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Bloom v. Independence Blue Cross

United States District Court, E.D. Pennsylvania

July 31, 2015





         Gerald Austin McHugh, United States District Judge.

         This case involves the broad but sometimes hard to define scope of jurisdiction under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. (" ERISA" ). The central question: is this case a simple payment dispute, unworthy of federal jurisdiction, or are Plaintiffs, even though they are providers, properly raising an issue as to the scope of patients' coverage, giving rise to interests protected by ERISA?

         Plaintiffs are Dr. Howard Bloom, a chiropractor, and his practice, Weather Vane Chiropractic, P.C. Defendants are insurance providers, Independence Blue Cross, Inc. (" IBC" ), QCC Insurance Company, Keystone Health Plan East, Inc., and AmeriHealth HMO, Inc. From May 2005 until October 2013, Dr. Bloom was a participating provider in Defendants' network of health care providers. Together, Defendants and Dr. Bloom, as an in-network provider, offered medical services to plan beneficiaries under the terms of their health care plans (" IBC Plans" ). During the course of his business relationship with Defendants, Dr. Bloom's individual rights and duties as an in-network provider were separately governed by a Professional Provider Agreement (" Provider Agreement" ).

         Plaintiffs assert that IBC rescinded coverage for certain medical procedures, after allegedly covering those same services for years, and have brought suit to enforce what they contend are their individual and derivative rights under the relevant IBC plans governed by ERISA. Specifically, Plaintiffs allege that Defendants' retroactive denial of covered benefits amounted to an " Adverse Benefits Determination" under ERISA, triggering the notice and appeal process afforded to plan beneficiaries by the statute. In addition, Plaintiffs directly bring supplemental state law claims, including breach of the Provider Agreement, fraud, negligent misrepresentation, and malicious prosecution. Defendants have moved to dismiss the entirety of Plaintiffs' First Amended Complaint, arguing Plaintiffs fail to state plausible ERISA claims, depriving this Court of subject matter jurisdiction. Because I am persuaded that Plaintiffs allege an ERISA coverage dispute under the IBC Plans via a valid assignment of rights from the plan participants, as opposed to a simple payment dispute under the Provider Agreement, Defendants' Motion to Dismiss will be denied.

         I. Relevant Facts Alleged in Plaintiffs' First Amended Complaint

         Plaintiffs' First Amended Complaint includes various details of the dispute that are not essential to resolving the instant Motion to Dismiss. In the description of the facts below, I focus only on those allegations that are particularly relevant to the current Motion.

         Dr. Howard Bloom is a licensed chiropractor in Pennsylvania who conducts his professional practice through Plaintiff Weather Vane Chiropractic, P.C. (" Weather Vane" ). First Amended Complaint ¶ 15. Including its subsidiaries, Plaintiff identifies Defendant IBC as the leading health insurer in southeastern Pennsylvania, administering health insurance benefits of more than 2.2 million Pennsylvanians. Id. at ¶ 21.

         " Pursuant to the terms of the applicable IBC Plans, IBC is required to provide IBC Plan Beneficiaries with payment or reimbursement for specified covered health care services ('Covered Services')." Id. at ¶ 22. " IBC Plan Beneficiaries" include direct plan participants, as well as their eligible spouses and children. Id. at ¶ 5. In order to receive the full extent of benefits under the IBC Plans, beneficiaries are often required to obtain Covered Services by utilizing " in-network" or " participating providers," since those providers have contractually agreed to participate in the applicable IBC plan and to render care on a fixed fee basis, as separately regulated by individual " provider agreements." Id. at ¶ 22. Stated differently, the IBC Plans control what services are considered " Covered Services" for beneficiaries, while provider agreements dictate the rights and responsibilities of the provider in performing those services. Of greatest significance here, the Provider Agreement at issue, which sets fees, does not in any way purport to control what medical services are eligible for coverage under the relevant IBC plans.

         In May 2005, Dr. Bloom signed a Professional Provider Agreement with Defendants QCC, Keystone, and AmeriHealth (together, " Independence" ). Id. at ¶ 37. The purpose of the Agreement is readily apparent on the first page: " Independence and [Dr. Bloom] mutually desire to enter into this Agreement whereby [Dr. Bloom] shall render Covered Services to Beneficiaries of the various Benefit Programs and shall be compensated by Independence therefor, as more explicitly described hereafter." Memorandum of Law In Support of Defendants' Motion to Dismiss, Exhibit A at 1. " Covered Services" are defined in the Provider Agreement as " Medically Necessary health care services and supplies that are to be provided by [Dr. Bloom] to Beneficiaries for which a Beneficiary has coverage pursuant to the applicable Benefit Program or Benefit Program Agreement." Id. at ¶ 1.10.

         Patients at Dr. Bloom's practice, Weather Vane, ordinarily signed a standard " Financial Policy" form, which included the following assignment clause: " THIS IS A DIRECT ASSIGNMENT OF MY RIGHTS AND BENEFITS UNDER THIS POLICY." First Amended Complaint at ¶ 122. Weather Vane's services included massage therapy provided by licensed massage therapists, known as " Delegated Adjunctive Therapeutic Massage Procedures" (" DATMP" ). Id. Weather Vane provided DATMP to patients " for more than five years prior to 2006." Id. at ¶ 47. During the pre-2006 time period, Defendants considered DATMP to qualify as a Covered Service under the relevant IBC plans and paid Dr. Bloom directly for those procedures. Id.

         In 2006, IBC issued a billing guide supplement that informed participating providers that IBC would cover massage, but would not cover any services performed by a massage therapist. Id. at ¶ ¶ 49-51. The guide provided: " Note: IBC does not provide reimbursement for services that are performed by a massage therapist. This applies to independently practicing massage therapists as well as those who are employed and supervised by an eligible health care professional." Id. at ¶ 51.

