Umbach Medical Group, PLLC v. Elevance Health Inc. ( 2024 )

1 UNITED STATES DISTRICT COURT DISTRICT OF NEVADA 2 3 Umbach Medical Group, PLLC, et al., Case No. 2:23-cv-02159-CDS-MDC 4 Plaintiffs Order Denying Defendant’s Motion to Dismiss 5 v. 6 Elevance Health Inc., et al., [ECF No. 14] 7 Defendants 8 9 Umbach Medical Group PLLC dba Blossom Medical Group, Thomas Umbach MD PC 10 dba Blossom, Umbach Medical Associates PLLC, Umbach Group Practice PLLC, Umbach and 11 Associates PLLC, Warm Springs Surgical Center LLC, and Umbach Surgical Group PLLC dba 12 Warm Springs Anesthesia (collectively, plaintiffs) bring this action to recover unpaid benefits 13 from defendants Elevance Health, Inc. and Rocky Mountain Hospital and Medical Service, Inc. 14 dba Anthem Blue Cross and Blue Shield (collectively, defendants). Defendants move to dismiss 15 plaintiffs amended complaint (ECF No. 13) under Rule 12(b)(6) for failure to state a claim upon 16 which relief can be granted (ECF No. 14). The motion is fully briefed. ECF No. 15; ECF No. 16. 17 For the reasons herein, I deny the defendants’ motion, order limited discovery, and stay this case 18 pending the completion of the ordered discovery period and settlement conference. 19 I. Background 20 Defendants provide group health plans as a basis for insurance coverage. Am. compl., 21 ECF No. 13 at ¶ 1. Group health plans are contracts between defendants and patients; the group 22 health plan outlines the terms of insurance provided to patients. Id. at ¶ 18. Plaintiffs are 23 surgeons, registered nurses, anesthesiologists, dieticians, and other clinicians who work 24 together as Blossom Bariatrics and Warm Springs Surgical Center where they have performed 25 hundreds of surgeries on patients in Las Vegas, Nevada, who were insured under defendants’ 26 group health plans. Id. at ¶¶ 1, 17, 22. 1 Plaintiffs have not contracted directly with National Blue Cross Blue Shield, making 2 plaintiffs out-of-network providers for the patients with defendants’ group health plan 3 insurance coverage. Id. at ¶ 20. Accordingly, National Blue Cross Blue Shield is not contractually 4 required to make direct payments to plaintiffs. Id. at ¶ 27. 5 Plaintiffs required their patients to sign an “Assignment of Insurance Payment 6 agreements” (the “Exemplar Assignment”). Id. at ¶ 29. The Exemplar Assignment states that 7 plaintiffs bill patient’s insurance companies “as a courtesy for all in network and out of network 8 policies.” Exemplar Assignment, Pls.’ Ex. A, ECF No. 15-1 at 2. It further states that insurance 9 companies occasionally send payment directly to the patient instead of the provider, and if the 10 patient receives the payment, they should forward the payment to plaintiffs. Id. By signing the 11 agreement, patients agree to “assign to [plaintiffs] any and all sums of money which [the 12 patient] received to date or which [the patient] may receive in the future from [their] health 13 insurance company.” Id. They also agree to “authorize [plaintiffs] to file appeals, 14 reconsiderations, grievances, and complaints regarding the payment of all said claims” and 15 “grant permission to [plaintiffs] the right to pursue [the patient’s] insurer legally if necessary.” 16 Id. 17 Plaintiffs allege that despite knowledge of the assignments, defendants have refused to 18 pay over 30,000 claims for out-of-network medical charges or sent payments to the patients 19 directly in violation of NRS 689A.135. Id. at ¶¶ 39, 44–48. Plaintiffs filed this action against 20 defendants asserting claims for (1) breach of contract, (2) intentional interference with 21 contracts; and (3) declaratory relief under Nevada Revised Statute (NRS) 689A.135. ECF No. 13 22 at ¶¶ 49–74. Plaintiffs seek to: (1) recover payments made by defendants directly to the patients 23 (double payment of benefits under NRS 689A.135); and (2) recover unpaid benefits. See generally 24 id. 25 26 1 II. Legal standard 2 The Federal Rules of Civil Procedure require a plaintiff to plead “a short and plain 3 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). 