September 28, 2021

Volume XI, Number 271


September 27, 2021

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Ninth Circuit: Insurers Must Honor Their Promises to Out-Of-Network Providers

In July, we reported (here) on a Third Circuit decision that held an out-of-network provider’s direct claims against an insurer for breach of contract and promissory estoppel were not pre-empted by ERISA. That opinion was a significant win for healthcare providers. Recently, there has been another important win for out-of-network providers—this time from the Ninth Circuit.

In Beverly Oaks Physicians Surgical Ctr., LLC v. Blue Cross & Blue Shield of Illinois, 983 F.3d 435, 442 (9th Cir. 2020), an out-of-network surgical center sued Blue Cross for improperly refusing to pay—or dramatically underpaying—charges for seventeen procedures performed for fourteen patients.

The surgical center in Beverly Oaks followed the typical procedures for out-of-network care. Prior to each procedure, it obtained an assignment from the patients. It also called Blue Cross to confirm that Blue Cross would cover the procedures. Following the procedures, it submitted claim forms to Blue Cross totaling $1.4 million. Of these, Blue Cross paid only $130,000, less than one tenth what was owed.

In the subsequent suit, Blue Cross asserted—for the first time—that the surgical center could not recover any payment due to a non-assignment provision contained in each of the patients’ plans. The District Court agreed, and dismissed the surgical center’s suit for failure to state a claim.

However, the Ninth Circuit reversed the dismissal, finding that the surgical center had alleged facts sufficient to suggest that Blue Cross waived the anti-assignment provision by failing to assert it sooner, and that Blue Cross was estopped from asserting the provision because it promised to pay the claims in pre-surgery phone calls.

For lawyers, this case is another small indication that courts across the country are waking up to the difficulties faced by out-of-network health care providers arising from insurers’ use (and abuse) of boilerplate anti-assignment provisions in health plans. For out-of-network providers, this case highlights the importance of following good pre-procedure protocols, and pinning down the terms of payment before agreeing to provide services.

©2021 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume XI, Number 41

About this Author

William Gibson Litigation Attorney Epstein Becker & Green Princeton, NJ
Senior Counsel

WILLIAM GIBSON is a Senior Counsel in the Litigation practice, in the Princeton office of Epstein Becker Green.

Mr. Gibson:

  • Represents clients in civil litigation matters involving commercial disputes, breach of contract, products liability, consumer fraud, securities fraud and market manipulation, and shareholder disputes
  • Provides representation in employment litigation, including defending against EEOC claims and class actions
  • Represents clients in civil and criminal investigations relating to antitrust violations, corruption,...
Maximilian D. Cadmus Litigation & Business Disputes Attorney Epstein Becker & Green Princeton, NJ

MAXIMILIAN D. CADMUS is an Associate in the Litigation & Business Disputes practice, in the Princeton office of Epstein Becker Green.

Mr. Cadmus:

  • Represents clients in a variety of commercial litigation and related contexts, including insurance coverage disputes, administrative appeals, and business, products liability, and professional liability litigation
  • Provides representation to clients before state and federal courts, arbitration panels, and administrative agencies

Before joining Epstein Becker Green, Mr. Cadmus was a...