Harris Methodist Fort Worth v. Sales Support Services Inc. Employee Health Care Plan , 426 F.3d 330 ( 2005 )

United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT September 20, 2005
Charles R. Fulbruge III
_______________________ Clerk
NO. 04-10761
_______________________
HARRIS METHODIST FORT WORTH,
Plaintiff-Appellant,
versus
SALES SUPPORT SERVICES INCORPORATED
EMPLOYEE HEALTH CARE PLAN;
SALES SUPPORT SERVICES INC.,
Defendants - Third Party Plaintiffs - Appellees,
Appellants - Cross Appellees,
versus
TRANSAMERICA LIFE INSURANCE AND ANNUITY COMPANY;
STANDARD SECURITY LIFE INSURANCE COMPANY OF NEW YORK,
Third Party Defendants - Appellees - Cross Appellants,
BERKLEY RISK MANAGERS,
Third Party Defendant - Appellee.
Appeals from the United States District Court
for the Northern District of Texas
Fort Worth Division
Before JOLLY, HIGGINBOTHAM, and JONES, Circuit Judges.
EDITH H. JONES, Circuit Judge:
The district court granted summary judgment to Sales
Support Services, Inc. (“Sales Support”) and its Employee Health
Care Plan, a self-insured employee welfare benefit plan governed by
ERISA (“the Plan”), holding that an expectant mother did not
sufficiently assign her benefits claim on behalf of her prematurely
born twins to the admitting hospital, Harris Methodist Fort Worth
(“Harris”). Harris, a Preferred Provider Organization (“PPO”) for
the Plan, was thus denied recovery for the twins’ lengthy hospital
stay. Concluding that the assignment of benefits was sufficient;
that the Plan authorized assignments to PPOs such as Harris; and
that Harris timely filed benefit claims, we REVERSE and REMAND for
further proceedings consistent with this opinion.
I. Background
Brenda Crosson (“Crosson”) was an employee of Sales
Support Services, Inc. in Fort Worth, Texas, and a participant in
the Plan. The Plan was part of the ProAmerica PPO managed care
network, which allowed its participants to receive discounted care
from designated PPO providers.1 Sales Support, as the Plan
sponsor, administrator, and named fiduciary, reserved the right to
determine eligibility for benefits and to construe the Plan’s
terms. Berkley Risk Managers (“Berkley”) served as Sales Support’s
third-party plan administrator.
1
The Plan defined PPO providers in the following manner:
PPO providers have agreed to provide services to Covered Persons at
reduced rates. Therefore, to encourage the use of PPO providers
whenever possible, the Plan will generally provide a better benefit
for their services. . . .
2
After only twenty-three weeks of pregnancy, Crosson was
admitted to Harris and gave birth on December 31, 1997. Upon
admission, she signed a “General Conditions of Treatment” form
assigning to Harris the right to receive and enforce payment under
the Plan for all medical services provided. The extremely
premature twins, Lacie and Kaycee Crosson, weighed less than a
pound each and were treated at Harris from December 31, 1997,
through April 1, 1998. Their hospitalization cost $666,931.89.
Although the Plan paid the charges incurred by Crosson at the
hospital, and it concedes the twins were covered through Crosson’s
Plan participation, it paid nothing for Harris’s services to the
twins.2 Harris delivered the Crosson file to its counsel for
collection on July 23, 1998.
Harris filed suit under ERISA against Sales Support and
the Plan on June 29, 2001, for appellees’ failure to reimburse it
for services provided to the twins. Sales Support filed
third-party claims against both Berkley and its excess loss
insurers,3 Standard Security Life Insurance Company of New York
(“SSLIC”) and Transamerica (collectively, “Excess-Loss Insurers”),
and the Excess-Loss Insurers filed counterclaims against Sales
2
Sales Support contends that it paid the $15,000 “retention amount”
toward each of the twins, while Harris claims that it has received no payment
toward the twins’ accounts. Given our conclusion, we need not resolve this
particular dispute over the otherwise undisputed facts.
3
The facts and procedural history with regard to the Excess-Loss
Insurers are omitted because we need not reach these claims. All third parties
properly appealed to this court and the district court should reach the merits
of these claims on remand.
3
Support. Numerous cross-motions for summary judgment were filed.
The district court resolved the competing claims by granting
summary judgment against Harris on grounds that (1) because of a
defective assignment, Harris lacked standing to sue under ERISA;
and (2) the Plan’s contractual statute of limitations provision
barred Harris’s claims. The court accordingly dismissed as moot
the claims between Sales Support and the Excess-Loss Insurers.
