Pacific Shores Hospital v. Medical Mutual of Ohio (Related Cases) Case Nos: CV 02-4273 GHK and
CV 02-4275 CBM
This case involved two patients, who were each covered under health plans insured by Medical Mutual of Ohio (MMO).
Patient No. 1 was an 18 year-old female with a history of severe depression. Upon admission, she was extremely depressed, had suicidal ideations, with a plan and was unable to separate reality from fantasy. She also suffered bulimia. She underwent 16 days of inpatient treatment. Each day of treatment was meticulously case managed and approved by the insurer, telephonically. Pacific Shores submitted a claim for the amount of the treatment. Instead of full payment, Pacific Shores received approximately half of it from the insurer and a letter stating that there was “no documented medical necessity for providing this treatment in an inpatient setting." The letter was utterly inconsistent with the prior certifications that had been given to the hospital over the phone.
Patient No. 2 was a 34 year-old female who was admitted to Pacific Shores for treatment of major depression. She underwent approximately three weeks of inpatient treatment. Just as had been the case with Patient No. 1, each day of treatment was meticulously case managed and approved by the insurer, telephonically. Pacific Shores submitted a claim in the amount of treatment rendered. MMO paid a portion of the claim and denied the rest of it.
The two claims were handled in tandem. After several phone exchanges between Pacific Shores and MMO, the insurer eventually withdrew its denial on grounds of “medical necessity”. But then, it still refused to pay the remainder of the claim, based on yet another new ground for denial. The insurer asserted that MMO was entitled to substantially discount all charges by Pacific Shores, pursuant to the terms of a Preferred Provider (PPO) agreement between Nations Health Plan ("NHP") and another entity, formerly known as "BHC Pacific Shores Hospital".
Several phone conversations and letters were exchanged between Pacific Shores and the insurer relating to this new issue. Pacific Shores satisfied MMO that none of its charges were in any way subject to any such "discount", Pacific Shores Hospital was not the same entity as "BHC Pacific Shores Hospital" and , therefore, it was not and never had been a party to any such PPO agreement.
Notwithstanding the apparent resolution of the "PPO discount" issue, MMO still refused to pay the remainder of the claim, asserting yet another new ground for denial. At that point it contended that although benefits would be due and payable, pursuant to the terms of the Plan, those benefits were not assignable by the patient to Pacific Shores. Therefore, MMO said it was under no obligation to pay any part of the balance due to Pacific Shores.
Later on, in correspondence between attorneys, MMO resurrected the "discount" issue, in yet another form, asserting for the first time that even though Pacific Shores was not a party to any PPO agreement between Nations Health Plan ("NHP") and "BHC Pacific Shores Hospital", Pacific Shores was nevertheless bound by that PPO agreement as it was a "de facto successor" of "BHC Pacific Shores Hospital".
The assignment argument didn’t hold water. Assignments of benefits are an essential part of medical practice today and they are entirely consistent with the basic purposes of ERISA. See Misic v. Building Service Employees Health & Welfare Trust, 789 F.2d 1374, 1377 (9th Cir. 1986) and see: The Meadows v. Employers Health Insurance 826 F. Supp. 1225 (Dist. Arizona, 1993). It’s well-settled in this circuit that a health care provider with a valid assignment has the same standing to bring a civil action for non-payment under an ERISA benefit plan, as the plan participant has. See: Misic, supra at 1377-79. The only time ERISA welfare plan payments are not assignable is if there is an express non-assignment clause in the Plan. Davidowitz v. Delta Dental Plan of California, Inc. (9th Cir, 1991) 946 F.2d 1476. And there was nothing in any plan document that could have been construed as an express non-assignment clause. The argument also made no sense in light of the fact that MMO had already paid a portion of the claim directly to Pacific Shores. MMO’s “de facto” successor argument didn’t fly either. Pacific Shores was not a successor in interest to "BHC Pacific Shores Hospital".
Result: A lawsuit was filed. The case was resolved satisfactorily.