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Prospect Medical, P.C., Montvale Surgical Center, North Jersey Surgery v. Horizon Blue Cross Blue Shield of New Jersey

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


August 19, 2011

PROSPECT MEDICAL, P.C., MONTVALE SURGICAL CENTER, NORTH JERSEY SURGERY CENTER, AND NORTHEAST SPINE AND WELLNESS, PLAINTIFFS-APPELLANTS,
v.
HORIZON BLUE CROSS BLUE SHIELD OF NEW JERSEY, INC,, I/P/A, HORIZON HEALTHCARE OF NEW JERSEY, INC., DEFENDANT-RESPONDENT.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted - December 7, 2010

Before Judges Carchman, Messano and Waugh.

Plaintiffs Prospect Medical, P.C. (Prospect), Montvale Surgical Center (Montvale), North Jersey Surgery Center (North Jersey), and Northeast Spine and Wellness (Northeast) (collectively, plaintiffs), a group of out-of-network healthcare providers, appeal from two orders entered in favor of defendant Horizon Healthcare of New Jersey, Inc. (Horizon). The first order, entered March 19, 2010, denied plaintiffs' requests for injunctive relief and a protective order limiting the scope of discovery. The second, entered April 1, 2010, dismissed plaintiffs' complaint for failure to state a claim. See R. 4:6-2(e).

Plaintiffs alleged that between November 2007 and January 2009, they administered manipulation under anesthesia (MUA) to several patients insured under health insurance plans administered by Horizon. Horizon initially approved these claims and paid plaintiffs for their services.

The express terms of each benefit plan, however, did not provide coverage for MUA:

Spinal manipulation under anesthesia (MUA) is considered investigational for the treatment of pain syndromes of musculoskeletal origin including, but . . . not limited to, acute and chronic neck and back pain. [ ] INFORMATIONAL NOTE: There is [a] lack of evidence from available published literature that spinal manipulation under anesthesia has been established as a safe and effective treatment for pain syndromes of musculoskeletal origin.

Additionally, each benefit plan contained an "anti-assignment clause" that prohibited the subscriber's assignment of benefits to out-of-network providers.

Horizon began to recoup the funds initially paid to plaintiffs as offsets to outstanding claims involving other Horizon-insured patients. On October 1, 2009, Prospect, Montvale, and North Jersey filed their complaint; an amended complaint joining Northeast was subsequently filed on or around October 15. Horizon filed its answer shortly thereafter.

In their amended complaint, plaintiffs alleged that Horizon sought recoupment for these alleged "'overpayment[s]'" after the services were provided, and in some instances, "without notice and an opportunity to be heard." It was alleged in the second count of the amended complaint that with respect to one of the patients, P.R., Horizon began recouping payments from Prospect more than two years after the treatments were made, and nearly twenty-two months after it tendered payment. Plaintiffs sought "an award of medical fees and interest" based upon Horizon's "breach[] [of] its common law duty of good faith and fair dealing," "breach[] [of] its fiduciary duty," and plaintiffs' detrimental reliance on Horizon's prior payments. Plaintiff also sought injunctive relief prohibiting future recoupment. In the third count of the complaint, plaintiffs alleged a violation of the Consumer Fraud Act, N.J.S.A. 56:8-1 to -184 (the CFA), and in the fourth count, a violation of New Jersey's Racketeer Influenced and Corrupt Organizations statute, N.J.S.A. 2C:41-1 to -6.2 (Rico).

Horizon served written discovery demands. On February 3, 2010, plaintiffs filed a motion for a protective order limiting discovery and later moved ex parte for injunctive relief to halt the continuing recoupment. The judge entered an order to show cause temporarily enjoining Horizon from recouping any additional funds from plaintiffs' accounts receivable.

Following oral arguments on March 5, 2010, the judge entered an order dissolving the temporary restraints as to Prospect, North Jersey, and Northeast. The transcript from the proceedings indicates that the judge reserved decision on plaintiffs' request for a protective order and whether to dissolve the temporary restraints on Horizon's recoupment from Montvale.

Plaintiffs filed a motion to amend the complaint on March 8, and, on March 12, Horizon cross-moved to dismiss the complaint. On March 19, the judge entered two orders denying plaintiffs' request for a protective order and dismissing the order to show cause. In a short written opinion accompanying the orders, the judge explained that he was denying the request for a protective order because plaintiffs' counsel failed to certify that she previously engaged in good-faith discussions with defense counsel regarding discovery, see R. 1:6-2(c), and "[p]laintiffs [made] no assertion as to what specific discovery requests they object[ed] to, and why they object[ed] to them, only that they are 'of a broad and harassing nature.'"

