On October 27, 2010, a Federal Court Ruled against Blue Cross and Blue Shield of Rhode Island's (BCBSRI) overpayment recoupment practice. The Court relied upon a U.S. Supreme Court Ruling in Aetna v. Davila, and ruled that federal ERISA law limits the potential recovery by BCBSRI, and that BCBSRI's state law claims for breach of contract and fraud are completely preempted by the Employee Retirement Income Security Act (ERISA). BCBSRI’s post-payment audit is a fiduciary conduct governed by Federal Law ERISA instead of provider PPO contract.
Hanover Park, IL (PRWeb) November 1, 2010 – The federal district court in Rhode Island ruled on October 27, 2010 against BCBSRI over its recoupment practice for over $400,000 against two healthcare providers. Relied upon recent US Supreme Court rulings, the court ruled that federal law ERISA limits or prohibits BCBSRI from recouping alleged overpayment, and BCBSRI’s state law breach of PPO contract claim and fraud claim are completely preempted by federal law ERISA in BCBSRI’s motion to remand to state court. ERISAclaim.com provided the ERISA compliance assistance and support in the defendant providers’ ERISA administrative appeals and judicial litigation in this case, and now offers free Webinars to discuss the profound impact of the court ruling in the popular overpayment recoupment healthcare crisis, estimated in trillion dollars.
"This federal court ruling provides the most timely and valuable guidance on the remedies, rights and governing laws for everyone in this trillion dollar health-care overpayment crisis faced by every healthcare provider today”, said Dr. Jin Zhou, president of ERISAclaim.com, a national consultant on ERISA compliance and claim appeals.
According to the court papers, "Blue Cross alleges that Defendants purposely miscoded services which resulted in Blue Cross paying them over $400,000 for services that were not covered by "the applicable BCBSRI subscriber contracts”. “Blue Cross stated its conclusion that the miscoding was an "intentional misrepresentation” and demanded repayment of $412,952.93”. BCBSRI sued two providers in the state court of Rhode Island, among other things, alleging: “Count I alleges that Defendants breached their Provider Agreements, by submitting claims for unauthorized services, and, in the case of Defendant Korsen, by terminating the Provider Agreement without proper notice to Blue Cross. Count II is for fraud based on false and fraudulent claims submitted by Defendants for compensation”. “Defendants removed the case to this Court arguing that Blue Cross' state law claims for breach of contract and fraud (Counts I and II) are completely preempted by the Employee Retirement Income Security Act ("ERISA")”. Federal court made following ruling in denying BCBSRI’s motion to remand the case to the state court.
In deciding that BCBSRI’s post-payment audit and overpayment recoupment is a fiduciary conduct governed by ERISA rather than PPO contract, the court explained:
“Based on the allegations in the Amended Complaint, it appears that Blue Cross defines permissible, compensable medical services; it determines which services are medically necessary for its subscribers; and it audits medical providers to determine if their services are medically necessary and generally accepted in the medical community. This is the conduct of an ERISA fiduciary in connection with an ERISA plan. Whether this conduct is directed at, or has an impact upon, subscribers or other parties within the complex ERISA administrative mechanism is not a distinction drawn by the statute. See Aetna Health Inc. v. Davila, 542 U.S. 200, 220 (2004) ("Classifying any entity with discretionary authority over benefits determinations as anything but a plan fiduciary would thus conflict with ERISA's statutory and regulatory scheme.").
In deciding that the overpayment recoupment dispute is not governed by BCBSRI provider contract under state law and but is completely governed and preempted by federal law ERISA, the court explained:
“The Court holds further that there is no independent legal duty controlling Defendants' conduct herein; because, while the Provider Agreements do impose duties on Defendants, these duties are not independent of the terms of the ERISA plans. Consequently, the Court holds that Blue Cross' Count I for breach of contract, alleging that Defendants breached the Provider Agreements by submitting claims using improper CPT codes and submitting claims for services that were inappropriate or not medically necessary, and Count II for fraud are completely preempted by ERISA. The Court converts these claims to a federal ERISA § 502 (a) (3) claim.”
In deciding that federal law ERISA prohibits or limits BCBSRI’s alleged overpayment recovery against healthcare providers, the court explained:
“Though the Court's ruling limits Blue Cross' potential recovery, this holding is consistent with the legislative aims identified by the Supreme Court in Davila: "The limited remedies available under ERISA are an inherent part of the 'careful balancing' between ensuring fair and prompt enforcement of rights under a plan and the encouragement of the creation of such plans." 542 U.S. at 215 (quoting pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 55 (1987). Moreover, the Congressional objectives of consistency in regulation and uniform administration of ERISA plans are met”.
The court case info: BLUE CROSS & BLUE SHIELD OF RHODE ISLAND v. JAY S. KORSEN and IAN D. BARLOW, filed on October 27, 2010, Case#: 1:09-cv-00317-L-LDA, UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND
Click here for a complete copy of the court decision.
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