HCA Health Services of Tennessee, Inc. v. Bluecross Blueshield of Tennessee, Inc.

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
May 20, 2015 Session
HCA HEALTH SERVICES OF TENNESSEE, INC., ET AL. v. BLUECROSS
BLUESHIELD OF TENNESSEE, INC.
Appeal from the Chancery Court for Davidson County
No. 10896II Carol L. McCoy, Chancellor
No. M2014-01869-COA-R9-CV – Filed June 9, 2016
Interlocutory appeal in suit brought by healthcare corporations to recover costs for
emergency medical services rendered to patients participating in Defendant‘s insurance
plans. We conclude that the Employee Retirement Income Security Act (―ERISA‖)
preempts plaintiffs‘ state-law cause of action based on implied-in-law contract; that we
are without subject matter jurisdiction to rule on whether Plaintiffs should be deemed to
have exhausted the insurance company‘s appeals process and therefore decline to
consider whether summary judgment should have been granted on the defense of failure
to exhaust administrative remedies; that Plaintiff is not entitled to relief under an implied-
in-law contract cause of action as to those plans which are not governed by ERISA based
upon the duties imposed on the parties by state and federal law; that the insurance
company should have been granted summary judgment on certain coverage claims
arising from plans not governed by ERISA because Plaintiffs failed to exhaust grievance
procedures; that Tenn. Code Ann. § 56-7-110(b) does not bar coverage claims; and that
47 coverage claims were improperly included in this lawsuit and should have been
dismissed on summary judgment. Accordingly, we affirm in part, reverse in part, and
vacate in part the lower court‘s order and remand for further proceedings.
Tenn. R. App. P. 9 Interlocutory Appeal; Judgment of the Chancery Court
Affirmed in Part, Reversed in Part, Vacated in Part, and Remanded
RICHARD H. DINKINS, J., delivered the opinion of the court, in which ANDY D. BENNETT
and W. NEAL MCBRAYER, JJ., joined.
Richard C. Rose, Robert F. Parsley, James T. Williams, Chattanooga, Tennessee, for the
appellant, BlueCross BlueShield of Tennessee, Inc.
David A. King and Kinika L. Young, Nashville, Tennessee, for the appellees, HCA
Health Services of Tennessee, Inc., Hendersonville Hospital Corporation, Central
Tennessee Hospital Corporation, and HTI Memorial Hospital Corporation.
OPINION
I. FACTUAL AND PROCEDURAL BACKGROUND
This interlocutory appeal involves the payment of claims for healthcare services
provided in Plaintiffs‘ hospital emergency rooms to participants in Defendant‘s insurance
plans.
Plaintiffs (collectively, ―HCA‖) are Tennessee corporations that own and operate
eight hospitals in Middle Tennessee under the name Tristar Health System. Defendant
BlueCross BlueShield of Tennessee (―BCBST‖) sells health insurance policies to
individuals as well as to participants in employee welfare benefit plans, which are
established or maintained by private employers or employee organizations and governed
by the federal Employee Retirement Income Security Act (―ERISA‖).1 BCBST also
provides policies to the employees of churches and state or local governments; these
insurance policies are not governed by ERISA. See 29 U.S.C. § 1003.
BCBST contracts with healthcare providers, such as HCA, to serve patients who
are participants in BCBST‘s insurance plans. In Tennessee BCBST maintains two
networks of healthcare providers which are available to participants: Networks S and P.
Network P offers participants a wide variety of practitioners, hospitals, and other
providers; in contrast, Network S costs less and has fewer providers than Network P. As
a provider of healthcare, HCA has entered into an agreement with BCBST, known as a
network agreement, to provide healthcare services to participants in the Network P plans;
no similar agreement exists with respect to participants in Network S plans.
HCA has treated thousands of participants of BCBST‘s S and P networks in its
emergency rooms. Prior to being discharged, each participant signed a ―Conditions of
Admission Agreement‖ in which the participant assigned the benefits from the plan to
HCA. Based on this assignment, HCA sent bills for its services directly to BCSCT,
expecting BCBST to pay the charges, minus any co-payment for which the patient was
responsible. When BCBST determined that the situation was a true medical emergency,
it paid HCA‘s bill in full for services rendered to Network S participants. However, for
1
ERISA is codified at 29 U.S.C. 1001 et. seq., and regulates employee benefit plans by ―requiring the
disclosure and reporting to participants and beneficiaries of financial and other information with respect
thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee
benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal
courts.‖ 29 U.S.C. § 1001.
2
claims that BCBST determined were not true medical emergencies, BCBST did not pay
the full amount of the bill.
Being disappointed with BCBST‘s reimbursement for emergency room services
provided to Network S participants when BCBST determined that the situation was not
an emergency, HCA filed suit against BCBST on June 1, 2010, alleging that BCBST
―systematically paid substantially less than the Hospitals‘ usual and customary charges
for Network S patients . . . generally a small percentage of charges.‖ HCA asserted
causes of action for implied-in-law contract and breach of contract and sought actual
damages of ―at least $7.8 million‖ for the services rendered to Network S participants at
the hospitals since January 1, 2007. The first amended complaint added a cause of action
for a declaratory judgment that, under the plan documents, BCBST ―must reimburse the
hospitals for at least 80% of full-billed usual and customary charges‖ and ―no longer
apply a ‗Maximum Allowable Charges‘ limitation, or any similar limitation, to reduce the
amount owed on full-billed usual and customary charges‖ for emergency services
provided to Network S patients. HCA amended the complaint a second time to add,
within its breach of contract cause of action, an action to recover benefits as assignee of
the participants‘ benefits pursuant to the civil recovery enforcement provision of ERISA,
29 U.S.C. § 1132(a)(1)(B).
In due course, BCBST moved for partial summary judgment, on the grounds that:
(1) ERISA preempted HCA‘s state law cause of action for unjust enrichment; (2) all but
145 of the 4,037 ERISA benefits claims were subject to dismissal because HCA failed to
exhaust administrative remedies; (3) federal courts had exclusive jurisdiction of and HCA
lacked standing to pursue the matters raised in the declaratory judgment action; (4) that,
with respect to HCA‘s unjust enrichment cause of action: express contracts already
governed the subject matter, HCA failed to exhaust its remedies against the network S
participants, and HCA failed to confer a benefit on BCBST; (5) claims for which HCA
received any payment from BCBST on or before November 30, 2008 were time-barred
under Tenn. Code Ann. § 56-7-110(b) and should be excluded from the suit; (6) Plaintiff
had failed to exhaust administrative grievance procedures governing the non-ERISA
plans, which should result in dismissal of 540 claims; and (7) the 112 Network P claims
should be dismissed because the parties have agreements that govern these claims.
With respect to BCBST‘s contention that HCA failed to exhaust administrative
remedies, HCA moved for partial summary judgment on the ground that ―[t]he
undisputed facts show that the notices of adverse benefit determination and denial letters
for the claims at issue do not provide the information required by ERISA regulations‖
and that, in accordance with 29 C.F.R. § 2560.503-1(l),2 the trial court should deem that
HCA had exhausted administrative remedies.
2
29 C.F.R. § 2560.503-1(l) states:
3
The trial court entered a Memorandum Opinion and Order on January 9, 2014,
followed by a revised Memorandum and Order on April 22, 2014. In the revised order,
the Chancellor held as follows:
BlueCross/BlueShield is granted partial summary judgment
dismissing the Hospitals‘ state law claims because ERISA is the exclusive
remedy for all claims relating to an ERISA plan and neither the Hospital
nor the Court may avoid the provisions of that statue by reference to a non-
ERISA cause of action.
BlueCross/BlueShield is denied partial summary judgment as to the
Hospitals‘ claim for declaratory judgment because in the second amended
complaint, the Hospitals seek a declaration of rights under the derivative
claim[3] regarding the proper construction of the Network S plan
documents, the assignment of benefits, BlueCross/BlueShield‘s internal
policy documents and its appeal process and its application of undeclared
and/or unwritten criteria for denying claims. To the extent that the
Hospitals‘ request for a declaratory judgment is premised on contracts
implied-in-law, ERISA provides the exclusive remedy and accordingly, that
portion of the Hospitals‘ request for declaratory judgment is dismissed.
