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5th Cir. - Convoluted Claims Between Provider and Aetna

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  • 5th Cir. - Convoluted Claims Between Provider and Aetna

    Here's a new case out of the Fifth Circuit entitled North Cypress Medical Center Operating Company, Limited; North Cypress Medical Center Operating Company GP, LLC, v. Aetna Life Insurance Company. This is both a convoluted opinion and a very convoluted case. However, to boil it down to its simplest terms, NCMC sued Aetna alleging that Aetna underpaid out-of-network providers under ERISA and Texas law. Aetna then counterclaimed alleging that NCMC fraudulently and negligently represented its billing practices by routinely waiving patient responsibilities, yet billing Aetna for the total out-of-network cost. The District Court, somehow, held a 5 day bench trial on the ERISA causes of action and then a 3 week jury trial on the state law claims. In essence, all of that ended in a stalemate and the parties appealed. I will skip through a lot of this opinion and try to only get to the relevant ERISA stuff. NCMC first appealed arguing that it should have been entitled to more discovery.

    NCMC argues that without access to Aetna's "reimbursement methodology," it could not replicate the UCR to determine whether Aetna abused its discretion under its ERISA plans. NCMC's appeal effectively challenges two rulings: the denial of NCMC's March 2014 motion to compel disclosure of Aetna's "fee schedules" and "reimbursement methodologies," and the court's conclusion in granting Aetna judgment under Rule 52(c) and holding that NCMC was not entitled to access Aetna's database under ERISA. NCMC argues this information was relevant to establish damages, and it was ?entitled to this information under ERISA," 29 U.S.C. § 1024(b)(4).

    After granting NCMC's motion to compel production, the district court denied NCMC's subsequent motion to compel production of the same So we consider whether the error was harmless. At first glance, NCMC's argument regarding the harm of the error has some bite: Because Aetna's plans reimburse providers based on the UCR, NCMC needed to know how Aetna determined the UCR to assess whether it was paid under the terms of Aetna's plans. In other words, without this information, NCMC could not establish an ERISA violation. We disagree that the error harmed NCMC because Aetna provided methods it used to calculate its reimbursement rates.
    Further,

    NCMC also argues it was entitled to "information revealing Aetna's methodology for calculating UCR reimbursement on out-of-network claims" under ERISA, 29 U.S.C. § 1024(b)(4). We disagree.

    ERISA requires a plan administrator, upon written request, to furnish plan documents to participants and beneficiaries, including "the latest updated summary, plan description, . . . trust agreement, contract, or other instruments under which the plan is established or operated." "Any administrator . . . who fails or refuses to comply with a request for any information" may be "personally liable to such participant or beneficiary." ERISA defines "administrator" as "the person specifically so designated" in the plan or "the plan sponsor" if no administrator is designated.

    NCMC invokes ERISA §§ 104(b)(4) & 502(c) as a basis for civil penalties. But here, Aetna is neither the designated administrator nor the sponsor of the plans at issue. Instead, Aetna "serves as the third-party administrator pursuant to various [agreements]." And the Fifth Circuit does not recognize a de facto administrator doctrine in the context of an insurance company involved in claims handling. So Aetna is not subject to either ERISA's disclosure requirement or the civil penalty under the circumstances here.
    Finally, the court finds that Aetna did not abuse its discretion.

    To determine whether Aetna, as a third-party administrator, abused its discretion in construing a plan's terms, we analyze its plan interpretation in two steps. First, the court asks whether Aetna's reading is "legally correct." ERISA plans must be written to be understood by the average plan participant, so plans "are interpreted in their ordinary and popular sense as would a person of average intelligence and experience." The "most important factor to consider" is whether Aetna's "interpretation is consistent with a fair reading of the plan[s]." If so, the inquiry ends, and there was no abuse of discretion. Otherwise, the court "must then determine whether [Aetna's] decision was an abuse of discretion." This court is "not confined to this test" and may ""skip the first step if" it "can more readily determine that the decision was not an abuse of discretion.""

    Instead of comparing the plan terms to Aetna's payments, NCMC argues it is entitled to 75% of NCMC's billed charges, the amount Aetna historically allowed under Multi-Plan before August 2012. NCMC offered an estimate of Aetna's underpayment based on that figure. The district court determined that Aetna had discretionary authority to determine the UCR, so NCMC had the burden to identify specific proof of underpayment. But NCMC did not identify specific claims for which it sought recovery; there was no evidence Aetna failed to make determinations under the terms of its plans.

    NCMC makes this same argument on appeal without identifying any claim Aetna allegedly underpaid. Aetna's agreement with Multi-Plan provided for a fixed percentage of billed charges. But Aetna exercised its contractual right to stop processing NCMC's claims through Multi-Plan because NCMC's rates "greatly exceeded those of local providers." Once Aetna removed NCMC from Multi-Plan, the terms of the Multi-Plan agreement did not apply. Aetna was required to apply the reasonable and customary rate. Aetna thus processed claims by applying the coverage formula under its health care plan terms. Aetna never declined NCMC's claims; it paid them according to the "reasonable and customary amount" as defined under the plan language. Aetna also produced all information needed to determine whether it complied with the terms of its plans, and NCMC had access to every plan at issue.

    The district court therefore did not err in granting Aetna's Rule 52(c) motion for judgment as a matter of law.
    The court concludes: "Once again, we end very much like we began a virtual stalemate." I suspect this is not the last we will see of this case. The opinion is attached below.
    Attached Files
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