The opinion of the court was delivered by: Matthew F. Kennelly, District Judge
MEMORANDUM OPINION AND ORDER
The plaintiffs in this case are chiropractic physicians who have provided services to members of health care plans insured or administered by the defendants, and professional associations whose members are chiropractic physicians. The defendants are Blue Cross and Blue Shield of America (BCBSA) and individual Blue Cross and Blue Shield entities (BCBS entities). BCBSA is a national umbrella organization that facilitates the activities of individual BCBS entities. Individual BCBS entities insure and administer health care plans to Blue Cross and Blue Shield customers (BCBS insureds) in various regions.
Plaintiffs' allegations all concern actions they allege the defendants took to improperly take money belonging to plaintiffs. They allege that defendants would initially reimburse plaintiffs for services they provided to BCBS insureds and then sometime afterward would make a false or fraudulent determination that the payments had been in error and would demand repayment from plaintiffs. If the plaintiffs refused to return the payment as demanded, defendants would force recoupment by withholding payment on other, unrelated claims for services plaintiffs provided to other BCBS insureds. Plaintiffs contend defendants' actions violated the Racketeer Influenced and Corrupt Organizations Act (RICO), the Employee Retirement Income Security Act (ERISA), and Florida state law (with respect to plaintiffs and defendants located in Florida). On behalf of themselves, their members, and a putative class of similarly-situated health care providers, plaintiffs seek to recover the money that they allege defendants improperly recouped from them and to enjoin defendants from engaging in similar behavior in the future.
Defendants have moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) on several grounds. They argue that plaintiffs have failed to plead facts that, if true, would give rise to a viable RICO or ERISA claim. They further contend that several plaintiffs lack standing to sue and that the factual allegations regarding several individual BCBS entities are too scant to allow claims to proceed against those entities. They argue that some plaintiffs' claims are precluded under the doctrine of accord and satisfaction because those plaintiffs have reached monetary settlements with the BCBS entities that made repayment demands against them. Finally, they argue that one claim (count 6) must be dismissed because the Florida statute at issue in that claim does not provide for a private right of action.*fn1
For the reasons below, the Court grants defendants' motion with regard to the RICO claims, denies the motion with regard to the ERISA claims, denies the motion in part and grants it in part with regard to the standing argument, denies the motion with regard to arguments concerning particular plaintiffs or defendants involving factual insufficiency or accord and satisfaction, and defers ruling on the motion with regard to the Florida law claim and the Rhode Island plaintiffs.
When considering a motion to dismiss a complaint, the Court accepts the facts stated in the complaint as true and draws reasonable inferences in favor of the plaintiff. Newell Operating Co. v. Int'l Union of United Auto., Aerospace, and Agr. Implement Workers of Am., 538 F.3d 583, 587 (7th Cir. 2008). The Court takes the following facts from the allegations in plaintiffs' amended complaint.
BCBSA is a federation of BCBS entities that licenses the use of the BCBS name. The remaining defendants are regional BCBS entities, health care companies that have licenses from BCBSA to use the BCBS name. BCBS entities work together, with the oversight and assistance of BCBSA, to administer health care plans to people insured by BCBS entities.
A number of the plaintiffs, Drs. Kuhlman, Korsen, Gearhart, Leri, Askar, Barnard, Wahner, Fava, Barber, Ford, Miggins, Paulsen, Renneke, Reno, Dwyer, Young, and Thompson, are licensed chiropractors. Plaintiff Barlow is a licensed occupational therapist. For purposes of this opinion, the Court refers to these plainitffs collectively as the "individual plaintiffs".
During the period when the acts giving rise to plaintiffs' claims took place, each of the individual plaintiffs had a signed contract (a "provider agreement") with at least one BCBS entity in the region where the plaintiff practiced. For purposes of this opinion, the Court refers to the BCBS entity with which a plaintiff signed a provider agreement as that plaintiff's "local BCBS entity." Pursuant to these contracts, plaintiffs agreed to provide covered services to BCBS insureds at agreed-upon discounted rates, in exchange for obtaining access to BCBS insureds of all BCBS entities. Under the terms of the provider agreements, a plaintiff could provide medical services to any BCBS insured and then submit a reimbursement form to the insured's local BCBS entity, which would administer payment to that plaintiff for services rendered to the BCBS insured.
The provider agreements limit reimbursement to "covered services," as defined in the agreements. If an individual plaintiff provided services to a BCBS insured that did not fall under the "covered services" definition, the plaintiff would not be reimbursed for those services. Typically, plaintiffs have patients sign agreements in advance of treatment stating that it is the responsibility of the patient to pay for any services that are not reimbursed by the insurer.
