Below are two recent New Jersey Federal District Court cases. In one matter, a group of Plaintiffs filed a class action against Quest regarding the difference in prices that Quest charges self-pay patients and patients with insurance. In the second case, a New Jersey Federal District Court awarded attorneys’ fees and costs to a defendant regarding a complaint filed by an out of network provider. Both of these cases may impact your practice.
Leslie v. Quest Diagnostics, Inc., Civ. A. No. 17-1590. In this matter, Plaintiffs filed a class action against Quest. Plaintiffs were either uninsured or under-insured and Quest billed each for laboratory testing services based on "chargemaster" prices that Quest sets. Plaintiffs alleged contract-based claims, arguing that Quest maintains two sets of rates: the chargemaster rates that it bills to uninsured or under-insured patients and negotiated rates that it charges to third party payers and wholesale clients. According to Plaintiffs, the chargemaster rates are generally 500% to 1000% of the negotiated rates with third party payers, and therefore, neither represent actual market nor reasonable rates for the services provided.
As to the contract claims, Plaintiffs alleged that because Quest never contracted with Plaintiffs to charge these rates, the relationship between Plaintiffs and Quest is governed by a contract implied-in-fact with a missing essential term: price. Plaintiffs allege that because this implied contract lacks an agreement on price, Quest is limited under contract principles to charge only a "reasonable" price, that is, a price which is more similar to the negotiated rates paid by third-party payers.
Plaintiffs' second theory asserted violations of state consumer fraud statutes from nine different states. Under this theory, Plaintiffs alleged that Quest engaged in an unconscionable and unfair commercial practice by billing Plaintiffs based on the chargemaster prices and then harassing Plaintiffs to collect the debt accrued for the billed laboratory services.
After dismissing their initial complaint, Plaintiffs filed an amended complaint. Quest then proceeded to file a motion to dismiss the amended complaint. As to the consumer fraud statutes, the Court granted Quest’s motion as to New Jersey and North Carolina based on the "learned professional" rule. The Court found that Quest, like hospitals and ambulance service providers, qualifies as a learned professional covered by other state regulations rendering a claim under the New Jersey or North Carolina consumer protection statutes precluded. However, as to the other seven states, the Court found, at the motion to dismiss stage, that Plaintiffs alleged sufficient facts to support their theory of unfair trade practices based on excessive pricing because the prices billed by Quest were 500% to 1000% more than the prices paid by 99% of Quest's customers and the costs billed to them had no relationship to the actual cost incurred by Quest, and that these amounts are "substantially above the rates customarily received by other similarly situated lab companies for similar services." The Court held that “in sum, Plaintiffs allege that Quest's chargemaster prices are unreasonable, unfair, or excessive based on Quest's internal cost structure, the usual and customary rates charged, and payments received for these services by both Quest and other laboratory testing services.”
The Court similarly denied Quest’s motion to dismiss regarding the contract-based claims. Plaintiffs alleged that it was only after Quest completed the requested services that price was mentioned by Quest. The Court found that, at the motion to dismiss stage, Plaintiffs sufficiently alleged that Quest's chargemaster prices “are unreasonable based on Quest's internal cost structure, the usual and customary rates charged, and payments received for these services by both Quest and other laboratory testing services.”
Atlantic Plastic &Hand Surgery v. Anthem Blue Cross Life & Health Ins., Civ.A.No. 17-4600. On February 12, 2014, Dr. Risin, the owner of Atlantic Plastic & Hand Surgery, an out-of-network provider, performed a surgical procedure on his patient, Clifford Robinson. Mr. Robinson is a member of a self-funded ERISA- plan (the “Plan”). On June 22, 2017, after the Plan partially denied the claim leaving an outstanding balance of $52,259.70, Atlantic, based on a power of attorney received from Mr. Robinson, brought an action against Ashland, LLC and Anthem Blue Cross Life and Health Insurance Company.
Atlantic alleged a wrongful denial of benefits claim pursuant to § 502(a)(1)(B) of ERISA, on the basis of Defendants’ failure to compensate it at the “usual and customary charge” for out-of-network services. On March 22, 2018, the Court granted Defendants’ motion to dismiss, holding that Atlantic did not allege a Plan provision obligating Defendants to provide payment at the usual and customary rate. After Atlantic filed an amended complaint, the Court dismissed the amended complaint as well for the same reason. Thereafter, Ashland moved for attorneys’ fees and costs under ERISA’s prevailing party provision. The Court granted the motion because Atlantic admitted that Defendants attached the Plan to their motion to dismiss and, at that time, Atlantic should have realized that the Plan did not provide for a “usual and customary charge” for out-of-network medical services. The Court, however, denied Ashland’s request for $34,725.29 in attorneys’ fees and costs, but provided Ashland leave to submit additional proofs to support its request for that amount.