BlueCross/BlueShield is denied partial summary judgment based on
the Hospitals‘ alleged failure to exhaust mandatory administrative remedies
under the ERISA plans. Any decision regarding ERISA benefit claims,
assignments, appeals procedures, flawed or otherwise, is governed by
ERISA and shall be resolved upon a full hearing, not by summary
judgment. This Court‘s previous analysis that the Hospitals‘ implied-in-
Failure to establish and follow reasonable claims procedures. In the case of the failure of
a plan to establish or follow claims procedures consistent with the requirements of this
section, a claimant shall be deemed to have exhausted the administrative remedies
available under the plan and shall be entitled to pursue any available remedies under
section 502(a) of [ERISA, codified at 29 U.S.C. § 1132(a)] on the basis that the plan has
failed to provide a reasonable claims procedure that would yield a decision on the merits
of the claim.
3
The trial court explained in a footnote that HCA‘s claims ―are characterized as derivative claims because
they are based upon the assignment of benefits executed by patients to the Hospitals.‖ We adopt this
characterization and will refer to HCA‘s breach of contract cause of action as the ―derivative cause of
action.‖
HCA‘s quantum meruit/implied contract/unjust enrichment cause of action does not rely upon
patients‘ assignments of benefits but rather on the benefit HCA alleges it as conferred on BCBST directly
in the absence of a contract between the parties regarding network S patients; accordingly, we will refer
the quantum meruit cause of action as the ―direct cause of action.‖
4
law contract claim did not require reference to BlueCross/BlueShield‘s
procedures for administrative appeals, assignments or benefit claims and
was not pre-empted by ERISA was in error. Upon review of the pleadings,
the earlier memoranda, the supplemental memoranda and arguments made
by the parties at the hearing on the motions to alter or amend, this Court is
persuaded that ERISA is the exclusive remedy for all claims relating to
ERISA plans and therefore, BlueCross/BlueShield‘s motion for partial
summary judgment is appropriate and granted as to the implied-in-law
contract claims.
The Court concludes that the Hospitals‘ action for breach of an
implied-in-law contract with BlueCross/BlueShield is pre-empted by
ERISA. Under common law theories and the state statute, the Hospitals
would be entitled to recover from BlueCross/BlueShield the reasonable
value of the emergency services rendered to BlueCross/BlueShield‘s
patients/enrollees in Network S, but for the provisions contained in the
federal law, ERISA, which is the exclusive remedy for all claims relating to
ERISA plans.
BlueCross/BlueShield is denied partial summary judgment on its
assertion that all claims for which the Hospitals received any payment from
them on or before November 30, 2008 are time-barred under Tenn. Code
Ann. §56-7-110(b). In analyzing the issues, the court confused the ERISA
pre-emption doctrine. These claims involve material facts which, when
combined with the controlling law under ERISA, preclude summary
judgment.
BlueCross/BlueShield is granted partial summary judgment
regarding the Hospital‘s claim for quantum-meruit pursuant to the
Hospitals‘ implied-in-law contract claim.
BlueCross/BlueShield is denied partial summary judgment regarding
all but 24 of the 564 ―non-ERISA‖ claims [claims relating to employee-
sponsored health plans not governed by ERISA because they are church-
related or governmental] because the Hospitals claim BlueCross/BlueShield
failed to comply with mandatory ERISA pre-litigation grievance processes
that are required to be included in any health care plan.
BlueCross/BlueShield‘s request for partial summary judgment necessitates
resolution of material fact disputes and is denied.
The Hospitals are denied partial summary judgment seeking a
declaratory judgment that they are deemed to have exhausted all
administrative remedies available and that BlueCross/BlueShield‘s
5
Network S appeal process is unreasonable, arbitrary or capricious.
Contrary to the Hospitals‘ assertion that the facts are undisputed, resolution
of whether the appeals‘ procedures comport with ERISA requires proof that
the notices of adverse benefit determination and denial letters for the claims
at issue failed to provide the information required by the ERISA
regulations.
All other matters raised by either party seeking partial summary
judgment are respectfully denied. IT IS SO ORDERED.
Both parties sought interlocutory review pursuant to Tenn. R. App. P. 9. The
appeal was granted, limited to the following issues:
1. Whether HCA‘s implied-in-law contract claim is preempted by ERISA.
2. Whether BCBST‘s administrative appeals procedures violate ERISA
requirements, thus permitting the hospitals to seek full-billed charges.
3. For the 4,037 claims governed by ERISA, whether all but 145 should be
dismissed for failure to exhaust administrative remedies.
4. For all non-ERISA claims, whether Tenn. Code Ann. §56-7-2355 or the
Emergency Medical Treatment and Active Labor Act (EMTALA), as
amended, 42 U.S.C. § 1395dd, give the hospitals an implied contractual
cause of action for quantum meruit and, if so, what are its applicable
elements and defenses.
5. For the 564 non-ERISA claims, whether all but 24 should be dismissed
due to failure to comply with contractual pre-litigation grievance
requirements.
6. Whether all claims for which the hospitals received payment from the
insurance company on or before November 30, 2008 are time-barred under
Tenn. Code. Ann. § 56-7-110(b).
7. Whether claims related to insureds in the insurance company‘s Network
P should be dismissed because the parties have managed-care contracts
specifically governing those claims.
II. STANDARD OF REVIEW
We review findings of fact by the trial court ―de novo upon the record of the trial
court, accompanied by a presumption of the correctness of the finding, unless the
6
preponderance of the evidence is otherwise.‖ Tenn. R. App. P. 13(d). This presumption
of correctness ―applies only to findings of fact, not to conclusions of law[; a]ccordingly,
appellate courts review a trial court‘s resolution of legal issues without a presumption of
correctness and reach their own independent conclusions regarding these issues.‖
Cumberland Bank v. G & S Implement Co., Inc., 211 S.W.3d 223, 228 (Tenn. Ct. App.
2006)
The Chancellor‘s order was based upon the parties‘ cross motions for summary
judgment. A party is entitled to summary judgment only if the ―pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits…show that
there is no genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.‖ Tenn. R. Civ. P. 56.04. The party seeking summary
judgment ―bears the burden of demonstrating that no genuine issue of material fact exists
and that it is entitled to judgment as a matter of law.‖ Armoneit v. Elliot Crane Service,
Inc., 65 S.W.3d 623, 627 (Tenn. Ct. App. 2001).
A succinct statement setting forth the standard for considering motions for
summary judgment where the moving party does not bear the burden of proof was set
forth by this court in Hall v. Gaylord Entm’t Co.:4
When the moving party does not bear the burden of proof at trial, the
moving party may make the required showing and shift the burden of
production either ―(1) by affirmatively negating an essential element of the
nonmoving party‘s claim or (2) by demonstrating that the nonmoving
party‘s evidence at the summary judgment stage is insufficient to establish
the nonmoving party‘s claim or defense.‖ Rye v. Women’s Care Ctr. of
Memphis, MPLLC, [477] S.W.3d [235], No. W2013-00804-SC-R11-CV, at
*22 (Tenn. Oct. 26, 2015).
***
If the moving party does satisfy its initial burden of production, ―the
nonmoving party ‗may not rest upon the mere allegations or denials of [its]
pleading,‘ but must respond, and by affidavits or one of the other means
provided in Tennessee Rule 56, ‗set forth specific facts‘ at the summary
judgment stage ‗showing that there is a genuine issue for trial.‘ ‖ Rye, [477]
4
Prior to October 26, 2015, courts which were considering motions for summary judgment were to apply
the standard set forth in Hannan v. Alltel Publishing Co., 270 S.W.3d 1 (Tenn. 2008) for cases filed
before July 1, 2011; for cases filed after July 1, 2011, courts are to apply Tenn. Code Ann. § 20-16-101.
On October 26, 2015, in Rye v. Women’s Care Ctr. of Memphis, MPLLC, 477 S.W.3d 235, 273 (Tenn.
2015), our Supreme Court overruled Hannan and adopted a standard for cases filed prior to July 1, 2011,
that is consistent with the standard at applicable to Federal Rule 56. Inasmuch as this case was filed June
1, 2010, we apply the standard as directed by the Rye court.
