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St. Peter's University Hospital v. New Jersey Building Laborers Statewide Welfare Fund

Superior Court of New Jersey, Appellate Division

July 2, 2013

ST. PETER'S UNIVERSITY HOSPITAL, Plaintiff-Appellant,
v.
NEW JERSEY BUILDING LABORERS STATEWIDE WELFARE FUND, Defendant/Third-Party Plaintiff-Respondent, and LOCAL 469 TEAMSTERS HEALTH AND WELFARE FUND, LOCAL 88 WELFARE FUND, LOCAL 966 TEAMSTERS HEALTH FUND, PLAINTIFF LABORATORIES, INC., LOCAL 348 HEALTH & WELFARE FUND, SPECTRUM FOR LIVING, Defendants,
v.
UNION LABOR LIFE INSURANCE COMPANY, Third-Party Defendant-Respondent. ST. PETER'S UNIVERSITY HOSPITAL, Plaintiff-Appellant,
v.
LOCAL 594 - BUILDING LABORERS WELFARE FUND, Defendant/Third-Party Plaintiff-Respondent,
v.
UNION LABOR LIFE INSURANCE COMPANY, Third-Party Defendant-Respondent. ST. PETER'S UNIVERSITY HOSPITAL, Plaintiff-Appellant,
v.
LOCAL 94 HEALTH AND WELFARE FUND, LOCAL 138 WELFARE FUND, LOCAL 25-SHEET METAL WORKERS WELFARE FUND, EMPLOYEE SECURITY FUND OF THE ELECTRICAL PRODUCTS INDUSTRIES, INDEPENDENT CARE PLUS, LOCAL 1181 WELFARE FUND, BUILDING TRADES WELFARE BENEFIT FUND, BUILDERS GENERAL SUPPLY COMPANY, Defendants, and NEW JERSEY BUILDING LABORERS STATEWIDE WELFARE FUND, Defendant/Third-Party Plaintiff-Respondent,
v.
UNION LABOR LIFE INSURANCE COMPANY, Third-Party Defendant-Respondent.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued: January 30, 2013.

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket Nos. L-2666-10, L-2820-10, and L-4712-10.

Camille Kassar argued the cause for appellant (Maloof, Lebowitz, Connahan & Oleske, attorneys; Anthony J. Chirles, Jr., on the brief).

Seth Ptasiewicz argued the cause for respondent New Jersey Building Laborers Welfare Fund (Kroll Heineman Carton, LLC, attorneys; Michael G. McNally, on the brief).

Andrew O. Bunn argued the cause for respondent Union Labor Life Insurance Company (DLA Piper LLP, attorneys; Mr. Bunn and James V. Noblett, on the brief).

Before Judges Axelrad, Nugent and Haas.

OPINION

AXELRAD, P.J.A.D.

In these consolidated appeals, we decide whether the Employee Retirement Income Security Act (ERISA), 29 U.S.C.A. § 1001 to -1461, preempts a medical provider's claims against the ERISA benefit plan for payment of the provider's customary fees for the services it rendered to patients rather than the discounted fees the plan would have been legally entitled to pay had it not breached its contractual obligation for timely payment. We are satisfied the provider's claims are expressly preempted by Section 514(a) of ERISA, 29 U.S.C.A. § 1144(a), and thus affirm summary judgment dismissal of the complaints.

I.

The facts are, for the most part, undisputed. Plaintiff, St. Peter's University Hospital (the Hospital), is a medical facility that provides health care to the general public, including individuals who are entitled to receive services under health care plans. Defendant New Jersey Building Laborers Statewide Welfare Fund[1] and its predecessor, defendant Local 594 - Building Laborers Welfare Fund (collectively referred to as the Fund), are employee welfare benefit plans that provide medical benefits to participants and their dependents. Third-party defendant Union Labor Life Insurance Company (Union Labor Life) is a claims administrator and processor that provides services to the Fund under an administrative services agreement. MagNet, Inc. (MagNet) is a preferred provider organization (PPO) that contracts with employer groups and insurance carriers to make available to covered persons the option of receiving health care at hospitals within the network.

On August 22, 1995, the Hospital and MagNet entered into an agreement (hospital agreement) in which the Hospital, as a network hospital, agreed to provide medical services to eligible persons insured by group health coverage providers, such as the Fund, at a reduced rate of payment established by MagNet. The discount was conditioned on timely payment under the contract, i.e., thirty days after receiving a clean claim.[2] If not timely paid, the insurance provider would "lose the benefit of the MagNet discounted reimbursement rate" and the Hospital could bill and collect from the insurance provider and eligible person its customary rate for the services. Upon authorization from MagNet, the Hospital could pursue any remedies available under law. The hospital agreement was amended on February 11, 2002, to remove the authorization requirement and permit the Hospital to "pursue reimbursement at One Hundred Percent (100%) of full billed charges using any remedies available at law" if the insurance provider failed to pay a "Clean Claim for Covered Hospital Services rendered to an Eligible Person" within the contractual time frames.

MagNet and the Fund entered into a subscriber agreement on February 8, 2001, containing similar terms. Specifically, the agreement provided for discounted payment to the Hospital conditioned on timely payment, i.e., thirty days after receipt of the submitted clean claim.

In these cases involving three separate patients insured by the Fund, the Fund paid the Hospital's discounted rates well beyond the thirty-day period. On April 2 and 3, 2004, the Hospital provided medical services to Patricia Desanto totaling $16, 560.31. It submitted a clean claim on April 13, 2004, and received $2272 payment from the Fund on or about September 27, 2004. From June 16, 2004 through June 29, 2004, the Hospital provided medical services to Francis Almeida totaling $77, 152.43. It submitted a clean claim on July 7, 2004, and received $29, 536 payment from the Fund on or about March 7, 2005. From August 23, 2004 through August 25, 2004, the Hospital provided medical services to Kimberly Krupa totaling $19, 312.39. It submitted a clean claim on September 2, 2004, and received $4544 payment from the Fund on or about June 20, 2005.

On April 8, 2010, the Hospital filed a complaint (Docket No. L-2666-10) against the Fund, seeking to recover the $14, 288.31 balance due for services provided to Desanto.[3] On April 19, 2010, the Hospital filed a complaint (Docket No. L-2820-10) against the Fund, alleging it owed the balance of $47, 589.43[4] for services rendered to Almeida. On June 23, 2010, the Hospital filed a complaint (Docket No. L-4712-10) against the Fund, seeking to recover the $14, 768.39 balance due for services provided to Krupa. In all three complaints the Hospital alleged the Fund was not eligible to pay the discounted rate because it failed to make payment within the contractually required time period, and the Fund was unjustly enriched to the Hospital's detriment. The Hospital sought to recover the difference between the discounted rates and the customary rates for the services rendered to the three patients.

In each case, the Fund filed an answer and third-party complaint against Union Labor Life for indemnity for failure of its claims processor to timely pay the claims. Union Labor Life answered the third-party complaints.

Following the completion of discovery, Union Labor Life filed motions for summary judgment in all three cases to dismiss the Hospital's complaints, alleging the claims were preempted by ERISA. The Hospital opposed the motions and filed cross-motions for summary judgment against the Fund.

At the conclusion of oral argument on October 14, 2011, Judge Phillip Paley granted Union Labor Life's motions for summary judgment and denied the Hospital's cross-motions for summary judgment. Judge Paley found state law claims against the Fund were expressly preempted by Section 514(a) of ERISA and should be dismissed. ...


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