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OSF Healthcare System v. Matcor M Fabrication (Illinois) Inc.

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

May 3, 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 Plaintiff OSF's Motion to Reconsider, ECF No. 15, which asks the Court to reconsider its March 9, 2017 Order granting Defendants Matcor M Fabrication (Illinois) Inc. and Matcor M Fabrication (Welcome) Inc. Group Benefit Plan's Motion to Dismiss, ECF No. 13. For the following reasons, the motion is DENIED.

         BACKGROUND

         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.

         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, contains a section entitled “Procedures for Submitting Claims, ” which states that “[m]ost providers will accept assignment and coordinate payment directly with the Plan on the Covered Person's behalf. If the provider will not accept assignment or coordinate payment directly with the Plan, then the Covered Person will need to send the claim . . . in order to receive reimbursement.” Benefit Summ. 94.

         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 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-meaning the remaining balance of the billed services- 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, a prerequisite to bringing suit under the statute. Specifically, Matcor argued that OSF did not comply with the appeals procedure in the Plan, which required a provider to first become authorized as a personal representative of the Plan participant, and therefore its attempts to appeal the adverse benefit determination were ineffective. Mot. Dismiss ¶ 5. OSF argued that, due to the fact that it has already received direct payment from Matcor under the Plan, it qualified as a beneficiary under ERISA, and therefore had ERISA appeal rights, whether or not it followed Plan procedures to become a personal representative. OSF also argued that the Plan did not provide meaningful review procedures, as required by ERISA, so 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 9-10, ECF No. 9.

         In its March 9, 2017 Order, the Court granted the Motion to Dismiss, finding that OSF had standing to bring suit as a beneficiary under ERISA but had not become a personal representative and did not have the right to appeal an adverse benefit determination. The Court also concluded that the Plan provided a “reasonable opportunity” to appeal guaranteed by 29 C.F.R. § 2560.503-(1)(h)(1) and, based on the facts and arguments presented, OSF had not sufficiently alleged facts showing that administrative exhaustion requirement should be excused. Mar. 9, 2017 Order 7-9. OSF now argues that the Court should reconsider its decision because as an ERISA beneficiary, it has an “unqualified right to appeal” the adverse benefit determination. Pl.'s Mem. Supp. Mot. Reconsider 5, ECF No. 16. It further argues that Matcor waived any argument that OSF failed to exhaust administrative remedies because it responded to OSF's appeals and did not provide OSF with the information it needed to perfect an appeal under the Plan's terms. Id. at 8-9; 15.

         DISCUSSION

          I. Legal Standard for Motion to Reconsider Under FRCP 59(e)

         Reconsideration of a judgment under Rule 59(e) may be granted only if the movant presents newly discovered evidence or if the movant points to evidence in the record that clearly establishes a manifest error of law or fact. Oto v. Metro. Life Ins. Co., 224 F.3d 601, 606 (7th Cir. 2000). “A ‘manifest error of law' occurs when the district court commits a ‘wholesale disregard, misapplication, or failure to recognize controlling precedent.'” Burritt v. Ditlefsen, 807 F.3d 239, 253 (7th Cir. 2015) (quoting Oto, 224 F.3d at 606). A court may reconsider where it has “patently misunderstood a party. . . or has made an error not of reasoning but of apprehension, ” but motions to reconsider should be “rare.” Bank of Waunakee v. Rochester Cheese Sales, Inc., 906 F.2d 1185, 1191 (quoting Above the Belt, Inc. v. Mel Bohannan Roofing, Inc., 99 F.R.D. 99, 101 (E.D. Va 1983)). Further, a Rule 59(e) motion cannot be used to introduce evidence that could have been presented prior to the entry of final judgment. Oto, 224 F.3d at 606.

         II. Analysis

         OSF asks the Court to reconsider its March 9, 2017 Order dismissing the suit. OSF argues that “an ERISA [beneficiary] has an unqualified right to appeal an adverse benefit determination by an ERISA governed health plan.” Pl.'s Mem. Supp. Mot. Reconsider 5. 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). ERISA defines a beneficiary as “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.” 29 U.S.C.A. § 1002. Determining beneficiary status is important because ERISA requires plans to provide certain notices and procedures to beneficiaries. 29 U.S.C. §§ 1133(1)- (2); 1135; see 29 C.F.R. § 2560.503-1(a)-(b).

         OSF argued in its response to the Motion to Dismiss that its beneficiary status stemmed from Matcor's partial payment of the billed services directly to OSF: in paying the benefits directly to the hospital, Matcor was “acknowledging and creating an assignment.” Pl.'s Mem. Obj. Def.'s Mot. Dismiss 5. The Plan allowed, but did not require, such direct payments to providers: “Most providers will accept assignment and coordinate payment directly with the Plan on the Covered Person's behalf. If the provider will not accept assignment or coordinate payment directly with the Plan, then the Covered Person will need to send the claim . . . in order to receive reimbursement.” Benefit Summ. 94. Because the Plan allowed for such payments, and did in fact pay OSF such a payment, OSF argues that it was entitled to a benefit by the terms of the Plan, and therefore is a beneficiary. Pl.'s Mem. Obj. Def.'s Mot. Dismiss 6. OSF argues it is entitled to notice and appeal rights and a direct right of action under ERISA and that the Plan's appeals process is “irrelevant” to it because ...


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