant — in accordance with contractual arrangements between the provider and an insurer or managed care organization, where the provider has no recourse against the claimant for amounts, in whole or in part, not paid by the insurer or managed care organization." (Buffaloe Decl., Ex. G.) Consequently, "[a]ny request by the doctor to the managed care organization for payment or reimbursement for services rendered to a participant is a request made under the contract with the managed care organization, not the group health plan; accordingly, the doctor's request is not a claim for benefits governed by the regulation. On the other hand, where a claimant may request payments for medical services from a plan, but the medical provider will continue to have recourse against the claimant for amounts unpaid by the plan, the request, whether made by the claimant or by the medical provider (e.g., in the case of an assignment of benefits by the claimant) would constitute a claim for benefits by the claimant." (
Defendants suggest that the Court previously found this language to be "misguided." (Def.'s Br. Opp. Cert. 30.) But this is not so. What the Court found misguided was Defendants' contention that this language made clear that the reason for an overpayment determination, stated by an insurer in a repayment demand letter, determines whether the patient will ultimately be financially liable to the provider. The Court rejected this contention, as previously discussed, because it would result in an unwieldy and illogical standard that ultimately requires the Court to accept the insurer's stated reason for an overpayment at face value.
Defendants provide no reason why this ruling would not apply with equal force to the ONET Repayment Demand Class, nor does the Court see any such reason. Furthermore, this ruling is wholly consistent with the aforementioned language from the DOL document, which, in the Court's view, makes clear that ERISA claims procedures do not apply to payment disputes that are determined by the terms of a separate agreement between the provider and the insurer, and under which the provider is barred from balance billing the insurer. As previously discussed, overpayment disputes concerning services performed on an in network basis are not subject to ERISA because they are resolved under terms of the provider's network contract. The ONET Repayment Demand Class, however, consists only of providers that are asserting claims concerning services that are not subject to any separate payment agreements with United, including third-party network agreements. Therefore, the ONET Repayment Demand Class satisfies Rule 23(a)'s commonality requirement with respect to whether an overpayment determination against a provider for out of network services amounts to an ABD under ERISA.
As previously discussed, if an insurer makes an ABD under an ERISA plan, a member or beneficiary of that plan is entitled to certain rights under ERISA, including (1) sufficient notice of the ABD; (2) the right to appeal the ABD; and (3) a full and fair review of the appeal.
Defendants argue that assessing substantial compliance with these requirements is not subject to common proof because it would require examining the full course of communications between United and a given provider. In its prior ruling regarding certification of the ERISA Recoupment Class, the Court found that:
Defendants fail to provide any evidence whatsoever that United substantially complied with the three aforementioned ERISA regulations — that the Court found United to have violated across all overpayment notifications — during the course of their communications with one or more members of the ONET Repayment Demand Class.
Defendants further argue that ERISA compliance is an individual inquiry because United is required to substantially comply with ERISA regulations only when a class member apprises United of an assignment so that United knows that the class member is entitled to ERISA-compliant notice. Therefore, Defendants maintain that they have "a unique defense that [United] provided fully ERISA-compliant notice to the only party it had reason to know was entitled to it — the member." (Def.'s Br. Opp. Cert. 33.)
This argument follows the same logic as Defendants' anti-assignment argument and fails for precisely the same reasons. As previously discussed, United issued to each class member (1) a direct payment of benefits; and (2) one or more demands seeking a direct repayment of some or all of those benefits from that class member. Thus, just as United has waived any defense based on a provision barring an assignment of those benefits to a class member, United has similarly waived any defense asserting that it had no notice of an assignment of those benefits to a class member. Consequently, the ONET Repayment Demand Class satisfies Rule 23(a)'s commonality requirement with respect to whether United's notification letters comply with ERISA.