Harris now appeals the court’s dismissal of its claims; Sales
Support and the Excess-Loss Insurers appeal the dismissal of their
competing claims.
II. Discussion
This court reviews the district court’s grant of summary
judgment de novo using the same standard as the district court.
Royal Ins. Co. of America v. Hartford Underwriters Ins. Co., 391
F.3d 639, 641 (5th Cir. 2004). We review questions of law de novo.
In re CPDC, Inc., 337 F.3d 436, 441 (5th Cir. 2003).
Harris contests both aspects of the district court’s
ruling against it. It is well established that a healthcare
provider, though not a statutorily designated ERISA beneficiary,
may obtain standing to sue derivatively to enforce an ERISA plan
beneficiary’s claim. See Tango Transport v. Healthcare Fin. Servs.
LLC, 322 F.3d 888, 893 (5th Cir. 2003). The first inquiry here is
thus whether Harris became an assignee of Crosson’s ERISA benefits
claim for the Crosson twins. If Harris prevails on this issue, the
4
next question is whether the claim was time-barred under the terms
of the Plan.
A. Whether Harris Obtained a Valid Assignment
The district court held that Harris never obtained a
valid assignment for the twins’ services based on its narrow
interpretation of both the hospital’s “General Conditions of
Treatment” form executed by Crosson and the language of the
company’s Summary Plan Description (“SPD”). Like the district
court, we interpret the assignment form in accordance with Texas
contract law principles and the SPD under ERISA principles.
An assignment is “a manifestation to another person by
the owner of a right indicating his intention to transfer, without
further action or manifestation of intention, his right to such
other person or third person.” Wolters Village Mgmt. Co. v.
Merchants & Planters Nat’l Bank of Sherman, 223 F.2d 793, 798 (5th
Cir. 1955) (internal citations and marks omitted); accord RESTATEMENT
(SECOND) OF CONTRACTS § 324 (1981) (“It is essential to an assignment
of a right that the obligee manifest an intention to transfer the
right to another person without further action or manifestation of
intention by the obligee. The manifestation may be made to the
other or to a third person on his behalf and, except as provided by
statute or by contract, may be made either orally or by writing.”).
Once a valid assignment is made, “the assignor’s right to
performance by the obligor is extinguished in whole or in part and
5
the assignee acquires a right to such performance.” RESTATEMENT
(SECOND) OF CONTRACTS § 317(1) (1981); see also FDIC V. McFarland, 243
F.3d 876, 887 n.42 (5th Cir. 2001) (“[I]t is generally true that
‘an assignee takes all of the rights of the assignor, no greater
and no less[.]”) (quoting In re New Haven Projects Ltd. Liability
Co. v. City of New Haven, 225 F.3d 283, 290 n.4 (2d Cir. 2000)).
To decide whether Harris became an assignee, we must
“examine and consider the entire writing and give effect to all
provisions such that none are rendered meaningless.” Gonzalez v.
Denning, 394 F.3d 388, 392 (5th Cir. 2004) (internal citations and
quotation marks omitted). Contractual terms receive their ordinary
and plain meaning unless the contract indicates the parties
intended to give the terms a technical meaning. Id. Where a
contract is written so that it can be given “a definite or certain
legal meaning,” it is not ambiguous. Id. However, where a
contract is subject to two or more reasonable interpretations, it
is ambiguous and extrinsic evidence may be considered. Id.
In addition, ERISA requires that the SPD be “written in
a manner calculated to be understood by the average plan
participant, and . . . be sufficiently accurate and comprehensive
to reasonably apprise such participants and beneficiaries of their
rights and obligations under the plan.” 29 U.S.C. § 1022; see also
Hansen v. Continental Ins. Co., 940 F.2d 971, 981 (5th Cir. 1991)
(“[T]he very purpose of having a summary plan description of the
policy is to enable the average participant in the plan to
6
understand readily the general features of the policy, precisely so
that the average participant need not become expert in each and
every one of the requirements, provisos, conditions, and
qualifications of the policy and its legal terminology.” (emphasis
in original)). Hansen also requires that any ambiguities in the
SPD must be resolved in the employee’s favor, and the SPD must be
read as a whole. 237 F.3d at 512.
Two documents are pertinent to the assignment at issue.
The first is the “General Conditions of Treatment” document that
Crosson signed upon entering the hospital, several portions of
which are relevant. Paragraph 5 provides:
5. FINANCIAL AGREEMENT AND ASSIGNMENT OF BENEFITS: In
consideration for the services to be rendered to me, I
hereby promise to pay for those services in accordance
with the rates and terms now in effect at the Hospital,
to the extent I am legally responsible for such payment.
