Amanda Brown v. BlueCross BlueShield of Tenn. , 827 F.3d 543 ( 2016 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 16a0147p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
AMANDA G. BROWN; HARROGATE FAMILY ┐
PRACTICE LLC, │
Plaintiffs-Appellants, │
│
> No. 15-5739
v. │
│
│
BLUECROSS BLUESHIELD OF TENNESSEE, INC., │
Defendant-Appellee. │
┘
Appeal from the United States District Court
for the Eastern District of Tennessee of Chattanooga.
No. 1:14-cv-00223—Curtis L. Collier, District Judge.
Argued: March 17, 2016
Decided and Filed: June 27, 2016
Before: KETHLEDGE, DONALD, and ROTH*, Circuit Judges.
_________________
COUNSEL
ARGUED: Hudson T. Ellis, ERIC BUCHANAN & ASSOCIATES, PLLC, Chattanooga,
Tennessee, for Appellants. James T. Williams, MILLER & MARTIN PLLC, Chattanooga,
Tennessee, for Appellees. ON BRIEF: Hudson T. Ellis, Eric L. Buchanan, ERIC BUCHANAN
& ASSOCIATES, PLLC, Chattanooga, Tennessee, for Appellants. James T. Williams, Donald
J. Aho, Robert F. Parsley, MILLER & MARTIN PLLC, Chattanooga, Tennessee, for Appellees.
*
The Honorable Jane R. Roth, Senior Circuit Judge for the United States Court of Appeals for the Third
Circuit, sitting by designation.
1
No. 15-5739 Brown, et al. v. BlueCross BlueShield of Tenn. Page 2
_________________
OPINION
_________________
ROTH, Circuit Judge. Healthcare provider Harrogate Family Practice, LLC, and its
owner, Amanda Brown (collectively Harrogate), brought suit under Section 502 of the Employee
Retirement Income Security Act of 1974 (ERISA) to inter alia, enjoin Blue Cross Blue Shield of
Tennessee (Blue Cross) from recouping payments for services Harrogate provided to Blue Cross
members. The district court dismissed for lack of subject matter jurisdiction, finding that
Harrogate lacked standing under ERISA. On appeal, Harrogate argues that it has direct standing
to sue as an ERISA beneficiary or, in the alternative, that it acquired derivative standing via an
assignment of benefits from Blue Cross members. We conclude that while Harrogate does have
derivative standing through an assignment of benefits, its claim regarding recoupments falls
outside the scope of that assignment and therefore we affirm the judgment of the district court.
I. Background
Harrogate is a healthcare provider that participates in Blue Cross networks, regularly
treating patients who are participants and beneficiaries under health-benefit plans administered
by Blue Cross. Per industry practice, Harrogate’s patients signed an “Assignment of Benefits
Form,” allowing Harrogate to bill Blue Cross directly for payment of services.1 The
arrangement between Harrogate and Blue Cross is governed by a Provider Agreement, which
allows Blue Cross to perform post-payment audits and recoup overpayments from Harrogate in
the event a payment error is detected.2 The Provider Agreement includes a clause requiring that
disputes between Blue Cross and Providers be submitted to binding arbitration.
1
The “Assignment of Benefits Form” states, in relevant part, “I request that payment of authorized
insurance benefits . . . be made on my behalf to Harrogate Family Practice, LLC . . . . I understand that I am
financially responsible to the organization for any charges not covered by Health care benefits.”
2
The Provider Agreement provides, in relevant part, “Claim payments made by BCBST are contingent
upon the accuracy of diagnostic and other information provided to BCBST. If BCBST determines that it has made
erroneous overpayments or underpayments to the Professional, BCBST may recover or make additional payments to
correct such errors. . . . If BCBST determines in its sole discretion that it has made an overpayment to the
Professional, the Professional agrees to reimburse BCBST for such overpayment and BCBST may recover the
No. 15-5739 Brown, et al. v. BlueCross BlueShield of Tenn. Page 3
At issue are claims filed by Harrogate for antigen leukocyte cellular antibody (ALCAT)
tests, which purport to identify certain food allergies. Blue Cross claims that these tests are
“unproven,” with “little or no scientific rationale,” and therefore categorizes the tests as
“investigational.” Investigational treatments are not “covered, compensable services” under
Blue Cross’s Manual for Providers, which is incorporated by reference into the Provider
Agreement. The Provider Agreement also specifies that Harrogate may not “back-bill” patients
for un-reimbursed, investigational treatments unless prior to rendering such services, “the
Provider has entered into a procedure-specific written agreement with the Member, which has
advised the Member of his/her payment responsibilities.”