7
S.W.3d [235], No. W2013-00804-SC-R11-CV, at *22 (quoting Tenn. R.
Civ. P. 56.06). The nonmoving party must demonstrate the existence of
specific facts in the record that could lead a rational trier of fact to find in
favor of the nonmoving party. Id. If adequate time for discovery has been
provided and the nonmoving party‘s evidence at the summary judgment
stage is insufficient to establish the existence of a genuine issue of material
fact for trial, then the motion for summary judgment should be granted. Id.
Thus, even where the determinative issue is ordinarily a question of fact for
the jury, summary judgment is still appropriate if the evidence is
uncontroverted and the facts and inferences to be drawn therefrom make it
clear that reasonable persons must agree on the proper outcome or draw
only one conclusion. White v. Lawrence, 975 S.W.2d 525, 529–30 (Tenn.
1998).
Hall, No. M2014-02221-COA-R3-CV, 2015 WL 7281784, at *4-5 (Tenn. Ct. App. Nov.
17, 2015) (emphasis in original) (footnotes omitted). We review the trial court‘s ruling
on a motion for summary judgment de novo with no presumption of correctness, as the
resolution of the motion is a matter of law. Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn.
2002); see also Martin v. Norfolk S. Ry., 271 S.W.3d 76, 83 (Tenn. 2008). We view the
evidence in favor of the non-moving party by resolving all reasonable inferences in its
favor and discarding all countervailing evidence. Stovall v. Clarke, 113 S.W.3d 715, 721
(Tenn. 2003); Godfrey, 90 S.W.3d at 695.
III. DISCUSSION
ISSUE 1: WHETHER ERISA PREEMPTS HCA’S IMPLIED-IN-LAW CONTRACT
CAUSE OF ACTION
The trial court granted BCBST‘s motion for summary judgment and dismissed
HCA‘s direct cause of action ―because ERISA is the exclusive remedy for all claims
relating to an ERISA plan and neither the Hospital nor the Court may avoid the
provisions of that statute by reference to a non-ERISA cause of action.‖ HCA asserts that
this holding was in error because HCA‘s direct cause of action does not relate to ERISA
benefit plans.
The United States Supreme Court explained the concept of ERISA preemption in
Aetna Health v. Davila:
Congress enacted ERISA to ―protect ... the interests of participants in
employee benefit plans and their beneficiaries‖ by setting out substantive
regulatory requirements for employee benefit plans and to ―provid[e] for
appropriate remedies, sanctions, and ready access to the Federal courts.‖ 29
U.S.C. § 1001(b). The purpose of ERISA is to provide a uniform
8
regulatory regime over employee benefit plans. To this end, ERISA
includes expansive pre-emption provisions, see ERISA § 514, 29 U.S.C. §
1144, which are intended to ensure that employee benefit plan regulation
would be ―exclusively a federal concern.‖ Alessi v. Raybestos–Manhattan,
Inc., 451 U.S. 504, 523, 101 S. Ct. 1895, 68 L. Ed. 2d 402 (1981).
ERISA‘s ―comprehensive legislative scheme‖ includes ―an integrated
system of procedures for enforcement.‖ Russell, 473 U.S., at 147, 105 S. Ct.
3085 (internal quotation marks omitted). This integrated enforcement
mechanism, ERISA § 502(a), 29 U.S.C. § 1132(a), is a distinctive feature
of ERISA, and essential to accomplish Congress‘ purpose of creating a
comprehensive statute for the regulation of employee benefit plans.[5] As
the Court said in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S. Ct.
1549, 95 L. Ed. 2d 39 (1987):
5
ERISA‘s civil enforcement provision, found at section 502 of the Act and codified at 29 U.S.C. §
1132(a)(1)(B), provides in relevant part:
(a) Persons empowered to bring a civil action
A civil action may be brought—
(1) by a participant or beneficiary—
…
(B) to recover benefits due to him under the terms of his plan, to enforce his rights under
the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.
The Supreme Court explained this provision in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 52-53 (1987):
The civil enforcement scheme of § 502(a) is one of the essential tools for accomplishing
the stated purposes of ERISA. The civil enforcement scheme is sandwiched between two
other ERISA provisions relevant to enforcement of ERISA and to the processing of a
claim for benefits under an employee benefit plan. Section 501, 29 U.S.C. § 1131,
authorizes criminal penalties for violations of the reporting and disclosure provisions of
ERISA. Section 503, 29 U.S.C. § 1133, requires every employee benefit plan to comply
with Department of Labor regulations on giving notice to any participant or beneficiary
whose claim for benefits has been denied, and affording a reasonable opportunity for
review of the decision denying the claim. Under the civil enforcement provisions of §
502(a), a plan participant or beneficiary may sue to recover benefits due under the plan,
to enforce the participant‘s rights under the plan, or to clarify rights to future benefits.
Relief may take the form of accrued benefits due, a declaratory judgment on entitlement
to benefits, or an injunction against a plan administrator‘s improper refusal to pay
benefits. A participant or beneficiary may also bring a cause of action for breach of
fiduciary duty, and under this cause of action may seek removal of the fiduciary. §§
502(a)(2), 409. In an action under these civil enforcement provisions, the court in its
discretion may allow an award of attorney‘s fees to either party. § 502(g).
9
―[T]he detailed provisions of § 502(a) set forth a
comprehensive civil enforcement scheme that represents a
careful balancing of the need for prompt and fair claims
settlement procedures against the public interest in
encouraging the formation of employee benefit plans. The
policy choices reflected in the inclusion of certain remedies
and the exclusion of others under the federal scheme would
be completely undermined if ERISA-plan participants and
beneficiaries were free to obtain remedies under state law that
Congress rejected in ERISA. ‗The six carefully integrated
civil enforcement provisions found in § 502(a) of the statute
as finally enacted ... provide strong evidence that Congress
did not intend to authorize other remedies that it simply
forgot to incorporate expressly.‘ ‖ Id., at 54, 107 S. Ct. 1549
(quoting Russell, supra, at 146, 105 S. Ct. 3085).
Therefore, any state-law cause of action that duplicates, supplements, or
supplants the ERISA civil enforcement remedy conflicts with the clear
congressional intent to make the ERISA remedy exclusive and is therefore
pre-empted. See 481 U.S., at 54–56, 107 S. Ct. 1549; see also Ingersoll–
Rand Co. v. McClendon, 498 U.S. 133, 143–145, 111 S. Ct. 478, 112
L. Ed. 2d 474 (1990).
542 U.S. 200, 208-209 (2004) (emphasis in original).
In the interest of clarity, at the outset we address the two categories of preemption
that may apply when considering the effect of ERISA on state law causes of action –
complete preemption and conflict preemption. Complete preemption is ―a description of
the specific situation in which a federal law not only preempts a state law to some degree
but also substitutes a federal cause of action for the state cause of action.‖ Schmeling v.
NORDAM, 97 F.3d 1336, 1342 (10th Cir. 1996).6 Conflict preemption, on the other
hand, codified at 29 U.S.C. § 1144, ―allows a defendant to defeat a plaintiff‘s state-law
claim on the merits by asserting the supremacy of federal law as an affirmative defense.‖
Cmty. State Bank v. Strong, 651 F.3d 1241, 1261 n.16 (11th Cir. 2011). In their briefs on
appeal, BCBST has argued, and HCA defended, that conflict preemption applies to defeat
HCA‘s direct state law cause of action; neither party argues that complete preemption
applies. Consequently, we address this issue as one of conflict preemption.
6
In Davila, quoted supra, the Court considered the effect of ERISA on an alleged violation of a duty
imposed by state law and held ―if an individual, at some point in time, could have brought his claim under
ERISA § 502(a)(1)(B), and where there is no other independent legal duty that is implicated by a
defendant‘s actions, then the individual‘s cause of action is completely pre-empted by ERISA §
502(a)(1)(B).‖ Davila, 542 U.S. at 210.
10
ERISA‘s conflict preemption provision, found at 29 U.S.C. § 1144, ―preempts
‗any and all State laws insofar as they may now or hereafter relate to any employee
benefit plan‘ governed by ERISA.‖ Thurman v. Pfizer, Inc., 484 F.3d 855, 861 (6th Cir.
