South Coast Specialty Surgery Ctr. v. Blue Cross of Cal., __ F.4th __, 2024 WL 105317 (9th Cir. Jan. 10, 2024)
South Coast Specialty Surgery Center sought reimbursement from Blue Cross of California (Anthem) for the costs of medical services provided to patients (plan participants) who had executed assignments to South Coast of their insurance benefits. After Anthem implemented a “pre-payment review” process that limited coverage for South Coast’s services, South Coast sued Anthem under ERISA to recover $5.4 million in unpaid services. The district court dismissed South Coast’s complaint with prejudice, ruling that South Coast lacked authority to sue because the “Assignment of Benefits” form executed by plan participants furnished South Coast the right to receive direct payment from Anthem, but not the right to sue for non-payment. South Coast appealed.
The Ninth Circuit reversed, holding that a healthcare provider may sue under ERISA if it has a valid assignment of rights from plan participants. The court explained that ERISA permits plan participants to sue health insurers to recover unpaid benefits, and further allows participants to assign their rights to healthcare providers who may file derivative claims seeking to recover payments due for services rendered. Here, because South Coast’s “Assignment of Benefits” form validly assigned the right to receive insurance benefits, the form also implicitly gave South Coast the derivative authority to sue health insurers for non-payment of services under ERISA. The court reasoned that construing the assignment to preclude South Coast from suing for unpaid services made “neither textual nor practical sense” because that would leave South Coast with “little legal recourse after ‘fronting’ the costs of care.” “Recognizing derivative authority to sue, by contrast, serves ERISA’s purpose by ‘making it unnecessary for health care providers to evaluate the solvency of patients before commencing medical treatment, and by eliminating the necessity for beneficiaries to pay potentially large medical bills and await compensation from the plan.’”
