Keith Raymond, et al v. Avectus Healthcare Solutions,, et al

Filing

OPINION and JUDGMENT filed : REVERSED and REMANDED. Decision for publication. Gilbert S. Merritt, Alice M. Batchelder (AUTHORING), and Eric L. Clay, Circuit Judges.

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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 17a0123p.06

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

KEITH RAYMOND; TIMOTHY STRUNK, individually and
on behalf of all others similarly situated,
Plaintiffs-Appellants,
v.
AVECTUS HEALTHCARE SOLUTIONS, LLC; MERCY
HEALTH,
Defendants-Appellees.

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No. 16-4172

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Appeal from the United States District Court
for the Southern District of Ohio at Cincinnati.
No. 1:15-cv-00559—Michael R. Barrett, District Judge.
Argued: April 27, 2017
Decided and Filed: June 12, 2017
Before: MERRITT, BATCHELDER, and CLAY, Circuit Judges.
_________________
COUNSEL
ARGUED: Gary F. Franke, GARY F. FRANKE CO. LPA, Cincinnati, Ohio, for Appellants.
Ronald D. Holman II, TAFT STETTINIUS & HOLLISTER LLP, Cleveland, Ohio, for Appellee
Avectus. Kris M. Dawley, ICE MILLER LLP, Columbus, Ohio, for Appellee Mercy. ON
BRIEF: Gary F. Franke, Michael D. O’Neill, GARY F. FRANKE CO. LPA, Cincinnati, Ohio,
C. David Ewing, EWING & WILLIS, PLLC, Louisville, Kentucky, for Appellants. Ronald D.
Holman II, Michael J. Zbiegien, Jr.,TAFT STETTINIUS & HOLLISTER LLP, Cleveland, Ohio,
Chad R. Ziepfel, TAFT STETTINIUS & HOLLISTER LLP, Cincinnati, Ohio, for Appellee
Avectus. Kris M. Dawley, John P. Gilligan, Mary F. Geswein, ICE MILLER LLP, Columbus,
Ohio, for Appellee Mercy.

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_________________
OPINION
_________________
ALICE M. BATCHELDER, Circuit Judge. Appellants and purported class plaintiffs,
Keith Raymond and Timothy Strunk, were injured in separate accidents and were both treated by
Appellee Mercy Health. Even though Raymond and Strunk have health insurance, Mercy Health
did not submit their medical bills to their respective health insurance carriers. Instead, Mercy
Health and its debt collector, Appellee Avectus Healthcare Solutions, sought payment from any
tort settlement or award Raymond and Strunk would receive. The district court determined that
this conduct did not violate Ohio Revised Code § 1751.60. Because we disagree, we REVERSE
and REMAND for further proceedings not inconsistent with this opinion.
I.
In February 2015, Raymond was injured in a slip-and-fall accident, and he received
medical treatment at Mercy Health Anderson Hospital. In June 2013, Strunk was injured in a car
accident, and he received medical treatment at Mercy Health Clermont Hospital. Raymond and
Strunk both have health insurance, and each of their health insurance carriers has an agreement
with Mercy Health for the provision of services.1 Raymond and Strunk provided to Mercy
Health all relevant information necessary for the hospital to submit claims for coverage. Mercy
Health, however, did not submit the claims to Raymond’s and Strunk’s health insurance
providers.
Instead, Avectus, on behalf of Mercy Health, sent letters2 to Raymond’s and Strunk’s
attorneys stating the balance due for medical services and requesting that, in order to prevent
collection efforts against their respective clients, the attorneys sign a “letter of protection”

1

Avectus asserts that Raymond and Strunk failed to allege in their complaint that Mercy Health had a
contract with their health insurance carriers. Avectus is incorrect; Raymond and Strunk make that very allegation in
paragraph 45 of their complaint.
2

Avectus and Mercy Health argue that Avectus also sent letters to Raymond and Strunk directly, requesting
information about their respective tort claims. However, reference to these letters is absent from the complaint, and
Raymond and Strunk do not rely on them for any of their claims. Therefore, we do not address these letters further.