In November 2013, Blue Cross conducted two audits of Harrogate’s billings and found
improper payments to Harrogate for ALCAT tests. Based on these findings, Blue Cross began
recouping overpayments from Harrogate. Harrogate brought suit in the United States District
Court for the Eastern District of Tennessee, seeking declaratory and injunctive relief to bar
further recoupment by Blue Cross under ERISA §§ 502(a)(3) and 502(a)(1)(B), as well as
compensatory relief for funds that had allegedly been wrongfully recouped. Blue Cross moved
to dismiss the case under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), arguing that
Harrogate lacked standing under ERISA, and also moved to compel arbitration under the
Provider Agreement. The district court granted Blue Cross’s motion to dismiss, holding that
Harrogate did not meet the statutory definition of “beneficiary” and that Harrogate had not
received a valid assignment for the purpose of conferring derivative standing to bring suit under
ERISA. Harrogate now appeals.
amount of such overpayment by offsetting the overpayment against what is owed to the Professional for other claims
or by requesting repayment of the overpayment from the Professional.”
No. 15-5739 Brown, et al. v. BlueCross BlueShield of Tenn. Page 4
II.3 Direct Standing under ERISA
ERISA’s civil enforcement provision empowers only plan participants and beneficiaries
to bring suit to recover their benefits under a plan. 29 U.S.C. § 1132(a)(1)(b). A beneficiary is
defined as “a person designated by a participant, or by the terms of an employee benefit plan,
who is or may become entitled to a benefit thereunder.” 29 U.S.C. § 1002(8). Harrogate argues
that it meets the statutory definition of “beneficiary” because it is “designated by the applicable
ERISA Plans to receive and [does] in fact receive Plan benefits in exchange for medical care
provided to participants.”
The Sixth Circuit has long rejected this theory of ERISA standing. “The fact that
[a healthcare provider] may be entitled to payment from [an insurance company] as a result of
her clients’ participation in an employee plan does not make her a beneficiary for the purpose of
ERISA standing.” Ward v. Alternative Health Delivery Sys., Inc., 261 F.3d 624, 627 (6th Cir.
2001). This position is consistent with every other circuit that has considered the issue. See Pa.
Chiropractic Ass’n v. Independence Hosp. Indem. Plan, Inc., 802 F.3d 926, 930 (7th Cir. 2015)
(holding that healthcare providers “are not ‘beneficiaries’ as ERISA uses that term.”); Spinedex
Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282, 1289 (9th Cir.
2014) (holding that a health care provider “cannot bring claims for benefits on its own behalf”
under ERISA); Pascack Valley Hosp., Inc. v. Local 464A UFCW Welfare Reimbursement Plan,
388 F.3d 393, 400 (3d Cir. 2004) (“We conclude that the Hospital could not have brought its
claims under § 502(a) because the Hospital does not have standing to sue under that statute.”);
Hobbs v. Blue Cross Blue Shield of Ala., 276 F.3d 1236, 1241 (11th Cir. 2001) (“Healthcare
providers . . . are not considered ‘beneficiaries’ or ‘participants’ under ERISA.”). The Second
Circuit provided an excellent summary of the logic behind these holdings in its recent Rojas
decision, in which it concluded that:
3
The District Court entered a final judgment granting Blue Cross’s Motion to Dismiss under Fed. R. Civ. P.
