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U.S. Renal Care, Inc. v. Wellspan Health

United States District Court, M.D. Pennsylvania

March 21, 2017

U.S. RENAL CARE, INC. d/b/a U.S. RENALCARE CENTRAL YORK, DIALYSIS individually and as ASSIGNEE OF PATIENT, WW, Plaintiff/ Counter-Defendant,


          SYLVIA H. RAMBO, United States District Judge

         In this action involving a dispute between a healthcare provider and an employee welfare benefit plan regarding alleged overpayments made to the healthcare provider made pursuant to the plan, Plaintiff brings claims pursuant to ERISA, as well as other state law and federal claims, regarding Defendants' recoupment of the alleged overpayments, and Defendants have responded by asserting counterclaims for the remainder of the overpayments. Presently before the court are cross-motions for summary judgment. For the reasons stated herein, the court will grant Defendants' motion for summary judgment as to Plaintiff's claims, grant in part and deny in part Defendants' motion for summary judgment as to their counterclaims, deny Plaintiff's motion for summary judgment as to its own claims, and grant in part and deny in part Plaintiff's motion for summary judgment as to Defendants' counterclaims.

         I. Background

         In considering the instant motions for summary judgment, the court relied on the uncontested facts or, where the facts were disputed, viewed the facts and deduced all reasonable inferences therefrom in the light most favorable to the nonmoving party in accordance with the relevant standard when deciding a motion for summary judgment. See Doe v. C.A.R.S. Prot. Plus, 527 F.3d 358, 362 (3d Cir. 2008).

         A. Facts[1]

         Plaintiff U.S. Renal Care, Inc. d/b/a U.S. Renal Care Central York Dialysis (“Plaintiff”) is a medical services provider that offers dialysis services. Defendant Wellspan Health (“Wellspan”) is the parent organization of Defendant Wellspan Medical Plan (the “Plan”), which is a self-funded employee welfare benefit plan within the meaning of § 3(1) of ERISA, 29 U.S.C. § 1002(1), that provides medical benefits to eligible employees and their eligible dependents. Defendant South Central Preferred, Inc. (“South Central” and, collectively with Wellspan and the Plan “Defendants”), which is also owned by Wellspan, acts as the claims administrator, Preferred Provider Organization, and Third Party Administrator for the Plan, and performs the fiduciary duties of plan administration, including making initial benefits determinations. Defendants work with Pennsylvania Preferred Health Network (“PPHN”) as their healthcare network to provide benefits to beneficiaries under the Plan.

         According to the Plan Document and Summary Plan Description, [2] the Plan provides four tiers of benefits. As an out-of-network provider within the PPHN service area, Plaintiff was entitled to benefits payments in Tier 4, which are paid at 50% of the Usual Customary and Reasonable Charge (“UCR”) - the average costs for medical services in a geographic area - until a beneficiary has met their out-of-pocket maximum, and at 100% of UCR thereafter.

         In the event of an adverse benefit determination, the Plan states that the administrator must provide written notice of the denial, which includes: the reasons for the denial; a reference to the plan provisions upon which the denial was based; a description of any additional information needed from the beneficiary to perfect the claim; notice that the beneficiary is entitled to request a review of the claim denial and a description of the appeal process; and a statement that the beneficiary has a right to bring a civil action under ERISA following any denial or appeal. The Plan defines an adverse benefit determination as “[a] denial, reduction, or termination of benefits; or . . . [a] failure to provide or make payment (in whole or in part) for a benefit.”

         From December 7, 2012 until October 31, 2014, Plaintiff provided dialysis services to patient WW, who was a beneficiary of the Plan through his spouse. In return for medical services, WW assigned all of his benefits and rights under the Plan to Plaintiff pursuant to an Assignment of Benefits (“AOB”), which included the assignment of any legal or administrative claims arising under any ERISA or non-ERISA group health plan, and directed any insurance policy or health plan pay benefits for WW directly to Plaintiff. (See Doc. 72-3.) At all relevant times, Plaintiff was considered an “out-of-network” provider under the terms of the Plan, and there was never any participating provider agreement or other contract between the Plan and Plaintiff. As WW's assignee, however, Plaintiff was entitled to payments for services provided to WW directly from the Plan, because the Plan followed the insurance industry custom of making payments directly to assignees of beneficiaries. (See Doc. 83-1, ¶¶ 13, 15.) Although South Central did not receive a copy of the AOB between WW and Plaintiff until March 24, 2013, it paid Plaintiff as an assignee because Plaintiff indicated on its claims for covered services that there had been an assignment of WW's benefits. (Id. at ¶¶ 14, 16.)

