United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
MATTHEW F. KENNELLY, District Judge.
This decision constitutes the Court's findings of fact and conclusions of law following the bench trial held on the remaining claims in this case on December 2, 3, and 4, 2013.
Associations representing the interests of individual chiropractors sued Blue Cross and Blue Shield Association (BCBSA) and a number of Blue Cross Blue Shield (BCBS) entities for violations of the Employee Retirement Income Security Act (ERISA). BCBSA is a national umbrella organization that facilitates the activities of individual BCBS entities, which insure and administer health care plans for Blue Cross and Blue Shield members (BCBS insureds) in various regions.
A. Procedural history involving association plaintiffs
This case has a long and complex procedural history. On November 16, 2009, the association plaintiffs filed a first amended complaint, claiming that BCBSA and BCBS entities violated ERISA, the Racketeer Influenced and Corrupt Organizations Act (RICO), and Florida law. On May 17, 2010, the Court dismissed the RICO claims but declined to dismiss the ERISA claims. Penn. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n , No. 09 C 5619, 2010 WL 1979569 (N.D. Ill. May 17, 2010).
On June 29, 2010, plaintiffs filed a second amended complaint, in which they reasserted their ERISA and RICO claims and added a RICO conspiracy claim and an ERISA claim by a BCBS plan participant, Katherine Hopkins, on behalf of a putative class of BCBS subscribers. The Court dismissed the amended RICO claims as well as Hopkins's ERISA claim. Penn. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n , No. 09 C 5619, 2010 WL 3940694 (N.D. Ill. Oct. 6, 2010).
In January 2011, plaintiffs filed a third amended complaint, in which they amended Hopkins's ERISA claims and added defendants on those claims. The Court ultimately granted summary judgment for defendants against Hopkins. See Penn. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n , No. 09 C 5619, 2012 WL 182213 (N.D. Ill. Jan. 23, 2012).
On February 17, 2011, plaintiffs filed the current version of their complaint (the fourth amended complaint), in which they asserted ERISA claims in three counts. In count one, they sought to recover unpaid benefits that they contended BCBS entities unlawfully recouped from them. In counts two and four, plaintiffs requested injunctive and other equitable relief under section 502(a)(3) of ERISA. In count three, certain of the plaintiffs alleged that BCBSA and BCBS entities violated section 627.419 of the Florida Code, which prohibits insurance providers from discriminating against chiropractors.
On March 11, 2011, plaintiffs asked the Court to certify three classes. These included a class of health care providers from whom BCBS had recouped repayments, a class of health care subscribers from whom one of the BCBS entities sought repayments and certain health care providers sought additional payments (due to the repayment demands the providers were facing), and a class of Florida chiropractors from whom BCBS entities withheld payments in certain circumstances. On December 28, 2011, the Court denied plaintiffs' motion for class certification. Penn. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n , No. 09 C 5619, 2011 WL 6819081 (N.D. Ill.Dec. 28, 2011). Plaintiffs thereafter moved to certify a number of smaller classes. The Court denied these motions as well. Penn. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n, 286 F.R.D. 355 (N.D. Ill. 2012).
Defendants moved for summary judgment on the grounds that plaintiffs lacked standing to sue and the Court would be unable to grant the injunctive relief that plaintiffs sought. The Court denied defendants' motion, concluding that plaintiffs had associational standing and that there were forms of declaratory and injunctive relief that it could potentially order in the case. Plaintiffs moved for summary judgment on the basis that defendants had uniform practices regarding post-payment audits and repayment demand policies that disregarded ERISA's requirements. The Court denied plaintiffs' motion, finding that genuine factual disputes remained regarding what each entity's policies or approaches were. Penn. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n , No. 09 C 5619, 2013 WL 595510 (N.D. Ill. Nov. 7, 2013).
B. Procedural history of PCA v. IBC
Following the Court's November 2013 summary judgment ruling, nearly all of the remaining claims were settled. Only one set of claims remains, specifically, the claims of Pennsylvania Chiropractic Association (PCA) against Independence Blue Cross (IBC), a BCBS entity operating in certain parts of Pennsylvania. PCA alleges that IBC violated, and continues to violate, notice and appeal requirements allegedly owed to PCA members under ERISA. PCA has asked the Court for prospective injunctive relief, namely requiring IBC to reform its policies in connection with post-payment audits and seeking repayment from chiropractic care providers.
As indicated earlier, on December 2, 3, and 4, 2013, the Court conducted a bench trial on PCA's claims against IBC. The following constitutes the Court's findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a)(1).