12(b)(1) and 12(b)(6). Harrogate timely appealed the dismissal. We have jurisdiction over the present appeal
pursuant to 28 U.S.C. § 1291. We review the District Court’s dismissal for lack of subject matter jurisdiction de
novo, but accept any factual findings that the district court made in its analysis unless clearly erroneous. “Where a
defendant moves to dismiss a complaint for the lack of subject matter jurisdiction, the plaintiff has the burden of
proving jurisdiction in order to survive the motion.” Davis v. United States, 499 F.3d 590, 593-94 (6th Cir. 2007)
(internal quotations omitted).
No. 15-5739 Brown, et al. v. BlueCross BlueShield of Tenn. Page 5
“Beneficiary,” as it is used in ERISA, does not without more encompass
healthcare providers. Although the term “benefit” is not defined in ERISA, we
are persuaded that Congress did not intend to include doctors in the category of
“beneficiaries.” Benefits to which a beneficiary is entitled are bargained-for
goods, such as “medical, surgical or hospital care,” rather than a right to payment
for medical services rendered . . . . While [the Provider] may indeed be entitled to
a benefit qua benefit through operation of the plan—i.e., payment for its medical
services—[the Provider] confuses the issue. The “benefit” the plan provides
belongs to [the Provider’s] patients; [the Provider’s] claim to payment for covered
services is a function of how [the insurer] reimburses healthcare providers under
the Benefit Plan. That right to payment does not a beneficiary make.
Rojas v. Cigna Health and Life Ins. Co., 793 F.3d 253, 257-58 (2d Cir. 2015) (internal citations
omitted).
Harrogate has offered no persuasive reasoning to disturb our previous holding or
contradict those of the other circuits. Thus, consistent with our previous decision in Ward, we
hold that a healthcare provider does not qualify as a statutory beneficiary under ERISA and
therefore affirm the district court’s finding that Harrogate lacks direct standing to bring its
claims.
III. Derivative Standing under ERISA
Harrogate asserts that even if it lacks standing as a statutory beneficiary, it can still
pursue its claims under a theory of derivative standing, based on the “Assignment of Benefits
Forms” its patients signed. Derivative standing confers upon the holder of a valid assignment
“standing to sue in place of the assignor.” Misic v. Bldg. Serv. Emps. Health and Welfare Trust,
789 F.2d 1374, 1378 (9th Cir. 1986). As we previously held, a provider obtains derivative
standing to sue under ERISA only when the patient “actually convey[s]” a “valid assignment of
benefits” under the plan. Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272, 1277 (6th
Cir. 1991). Blue Cross argues that Harrogate’s “Assignment of Benefits Forms” provide only for
direct payment and are therefore insufficient to grant an assignment of rights for purposes of
derivative standing. The district court agreed, finding “no consensus among the federal courts
regarding whether language that provided for direct payment of benefits constitutes an
assignment for purposes of ERISA.”
No. 15-5739 Brown, et al. v. BlueCross BlueShield of Tenn. Page 6
However, there is now a broad consensus that “when a patient assigns payment of
insurance benefits to a healthcare provider, that provider gains standing to sue for that payment
under ERISA § 502(a).” North Jersey Brain and Spine Ctr. v. Aetna, Inc., 801 F.3d 369, 372 (3d
Cir. 2015); see also Rojas, 793 F.3d at 258 (2d Cir. 2015); Spinedex, 770 F.3d at 1289 (9th Cir.
2014); Tango Transp. v. Healthcare Fin. Servs. LLC, 322 F.3d 888, 889 (5th Cir. 2003); I.V.
Servs. of Am. v. Inn Dev. & Mgmt., 182 F.3d 51, 54 n.3 (1st Cir. 1999); Kennedy v. Conn.
