Strasburger.com Health Industry Online
HIO NEWSLETTER  January 18, 2012  STRASBURGER & PRICE, LLP

PREPARED BY

>Debra W. Biehle
Debra W. Biehle

1401 McKinney Street
Suite 2200
Houston, Texas 77010
713.951.5615 Direct
debra.biehle@
strasburger.com



WARNING: YOUR ASSIGNMENT OF BENEFITS FORM MAY LEAVE YOU EMPTY-HANDED

Many health care providers give little thought to their assignment of benefits form. It is one of many documents which the patient must sign upon intake or admission.  However, the precise language within the assignment of benefits form becomes critical when a non-participating provider files suit against the insurance company in a reimbursement dispute.  Once litigation is underway, insurance companies typically challenge the non-participating provider’s right to maintain the lawsuit based on alleged lack of standing.  In the legal context “standing” means the right to “stand in the shoes” of the patient and assert any claims he/she could have asserted against the insurance company.  For the non-participating provider, standing is most often obtained via the assignment of benefits form.  This is the document in which the patient assigns his or her rights under the health insurance plan to the provider.  In certain cases, even a “bare bones” assignment may be sufficient to confer standing on the provider. However, the issue is greatly complicated by the fact that in the vast majority of cases, the health benefits plan at issue is governed under the terms of the Employee Retirement Income Security Act of 1974 (“ERISA”).  ERISA strictly limits the persons who may bring suit to recover benefits under an ERISA-governed plan. For the unwary provider, an insufficient assignment of benefits can destroy its chances of recovery.

Under ERISA, a civil action may only be brought by a plan “participant,” “beneficiary,” or “fiduciary.”  29 U.S.C. § 1132(a).  Given that a provider does not fall under any of these categories, he must obtain derivative standing to bring suit as a beneficiary.  This is accomplished via the assignment of benefits form.  Texas courts have repeatedly held that a patient may validly assign his rights under a health benefits plan to a healthcare provider.  Hermann Hosp. v. MEBA Med. & Benefits Plan, 845 F.2d 1286, 1287  (5th Cir. 1988).  However, the fact that it can be done does not mean that every assignment of benefits form contains the necessary language to clear the hurdles set out by ERISA.  A recent opinion out of the Southern District of Texas should serve as a warning to all providers, particularly non-participating providers, to review and update their assignment of benefits form.

In N. Cypress Med. Ctr. Operating Co. v. MedSolutions, Inc., 2010 U.S. Dist. LEXIS 119455 (S.D. Tex. Nov. 10, 2010), Plaintiffs North Cypress Medical Center Operating Co., Ltd. and North Cypress Medical Center Operating Company GP, LLC (collectively, "North Cypress") filed suit against Defendant MedSolutions, Inc. (“MedSolutions”), a third-party administrator that processed claims for several different insurers. In response, MedSolutions moved to dismiss North Cypress’s claims alleging that North Cypress, as a non-participating provider, did not have standing to assert its claims under the ERISA-governed health benefits plans. The federal district court began its analysis by recognizing that a plan beneficiary may assign his or her right to sue, thereby giving the assignee healthcare provider derivative standing.  However, the court then noted that the burden of establishing standing rested with the healthcare provider. North Cypress argued that it had standing based upon the valid assignments of ERISA benefits received from each of its patients.  MedSolutions countered that the assignments only gave North Cypress the “right to recover benefits for services rendered; nothing more and nothing less.”  In essence, MedSolutions claimed that the assignment provision did not effectively assign the types of claims asserted by North Cypress, particularly its claims for breach of fiduciary duties under ERISA.

In determining whether the assignment was sufficient, the federal district court noted that the starting point for construing a contract is its language. The North Cypress assignment provision stated, in part, as follows:

I HEREBY IRREVOCABLY ASSIGN AND TRANSFER TO THE HOSPITAL AND/OR HOSPITAL-BASED PHYSICIANS ALL RIGHT, TITLE AND INTEREST IN ALL BENEFITS PAYABLE FOR THE HEALTHCARE RENDERED, WHICH ARE PROVIDED IN ANY AND ALL INSURANCE POLICIES AND HEALTH BENEFIT PLANS FROM WHICH I AM ENTITLED SERVICES OR I AM ENTITLED TO RECOVER, I UNDERSTAND THAT ANY PAYMENT RECEIVED FROM THESE POLICIES AND/OR PLANS WILL BE APPLIED TO THE AMOUNT THAT I HAVE AGREED TO PAY FOR SERVICES RENDERED DURING THIS ADMISSION, AS FURTHER DESCRIBED IN SECTION 2.

The court noted that the assignment did not refer specifically to “fiduciary duties.”  Instead, the assignment referred to rights, title, and interest to “benefits payable for the healthcare rendered.”  North Cypress argued that the plain language of the assignment demonstrated that North Cypress had standing to sue under ERISA for breach of fiduciary duties as a breach of fiduciary duty is within the scope of an “administrative remedy, claim and/or lawsuit.”    The court rejected North Cypress’s argument , holding that “the assignment at issue in this case is not an express and knowing assignment of fiduciary duty claims. Therefore, North Cypress does not have derivative standing to assert these claims . . . In sum, because North Cypress’s patients did not expressly and knowingly assign the right to assert ERISA fiduciary duty claims to North Cypress, it lacks standing to assert the claims.”  The court then dismissed the claims with prejudice.

Given today’s world of shrinking reimbursements, many providers may find themselves seeking redress at the courthouse.  Don’t allow an insufficient assignment of benefits form destroy your chances of recovery.  Attached is a sample assignment of benefits form which addresses the deficiencies some courts have highlighted. We recommend you review your assignment of benefits form now and ensure that it contains everything necessary to preserve your rights to seek full reimbursement from the insurance company.  Additionally, keep in mind that as case law in this area continues to develop, further updates and reviews may be necessary. Ensuring that your assignment of benefits form is up to par is the best medicine for the non-participating provider. 




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