A. Practices of PCA members
At the bench trial, PCA offered testimony from, among other witnesses, two Pennsylvania chiropractors, Mark Barnard and Barry Wahner. Both Barnard and Wahner have been chiropractors since 1991, and both are participating providers with IBC. Wahner is a current PCA member; Barnard was not when he testified at trial but was considering joining the association. PCA contended, and the evidence shows, that the two chiropractors' dealings with Independence Blue Cross are representative of those of other PCA members.
IBC administers health care benefit plans that are offered through employers and other groups. The plans typically provide for greater benefits if the plan member is treated by a health care provider who is part of a network established by IBC. IBC enters into contracts with physicians, chiropractors, and other health care providers to provide services to plan members at established rates.
Both Barnard and Wahner agreed to be participating ("in-network") providers with IBC by signing provider agreements in 1997, and each understood that the agreement governed his arrangement with IBC. They promised "to render Covered Services to Beneficiaries" according to the terms of the agreements as well as IBC's policies as outlined in its Provider Manual, including its grievance and appeals policies. Pl.'s Ex. 15 at IBC0003160; Pl.'s Ex. 16 at IBC0003177. A "Beneficiary" is "[a]n individual who, on the date of service, is eligible to receive Covered Medical Services under a Benefit Program or Benefit Program Agreement." Pl.'s Ex. 15 at IBC0003157; Pl.'s Ex. 16 at IBC0003174. Covered services are those that are "Medically Necessary" and "provided pursuant to a Benefit Program, " and "Excluded Services" are those that are not medically necessary or are not covered under the program in question. Pl.'s Ex. 15 at IBC0003158; Pl.'s Ex. 16 at IBC0003181.
The provider agreement says that IBC pays providers directly for covered services: "Unless the claim is disputed, Independence shall make payment on each of Provider's clean, completed, accurate and timely submitted claims for Covered Services rendered to a Beneficiary...." Pl.'s Ex. 15 at IBC0003163; Pl.'s Ex. 16 at IBC0003186. (Elsewhere, IBC is defined as the "Payor." Pl.'s Ex. 15 at IBC0003159; Pl.'s Ex. 16 at IBC0003182.) The agreement also defines "capitation compensation, " which is a "per Member per month (PMPM) payment, payable monthly for each Member who has selected or has been assigned to Provider." Pl.'s Ex. 15 at IBC0003158; Pl.'s Ex. 16 at IBC0003181. The IBC provider manual lists several services that are "included in the monthly capitation" and therefore "should be provided by the [primary care physician]'s designated physical and occupational therapy provider, " among them therapeutic exercise, "[a]ll physical modalities, " and occupational therapy. Def.'s Ex. 54 at IBC0005057. Further, IBC reimburses certain services, such as electric muscle stimulation, on a capitated basis only. For example, IBC will not pay a provider for having delivered electric muscle stimulation to an insured unless that provider was authorized to receive payment for that service on a capitated basis at the time it was delivered.
If a participating provider like Barnard or Wahner provides a non-covered service to a patient, the provider is required by his contract to provide advance notice to the patient that IBC will not pay for it and that the patient will be liable for the cost. If the provider does not get this advance permission, he cannot bill the patient, in accordance with the contract's "beneficiary hold harmless" clause. That provision states that "in no event" may providers charge beneficiaries or subscribers "or have any recourse against" them, "including but not limited to non-payment, insolvency, or breach of this Agreement." Pl.'s Ex. 15 at IBC0003164; Pl.'s Ex. 16 at IBC0003181.
The provider agreement also contains several provisions relating to the recoupment of funds by IBC from the provider. In the section entitled "Payment, " the agreement states that IBC will pay claims within thirty days but that it has "the right to offset claim payments to provider by any amount owed by provider to Independence." Pl.'s Ex. 15 at IBC0003163; Pl.'s Ex. 16 at IBC0003180. Section 3.11 of the document, labeled "Adjustments, " notes that "[p]ayments to Providers are subject to retroactive adjustment by Independence for up to six (6) months." Pl.'s Ex. 15 at IBC0003165; Pl.'s Ex. 16 at IBC0003182. That section allows for such adjustments in two scenarios: when IBC learns that the patient was not actually eligible for coverage when services were provided, or when the patient was not covered at the time of service, but IBC later learns the person was covered.
