In this article, I try to provide a simplified distillation of Crescent City Surgical Centre v. United Healthcare of La., Inc., [1] a recent dispute between a health care provider and a payor. For ease of reading, anything that might slow the reader down is relegated to a footnote.

Introduction

This case illustrates how certain claims by a Provider against an out-of-network (“OON”) Payor might be kept in state court and not preempted by ERISA, [2] if the Provider desires.

Facts

Provider [3] sued Payor [4] in state court seeking reimbursement on certain claims. Provider is OON with Payor (i.e., they have no managed care-type contract between them to cover payment of all claims). Provider’s complaint alleged that Payor preauthorized certain treatments at agreed upon rates through Payor’s online portal, thus creating a contract between the parties as to those treatments. Provider also alleged that Payor failed to make those agreed-upon payments.

Payor removed the case to federal court, claiming that this was an ERISA case and thus properly in federal court (because ERISA preempted the state law claims). [5]

Provider responded, saying it was only suing in state court over the agreed-upon (i.e., contracted) payments and not suing on any noncontract claims that required derivative standing under ERISA. [6] On that basis, Provider asked the Federal District Court Judge [7] to remand the case back to state court. The court agreed with Provider and remanded the case to state court.

Court’s Rationale

In remanding, the court emphasized several points:

  1. In determining ERISA preemption, courts focus specifically on the rights that a provider is seeking to enforce.
  2. Because many potential claims here could be enforced under ERISA (derivatively through patients’ assigning benefits), those claims would be completely preempted by ERISA and properly in federal court if Provider were seeking to enforce such claims.
  3. Here, Provider was not seeking to enforce such derivative-only ERISA claims. [8]

Analysis

In most OON situations, payors will try to shift providers’ claims into federal court under the rationale that, absent an overarching managed care contract between the parties, all state law claims are preempted by ERISA. Payors appear to do this for two main reasons:

  1. ERISA payment disputes are sometimes harder for a provider to prove than disputes based on state law claims (proving patient-based derivative standing is replete with procedural traps that have nothing to do with the merits).
  2. State law claims can offer providers more effective relief in many instances.