Houston Court Brings the Heat in Payer Provider Case

bcbs lawsuitBy: Jeff Cohen 

A recent Texas District Court case took the usually frustrating ERISA dynamics applicable in payer provider disputes and upended them in a way that helped the provider.  There (Cigna v. Humble Surgical Hospital, Civ. Action No. 4:13-CV-3291, U.S. Dist. Ct., S.D. Tex., Houston Division), the court was faced with an out of network hospital sued by CIGNA to recover payments made.  In particular, the case involved—

  • An out of network hospital (HSH);
  • HSH set its prices higher than neighboring in network hospitals;
  • HSH billed Cigna members for deductibles and coinsurance at in network rates, but billed Cigna on an out of network basis;
  • Cigna alleged that the billing practices of HSH caused Cigna to pay more than its required share under applicable plans, even though plan members paid little or nothing at all;
  • Cigna also alleged HSH paid owner physicians referral fees to induce patient referrals; and
  • Cigna sought to recover payments made to HSH.

The case is a departure from the usual scenario, which involves (a) providers suing payers for payment and relying on state laws to do so, and (b) provides side stepping those state laws by successfully arguing that the federal ERISA law applies (which usually offers provides less favorable remedies).

Instead of the usual scenario, where the payer argues that state law shouldn’t apply, but ERISA should, here Cigna argued just the opposite:  Texas laws should apply that would permit Cigna’s claims of fraud and such to progress.  Moreover, where the usual scenario typically involves the payer trying to squash a provider’s claim by alleging that the provider lacks (standing) the ability to even bring the case, here it was the provider that used the standing argument to prevent the Cigna case from progressing.

The case is interesting in the context of a recent spate of payer provider litigation.  Whether or not Cigna’s approach of paying, then challenging by using state law claims remains to be seen.  Though providers appear to be gaining ground in payer disputes in certain jurisdictions on ERISA issues that traditionally blocked provider claims (e.g. the 2014 Arizona, Spinedex case and the more recent Texas, North Cypress case), those claims arose in the usual context of providers denying payment, then being sued.  Here, Cigna’s decision to pay, then sue, then use ERISA as a sword instead of the usual shield, is novel, but was unsuccessful in this court.  Whether or not payers continue this trend remains to be seen, but providers should pay particular attention, not only as courts wrestle with the relative rights of payers and providers, but also as the existence of out of network providers appears to be expanding.

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