Several plaintiffs, the Pennsylvania Chiropractic Association, New York Chiropractic Council, Association of New Jersey Chiropractors, Florida Chiropractic Association, and California Chiropractic Association, are professional associations whose members consist of chiropractic physicians. The Court refers to these plaintiffs collectively as the "association plaintiffs." Members of these associations often have provider agreements with BCBS entities with terms similar or identical to those described above.
Though an individual plaintiff's contract is with his local BCBS entity, a BCBS insured may obtain health care services from any doctor in the nationwide network of BCBS entities. An insured, therefore, may be treated by a physician whose provider agreement is with a BCBS entity other than the one that insures the BCBS insured. If a patient's insurance is provided through a BCBS entity outside the state where medical services are performed (for example, if a patient is insured by her employer, whose headquarters are in state A, but she receives treatment from a provider in state B), the BCBS entity that operates in the state where she is treated (state B) is referred to as the "host plan," while the BCBS entity that actually insures or administers her insurance plan (state A) is referred to as the "home plan".
When a doctor provides medical services to a patient who is insured by an outof-state BCBS entity, he submits a claim for reimbursement to his local BCBS entity (the host plan). The host plan processes the claim and determines the amount of reimbursement due to the doctor. The host plan then consults with the BCBS entity that administers the patient's insurance (the home plan). The home plan determines whether the services that were provided to the patient are "covered services" under her health insurance plan. If the services are covered services, the home plan authorizes the host plan to pay benefits to the doctor. The ultimate financial responsibility for paying the benefits rests with the home plan. Benefits are paid either from the home plan's own assets (in the case of a "fully insured" plan) or from the assets of the patient's employer (in the case of a "self-funded" plan). The process through which BCBS entities collaborate to ensure nationwide coverage for BCBS Insureds is known as the BlueCard program. The BlueCard program is implemented and overseen by BCBSA.
During the relevant period, the individual plaintiffs submitted claims for reimbursement to their local BCBS entities for services provided to both local and outof-state BCBS insureds. Plaintiffs assert that the "vast majority" of the BCBS insureds on whose behalf plaintiffs submitted claims received their insurance from BCBS entities as part of private employee welfare benefit plans that are subject to ERISA.
B. Plaintiffs' allegations
Plaintiffs' claims stem from what they allege was a practice of defendants to improperly recoup money that had previously been paid to plaintiffs for medical services they had provided to BCBS insureds. Plaintiffs allege that defendants would pay for services and then sometime later would make a false or fraudulent determination that individual plaintiffs had been overpaid for those services. Defendants would demand that individual plaintiffs repay the supposedly overpaid amounts immediately but would not provide information about which claims, services, or patients were allegedly the subject of overpayment.
Plaintiffs allege that when defendants made these repayment demands, they often offered no appeal process at all. When an appeal process was available, plaintiffs allege, defendants refused to provide specific details about which patients, claims, and plans were affected. This, plaintiffs allege, made it difficult or impossible for them to challenge the reimbursement demands effectively. Plaintiffs further allege that defendants threatened to, and in some cases actually did, force individual plaintiffs to repay the amounts they allegedly owed. Defendants did this by withholding payments to which plaintiffs were otherwise entitled for unrelated claims they had submitted on behalf of other BCBS insureds.
Plaintiffs sue on behalf of themselves and, in the case of association plaintiffs, on behalf of their members. They also sue on behalf of a putative class of similarly-situated individual plaintiffs.
1. RICO Allegations (Counts 3, 4 and 5)
Plaintiffs contend that the repayment demands and forced recoupments are part of a nationwide fraudulent scheme by BCBSA and numerous BCBS entities to improperly obtain funds from health care providers, including the individual plaintiffs and members of the association plaintiffs' organizations. BCBSA has a national anti-fraud department, and individual BCBS entities have their own anti-fraud departments. Plaintiffs allege that BCBSA used its national anti-fraud department to organize the local BCBS entities' anti-fraud departments and that they all worked in concert. This, plaintiffs contend, constituted an association-in-fact "enterprise" under RICO.
Plaintiffs allege that working together, the anti-fraud departments identified targets and then coerced payments from providers by making vague allegations of overpayment without a legitimate basis, failing to provide an appeal process, and then forcibly recouping the money by withholding it on other, unrelated claims. They contend that plaintiffs participated in the conduct of the enterprise through a pattern of racketeering activity, including using the mail to deliver false recoupment demands and benefit denials and stealing money from employee benefit plans in an effort to enhance their profits. Plaintiffs allege that these acts violated RICO, 18 U.S.C. § 1962(c).