2007) (quoting 29 U.S.C. § 1144(a)). In Thurman the Sixth Circuit Court of Appeals set
forth three categories of state law causes of actions that ERISA preempts:
[S]tate-law claims ―that (1) ‗mandate employee benefit structures or their
administration;‘ (2) provide ‗alternate enforcement mechanisms;‘ or (3)
‗bind employers or plan administrators to particular choices or preclude
uniform administrative practice, thereby functioning as a regulation of an
ERISA plan itself.‘ ‖ Penny/Ohlmann/Nieman, Inc. v. Miami Valley
Pension Corp., 399 F.3d 692, 698 (6th Cir. 2005) (―PONI‖) (quoting Coyne
& Delany Co. v. Selman, 98 F.3d 1457, 1468 (4th Cir.1996)). With respect
to claims that do not fall within these three categories, we continue to
follow our prior precedent that focuses on the nature of the remedy sought
by a plaintiff.
484 F.3d at 861. Though the parties have mentioned all three categories in their
respective briefs, we have determined that the second category is applicable to HCA‘s
direct cause of action.
BCBST asserts that HCA‘s direct cause of action is a preempted ―alternate
enforcement mechanism‖ because HCA obtained benefits under an ERISA plan for the
claims at issue as an assignee and is now seeking additional, extra-contractual, extra-
ERISA remedies for alleged underpayments. HCA does not specifically address the
applicability of the ―alternate enforcement mechanism‖ category in its brief. However,
HCA argues generally that its direct cause of action is independent, unrelated to any
ERISA plan; as a separate matter, HCA argues that the implied-at-law contract action
arises from a direct relationship created by the Emergency Medical Treatment and Active
Labor Act (―EMTALA‖), codified at 42 U.S.C. § 1395dd, and Tenn. Code Ann. § 56-7-
2355. (See discussion of these statutes in Issue 4, infra.). HCA asserts it is not seeking to
recover benefits under the plan, but instead seeks adequate payment for services that
HCA was required to provide and BCBST was required to cover.
In its complaint, after acknowledging recovery of ERISA benefits as an assignee, 7
HCA asserted a separate direct cause of action for implied-in-law contract seeking
7
The assignments of benefits HCA received from plan participants gave HCA the standing and ability to
bring actions for underpayment or denial of rights under 29 U.S.C. § 1132(a)(1)(b). Cromwell, 944 F.2d
at 1277 (holding that ―a health care provider may assert an ERISA claim as a ‗beneficiary‘ of an
employee benefit plan if it has received a valid assignment of benefits.‖). For the ERISA-governed
claims in the case at bar, HCA brought an action pursuant to 29 U.S.C. § 1132(a)(1)(b), which is not at
issue in this interlocutory appeal, as well as its direct cause of action for unjust enrichment.
11
additional recovery for the same services provided to ERISA plan members. As noted in
River Park Hosp. v. BlueCross BlueShield of Tenn., Inc., 173 S.W.3d 43, 57-58 (Tenn.
Ct. App. 2002), an implied-at-law contract claim is premised on a relationship established
when a plaintiff confers a benefit on a defendant without a contractual agreement and
seeks payment because the circumstances would make it inequitable for the defendant to
not pay. In the ―IMPLIED CONTRACT/UNJUST ENRICHMENT‖ portion of the
complaint, HCA alleges that ―BCBST‘s contracts with these patients or their employers
required payment of in-network benefits for emergency medical services, whether the
services were rendered by an in-network provider or an out-of-network provider.‖8 The
relationship upon which HCA premises its state law cause of action is the relationship
established by the insurance contract, governed by ERISA, between BCBST and the
patient; HCA seeks to recover a ―reasonable reimbursement for [HCA‘s] provision of
emergency medical services‖ outside of the exclusive enforcement mechanism set forth
in ERISA. PONI, 399 F.3d at 700. Inasmuch as HCA relies on the relationship between
BCBST and the participants in the plans to establish the relationship that is the basis of
the implied-in-law contract, we hold that HCA‘s direct cause of action is an alternative
enforcement mechanism to ERISA and is preempted. Id. at 698; Thurman, 484 F.3d at
861. Accordingly, we affirm the trial court‘s grant of summary judgment to BCBST and
dismissal of HCA‘s direct cause of action with respect to the ERISA-governed plans.
ISSUE 2: WHETHER BCBST’S ADMINISTRATIVE APPEALS PROCEDURES
COMPLY WITH ERISA REQUIREMENTS
ERISA requires that every employee benefit plan shall ―provide adequate notice in
writing to any participant or beneficiary whose claim for benefits under the plan has been
denied‖ and ―afford a reasonable opportunity to any participant whose claim for benefits
has been denied for a full and fair review.‖ 29 U.S.C. § 1133. Requirements for such
review procedures are contained in 29 C.F.R. § 2560.503-1. Subsection (g) of the
regulation, ―Manner and content of notification of benefit determination,‖ sets forth the
information required to be included in a written or electronic notification of an adverse
benefit determination; subsection (h) ―Appeal of adverse benefit determinations,‖
requires that every benefit plan have a procedure through which a claimant can appeal an
adverse benefit determination and receive a full and fair review; and subsection (1)
provides that ―a claimant shall be deemed to have exhausted the administrative remedies
available under the plan and shall be entitled to pursue any available remedies under
section 502(a) of the Act‖ when a plan fails ―to establish or follow claims procedures
consistent with the requirements of this section.‖
HCA relied upon 29 U.S.C. § 1133 and the implementing regulation to argue
before the trial court that BCBST‘s ERISA-governed employee benefit plans failed to
8
BCBST‘s response to this allegation was ―BCBST admits that members of Network S have insurance
contracts or employer-sponsored health plans that provide certain coverage for health care.‖
12
comply with certain regulations, and therefore, HCA did not have to exhaust BCBST‘s
administrative remedies process before bringing suit as assignee of the plans‘ benefits.
HCA sought a declaratory judgment to this effect and moved for summary judgment on
the same. The trial court denied HCA‘s motion, holding that factual disputes precluded a
ruling because ―whether the appeals‘ procedures comport with ERISA requires proof that
the notices of adverse benefit determination and denial letters for the claims at issue
failed to provide the information required by the ERISA regulations.‖
Before we can determine whether BCBST‘s administrative appeals process
comports with ERISA, we must determine whether we have jurisdiction over this subject
matter. Section 502 of ERISA, found at 29 U.S.C. § 1132, is the ―civil enforcement‖
provision of ERISA. It reads in pertinent part that:
(a) Persons empowered to bring a civil action
A civil action may be brought--
***
(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or
practice which violates any provision of this subchapter or the terms of the
plan, or (B) to obtain other appropriate equitable relief (i) to redress such
violations or (ii) to enforce any provisions of this subchapter or the terms of
the plan;
***
(e)(1) Except for actions under subsection (a)(1)(B) of this section, the
district courts of the United States shall have exclusive jurisdiction of civil
actions under this subchapter brought by the Secretary or by a participant,
beneficiary, fiduciary, or any person referred to in section 1021(f)(1) of this
title. State courts of competent jurisdiction and district courts of the United
States shall have concurrent jurisdiction of actions under paragraphs (1)(B)
and (7) of subsection (a) of this section.[9]
29 U.S.C.A. § 1132(a)(3), (e)(1). The Sixth Circuit Court of Appeals has noted that
―Section 1132(a)(3) allows a party to bring a civil action for relief when the [notice and
review] requirements of § 1133 are not met,‖ Stuhlreyer v. Armco, Inc., 12 F.3d 75, 78
n.2 (6th Cir. 1993) (citing Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1135 (7th Cir.
1992)); accord Parkridge Med. Ctr., Inc. v. CPC Logistics, Inc. Grp. Ben. Plan, No.
1:12-CV-124, 2013 WL 3976621, at *8 (E.D. Tenn. Aug. 2, 2013). Thus, Section
1132(a)(3), not section 1132(a)(1)(B), is the vehicle by which HCA may seek relief from
9
Subsection (a)(7), not applicable here, permits a civil action to be brought “by a State to enforce
compliance with a qualified medical child support order (as defined in section 1169(a)(2)(A) of this
title).‖ Such actions may be heard by state or federal courts.
