LOURDES SPECIALTY HOSPITAL OF SOUTHERN NEW JERSEY v. H.D. SUPPLY, INC. HEALTH AND WELFARE PROGRAM

Filing 16

OPINION. Signed by Judge Noel L. Hillman on 8/10/2018. (dmr)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

LOURDES SPECIALTY HOSPITAL OF
SOUTHERN NEW JERSEY, on
assignment of Timothy W.,

No. 1:17-cv-11527 (NLH/KMW)
OPINION

Plaintiff,
v.
H.D. SUPPLY, INC. HEALTH AND
WELFARE PROGRAM,
Defendant.

APPEARANCES:
MICHAEL J. SMIKUN
MICHAEL GOTTLIEB
CALLAGY LAW, PC
650 FROM ROAD
SUITE 565
PARAMUS, NJ 07652
On behalf of Plaintiff
JAMES P. ANELLI
DANITA C. MINNIGAN
LECLAIRRYAN
ONE RIVERFRONT PLAZA
1037 RAYMOND BOULEVARD
16TH FLOOR
NEWARK, NJ 07102
On behalf of Defendant
HILLMAN, District Judge
This is an ERISA suit concerning Defendant H.D. Supply,
Inc. Health and Welfare Program’s alleged failure to properly
reimburse Plaintiff Lourdes Specialty Hospital of Southern New
Jersey for medical services provided by Plaintiff.

Before the

Court is Defendant’s Motion to Dismiss.

For the reasons that

follow, Defendant’s motion will be granted.
I.
The Court takes its facts from Plaintiff’s November 10,
2017 Complaint.

Timothy W. (“Patient”) underwent treatment in

Plaintiff’s long-term acute care facility.
insurance plan with Defendant.

Patient has an

A representative of Defendant

verified Patient’s insurance with Plaintiff.

Plaintiff obtained

an assignment of benefits from Patient, which Plaintiff alleges
enables it to bring this ERISA claim.

Pursuant to this

assignment, Plaintiff submitted a Health Insurance Claim Form in
connection with Patient’s treatment.
Patient’s first stay at the facility took place from
September 15, 2014 through October 27, 2014.

Patient’s second

stay took place from March 19, 2015 to May 29, 2015.

Patient’s

first stay was divided into three separate billing cycles;
Patient’s second stay was divided into four billing cycles.
Plaintiff’s total charges for the first billing cycle of
Patient’s first stay were $169,160.50.
in the amount of $123,031.81.

Defendant issued payment

Plaintiff pleads Defendant’s

payment for Patient’s first cycle of treatment “is consistent
with the rates promised during the insurance verification
process.”

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Plaintiff pleads that for the subsequent billing cycles,
“Defendant reimbursed Plaintiff substantially less than what was
promised during the insurance verification process and a
substantially lower percentage of usual and customary charges
than what was remitted for the first billing cycle.”

For

instance, Plaintiff’s charges for the second billing cycle of
Patient’s first stay were $178,541.29, but Defendant paid
$22,797.83.

As to the first billing cycle of Patient’s second

stay, Plaintiff’s charges were $188,432.05, but Defendant paid
$22,589.32.

As to the second billing cycle of Patient’s second

stay, Plaintiff’s total charges were $184,079.32, but Defendant
paid $26,717.13.

As to the third billing cycle of Patient’s

second stay, Plaintiff’s total charges were $184,832.89, but
Defendant paid $13,220.09.

As to the fourth billing cycle of

Patient’s second stay, Plaintiff’s charges were $324,962.93, but
Defendant paid $36,652.08.
While Plaintiff submitted appeals, Defendant did not remit
any additional payments.

Plaintiff pleads Defendant’s

reimbursement amounts to an underpayment of $1,110,106.20 based
on the terms of the insurance plan.
Plaintiff’s November 10, 2017 Complaint asserts two claims:
(1) failure to make all payments under 29 U.S.C. § 1132(a)(1)(B)
and (2) breach of fiduciary duty and co-fiduciary duty under 29

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U.S.C. §§ 1132(a)(3), 1104(a)(1), and 1105(a).

Defendant filed

a Motion to Dismiss on January 22, 2018.
II.
This Court has federal question jurisdiction pursuant to 28
U.S.C. § 1331.
III.
When considering a motion to dismiss a complaint for
failure to state a claim upon which relief can be granted
pursuant to Federal Rule of Civil Procedure 12(b)(6), a court
must accept all well-pleaded allegations in the complaint as
true and view them in the light most favorable to the plaintiff.
Evancho v. Fisher, 423 F.3d 347, 351 (3d Cir. 2005).

It is well

settled that a pleading is sufficient if it contains “a short
and plain statement of the claim showing that the pleader is
entitled to relief.”

Fed. R. Civ. P. 8(a)(2).