         Dr. Bloom alleges the note " was not incorporated or referenced in the Provider Agreement or, on information and belief, in the plan documents of IBC Plan Beneficiaries." Id. at ¶ 53. Accordingly, Dr. Bloom submits that the billing note did not, and could not, preclude reimbursement for DATMP. Id. at ¶ 54. Moreover, Dr. Bloom alleges that despite the billing note, IBC continued to pay for DATMP services provided to beneficiaries who were covered for such procedures under their applicable IBC plans. Id. at ¶ 55.

         However, IBC reversed course in 2007 and demanded reimbursement for " overpayments" made to Dr. Bloom and other Pennsylvania chiropractors by Keystone for massage services provided to their insureds from 2006 to 2007, claiming those massage procedures were not Covered Services under the applicable Keystone plans. Id. at ¶ 56. After receiving pushback regarding the legality of the overpayment notices from the Pennsylvania Chiropractic Association and numerous individual chiropractors--specifically whether the procedures were Covered Services under the plans and whether IBC had the legal right to recover payments retroactively--IBC suspended its recollection efforts. Id. at ¶ 57. IBC resumed its recollection efforts in December 2008. Id. at ¶ 58. Dr. Bloom initially entered an agreement to repay IBC in installments, subject to a reservation of his rights to recover those repayments, but he ceased payments when he learned of a lawsuit challenging IBC's right to recover under the circumstances. Id. at ¶ ¶ 59-60.

         In an alleged attempt to discourage other chiropractors from delegating activities to unlicensed support personnel, IBC decided to refer accusations of insurance fraud against Dr. Bloom to the state Attorney General in or around 2009. Id. at ¶ ¶ 62-65. Nonetheless, IBC continued to pay for massage services reported by Weather Vane from 2008 until Dr. Bloom's arrest in 2011. Id. at ¶ 66.

         IBC issued a Medical Policy Bulletin effective June 18, 2008, which included a provision that specified IBC " does not provide reimbursement for services that are performed by someone other than an eligible health care provider .... This includes massage therapists." Id. at ¶ 68. Subsequent 2009 and 2011 Bulletins contain the same or similar provisions. Id. at ¶ ¶ 70-71. However, despite these bulletins, Dr. Bloom contends that IBC has in fact continued to reimburse providers for services that the provider delegates to subordinates, such as physical therapists who delegate to assistants. Id. at ¶ 72, 85.

         On January 4, 2013, Dr. Bloom was acquitted of all criminal charges. Id. at ¶ 91. Three days later, on January 7, 2013, IBC informed Dr. Bloom that IBC would require pre-payment review of all of his claims, requiring Plaintiffs to attach supporting medical records for every patient's claim(s). Id. at ¶ 93. By letter dated April 4, 2013, IBC advised Dr. Bloom of its intent to terminate his Provider Agreement unless he " cured" various alleged breaches within 30 days. Id. at ¶ 97. The April 4, 2013 letter further advised Dr. Bloom that in order to " cure" the alleged breaches, he would be required to repay $352,948 in overpayments, primarily for services rendered by massage therapists. Id. at ¶ 98. IBC subsequently began to unilaterally offset claims due to Dr. Bloom against the $352,948 in alleged overpayments. Id. at ¶ 99-100.

         At IBC's request, Dr. Bloom submitted a Certificate of Compliance to IBC in May 2013. Id. at ¶ 101. Dr. Bloom alleges that up to 2013, IBC repeatedly confirmed that patients could receive coverage for DATMP performed by a massage therapist when Weather Vane employees would call IBC for pre-certification and confirmation of coverage. Id. at ¶ 102-106. By letter dated September 26, 2013, IBC informed Dr. Bloom that he had not cured the various material breaches of his Provider Agreement, and, as a result, his Provider Agreement would be terminated effective October 23, 2013. Id. at ¶ 107.

         II. Plaintiffs' Claims

         In their First Amended Complaint, Plaintiffs bring ten claims against Defendants challenging their conduct. The first four counts arise under the federal Employee Retirement Income Security Act (" ERISA" ). The remaining counts allege violations of state law.

         Plaintiffs' first count alleges Defendants violated ERISA based on the terms of the IBC ERISA Plans, claiming that Defendants' denial of benefits and efforts to retroactively rescind coverage through the recoup of payments constituted Adverse Benefits Determinations. Accordingly, Plaintiffs contend that Defendants failed to comply with ERISA's statutory notice and appeal requirements in violation of federal law.

         Plaintiffs' second count alleges that ERISA entitled them to a review of claims denials, and further that Defendants did not provide Plaintiffs with the review. Plaintiffs claim that Defendants' failure to provide the required process entitles them to injunctive and declaratory relief as well as unpaid benefits.

         Count Three of Plaintiffs' First Amended Complaint seeks clarification of " Plaintiffs' rights to future benefits under the terms of IBC ERISA Plans." Id. at ¶ 178. Specifically, Plaintiffs request a declaratory judgment establishing they are entitled to direct payments from IBC for DATMP.

         Count Four asks the Court for an injunction to prevent Defendants from denying claims for DATMP in the future.

         Plaintiffs' fifth count alleges a state law breach of contract claim. Specifically, Plaintiffs assert IBC violated the Provider Agreement between Dr. Bloom and IBC.

         Count Six asserts a claim of promissory estoppel against Defendants. According to Plaintiffs, Defendants repeatedly confirmed to Plaintiffs' employees that patients could receive " therapeutic massage when performed by a licensed massage therapist." Id. at ΒΆ 194. Plaintiffs acted on those confirmations and provided the service, and ...

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