In 2009, IBC issued a document entitled "Fee Schedule Advisory and Amendment 2009 for Chiropractic Providers." See Def.'s Exs. 57, 57.1, 57.2. Among other changes, the document amended section 3.11 of the provider agreement, stating that provider payments are still "subject to retroactive adjustments, " but that "recoveries of overpayments or otherwise incorrect, or unwarranted payments" will occur "no more than eighteen (18) months after receipt of payment by Provider." Def.'s Ex. 57 at IBC0001745-46. During her testimony at trial, Linda Paterson, senior director of provider network services for IBC, stated that the eighteen-month period was established because of a "business decision to limit our ability to go back and recover overpayments to 18 months in 2009." Trial Tr. at 442. Though Barnard testified that he had received this document, Wahner said he had never seen it. At trial, Paterson agreed in her testimony that this amendment was not operative during the period when IBC made recoupments from chiropractors for services they provided in 2007 and 2008.
The IBC provider manual includes information on the appeal process afforded to providers. Among the "examples of appealable events" listed in the manual are "coding logic, " "application of claim payment policy, " and "claims adjudication settlement not consistent with law or contract." Pl.'s Ex. 19 at IBC0005782. The review process does not apply to determinations of medical necessity, "claims for services considered non-Medically Necessary, " or eligibility determinations. Id. The manual indicates that a provider can appeal IBC's decisions through two levels. First, a provider may "submit claim inquiries" to an address, and if she is dissatisfied with the initial appeal determination, she may send a second-level appeal to a different address. Id. at IBC0005782-83. The second-level appeal "will be reviewed by an internal Provider Appeals Review Board (PARB)" with three members, whose decision "will include a detailed explanation" for the provider and will constitute the final decision on the appeal. Id. at IBC0005783.
As participating providers, and as provided under the agreement, both Wahner and Barnard receive payment directly from IBC for services that are covered under their patients' insurance plans. For these covered services, patients are responsible only for co-pay amounts and certain deductibles. The practice in Wahner's office, until such information became available via an online system called NaviNet at an unspecified time in the recent past, was to call the insurance company in advance of providing services to determine the extent of each patient's coverage. Barnard's testimony was in a similar vein: he stated that "[w]ith every patient that comes in with every insurance company, " his staff calls the insurance company and fills out "a very detailed form" noting whether the services to be provided are covered." Trial Tr. at 200. If a patient's insurance plan does not cover the service in question, the patients are responsible for the full cost of the service. Both Barnard and Wahner testified credibly that they routinely and regularly discussed this with patients before performing non-covered services.
In addition, Wahner testified credibly that he "always" obtains an assignment of benefits from his patients, because "[w]e want to be sure that we're paid. We also want the patient to understand who's responsible for the bills and who's responsible for the payments." Trial Tr. at 89-90. Barnard similarly testified, credibly, that for each new patient, "[t]here's an assignment of benefits, " id. at 194, which he has patients fill out "[u]ltimately to ensure that we get paid." Id. at 197. In one sample of an assignment form, a patient of Barnard's "assign[ed] and convey[ed] directly" to Barnard "all medical benefits and/or insurance reimbursement, if any, otherwise payable to me for services rendered from such doctor and clinic." Def.'s Ex. 4 at Barnard002361. The assignment further conveyed the patient's claims against the patient's insurer to Barnard. Id. A sample assignment from a patient of Wahner's was similar; there, a patient "assign[ed] directly" to Wahner "all insurance benefits, if any, otherwise payable to me for services rendered, " and signaled his or her understanding "that I am financially responsible for all charges whether or not paid by insurance." Def.'s Ex. 3 at Wahner 000234. Barnard and Wahner both testified that they typically see or make a copy of a patient's insurance card, but both said that they did not see the patients' actual insurance plans. This testimony was likewise credible.
In late 2006 or early 2007, IBC experienced what it says was a computer glitch that caused it to make erroneous payments to PCA members in the following way. As described above, IBC provides benefit payments to some health care providers on a capitated basis, meaning that it pays them a set fee for each patient to whom they provide certain services. The claimed computer glitch caused IBC to pay PCA members who were not authorized to provide services on a capitated basis for services that are supposed to be reimbursed on a capitated basis only.
To correct for this, IBC began to recover-recoup-the payments that it says it had made erroneously to PCA members. In particular, IBC withheld payment for non-capitated services, the services for which providers were authorized to receive payment. Further, IBC retracted and reprocessed PCA members' original claims for the capitated services. In 2007-2008, IBC recouped a total of $1.3 million from about 472 PCA members.
IBC recoups funds from a provider when it determines that it has paid the provider in error. The Court finds credible Barnard's testimony that recoupment "happened quite frequently" to him, particularly in 2005-2006 and 2007-2008. Trial Tr. at 203. The Court likewise finds credible Wahner's testimony that "it's fairly common" for IBC to retroactively deny a claim that it has already paid him. Id. at 96. Wahner testified that IBC made a recoupment from him just a week before the bench trial due to a purported change in an insured's plan. IBC representative Paterson conceded that "on a pretty routine basis, there will be an offset taken from a provider claim based on a finding that the member lacked eligibility." Id. at 345. Other circumstances in which IBC regularly recoups payments involve when an insured does not remit his or her co-pay balance, fails to meet a deductible requirement, exceeds his or her visitation limits, or experiences a plan change.