“While a complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations, a
plaintiff’s obligation to provide the ‘grounds’ of his
‘entitle[ment] to relief’ requires more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action will not do . . . .”

Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 555 (2007) (alteration in original)
(citations omitted) (first citing Conley v. Gibson, 355 U.S. 41,
47 (1957); Sanjuan v. Am. Bd. of Psychiatry & Neurology, Inc.,
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40 F.3d 247, 251 (7th Cir. 1994); and then citing Papasan v.
Allain, 478 U.S. 265, 286 (1986)).
To determine the sufficiency of a complaint, a
court must take three steps.
First, the court must
“tak[e] note of the elements a plaintiff must plead to
state a claim.”
Second, the court should identify
allegations that, “because they are no more than
conclusions, are not entitled to the assumption of
truth.” Third, “whe[n] there are well-pleaded factual
allegations, a court should assume their veracity and
then determine whether they plausibly give rise to an
entitlement for relief.”
Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011) (alterations
in original) (citations omitted) (quoting Ashcroft v. Iqbal, 556
U.S. 662, 664, 675, 679 (2009)).
A district court, in weighing a motion to dismiss, asks
“not whether a plaintiff will ultimately prevail but whether the
claimant is entitled to offer evidence to support the claim.”
Twombly, 550 U.S. at 563 n.8 (quoting Scheuer v. Rhoades, 416
U.S. 232, 236 (1974)); see also Iqbal, 556 U.S. at 684 (“Our
decision in Twombly expounded the pleading standard for ‘all
civil actions’ . . . .”); Fowler v. UPMC Shadyside, 578 F.3d
203, 210 (3d Cir. 2009) (“Iqbal . . . provides the final nail in
the coffin for the ‘no set of facts’ standard that applied to
federal complaints before Twombly.”).

“A motion to dismiss

should be granted if the plaintiff is unable to plead ‘enough
facts to state a claim to relief that is plausible on its

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face.’”

Malleus, 641 F.3d at 563 (quoting Twombly, 550 U.S. at

570).
IV.
The Court will grant Defendant’s Motion to Dismiss based on
the plan having a clear and unambiguous anti-assignment clause
regarding assignment of the right to sue.

The plan provides, in

pertinent part, as follows:
Benefits for medical expenses covered under this Plan
may be assigned by a member to the provider as
consideration in full for services rendered; however, if
those benefits are paid directly to the associate, the
Plan shall be deemed to have fulfilled its obligations
with respect to such benefits.
The Plan will not be
responsible for determining whether any such assignment
is valid. Payment of benefits which have been assigned
will be made directly to the assignee unless a written
request not to honor the assignment, signed by the member
and the assignee, has been received before the proof of
loss is submitted.
No member shall at any time, either during the time in
which he or she is a member in the Plan, or following
his or her termination as a member, in any manner, have
any right to assign his or her right to sue to recover
benefits under the Plan, to enforce rights due under the
Plan or to any other causes of action which he or she
may have against the Plan or its fiduciaries.
A provider which accepts an assignment of benefits, in
accordance with this Plan as consideration in full for
services rendered, is bound by the rules and provisions
set forth within the terms of this document.
(emphasis added).
The plan language is clear and unambiguous in prohibiting
an assignment of the right to sue to recover benefits.

In May

2018, the Third Circuit concluded that “anti-assignment clauses
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in ERISA-governed health insurance plans as a general matter are
enforceable.”

Am. Orthopedic & Sports Med. v. Indep. Blue Cross

Blue Shield, 890 F.3d 445, 453 (3d Cir. 2018).

Courts in the

District have held that this is true even when enforced against
a healthcare provider.

Id.; see also Univ. Spine Ctr. v.

Horizon Blue Cross Blue Shield of N.J., No. 16-8253, 2017 WL
3610486, at *2 n.3 (D.N.J. Aug. 22, 2017) (“[A]n anti-assignment
clause can be enforced against the provider of the services that
the Plan is maintained to furnish.”); Univ. Spine Ctr. v. Aetna
Inc., No. 17-8160, 2018 WL 1409796, at *5 n.6 (D.N.J. Mar. 20,
2018).
Plaintiff, however, relies on the language allowing an
assignment of benefits to a medical provider as consideration
for the medical services, arguing that “implicit in the right to
receive payment is the right to file suit for non-payment.”
Plaintiff relies on North Jersey Brain & Spine Center v. Aetna,
Inc., 801 F.3d 369 (3d Cir. 2015) in opposition to Defendant’s
motion.

In that case, the Third Circuit held that, “as a matter

of federal common law, when a patient assigns payment of
insurance benefits to a healthcare provider, that provider gains
standing to sue for that payment under ERISA § 502(a).”
372.

Id. at

It concluded that “[a]n assignment of the right to payment

logically entails the right to sue for non-payment.”