Typicality requires that "the claims or defenses of the representative parties are typical of the claims or defenses of the class." Fed. R. Civ. P. 23(a)(3). This requirement "ensure[es] that the class representatives are sufficiently similar to the rest of the class — in terms of their legal claims, factual circumstances, and stake in the litigation — so that certifying those individuals to represent the class will be fair to the rest of the proposed class."
In ascertaining typicality, the Court must consider three factors. First, it must consider "the similarity of the legal theory and legal claims[.]"
Second, the Court must consider "the similarity of the individual circumstances on which those theories and claims are based."
Third, the Court must consider "the extent to which the proposed representative may face significant unique or atypical defenses to her claims."
In its previous ruling denying certification of the ERISA Recoupment Class, the Court found that that class failed to satisfy Rule 23(a)'s typicality requirement because "United recovers a substantial portion of repayment dollars through voluntary repayments, while none of the named plaintiffs submitted a voluntary repayment in response an overpayment determination."
Plaintiffs argue that the ONET Repayment Demand Class cures this deficiency by excising those members of the ERISA Recoupment Class that submitted any repayment or incurred any offset. Therefore, according to Plaintiffs, the voluntary repayment defense will not apply to any member of the ONET Repayment Demand Class.
Defendants argue that the ONET Repayment Demand Class does not satisfy Rule 23(a)'s typicality requirement because excising all providers that submitted any repayment or incurred any offset renders the named Plaintiffs atypical of the class and/or outside the class definition.
Defendants also contend, correctly, that the repayment demands against Tri3 specified in the SAC resulted either in involuntary offsets,
To be sure, the SAC makes clear that both BHSC and Tri3 received other repayment demands from United against which they seek to assert ERISA claims. It may very well be that one or more of those repayment demands are active and unresolved. However, Plaintiffs fail to provide any evidence of any such demands, and the Court cannot simply assume that one or more exists in order to find that BHSC's and/or Tri3's ERISA claims are typical of the class as a whole.
In general, this defect would result in an outright denial of Plaintiffs' Motion for Class Certification. However, because the ONET Repayment Demand Class otherwise satisfies the requirements of class certification, the Court will afford Plaintiffs the opportunity to present evidence that BHSC and/or Tri3 seeks an ERISA claim against one or more active, unresolved repayment demands that fit within the definition of the ONET Repayment Demand Class. If Plaintiffs fail do so, they will not satisfy Rule 23(a)'s typicality requirement and certification will be denied.
Adequacy requires that "the representative parties will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). "The adequacy inquiry has two components designed to ensure that absentees' interests are fully pursued."
"The second component of the adequacy inquiry seeks to uncover conflicts of interest between named parties and the class they seek to represent."
Here, as with typicality, that none of the named plaintiffs of the ONET Repayment Demand Class asserts an ERISA claim against one or more specified active, unresolved repayment demands — while class membership, by definition, requires one or more active, unresolved repayment demands — defeats adequacy because the named plaintiffs will not adequately represent the interests of the class as a whole, one of which is to avoid entirely the issue of voluntary repayment or offset.
However, because the same evidence will satisfy both the typicality and adequacy requirements of Rule 23(a), the Court will afford Plaintiffs the opportunity to present evidence that BHSC and/or Tri3 seeks an ERISA claim against one or more active, unresolved repayment demands that fit within the definition of the ONET Repayment Demand Class. If Plaintiffs fail do so, they will not satisfy Rule 23(a)'s typicality requirement and certification will be denied.
In addition to Rule 23's explicit requirements, "courts have grafted on to it two additional criteria, often referred to as the `implicit requirements' of class certification: that the class be `definite' or `ascertainable' and that the class representative be a member of the class."
"The ascertainability requirement serves several important objectives."
Defendants argue that the ONET Repayment Demand Class is not readily ascertainable. In doing so, they contend that (1) complex, individualized, factual inquiries are required to determine which class members are subject to a voluntary payment defense; (2) limiting the class to out of network providers would not excise all providers that are subject to arbitration provisions; and (3) out of network providers cannot be determined through administratively feasible means.
