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Title Orthopedic Specialists of Southern California v. Ilwu-Pma Welfare Plan

February 28, 2013


The opinion of the court was delivered by: Honorable Christina A. Snyder


Present: The Honorable CHRISTINA A. SNYDER

CATHERINE JEANG N/A N/A Deputy Clerk Court Reporter / Recorder Tape No. Attorneys Present for Plaintiffs: Attorneys Present for Defendants Not present Not present Proceedings: (In Chambers:) PLAINTIFF'S MOTION TO REMAND (filed December 31, 2012) [Dkt. No. 8]


The Court finds this motion appropriate for decision without oral argument. Fed. R. Civ. P. 78; Local Rule 7-15. Accordingly, the hearing date of March 4, 2013, is vacated, and the matter is hereby taken under submission.

On July 19, 2012, plaintiff Orthopedic Specialists of Southern California ("OSSC") filed suit against defendant ILWU-PMA Welfare Plan Benefits ("ILWU") in the Los Angeles County Superior Court. Plaintiff asserts state-law claims for recovery of payment on open book account and for services rendered, breach of implied-in-fact and oral contract, estoppel, quantum meruit, negligence per se, and violation of California Health & Safety Code § 1371.4. The gravamen of plaintiff's complaint is that defendant made various representations and warranties to plaintiff regarding payments that would be made but were in fact not paid, independent of any contractual rights of plaintiff's patients or other insurance agreements. Compl. ¶ 5.

On August 31, 2012, defendant removed this action to this Court, on the ground that plaintiff's claims are completely preempted by ERISA, 29 U.S.C. § 1001, et seq. Dkt. No. 1. In particular, defendant contends that ILWU is a welfare benefit plan, as defined by ERISA section 3(1), 29 U.S.C. § 1002(1)(a), and that plaintiff seeks additional compensation from the plan for services it allegedly provided to plan members.

On December 31, 2012, plaintiff filed the instant motion to remand. Dkt. No. 8.

Defendant opposed the motion on February 6, 2013, and plaintiff replied on February 15, 2013. After considering the parties' arguments, the Court finds and concludes as follows.


Plaintiff alleges the following facts in support of its claims. Plaintiff is a professional group of orthopedists and health care providers located in the County of Los Angeles. Compl. ¶ 1. At various times, one of plaintiff's physician provided medical or orthopedic services to one of defendant's beneficiaries as an "out-of-network" or "non-participating provider." Id. ¶ 9. As a non-participating provider, plaintiff had no standing contract with defendant setting the rates of reimbursement for the particular types of services that plaintiff provided. Id. Prior to providing medical services to any plan beneficiary, plaintiff contacted defendant and was advised that the patients were insured by defendant, and defendant promised that it would pay for plaintiff's services at "usual, customary, and reasonable rates" ("UCR rates") and in conformance with California law. Id. ¶ 10; see also id. ¶ 30 (alleging that defendant "entered into implied contracts with [plaintiff]" to pay it UCR rates). Defendant did not advise plaintiff of any exclusions or limitations on coverage that would result in denial of coverage to plaintiff's patients, nor did defendant inform plaintiff of what its precise reimbursement would be until after a procedure has been performed. Id. ¶¶ 11, 39. Moreover, defendant's contract with its beneficiaries required defendant to pay non-contracted providers their UCR rates for services the provider rendered. Id. ¶ 27. But for these representations as to coverage and payment, plaintiff would not have rendered services to defendant's beneficiaries. Id. ¶¶ 22--24.

After providing the medical services to defendant's beneficiaries, plaintiff submitted invoices to defendant for adjustment and payment, including all relevant medical records and other requested information. Id. ¶¶ 25, 40--41. Rather than paying plaintiff the UCR rate, however, defendant consistently "underpaid for medically necessary and appropriate services" that plaintiff provided, "in violation of California law" and the parties' oral agreement. Id. ¶¶ 15, 25, 37, 42. Defendant did so using "illegal and/or flawed databases and systems to calculate reimbursement for non-contracting providers," id. ¶¶ 26, 33--35, 43--45, despite defendant's knowledge of the amounts usually charged by medical providers for such services, id. ¶ 28. This is in contravention to regulations adopted by the California Department of Managed Health Care, which provides that payment to "non-contracted providers" shall be based upon "the fees usually charged by the provider" and "prevailing provider rates charged in the general geographic area in which the services were rendered," among other factors. Compl. ¶ 31 (quoting 28 Cal. Code Regs. § 1300.71(a)(3)(B)).

Defendant's practices have caused plaintiff to "exhaust time and energy" appealing improperly reimbursed claims and have forced plaintiff to take a loss for its services when it is unable to collect the remaining amounts due from its patients. Id. ΒΆ 44. In addition, plaintiff avers that the "physician-patient relationship is undermined, as the physicians have been branded as charlatans whose bills ...

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