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Scripps Health, A California Corporation v. Food Employers & Bakery & Confectionery Workers Benefit Fund of

April 24, 2012

SCRIPPS HEALTH, A CALIFORNIA CORPORATION, PLAINTIFF,
v.
FOOD EMPLOYERS & BAKERY & CONFECTIONERY WORKERS BENEFIT FUND OF SOUTHERN CALIFORNIA, A CALIFORNIA CORPORATION; ANTHEM BLUE CROSS LIFE & HEALTH INSURANCE CO., A CALIFORNIA CORPORATION; AND DOES 1 THROUGH 15, DEFENDANT.



The opinion of the court was delivered by: Hayes, Judge:

ORDER

The matters before the Court are 1) the motion for summary judgment filed by Defendant Food Employers & Bakery & Confectionery Workers Benefit Fund of Southern California (ECF No. 28); and 2) the motion for summary judgment filed by Plaintiff Scripps Health (ECF No. 42).*fn1

BACKGROUND

On October 29, 2010, Plaintiff Scripps Health (Scripps) filed an action against Defendants Food Employers & Bakery & Confectionery Workers Benefit Fund of Southern California (FEBC) and Anthem Blue Cross Life & Health Insurance Co. (Blue Cross) in the Superior Court of the State of California County of San Diego alleging breach of written contract, breach of implied contract, estoppel and declaratory relief. (ECF No. 1 at 6). Plaintiff Scripps asserts that it is entitled to be paid immediately by Defendants for "life saving emergency care to one of its insureds." Id.

On December 2, 2010, Defendant FEBC removed the action to this federal court asserting jurisdiction under 28 U.S.C. § 1441 "based upon the fact that the gravamen of the Complaint is to seek benefits from a self-funded plan governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001, et seq., that necessarily involve questions arising under ERISA, including pre-emption issues and defenses under ERISA." Id. at 2-3.

On November 14, 2011, Defendant FEBC filed a motion for summary judgment. (ECF No. 28). Defendant FEBC asserts that it is entitled to summary judgment as a matter of law "[b]ased upon the undisputed contractual provisions between Scripps and [Blue Cross Defendants], the undisputed facts of the claim, and the provisions of the written plan of benefits of FEBC." (ECF No. 28-1 at 6). Defendant FEBC contends that all claims filed by the Plaintiff Scripps are claims for benefits under the terms of an employee benefit plan governed by ERISA. Defendant FEBC contends that Plaintiff's claims are subject to federal jurisdiction under ERISA, and that Plaintiff's complaint is completely preempted by ERISA. Defendant FEBC asserts that Plaintiff Scripps is not entitled to payment under the terms of the contract between Plaintiff Scripps and Blue Cross or under the ERISA benefit plan. Defendant FEBC asserts that Plaintiff Scripps failed to exhaust or initiate the administrative remedies under the benefit plan, and that the work-for-profit provision of the benefit plan excludes coverage under the present circumstances.

On November 14, 2011, Plaintiff Scripps filed a motion for summary judgment against Defendant FEBC. (ECF No. 42). Plaintiff Scripps asserts that it is entitled to judgment in the amount of $527,389.63. Plaintiff Scripps contends that it is entitled to recover under a written contract independent of any ERISA plan. Plaintiff Scripps asserts that Defendant FEBC breached its duty to Plaintiff Scripps as a "Other Payor" under a contract between Plaintiff Scripps and Blue Cross. Plaintiff Scripps asserts that Defendant FEBC cannot rely upon the failure to exhaust administrative remedies due to its own failure to comply with ERISA regulations and that Defendant FEBC has forfeited its right to claim a work-for-profit exclusion under the benefit plan. Plaintiff Scripps contends that Defendant FEBC has no excuse to avoid its obligation to pay Scripps for services rendered to the Patient.

FACTS

Plaintiff Scripps is a non-profit, community-based health care delivery network located and doing business in San Diego, California. Plaintiff Scripps operates four acute-care hospitals licensed to provide general acute inpatient and outpatient services.

Defendant FEBC is an employee welfare benefit plan governed by ERISA. Defendant FEBC provides health care coverage to its members and their dependents. Defendant FEBC is self-funded in that the payment of any medical costs comes directly from the assets of the Defendant FEBC and not an insurer or other third party.