The judge also found that the anti-assignment provisions in Horizon's plans were valid, and, therefore, any assignment of benefits was void and plaintiffs lacked standing to recover on their patients' behalf. Applying the standards for preliminary injunctive relief set out in Crowe v. DeGioia, 90 N.J. 126, 132-34 (1982), the judge concluded that plaintiffs failed to show a probability of success on the merits.

On April 1, 2010, the judge dismissed the complaint with prejudice and formally denied plaintiffs' motion to file another amended complaint.*fn1 In an attached rider, the judge rejected the argument that Horizon's payment of claims constituted a waiver of the anti-assignment clause, concluding that plaintiffs had presented no evidence "that Horizon clearly, unequivocally, and decisively waived the anti-assignment clause of the policy." This appeal followed.

Plaintiffs raise the following arguments:

POINT ONE: ACTIONABILITY OF CLAIM: DEFENDANT DOES NOT HAVE A LEGAL RIGHT TO CHANGE ITS DETERMINATION REGARDING MEDICAL NECESSITY AFTER PROCESSING AND PAYING PLAINTIFFS UNDER EITHER STATE OR FEDERAL LAW.

POINT TWO: STANDING: DEFENDANT HORIZON HAS, BY ESTABLISHED LAW, EVIDENCED A COURSE OF DEALING WITH PLAINTIFFS IN WHICH IT HAS WAIVED THE ANTI-ASSIGNMENT CLAUSE IN DEFENDANT'S CONTRACTS WITH ITS INSUREDS AND CONSENTED TO THE ASSIGNMENT OF BENEFITS. POINT THREE: THE CONSUMER FRAUD ACT: PLAINTIFFS SATISFY ELEMENTS OF BOTH THE CONSUMER FRAUD ACT AS WELL AS COMMON LAW FRAUD.

POINT FOUR: THE RICO ACT: PLAINTIFFS SATISFY ELEMENTS OF THE RICO ACT.

POINT FIVE: INJUNCTIVE RELIEF: POINT SIX: DEFENDANTS SHOULD NOT BE ENTITLED TO EXTENDED DISCOVERY AS PURSUANT TO N.J.A.C. 11:22-1.6 THEY HAVE LOST THEIR ABILITY TO DISPUTE THESE CLAIMS.

POINT SEVEN: AN APPEAL TO THE STATE HEALTH BENEFITS COMMISSION IS NOT PERMITTED, AND NOT REQUIRED AND PLAINTIFF'S WERE NOT GIVEN NOTICE AND AN OPPORTUNITY TO BE HEARD[.]

We affirm in part, reverse in part, and remand the matter for further proceedings consistent with this opinion.

We first consider whether plaintiffs' complaint was properly dismissed for failure to state a claim. When reviewing a dismissal pursuant to Rule 4:6-2(e), our "inquiry is limited to examining the legal sufficiency of the facts alleged on the face of the complaint." Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989) (citing Rieder v. Dep't of Transp., 221 N.J. Super. 547, 552 (App. Div. 1987)). Thus, the court must only ascertain "whether a cause of action is 'suggested' by the facts" alleged in the pleading. Ibid. (quoting Velantzas v. Colgate-Palmolive Co., 109 N.J. 189, 192 (1988)). Furthermore, "[w]e accord every reasonable inference to the plaintiff." Smith v. SBC Commc'ns, Inc., 178 N.J. 265, 282 (2006).

However, "[i]f . . . matters outside the pleading are presented to and not excluded by the court, the motion [to dismiss] shall be treated as one for summary judgment and disposed of as provided by R. 4:46, and all parties shall be given reasonable opportunity to present all material pertinent to such a motion." R. 4:6-2. Additionally, a trial court has discretion to convert an application for a temporary restraining order into a motion for summary judgment when there are no material facts in dispute. Concerned Citizens of the Borough of Wildwood Crest v. Pantalone, 185 N.J. Super. 37, 48 (App. Div. 1982). Here, although he did not expressly "treat[]" the motion to dismiss as one seeking summary judgment, the judge considered matters "outside the pleading" in reaching his decision.

Plaintiffs did not object to consideration of those materials, and have not argued that they were denied an "opportunity to present all [pertinent] material."

