United States District Court, N.D. California, San Jose Division
ORDER DENYING MOTION TO DISMISS FIRST AMENDED
COMPLAINT RE: DKT. NO. 58
H. KOH United States District Judge.
the Court is a motion to dismiss filed by Defendants Blue
Cross of California dba Anthem Blue Cross and Anthem Blue
Cross Life and Health Insurance Company (collectively,
“Anthem”) seeking to dismiss the sole claim in
Plaintiff County of Monterey dba Natividad Medical
Center's (“Natividad”) first amended
complaint (“FAC”). See ECF No. 58
(“Mot.”). Having considered the parties'
briefs, the relevant law, and the record in this case, the
Court DENIES Anthem's motion to dismiss the FAC.
is a 172-bed acute care hospital owned and operated by the
County of Monterey. ECF No. 57 (“FAC”) ¶ 3.
On August 1, 2012, Anthem and Natividad entered into a
Facility Agreement pursuant to which Natividad agreed to
provide certain healthcare services to Anthem members and
Anthem agreed to pay Natividad certain rates for those
services. Id. ¶ 14.
Facility Agreement governs not only claims for Anthem's
insureds, but also services claims for members of
“Other Payors” for whom Anthem provides claims
processing services and to whom Anthem has sold, leased,
transferred or conveyed its “Managed Care
Network.” Id. ¶ 14. Natividad alleges
that these “Other Payors” include 32 ERISA Plans
that Natividad has identified in its FAC. Id.
¶¶ 7, 15. The FAC alleges that these ERISA Plans
entered into contracts with Anthem that required the ERISA
Plans to comply with the terms of Anthem's contracts with
providers in Anthem's Managed Care Network, including the
Facility Agreement between Anthem and Natividad. Id.
¶ 18. Natividad also alleges that Anthem functions as
the de facto plan administrator for the ERISA Plans
because Anthem has, inter alia, (i) drafted and provided plan
members with plan documents; (ii) operated a centralized
verification and authorization telephone number which handled
calls for members of the ERISA Plans; (iii) authorized
Natividad to provide medical services to beneficiaries of the
ERISA Plans; (iv) received and processed electronic bills
from Natividad for claims for members of the ERISA Plans,
including plans that are not named as defendants in the FAC;
(v) communicated with Natividad on behalf of the ERISA Plans
regarding authorization of surgical procedures; (vi)
interpreted ERISA Plan language; (vii) issued remittance
advices and EOBS; (viii) priced claims for the ERISA Plans;
(ix) communicated with Natividad with respect to the
processing of claims on behalf of the ERISA Plans; (x)
processed appeals, and sent appeal response letters; and (xi)
issued payment to Natividad. Id. ¶ 10.
time Natividad and Anthem entered into the Facility
Agreement, Natividad did not have its certification to
provide trauma services. Id. ¶ 19. Therefore,
the parties did not agree upon trauma rates. Id.
Instead, the Facility Agreement contemplated that the parties
would negotiate new trauma rates once Natividad obtained its
certification. Id. On January 5, 2015, Natividad
received its certification to provide trauma services and
began providing trauma services. Id. ¶ 21.
However, Natividad alleges that the parties' attempts to
negotiate trauma rates after that date were unsuccessful.
Id. ¶ 22. As a result, the FAC alleges that
Anthem, on behalf of the ERISA Plans, has been improperly
pricing trauma rates at the lower rates for emergency
services in the Facility Agreement. Id. ¶¶
22-24, 29-32. Specifically, the FAC alleges that
“Natividad is informed and believes that Anthem has
recommended and/or instructed the ERISA Plans to pay
Natividad's trauma claims at the emergency services
rates, and that the ERISA Plans are relying on and using
Anthem's processing and pricing of the trauma claims at
the emergency services rate to underpay the trauma
claims.” Id. ¶ 29. The FAC alleges that
the difference between Natividad's billed charges and the
amounts that the ERISA Plans are paying for the trauma claims
exceeds $18 million. Id. In many cases, Anthem has
held Natividad's claims submissions in limbo without
allowing or denying the claims. Id. ¶ 30. By
paying the claims at the emergency services rate, the FAC
alleges that Natividad is informed and believes that Anthem
has improperly interpreted the ERISA Plan documents.
Id. ¶ 31.
alleges that it is an assignee of its patients' benefits
under the ERISA Plans because “[a]s a condition of
admission, every patient treated at Natividad signed an
Assignment of Benefits form agreeing to, inter alia,
assign his or her health insurance benefits to
Natividad.” Id. ¶ 25. The assignment of
insurance benefits provision states as follows:
I assign and authorize direct payment to the hospital of all
insurance benefits payable for this hospitalization or for
these outpatient services. I agree that the insurance
company's payment to the hospital pursuant to this
authorization shall discharge the insurance company's
obligations to the extent of such payment. I understand that
I am financially responsible for charges not paid according
to this assignment.
