Houston hospital pushes forward with plan payment embezzlement allegations

By Carrie Salls | Nov 17, 2016

HOUSTON – RedOak Hospital LLC has responded to AT&T Services Inc.’s motion to dismiss a lawsuit related to withheld insurance plan payments, alleging the defendant’s argument “misses the mark because the plans’ anti-assignment provisions are ineffective as a matter of law.”  

According to the case docket page, RedOak seeks $62 million as part of the lawsuit filed against AT&T Services, Inc. and United Healthcare Services Inc. in connection with amounts allegedly owed under the Employee Retirement Income Case Security Act of 1974 (ERISA) for governed, self-insured welfare benefit plans.


AT&T said in its dismissal motion that RedOak is alleging it participated in a scheme to “abstract, withhold, embezzle and convert” plan assets that were allegedly owed to RedOak through assignments.


“However, RedOak’s kitchen-sink approach to pleading and the alleged complexity of this ‘elaborate scheme’ -- which in reality is nothing more than an accounting dispute between RedOak and AT&T Services’ third-party benefits administrator -- cannot obscure the fact that all of RedOak’s claims should be dismissed,” AT&T Services said.


According to RedOak’s second amended complaint, filed with the U.S. District Court for the Southern District of Texas Nov. 9 in further response to the dismissal motion, the plan sponsor AT&T, Inc., which is not a party to the lawsuit, designated AT&T Services as the administrator for two umbrella benefit plans. United Healthcare entered an agreement with AT&T Services to act as a third-party medical benefits administrator.


RedOak is one of the out-of-network providers that treat plan beneficiaries.


Whenever the plans pay less than 100 percent of an out-of-network provider’s claim, the plans’ failure or refusal to pay the full amount of those charges is deemed an adverse benefit determination under ERISA, RedOak argues.


United, as the contracted medical benefits administrator, is authorized by AT&T Services to make eligible allowed amount determinations for every claim that is submitted. RedOak said it is to be paid the allowed amount through plan assets after United makes its determination, minus any of the plan beneficiaries’ out-of-pocket expenses.


RedOak said it has never agreed, in writing or otherwise, that AT&T Services or United may withhold payments owed by the plans in order to recover alleged previous overpayments made by another United plan or for a different United fully insured plan or to take the offsets challenged in the lawsuit


Following issues tied to the reduction of three plan beneficiaries’ RedOak Hospital bills, RedOak said United failed to treat its unilateral decision to withhold payment as an adverse benefit determination, and did not provide the informational items or appellate procedures mandated by the ERISA claims procedure.


United provided RedOak with explanation of benefits forms for the three beneficiaries, indicating that although it had determined that the beneficiaries were entitled to payment under the plans, that payment would not be turned over to RedOak because of an alleged and disputed past overpayment.


“Importantly, the disputed past overpayments were not made on behalf of beneficiaries, rather the disputed over payments were made to plaintiff, several months earlier, on behalf of several individuals who were all insured by different plans,” RedOak said in its dismissal motion response.


RedOak said it filed the lawsuit because the beneficiaries assigned their rights to benefit payments under the plans to RedOak, and the plans do not provide for the type of offsets kept by United.


RedOak is alleging AT&T Services knew or should have known that the plans do not permit the reduction of benefits for one United insured in order to recover “overpayments” that a different United plan purportedly made on claims submitted on behalf of a different United-insured patient.


Through the lawsuit, RedOak seeks plan benefits payments, attorney fees and costs, including those for an appeal, and pre-judgment and post-judgment interest.

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