When reviewing a grant of summary judgment, we employ the same standards used by the motion judge. Atl. Mut. Ins. Co. v. Hillside Bottling Co., Inc., 387 N.J. Super. 224, 230 (App. Div.), certif. denied, 189 N.J. 104 (2006). We first determine whether the moving party has demonstrated there were no genuine disputes as to material facts. Ibid.

[A] determination whether there exists a "genuine issue" of material fact that precludes summary judgment requires the motion judge to consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party. [Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995).]

We then decide "whether the motion judge's application of the law was correct." Atl. Mut. Ins. Co., supra, 387 N.J. Super. at 231. We owe no deference to the motion judge's conclusions on issues of law. Ibid. (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995)).

We have previously held that "the anti-assignment clause in Horizon's subscriber contracts is valid and enforceable to prevent assignment by subscribers of policy benefit payments to non-participating medical providers without Horizon's consent." Somerset Orthopedic Assocs. v. Horizon Blue Cross & Blue Shield of N.J., 345 N.J. Super. 410, 423 (App. Div. 2001). "[T]he assignment of benefits to non-participating physicians such as plaintiffs, by reducing the incentive to contractually join Horizon's provider networks, is violative of strong public policy embodied in Horizon's enabling legislation." Ibid.

We agree with the motion judge that the anti-assignment provisions in Horizon's insurance plans precluded plaintiffs from asserting any rights on behalf of the individual patients involved. However, the question remains whether the motion record, as presented, demonstrated as a matter of law that Horizon had not waived the anti-assignment provisions.

"Waiver, under New Jersey law, involves the intentional relinquishment of a known right, and thus it must be shown that the party charged with the waiver knew of his or her legal rights and deliberately intended to relinquish them." Shebar v. Sanyo Bus. Sys. Corp., 111 N.J. 276, 291 (1988). Waiver requires "a voluntary, clear and decisive act, implying an election to forego some advantage which the waiving party might have insisted on." Deerhurst Estates v. Meadow Homes, Inc., 64 N.J. Super. 134, 145 (App. Div. 1960), certif. denied, 34 N.J. 66 (1961). We have held that "an anti-assignment clause may be waived by a written instrument, a course of dealing, or even passive conduct." Garden State Bldgs., L.P. v. First Fid. Bank, N.A., 305 N.J. Super. 510, 524 (App. Div. 1997), certif. denied, 153 N.J. 50 (1998). "Questions of waiver . . . are usually questions of intent, which are factual determinations that should not be made on a motion for summary judgment." Shebar, supra, 111 N.J. at 291.

Plaintiffs argued that Horizon waived the anti-assignment provisions by making payments without protest and with full recognition of the MUA services provided. Plaintiffs also alleged that in some instances they were not provided with notice and an opportunity to appeal.

Horizon, in opposing injunctive relief, attached copies of letters sent to some of the plaintiffs advising in a relatively short time after payment, that there was an "overpayment" and, if the monies were not returned, recoupment would occur.*fn2

Horizon also included letters demonstrating that with respect to some of the "overpayment" demands, plaintiffs obviously had notice, because they availed themselves of the internal Horizon appeals process.

However, there were no letters regarding some of the patient claims, and, as indicated, in some cases, Horizon's demand for repayment was not made for many months after payment was sent to plaintiffs. In one of the exhibits, Horizon indicated that repayment was required because of an overpayment; the reason given was "this claim has been adjusted because the incorrect coinsurance was applied." In the record as presented, in correspondence sent directly to the providers, Horizon never asserted the anti-assignment provisions of the insurance agreements.

Only "[i]f there exists a single, unavoidable resolution of the alleged disputed issue of fact," in this case, whether Horizon waived the anti-assignment provisions in some, or all, of the subscriber contracts, is "that issue . . . insufficient to constitute a 'genuine' issue of material fact for purposes of Rule 4:46-2." Brill, supra, 142 N.J. at 540. Based on the motion record supplied for our review, we conclude that summary judgment was inappropriately granted on the waiver issue. We are therefore compelled to reverse and remand the matter for further proceedings consistent with this opinion.*fn3

A-3690-09T3

Having said that, we find little merit to the balance of plaintiffs' arguments. We address them to provide necessary guidance on remand.

