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California Spine and Neurosurgery Institute v. JP Morgan Chase & Co.

United States District Court, N.D. California

December 23, 2019

JP MORGAN CHASE & CO., et al., Defendants.


          PHYLLIS J. HAMILTON United States District Judge

         Defendants JP Morgan Chase (“defendant JPM”) and United Healthcare Insurance Co.'s (“defendant United Healthcare”) (collectively, “defendants”) motion for judgment on the pleadings came on for hearing before this court on December 18, 2019. Plaintiff California Spine and Neurosurgery Institute (“plaintiff”) appeared through its counsel, Anthony Maul. Defendant appeared through their counsel, Jessica Hardy. Having read the papers filed by the parties and carefully considered their arguments and the relevant legal authority, and good cause appearing, the court hereby GRANTS WITHOUT PREJUDICE defendants' motion for the following reasons.


         On March 22, 2019, plaintiff filed this action against defendants in Alameda County Superior Court. Dkt. 1-1 (Compl.). In its complaint, plaintiff alleges state law claims for quantum meruit and promissory estoppel in connection with plaintiff's provision of surgical services to an unidentified insured patient, “BM.”

         On June 19, 2019, defendants removed the action to this court. Dkt. 1. On November 13, 2019, defendants filed this motion for judgment on the pleadings. Id. 20. At core, defendants argue that plaintiff's state law claims are expressly preempted by Title 29 U.S.C. § 1144(a). As further explained below, the court's resolution of this motion turns on whether plaintiff's state law claims “relate to” the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as that phrase is understood under Title 29 U.S.C. § 1144(a). For that reason, the court details the allegations of this otherwise straightforward dispute below.

         A. The Operative Allegations

         Plaintiff provides complex surgeries to patients in Mountain View. Compl. ¶ 1. Defendant JPM (the investment bank) sponsors an “employee health insurance plan” that is administered on defendant JPM's behalf by defendant United Health under an administrative services agreement. Id. ¶ 4. Defendant United Health operates as a managed care company and “insurers [sic] and administers” health insurance policies. Id. ¶ 5. With respect to defendant United Health, plaintiff is an “out of network” provider, which means that plaintiff “has not contracted with [defendant United Health] to participate in its provider network, or to provide services to its insureds at particular reimbursement rates.” Id. ¶ 8. BM is a middle-aged man who received the subject surgical services on his lower back pursuant to defendant JPM's plan. Id. ¶¶ 6, 7.

         Plaintiff's claims “arise from” defendants' “drastic underpayment for highly complex and skilled surgical services” that plaintiff provided to BM. Id. ¶ 6. On or around August 23, 2018, plaintiff's staff called defendant United Health “to verify the details of BM's insurance coverage and benefits.” Id. ¶ 9. According to plaintiff, “[a] representative of [defendant United Health] informed plaintiff's staff that [defendant United Health's] payment for covered care rendered to BM by out-of-network providers would be based on ‘usual and customary rates.'” Id. Plaintiff's staff recorded this information “on an insurance verification form.” Id.

         Plaintiff alleges that the phrase “usual and customary” is “a term of art in the healthcare and insurance industry” and “refers to the ordinary market rates charged in a geographic area for similar medical services provided under similar circumstances by providers with similar training and expertise.” Id. ¶ 10. Plaintiff further alleges that the California Department of Managed Health Care has adopted regulations codifying the definition of “reasonable and customary” to have a specific meaning and that defendants are aware of the meaning of “usual and customary” as defined by the California regulations. Id. Plaintiff subsequently alleges that defendant United Health “promised” to pay plaintiff the “usual and customary rates.” Id. ¶ 14. Plaintiff relies upon the parties' August 23, 2018 phone call as the basis for such alleged promise. Id. ¶ 17.

         Before performing the subject surgery on BM, plaintiff “sought prior approval of coverage from defendant United Health.” Id. ¶ 11. On or about August 27, 2018, defendant United Health sent plaintiff a letter approving plaintiff's performance of back surgery on BM. Id. Such approval cited certain service codes as eligible for coverage. Id. Defendants did not reverse their prior approval of coverage. Id. ¶ 14.

         On September 6, 2018, plaintiff performed surgery on BM. Id. ¶ 12. Plaintiff then billed defendants for its services using the cited service codes and applying plaintiff's standard rates for such services. Id. In total, plaintiff charged defendants $77, 000. Id. Plaintiff alleges that the rates ultimately charged to defendants “reflected the reasonable and customary value of the services at issue” and that plaintiff's standard rates “are based on payments plaintiff has historically received from other payers, as well as plaintiff's understanding of the prevailing rates” in Silicon Valley for such services as provided by comparable doctors. Id. ¶ 13.

         Defendant United Health paid plaintiff only $2, 300 for the surgery provided by plaintiff to BM. Id. ¶ 14. Defendant United Health contended that the “allowed amount” for all services provided by plaintiff was “only $6, 600, $4, 300 of which was chargeable to [BM's] deductible, copayment or coinsurance.” Id. ¶ 14. Plaintiff alleges that such allowed amounts “are far below even the average rates for such services in plaintiff's geographic area, ” much less the rates of a doctor with the qualifications of the surgeon here. Id. ¶ 15. Plaintiff further alleges that it “would not have performed the services upon BM, let alone sought pre-approval of coverage from [defendant United Health], had it known defendants would pay an amount so far below usual and customary rates.” Id.

         Significantly, in its complaint, plaintiff makes no reference to an assignment of any rights, including those under an ERISA plan, by BM to plaintiff.

         1. Allegations in Support of ...

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