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OSF Healthcare System an Illinois not for Profit Corp. v. Matcor M Fabrication Illinois Inc.

United States District Court, C.D. Illinois, Peoria Division

March 9, 2017

OSF HEALTHCARE SYSTEM an Illinois not for profit corporation d/b/a SAINT FRANCIS MEDICAL CENTER, Plaintiff,
v.
MATCOR M FABRICATION ILLINOIS INC and MATCOR M FABRICATION WELCOME INC GROUP BENEFIT PLAN, Defendant.

          ORDER

          SARA DARROW, UNITED STATES DISTRICT JUDGE

         Before the Court is Defendants Matcor M Fabrication (Illinois) Inc. and Matcor M Fabrication (Welcome) Inc. Group Benefit Plan's Motion to Dismiss, ECF No. 4, which seeks dismissal of Plaintiff OSF Healthcare System's Complaint, ECF No. 1. For the following reasons, the Motion is GRANTED and the Complaint is DISMISSED.

         BACKGROUND[1]

         Plaintiff OSF Healthcare System (“OSF”) is a healthcare services provider in the state of Illinois. OSF provided medical care to R.M.W., a minor child of a participant in the Matcor M Fabrication (Welcome) Inc. Group Benefit Plan (“Matcor” or “the Plan”), at one of its hospitals, Saint Francis Medical Center, on or around September 24, 2012 through October 7, 2012. The cost of the provided medical attention totaled $113, 578.89.

         Under the plan, the claims processor reviews the claim for services provided and makes a determination regarding the amount of benefits available. If the charges are not covered completely, the Plan provides an explanation to its participant as to why the payment is less than the amount billed. The Plan paid $31, 570.34 toward the account, leaving a balance of $82, 008.55.

         The Health Benefit Summary Plan Description, (“Benefit Summ.”), Compl., Ex. B, ECF No. 1-3, which states the procedures for appealing Adverse Benefit Determinations, requires that “a Covered Person[2] or his/her Personal Representative” make a mandatory first level appeal within 180 days after receipt of the Explanation of Benefits form. Benefit Summ. 97. A “Personal Representative” is defined under the Plan to include providers “who can contact the Plan on the Covered Person's behalf to help with claims, appeals, or other benefit issues.” Benefit Summ. 93. For a Covered Person to designate a Personal Representative, the Plan requires written submission to the Plan, identifying the provider by name, “the date and duration of the appointment and any other pertinent information.” Id. In order to finalize the authorization, the Plan requires signature by the Covered Person. Id. An appeal filed by a provider who is not an authorized Personal Representative is “not considered an appeal.” Benefit Summ. 97. OSF alleges that it appealed Matcor's adverse benefit determination and refusal to pay seven times: February 14, 2013, May 8, 2013, July 25, 2013, September 5, 2013, January 12, 2015, July 22, 2015, and August 25, 2015. The basis for OSF's appeals was that the reimbursement formula used to calculate the adverse benefit determination was not based on language in the Plan. The Plan denied these appeals.

         On February 10, 2016, OSF filed its complaint pursuant to the Employment Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1132(a)(1), against Matcor, seeking benefits owed under the Plan plus courts costs and attorneys' fees. Matcor filed its Motion to Dismiss, ECF No. 4, on May 4, 2016, arguing that OSF failed to exhaust the Plan's administrative remedy. Matcor argues that no timely appeal was ever filed, because OSF was never certified as a Personal Representative of the Covered Person, and therefore its appeals did not meet the requirements of the Plan. Mot. Dismiss ¶ 5. OSF argues that, due to the fact that it has already received direct payment from Matcor under the Plan, it qualifies as a beneficiary under ERISA, and therefore had appeal rights by virtue of caselaw and regulations, whether or not it was designated as a Personal Representative in accordance with the Plan. OSF also argues that an ERISA-compliant plan must provide appeal rights for beneficiaries, and because the Plan did not provide meaningful review procedures, any argument made by Matcor regarding OSF's failure to exhaust its administrative remedies should be moot. Pl.'s Mem. Obj. Def.'s Mot. Dismiss 9, ECF No. 9. At issue is OSF's ability to appeal to the Plan and whether or not it could do so as a “beneficiary” under ERISA rather than an authorized Personal Representative of the insured.

         DISCUSSION

          I. Standard of Review

         A court will dismiss a complaint if it does not state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). The complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a), and must “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)) (quotation marks omitted). The pleader's claim must be facially plausible, meaning that the factual allegations allow the court to draw a “reasonable inference” that the purported misconduct occurred. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The complaint does not need to allege “all, or any, of the facts logically entailed by the claim and it certainly need not include evidence.” Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008) (internal quotations omitted). A plaintiff may, however, “plead itself out of court by pleading facts that establish an impenetrable defense to its claims.” Id. at 1086. The plaintiff must do more than “avoid foreclosing possible bases for relief in [its] complaint; [it] must also show that relief actually is plausible.” Id.

         The court will consider exhibits attached to the complaint, “if they are referred to in the plaintiff's complaint and are central to his claim.” McCready v. Ebay, Inc., 453 F.3d 882, 891 (7th Cir. 2006) (quoting 188 LLC v. Trinity Indus., Inc., 300 F.3d 730, 735 (7th Cir. 2002); see Fed. R. Civ. P. 10(c) (“A copy of a written instrument that is an exhibit to a pleading is a part of the pleading for all purposes.”)

         II. ERISA Standing and Administrative Exhaustion

         a. Legal Standard

         ERISA provides a right of action “by a participant or beneficiary . . . to recover benefits due to him under the terms of his plan [or] to enforce his rights under the terms of the plan[.]” 29 U.S.C. § 1132(a)(1)(B). A beneficiary, pursuant to the statute, is “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.” Id. § 1002(8). The Seventh Circuit recognizes that status as an ERISA beneficiary “is not limited to individuals designated by a ‘participant' to receive benefits, ” and that beneficiary status may come from receiving benefits “under the terms of the plan itself[.]” Ruttenberg v. U.S. Life Ins. Co. in City of New York, 413 F.3d 652, 662 (7th Cir. 2005). In Kennedy v. Connecticut General Life Insurance Co., the Seventh Circuit held that providers of medical services may sue as beneficiaries for nonpayment, so long as they have a “colorable claim to benefits.” Kennedy v. Conn. Gen. Life Ins. Co., 924 F.2d 698, 700 (7th Cir. 1991). While the examination of a claim on its merits requires that a court hew closely to the terms of a benefits plan, see 29 U.S.C. § 1104(a)(1)(D), statutory standing for a federal court to hear the claim exists unless “the language of the plan is so clear that any claim as an assignee must be frivolous.” Kennedy, ...


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