Ninth Circuit Revives Surgery Center’s ERISA Action Alleging Insurer Shorted Provider $5.4 Million
- January 12, 2024
An ambulatory surgery center had a valid assignment from its patients that included the right to sue an insurer for non-payment of benefits under the Employee Retirement Income Security Act’s (ERISA’s) civil enforcement provision, the Ninth Circuit held January 10.
The appeals court reversed the dismissal of South Coast Specialty Surgery Center Inc.’s action against Blue Cross of California, d/b/a Anthem Blue Cross (Anthem) under Section 502(a) of ERISA for an alleged $5.4 million reimbursement shortfall for medical services provided to South Coast patients.
According to the Ninth Circuit panel, South Coast’s “Assignments of Benefits” form conferred not only a right to seek payment of benefits, but also to sue for non-payment under ERISA.
Anthem insures or is a claims administrator for many of South Coast’s patients. In 2019, Anthem formally instituted a “pre-payment review” process, which South Coast alleged significantly curtailed coverage for the costs of its procedures.
South Coast brought an ERISA action against Anthem. As a health care provider, South Coast lacked direct authority to sue under ERISA, but it asserted the “Assignment of Benefits” form provided it derivative authority to bring a civil enforcement action under Section 502(a). The district court disagreed and dismissed the action with prejudice.
Reversing, the Ninth Circuit noted longstanding precedent permitting the assignment of health and welfare benefits to health care providers allowing them to bring derivative claims on behalf of their patients.
The appeals court found South Coast’s “Assignment of Benefits” form validly assigned it the right to sue for non-payment of benefits, even without express language to that effect.
Anthem argued that the form only assigned South Coast the right to direct payment, not the legal right to sue for non-payment. But the appeals court disagreed, noting the assignment of the right to benefits generally includes the right to sue for non-payment of benefits.
“Indeed, permitting South Coast to recover plan benefits, but precluding it from suing for the non-payment of those benefits by a single insurer, leaves South Coast with little legal recourse after ‘fronting' the costs of care," the appeals court observed.
The appeals court emphasized that its decision was limited to whether ERISA permitted a health care provider to bring a derivative suit under Section 502(a), not a general rule that “all assignments of the right to benefits—regardless of who made the assignment and who received it— necessarily confer the right to sue under ERISA.”
South Coast Specialty Surgery Ctr. Inc. v. Blue Cross of Cal., No. 22-55717 (9th Cir. Jan. 10, 2024).