In February 2007, IBC's Paterson sent a letter to all of the insurer's participating chiropractors. The letter stated that IBC "may have erroneously reimbursed some providers" for services that are subject to capitation. Pl.'s Ex. 80.1 at Wahner000099. Paterson informed the providers that "[t]hese capitated services are not eligible for separate payment to non-capitated providers, " and she provided the name and number of an employee to call with any questions. Id. As Paterson testified, "We were basically alerting providers to the fact that we had identified payments in error and reminding providers of the... [c]apitated program." Trial Tr. at 350-51.
On August 3, 2007, Paterson sent letters to Barnard, Wahner, and approximately 470 other chiropractors-about one-third of IBC's participating chiropractor providers in Pennsylvania. These were the chiropractors whom IBC deemed it had incorrectly paid for physical therapy services, which it said were subject to capitation. The letter referenced the February 2007 letter. Under a heading, "Where the Errors Occurred, " Paterson said "[t]he overpayments were for physical medicine and rehabilitation services included in the HMO Short Term Rehabilitation Therapy Capitation Program." Pl.'s Ex. 25 at IBC0008626. The letter continued: "As a result of a review of services provided by your practice, we have identified overpayments made to your practice." Id. The letter, or at least the version in evidence, did not list or detail any of the specific services in question. It did, however, contain another heading, "Repayment Options, " under which the providers were told they had "several options for repayment, " including the name and number of an IBC employee to whom they could report their repayment plan choice or address "any questions." Id. Providers were also told that IBC would "begin adjusting" the providers' claims if they did not contact the employee by September 10, 2007. Id.
Less than three weeks later, on August 21, 2007, Paterson sent the providers a third letter relating to the "erroneous overpayments." Pl.'s Ex. 24 at IBC0008625. In the letter, Paterson indicated that IBC had "received a number of inquiries regarding our overpayment documentation, " and that "as a result, we are temporarily suspending our recovery activities until further notice while we look into the questions that have been raised." Id. The letter offered the name and phone number of a manager of provider network services, whom providers could contact with "any questions." Id.
On December 2, 2008, Paterson sent PCA members letters stating that IBC would be recouping the claimed overpayments. In cases where IBC was seeking the return of more than $500, it offered several options for repayment: offsetting the amount due against future remittances until the balance is zero; withholding payments from remittances over a ten month period; repaying the amount in installments; or repaying in a lump sum. In the letter, Paterson asked the provider to contact IBC within ten business days to select one of the options. Paterson advised in the letter that if the provider did not choose a payment method within thirty days, IBC would begin recouping the amounts due from other remittances until the balance was satisfied. Paterson's letter did not ask for any information or materials about the claims, explain how IBC had determined that the provider owed it the amount indicated, or provide the insurance plans (or relevant language from the plans) of the patients who had allegedly received the non-capitated services inappropriately from the provider.
When recoupment efforts were driven by the claimed computer glitch, IBC notified providers that it would be recovering payments from them, in the manner described above. In other cases, IBC simply begins recouping payments and then sends providers a statement of remittance (SOR). In this regard, Paterson stated that typically, "[t]he sole correspondence relating to the recoupment is in the [SOR]...." Trial Tr. at 297. The SOR identifies the claims that IBC has either already adjusted or intends to adjust, primarily by giving the names of the insured patients who received the services in question and the service codes delineating the services. It also lists a phone number that the provider can call with questions. The SOR does not, however, identify the provision(s) of the given insured's plan that IBC relied on in making its determination nor does it even provide the reason for the recoupment. In addition, the SOR does not inform the provider that she has a right to appeal IBC's determination, let alone describe what the appeal process would entail and what it requires the provider to do. IBC also sends providers an electronic document called an "837, " which is simply an electronic version of the SOR.
PCA members have access to NaviNet, an online program that contains information about BCBS insureds, including the medical services for which their providers may be reimbursed, co-pay and deductible requirements, visit limitations, and more. Paterson acknowledged that NaviNet contains no information regarding recoupment efforts beyond what is in the SOR or 837. NaviNet does provide access to the provider manuals that BCBS entities issue to providers. But although these manuals identify general appeals procedures that are available to providers, they do not speak to the ways in which providers can challenge a BCBS entity's recoupment of a ...