"It long has been the general common-law rule that where a party, without mistake of fact, fraud, duress, or extortion, voluntarily pays money on a demand that is not enforceable against him, he may not recover it."
Defendants argue that (1) determining whether a provider had knowledge of the facts surrounding a repayment demand requires an individualized examination of United's repayment demand letters; (2) determining which providers affirmatively authorized offsets requires an individualized examination of provider letters, United's internal records of provider telephone calls, and the records kept by providers; and (3) determining which providers voluntarily paid United by check requires an individualized examination of all correspondence accompanying refunds.
These arguments are red herrings. The ONET Repayment Demand Class excludes not only those repayment demands from the previously proposed ERISA Recoupment Class that were resolved through voluntary payments or voluntarily authorized offsets; it excludes those that were resolved through any payment or offset, whether voluntary or involuntary.
Plaintiffs provide evidence that pending, unresolved repayment demands are readily identifiable. As previously noted, three separate divisions within United conduct post-payment audits and pursue overpayment recoveries: Benefits Operations, ARO, and PAS. "All overpayments pursued by ARO are loaded into the ODAR database." (Beswick Decl. ¶ 3.) "Overpayments that are identified by Benefit Operations but not loaded into ODAR are not actively pursued by any recovery personnel." (
Thus, it is clear that United keeps track of its overpayment determinations and repayment demands in certain databases and a simple search or review of these databases used by ARO and Benefits Operations, and the analogous ones used by PAS, would reveal those repayment demands that have been satisfied and those that are outstanding. Indeed, it would be hard to fathom that a health insurance company that puts significant resources into identifying and recouping benefit overpayments would be unable to readily identify repayment demands have been resolved through either payment, offset, or otherwise, and those that are outstanding.
In their sur-reply, Defendants do not dispute that their databases may readily identify and distinguish outstanding repayment demands. However, they argue that a class definition that excludes all repayments and offsets, whether voluntary or not, does not render the voluntary repayment defense inapplicable because United receives numerous repayments and executes both voluntary and involuntary offsets on a daily basis. As a result, "every day between the date of certification" — Plaintiffs' suggested date for determining whether a repayment demand is outstanding — "and the date of trial, more and more of the claims included in the revised class would be resolved outside the litigation through voluntary payments." (Def.'s Br. Sur-Rep. Cert. 3.) According to Defendants, the ONET Repayment Demand Class would therefore not be readily ascertainable because identifying the class members will necessarily require an individualized inquiry to determine which of those repayments and offsets between the date of certification and trial are, as a matter of law, voluntary.
This is a problem. However, there is a solution, and it lies in a modification of the scope of injunctive relief sought by the ONET Repayment Demand Class. In order to properly implement the injunction sought by Plaintiffs compelling United to reissue outstanding repayment demands that comply with ERISA, there must be a point at which United is barred from accepting a repayment or executing an offset with respect to its outstanding repayment demands. Otherwise it will be impossible to apply the injunction across the class at any point due to the high risk of contemporaneous repayments or offsets. Thus, any future injunction against United in this case will include a provision barring United from accepting any repayment or executing any offset with respect to any repayment demand, as of the date of final judgment.
Defendants argue that determining which members of the ONET Repayment Demand Class are subject to arbitration provisions that would bar their claims here is an individualized inquiry because many providers that United issues payment to on an out of network basis are also participants in certain "wrap networks" that often contain arbitration provisions covering payment disputes with United. As a result, according to Defendants, "[i]f a claim was submitted by a provider pursuant to a wrap network agreement, the provider's contract with the wrap network would need to be individually examined to determine whether it contains an arbitration clause that applies to the provider's putative ERISA claim." (Def.'s Br. Opp. Cert. 16.)
