On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, L-2196-03.
The opinion of the court was delivered by: R. B. Coleman, J.A.D.
Before Judges Lefelt, Hoens and R. B. Coleman.
Plaintiffs, Fredric Feit, M.D. and Modern Pain Therapy Center, Inc., appeal from the dismissal of their complaint alleging breach of contract, defamation, malicious prosecution and tortious interference. The complaint sought damages for Horizon's termination of Dr. Feit as a participating physician in the Horizon Blue Cross and Blue Shield of New Jersey (Horizon) provider network and for its report of the termination to the New Jersey Board of Medical Examiners (the Board). The trial court dismissed the First Count, the Second Count, the second (erroneously designated) Second Count, the Third Count and the Sixth Count of plaintiff's complaint. As to those counts asserting tort claims, the court ruled that Horizon is immune pursuant to N.J.S.A. 45:9-19.1 because it did not act with malice and it had a good faith basis to notify the Board of the termination. We affirm that basis for dismissing the tort claims, but we reverse the court's dismissal of the Fourth and Fifth Counts of plaintiffs' complaint, to the extent they seek compensatory damages for the alleged breach of the provider contract. The trial court held these claims were federally preempted by the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. § 1001 et seq. We disagree and conclude that the doctor is entitled to adjudicate his contract-based claims for wrongful termination of the provider contract and for payment for services rendered under that provider contract prior to its termination. We reverse and remand for that purpose.
On September 22, 1994, plaintiff Fredric Feit, M.D., signed a provider contract with defendant Horizon entitled "Agreement with Participating Physicians and Providers." By the terms of that agreement, Feit became a participating physician in Horizon's provider network, a capacity in which he continued until May 24, 2002. As a result, Feit received direct payment from Horizon for health care services he provided to its subscribers in the area of his specialty, rehabilitation and pain management. Pursuant to paragraph six of the agreement, either party could cancel the contract by giving thirty days' written notice.
The agreement provided that Feit would allow Horizon "to review and copy patients' records in [his] office during regular business hours." In furtherance of that provision and authorization, in October 1998, Horizon's Utilization Review Department (UR Department) conducted a review of Feit's practice in Freehold, Modern Pain Therapy Center, Inc. During its review, Horizon analyzed medical records and claims for services Feit rendered from January 1, 1997 through June 30, 1998. As a result of its analysis, on October 15, 1998, the UR Department determined, in relevant part, that Feit's medical records "lack[ed] documentation to support the complexity of the patient evaluation and management codes billed." It further observed that while "patients [were] seen for a prolonged period of time there [were] no documented treatment plan[s]." Horizon concluded that "the medical records reviewed are lacking adequate documentation to support reimbursement and do not meet the standard of care of the practicing community." While it did not seek a refund for any prior inadequately documented claims, Horizon informed Feit that it would be reviewing his claims on a prepayment basis.
In December 1999, Horizon's UR Department referred the medical records of two of Feit's patients to its Medical Advisor's Office as well as to an independent board certified pain management consultant. These reviewers opined that the documented treatment that those patients received during this time was "not medically appropriate" based, in relevant part, on insufficient documentation and the absence of a clearly stated treatment plan. Consequently, Horizon did not reimburse Feit for those patients' treatments. The reviewers also questioned the authenticity of the documentation for the two patients, as their medical records were "essentially identical."
Due to its continuing belief that Feit's documentation was inadequate, the UR Department referred Feit to its Special Investigations Unit (SI Unit), which investigates cases of alleged billing fraud and inappropriate medical practices. On May 8, 2000, Vincent C. Ceglia, a member of the SI Unit, sent a letter to Feit, requesting an on-site audit of his patient records. As Feit did not respond, Ceglia wrote to Feit again on May 22, 2000 and on August 1, 2000, informing Feit that he was in breach of his contract. In the August 1, 2000 letter, Ceglia gave Feit notice that any outstanding or future payments would be withheld until Horizon could conduct an on-site audit.