Id.

However, the Third Circuit explained the precise issue it was
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considering when making that statement: “whether a patient’s
explicit assignment of payment of insurance benefits to her
healthcare provider, without direct reference to the right to
file suit, is sufficient to give the provider standing to sue
for those benefits under ERISA § 502(a).”

Id. at 370.

The Third Circuit addressed its 2015 decision in American
Orthopedic & Sports Medicine, in which it recognized its holding
to be “that a valid assignment of benefits by a plan participant
or beneficiary transfers to such a provider both the insured’s
right to payment under a plan and his right to sue for that
payment.”

890 F.3d at 450.

The Third Circuit also reiterated

the narrowness of that holding:
[I]n NJBSC we merely held – in the absence of an antiassignment clause – that “when a patient assigns payment
of insurance benefits to a healthcare provider, [the]
provider gains standing to sue for that payment.” We
had no occasion to address the effect or enforceability
of an anti-assignment clause . . . .
Id. (second alteration in original) (citation omitted) (quoting
N. Jersey Brain & Spine Ctr., 801 F.3d at 372).

Accordingly,

the limited holding of this 2015 decision related to when an
assignment referenced only the right to benefits and not the
right to sue.

Simply put, North Jersey Brain & Spine Center did

not address the precise issue before the Court in this case.
The Court recognizes the general proposition that the right
to sue follows an assignment of the right to benefits.

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However,

the Court is faced here with an assignment of the right to
benefits coupled with a clear and unambiguous anti-assignment
clause regarding the right to sue.

The Court finds these two

provisions, dealing with two distinct rights, to be compatible.
Plaintiff has cited no authority to the contrary.

Finding the

anti-assignment clause clear and unambiguous, the Court finds
the clause enforceable here.
The Court further rejects Plaintiff’s argument that the
anti-assignment clause was waived through a course of dealing.
Plaintiff specifically pinpoints the following as purportedly
evidencing a waiver of the anti-assignment clause:
Defendant verified Patient’s insurance coverage and
Plaintiff proceeded to treat Patient.
Plaintiff then
submitted its medical bills directly to Defendant, which
were accompanied by the assignment of benefits.
Defendant, in turn, issued partial payment directly to
Plaintiff.
Plaintiff then directly engaged with
Defendant through the completion of Defendant’s internal
appeals process.
(citations omitted).
“[I]t is now well-settled law in the District of New Jersey
that the Plan did not waive the Anti-Assignment Clause by
dealing directly with the Medical Provider in the claim review
process, or by directly remitting payment to the Medical
Provider.”

Emami v. Quinteles IMS, No. 17-3069, 2017 WL

4220329, at *3 (D.N.J. Sept. 21, 2017) (motion to dismiss);
accord Univ. Spine Ctr. v. Aetna, Inc., No. 17-8161, 2018 U.S.

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Dist. LEXIS 92578, at *13 (D.N.J. May 31, 2018) (finding on a
motion to dismiss that payment of part of the plaintiff’s claim
and engagement in the appeals process is “insufficient to
establish waiver”); IGEA Brain & Spine, P.A. v. Blue Cross &
Blue Shield of Minn., No. 16-5844, 2017 WL 1968387, at *3
(D.N.J. May 12, 2017) (finding on a motion to dismiss that the
plaintiff’s preparing of a health insurance claim form demanding
reimbursement for services and the plaintiff’s engagement in the
administrative appeals process with the defendant was
“insufficient to constitute a waiver” and stating that “[s]imply
engaging in a claim review process with Plaintiff does not
demonstrate a ‘clear and decisive act’ to waive the Plan’s antiassignment provisions and confer upon Plaintiff standing”).
Indeed, the Third Circuit’s recent opinion, while
considering a claim under Pennsylvania law, held the same in
considering whether an anti-assignment provision was waived by
processing a claim form and issuing a check to the appellant.
See Am. Orthopedic, 890 F.3d at 454 (citing case law from the
District of New Jersey and concluding that “routine processing
of a claim form, issuing payment at the out-of-network rate, and
summarily denying the informal appeal do not demonstrate ‘an
evident purpose to surrender’ an objection to a provider’s
standing in a federal lawsuit”).

While Plaintiff argues its

waiver argument warrants the need for discovery it is unclear
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what additional facts would be known only to Defendant or to
third parties.

Plaintiff’s waiver argument centers on

Defendant’s course of dealing with Plaintiff, facts readily
available to Plaintiff at the pleading stage.

Assuming all of

the Complaint’s factual allegations to be true, such actions by
Defendant toward Plaintiff would not constitute a waiver of the
anti-assignment clause.
The Court will grant Defendant’s Motion to Dismiss.

An

appropriate Order will be entered.

Date: August 10, 2018
At Camden, New Jersey

s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.

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