I hereby assign to the Hospital and any practitioner
providing care and treatment to me, any and all benefits
and all interest and rights (including causes of action
and the right to enforce payment) for services rendered
under any insurance policies or any reimbursement or
prepaid health care plan . . . .
(emphasis added). At the bottom of the page, the capitalized
statement, “THIS IS A LEGAL CONSENT AND ASSIGNMENT OF BENEFITS
FORM,” is just above where Crosson signed. Immediately below her
signature, she wrote “self” on the line identifying her
“relationship to patient or legal representative.”
Paragraph 1 of the form, labeled “CONSENT TO TREATMENT,”
states (inter alia): “If I am to receive obstetrical care, this
consent is given for any child(ren) born to me during this
7
hospitalization . . . .” Juxtaposing this paragraph’s reference to
children with the language of paragraph 5 and Crosson’s identifi-
cation of herself as the patient, the district court concluded that
the hospital’s document effected an assignment to Harris of only
the benefits due for treatment of Crosson herself, not those due
for the twins’ care.
We disagree with the district court’s analysis. Taken in
its entirety, the form signaled Crosson’s intent to assign the
twins’ claims. First, Crosson expressly consented, through para-
graph 1 of the form, to medical treatment for the newborns as well
as herself. Second, she consented, in paragraph 4, to Harris’s
release of all necessary financial and medical records to her
newborns’ physician and, in broad terms, to any entity processing
her health plan claim. Third, she assigned to Harris, in paragraph
5, “any and all benefits and all interest and rights for services
rendered under any insurance policies or prepaid health care plan.”
Fourth, in executing the “Legal Consent and Assignment of Benefits
Form,” Crosson signed alternatively as “Patient or Legal Represen-
tative.” “Legal Representative” was defined in the form’s conclud-
ing section to include the “parent” of a minor patient.
That Crosson designated herself as the “patient” was
accurate upon her admission to Harris, because the children had not
been born. The designation is, under the circumstances of her
admission and the entirety of the form, no more limiting than
Paragraph 5’s assignment “to the Hospital and any practitioner
8
providing care and treatment to me” of “any and all benefits,” etc.
(emphasis added). In this grammatically ambiguous way, Crosson
also acknowledges in paragraph 5 her personal responsibility to pay
for “the services rendered to me” (emphasis added). Under Sales
Support’s reasoning, however, the latter personal reference would
relieve Crosson of all liability to pay for the twins’ care.
Construing this form as a whole to be an insufficient assignment of
benefits for the twins thus leads to absurdity.
The SPD furnishes an additional basis for Harris’s claim,
as it characterizes the Plan’s payment obligations under the
subtitle, “Assignments to Providers”:
All Eligible Expenses reimbursable under the Health Care
Coverages of the Plan will be paid to the covered
Employee except that: (1) assignments of benefits to
Hospitals, Physicians, or other providers of service will
be honored, [or] (2) the Plan may pay benefits directly
to providers of service unless the Covered Person
requests otherwise, in writing, within the time limits
for filing proof of loss . . .
Benefits due to any PPO provider will be considered
“assigned” to such provider and will be paid directly to
such provider, whether or not a written assignment of
benefits was executed.
(emphasis added). As a PPO provider, Harris contends that this
provision of the Plan constitutes a valid assignment and confers
standing to sue. This language is straightforward: Assignments
are honored and recognized, with or without a writing. The Plan
document covers all participants in the Plan; the fact that Harris
also had a standard written assignment form for incoming patients
does not diminish the Plan’s coverage one way or the other — Harris
9
was merely attempting to ensure that it received a valid assignment
from any patient admitted for treatment. Appellees cannot use
Harris’s admission form as a means to circumvent the Plan’s
obligations under the plain language of its governing documents.4
Allowing a contrary result would undermine the relationship agreed
to between the Plan and any PPO provider with which the Plan has an
existing, “preferred” business relationship.
Appellees respond that if the Plan itself effects an
assignment to PPO providers, there would be no need further to add
that assignees will be paid directly. Harris’s interpretation,
they aver, creates an unnecessary redundancy in violation of the
maxims of contract interpretation. Why Sales Support would trumpet
its self-imposed obligation to pay PPO providers directly,
irrespective of an assignment, is perplexing. Had it actually paid
Harris directly for the services it rendered to the twins, there
would have been no need for a lawsuit.