Due to Feit's failure to respond to Horizon's requests to conduct an on-site audit, the matter was referred to Horizon's legal department. On May 2, 2001, Frederic N. Futterman, Horizon's Assistant General Counsel, wrote to Feit, informing him that if he did not contact Horizon within five business days to schedule an on-site audit, Horizon would "proceed with the termination of [Feit's] contract and [his] status as a participating physician." Feit did not respond. So, on July 30, 2001, Horizon's Senior Medical Director, Stanley E. Harris, M.D., informed Feit that Horizon was terminating him as a participating physician, effective August 31, 2001. Horizon gave the following reasons:
We have decided to exercise our right to terminate the Agreement based upon your breach of its terms, as demonstrated by your failure to cooperate with individuals in our Utilization Management and Investigations Departments to the extent that they have been unable [to] conduct their routine utilization management and audit functions with regard to your practice. Your breach of the Agreement has further manifested itself by these individuals being unable to arrange an on-site audit as well as your failure to present us with copies of various medical records that we require to complete our review and audit tasks despite our repeated requests.
In early August 2001, Feit called Harris regarding the termination letter and expressed a willingness to allow the audit and inquired about his right to contest the termination. In a letter dated August 9, 2001, Harris informed Feit that, although he had no formal appeal rights to contest his termination, he could write a letter to Harris "detailing the circumstances related to your failure to comply and failure to respond to the May 2, 2001 letter." In a letter received by Horizon on September 5, 2001, Feit expressed a desire to allow an on-site audit of his office records.
Horizon suspended its announced termination action for ninety days, provided that Feit would allow it to conduct an on-site audit immediately. Horizon also informed Feit that he would have to submit a recredentialing package before he could be considered for reinstatement as a participating physician.
After conducting the on-site audit, Horizon referred the files of five of Feit's patients to Dr. Clay Miller, M.D., an independent medical examiner affiliated with Core, Inc., who had experience in pain management. In his Peer Review Analysis, dated January 18, 2002, Miller noted that Feit prescribed therapies and treatments that were excessive for pain management. In Miller's opinion, the multiple injections, blocks and physical therapies were "palliative and not restorative and therefore not medically necessary for an ongoing chronic pain that has not responded to 3-months of treatments." Miller commented that Feit's medical records did not support the medical necessity or appropriateness of office visits for which they were billed and that he failed to adequately document reasonable treatment plans. Miller also noted that Feit prescribed several narcotic medications, a practice which was not the industry standard. Miller maintained the industry standard was to use one long-acting narcotic with a short-acting one for breakthrough pain.
Due to the concerns Miller raised in his Peer Review Analysis, the SI Unit referred Feit's alleged practices to Horizon's Quality Case Review Subcommittee (the Review Subcommittee) to determine whether it should pursue a professional competency action against Feit. After discussing the concerns regarding Feit at its monthly meeting in April 2002, the Review Subcommittee requested written comments from Feit within ten business days concerning his treatment of the five patients upon whom Miller's Peer Review Analysis was based. With its letter to Feit, the Review Subcommittee enclosed a copy of Miller's analysis. Feit did not respond to this request. Hence, at its May 14, 2002 meeting, the Review Subcommittee referred the matter to Horizon's Credentialing Subcommittee with a recommendation to terminate Feit "as an imminent threat to the welfare & safety of [its] members."
A few days later, on May 17, 2002, the Credentialing Subcommittee accepted the Review Subcommittee's recommendation to terminate Feit as a participating physician. The Credentialing Subcommittee indicated Feit would be given ninety days to appeal its decision. Instead, on May 24, 2002, Dr. Ana Baez, M.D., Medical Director and Acting Chairperson of the Credentialing Subcommittee, sent Feit a letter informing him that his provider contract "has been terminated immediately based on the Subcommittee's view that your continued participation presents an imminent danger to the health, safety and welfare of our plan's insured persons." Baez informed Feit that he had thirty days in ...