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against any settlement or judgment. Both letters also included a place for the relevant attorney’s
signature and the following language:
I agree to immediately notify Avectus Healthcare Solutions of any settlement,
judgment, or dismissal of this claim and, further, agree to withhold and pay
directly to Mercy Health [] the balance of any unpaid charges owed by the above
individual on this claim should my firm obtain any settlement or judgment for this
patient.
These letters, Raymond and Strunk assert, demonstrate that Mercy Health and Avectus
sought compensation from them for their medical expenses, in violation of Ohio Revised Code
§ 1751.60. Raymond and Strunk filed suit in the U.S. District Court for the Southern District of
Ohio, alleging eight claims, each of which the parties agree depends on Mercy Health and
Avectus’s violation of § 1751.60. The district court dismissed the complaint for failure to state a
claim, finding that § 1751.60 did not apply and Mercy Health and Avectus did not violate the
statute. This timely appeal followed.
II.
“We review de novo a district court’s decision to grant a motion to dismiss for failure to
state a claim under Rule 12(b)(6).” Jackson v. Ford Motor Co., 842 F.3d 902, 906 (6th Cir.
2016) (citation omitted). “To survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id.
(quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “The defendant has the burden of
showing that the plaintiff has failed to state a claim for relief.” Directv, Inc. v. Treesh, 487 F.3d
471, 476 (6th Cir. 2007).
The sole issue on appeal is whether Mercy Health and Avectus’s conduct is prohibited by
Ohio Revised Code § 1751.60(A).3 Section 1751.60(A) states:
Except as provided for in divisions (E) and (F) of this section, every provider or
health care facility that contracts with a health insuring corporation to provide
health care services to the health insuring corporation’s enrollees or subscribers

3

The parties briefly raise additional arguments regarding dismissal of Raymond’s and Strunk’s claims.
However, as the district court did not address these arguments in the first instance, such arguments are better suited
for review on remand and we do not address them further.

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shall seek compensation[4] for covered services solely from the health insuring
corporation and not, under any circumstances, from the enrollees or subscribers,
except for approved copayments and deductibles.
Ohio Rev. Code Ann. § 1751.60(A).
The Ohio Supreme Court has held that this section “governs providers or health-care
facilities, health-insuring corporations, and a health-insuring corporation’s insured.” King v.
ProMedica Health Sys., Inc., 955 N.E.2d 348, 350 (Ohio 2011). The statute does not apply
where a healthcare provider seeks compensation for services from a party other than a healthinsuring corporation or a health-insuring corporation’s insured. Id. at 351; see Hayberg v.
Robinson Mem’l Hosp. Found., 995 N.E.2d 888, 893 (Ohio Ct. App. 2013) (“[T]he King court
emphasized that R. C. 1751.60(A) only refers to health-care providers and health insurers . . . R.
C. 1751.60(A) is not controlling as to the amount which a hospital can seek to recovery [sic]
from an insurer other than the health insurer.”).

The statute’s prohibition on seeking

compensation does apply when “a health-care services contract is in place between a provider
and a health-insuring corporation” and the provider seeks payment from a “health-insuring
corporation’s insured.” King, 955 N.E.2d at 351.
III.
That is precisely the circumstance we are presented with in this case. Raymond and
Strunk allege that they are insured and that the healthcare provider, Mercy Health, has a contract
for services with their respective health-insurance providers. Raymond and Strunk further allege
that Mercy Health, through Avectus, by requesting that Raymond’s and Strunk’s attorneys
“withhold and pay directly to Mercy Health [] the balance of any unpaid charges owed” by
Raymond and Strunk, “collect[ed] and attempt[ed] to collect monies directly from patients” for
healthcare services. Mercy Health and Avectus thus sought payment “from a health-insuring
corporation’s insured” while in a healthcare services contract with Raymond’s and Strunk’s
health-insurance providers. See King, 955 N.E.2d at 351. Therefore, not only does § 1751.60

4

“‘Compensation’ means remuneration for the provision of health care services, determined on other than a
fee-for-service or discounted-fee-for-service basis.” Ohio Rev. Code Ann. § 1751.01(F).

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apply, but according to the allegations in the complaint, Mercy Health and Avectus’s conduct
violated the statute.
Mercy Health and Avectus assert that they did not seek compensation from Raymond and
Strunk, but attempted to collect the medical bills from the responsible third party. They argue
that their conduct is comparable to that of the healthcare providers in King and Hayberg. But the
conduct of Mercy Health and Avectus in this case is markedly different from that of the
healthcare providers in King and Hayberg. In both of those cases, the healthcare providers
sought and received payment from third-party insurers who did not have healthcare-services
contracts with the providers. See King, 955 N.E.2d at 350–51; Hayberg, 995 N.E.2d at 893. As
the Ohio Supreme Court explained in King, payment from a third-party insurer was not
“compensation” from King because the payment was a fulfillment of the third-party’s
“contractual obligation to King to cover her medical costs in the event of an accident,” and the
healthcare provider received payment from the third-party insurer, not from King. 955 N.E.2d at
350–51. The Ohio Supreme Court therefore concluded that the healthcare provider did not
violate § 1751.60 “[b]ecause King was not asked to make any payment for the services she
received.” Id. at 351. In the present case, by contrast, the protection letter seeks to require
Raymond’s and Strunk’s attorneys to withhold funds due to their clients from a tort settlement or
judgment and use them to pay the outstanding account balances directly to Mercy Health.
Therefore, unlike the healthcare providers in King and Hayberg, Mercy Health would receive
compensation for its medical services from Raymond and Strunk.
Nonetheless, Mercy Health and Avectus assert that payment of the medical bills from a
tort settlement or judgment is effectively payment by a third party. Mercy Health and Avectus
are incorrect. First, money paid by the tortfeasor to Raymond and Strunk through settlement or
judgment in a tort action belongs to Raymond and Strunk.5 Cf. Holeton v. Crouse Cartage Co.,