General Life Ins. Co., 924 F.2d 698, 701 (7th Cir. 1991). Indeed, the case that the district court
relied most heavily upon for rejecting Harrogate’s claim of derivative standing was recently
overturned on appeal by the Third Circuit in American Chiropractic, which found that an
assignment of benefits was effective to grant the healthcare provider derivative standing under
ERISA. Am. Chiropractic Ass’n. v. Am. Specialty Health Inc., 625 F. App’x. 169, 174-75 (3d
Cir. 2015). In that case, the Third Circuit recognized that an assignment of the right to
payment—with language virtually identical to that in Harrogate’s “Assignment of Benefits”
form4—necessarily included the ability to enforce that right by bringing suit under ERISA to
collect money owed. In a companion case, the Third Circuit elaborated that “the assignment is
only as good as payment if the provider can enforce it” and therefore, “[a]n assignment of the
right to payment logically entails the right to sue for non-payment.” North Jersey Brain,
801 F.3d at 372-73.
These rulings are consistent with Congress’s stated purpose in enacting ERISA: to
“protect [] the interests of participants in employee benefit plans.” 29 U.S.C. § 1001(b).
Therefore,
[i]t does not seem that the interests of patients or the intentions of Congress would
be furthered by drawing a distinction between a patient’s assignment of her right
to receive payment and the medical provider’s ability to sue to enforce that right.
The value of such assignments lies in the fact that providers, confident in their
right to reimbursement and ability to enforce that right against insurers, can treat
patients without demanding they prove their ability to pay up front. Patients
increase their access to healthcare and transfer responsibility for litigating unpaid
4
In American Chiropractic, the relevant assignment “authorized payment of medical benefits to [the
provider] for all services rendered.” Such an assignment was sufficient to “afford [the Provider] standing to sue his
patients’ insurers for reimbursement for services he provided.” 625 F. App’x. at 174-75. Similarly, Harrogate’s
“Assignment of Benefits Forms” read: “I request that payment of authorized insurance benefits . . . be made on my
behalf to Harrogate Family Practice, LLC.”
No. 15-5739 Brown, et al. v. BlueCross BlueShield of Tenn. Page 7
claims to the provider which will ordinarily be better positioned to pursue those
claims. These advantages would be lost if an assignment of payment of benefits
did not implicitly confer standing to sue.
North Jersey Brain, 801 F.3d at 373-74 (internal citations omitted).
We agree that the assignment of the right to payment is sufficient to confer derivative
standing to bring suit for non-payment under ERISA. We therefore reverse the district court’s
holding that Harrogate’s “Assignment of Benefits Forms” were not valid assignments of benefits
for the purpose of conferring derivative standing.
IV. Scope of Harrogate’s Derivative Standing
Harrogate presents a third, more novel question for this court: whether its present suit for
recoupments falls within the scope of its derivative standing under ERISA. A healthcare
provider-assignee “stands in the shoes of the beneficiary,” and can only assert claims that could
have been brought by patients themselves. Blue Cross of Calif. v. Anesthesia Care Assoc. Med.
Grp., Inc., 187 F.3d 1045, 1051 (9th Cir. 1999); CardioNet, Inc. v. Cigna Health Corp., 751 F.3d
165, 178 (3d Cir. 2014) (“It is a basic principle of assignment law that an assignee’s rights derive
from the assignor. That is, an assignee of a contract occupies the same legal position under a
contract as did the original contracting party, he or she can acquire through the assignment no
more and no fewer rights than the assignor had, and cannot recover under the assignment any
more than the assignor could recover.”) (internal quotations omitted). In the present case, the
recoupment of payments is governed by the Provider Agreement between Harrogate and Blue
Cross, not the employee benefits agreements between Blue Cross and its members. Thus, Blue
Cross argues that a claim to enjoin recoupments falls outside the scope of Harrogate’s
assignment because it could not have been brought by the patient-assignors. Harrogate
disagrees, claiming that Blue Cross is attempting to use its post-payment recoupment procedure
to make an end-run around the protections of ERISA.
Both parties root their arguments in the seminal Ninth Circuit case Blue Cross of
California v. Anesthesia Care, 187 F.3d 1045 (9th Cir. 1999). In that case, the court considered
a dispute between Blue Cross and medical providers relating to changes to the fee schedule laid
out in the Blue Cross provider agreements and held that the providers’ claims could not be
No. 15-5739 Brown, et al. v. BlueCross BlueShield of Tenn. Page 8
brought under ERISA because “the Providers are asserting contractual breaches, and related
violations . . . that their patient-assignors could not assert [because] the patients simply are not
parties to the provider agreements between the Providers and Blue Cross.” Id. at 1051.
