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Kindred Hospitals Ltd. Partnership v. Aetna Life Insurance Co.

United States District Court, N.D. Texas, Dallas Division

June 9, 2017

KINDRED HOSPITALS LIMITED PARTNERSHIP d/b/a KINDRED HOSPITAL HOUSTON MEDICAL CENTER, et al., Plaintiffs,
v.
AETNA LIFE INSURANCE COMPANY, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          SIDNEY A. FITZWATER UNITED STATES DISTRICT JUDGE

         In this action removed on the basis of ERISA[1] preemption, plaintiffs' motion to remand presents the question whether ERISA completely preempts any of plaintiffs' claims and thus confers federal question jurisdiction. Concluding that it does not, the court grants the motion to remand, but it denies plaintiffs' request for attorney's fees and costs.

         I

         This is a suit by plaintiffs Kindred Hospitals Limited Partnership d/b/a Kindred Hospital Houston Medical Center, THC Houston, Inc. d/b/a Kindred Hospital-Bay Area, and d/b/a Kindred Hospital Houston-Northwest, and Transitional Hospitals Corporation of Texas, Inc. d/b/a Kindred Hospital Tarrant County-Fort Worth Southwest (collectively, “Kindred”), operators of long-term acute care hospitals, against defendants Aetna Life Insurance Company and Aetna Health, Inc. (collectively, “Aetna”). Kindred sues under state law to recover unpaid insurance payments based on Aetna's representations that insurance would cover the charges.[2] Kindred alleges that, before admitting the patients in question, it sought Aetna's confirmation of what charges would be covered, but that Aetna's payments were less than what it represented would be paid.

         Kindred seeks to recover unpaid charges for 15 patients. To establish that this case was removable based on the court's federal question jurisdiction, Aetna need only establish that one of the claims is completely preempted. Aetna focuses its argument on five patients who it asserts, without dispute, were ERISA plan participants or beneficiaries. The court will do so as well.

         Before admitting patient T.V., [3] Kindred used the database Passport OneSource to verify her insurance coverage. The database information, originally provided by Aetna, indicated that T.V.'s Aetna-administered plan included National Advantage Program (“NAP”) coverage. Kindred understood NAP coverage to mean that it would be compensated at the rate provided in its contract with third-party network MultiPlan. MultiPlan enters into contracts with hospitals and payors, including Kindred and Aetna, to set payment rates. When hospitals participate in MultiPlan, they agree to provide care to patients whose insurers are MultiPlan members, and to accept payments from insurers at discounted rates if made within the contracted time limits. After providing care to T.V., Kindred billed Aetna in the ordinary course. Aetna paid Kindred on the claims, but did so at less than the MultiPlan contract rate. Kindred appealed, but Aetna upheld its original decision. Kindred alleges that it was underpaid by $5, 843.93, the difference between the rate Aetna represented that it would pay and the amount actually paid. According to Aetna, it paid the T.V. claims at the MultiPlan rate, but it denied particular charges because T.V.'s plan limited coverage for private room charges.

         Patient L.J. was a patient at a Kindred hospital on five occasions. Each time, before admitting L.J., Kindred contacted Aetna to verify coverage and terms of payment. Each time, Aetna represented that coverage existed, and that payment would be made at the rate of 60% of usual and customary charges. Kindred understood usual and customary charges to mean its usual billed charges. But when Kindred billed Aetna for the care of L.J., instead of paying 60% of the billed charges, Aetna paid 60% of the MultiPlan discounted rate. Kindred alleges that it was underpaid by $295, 629.81, the difference between the rate Aetna represented that it would pay and the amount actually paid. According to Aetna, the underpayment was due to rejection of private room charges that were not covered by L.J.'s plan, not to the rate of payment.

         Before admitting patient J.J., Kindred contacted Aetna to verify coverage and terms of payment. “Aetna advised Kindred that J.J. was eligible for coverage, that Aetna would pay primary to Medicare, and that Kindred would be paid based on 300 percent of the Medicare allowable rate.” Pet. ¶ 63. When J.J. was admitted a second time, Kindred sought and received materially similar assurances. When Kindred billed Aetna for care of J.J., Aetna underpaid the claim compared with its prior representations. And while Kindred was seeking further payment on the deficiency, Aetna recouped some of the amount it had already paid, asserting that Medicare had become the primary payor before J.J.'s first admission. Kindred alleges that Aetna's position is both substantively wrong-because Medicare did not become primary payor until after the hospital stays in question-and contrary to Aetna's representations during pre-admission verification. Kindred alleges that it was underpaid by $238, 849.83, the difference between what Aetna represented that it would pay and the amount retained by Kindred. According to Aetna, the question whether J.J.'s insurance plan or Medicare was primary is controlled by the terms of the plan.