If plaintiffs prevail on their waiver claim, they may assert claims consistent with the rights obtained from the assignments executed by their patients, no more or less. Since the record is incomplete regarding all claims asserted by all plaintiffs, what the appeals processes were and whether plaintiffs availed themselves of them in each case, and because the issue was never addressed below, we refuse to consider plaintiffs' first point on appeal.*fn4

We agree, however, that plaintiff's CFA and RICO claims were properly dismissed. While the CFA "encompass[es] the sale of insurance policies as goods and services that are marketed to consumers," "the payment of insurance benefits is not subject to the CFA." Lemelledo v. Benefit Mgmt. Corp., 150 N.J. 255, 265 (1997) (citing Nikiper v. Motor Club of Am., 232 N.J. Super. 393, 401 (App. Div.), certif. denied, 117 N.J. 139 (1989); Pierzga v. Ohio Cas. Group of Ins. Cos., 208 N.J. Super. 40, 47 (App. Div.), certif. denied, 104 N.J. 399 (1986)); see also In re Van Holt, 163 F.3d 161, 168 (3d Cir. 1998) ("[T]he mere denial of insurance benefits to which . . . plaintiffs believe[] they [are] entitled does not comprise an unconscionable commercial practice."). Plaintiffs failed to allege a claim of common law fraud with the required specificity. See R. 4:5-8(a).

"The gravamen of a RICO violation . . . is the involvement in the affairs of an enterprise through a pattern of racketeering activity." State v. Ball, 141 N.J. 142, 155 (1995), cert. denied sub nom., Mocco v. New Jersey, 516 U.S. 1075, 116 S. Ct. 779, 133 L. Ed. 2d 731 (1996). "A 'pattern of racketeering activity' requires '[e]ngaging in at least two incidents of racketeering conduct' that 'embrace criminal conduct' and are interrelated." Franklin Med. Assocs. v. Newark Pub. Schs., 362 N.J. Super. 494, 513 (App. Div. 2003) (alteration in original) (citing N.J.S.A. 2C:41-1(d)). Plaintiffs did not, nor could they in good faith, allege that Horizon engaged in necessary predicate criminal conduct.

We also affirm the motion judge's decision to deny plaintiffs preliminary injunctive relief. "[A] party who seeks mandatory preliminary injunctive relief must satisfy a 'particularly heavy' burden." Rinaldo v. RLR Inv., LLC, 387 N.J. Super. 387, 396 (App. Div. 2006) (quoting Punnett v. Carter, 621 F.2d 578, 582 (3d Cir. 1980)). A successful applicant must demonstrate by clear and convincing evidence, Am. Emp'rs' Ins. Co. v. Elf Atochem N. Am., 280 N.J. Super. 601, 610-611 n.8 (App. Div. 1995), that a stay is necessary to prevent irreparable harm, that the legal right underlying the claim is settled, that the material facts are substantially undisputed, that the applicant has a reasonable probability of success on the merits, and that a balancing of the equities and the hardships weighs in favor of granting relief. Crowe, supra, 90 N.J. at 132-34. "Harm is generally considered irreparable in equity if it cannot be redressed adequately by monetary damages." Id. at 132-33.

Plaintiffs failed to establish by clear and convincing evidence their entitlement to preliminary injunctive relief. The judge properly exercised his discretion in dissolving the temporary restraining order.

Lastly, in Point Six, plaintiffs contend that the judge erred by denying their motion for a protective order limiting the scope of discovery because "[d]efendant does not have standing to request discovery regarding any matters or patients not the subject of recoupment." We "normally defer to a trial court's disposition of discovery matters, including the formulation of protective orders, unless the court has abused its discretion." Payton v. N.J. Tpk. Auth., 148 N.J. 524, 559 (1997) (citing Hammock ex rel. Hammock v. Hoffman-LaRoche, 142 N.J. 356, 380 (1995)). In general, "[p]arties may obtain discovery regarding any matter, not privileged, which is relevant to the subject matter involved in the pending action."

R. 4:10-2(a). However, all motions "involving any aspect of pretrial discovery" must be: [A]ccompanied by a certification stating that the attorney for the moving party has

. . . personally conferred orally or has made a specifically described good faith attempt to confer orally with the attorney for the opposing party in order to resolve the issues raised by the motion by agreement or consent order and that such effort at resolution has been unsuccessful . . . .

[R. 1:6-2(c).]

Given that plaintiffs failed to comply with the Rule and, more importantly, neglected to specify which discovery requests were objectionable and why, the trial court was well within its discretion to deny the protective order.

Affirmed in part, reversed in part, and remanded. We do not retain jurisdiction.


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