13
BCBST‘s allegedly ERISA-violating appeals procedures. However, state courts are not
vested with jurisdiction to hear a cause of action brought pursuant to section 1132(a)(3).
We concur with our sister court, the Colorado Court of Appeals, which has held, ―[T]he
federal courts have exclusive jurisdiction to address violations of this ERISA provision
[§1133].‖ Matter of Estate of Damon, 892 P.2d 350, 357 (Colo. App. 1994), aff’d, 915
P.2d 1301 (Colo. 1996).
Because state courts have only been granted jurisdiction to hear causes of action
arising under § 1132(a)(1)(B) and (7) and because, as declared in Stuhlreyer, 12 F.3d at
78, a cause of action for violations of § 1133 must be brought under §1132(a)(3), only
federal courts have subject matter jurisdiction to hear arguments such as that made by
HCA that BCBST‘s administrative appeals procedures do not comply with §1133 and its
implementing regulation. We conclude that we are without subject matter jurisdiction to
consider this issue; accordingly we vacate the ruling on this matter and dismiss HCA‘s
cause of action seeking a declaratory judgment that it is deemed to have exhausted all
administrative remedies available.
ISSUE 3: HCA’S FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES WITH RESPECT
TO ERISA CLAIMS
BCBST next argues that the court erred in denying summary judgment because
HCA failed to exhaust administrative remedies prior to bringing suit, which should result
in the dismissal of those claims from the lawsuit. Case law supports BCBST‘s argument
that ―the administrative scheme of ERISA requires a participant to exhaust his or her
administrative remedies prior to commencing suit.‖ Cantrell v. Walker Die Casting, Inc.,
121 S.W.3d 391, 395 (Tenn. Ct. App. 2003) (quoting Ravencraft v. UNUM Life Ins. Co.
of Am., 212 F.3d 341, 343 (6th Cir. 2000)); see also Scott v. Regions Bank, 702 F. Supp.
2d 921, 932 (E.D. Tenn. 2010) (citing Miller v. Metropolitan Life Ins. Co., 925 F.2d 979,
986 (6th Cir. 1991)).
Issues 2 and 3 are closely related.10 As noted in our discussion of Issue 2, supra,
HCA has asserted that BCBST‘s appeals process does not comply with ERISA
regulations, which could possibly excuse its failure to exhaust administrative remedies,
see 29 C.F.R. § 2560.503-1(l), and we have held that the issue must be resolved by a
court of competent jurisdiction. In light of the interrelatedness of these issues, we see no
reason to address the merits of the third issue certified for appeal. There must be a
determination that BCBST‘s appeals procedure complies with ERISA regulations to
resolve the issue of whether failure to exhaust the procedure is excused. Accordingly, it
is appropriate that we vacate the Chancellor‘s ruling in this regard.
10
HCA addresses both issues together in one section of its brief and advanced its ―deemed exhausted‖
argument before the trial court in response to BCBST‘s position that HCA‘s failure to exhaust
administrative remedies should warrant dismissal.
14
ISSUE 4: WHETHER A CAUSE OF ACTION BASED ON AN IMPLIED-IN-LAW CONTRACT
IS AVAILABLE RELATIVE TO CLAIMS NOT GOVERNED BY ERISA
The fourth issue we are called to resolve arises from the court‘s grant of summary
judgment to BCBST on HCA‘s implied-in-law contract cause of action. As to the plans
governed by ERISA, the court held that preemption applied; as to the plans not governed
by ERISA, the court did not specify the legal basis upon which it was granting summary
judgment. We restate the issue here:
For all non-ERISA claims, whether Tenn. Code Ann. §56-7-2355 or the
Emergency Medical Treatment and Active Labor Act (EMTALA), as
amended, 42 U.S.C. § 1395dd, give the hospitals an implied contractual
cause of action for quantum meruit and, if so, what are its applicable
elements and defenses.
HCA argues that BCBST has been unjustly enriched by ―paying a cut-rate amount
which has no basis in law and is contrary to its longstanding policy‖ and that BCBST ―is
thus taking advantage of HCA‘s obligations under EMTALA to provide emergency care
to Network S members to unilaterally impose a draconian discount.‖ HCA contends that
the parties in this case are similarly situated to those in River Park Hosp. v. BlueCross
BlueShield of Tenn., Inc. and that this Court should find that an implied-in-law contract
exists in the instant case as we so found in River Park.
The defendants in River Park were BCBST and its subsidiary Volunteer State
Health Plan, a health maintenance organization which operated under the name
―BlueCare‖ and participated in the State of Tennessee‘s Medicaid system known as
TennCare as a managed care organization (―MCO‖); BlueCare had been required to enter
a contractor risk agreement with the State of Tennessee in order to become a Tennessee
MCO. River Park, 173 S.W.3d at 48-49. Under the terms of the agreement, BlueCare
received a monthly payment, known as a capitation payment, for each BlueCare enrollee;
in exchange BlueCare was to arrange for medical services for the enrollee. Id. at 48.
With respect to emergency care specifically, the agreement stated that ―The Contractor
shall be required to pay for all emergency medical services which are medically
necessary until the clinical emergency is stabilized,‖ but did not set forth the rates which
BlueCare would pay for the care. Id. at 59. The plaintiff was River Park Hospital, which
provided emergency care to BlueCare‘s enrollees at discounted rates pursuant to a
contract with BlueCare. Id. at 49. The contract expired and River Park began billing
BlueCare at non-discounted rates. Id. Instead of paying the full charges, BlueCare paid
River Park at the rate that had been set in the expired contract. Id. River Park brought
suit against BlueCare alleging unjust enrichment and other theories of recovery. Id. at 50.
Trial was bifurcated, and the case proceeded to a determination of whether
15
BlueCare was unjustly enriched by having received payment from the State for enrollees
in the TennCare program but paying River Park less than the amount billed for
emergency room care for those enrollees. Id. at 50-51. Following a preliminary ruling
which both parties sought to modify or amend, as well as the taking of additional proof,
the trial court held in pertinent part, that:
By federal law River Park must provide these emergency services to any
patient without regard to insurance until the patient is stabilized. BlueCare
is legally obligated by its contract with the State to pay for emergency
medical services provided to its enrollees. There was no agreement
concerning the amount of payment for these emergency services.
Id. at 53. The trial court thereupon held that BlueCare had been unjustly enriched under
the circumstances presented. Id. at 52. This Court affirmed the trial court‘s ruling that an
implied-in-law contract existed between the hospital and BlueCare and remanded the
case for a determination of the reasonable rate of reimbursement for emergency medical
services provided by the hospital to BlueCare enrollees. Id. at 61.
We disagree with HCA‘s contention that the holding in River Park is ―squarely on
point.‖ Unlike River Park, where BlueCare had received payment for each TennCare
enrollee and was under an obligation to pay for emergency services rendered to the
enrollee, the patients in this case are participants in commercial health benefit plans
which include coverage provided by BCBST for emergency medical services, at a level
which depends upon the specific plan and the facts and circumstances of each claim. 11 In
11
The non-ERISA plans contain Emergency Care provisions, which set forth the coverage provided to
Network S patients and limit the coverage in cases of non-emergencies, that are identical or similar to the
following language from the Core-3PPO plans:
E. Hospital Emergency Care Services
Medically Necessary and Appropriate health care services and supplies furnished in a
Hospital which are required to determine, evaluate and/or treat an Emergency until such
condition is stabilized, as directed or ordered by the Practitioner or Hospital protocol.
1. Covered
a. Medically Necessary and Appropriate health care services, supplies and medications
necessary for the diagnosis and stabilization of Your Emergency Condition.
b. Practitioner services.
2. Exclusions
a. Treatment of a chronic, non-Emergency condition, where the symptoms have existed
over a period of time, and a prudent layperson who possesses an average knowledge of
health and medicine would not believe it to be an Emergency.
b. Services received for inpatient care or transfer to another facility once your medical
condition has stabilized, unless Prior Authorization is obtained from the Plan within 24
16
River Park, HCA could only seek payment from BlueCare; significantly, and as
distinguished from River Park, in this case HCA can seek payment directly from the
patients it has treated, with the amount it may have received from BCBST operating to
reduce the amount for which the patient is responsible. Accordingly, we turn our focus to
whether EMTALA12 and Tenn. Code Ann. § 56-7-235513 give HCA a direct cause of
hours or next working day.