This argument is irrelevant because, as previously discussed, the ONET Repayment Demand Class excludes all overpayment determinations regarding claims subject to any network agreement. But even if it were relevant, the Court of Appeals has recently ruled that an arbitration clause in an agreement between a provider and an insurer that might bind a provider's direct claim does not bind that provider's derivative claim via patient assignment.
Moreover, were the Court "to prevent providers that have promised to arbitrate their own claims against an insurer from bringing patients' claims in court, these providers would be less likely to accept patients' claims in exchange for services."
Defendants argue that "there is no simple and reliable way to identify" out of network healthcare providers in United's databases. (Def.'s Br. Opp. Cert. 17.) In doing so, they note that (1) a provider may be in network with respect to certain United benefit plans, such as Medicare, but out of network for others; and (2) a provider may be in network for certain services, such as transplant services, but out of network for others.
This is beside the point. It may very well be that a given provider treats certain Unitedinsureds or performs certain services on an in network basis and others on an out of network basis. But this just means that the provider is a member of the ONET Repayment Demand Class with respect to repayment demands regarding those services performed and/or those Unitedinsureds treated on an out of network basis. There is no dispute that United has records of those claims that are processed on an in network basis and those on an out of network basis.
Defendants further contend that a provider's network status is often unclear and is often the subject of dispute between the provider and United. To support this contention, Defendants point to evidence that (1) Dr. Sprandel was for a time mistakenly treated as an in network provider; and (2) Tri3 was for a time confused about its network status. While United may from time to time mistake a provider's network designation, this does not change the fact that, through its business records, United can readily ascertain, with reasonable certainty, those provider claims that are processed on an in network basis and those that are processed on an out of network basis. Consequently, the ONET Repayment Demand Class satisfies Rule 23's ascertainability requirement.
Plaintiffs seek certification of the ONET Repayment Demand Class under Rule 23(b)(1)(A). Rule 23(b)(1)(A) permits certification if "prosecuting separate actions by or against individual class members would create a risk of . . . inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class." Fed. R. Civ. P. 23(b)(1)(A);
"This requires more than a risk that separate judgments would oblige the opposing party to pay damages to some class members but not to others or to pay them different amounts."
Thus, "the phrase `incompatible standards of conduct' is deemed to refer to the situation in which different results in separate actions would impair the opposing party's ability to pursue a uniform continuing course of conduct." Wright, Miller & Kane § 1773. This often manifests "in cases where the party is obliged by law to treat the members of the class alike (a utility acting toward customers; a government imposing a tax), or where the party must treat all alike as a matter of practical necessity (a riparian owner using water as against downriver owners)."
In its prior opinion, with respect to certification of the ERISA Recoupment Class, the Court ruled that:
Defendants take issue with this ruling, arguing that "the mere possibility that individual adjudications could produce inconsistent results does not satisfy the requirements of Rule 23(b)(1)(A), so long as the defendant would be
The Court agrees that inconsistent adjudications as to liability or damages, by themselves, do not amount to incompatible standards of conduct. However, the Court cannot find that Rule 23(b)(1)(A) is so stringent and technical that incompatible standards of conduct can only be established through the risk of multiple court orders requiring a defendant to engage in diametrically opposed conduct. Rather, as previously discussed, the incompatible standards of conduct requirement may be satisfied by showing that separate actions risk more generally impairing the opposing party's ability to pursue a uniform course of conduct.
Indeed, courts have certified classes under 23(b)(1)(A) where inconsistent individual adjudications would hinder a defendant from structuring a legally compliant, uniform policy or program, should the defendant be required to do so, in order to limit its exposure to future claims against a particular course of conduct.
Here, the ONET Repayment Demand Class asserts ERISA claims against United's policies and procedures concerning notice to healthcare providers of overpayment determinations regarding services performed on an out of network basis. As previously discussed, a central issue surrounding these claims is whether any overpayment determination whatsoever regarding services performed on an out of network basis constitutes an ABD under ERISA, thereby requiring that any and all of United's repayment demands comply with ERISA's notice and appeal regulations. As a result, individual actions could very well result in divergent rulings on this issue that would, in turn, impair United's ability to pursue uniform policies and practices regarding overpayment notification.