         Before admitting patient T.B., Kindred contacted Aetna to verify coverage and terms of payment. An Aetna representative told Kindred that T.B. was eligible for coverage and that Kindred would be paid 100% of its usual, customary, and reasonable charges after T.B.'s out-of-pocket maximum was met. When Kindred billed Aetna for the T.B. claim, Aetna paid less than what it initially represented. Kindred alleges that it was underpaid by $32, 024.12, the difference between what Aetna represented that it would pay and the amount actually paid. According to Aetna, the difference between the billed charges and payment was due to a different interpretation of what was reasonable and customary. T.B.'s plan provided that Recognized Charges, also known as Reasonable and Customary charges, would be reimbursed, but also stated that what was reasonable and customary would be determined by the claims administrator-Aetna.

         Before admitting patient J.S., Kindred contacted Aetna to verify coverage and terms of payment. Aetna told Kindred that coverage existed and that Kindred would be paid 100% of its usual and customary charges after J.S.'s out-of-pocket maximum was met. But when Kindred billed Aetna for care of J.S., Aetna paid less than what it initially represented. Kindred alleges that it was underpaid by $124, 861.65, the difference between what Aetna represented that it would pay and the amount actually paid. According to Aetna, the payment differed from the billed charges because J.S.'s plan excluded charges in excess of the Recognized Charge for particular care in a geographic area. The plan granted Aetna authority to determine the Recognized Charge.

         Kindred sued Aetna in state court for fraudulent misrepresentation, negligent misrepresentation, promissory estoppel, violations of the Texas Insurance Code, breach of written contract, breach of implied-in-fact contract, and declaratory judgment. Aetna removed the case to this court on the basis that one or more of Kindred's claims is completely preempted by ERISA, thereby conferring federal question jurisdiction on this court.[4] Kindred now moves to remand and for its attorney's fees and costs. Aetna opposes the motion.

         II

         As the removing party, Aetna “has the burden of overcoming an initial presumption against jurisdiction and establishing that removal is proper.” Carnes v. Data Return, LLC, 2005 WL 265167, at *1 (N.D. Tex. Feb. 1, 2005) (Fitzwater, J.) (citing Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001)). “In general, defendants may remove a civil action if a federal court would have had original jurisdiction.” De Aguilar v. Boeing Co., 47 F.3d 1404, 1408 (5th Cir. 1995) (citing 28 U.S.C. § 1441(a)). “Due regard for the rightful independence of state governments, which should actuate federal courts, requires that they scrupulously confine their own jurisdiction to the precise limits which (a federal) statute has defined.” Victory Carriers, Inc. v. Law, 404 U.S. 202, 212 (1971) (quoting Healy v. Ratta, 292 U.S. 263, 270 (1934)). “The federal removal statute, 28 U.S.C. § 1441 (1997), is subject to strict construction because a defendant's use of that statute deprives a state court of a case properly before it and thereby implicates important federalism concerns.” Frank v. Bear Stearns & Co., 128 F.3d 919, 922 (5th Cir. 1997) (citing Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365 (5th Cir. 1995)). “[D]oubts regarding whether removal jurisdiction is proper should be resolved against federal jurisdiction.” Acuna v. Brown & Root Inc., 200 F.3d 335, 339 (5th Cir. 2000).

         Ordinarily, “[r]emoval is not possible unless the plaintiff[s'] ‘well pleaded complaint' raises issues of federal law sufficient to support federal question jurisdiction.” Rodriguez v. Pacificare of Tex., Inc., 980 F.2d 1014, 1017 (5th Cir. 1993) (citing Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 152 (1908)). “There is an exception, however, to the well-pleaded complaint rule.” Aetna Health Inc. v. Davila, 542 U.S. 200, 207 (2004).

When a federal statute wholly displaces the state-law cause of action through complete pre-emption, the state claim can be removed. This is so because when the federal statute completely pre-empts the state-law cause of action, a claim which comes within the scope of that cause of action, even if pleaded in terms of state law, is in reality based on federal law.

Id. at 207-08 (citation, brackets, and internal quotation marks omitted) (quoting BeneficialNat'l Bank v. Anderson, 539 U.S. 1, 8 (2003)). Thus because plaintiffs' state-court original petition (“petition”) does not assert claims under federal law, and because Aetna does not contend that the court has diversity jurisdiction, [5] Aetna can establish removal jurisdiction only if ERISA completely preempts one or more of Kindred's state-law claims. S ...


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