         In at least two separate phone calls, Plaintiff verified benefits with South Central, which represented that Plaintiff was an out-of-network provider and benefits would be paid, after a $250 deductible, at 50% of UCR until WW's out-of-pocket maximum for each benefit year had been met, and then at 100% of UCR. On March 21, 2013, South Central sent revised Explanations of Benefits (“EOBs”) to WW, which contained an explanation of overpayments that the Plan had made to Plaintiff for WW's dialysis services, and advising him of his right to appeal. On the same date, South Central sent Plaintiff requests for refunds of the overpayments, which stated that six claims were “paid at the incorrect benefit/network level, ” and detailed the amounts that were paid for services and the amounts that should have been paid. South Central also sent Provider Payment Reports to Plaintiff, which included further details about the allegedly overpaid claims. In total, South Central requested a refund in the amount of $59, 752.16 for the six overpaid claims. Plaintiff replied to South Central via letters dated April 26, 2013, disputing that any refund was required and requesting: 1) EOBs for each claim, including how South Central determined the overpayment; 2) the reason for the change in benefits; 3) a copy of WW's benefits under the Plan; and 4) the network being used to calculate UCR.

         South Central replied to Plaintiff via letters dated May 20, 2013, stating that there had not been any change in benefits. Instead, the claims processor erroneously paid the claims at the full billed amount rather than at 50% of UCR under the terms of the Plan. Attached to each of these letters, which responded separately to each of the six overpaid claims, were copies of the original and revised EOBs, a spreadsheet summary detailing the correctly-processed claims, as well as portions of the Plan document that defined UCR and advised of the Plan's appeal procedures should the claimant disagree with the adverse benefit determination.

         On February 21, 2014, counsel for Defendants notified Plaintiff by letter that, in addition to the overpayments that resulted from a clerical error on behalf of an employee of South Central covering dates of service from December 7, 2012 through January 13, 2013, and totaling $59, 752.16, a second set of overpayments occurred for dates of service from January 16, 2013 through October 16, 2013, totaling $145, 920.31, which were caused by a mathematical error on behalf of another South Central employee. The letter further stated that if Plaintiff did not voluntarily refund the total $205, 672.47 within ten days, Defendants would recoup the overpayments by withholding then-current and future allowable payments and possibly filing litigation.

         Plaintiff responded via counsel in a letter dated March 5, 2014, wherein it disputed the alleged overpayments and Defendants' right to recoup them, and requested the methodology used to calculate the overpayment, any documents relied on in making such calculation, and a complete fee schedule for dialysis services charged by Defendants' non-contracted payers. While counsel for Plaintiff and Defendants continued to exchange letters reiterating their positions, and referring to Plaintiff as WW's assignee, South Central sent a letter dated April 30, 2014 not to Plaintiff's counsel, but directly to WW, outlining its intention to recoup payments from Plaintiff, advising WW of his right to appeal the adverse benefits determination within 180 days, and attaching revised EOBs. Defendants subsequently began to recoup the alleged overpayments by withholding payments for services provided to WW by Plaintiff and to date has recouped a total of $45, 966.08.

         B. Procedural History

         Plaintiff initiated this action by filing a complaint on November 25, 2014, wherein it asserted claims under both ERISA and Pennsylvania state law due to Defendants' recoupment of its purported overpayments. (Doc. 1.) Defendants filed a motion to dismiss the complaint on February 18, 2015 (Doc. 19), and then on February 24, 2015, filed their own complaint against Plaintiff containing related claims in a separate action, (Civ. No. 1:15-cv-0400, Compl., Doc. 1) (hereinafter “counterclaims”), which the court consolidated into the instant matter on March 16, 2015 (see Doc. 25). In their counterclaims, Defendants asserted equitable claims under ERISA relating to the alleged overpayments as well as an unjust enrichment claim under Pennsylvania state law. (Id., ¶¶ 104, 107-110.) On April 6, 2015, Plaintiff filed a motion to dismiss Defendants' counterclaims. (Doc. 30.)

         By memorandum and order dated September 10, 2015, the court dismissed Counts I and IV of Plaintiff's complaint, which asserted, respectively, claims for state law conversion and breach of fiduciary duty under ERISA, but declined to dismiss Plaintiff's ERISA claims for benefits and inadequate notice contained in Counts II and III, or any of Defendants' counterclaims. (See Docs. 46 & 47.)

         On October 30, 2015, Plaintiff requested to expand discovery beyond the administrative record (Doc. 57), which Defendants opposed (Doc. 60). After the parties filed, with leave of the court, both a reply (Doc. 64) and sur-reply (Doc. 67), the court ordered Defendants to submit what they deemed to be the complete administrative record (Doc. 70). On February 8, 2016, Defendants submitted the administrative ...

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