HOUSTON – A federal judge has dismissed without prejudice breach of an implied contract claims, within an insurance dispute pitting a Harris County emergency room system versus the state’s Blue Cross and Blue Shield entity.
On Oct. 2, U.S. District Court for the Southern District of Texas Judge Lee H. Rosenthal ruled in favor of Blue Cross and Blue Shield of Texas, and for now, dismissed the breach claims brought by plaintiffs West Grey Properties, LLC (doing business as “Bellaire ER”) and Cypress Emergency Room, LLC, (doing business as “Fairfield ER”).
“Bellaire ER is an emergency room in Harris County, Texas. It offers a variety of emergency care services. Bellaire ER alleges that in 2022, it provided emergency medical services to 15 patients who represented that they were insured by Blue Cross Texas. These services were all for out-of-network care. Bellaire ER alleges that Blue Cross Texas was statutorily obligated to reimburse Bellaire ER as an out-of-network provider at the ‘usual and customary’ rate. While Bellaire ER does not cite to a specific section of Senate Bill 1264 or the Texas Insurance Code obligating payment at the usual and customary rate, the Court assumes that Bellaire ER relies on Section 1271.157 of the Insurance Code. Bellaire ER alleges that it billed Blue Cross for the services the patients received, using reasonable and customary rates for those services,” Rosenthal said.
“Bellaire ER alleges that Blue Cross Texas paid Bellaire ER only a fraction of the amounts billed. In some cases, according to Bellaire ER, it received no payment, even though Blue Cross acknowledged coverage for the services provided. Bellaire ER and Blue Cross Texas participated in mandatory mediation, as required by Section 1467.0575 of the Texas Insurance Code, but were unable to reach a resolution on the required payments for the 15 patients. Section 1467.0575 allows parties to file a civil action to determine the amount due to an out-of-network provider by an insurer, if the parties are unable to reach an agreement through mediation. This lawsuit and motion to dismiss followed. Blue Cross Texas now moves to dismiss the breach of implied contract claims on the basis that there was no ‘meeting of the minds’ as to the reimbursement amounts that Bellaire ER is entitled to receive. It argues that an implied-in-fact contract was never formed. Blue Cross Texas also moves to dismiss the attorney’s fees claims on the basis that Chapter 1467 of the Texas Insurance Code, under which Bellaire ER brings this suit, does not expressly provide for the recovery of fees.”
Rosenthal explained the arguments as presented by both sides showed that the defendant did not breach an implied contract – either in fact or in law.
“Blue Cross Texas argues that Bellaire ER’s claim of an implied-in-fact contract is foreclosed by Molina Healthcare of Texas, Inc. v. ACS Primary Care Physicians Sw., PA. In Molina, the Texas Court of Appeals, Houston held that when providers and insurers have not agreed on a rate of reimbursement, despite a statutory obligation to reimburse at a ‘usual and customary rate,’ there is no meeting of the minds and no implied-in-fact contract. The Molina court held that the rate of reimbursement is ‘an essential term of a contract between an emergency care provider and a health insurance company, perhaps even the most important term. Bellaire ER argues that in this case, unlike Molina, the complaint alleges that the parties had a meeting of the minds that the ‘usual and customary is the reimbursement rate’ and that Blue Cross is therefore ‘bound to pay usual and customary.’ The problem, however, is that the pleadings do not allege facts that could show party agreement on what the usual and customary reimbursement rates were for the services that Bellaire ER provided,” Rosenthal stated.
“Bellaire ER attempts to distinguish Molina by arguing that the insurer in that case sought to reverse a jury verdict in favor of the healthcare provider and render judgment in the insurer’s favor, while in this case, the insurer is challenging the sufficiency of the healthcare provider’s complaint allegations. Bellaire ER also argues that in Molina, the insurer and healthcare provider had tried but failed to negotiate a contract to make the providers part of the insurer’s network, but could not agree on the price. In this case, by contrast, there was no effort to negotiate an express contract. These procedural and factual differences do not change the fact that in Molina, the court held that when an emergency care provider and an insurer have not agreed on a reimbursement rate, having the ER provide the services is not an implied-in-fact contract that the insurer will pay a certain reimbursement rate. Bellaire ER has failed to sufficiently plead a claim for breach of an implied-in-fact contract with Blue Cross Texas.”
Rosenthal added the plaintiffs also did not illustrate how the defendant’s actions constituted a breach of an implied-in-law contract.
“Bellaire ER points to Paragraphs 4 and 5 of its first amended complaint, to argue that it states a claim for a breach of an implied-in-law contract. These paragraphs of the complaint allege that Blue Cross Texas is obligated to reimburse Bellaire ER at the ‘usual and customary rate,’ under the Texas Insurance Code. In its response, Bellaire ER repeats its claims that Blue Cross Texas ‘accepted this legal obligation when it accepted coverage for the claims at issue in this litigation, rendered a claim decision and/or tendered partial payment and participated in statutorily required mediation. Bellaire ER argues that because Blue Cross Texas had a statutory obligation to reimburse Bellaire ER at the ‘usual and customary rate,’ justice requires the court to find an implied-in-law contract,” Rosenthal said.
“These allegations support Bellaire ER’s claims for breach of the Texas Insurance Code, claims that Blue Cross Texas has not moved to dismiss and which the court need not address on the merits. These allegations do not support a separate claim for breach of an implied-in-law contract. Bellaire ER has not pleaded facts showing that Blue Cross Texas would be unjustly enriched if the court did not find and enforce an implied-in-law contract. To the extent that Bellaire ER attempts to plead such a claim, it has not plausibly done so.”
Due to the failure of the other two claims, Rosenthal also threw out a request for attorney’s fees from plaintiff counsel.
According to Rosenthal, Bellaire ER must file its amended complaint by Nov. 1.
U.S. District Court for the Southern District of Texas case 4:24-cv-01275
From the Southeast Texas Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com