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Osf Healthcare System v. Contech Construction Products Inc. Group Comprehensive Health Care

United States District Court, C.D. Illinois, Rock Island Division

September 23, 2014

OSF HEALTHCARE SYSTEM, an Illinois not for profit corporation d/b/a SAINT FRANCIS MEDICAL CENTER, Plaintiff,


SARA DARROW, District Judge.

Plaintiff OSF Health Care System ("OSF") is suing Defendant Contech Construction Products Inc. Group Comprehensive Health Care ("Plan") under the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., and Illinois state law for compensation for medical services OSF rendered to a Plan participant at its St. Francis Medical Center. The Plan has moved to dismiss OSF's Complaint on several grounds. Mot. Dismiss 1, ECF No. 5. Plaintiff's Motion for Leave to File Supplemental Response to Motion to Dismiss, ECF No. 14, is DENIED. For the following reasons, Defendant's Motion to Dismiss, ECF No. 5, is GRANTED IN PART and DENIED IN PART.


The Plan is a health care plan for employees of Contech Engineered Solutions, LLC ("Contech"), formerly Contech Construction Products Inc. The Plan is a self-funded employee welfare benefit plan as defined by ERISA, 29 U.S.C. § 1002. United Medical Resources, Inc. ("UMR") administers claims under the Plan. OSF, as St. Francis Medical Center, is a health care services provider in Peoria, Illinois.

In October 2011, OSF provided medical services to J.G., son and dependent of James Giordano, a Contech employee and Plan participant. J.G. was taken to OSF St. Margaret's-an in-network provider in Spring Valley, Illinois-on October 29, 2011, while suffering seizures and partial paralysis, among other symptoms. Medical staff at St. Margaret's told J.G.'s parents that he required immediate evaluation by a pediatric facility with neurological capability, and the nearest such facility was OSF St. Francis Medical Center. Accordingly, J.G. was transferred to the pediatric intensive care unit at St. Francis, an out-of-network provider in Peoria, Illinois. There, J.G. received treatment on October 30 and 31, 2011, at a total cost of $21, 332.00. OSF billed the Plan for this amount. The Plan only paid $9, 176.23, refusing to pay the $12, 155.77 balance.

The Summary Plan Description ("SPD"), the Plan's governing document, provides that participants may appeal a benefits claim denial within 180 days following receipt of notice of an adverse benefit determination. That notice is to contain, among other information, a "reference to the specific portion of the SPD upon which a denial is based" and "[s]pecific reasons for denial."

In a January 2, 2012 Explanation of Benefits notice sent to Giordano and OSF, the Plan indicated that it refused to pay $1, 409.43 in "Room & Board" and $10, 522.34 in "Hospital Extras" because these services "exceed[ed] the usual, reasonable, and customary amounts. Refer to the General Exclusions in your SPD." The Plan also refused to pay two charges labeled as "Hospital Extras, " in the amounts of $112.00 apiece, stating that they were "denied as unbundled/unrelated/undocumented/unidentified/duplicated or erroneous. Refer to the General Exclusions in your SPD." The notice further indicated that an appeal of this denial must be submitted in writing within 180 days of its receipt, and it must include "proof that the claim for benefits is payable under the provisions of the Plan. Failure to include relevant facts will be considered a waiver of your right to include them in your appeal."

In a May 3, 2012 letter, OSF identified Giordano's claim by name, account number and member ID, and demanded payment of the $12, 155.77 balance. OSF explained:

[W]e are unable to accept your request for usual and customary pricing. It is standard practice for all of our Entities to bill according to the guidelines set forth by Medicare. In keeping with that doctrine, we expect the same principles to apply to any party who accept[s] responsibility for claims processing. This letter shall serve as our intent to be paid in full for all billed charges. Non-compliance with this directive will result in added financial responsibility for the patient. Please remit additional payment immediately.

OSF submitted an identical request on May 25, 2012. Additionally, in a June 30, 2012 document addressed to UMR and entitled "Appeal for Additional Finalized Payment, " James Giodarno discussed the circumstances leading to his son's treatment at OSF, explained that UMR led him to believe his son qualified for treatment at St. Francis at an in-network rate, and requested that the Plan pay the balance of OSF's bill.

On February 7, 2013, counsel for OSF submitted a letter requesting payment from the Plan for the remaining balance, asserting OSF's beneficiary status under ERISA, 29 U.S.C. § 1002(8), and stating that OSF would interpret failure by the Plan to respond within 30 days as exhaustion of OSF's administrative remedies. The Plan replied on February 20, 2013, stating that OSF's appeal was received on February 12, 2013; therefore, it was time-barred under the 180-day deadline for appeals following receipt of an adverse benefit determination. On March 20, 2013, counsel for OSF responded that its February 7, 2013 correspondence with the Plan was part of a "continued appeal" that began with OSF's May 3, 2012 letter.

On November 23, 2013, OSF filed the instant suit as a "beneficiary" under ERISA, 29 U.S.C. § 1132(a)(1)(B), seeking payment of the balance for Giordano's treatment, which OSF claims it is owed pursuant to the Plan's terms and federal law governing health insurance coverage of out-of-network emergency care, see 42 U.S.C. § 300gg-19a(b)(1)(C)(II). OSF additionally seeks payment of interest, running from December 15, 2011, on this allegedly delinquent payment of a claim for health care services pursuant to 215 ILCS 5/368a(c). On February 5, 2014, the Plan moved to dismiss the Complaint in its entirety.


The Plan moves to dismiss on the following grounds: (1) OSF lacks standing to maintain this lawsuit under ERISA § 502(a)(1)(B); (2) OSF's administrative appeal is untimely under the terms of the Plan; and (3) ERISA pre-empts application of Illinois law requiring ...

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