Id. Natividad informed Anthem it was operating as an
assignee of the patients in two ways. First, every claim
submission to Anthem included a UB04 form, which indicates on
Box 54 that the provider, Natividad, had an assignment of
benefits from the member. Id. ¶ 26. Second,
Natividad sent Anthem ERISA appeal letters which stated in
the first paragraph: “With this appeal letter, we have
included an Assignment of Benefits and Appointment of
Authorized Representative from your Member to Natividad
Medical Center.” Id. ¶ 27.
alleges that after receiving the improper emergency services
rate for the trauma claims, Natividad would send Anthem two
appeal letters. Id. ¶ 38. The first appeal
letter was sent directly to Anthem. Id. The first
appeal letter informed Anthem that the arbitrator had found
Natividad is owed 80% of its billed charges for all trauma
claims and requested that Anthem re-price and re-process the
claims at 80% of billed charges. Id. The FAC alleges
that Anthem either failed to respond to these first appeal
letters or improperly denied them. Id. Natividad
would then send a second appeal letter to Anthem, but the
letter would note that the appeal was made pursuant to ERISA
based on an assignment of benefits that Natividad received
from each member. Id. The second appeal letter
specifically asked Anthem, in all capital letters, bolded and
underlined, to provide the hospital with the ERISA Plan
document for the plan at issue. Id. Natividad did
not receive any plan documents from Anthem and only rarely
received responses from the ERISA Plans themselves.
Id. Natividad never received a response setting
forth the specific plan provisions on which the determination
was based. Id.
capacity as an assignee of its patients' benefits, and
based on the above described allegations, Natividad asserts
one claim against Anthem for failure to pay plan benefits
under the Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. § 1132(a)(1)(B).
Id. ¶¶ 183-194. Specifically, Natividad
“believes that ERISA Plans at issue in this case
required Anthem and the ERISA Plans to pay Natividad
customary and reasonable rates for the inpatient and
outpatient trauma services that Natividad has provided to the
ERISA Plan members.” Id. ¶ 192.
Natividad seeks compensatory damages and declaratory relief.
Id. at 39. Specifically, Natividad seeks a
declaration that it is “entitled to be paid a
reasonable and customary amount for the trauma services it
has provided, and is providing to the ERISA Plans, ”
and that Anthem's “practice of pricing, processing,
and paying Natividad's trauma claims at the emergency
services rate in the Facility Agreement is improper.”
filed its initial complaint on July 27, 2017. See
ECF No. 1. On November 11, 2017, the Court stayed the case
pending the parties' arbitration, which concerned the
issue of the reasonable value of trauma services Natividad
provided to Anthem members. ECF No. 29; FAC ¶¶
33-35. However, because the arbitration concerned only
Anthem's fully-insured members, it did not encompass the
ERISA Plan claims at issue in this litigation. FAC ¶ 34.
August 10, 2018, the arbitrator issued the Final Arbitration
award, which found that: (1) the parties did not agree that
Natividad's claims were to be reimbursed at either the
emergency services rate or Other Services rate; (2) having
failed to agree on any rate to apply to Natividad's
trauma services, the parties impliedly agreed that such
services would be reimbursed at a reasonable value, which is
fair market value; and (3) Natividad is awarded declaratory
relief that the reasonable value of its trauma services
provided to Anthem members is 80% of Natividad's billed
charges. Id. ¶ 36. Anthem has since paid all
trauma claims for its fully-insured members with dates of
service through April 2018 at 80% of billed charges.
Id. ¶ 37.
October 8, 2018, Anthem filed a motion to dismiss the initial
complaint. ECF No. 37. Natividad opposed on October 22, 2018.
ECF No. 41. Anthem replied on October 29, 2018. ECF No. 42.
January 24, 2019, at the initial case management conference,
the Court lifted the stay and directed the Clerk to reopen
the case file. ECF No. 50.
January 28, 2019, the Court granted Anthem's motion to
dismiss the initial complaint without prejudice. ECF No. 52
(“January 28, 2019 Order”). Specifically, the
Court found that Natividad's complaint failed to plead
factual allegations with specificity and that factual
allegations were missing from the complaint, “including
the specific claims, dates, explanations of benefits, and the
ERISA Plan provisions at issue.” Id. at 8. The
Court further requested that “the parties meet and
confer to assess whether claim numbers, patients numbers, or
some other claim or patient identifiers could be used in
public filings that would protect patient privacy, but enable
the parties to identify the relevant claim or patient without
sealing” and that “[u]sing such identifiers would
minimize the sealing burdens on the parties and the Court in
this case.” Id. at 9. The Court also found
that Natividad's complaint insufficiently alleged
standing and that Natividad needed to allege the specific
language of the assignment of benefits. Id. at 9-11.
In its motion to dismiss briefing, Natividad did not contest
its failure and instead argued that it could “easily
cure any deficiency by quoting the language of its assignment
of benefits and/or attaching a sample assignment of benefits
to any amended complaint.” Id. at 11. Finally,
the Court found that Natividad's complaint failed to
sufficiently allege that Anthem is a de facto plan
administrator because Natividad did not specifically identify
the ERISA Plans or claims at issue, and thus “the
related allegations about how Anthem controlled or managed
these ERISA Plans [were] necessarily vague and
conclusory.” Id. at 11-13. The Court granted
Natividad leave to amend to cure these deficiencies.
Id. at 13-14.
February 26, 2019, the Court granted the parties'
stipulation to extend Natividad's deadline to file its
FAC. ECF No. 54. The Court also explained that the number of
claims and ERISA Plans that Natividad intended to add to the
FAC would be unmanageable. Id. Thus, the Court
required the parties to elect 10 ...