A universal part of the American medical experience is paperwork. Everyone is familiar with visiting a healthcare provider for the first time, filling out history forms and signing pages of documents that they either do not understand or do not care about. The Ninth Circuit recently grappled with a minimally explored legal issue surrounding one such document: whether a non-participant healthcare provider, as assignee of health plan beneficiaries under an assignment form, has Article III standing to bring a denial of benefits claim under ERISA.
Plaintiff Spinedex was a physical therapy clinic that had a number of patients covered by the defendant health plans although plaintiff was not a provider for plan participants. United Healthcare served as claims administrator for the defendant health plans and also insured many of those plans. New Spinedex patients were required to sign, among other things, an assignment of benefits form, an authorization of representation form, an enrollment form, and a financial policy form. The enrollment form included an acknowledgment that patients were liable for all costs of services provided; similarly, the financial policy explained patients would be responsible for any treatment costs not covered by their health plans.
The assignment form and authorization form, respectively, assigned Spinedex its patients “rights and benefits” under their respective health plans and authorized Spinedex to represent patients in administrative or civil proceedings that may arise in pursuit of benefits under their health plans. Most of the defendant health plans allowed written assignment of claims by their subscribers. Spinedex submitted claims to United after treating patients covered by the plans and United denied a number of such claims in whole or in part. Spinedex did not seek payment from its patients. These denials ultimately resulted in litigation when Spinedex sued United Healthcare and 44 health plans governed by ERISA for which United Healthcare was the claims administrator of the Plans. Under the Plans, for out-of-network care, Plan beneficiaries were required to request payment from their respective Plans. After defendants filed summary judgment based on lack of standing, the District Court granted summary judgment, holding, inter alia, that Spinedex lacked Article III standing to bring its denial of benefits and breach of fiduciary duty claims. Spinedex appealed.
The Ninth Circuit began by recognizing that, under ERISA’s civil enforcement provision, only participants, beneficiaries, fiduciaries, and the secretary of labor are empowered to bring a civil action. Spinedex was none of the above, thereby requiring it to “[bring a civil claim] derivatively, relying on its patients’ assignments of their benefits claims.” The defendants’ argument hinged on the first element of Article III standing: “[A] plaintiff must show (1) it has suffered an “injury in fact” that is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical.” Spinedex PT v. United Healthcare, citing Friends of the Earth, Inc. v. Laidlaw Envtl. Servs. (TOC), Inc., 528 U.S. 167, 180–81 (2000).
Specifically, the defendants argued that the assigning patients have not suffered an “injury in fact” because Spinedex had not sought payment from its assigning patients for any shortfall. Therefore, defendants argued that since Spinedex stands in the shoes of, and can have no greater injury than, its assignors, Spinedex did not suffer injury in fact.
The court thoroughly dismantled this argument. It relied on at least one case from the Eleventh Circuit directly on point (the only other federal court to directly address this issue): HCA Health Services of Georgia, Inc. v. Employers Health Insurance Co., 240 F.3d 982 (11th Cir. 2001) (“HCA”). In that case, the defendant argued that the plaintiff lacked Article III standing because it failed to bill its patient-assignor for the denied benefits and thus lacked standing. The court in HCA disagreed and held that an assignee healthcare provider had standing to sue for recovery of benefits.
The Ninth Circuit also compared the present case to the Supreme Court’s decision in Sprint Communications Co. v. APCC Services, Inc., 554 U.S. 269 (2008). In that case, payphone operators had assigned third party aggregator companies their right to sue long-distance carriers for money owed, with an agreement that the aggregators would pay the proceeds of the suits back to the operators, minus a small fee. Sprint Communications was decided in a five-four split, with the dissent raising concern that the assignee had no stake in the outcome of the litigation beyond their fee. Here, Spinedex had an interest because its “patients assigned the entirety of their claims against the Plans, and Spinedex, as assignee, is permitted to keep all amounts recovered in suits brought on those claims.”
The defendants in Spinedex insisted that the plaintiff’s choice to not seek payment from the patients meant that those patients, as assignors, suffered no injury in fact after they assigned their rights. The court disagreed, stating “the patients’ injury in fact after the assignment is irrelevant.” Spinedex only took the rights the assignors had at the time, which included the right to seek payment directly from the health plans for charges by non-participant health care providers. Spinedex’s decision to not pursue its legal rights against its patients for payment did not affect it’s right to recover from the defendants.
The Ninth Circuit did not agree with all of Spinedex’s arguments, however. The court affirmed that the anti-assignment clause in one of the health plans precluded an assignment of benefits from the plan’s beneficiaries to Spinedex. The court also rejected Spinedex’s argument that the “assignment of rights and benefits” included the right to bring claims for breach of fiduciary duty, citing that the context of the agreement appears limited to issues of payment.
This decision is well reasoned and allows providers who have performed valuable services for plan participants to be paid directly from the ERISA plans that insure their patients and does not force the often needless action of actually seeking payment from them. Limiting physicians’ first recourse to their patients would have chilling effects both on providers and plan participants. Participants may forgo or delay vital healthcare because they cannot finance or they cannot pay for their care, and providers may limit their care to those participants whose health plans have previously paid properly assigned healthcare claims or participants who are able to first to pay for the care. But, these providers must first check the plans’ terms to assure themselves that they do not contain anti-assignment clauses