In any event, applying the rule that SPDs be interpreted
from the perspective of a layperson, the reference to direct
payment of assignees reasonably explains to Plan members the effect
4
Sales Support invokes Letourneau Lifelike Orthotics & Prosthetics,
Inc. v. Wal-Mart Stores, Inc., 298 F.3d 348, 352 (5th Cir. 2002), for the
proposition that a plan can bar assignments in some situations. This may be
true, but it does not apply to Sales Support’s own plan, which explicitly permits
assignments. Moreover, in Letourneau, neither party contested the fact that the
plan beneficiary’s hospital entrance form constituted a valid assignment of her
rights under ERISA to the plan provider despite an anti-assignment clause in the
plan documents; the dispute was over that plan’s coverage of the services
rendered. Because the services rendered in that case were not covered by the
plan in the first place, the provider lacked standing. See id. at 352-53.
10
of an assignment. A layperson would thus be informed that, where
possible, benefits would be paid directly to the PPO provider,
rather than through the customer. Cf. Hermann Hosp. v. MEBA Med.
& Benefits Plan (“Hermann II”), 959 F.2d 569, 573 (5th Cir.
1992)(determining that “the authorization language [within the plan
summary at issue] represents nothing more than cautious and prudent
‘belt and suspenders’ drafting”). The language also protects the
Plan from a claim made by a participant after the Plan has already
reimbursed the PPO provider. That the benefits are “considered
‘assigned’” is a colloquial explanation of a legal term to the
beneficiary; this language in no way detracts from the Plan’s
responsibility to pay the PPO provider as if by express assignment
from the beneficiary.
Both Appellant and Appellees try to draw support from
Dallas County Hospital District v. Associates’ Health and Welfare
Plan, 293 F.3d 282 (5th Cir. 2002). In Dallas County, this court
held that a plan’s broadly worded anti-assignment clause did not
prevent an assignment where a separate, more specific clause in the
plan allowed assignment to a PPO provider. Id. at 288-89. The
result stemmed from a careful analysis of the relevant plan
provisions; the case does not require a decision for either party
in the instant case. To the contrary, here, after employing the
same analysis used in Dallas County and other precedents, we
conclude that the Plan itself implied an assignment of the benefits
of the Crosson twins to Harris, and the form signed by Crosson upon
11
her admission to Harris did nothing to alter this assignment.
For all these reasons, Harris is an assignee of the
twins’ benefit claims and has standing under ERISA.
This interpretation of the relevant documents comports
with the rationale supporting the assignability of benefits under
ERISA-covered plans:
To deny standing to health care providers as assignees of
beneficiaries of ERISA plans might undermine Congress’
goal of enhancing employees’ health and welfare benefit
coverage. Many providers seek assignments of benefits to
avoid billing the beneficiary directly and upsetting his
finances and to reduce the risk of non-payment. If their
status as assignees does not entitle them to federal
standing against the plan, providers would either have to
rely on the beneficiary to maintain an ERISA suit, or
they would have to sue the beneficiary. Either
alternative, indirect and uncertain as they are, would
discourage providers from becoming assignees and possibly
from helping beneficiaries who were unable to pay them
“up-front.” The providers are better situated and
financed to pursue an action for benefits owed for their
services. Allowing assignees of beneficiaries to sue
under § 1132(a) comports with the principle of
subrogation generally applied in the law.
Hermann Hosp. v. MEBA Med. & Benefits Plan (“Hermann I”), 845 F.2d
1286, 1289 n.12 (5th Cir. 1988).
B. Whether Harris’s Claims Were Time-Barred
Because Harris was properly assigned the benefits for the
Crosson twins, we must also address whether Harris’s derivative
claims are barred by the three-year limitations period included in
the Plan.
Under ERISA, a cause of action accrues after a claim for
benefits has been made and formally denied. Hall v. Nat’l Gypsum
12
Co., 105 F.3d 225, 230 (5th Cir. 1997). Because ERISA provides no
specific limitations period, we apply state law principles of
limitation. See, e.g. Hogan v. Kraft Foods, 969 F.2d 142, 145 (5th
Cir. 1992). Where a plan designates a reasonable, shorter time
period, however, that lesser limitations schedule governs.
Northlake Reg’l Med. Ctr. v. Waffle House Sys. Employee Benefit
Plan, 160 F.3d 1301, 1303-04 (11th Cir. 1998); Doe v. Blue Cross &
Blue Shield United of Wisconsin, 112 F.3d 869, 874-75 (7th Cir.