On or about September 1, 2005, Plaintiff Scripps entered into an agreement with Blue Cross of California entitled "BLUE CROSS OF CALIFORNIA Comprehensive Contracting Hospital Agreement for Scripps Health." ("BCC Contract") (ECF No. 39). Pursuant to the BCC Contract, Scripps agreed to "provide to Members those Hospital Services which are Medically Necessary when such services are ordered by a licensed physician or other licensed health professional with appropriate medical staff privileges at HOSPITAL and are in accordance with the applicable Benefit Agreement and this Agreement." (BBC Contract, 4.1).

Under the BCC Contract, Plaintiff Scripps agreed to provide health care services at discounted rates to "Other Payors." (BBC Contract, 2.25). Defendant FEBC contracted with Blue Cross Life to act as the third party administrator for the claim at issue in this case. Defendant FEBC is an "Other Payor" under the BCC Contract.

Section 3.4 of the BBC Contract states that Scripps "agrees that each arrangement by which [Scripps] performs services for Covered Persons that utilize the Managed care Network shall constitute an independent legal relationship between [Scripps] and Affiliate or Other Payer."

Section 4.7 of the BBC Contract provides that Scripps agrees "to seek, accept and maintain evidence of assignment for the payment of Hospital Services provided to members by HOSPITAL, under the applicable Benefit Agreement." (ECF No. 39 at 4.7).

Section 4.10 of the BBC Contract states in part: "BLUE CROSS shall require that Other Payor compensate HOSPITAL in accordance with the terms of this Agreement. In the event any such Other Payor fails to make required payments, HOSPITAL may seek payment from the Covered Person (up to the rates specified herein) unless prohibited by applicable law." (ECF No. 39 at 4.10). The BBC Contract provides in part as follows:

BLUE CROSS will guarantee eligibility of a Member whose membership data is maintained on a BLUE CROSS system, when HOSPITAL obtains eligibility in advance of rendering service by accessing the BLUE CROSS eligibility and benefits verification system in strict accordance with the procedures provided in writing by BLUE CROSS to HOSPITAL. HOSPITAL will receive a verification for tracking purposes. Guarantee of eligibility will apply only if services are initiated within twenty (20) days of the receipt of verification code from BLUE CROSS.

A guarantee of eligibility is not a guarantee of payment. If HOSPITAL is notified that the Member is eligible, HOSPITAL is entitled to payments for services rendered, covered under, and subject to the exclusions and limitations of the relevant BENEFIT AGREEMENT. (BBC Contract, 6.9).

Patient in this case is the husband of a Member of the Bakery, Confectionery and Tobacco Workers International Union.*fn2 Member is a participant in the FEBC and Patient is eligible for covered services under the FEBC Plan as a dependent.

Under the FEBC Plan covered services include services which are "medically necessary, including "Emergency room or urgent care facility, in connection with a[n] ... accidental bodily injury which, in the absence of immediate care, could be reasonably expected to be life threatening or permanently disabling or disfiguring." (ECF No. 28, Exhibit 1, Food Employers and Bakery and Confectionery Workers Benefit Fund of Southern California Summary of Plan Description for Active Participants, December 2004 at 4-5). The FEBC benefit Plan contains the following provision: "GENERAL EXCLUSIONS FOR ALL COMPREHENSIVE HOSPITAL MEDICAL EXPENSES BENEFITS - No benefits will be provided for losses caused or contributed to by: . . . 9. Any injury or sickness which is sustained in the course of, or arises from, any occupation or employment for compensation, profit or gain." Id. at page 36.

The FEBC benefit plan contains the following provision:

If the illness, injury, disease or other condition for which benefits are sought resulted from the negligence, fault or other legal responsibility of a third party, you or your Dependent must execute an assignment form upon request by this Benefit Fund to recover an amount equal to, but not greater than, those payments it may make to you or your Dependent or your assignees for medical, Hospital, surgical and other expenses in connection with the condition or injury for which the third party was legally responsible. The Benefit Fund may not recover by way of this assignment an amount greater than the gross proceeds awarded to you or your Dependent through judgment, settlement or otherwise as a result of legal action, insurance claim or any other claim made against a third party pr parties. ...


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