2. ERISA Allegations (Counts 1, 2, and 7)
Plaintiffs allege that the repayment requests and forced recoupments also violated the terms of ERISA, which governs claims relating to any BCBS insured whose insurance is provided through a private employee benefit plan. Defendants argue that all the repayment demands were made pursuant to the provider agreements between individual plaintiffs and their local BCBS entities and therefore fall outside ERISA's purview.
Plaintiffs allege that defendants told the individual plaintiffs that the repayment demands were being made for a variety of reasons. These included: the individual plaintiff used the wrong code when billing for the service provided; the patient was no longer covered by the insurance plan when the service was performed; the patient's claims were covered by another insurer; or the individual plaintiff had mischaracterized the service provided as "mechanical traction" when it was not, in an effort to bring it under the umbrella of "covered services." Plaintiffs argue that despite what defendants say, the repayment demands and subsequent recoupment efforts actually amount to "adverse benefit determinations" -- that is, post hoc determinations that the services provided were not covered by the terms of the patient's insurance plan. Under ERISA, patients (and, by assignment, their physicians) have certain rights when an insurer makes an adverse benefit determination. These rights include adequate notice and opportunity for a full and fair review of an adverse benefits determination. Plaintiffs allege defendants did not comply with these procedures and that this practice of making post hoc adverse benefit determinations without an adequate appeals process violates ERISA, 29 U.S.C. § 1132(a)(1)(B) and 29 U.S.C. §1132(a)(3).
3. Florida State Law Claim (Count 6)
Plaintiffs Florida Chiropractic Association and Dwyer (the "Florida plaintiffs") and defendant Blue Cross Blue Shield of Florida (BCBSF) operate in Florida. BCBSF policies impose limits on the number of spinal manipulations that can be performed on a patient in a calendar year. The Florida plaintiffs contend that these limits violate a Florida state statute that prohibits discrimination against medical services provided by chiropractors, Section 627.419 of the Florida Code.
Plaintiffs seek recovery of money they allege was improperly recouped and declaratory and injunctive relief to prevent defendants from engaging in these disputed practices going forward.
Defendants have moved to dismiss plaintiffs' RICO and ERISA claims pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim on which relief can be granted. They have moved to dismiss the Florida state law claim because, they contend, the statute does not provide for a private right of action. They have also moved to dismiss all claims against certain defendants, alleging that the factual allegations in the complaint are too sparse to support a claim against these defendants. They have also moved to dismiss the claims of several individual plaintiffs on various procedural grounds. For the reasons stated below, the Court denies the motion in part and grants it in part.
When considering a motion to dismiss a complaint, the Court accepts the facts stated in the complaint as true and draws reasonable inferences in favor of the plaintiff. Newell Operating Co. v. Int'l Union of United Auto., Aerospace, and Agr. Implement Workers of Am., 538 F.3d 583, 587 (7th Cir. 2008). Though Federal Rule of Civil Procedure 8(a)(2) does not require a complaint to include "detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement 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) (internal citations omitted).
The Seventh Circuit recently noted that "the height of the pleading requirement is relative to circumstances." Cooney v. Rossiter, 583 F.3d 967, 971 (7th Cir. 2009). In complex cases like the RICO and ERISA claims at issue here, "a fuller set of factual allegations . . . may be necessary to show that the plaintiff's claim is not 'largely groundless.'" Limestone Dev. Corp. v. Village of Lemont, 520 F.3d 797, 803 (7th Cir. 2008). When, as in this case, discovery would be time-consuming and expensive, "the complaint must include as much factual detail and argument as may be required to show that the plaintiff has a plausible claim." Id. at 803-04. To be plausible, and thus survive a motion to dismiss, a complaint must include "enough fact to raise a reasonable expectation that discovery will reveal evidence" of defendants' liability. Twombly, 540 U.S.at 556.
A. RICO Claims (Counts 3, 4, and 5)
Plaintiffs allege that BCBSA and the BCBS entities participated in an enterprise (which they call the "recoupment enterprise") for the purpose of "creat[ing] a mechanism by which Defendants could enhance their profits by obtaining funds from providers . . . in a fashion designed to discourage opposition and avoid the obligations and duties Defendants otherwise were required to comply with." Compl. ¶ 527. They allege that the defendants worked together through their respective anti-fraud departments and refund departments "to design and implement a fraudulent scheme to obtain millions of dollars from Plaintiffs and members of the Classes through improper recoupment demands and forced recoupment payments." Id. ¶ 433.