4 Dismissal is appropriate under Rule 12(b)(6) when a pleader fails to state a claim upon which 5 relief can be granted. Fed. R. Civ. P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A 6 pleading must give fair notice of a legally cognizable claim and the grounds on which it rests, 7 and although a court must take all factual allegations as true, legal conclusions couched as 8 factual allegations are insufficient. Twombly, 550 U.S. at 555. Accordingly, Rule 12(b)(6) requires 9 “more than labels and conclusions, and a formulaic recitation of the elements of a cause of action 10 will not do.” Id. To survive a motion to dismiss, “a complaint must contain sufficient factual 11 matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 12 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A claim has facial plausibility 13 when the plaintiff pleads factual content that allows the court to draw the reasonable inference 14 that the defendant is liable for the misconduct alleged.” Id. This standard “asks for more than a 15 sheer possibility that a defendant has acted unlawfully.” Id. 16 If the court grants a motion to dismiss for failure to state a claim, leave to amend should 17 be granted unless it is clear that the deficiencies of the complaint cannot be cured by 18 amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). Under Rule 15(a), a 19 court should “freely” give leave to amend “when justice so requires,” and in the absence of a 20 reason such as “undue delay, bad faith or dilatory motive of the part of the movant, repeated 21 failure to cure deficiencies by amendment previously allowed, undue prejudice to the opposing 22 party by virtue of allowance of the amendment, futility of the amendment, etc.” Foman v. Davis, 23 371 U.S. 178 (1962). 24 25 26 1 II. Discussion 2 A. NRS 689A.135 3 Nevada Revised Statute 689A.135 permits patients to assign their health insurance 4 payments to health care providers and has provisions to ensure that medical providers are paid 5 by health insurers for services they provide patients, despite the prevalence of anti-assignment 6 provisions in group health insurance plans. See Nev. Rev. Stat. § 689A.135(1). That statute 7 provides that: 8 [a] person insured under a policy of health insurance may assign his or her right to benefits to the provider of health care who provided the services covered by the 9 policy. The insurer shall pay all or the part of the benefits assigned by the insured to the person designated by the insured. A payment made pursuant to this 10 subsection discharges the insurer’s obligation to pay those benefits. 11 Id. The statute also punishes health insurers who ignore or violate patients’ assignment of 12 payment to their medical providers by paying patients directly: 13 If the insured makes an assignment under this section, but the insurer after receiving a copy of the assignment pays the benefits to the insured, the insurer shall 14 also pay those benefits to the provider of health care who received the assignment as soon as the insurer receives notice of the incorrect payment. 15 16 Id. 17 Defendants argue that I should dismiss plaintiffs’ breach of contract and declaratory 18 relief claims with prejudice because NRS 689A.135 does not apply because plaintiffs, as 19 professional limited liability companies, professional corporations, and limited liability 20 corporations, do not fall within the enumerated list of “providers of health care” set forth in NRS 21 689A.135. Defs.’ mot. to dismiss, ECF No. 14 at 6. Indeed, NRS 689A.135 applies to providers of 22 health care,1 which are defined in an exhaustive list in NRS 689A.135(3). See Clark Cnty. Off. of 23 Coroner/Med. Exam’r v. Las Vegas Rev.-J., 458 P.3d 1048, 1057 (Nev. 2020). A cursory review of the 24 exhaustive list indicates that defendants are correct—plaintiffs are not considered providers of 25 1 Nev. Rev. Stat. § 689A.135(1) states, in part: “A person insured under a policy of health insurance may 26 assign his or her right to benefits to the provider of health care who provided the services covered by the policy.” 1 healthcare under NRS 689A.135(3). And in their response, plaintiffs did not deny, and thus 2 concede,2 that they are not considered a provider of healthcare under NRS 689A.135(3), so NRS 3 689A.135 does not apply to them. 4 Defendants also argue that I should dismiss plaintiffs’ breach of contract and declaratory 5 relief claims with prejudice because NRS 689A.135 does not apply to the group health plan. ECF 6 No. 14 at 7. Defendants are correct in their assessment of the statute; NRS 689A.020(2) limits 7 the scope of NRS 689A to exclude any group or blanket policy. See NRS 689A.020(2). And 8 plaintiffs’ response failed to address whether the statute applies to the group health plans, so 9 plaintiffs also concede that NRS 689A.135 does not apply to the group health plans. 10 Because NRS 689A.135 does not apply to plaintiffs or the group health plans, plaintiffs 11 are not entitled to double payment of benefits under the statute. However, plaintiffs argue that 12 their claims are not dependent on NRS § 689A.135, and to the extent the statute is referenced, it 13 is only for the direct payments to patients, which is a small portion of the claims. ECF No. 15 at 14 13. Therefore, to the extent plaintiffs’ breach of contract and declaratory relief claims rely on 15 NRS 689A.135, they are dismissed with prejudice. However, this does not conclude the court’s 16 inquiry into either claim. 