:: Health Care Provider’s Equitable Estoppel Claims Dismissed As Contrary to Plan’s MAC Provisions
According to the express language of the Plan, “Billed charges ["the amount a Provider charges for services rendered"] may be different from the amount that [Blue Cross] determines to be the Maximum Allowable Charge for services.”
Regency Hosp. of Cincinnati v. Blue Cross Blue Shield of Tenn., 2009 U.S. Dist. LEXIS 37111 (S.D. Ohio May 1, 2009)
This provider reimbursement case illustrates several hazards for the health care provider that warrant careful attention.
First, as always, “verification” calls are always less valuable than they first appear. Verification of what? (Rarely will you find a verification of “payment”).
Second, the language of assurance can be complex. In this case, as the excerpt reveals, a promise to pay the “maximum allowable charge” is far less of a commitment that it may appear.
Third, estoppel will be unavailable in most cases to backstop errors – at least where plan language is clear enough (and the plan administrator will get a pass in many cases based upon a discretionary clause).
The Facts
Regency, a provider of long term acute care hospital services, became embroiled in a dispute over a purported verification of eligibility or coverage, or both – the opinion is ambigous on this point.
The patient, Fogelson, was insured under a health plan issued by Blue Cross to Fogelson’s employer. Prior to her admission, Regency telephoned Blue Cross “to verify Fogelson’s coverage” and “to pre-certify her treatment.”
Regency alleged that a Blue Cross representative “confirmed Fogelson’s eligibility.” Later, Regency again called Blue Cross to “verify Fogelson’s coverage”, and Regency alleges that Blue Cross again “confirmed Fogelson’s eligibility”. Relying on this information, Regency provided services to Fogelson “without arranging alternate payment provisions from her.”
This Call Is Being Recorded
An interesting aspect of this case is that the conversations were recorded and the recordings used as evidence.
Resolution of this case is eased considerably due to the existence of a tape recording of the conversation between the parties where Blue Cross’s representations about coverage are expressly memorialized. The recording eliminates any genuine issue of material fact. And the tape recording entirely disproves Regency’s claims and affirms Blue Cross’s defense.
As the recording of the conversation between Blue Cross and Regency reflects, Regency asked if it would receive “usual and customary rates,” i.e., “UCR” rates, and, in response, Blue Cross expressly told Regency that “the Plan pays Maximum Allowable Charge rates.” In that same call, Blue Cross also expressly told Regency that there was a maximum lifetime benefit of $ 1,000,000.
The Litigation
Regency filed a state law action alleged breach of implied contract and estoppel. Blue Cross removed the case and moved for summary judgment. At the time the case was resolved, Regency had not amended its complaint to state a case for equitable estoppel under ERISA common law principles, but the Court removed any doubt that Regency had no estoppel case under state or federal law.
The Case For Preemption
Blue Cross argued that Regency’s state law claims are pre-empted by ERISA. Moreve, Blue Cross contended that Regency could not assert a breach of contract claim and has not pled a cognizable claim for equitable estoppel.
The Court agreed.
Negligent Misrepresentation Claim Rejected
Regency attempted a circumvention of the preemption argument by contending that it did not bring its claims seeking to enforce the terms and conditions of any health benefit plan. Rather, Regency argued, it based its claim for recovery of its damages for detrimental reliance based upon the words and actions of Blue Cross.
Regency maintains that “ERISA does not preempt state law when the state law claim is brought by an independent, third-party health care provider (such as a hospital) against an insurer for its negligent misrepresentation regarding the existence of health care coverage.” See Miami Valley Hospital v. Community Ins. Co., 2006 WL 2252669 *7 (S.D. Ohio, August 7, 2006) (Rose, J.) (quoting Transitional Hosps. Corp. v. Blue Cross & Blue Shield of Tex., Inc., 164 F.3d 952, 954 (5th Cir. 1999)).
The Court rejected this argument, stating that:
However, Transitional Hospital also held that “a hospital’s state-law claims for breach of fiduciary duty, negligence, equitable estoppel, breach of contract and fraud are preempted by ERISA when the hospital seeks to recover benefits owed under the plan to a plan participant who has assigned her rights to benefits to the hospital.” See Transitional Hosps., 164 F.3d at 954 (emphasis added).
Moreover, the Sixth Circuit has also held that ERISA preempts such estoppel and breach of contract claims. In Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272 (6th Cir. 1991), the Sixth Circuit stated that “ERISA preempts state law and state law claims that “relate to” any employee benefit plan as that term is defined therein.” Cromwell, 944 F.2d at 1275 (citing 29 U.S.C. Sec. 1 144(a) and Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987)). As such, the Sixth Circuit has specifically stated that equitable estoppel and promissory estoppel are expressly preempted. Cromwell, 944 F.2d at 1276.
On the first bill of $ 29,078.81, $ 23,022.33 was disallowed for inclusion within the Maximum Allowable Charge because, pursuant to the Plan, the charge exceeded the Diagnosis Related Grouping Rate. This disallowance left an allowed amount of $ 6,056.48. After deducting Ms. Fogelson’s $ 200 co-pay, Blue Cross properly paid 100% of the $ 5,856.48 balance.On the second bill of $ 213,648.07, $ 190,401.69 was disallowed for inclusion within the Maximum Allowable Charge because, pursuant to the Plan, the charge exceeded the Diagnosis Related Grouping Rate. This disallowance left an allowed amount of $ 23,246.38. After deducting Ms. Fogelson’s $ 200 co-pay, and $ 3,902.40 in co-insurance, 2 Blue Cross properly paid 100% of the $ 19.143.98 balance.