In count 3, plaintiffs allege that defendants engaged in mail and wire fraud in furtherance of the recoupment scheme, in violation of 18 U.S.C. § 1962(c). In count 4, they allege that defendants stole or embezzled from employee benefit plans in furtherance of the recoupment scheme, in violation of 18 U.S.C. § 1961(1)(B). In count 5, plaintiffs reassert the RICO allegations from counts 3 and 4 and seek declaratory and injunctive relief to enjoin the defendants from continuing to engage in the allegedly illegal practices. Defendants have moved to dismiss these claims on several grounds, which the Court considers in turn.
Defendants devote a good deal of their brief in support of the motion to dismiss arguing that plaintiffs' RICO allegations are simply implausible and that the Court should dismiss them on those grounds. The defendants read too broadly the Supreme Court's cases on the "plausibility" requirement of federal pleading.
Defendants argue that "plaintiffs' RICO claims rest on the utterly implausible theory that the RICO Defendants are using anti-fraud efforts -- in conjunction with major law enforcement agencies and many others throughout the industry -- to perpetuate wide-ranging thievery from health care providers, effectuated through mail and wire fraud." Mem. in Supp. of Joint Mot. to Dismiss RICO Claims (hereinafter "Docket No. 127"), at 12. In so arguing, defendants erroneously attempt to expand the Supreme Court's recent decisions in Twombly and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009), to give a court broad and largely unmoored discretion to determine at the outset of a case whether defendants' version of events is "much more plausible" than plaintiffs'. Docket No. 127 at 12. Twombly and Iqbal do not establish the sort of broad plausibility test that defendants encourage here.
In Twombly, the Supreme Court held that to survive a motion to dismiss, a complaint must contain sufficient factual matter, taken as true, to "state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. Iqbal instructs that "a claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 129 S.Ct. at 1949. "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. If a plaintiff is "armed with nothing more than conclusions," he is not entitled to discovery to attempt to discover facts that might support a purely speculative claim. Id.
At the motion to dismiss stage, however, the Court must accept the facts stated in the complaint as true and draw reasonable inferences in favor of the plaintiff. Twombly, 550 U.S. at 555-56; Newell Operating Co.,538 F.3d at 587. Defendants appear to read Twombly and Iqbal to suggest that a court making a plausibility determination should evaluate whether it is likely that a plaintiff will be able to prove the facts it alleges. This is incorrect. Though "a formulaic recitation of the elements of a cause of action" is insufficient to allow a plaintiff to survive a motion to dismiss, Twombly, 550 U.S. at 555, this "does not impose a probability requirement at the pleading stage; it simply calls for enough fact to raise a reasonable expectation that discovery will reveal evidence" of the alleged violation." Id. at 556. The Supreme Court has made it clear that "[a] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is very remote and unlikely." Id.
The plaintiffs in this case have made specific factual allegations they contend support an inference that defendants violated the RICO statute. These include allegations that defendants worked together through their anti-fraud and refund departments "to design and implement a fraudulent scheme" to "obtain millions of dollars" from plaintiffs through "improper recoupment demands." Compl. ¶ 433. They allege that defendants sent letters to individual plaintiffs demanding repayments that defendants knew to be false (id. ¶ 529), failed to provide an adequate appeal process to plaintiffs in an effort to obscure the nature of their actions (id. ¶ 531), and later forcibly recouped money to which they were not entitled (id. ¶ 536). Plaintiffs have alleged that defendants used computer programs and statistical modeling to identify easy targets for recoupment (id. ¶ 457) and that they calculated repayment amounts by extrapolating out from a small sample of claims without checking to see if individual claims were proper or not (id. ¶ 184). They allege that defendants withheld from plaintiffs key information, such as which patients' cases were being disputed, the dates of treatment, and the amounts billed, in an effort to prevent plaintiffs from bringing effective appeals. Id. ¶ 527. Taken as true, these factual allegations are sufficient to state a plausible claim.
2. Required Elements of a Claim Under § 1962(c)
Defendants next argue that plaintiffs' complaint fails to adequately plead the elements of a RICO violation under section 1962(c), which provides:
It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt. 18 U.S.C. § 1962(c). A claim under section 1962(c) requires a plaintiff to demonstrate "(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity." Viacom, Inc. v. Harbridge Merchant Servs, Inc., 20 F.3d 771, 778 (7th Cir. 1994) (quoting Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985)). Defendants argue that plaintiffs have not adequately alleged the existence of an enterprise, that each defendant engaged in a pattern of racketeering activity, and that each defendant proximately caused injury to each plaintiff.
Defendants argue that plaintiffs' complaint does not sufficiently allege a cognizable enterprise and that in any event, plaintiffs have not alleged facts sufficient to suggest that the individual ...