For example, a provider that treats United-insureds on an out of network basis might file an action against United claiming that a multitude of repayment demands, received by the provider, and stating varying reasons for the corresponding overpayment determinations, failed to comply with ERISA's notice and appeal regulations. In doing so, the provider might argue, as Plaintiffs did in this case, that any repayment demand, as a matter of law, no matter the stated reason for the corresponding overpayment determination, amounts to an ABD, and therefore must comply with ERISA. United, on the other hand, might argue, as it did this case, that whether an overpayment determination amounts to an ABD depends on the basis for the determination, and therefore certain repayment demands need comply with ERISA while others need not.
One court might agree with the provider, as the Court agreed with Plaintiffs in this case, that any and all repayment demands constitute ABDs under ERISA and therefore must comply with ERISA's notice and appeal requirements. In a second identical lawsuit brought by another provider, however, a court might agree with United and find that certain repayment demands issued to the provider are ABDs and need comply with ERISA, while others are not ABDs and therefore do not need to comply with ERISA. In a third identical lawsuit, a court might agree with United in principal but differ from the ruling in the second lawsuit as to which bases for an overpayment determination amount to an ABD and, in turn, those corresponding repayment demands that need comply with ERISA. Thus, although United could technically comply with each court order with respect to the appropriate individual provider, United would nonetheless have quite a difficult time deciding how to fashion its overpayment recoupment procedures. Consequently, the ONET Repayment Demand Class may be certified under Rule 23(b)(1)(A).
Rule 23(b)(2) permits certification if "the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole." Fed. R. Civ. P. 23(b)(2). "Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class."
In the its prior opinion, the Court found that the ERISA Recoupment Class failed to satisfy the requirements of Rule 23(b)(2) because "a single injunction would not provide appropriate relief to each member of the ERISA Recoupment Class."
Here, the ONET Repayment Demand Class seeks (1) injunctive relief under Rule 23(b)(2) in the form declaratory relief establishing that Defendants' policies, procedures and practices with respect to issuance of repayment demands to providers regarding claims processed on an out of network basis fail, as a matter of law, to substantially comply with ERISA; and (2) a permanent injunction requiring Defendants to reform their policies, procedures and practices, going forward, with respect to issuance of repayment demands regarding claims processed on an out of network basis, to comply with ERISA. The proposed permanent injunction cures the defect noted by the Court in its prior opinion. Specifically, requiring Defendants to reform their policies, procedures and practices, going forward, with respect to issuance of repayment demands regarding claims processed on an out of network basis, in accordance with ERISA, necessarily includes providing ERISA complaint notice of the underlying overpayment determination. Consequently, the ONET Repayment Demand Class may be certified under Rule 23(b)(2).
For the foregoing reasons, Defendants' Motion for Reconsideration is GRANTED. Dr. Sprandel cannot serve as a named Plaintiff of the ONET Repayment Demand Class. Plaintiffs' Motion to Certify the ONET Repayment Demand Class is GRANTED, subject to Plaintiffs' providing evidence that named plaintiffs BHSC and/or Tri3 seeks an ERISA claim against one or more active, unresolved repayment demands that fit within the definition of the ONET Repayment Demand Class.
The Court will enter an order implementing this opinion.
Defendants also point out that certain members of the ONET Repayment Demand Class, including Tri3 and BHSC, pursued successful appeals in the face of repayment demands. As the Court previously held, however, "[t]he fact that certain class members appealed one or more of United's overpayment determinations does not defeat commonality in this regard. United's notice and appeal process stands in violation of ERISA as a matter of law, whether or not a provider appeals."
According to Defendants, the respective legal theories set forth in this case and the
While the Court questioned whether these two classes could pragmatically co-exist in the same action,