5

In support of the argument that any tort settlement or judgment proceeds belong to them, Raymond and
Strunk cite Spectrum Health Continuing Care Group v. Anna Marie Bowling Irrecoverable Trust Dated June 27,
2002, 410 F.3d 304, 317 (6th Cir. 2005), a case addressing whether Medicaid’s balance-billing prohibition applied
to a healthcare provider seeking partial payment from a tort settlement. This case is inapposite. The Medicaid
statute requires a healthcare provider accepting any Medicaid payment to accept such amount as “payment in full.”
Id. at 314–15 (citations omitted). The healthcare provider therefore could not seek additional funds from anyone as
no outstanding balance remained. We do not address the Spectrum opinion further.

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748 N.E.2d 1111, 1119 (Ohio 2001) (stating, in the worker’s compensation context, that “the
claimant-plaintiff has a constitutionally protected [property] interest in his or her tort recovery”).
Therefore, any withholding or payment from settlement or judgment received by Raymond and
Strunk is payment from Raymond and Strunk.
Second, Avectus and Mercy Health’s reliance on King and Hayberg in support of their
argument that payment from a tort settlement or judgment is effectively payment by a third party
is misplaced. Those courts were both presented with the argument that the medical-benefits
insurance at issue was an asset belonging to King and Hayberg and that payment from the
medical-benefits insurance settlement was essentially payment from King and Hayberg. Both
cases, however, avoid the issue, instead finding that payment of medical bills by a third-party
insurer was not compensation paid under the pertinent health insurance/healthcare provider
contract. In King, the Ohio Supreme Court simply found that the third-party insurer’s payment
“did not equate” to compensation by King.

955 N.E.2d at 350.

In Hayberg, the court

determined that
this point is irrelevant under the King analysis. According to the Supreme Court,
R. C. 1751.60(A) only applies when there is a contractual relationship between
the hospital and the insurer. Under the undisputed facts of this case, the only
contractual relationship was between appellee and the GM plan. Since no contract
existed between appellee and Nationwide [the third-party insurer], the statute is
simply inapplicable to appellee’s separate request for payment from Nationwide.
995 N.E.2d at 893. As discussed above, the present case differs from King and Hayberg. Unlike
the healthcare providers in those cases, Mercy Health and Avectus sought compensation directly
from Raymond and Strunk. The case might be very different if Mercy Health and Avectus had
billed the responsible tortfeasor or the tortfeasor’s insurance company. Instead, Mercy Health
and Avectus sought compensation only from Raymond and Strunk.
Moreover, Mercy Health and Avectus seek the balance of any unpaid medical expenses if
the relevant attorney “obtain[s] any settlement or judgment.” As Raymond and Strunk argue, the
healthcare providers do not have an interest in “any” tort settlement or judgment received by
Raymond or Strunk. Mercy Health and Avectus certainly do not have a legal interest in a tort
settlement or judgment for pain and suffering, lost wages, etc. At best, Mercy Health and

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Avectus might assert a claim on a tort settlement or judgment that includes reimbursement for
the cost of medical services rendered by Mercy Health. However, even if Mercy Health and
Avectus had a legitimate claim on a tort settlement that included reimbursement of medical
expenses, they cannot presume that any settlement or judgment amount received by Raymond
and Strunk includes such reimbursement. See State ex rel. Ohio Acad. of Trial Lawyers v.
Sheward, 715 N.E.2d 1062, 1088–90 (Ohio 1999) (finding unconstitutional Ohio Revised Code
§ 2317.45, which allowed a pre-verdict set-off of collateral benefits, because, absent special jury
interrogatories, the court could not assume that the jury’s award duplicated any collateral
benefit). Mercy Health and Avectus’s demand does not account for circumstances when a
settlement or judgment lumps together reimbursement for medical expenses and compensation
for other categories of damages in a single amount. Therefore, even if Mercy Health and
Avectus were not barred from seeking compensation from Raymond and Strunk, they might not
have an interest in Raymond’s and Strunk’s tort recoveries.
IV.
The Ohio Supreme Court has narrowly interpreted Ohio Revised Code § 1751.60 to apply
only when “a health-care services contract is in place between a provider and a health-insuring
corporation” and the provider seeks payment from a “health-insuring corporation’s insured.”
King, 955 N.E.2d at 351. That is precisely what Mercy Health and Avectus sought to do in this
case. For that reason, we REVERSE and REMAND for further proceedings not inconsistent
with this opinion.