17 B. Right to sue for declaratory relief under the Exemplar Assignment 18 The Exemplar Assignment is titled “Assignment of Insurance Payments.” ECF No. 15-1 at 19 2. It assigns “any and all sums of money” patients receive from their health insurance company 20 and authorizes an insurance company “to pay all sums which it has paid or would pay to [the 21 patient] directly to” plaintiffs. Id. The Ninth Circuit has held that an assignment agreement does 22 not assign rights unless it is made clear from its terms that the parties intended to assign those 23 2 When opposition to a motion to dismiss failed to address arguments in the motion to dismiss, the 24 plaintiff effectively abandoned the claim to relief. Walsh v. Nev. Dep’t of Human Res., 471 F.3d 1033, 1037 (9th Cir. 2006). Additionally, Local Rule 7-2(d) provides, in relevant part, that “[t]he failure of a moving party 25 to file points and authorities in support of the motion constitutes a consent to the denial of the motion.” LR 7-2(d). 26 1 rights. ECF No. 14 at 7 (citing DB Healthcare, LLC v. Blue Cross Blue Shield of Ariz., Inc., 852 F.3d 868, 2 876–78 (9th Cir. 2017)). It is generally understood that “assignment of the right to benefits 3 generally includes the right to sue for nonpayment of benefits.” S. Coast Specialty Surgery Ctr., Inc. v. 4 Blue Cross of Cal., 90 F.4th 953, 960 (9th Cir. 2024) (citing DB Healthcare, 852 F.3d at 876–77). The 5 Ninth Circuit has previously held that if the assignment form does not encompass assignment of 6 equitable claims, a plaintiff is barred from bringing those claims. DaVita, Inc. v. Amy’s Kitchen, Inc., 7 981 F.3d 664, 678 (9th Cir. 2020) (DaVita I). However, at least one court has found an exception 8 to this rule. See Prime Healthcare Servs.-Reno, LLC v. Hometown Health Providers Ins. Co., 2022 U.S. Dist. 9 LEXIS 94638, at *5 (D. Nev. May 26, 2022). The Prime Healthcare court explained that the 10 circumstances were distinguishable from DaVita because “the assignee in DaVita specifically 11 sought injunctive and equitable relief ‘to address the allegedly illegal plan terms, including 12 reformation to conform the plan to the requirements of federal law[,]’” but the Prime Healthcare 13 plaintiff only alleged that the defendant “violated its own benefit plans by failing to pay or 14 underpaying [the plaintiff], and [the plaintiff] is seeking recovery, through equitable claims, of 15 the benefits owed.” Id. (quoting DaVita, Inc. v. Amy’s Kitchen, Inc., 379 F. Supp. 3d 960, 965 (N.D. 16 Cal. 2019) (DaVita II) aff’d 981 F.3d 664 (9th Cir. 2020)). 17 The defendants argue that Prime Healthcare’s holding is inconsistent with DaVita I and DB 18 Healthcare and therefore plaintiffs’ equitable claim for declaratory judgment should be dismissed. 19 ECF No. 16 at 4–5. In the alternative, they argue that “Plaintiffs’ declaratory relief claim is more 20 similar to that in DaVita than that in Prime Healthcare, since it seeks a declaration that Anthem’s 21 payments to the Patients was contrary to law.” Id. at 5. 22 Based on the information before the court at this time, I disagree with both of 23 defendants’ contentions. First, I do not find the holdings in DaVita I and DB Healthcare are 24 inconsistent with Prime Healthcare. As a threshold matter, the type of relief sought in the former 25 two cases is distinguishable from the relief sought in the latter. In the Davita litigation, the 26 plaintiff sought “injunctive and other equitable relief under 29 U.S.C. § 1132(a)(3) of ERISA to 1 address allegedly illegal plan terms, including reformation to conform the plan to the 2 requirements of federal law, as well as attorneys’ fees.” Davita II, 379 F. Supp. 3d at 965. In DB 3 Healthcare, the plaintiff sought “injunctive relief to prevent Anthem from offsetting asserted 4 overpayments against other payments due the [plaintiff] . . . ; declaratory relief that 5 [defendant]’s recoupment efforts are unlawful; monetary damages for benefits allegedly 6 unlawfully recouped; and declaratory and injunctive relief for breach of fiduciary duty.” 852 F.3d 7 at 876–77. Although DB Healthcare did address standing to bring assigned claims, those claims 8 were also tied to ERISA plans that specifically enumerated which categories of individuals and 9 entities may enforce each of the statute’s protections. Id. The general rule developed in DB 10 Healthcare and Davita I that an assignment of rights agreement, unless specifically stating 11 otherwise, only confers the right to sue for nonpayment, still holds true. Faced with a much 12 narrower request for equitable relief, directly connected to the nonpayment—rather than 13 addressing the lawfulness of parts of the agreement, or seeking reformation of the plan—Prime 14 Healthcare found a logical exception to this general rule. As to the defendants’ second contention, 15 as discussed further herein, without the contract between the defendants and the assignees 16 available to the court for consideration, it is unclear how this declaratory relief claim compares 17 to those in DB Healthcare, the Davita litigation, or Prime Healthcare. 