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Northwestern Memorial Hosp. v. Lake County Bd. of Com'rs Employee Health Ben. Plan

United States District Court, N.D. Illinois, Eastern Division

November 6, 2012

NORTHWESTERN MEMORIAL HOSPITAL, Plaintiff/Counterclaim Defendant,
v.
LAKE COUNTY BOARD OF COMMISSIONERS EMPLOYEE HEALTH BENEFIT PLAN, Defendant/Counterclaim Plaintiff, and First Health Group Corp., Defendant.

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[Copyrighted Material Omitted]

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Craig Randall Houser, Grabowski Law Center, LLC, Buffalo Grove, IL, for Plaintiff/Counterclaim Defendant.

Jeremy Nabil Gayed, Barrett & McNagny, Ft. Wayne, IN, John Stephen Dull, Dull & Duggan, Crown Point, IN, John R. Storino, Jenner & Block LLP, Chicago, IL, for Defendant/Counterclaim Plaintiff.

Jeffrey C. Clark, David Jordan Pivnick, McGuireWoods LLP, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER

JOAN HUMPHREY LEFKOW, District Judge.

Northwestern Memorial Hospital (" Northwestern" ) filed a two-count amended complaint [1] against Lake County Board of Commissioners Employee Health Benefit Plan (" the Plan" ) and First Health Group Corporation (" First Health" ) claiming that the Plan improperly denied benefits in violation of the Employee Retirement Income Security Act (" ERISA" ), 29 U.S.C. §§ 1001 et seq. (count I), and that the Plan and First Health are liable for damages for breach of contract (count II). [Dkt. 13.] The Plan filed a counterclaim against Northwestern seeking, in count I, attorneys' fees under ERISA and, in count II, reimbursement for overpayment of benefits.[2] [Dkt. 19.] The Plan and First Health have moved to dismiss count II of Northwestern's amended complaint [Dkts. 20, 28], and Northwestern has moved to dismiss the Plan's counterclaim. [Dkt. 15.]

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For the reasons that follow, the Plan and First Health's motions to dismiss will be granted, and Northwestern's motions to dismiss the Plan's counterclaim will be granted with leave to amend.

BACKGROUND[3]

Northwestern is a not-for-profit hospital located in Chicago, Illinois. (Am. Compl. ¶ 1.) The Plan is an employee benefit plan organized pursuant to ERISA that provides medical benefits for eligible employees of Lake County, Indiana. ( Id. ¶¶ 2-3.) First Health owns and operates a managed care organization. ( Id. ¶ 17.) First Health entered into contracts with medical providers (such as hospitals) that agreed to provide health care at reduced rates to clients in First Health's network. ( Id. ¶¶ 17, 19.) First Health's clients included employee benefit plans. ( Id. )

Hospital Contract

On or about September 16, 2004, Northwestern and First Health entered into a " Hospital Contract," at which time Northwestern became a " preferred provider" of medical services for First Health's clients. ( Id. ¶ 18.) As a preferred provider, Northwestern agreed to accept pre-negotiated payments for medical services offered to patients covered by a health insurance plan in First Health's network. ( Id. ¶ 19.) Sometime prior to August 26, 2008, the Plan joined First Health's network, becoming a " preferred payor," meaning that Plan participants would receive the advantage of the lower reimbursement rates negotiated by First Health with providers. ( Id. ¶ 20.)

" Payment Provisions" under Article 4 of the Hospital Contract detailed payment methods between Northwestern and payors such as the Plan. The billing procedures provide in relevant part:

(a) The Contract Hospital shall bill the Payor in accordance with this Article for the provisions of Inpatient Services and Outpatient Services to Participants, and the Payor shall only be liable for the amounts provided for in Paragraph 4.2(b), less amounts from any applicable copayments, deductibles, and coordination of benefits as described in Paragraph 4.2(c).
(d) Contract Hospital shall submit UB-92 billing forms, its successor billing forms or electronic equivalent, to the Payor which provide sufficient information to identify Inpatient Services and Outpatient Services provided, actual billed charges for such services and number of days Participants received such services.

(Hospital Contract ¶¶ 4.1(a), 4.1(d) (as amended)). The payor's obligations after receiving billing forms from Northwestern are these:

(a) First Health's agreement with Payors shall require the Payor to pay Contract Hospital within 30 days of receipt of billing forms which are accurate, complete, and otherwise in accordance with this Article 4, unless otherwise required by law.
(b) After there has been a submission of billing forms in accordance with Paragraph 4.1(d) of this Contract, the Contract Hospital shall be paid by the respective Payor at the [reduced] rates set forth in Appendix A.... Notwithstanding the above, Contract Hospital shall be entitled to full billed charge payment from Payors who are legally liable for payment of a claim when and if all of the

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following conditions apply to a specific claim:
1) An accurate, complete claim has been submitted to Payor at the address listed in the " Payor Notice" provided to Contract Hospital by First Health; and
2) Payor has failed to pay Contract Hospital within sixty (60) days of receipt of the final UB-92 billing form which is complete, accurate and otherwise in accordance with this Article 4, unless required by law.
(c) Where the Payor, pursuant to applicable coordination of benefits law, is primary, the Payor shall be required to pay the amounts due under this Contract as provided in Paragraphs 4.2(a) and 4.2(b). Where the Payor is other than primary, the Payor shall be required to pay only those amounts which, when added to amounts owed to Contract ...

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