While on its face the Ninth Circuit’s holding appears favorable to Blue Cross, the
reasoning of the decision muddies the water. In determining that the providers’ claims fell
outside the scope of their assigned ERISA standing, the court focused on the dichotomy between
“the right to payment, which might be said to depend on the patients’ assignments to the
Providers” and “the amount, or level of payment, which depends on the terms of the provider
agreements.” Id. (emphasis removed). As the Fifth Circuit, which adopted the Ninth Circuit’s
reasoning, clarified in Lone Star OB/GYN, “any determination of benefits under the terms of a
plan—i.e., what is ‘medically necessary’ or a ‘Covered Service’—does fall within ERISA.”
Lone Star OB/GYN Associates v. Aetna Health Inc., 579 F.3d 525, 531 (5th Cir. 2009). This
distinction between “right to payment”—which falls within a provider’s derivative standing for
ERISA purposes—and “rate of payment”—which does not—has since been adopted by other
circuits as well. Conn. State Dental Ass’n, 591 F.3d 1337, 1350 (11th Cir. 2009); Pascack
Valley, 388 F.3d at 403-404.
Seizing on this dichotomy, Harrogate argues that the present case is a clear example of a
dispute over its “right to payment” for services rendered. To this end, Harrogate correctly asserts
that if Blue Cross had made an initial adverse benefit determination and denied Harrogate’s
claims upfront, Harrogate would have derivative standing to sue for payment, because the
patients—the assignors of Harrogate’s status—could have brought that same suit. Thus,
Harrogate argues that Blue Cross is attempting to evade ERISA by disguising an adverse benefit
determination by recouping money post-payment, rather than denying it upfront.
We find Harrogate’s position colorable but ultimately unpersuasive. The fundamental
basis for the Ninth Circuit’s ruling in Anesthesia Care was a distinction between claims that
could have been brought by the patient-assignors and claims that could only have been brought
by the healthcare providers. In the present case, the patient-assignors are not party to the
Provider Agreement that governs the recoupment process, and Blue Cross has no right to recoup
payments for medical care made to its members. It is axiomatic that “[a]n assignee acquires no
No. 15-5739 Brown, et al. v. BlueCross BlueShield of Tenn. Page 9
greater rights than his assignor.” Rojas, 793 F.3d at 258-59 (internal quotations omitted).
Because Harrogate’s present suit to enjoin Blue Cross’s recoupments is not a suit that Blue Cross
members could have brought, it cannot be covered by those members’ assignment of benefits.
While the ultimate effect on Harrogate may be the same (i.e. non-payment), Harrogate’s
grievance with Blue Cross is uniquely its own; it is not derivative of Harrogate’s patients.
The conclusion that the present dispute falls outside the scope of Harrogate’s assigned
standing is further bolstered by the fact that the patient-assignors are unaffected by the outcome
of this litigation. The Provider Agreement states that
Providers may not seek payment from a Blue Cross Blue Shield of Tennessee
Member where . . . [s]ervices rendered are considered investigational by Blue
Cross Blue Shield of Tennessee and are therefore non-reimbursable, unless prior
to rendering such services to the member, Provider has entered into a procedure-
specific written agreement with the Member, which advised the Member of
his/her payment responsibilities.
Provider Manual, at ¶ 14. Thus, Harrogate cannot pass the cost of Blue Cross’s recoupments
back onto its patients. That the rights of insureds and their families are not at risk reinforces the
inapplicability of ERISA. Congress enacted ERISA “to protect the economic security of
American employees by regulating employer-sponsored pension and welfare plans.” Peter K.
Stris & Victor O’Connell, ERISA & Equity, 29 ABA J. Lab. & Emp. L. 125 (2013). Allowing
Harrogate to litigate a contractual dispute in federal court under ERISA is not “necessary to
further the statute’s purposes.” Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S.
1, 21 (1983).
V. Conclusion
For the foregoing reasons we affirm the judgment of the district court.