18 C. Need for discovery as to claims one and three 19 Based on the briefing, I see two issues that defendants improperly attempt to wield as 20 both sword and shield to argue for dismissal of the plaintiffs’ first and third claims. First, 21 defendants seek dismissal of plaintiffs’ breach of contract claim by arguing that plaintiffs have 22 not identified which terms were breached in the contracts between the defendants and the 23 plaintiffs’ patients. ECF No. 14 at 8. They state that “plaintiffs admit they have not seen any of 24 the insurance contracts upon which they base their breach of contract claim and do not know 25 what they require[.]” Id. Where the defendants refuse to elaborate on is that they currently 26 possess, or should possess, those patient contracts. Those contracts were presumably signed 1 between the defendants and the patients. As the plaintiffs explain in their response, they 2 estimate roughly “that there are 30 times more unpaid claims compared to direct payment 3 claims.” ECF No. 15 at 5. This number is speculative, but I find that the plaintiffs have met the 4 plausibility pleading standard to suggest that at least some of the claims are unpaid, and that not 5 all 30,000 claims were made as direct payments to patients. I find it difficult to imagine that the 6 contracts between the insurer and the patients do not—in some form or other—discuss right to 7 payment. Payment is at the heart of plaintiffs’ claims as they allege payment has been 8 appropriately assigned to them. Therefore, at this juncture of proceedings, the language of the 9 contracts is of significance to this dispute, and I find that, even though the plaintiffs have 10 provided little information on which to ground their complaint, their claim is plausible, and they 11 are therefore entitled to limited discovery as to the insurer-patient contracts relevant to the 12 30,000 claims. See, e.g., Giordano v. Pub. Serv. Co. of N.H., 2020 WL 2404885, at *4 n.4 (D.N.H. May 13 12, 2020) (“Where relevant facts necessary to support a claim are in the hands of the defendant, 14 the court may, sua sponte, order limited discovery.”) It would be against the interests of justice 15 to allow the defendants to argue that the plaintiffs—who were not parties to the contracts but 16 who were assigned at least some of the rights of one of the contract parties—cannot pursue 17 claims because they do not know what the contracts say. Chambers v. NASCO, Inc., 501 U.S. 32, 43 18 (1991) (Courts are vested with inherent powers that are “governed not by rule or statute but by 19 the control necessarily vested in courts to manage their own affairs so as to achieve the orderly 20 and expeditious disposition of cases.” (quoting Link v. Wabash R. Co., 370 U.S. 626, 630–31 (1962)); 21 see also Williams v. Yamaha Motor Co., 851 F.3d 1015, 1028 (9th Cir. 2017) (information that could 22 only be obtained through discovery need not be included in a complaint); Menard v. CSX Transp., 23 Inc., 698 F.3d 40, 45 (1st Cir. 2012) (“[S]ome latitude may be appropriate where a plausible claim 24 may be indicated based on what is known, at least where some of the information needed may 25 be in control of [the] defendants.” (internal quotations removed)). 26 1 Second, because I have found that NRS 689A.135 is inapplicable and double payment is 2 not appropriate, understanding which claims resulted in patients receiving direct payments and 3 which claims resulted in nonpayment may be an essential distinction. If, as the defendants 4 imply,3 all the 30,000 claims were addressed as direct payments to patients, then there is no 5 reason to further consider claims one and three to the extent they are based on NRS 689A.135. 