12
The relevant text of EMTALA provides:
If any individual (whether or not eligible for benefits under this subchapter) comes to a
hospital and the hospital determines that the individual has an emergency medical
condition, the hospital must provide either—
(A) within the staff and facilities available at the hospital, for such further medical
examination and such treatment as may be required to stabilize the medical condition, or
(B) for transfer of the individual to another medical facility in accordance with subsection
(c) of this section.
42 U.S.C.A. § 1395dd(b)(1).
13
Tenn. Code Ann. § 56-7-2355 provides in pertinent part:
(a) . . . (1) ―Emergency medical condition‖ means a medical condition that manifests
itself by symptoms of sufficient severity, including severe pain, that a prudent layperson,
who possesses an average knowledge of health and medicine, could reasonably expect
the absence of immediate medical attention to potentially result in:
(A) Placing the person‘s health in serious jeopardy;
(B) Serious impairment to bodily functions; or
(C) Serious dysfunction of any bodily organ or part.
***
(3) ―Health benefit plan‖ means any hospital or medical expense policy, health, hospital
or medical service corporation contract, a policy or agreement entered into by a health
insurer or a health maintenance organization contract offered by an employer, other plans
administered by the state government, or any certificate issued under the policies,
contracts or plans. . . .
(b)(1) A health benefit plan shall not deny coverage for emergency services if the
symptoms presented by an enrollee of a health benefit plan and recorded by the attending
provider indicate that an emergency medical condition could exist, regardless of whether
or not prior authorization was obtained to provide those services and regardless of
whether or not the provider furnishing the services has a contractual agreement with the
health benefit plan for the provision of the services to the enrollee.
***
(4) Coverage of emergency services shall be subject to applicable copayments,
coinsurance and deductibles.
17
action against BCBST for unjust enrichment.14
Our Supreme Court examined EMTALA in Chattanooga-Hamilton Cty. Hosp.
Auth. v. UnitedHealthcare Plan of the River Valley, Inc., stating:
The purpose of EMTALA was to prohibit ―patient dumping,‖ that is, ―the
practice of a hospital that, despite its capability to provide needed medical
care, either refuses to see or transfers a patient to another institution
because of the patient‘s inability to pay.‖ Baber v. Hosp. Corp. of Am., 977
F.2d 872, 873 n.1 (4th Cir. 1992); see also Beller v. Health and Hosp.
Corp. of Marion Cnty., Ind., 703 F.3d 388, 390 (7th Cir. 2012). To this
end, when a person without the ability to pay for medical services presents
to a hospital‘s emergency room, EMTALA requires the hospital to first
provide screening to ascertain whether the person has an ―emergency
medical condition.‖ If the hospital determines that the person has an
emergency medical condition, the hospital must provide such treatment as
is necessary to either stabilize the patient or transfer the patient to another
facility. Beller, 703 F.3d at 390.
475 S.W.3d 746, 750 (Tenn. 2015) (footnote omitted). EMTALA prevents a hospital
from turning away emergency patients; it ―does not extinguish an emergency patient‘s
14
HCA has also asserted that 45 C.F.R. § 147.138(b)(2)(ii) applies, arguing that it ―bars an insurer from
denying coverage for emergency medical services or discriminating based on the provider‘s network
status.‖ This federal regulation reads:
(b) Coverage of emergency services—
***
(2) General rules. A plan or issuer subject to the requirements of this paragraph (b) must
provide coverage for emergency services in the following manner—
***
(ii) Without regard to whether the health care provider furnishing the emergency services
is a participating network provider with respect to the services[.]
This regulation states its scope as follows:
If a group health plan, or a health insurance issuer offering group or individual health
insurance coverage, provides any benefits with respect to services in an emergency
department of a hospital, the plan or issuer must cover emergency services (as defined in
paragraph (b)(4)(ii) of this section) consistent with the rules of this paragraph (b).
45 C.F.R. § 147.138(b)(1). We find this regulation to be inapplicable to the facts of this case, as it did not
take effect until August 10, 2010, after this lawsuit was filed, and clearly states that ―the provisions of this
section apply for plan years (in the individual market, policy years) beginning on or after September 23,
2010.‖ 45 C.F.R. § 147.138(c).
18
obligation to pay for treatment.‖ El Paso Healthcare Sys., LTD v. Molina Healthcare of
New Mexico, Inc., 683 F. Supp. 2d 454, 460 (W.D. Tex. 2010).
Tenn. Code Ann. § 56-7-2355 imposes an obligation on BCBST to provide
coverage for emergency services received by its participants ―regardless of whether the
provider furnishing the services has a contractual agreement with the health benefit plan
for the provision of the services to the enrollee.‖
In light of the respective obligations imposed on the parties by these two statutes,
we must now consider whether those obligations create an implied-in-law contract
between the two. This Court set forth the elements of implied-in-law contracts in River
Park:
[C]ontracts implied in law ―are created by law without the assent of
the party bound, on the basis that they are dictated by reason and justice.‖
Id. The Tennessee Supreme Court has recognized that contracts implied in
law are also discussed in terms of unjust enrichment, quasi contract, and
quantum meruit:
Actions brought upon theories of unjust enrichment, quasi
contract, contracts implied in law, and quantum meruit are
essentially the same. Courts frequently employ the various
terminology interchangeably to describe that class of implied
obligations where, on the basis of justice and equity, the law
will impose a contractual relationship between the parties,
regardless of their assent thereto.
Paschall’s, Inc. v. Dozier, 219 Tenn. 45, 407 S.W.2d 150, 154 (1966)
[(emphasis removed)]; see also Whitehaven Cmty. Baptist Church v.
Holloway, 973 S.W.2d 592, 596 (Tenn. 1998) (stating that ―[u]njust
enrichment is a quasi-contractual theory under which a court may impose a
contractual obligation on the parties where one does not otherwise exist‖).
In order to establish a claim based on this type of contract, the plaintiff
must show that (1) a benefit has been conferred upon the defendant; (2) the
defendant appreciated the benefit; and (3) acceptance of the benefit under
the circumstances would make it inequitable for the defendant to retain the
benefit without paying the value of the benefit. Angus, 968 S.W.2d at 808
(quoting Paschall’s, 407 S.W.2d at 155).
173 S.W.3d at 57-58.
Applying these elements to the facts of this case, the duty imposed on HCA by
EMTALA and the prohibition imposed on BCBST by Tenn. Code Ann. § 56-7-2355 do
19
not create an implied-in-law contractual relationship upon which to sustain HCA‘s cause
of action. HCA has not conferred a benefit on BCBST; the services were rendered to the
patients, none of whom are party to this suit, and they are the ones who received the
benefits of medical care provided in HCA‘s emergency rooms and are obligated to pay
for the services.15 BCBST has not denied coverage for the services covered by the plan
to which the participant agreed and for which the participant paid.16 Without a benefit
being conferred on BCCST by HCA, a cause of action for implied-in-law contract cannot
be sustained.
Accordingly, we hold that EMTALA and Tenn. Code Ann. § 56-7-2355 do not
create a cause of action for implied-in-law contract in this case and therefore affirm the
trial court‘s grant of summary judgment to BCBST and dismissal of HCA‘s implied-in-
law contract cause of action.
ISSUE 5: WHETHER HCA’S FAILURE TO COMPLY WITH NON-ERISA PLANS’
GRIEVANCE PROCEDURES PRIOR TO FILING SUIT SHOULD RESULT IN DISMISSAL
The trial court denied BCBST summary judgment on its defense that HCA failed
to comply with grievance procedures prior to filing suit, as required by the terms of the
non-ERISA plans. The court held:
BlueCross/BlueShield is denied partial summary judgment regarding all but
24 of the 564 ―non-ERISA‖ claims [claims relating to employee-sponsored
health plans not governed by ERISA because they are church-related or
governmental] because the Hospitals claim BlueCross/BlueShield failed to
comply with mandatory ERISA pre-litigation grievance processes that are
required to be included in any health care plan. BlueCross/BlueShield's
request for partial summary judgment necessitates resolution of material
fact disputes and is denied.