1997).
This plan requires that any action to recover benefits be
commenced within “three (3) years from the time written proof of
loss is required to be given.” Additionally, “[w]ritten proof of
loss covering the details of the loss” must be given “within ninety
days after the date of such loss.” There is no dispute among the
parties that three years is a reasonable time period.
The dispute is over how to determine what constitutes a
“loss” under the Plan, which contains no explicit definition of
“loss.” This determination will be dispositive. If the Plan
required Harris to submit claims for the twins’ expenses each day
those expenses were incurred, on the theory that each day of
hospitalization is a “loss,” then the limitations period estops
Harris from obtaining reimbursement for all but two days’ worth of
13
claims.5 On the other hand, if the “loss” includes all the charges
for the duration of the twins’ hospital stay, then the Plan
required Harris to submit its claim only after they left the
hospital, and the claim for the full award of nearly $700,000 is
timely.
Appellees point to the Plan’s specification that medical
expenses are deemed incurred on “the actual date a service is
rendered” and implies that the Plan obliged Harris to submit claims
for expenses incurred by the twins on a daily basis. Later in
their brief, however, Appellees acknowledge that the date of loss
may alternatively run from the dates on which Harris submitted
interim billings for services. Harris, by contrast, contends that
a reasonable interpretation of the Plan allows recovery of all
expenses incurred by the twins because the “loss” should include
expenses for the entire hospitalization. According to Harris, the
particular circumstances under which the loss occurred — Crosson’s
giving birth to extremely premature twins and their continuous
hospitalization throughout this period — demonstrate that it would
have been reasonable for Harris to provide proof of loss to the
Plan after the twins’ departure. As a result, application of the
ninety-day proof of loss requirement, starting on April 1, 1998,
5
Harris filed the instant action on July 21, 2001. Three years and
ninety days prior to the filing date is March 31, 1998. Thus, if Appellees’ view
of the Plan controls, Harris can only recover expenses incurred on or after March
31, 1998, two days before the twins left the hospital. If Harris’s view
prevails, the three-years-and-ninety-days limitations period did not commence
until the twins left the hospital April 1, 1998, and thus none of the claim is
time barred.
14
would lead to a suit-filing deadline in July 2001.
Resolution of this dispute must stem from the background
principle that SPDs must be read and interpreted from the
perspective of a layperson. Lynd v. Reliance Standard Life Ins.
Co., 94 F.3d 979, 983 (5th Cir. 1996). So viewed, Harris has the
better of the argument. The ambiguity in Appellees’ interpretation
of “loss” is telling.6 The term is ambiguous because proofs of
“loss” must necessarily be filed based on the practicalities
surrounding each treatment regime covered by the Plan. Thus, a
single doctor visit could require a “proof of loss”; a series of
physical therapy treatments for back problems could reasonably
generate one or several proofs; a hospitalization may garner one or
several proofs. The ninety-day limit (or if applicable, the one-
year limit) constitutes a periodic deadline for filing such claims,
and such deadlines reasonably assure that claims will not be stale
when filed. Appellees, of course, do not contend that Harris,
following an interim billing regime, failed to meet the ninety-day
cutoffs. It is these deadlines, not the term “loss,” that govern
6
Further bearing on the issue, the Plan contains the following
language:
Failure to furnish such proof within the time required will not
invalidate nor reduce any claim if it can be shown that it was not
reasonably possible to file proof within such time, provided such
proof is furnished as soon as reasonably possible and in no event
. . . later than twelve (12) months from the date on which the
covered charges were incurred.
The twelve-month extension is in tension with Appellees’ position that Harris
needed to report complete charges on a daily basis to avoid running afoul of the
limitations period.
15
the timeliness of claims.
Sales Support tacitly acknowledges the absurdity of
construing “loss” to mean each day’s services during the
hospitalization, yet it seems equally arbitrary and unrealistic to
tie the three-year limitations deadline, as Sales Support
advocates, to the dates of each of the hospital’s interim bills.
Doing so could require the hospital to have filed separate suits to
recover for its separately billed charges. We conclude that the
term “loss” must be practically construed and varies depending on
the circumstances of medical care covered by the Plan; the
hospitalization in this case constituted one event of “loss” for
purposes of applying the Plan’s three-year deadline for filing
suit; and that “loss” accrued on the date of the twins’ discharge.
The hospital timely filed suit.
III. Conclusion
For the reasons stated above, we REVERSE and REMAND the
case to the district court for further proceedings consistent with
this opinion.
16