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Mbody Minimally Invasive Surgery, P.C. v. Empire Healthchoice Hmo, Inc.

United States District Court, S.D. New York

August 15, 2014



THOMAS P. GRIESA, District Judge.

This case arises out of a dispute between health insurance companies and medical professionals who treated patients enrolled in health plans offered by those companies. Plaintiffs allege that defendants underpaid and denied bills for medically-necessary services provided to patients covered by defendants' health insurance plans.

Some of the insurance plans at issue are subject to the requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"). Other plans identified in the complaint are not subject to ERISA ("non-ERISA plans") and are regulated by state law. The complaint asserts the following causes of action: wrongful denial of benefits under ERISA; violation of ERISA, 29 C.F.R. § 2560.503-1(g); breach of fiduciary duty under ERISA; breach of ERISA § 502(a)(3); breach of contract, breach of the implied covenant of good faith and fair dealing; unjust enrichment; deceptive act or practice in violation of New York General Business Law § 349; and failure to make timely payments in violation of New York Insurance Law § 3224-a.

On November 26, 2013, Defendants Empire Healthchoice HMO, Inc.; Empire Healthchoice Assurance Inc.; Community Insurance Company; and Anthem Health Plans of Virginia, Inc. (collectively, the "Empire defendants") filed a joint motion to miss. Blue Cross and Blue Shield of Massachusetts, Inc. ("BCBS") also filed a motion to dismiss on the same date. Defendants move to dismiss the complaint on multiple grounds, including, inter alia, plaintiffs lack standing to prosecute this action under ERISA, plaintiffs fail to state a cognizable claim under ERISA, and plaintiffs' state-law claims fail to state a claim upon which relief can be granted.

For the following reasons, the court grants BCBS's motion to dismiss in its entirety. The court grants in part and denies in part the motion filed by the Empire defendants.

The Complaint

Plaintiff Mbody Minimally Invasive Surgery, P.C. ("MMIS") is a medical practice that provides medical and surgical services. Plaintiff Nick Gabriel, D.O., is a bariatric surgeon and managing partner of MMIS, and plaintiffs Jordi Brewer, P.A., and Erin Nastro, P.A. are physician assistants who are employed at MMIS (collectively "the provider plaintiffs"). Bariatric surgery is also known as "weight-loss surgery." Bariatric surgeons help obese individuals lose weight by limiting the amount an individual can eat, through procedures like gastric bypass surgery, or the way in which nutrients are processed. See Gastric bypass surgery, THE MAYO CLINIC, (last visited Jul. 8, 2014).

Defendants are healthcare companies that sell various health insurance policies. Under these insurance plans, there are two types of healthcare providers: 1) "participating" providers, who contract with defendants to receive contractually established compensation for medical services, and 2) "out-of-network" providers, who do not have negotiated-payment rates and do not have contracts with defendants. For example, a participating physician could enter into a contract with defendants that entitles the physician to receive $120 for any patient, insured by one of defendants' plans, who visits the doctor for a physical examination. The provider plaintiffs in this case are considered "out-of-network" providers under the health plans offered by defendants.

Plaintiffs allege that they provided medical care to patients enrolled in defendants' health plans. After treating the patients, plaintiffs billed defendants for the cost of the services provided. Plaintiffs allegedly based their billing rates on the amount of compensation health insurance companies have historically paid for those services. In some cases, defendants remitted payment directly to plaintiffs. However, plaintiffs allege that defendants consistently and arbitrarily denied claims or under-reimbursed claims submitted by plaintiffs. For example, plaintiffs allege that Dr. Gabriel and Ms. Nastro performed a medical procedure on February 11, 2013, for which defendants paid Dr. Gabriel $2, 417.32 and paid his assistant, Ms. Nastro, $15, 000. Plaintiffs further allege that defendants offered no explanation for this discrepancy in payment. Attached to the complaint are four exhibits, which list the medical procedures for which plaintiffs seek payment, the date on which the procedures were performed, the relevant Current Procedural Terminology ("CPT") codes, the amount billed, and the amount paid.

Plaintiffs allege they are the assignees of the rights and benefits of patients who are covered under defendants' health insurance plans. Plaintiffs allege that "at all relevant times, " patients signed assignment of benefit forms, assigning "all of their health benefits and the right to appeal and to pursue adverse determinations of these benefits" to plaintiffs. (Compl. ¶ 23). However, as discussed further below, some of the relevant health insurance plans contain anti-assignment provisions. For example, one plan offered by Empire BlueCross BlueShield states that "any attempt to assign benefits or payments for benefits will be void unless authorized by us in writing..." (Declaration of Rachel Kramer, Nov. 26, 2013 ("Kramer Decl."), Ex. M). Plaintiffs do not allege that they received authorization to serve as assignees from any of the defendants.


To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must plead sufficient facts to state a claim for relief that is plausible on its face. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007); Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009). To establish a facially plausible case, a plaintiff must show "more than a sheer possibility that a defendant has acted unlawfully." Iqbal , 556 U.S. at 678. In deciding a motion to dismiss, the court accepts as true all well-pleaded allegations contained in the complaint and draws all reasonable inferences in favor of the plaintiff. See Twombly , 550 U.S. at 555-56. However, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal , 556 U.S. at 678.

A. Standing

Defendants argue that plaintiffs do not have standing to bring claims related to the insurance plans governed by ERISA. Standing to sue under ERISA § 502(a) is limited to "participants or beneficiaries" of ERISA plans. See 29 U.S.C. § 1132(a); Simon v. Gen. Elec. Co. , 263 F.3d 176, 177 (2d Cir. 2001). Plaintiffs concede that they are neither participants nor beneficiaries under the health plans. Instead, plaintiffs claim standing as assignees of the patients they treated.

It is well-established in this Circuit that "the assignees of beneficiaries to an ERISA-governed insurance plan have standing to sue under ERISA." I.V. Servs. of Am., Inc. v. Trs of Am. Consulting Eng'rs Council Ins. Trust Fund , 136 F.3d 114, 117 n.2 (2d Cir. 1998); see also Biomed Pharm., Inc. v. Oxford Health Plans (NY), Inc., No. 10-cv-7427, 2011 WL 803097 (S.D.N.Y. Feb. 18, 2011). Therefore, in order for plaintiffs to bring a claim related to a particular health insurance plan, plaintiffs must have obtained a valid assignment under that plan.

Plaintiffs allege that they have obtained valid assignments for all of the claims stated in the complaint. The complaint alleges that "at all relevant times, " patients signed assignment of benefit forms. (Compl. ¶ 24). However, plaintiffs do not have standing to bring claims under ERISA plans that contain express anti-assignment provisions. If a health insurance plan "unambiguously prohibits assignment, an attempted assignment will be ineffectual." Neuroaxis Neurosurgical Assocs, PC v. Costco Wholesale Co. , 919 F.Supp.2d 345, 351-52 (S.D.N.Y. 2013). Here, the anti-assignment provisions are clear. For example, the aforementioned Empire plan states that "any ...

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