(Bracketed text in original.) BCBST contends that this holding was in error and asserts on
appeal that ―HCA‘s legal contention that BCBST‘s administrative remedies for the 564
non-ERISA claims did not comply with ERISA is immaterial to claims governed by
Tennessee law.‖
We first consider the effect of the court‘s reference to the ―mandatory ERISA pre-
litigation grievance processes‖ in the context of deciding whether exhaustion of remedies
15
We are not persuaded by HCA‘s argument that ―HCA benefitted BCBST by helping BCBST to fulfill
its core obligation to ‗improve and sustain the physical, financial and community health of Tennessee.‖
16
Tenn. Code Ann. § 56-7-2355(b)(4) allows that ―[c]overage of emergency services shall be subject to
applicable copayments, coinsurance and deductibles‖; thus, the statute contemplates that ―coverage‖ does
not necessarily equate to payment in full for emergency medical services rendered.
20
is required with respect to the 564 non-ERISA claims in this lawsuit.
HCA argues in its brief that other regulations, which ―the parties and chancery
Court often colloquially referred to as ‗ERISA‘ regulations apply to non-ERISA plans as
well . . . because regulations applicable to non-ERISA group health plans (not just those
governed by ERISA) also incorporate the requirements of the ERISA regulations (29
C.F.R. § 2560.503-1) by reference.‖ To support this position, HCA cites to 26 C.F.R. §
54.9815-2719T, which is contained in Title 26, ―Internal Revenue Service,‖ and 45
C.F.R. § 147.136, which is found in Title 45, ―Public Welfare,‖ of the Code of Federal
Regulations. 17
We are not persuaded from our reading of the transcript of the hearing on the
motions for summary judgment that the trial court‘s one-sentence verbal ruling on this
matter, which contains a reference to unspecified ERISA regulations, was a ―colloquial‖
reference to federal regulations that are applicable to the non-ERISA plans at issue in this
lawsuit. We have reviewed the regulations which HCA cites and observe that both went
into effect on September 21, 2010, more than three months after HCA filed the present
suit. Both regulations contain the language that ―the provisions of this section apply for
plan years beginning on or after September 23, 2010.‖ Exhibit 5-A to the second
affidavit of Kelly Paulk, Director of Product Strategy for BCBST, shows that, with
respect to the non-ERISA claims at issue, the latest date healthcare services were
rendered was February 17, 2010; this fact is not disputed. Thus, the plan years for these
non-ERISA claims would have begun prior to September 23, 2010, and the regulations
do not apply to the non-ERISA plans. HCA has not cited, and our research has not
revealed, a Tennessee statute or regulation similar to 29 C.F.R. § 2560.503-1(l) that
would allow a court to determine that a participant can be deemed to have exhausted
administrative remedies available under an insurance plan when that plan ―fails to
17
26 C.F.R. § 54.9815-2719T, which went into effect on September 21, 2010, contained the following
provision:
(g) Applicability/effective date. The provisions of this section apply for plan years
beginning on or after September 23, 2010. See § 54.9815–1251T for determining the
application of this section to grandfathered health plans (providing that these rules
regarding internal claims and appeals and external review processes do not apply to
grandfathered health plans).
45 C.F.R. § 147.136, which also went into effect on September 21, 2011, contains nearly identical
language:
(g) Applicability date. The provisions of this section apply for plan years (in the
individual market, policy years) beginning on or after September 23, 2010. See § 147.140
of this part for determining the application of this section to grandfathered health plans
(providing that these rules regarding internal claims and appeals and external review
processes do not apply to grandfathered health plans).
21
establish or reasonable claims procedures.‖ 29 C.F.R. § 2560.503-1(l). For the plans
governed by ERISA, § 2560.503-1(l) allows such a determination, but as to the non-
ERISA plans, there is no comparable Tennessee statute or regulation. Consequently, the
plan participant or HCA, as assignee, was required to exhaust the grievance procedure
regarding these 564 claims before filing suit.
Of the 564 claims, BCBST contends that grievance procedures were initiated on
only 24 and that the remaining 540 claims should be dismissed. 18 Of the 540 claims, it is
not clear from the record whether the time period for filing grievance procedures had
expired for six claims which were made arising from the State Plan or State Teachers
Active plan because BCBST‘s list of non-ERISA claims, contained in Exhibit 5-A, does
not contain the date of BCBST‘s adverse benefit determination.19 Accordingly, we
remand those six claims for a determination by the trial court whether the time period for
initiating the grievance procedure has expired and for further proceedings as to those
claims for which the time period has not expired.
Excluding the 24 claims on which administrative appeals were initiated and the 6
claims arising out of the State Plan or the State Teachers Active Plan, we hold that
summary judgment should have been granted on the remaining 534 non-ERISA claims
because neither the patient nor HCA, as assignee, initiated grievance procedures before
suit was filed. We enter judgment for BCBST on those claims and remand this matter for
further proceedings as to the remaining 24 claims (as listed in BCBST‘s Exhibit 6-B).
18
Our review of the 564 claims for coverage under the non-ERISA plans was aided by examining Exhibit
5-A to the Second Affidavit of Kelly Paulk and Exhibit 6-B to the Affidavit of Shelley Sullivan, both of
which were filed under seal in support of BCBST‘s motion for summary judgment. Exhibit 5-A contains
the entire population of claims arising under the non-ERISA plans, and Exhibit 6-B lists the non-ERISA
claims for which grievance proceedings were initiated.
19
From Exhibits 5-A and 6-B, it appears that a few claims existed on which the time period for filing a
grievance procedure had not yet expired at the time the lawsuit was filed. Specifically, 6 of the 564
claims involved members of the State Plan or State Teachers Active Plan, both of which permit a
grievance proceeding to be initiated within two years of an adverse benefit determination. According to
Exhibit 5-A, the latest date of the medical service for any claims made pursuant to either of those plans
was December 18, 2009. Thus, at the time this lawsuit was filed approximately six months later, the two-
year period had not yet expired. According to Exhibit 6-B, which lists the non-ERISA claims for which
grievance proceedings were initiated, none of the six claims arising out of the State Plan or the State
Teachers Active Plan were the subject of a grievance proceeding. This exhibit was attached to an
affidavit signed on May 3, 2013 and filed with the court on May 15, 2013. Thus, by the time the
Chancellor was considering the motion for summary judgment in 2013, it is likely that the two-year
period had expired without the initiation of a grievance proceeding to appeal the adverse benefit
determination. However, because BCBST‘s list of non-ERISA claims does not contain the date of
BCBST‘s adverse benefit determination, a factual determination in this regard is needed.
22
ISSUE 6: WHETHER 902 OF HCA’S CLAIMS ARE TIME-BARRED
UNDER TENN. CODE ANN. § 56-7-110(b)
BCBST contends that the trial court erred in denying summary judgment to
BCBST on its defense that Tenn. Code Ann. § 56-7-110(b) is a statute of limitations that
bars 902 claims for which HCA received some payment from BCBST on or before
November 30, 2008. HCA argues that Tenn. Code Ann. § 56-7-110(b) does not apply
because it is not a statute of limitations. To resolve this issue, we look to the rules of
statutory construction set forth in McGee v. Best:
The rule of statutory construction to which all others must yield is that the
intention of the legislature must prevail. Mangrum v. Owens, 917 S.W.2d
244, 246 (Tenn. Ct. App. 1995) (citing Plough, Inc. v. Premier Pneumatics,
Inc., 660 S.W.2d 495, 498 (Tenn. Ct. App.1983); City of Humboldt v.
Morris, 579 S.W.2d 860, 863 (Tenn. Ct. App. 1978)). ―[L]egislative intent
or purpose is to be ascertained primarily from the natural and ordinary
meaning of the language used, when read in the context of the entire statute,
without any forced or subtle construction to limit or extend the import of
the language.‖ Mangrum v. Owens, 917 S.W.2d at 246; (quoting Worrall v.
Kroger Co., 545 S.W.2d 736, 738 (Tenn. 1977)). The Court has a duty to
construe a statute so that no part will be inoperative, superfluous, void or
insignificant. The Court must give effect to every word, phrase, clause, and
sentence of the Act in order to achieve the Legislature‘s intent, and it must
construe a statute so that no section will destroy another. Id. (citing City of
Caryville v. Campbell County, 660 S.W.2d 510, 512 (Tenn. Ct. App. 1983);
Tidwell v. Collins, 522 S.W.2d 674, 676 (Tenn. 1975)).
