In an opinion that sets forth a blueprint to class action certification for healthcare providers challenging insurance companies’ claim practices, a federal district court in New Jersey has granted class certification in DeMaria v. Horizon Healthcare Inc., d/b/a BlueCross BlueShield of New Jersey, No. 11-7298 (WJM) (D.N.J. June 1, 2015), an action brought by participating and non-participating chiropractors who treated patients insured by Horizon Healthcare Services, Inc., d/b/a BlueCross BlueShield of New Jersey and Horizon HMO.  The plaintiff chiropractors allege that Horizon systematically denied payment of insurance benefits for certain chiropractic treatments provided by the plaintiffs.  The district court held that the Complaint satisfied the elements for class certification under Fed.R.Civ.P. 23(a), as well as 23(b)(1) and 23(b)(3) and granted class certification.

Plaintiffs alleged that the class members regularly provided three types of chiropractic treatment:  (1) chiropractic manipulative therapy (“CMT”); (2) evaluation and management services (“E/M”); and (3) ancillary physical therapy (“PT”).  Horizon allegedly paid the plaintiffs for CMT, but denied all claims for E/M and PT on the grounds that its “bundling” practice incorporated payments for all chiropractic treatments into a “global fee” for CMT.  Horizon’s denial of these claims was automatic, as was its denial of all appeals.  Horizon’s Explanation of Benefit forms stated that the claims for E/M and PT were denied because chiropractors were “not eligible” for payment for those services. Plaintiffs sought relief for Horizon’s denial of E/M and PT claims on the ground that Horizon’s bundling practice violated the Employment Retirement Income Security Act of 1974 (ERISA) and breached its contracts.

Beginning its analysis, the court stated that the class certification motion poses

a simple concrete question.  Can the court fairly and efficiently determine whether the bundling policy violated the rights of the proposed classes?  Or do the individual inquiries that will be required to ultimately determine what, if any, actual damages each class member gets, pose such an overwhelming problem as to make class certification impractical and unfair?

Granting class certification, the court explained that all of the claims arise from common evidence, which began with the uniform definition of “therapeutic manipulation,” a covered treatment under all Horizon plans which included E/M and PT.  The court noted that it was undisputed that Horizon’s plan documents did not reference its bundling policy, which was only revealed on Explanation of Benefit forms as a payment made for CMT and a denial of claims for E/M and/or PT in instances when the provider administered CMT at the same time.  Not only was Horizon’s denial of claims and appeals automatic and systematic, but it was also unrelated to any medical criteria.

Plaintiffs’ ERISA claims allege two prongs of liability:  (1) Horizon’s denial of claims on the basis that chiropractors were not eligible for reimbursement for E/M and PT is false; and (2) Horizon’s denial of all appeals violated the “full and fair review” of appeals required by ERISA, 29 U.S.C. § 1133.  Plaintiffs’ contract claims, based upon the same evidence, allege that the bundling policy violated Horizon’s contractual obligation to pay for “therapeutic manipulation,” as defined in Horizon’s plans.

Rejecting Horizon’s arguments that its bundling policy was a “reasonable practice” consistent with Horizon’s provider manuals, the chiropractic industry literature, and industry practice generally, the court held that the four elements of commonality, typicality, adequacy, and numerosity under Rule 23(a) were satisfied because all class members suffered the same injury as a result of being subjected to an improper claims denial practice, with a common question of whether the automatic denial under the bundling policy violated ERISA and/or New Jersey contract law.  Plaintiffs’ claims are typical because, the court explained, all class members submitted the same Form 1500 for CMT, E/M, and PT, and were paid for CMT only but denied payment for PT and E/M on the grounds of chiropractor eligibility.  There was no doubt that the plaintiffs were adequate representatives or as to the numerosity of the class.

Moving to the predominance analysis under Rule 23(b)(3), the court rejected Horizon’s argument that individualized issues would predominate over the central and common question of the legality of Horizon’s bundling policy.  The court noted that the varying language of the assignment of benefits forms obtained by individual chiropractors from their patients was irrelevant, because all class members seeking payment submitted a Form 1500 to Horizon, which contained identical assignment language stating that the patient “authorizes payment of medical benefits to the undersigned physician or supplier for the services described below,” and Horizon accepted all Form 1500 assignments.  The court noted that the Form 1500 “creates a derivative right to sue for payment under both ERISA and New Jersey contract law,” and also that any anti-assignment clauses in Horizon’s contracts with its insureds had been waived by Horizon because it accepted assignments and made claims payments to the providers based upon the submission of a Form 1500.  The court stated:  “It would be patently unfair to allow the patient to assign his rights to payment to a provider but not let the provider sue for breach of the assigned contract for payment.”

Further, Horizon’s argument that claims might be denied for reasons other than the bundling policy was undermined by the limited scope of relief sought on a class-wide basis:  an order that Horizon reprocess the class members’ claims, which the court found necessary in order to keep the class manageable.  The court held that Horizon’s proffered possible reasons for denying the claims were all subordinate to the question of the bundling policy’s legality, and could be addressed in subsequent litigation.  The court also held that the ERISA classes could be certified under Rule 23(b)(1)(B) because the determination of the bundling policy’s legality for the named plaintiffs would have the effect of determining its legality for all proposed class members, even in the event of ruling in Horizon’s favor.

The determination whether or not to certify a proposed class is always one of the most important issues in a putative class action.  DeMaria lays out a roadmap for healthcare providers to obtain class certification in order to challenge policies by healthcare insurers that may systematically deny or reduce benefits paid.  Given the clear definition of the legal and factual issues raised by the class question, it appears that the DeMaria court’s analysis rests on solid ground under Rule 23.  It will be interesting to see the extent to which the approach in DeMaria is followed by other proposed plaintiffs and other courts, and whether other healthcare providers follow the blueprint provided by DeMaria to challenge other insurers’ claims policies.