Federal Judge Denies United Healthcare’s Motion to Dismiss in Case Brought by Texas General Hospital for Unpaid & Underpaid Claims

Background

Texas General Hospital is a private, acute care facility located in Grand Prairie, Texas. It is outside of UnitedHealthcare’s (“United”) provider network. In January of 2015, Texas General was the subject of intense scrutiny after a FOX 4 investigation revealed multiple billing complaints. A woman who underwent gastric sleeve surgery was charged a total of $622,000, most of which her insurance company, United, refused to pay. Another woman was charged $360,000 for a hysterectomy, including $18,000 for a disposable cup. United indicated to FOX 4 that it was deeply concerned about hospitals establishing an out-of-network strategy to hike the rates that they charge for services.[1]

A recent study by Johns Hopkins that was reported in the Dallas Morning News found that Texas General ranks 11th among the worst 50 hospital in the nation for inflating patients’ hospital charges and has the most inflated charges of any hospital in Texas.[2] The Office of Representative Chris Turner (D) of Arlington, Texas also conducted research looking at the cost of cardiology, general medicine, pulmonology, and urology at Texas General, then compared it to Texas Health Harris Methodist Hospital in Stephenville, Texas. His office found that the charges were egregiously high. In addition, National Nurses United conducted research which shows that Texas General is the most expensive hospital in Texas and the 8th most expensive nationwide.[3]

Lawsuit

In October 2015, Texas General Hospital sued UnitedHealthcare based in Minnetonka, Minnesota seeking more than $104 million in unpaid and underpaid medical bills. Texas General accused United of “drastically underpaying” and refusing to pay for medical care provided to United-insured members. The case is citation is Tex. Gen. Hosp., LP v. United Healthcare Servs., Inc., 2016 BL 208258, N.D. Tex., No. 3:15-CV-02096-M, 6/28/16.

Texas General’s Second Amended Complaint against United details an alleged pattern of United drastically underpaying and/or refusing to pay Texas General (the plaintiffs) for health insurance claims that Texas General submitted to United for reimbursement since at least March of 2012. The plaintiffs allege that United violated the terms of applicable plans which require reimbursement of medical expenses incurred by United members at “usual, customary, and reasonable rates.” Texas General contends that the total billed charges do reflect the usual, customary, and reasonable rates for the particular medical services provided at the hospital. According to the Complaint, United paid 25% of Texas Generals’ billed charges for 1,969 claims. The Complaint also alleges that United violated numerous provision of the Employee Retirement Income Security Act (“ERISA”) by breaching plan terms, breaching fiduciary duties of loyalty and due care, and failing to provide a full and fair review of denied claims. Finally, Texas General alleges breach of contract (for the non-ERISA plans) and breach of the duty of good faith and fair dealing.[4]

In November 2015, United filed a 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted. Specifically, United argued that Texas General failed to allege facts that plausibly established that United withheld any plan benefits. As detailed in United’s Memorandum in Support of the Motion to Dismiss, United contends that Texas General’s charges do not constitute the usual, customary, and reasonable rates for those services. Moreover, United contends that Texas General failed to establish that denials of payment were invalid, mistaken, or unsupported by applicable plan terms. United also contends that since Texas General failed to exhaust its administrative remedies, the claims for benefits should be barred.[5]

On June 28, 2016, Chief Judge Barbara M.G. Lynn of the U.S. District Court for the Northern District of Texas denied United’s motion to dismiss. In particular, Judge Lynn found that Texas General sufficiently pleaded claims and that United failed to provide “meaningful access” to its appeals procedures. As a result of the dismissal, Texas General can now pursue its claims for benefits and relief under ERISA. Furthermore, Texas General is now able to bypass United’s internal appeals process for all 1,969 United members and bring these actions against United directly in federal court. [6]

The case now moves forward in the litigation process.

[1] Becky Oliver, A FOX 4 Investigation of Hospital Billing Struck a Nerve with Our Viewers, and Now, an Austin Lawmaker is Stepping In, FOX 4 (Jan. 22, 2015), http://www.fox4news.com/news/798051-story.

[2] News Release, Johns Hopkins Bloomberg Sch. of Pub. Health Pol’y Mgmt., Some Hospitals Marking Up Prices More Than 1,000 Percent (June 8, 2015), http://www.jhsph.edu/news/news-releases/2015/some-hospitals-marking-up-prices-more-than-1000-percent.html.

[3] FOX 4 Investigation, supra note 1.

[4] Plaintiff’s Second Amended Compl., Tex. Gen. Hosp., LP v. United Healthcare Servs., Inc., 2016 BL 208258, N.D. Tex., No. 3:15-CV-02096-M, 6/28/16.

[5] Memorandum in Support of Defendant’s Motion to Dismiss Plaintiff’s Second Amended Compl., Tex. Gen. Hosp., LP v. United Healthcare Servs., Inc., 2016 BL 208258, N.D. Tex., No. 3:15-CV-02096-M, 6/28/16.

[6] Jacklyn Wille, United HealthCare Can’t Duck Hospital’s $104M Lawsuit, Bloomberg BNA (June 30, 2016), http://www.bna.com/united-healthcare-cant-n57982076319/.