106 S.W.3d 48, 64 (Tenn. Ct. App. 2002).
Tenn. Code Ann. § 56-7-110 is part of the general provisions of Chapter 7 of Title
56, which governs insurance and is concerned with payment errors occurring between
health care providers and health insurance entities20; subsection (b) reads as follows:
A health insurance entity shall not be required to correct a payment error to
a health care provider if the provider‘s request for a payment correction is
filed more than eighteen (18) months after the date that the health care
20
Tenn. Code Ann. § 56-7-110 was amended in 2009, and therefore different versions of the statute were
in effect during the time period in which HCA asserts BCBST underpaid emergency room claims.
Though the parties have not identified the version(s) of the statute applicable to each of the 902 claims,
we apply the 2009 amendment and note that our analysis would be the same under the previous version of
the statute.
23
provider received payment for the claim from the health insurance entity.
As an initial matter, we resolve a dispute between the parties as to the meaning of
the term ―payment error‖ in the statute; though subsection (b) uses the term, subsection
(a) does not define it. HCA argues that the term ―error‖ as used in the statute arises from
―a payment resulting from a mistake or oversight‖ and that a mistake has not occurred
because BCBST‘s asserted underpayment was intentional. BCBST contends that the
term ―error‖ should be defined as ―[a]n assertion or belief that does not conform to
objective reality; a belief that what is false is true or that what is true is false.‖ In the
absence of a statutory definition, we must ascertain the natural and ordinary meaning of
the word ―error.‖ To do that, we utilize the Webster‘s dictionary definition of ―error‖ as
―a mistake.‖21 Given the purpose of the statute and the various provisions thereof as
more fully discussed below, we construe the phrase ―payment error‖ in subsection (b) to
mean a ―payment mistake‖ arising between a health care provider and a health insurance
entity.
Subsection (a) contains definitions applicable to the part, including ―recoupment,‖
which occurs when a health insurance entity takes action ―to recover amounts previously
paid to a health care provider by withholding or setting off the amounts against current
payments to the health care provider.‖ Tenn. Code Ann. § 56-7-110(a)(5). Subsections
(c) through (g) address the time periods for correction of errors and notice requirements
imposed on health insurance entities who seek to recoup overpayments; specifically,
subsections (d), (e), and (g) impose notice requirements where a health insurance entity
has determined to recoup payments previously made, and subsections (c) and (f) set forth
the time periods in which a health insurance entity may recoup payments. Reading the
subsections together, subsection (b) relieves the insurance entity from having to correct a
payment mistake if the provider has not requested the correction within 18 months after
the provider received payment, while subsection (c) limits the insurance entity to an 18
month period from the date of payment within which to recoup a mistaken payment.
Subsection (b) is not located in Title 28, which sets forth the operation of statutes
of limitations generally and establishes periods for specific causes of action. The statute
is not phrased like other statutes of limitation, which typically contain language
referencing a time period within which an action must be brought,22 and does not use the
term ―cause of action‖ or ―action‖ or specify the time period in which such an action
must be brought. Tenn. Code Ann. § 56-7-110 as a whole sets forth a procedure by
which a health care provider and a health insurance entity are to resolve payments made
by mistake; the statute imposes a duty on the insurance entity to correct mistakes in
payment when a provider makes a timely request and allows the insurance entity to
recoup amounts mistakenly paid to health care providers. Tenn. Code Ann. § 56-7-
21
Webster’s II New College Dictionary (3d ed. 2005).
22
See, e.g., Tenn. Code Ann. §§ 28-3-104, -105; 29-28-103.
24
110(b) is not a statute of limitations, and we affirm the denial of summary judgment to
BCBST on this ground.23
ISSUE 7: NETWORK P CLAIMS
BCBST seeks dismissal of 112 of the 4,713 claims at issue, arguing the claims are
improperly included in this lawsuit because they arise out of Network P plans and thus do
not relate to Network S, which is at issue in this case. The Chancery Court did not
specifically address these 112 claims but generally denied BCBST‘s motion for summary
judgment by holding that ―[a]ll other matters raised by either party seeking partial
summary judgment are respectfully denied.‖
We have reviewed BCBST‘s statement of undisputed facts, HCA‘s responses
thereto, and the materials referenced in both; in these materials as well as its brief, HCA
concedes that 47 claims should not be included in this case because 34 of the 112 claims
involve Network P and an additional 13 are duplicative.24 Accordingly, these 47 claims
should be dismissed from this lawsuit.
HCA asserts that there are genuine issues of fact as to which network the
remaining 65 claims belong. We have reviewed the proof cited by HCA and conclude
that it establishes a genuine issue of material fact which precludes summary judgment on
these 65 claims.25
23
The parties have not distinguished whether these 902 claims arose from self-insured ERISA plans or
non-ERISA plans. ―Self-insured ERISA plans . . . are generally sheltered from state insurance
regulation.‖ UNUM Life Ins. Co. of Am. v. Ward, 526 U.S. 358, 367 n.2 (1999) (citing Metropolitan Life
Ins. Co. v. Massachusetts, 471 U.S. 724, 747 (1985)). Because we have held that statute does not operate
as a statute of limitations, we make no determination of whether ERISA would have preempted the
application of Tenn. Code Ann. § 56-7-110(b), as applied to any self-funded ERISA plans present in the
population of 902 claims.
24
In relevant part, HCA‘s responded to BCBSTs statements of undisputed material facts:
111. The Plaintiffs admit that they have mistakenly included claims relating to Network P
in the claims population for this lawsuit, and representatives of the Plaintiffs admit that
such claims are not properly part of this lawsuit. Ex. 4 to Amended Mot. For Partial
Summary Judgment, Second Affidavit of Robert F. Parsley (―Second Parsley Aff.‖), PP2-
3 & Exs. 4-A – 4-B.
Response: Disputed in part. The Hospitals admit that of the 112 claims that
allegedly fall under Network P, 47 of these claims should be removed from the
claims set. The Hospitals dispute that the remaining 65 claims are in fact under
Network P. See Affidavit of Angelia Wright, filed herewith.
25
In this regard, HCA cited the statement in Ms. Wright‘s affidavit that ―In a large number of these 65
claims, the patient showed an insurance card for Network S. In a few of these claims, a review of the
BCBST website inconsistently showed Network P as the patient‘s network.‖
25
In light of the parties‘ agreement that 47 claims were mistakenly included in the
claims population, we grant summary judgment on these claims. With respect to the
remaining 65 claims, the evidence presented establishes a genuine issue of fact as to
whether these claims fall under Network S or Network P, and summary judgment was
properly denied. We remand this matter for further proceedings in the trial court with
respect to these 65 claims.
IV. CONCLUSION
For the foregoing reasons, we:
(a) affirm the dismissal of HCA‘s state law cause of action for implied-in-law contract as
to the ERISA-governed plans on the basis that ERISA preempts this cause of action and
as to the non-ERISA claims on the ground that the duties imposed on HCA by EMTALA
and BCBST by Tenn. Code Ann. § 56-7-2355 do not create an implied-in-law contractual
relationship;
(b) vacate for lack of subject matter jurisdiction those portions of the April 22, 2014 order
in which the trial court considered whether the administrative appeals procedures related
to the ERISA plans complied with applicable regulations;
(c) grant summary judgment to BCBST that 534 non-ERISA claims are barred for failure
to exhaust administrative remedies, and remand for the trial court to determine whether
the time for filing grievance procedures has expired for the six claims for coverage made
under the State Plan and State Teachers Active Plan and for further proceedings on all
claims for which grievance procedures were timely initiated;
(d) affirm the denial of summary judgment to BCBST on its asserted defense that 902
claims are barred by the application of Tenn. Code Ann. § 56-7-110(b);
(e) affirm the denial of summary judgment on 65 of the 112 claims which are alleged to
be Network P claims and grant summary judgment as to the remaining 47 claims, which
are indisputably Network P claims.
________________________________
RICHARD H. DINKINS, JUDGE
26