Court Rules Against Provider for Faulty Assignment, Even With PPO Contract

Court Rules Against Provider for Faulty Assignment, Even With PPO Contract

Court Rules Against Provider for Faulty Assignment, Even With PPO Contract

Federal Court Decision on March 02, 2012 Rules Against PPO Hospital for Faulty ERISA Assignment: BCBS PPO Contract Is Not an ERISA Assignment, However Court Denies Plan’s Anti-Assignment Argument.

This case illustrates three issues of significant importance to all ASC providers.   First, the courts have again addressed the matter of standing and the importance of a complete, ERISA/PPACA compliant assignment for all ASC providers seeking ERISA/PPACA appeals and litigation.  Second, PPO contracted ASC providers are not granted automatic standing for appeal and litigation purposes.  Third, the court rejected the Plan’s anti assignment argument; anti assignment clauses are not enforceable with a complete valid ERISA assignment.

Every ASC in the country has had a claim denied.  If an ASC attempts to appeal any kind of denial such as UCR, medical necessity, policy exclusion or even overpayment request, that ASC will need a complete assignment.  If a claim denial is not resolved, and a court action is necessary, ASC’s will absolutely need a complete assignment.  ASC’s cannot sue in court, or even appeal denied claims, unless they have a complete assignment.  Unfortunately, the assignment most ASC’s, and physicians use is NOT a complete assignment.  This court case highlights the necessity for ASC owners, managers and consulting companies to review current patient assignments, as well as obtain complete assignments regardless of whether the ASC is in or out of network.

The court case info: Medical University Hospital v. Oceana Resorts, United States District Court, D. South Carolina, Charleston Division, March 2, 2012.

According to the Court document, the plaintiff  PPO hospital “Medical University Hospital Authority /Medical Center (MUSC) argued that as a PPO provider they are not required to obtain an ERISA assignment or otherwise has automatically obtained an ERISA Assignment from its PPO contracting or participation:

“First, MUSC argues that the Plan implicitly assigned benefits to all network providers based on the payment structure laid out in the Plan, and therefore, MUSC did not even need the Consent Form to obtain derivative standing. Under the terms of the Plan, a participant need only pay the deductible to a network provider from whom he or she obtains medical services. The network provider is then required to file its claim for those services with the TPA. The Plan states that the network provider will receive the scheduled amount as payment in full for the medical services. The terms of the Plan indicate that generally some party other than the participant will reimburse the Plan for the claims. Defendants agree that MUSC is a network or preferred provider.”

The Court rejected plaintiff’s PPO ERISA Assignment argument and stated that ERISA assignment has to come from a patient, not Plan or PPO network:

“MUSC did not claim that it had standing as a third-party beneficiary of the Plan; nor could it have successfully pursued this argument. The only Circuit to squarely address this issue held that “ERISA does not countenance third-party beneficiary claims,” and found, therefore, that a hospital could not have independent standing without an enforceable assignment from the participant. Dallas Cnty. Hosp. Dist. v. Assoc.’s Health & Welfare Plan, 293 F.3d 282, 289 (5th Cir. 2002). Thus, without a valid assignment from a beneficiary or a participant, MUSC could not have obtained derivative or direct standing.”

The Court also ruled for the self-insured ERISA plan because the plaintiff’s alleged ERISA assignment only covers an insurance policy not self-insured ERISA plan:

“Additionally, the Consent Form, which was prepared by MUSC, does not cover assignments to self-funded employee benefits plans. The Consent Form assigns benefits due under “any insurance policy.” The assignment provides examples of types of coverage which would be assigned, all of which are types of insurance. Section 1144(b)(2)(B) of ERISA forbids states from deeming an employee benefits plan “to be an insurance company or other insurer . . . or to be engaged in the business of insurance.” See also Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355, 372 (2002) (“ERISA’s `deemer’ clause provides an exception to its saving clause that prohibits States from regulating self-funded plans as insurers.”). The Fourth Circuit, therefore, has held that “[t]hird-party administrator[s], [are] not . . . insured[s].” Sheppard & Enoch Pratt Hosp., 32 F.3d at 123 n.1; but see Wheeler, 62 F.3d at 638 (discussing self-funded “ERISA health insurance plan” and applying principles of insurance law).”

Interestingly, for some unknown or perhaps strategic reason, the Complaint did not include the language of the alleged assignment or attach the Consent Form.  The Complaint also did not include information regarding any anti-assignment provision in the Plan document.  However, the Court rejected ERISA plan’s anti-assignment argument:

“Because it is possible for a medical provider to acquire derivative standing through an assignment of benefits by a plan participant, MUSC’s Complaint states a plausible claim for relief, and therefore, defendants’ motion to dismiss is denied”.

Due to the lack of or faulty ERISA Assignment, the Court finally ruled for the self-insured ERISA plan:

“For the foregoing reasons, the court DENIES defendants’ motion to dismiss, but GRANTS their motion for summary judgment.”

This court decision provides a clear roadmap for all PPO and Non-PPO ASC providers on the requirements of valid, complete assignments.  Longstanding traditional limited assignments are insufficient for ERISA appeals and litigations.  ASC’s must follow this roadmap through innovative and practical solutions with proactive ERISA compliant assignments and appeals in accordance with applicable federal ERISA and PPACA laws.

Many ASC’s are under the misconception that: (1) joining a PPO or HMO network contract automatically grants providers ERISA rights and federal regulations law governing most commercial health claims; (2) Federal ERISA regulations don’t regulate or are not relevant to PPO or HMO network providers.  Nothing could be further from the truth.  This court decision is a wakeup call for all contracted and non-contracted ASC providers.


AVYM advocates for education and understanding and provides in-depth analysis of this new in-network litigation as well as other issues affecting health care professionals with ongoing webinars.

To find out more about PPACA Claims and Appeals Compliance Services from AVYM please contact us at



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