6 However, if at least some of those 30,000 claims have not been paid at all—as the plaintiffs 7 allege—then the breach of contract and declaratory judgment claims regarding those unpaid 8 claims, which are not premised on NRS 689A.135 and would not involve double payment, can 9 and should be analyzed independently. Given that the defendants should have ready access to 10 information related to whom they dispersed money, I find that limited discovery here is 11 warranted. See, e.g., Innova Hosp. San Antonio, Ltd. P’ship v. Blue Cross & Blue Shield of Ga., Inc., 892 F.3d 12 719, 730 (5th Cir. 2018) (“when discoverable information is in the control and possession of a 13 defendant, it is not necessarily the plaintiff's responsibility to provide that information in her 14 complaint); Arista Recs., LLC v. Doe 3, 604 F.3d 110, 120 (2d Cir. 2010) (“The Twombly plausibility 15 standard, which applies to all civil actions does not prevent a plaintiff from ‘pleading facts 16 alleged upon information and belief’ where the facts are peculiarly within the possession and 17 control of the defendant, or where the belief is based on factual information that makes the 18 inference of culpability plausible.” (citations omitted)). 19 Therefore, the defendants are ordered to produce to plaintiffs within sixty days of this 20 order (1) the contracts signed between the defendants and the patients and (2) an accounting of 21 which claims were paid directly to patients, and which were not. After the production of this 22 limited discovery, the parties must attend a settlement conference with the assigned magistrate 23 judge. Should settlement fail, the parties have fourteen days to file a revised discovery and 24 scheduling plan. Aside from the limited discovery as set forth in this order, this case as to claims 25 26 3 By arguing that plaintiffs’ entire breach of contract and declaratory relief actions are premised on Nev. Rev. Stat. § 689A.135, the defendants imply that plaintiffs’ claims are primarily for double payment. 1 one and three is hereby stayed until fourteen days after the conclusion of the settlement 2 conference. 3 D. Need for discovery as to claim two 4 Unlike the contract and declaratory relief claims, which are reliant, at least partially, on 5 the insurance contracts between the defendants and the patients, the plaintiffs’ second claim 6 involves only the assignment agreements that both parties possess and have produced to the 7 court in the form of the Exemplar Assignment. However, this claim also cannot be resolved until 8 the limited discovery is completed. 9 In Nevada, the required elements for a claim of intentional interference with contractual 10 relations are: “(1) a valid and existing contract; (2) the defendant’s knowledge of the contract; 11 (3) intentional acts intended or designed to disrupt the contractual relationship; (4) actual 12 disruption of the contract; (5) resulting damage.” J.J. Indus., LLC v. Bennett, 71 P.3d 1264, 1267 (Nev. 13 2003). The defendants argue that the plaintiffs’ amended complaint fails to sufficiently allege 14 that their conduct was intentional under prong three and that there was an actual disruption of 15 the contract under prong four. Their “actual disruption” argument is essentially that, because 16 the contracts anticipated an insurance company’s payment directly to patients, their payment 17 directly to the patients resulted in no disruption to the contract. ECF No. 14 at 9–10. The 18 defendants separately argue that they were privileged to pay patients directly. Id. at 10–11. I find 19 that, once again, the number of claims that are unpaid, rather than paid out directly to patients, 20 is essential information to this question. As the plaintiffs argue, a major component of their 21 second claim rests on the failure to pay question rather than the double payment question. I find 22 that the previously discussed limited discovery is therefore necessary to address this claim as 23 well. I will defer ruling on the intentional interference question, both as it relates to unpaid 24 claims and claims paid directly to patients, until the limited discovery has been produced so the 25 parties can differentiate and argue clearly about each. 26 Conclusion 2 IT IS THEREFORE ORDERED that the defendants’ motion to dismiss [ECF No. 14] is 3]| denied. The defendants are ordered to produce for the plaintiffs (1) the contracts signed 4|| between the defendants and the patients and (2) an accounting of which of the 30,000 listed 5|| claims were paid directly to patients, and which were not. The defendants will until December 2, 2024, in which to turn this information over. The parties must then attend a settlement conference with the magistrate judge. Should it fail, the parties have fourteen days to provide the 8|| court a briefing schedule. Aside from the limited discovery, this case as to claims one and three is hereby stayed until fourteen days after the conclusion of the settlement conference. I defer ruling on claim two until the limited discovery is complete ul Dated: September 30, 2024 7) tla — 13 Crisfinz’D. Silva 4 Uni States District Judge / 15 16 17 18 19 20 21 22 23 24 25 26 ll