Faith Hospital Ass'n v. Blue Cross & Blue Shield of Missouri

857 S.W.2d 352, 17 Employee Benefits Cas. (BNA) 2562, 1993 Mo. App. LEXIS 712, 1993 WL 158419
CourtMissouri Court of Appeals
DecidedMay 18, 1993
DocketNos. 62050, 62092
StatusPublished

This text of 857 S.W.2d 352 (Faith Hospital Ass'n v. Blue Cross & Blue Shield of Missouri) is published on Counsel Stack Legal Research, covering Missouri Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Faith Hospital Ass'n v. Blue Cross & Blue Shield of Missouri, 857 S.W.2d 352, 17 Employee Benefits Cas. (BNA) 2562, 1993 Mo. App. LEXIS 712, 1993 WL 158419 (Mo. Ct. App. 1993).

Opinion

PUDLOWSKI, Judge.

Appellant Blue Cross and Blue Shield of Missouri (Blue Cross) appeals from a judgment in favor of Respondent Faith Hospital Association (Faith Hospital). The jury returned a verdict in favor of Faith Hospital on its breach of contract claim for Blue Cross’ nonpayment for services provided to patient William Lowry. Blue Cross contends Faith Hospital’s claim is preempted by the Employee Retirement Income Security Act of 1974 (ERISA) and the verdict directing instruction given to the jury was erroneous. Faith Hospital cross-appeals arguing it is entitled to an increase in the damages awarded. We affirm.

On June 30, 1988, Faith Hospital and Blue Cross executed a written Provider Agreement (Provider Agreement) that was effective through the end of 1989. Pursuant to the Provider Agreement, Faith Hospital would provide hospital services to persons covered by Blue Cross insurance, and Blue Cross would pay Faith Hospital its established charges for covered services.

The St. Louis Labor Health Institute (LHI) provides health care services for its members through contracts negotiated between their employers and the teamsters union. Under LHI’s Medical and Hospital Service Plan (Plan), hospital benefits are provided to members through an Enrollment Agreement with Blue Cross. According to the Plan, hospitalization of a Plan member requires the LHI Medical Director’s authorization. Pursuant to the Enrollment Agreement, Blue Cross processes claims submitted by hospitals for care furnished to LHI members. LHI decides whether claims for hospital services are payable under the LHI Plan. If LHI determines that the amount is properly payable, Blue Cross pays the hospital and is reimbursed by LHI with a percentage fee for administrative services. This arrangement allows LHI to take advantage of Blue Cross’ favorable rates for prepaid hospital services and to provide its members with a recognizable medical card. LHI also employs a staff of physicians who examine and treat LHI members at a clinic.

William Lowry was admitted to Faith Hospital on September 19, 1988 and was diagnosed as having lung cancer. On September 20,1988, Mr. Lowry underwent surgery and had part of his lung removed. He did reasonably well immediately after surgery, but suffered a severe stroke on the fifth post-operative day. Mr. Lowry’s condition gradually worsened until his death on December 5,1988. From the time of his surgery until his death, William Low-ry was in Faith Hospital’s intensive care unit.

When William Lowry was admitted on September 19, Faith Hospital was told that he would be covered by Medicare, with supplemental coverage from his insurance benefits as a retiree of Granite City Steel. William Lowry’s wife Helen was a member of the LHI plan through her employer, Dobbs International. As his wife’s dependent, Mr. Lowry was entitled to Blue Cross insurance under the LHI plan. On October 5, 1988, Helen Lowry went to Faith Hospital’s Admitting Office and updated the admission forms with this coverage information.

This same day a Faith Hospital employee called Blue Cross to verify Mr. Lowry’s insurance coverage. Upon obtaining assurance that Mr. Lowry was covered and that no pre-authorization was required, the Faith Hospital employee filled out an insurance verification form. Faith Hospital’s patient accounts manager, Rita Miller Sanders, reviewed the verification form, found it to be in order and returned it to the patient file.

On October 20, 1988, Rita Miller Sanders learned that LHI was involved. She called Blue Cross to determine the order in which to submit the billing; whether Medicare or Blue Cross should be made the primary coverage. A Blue Cross employee told Ms. Sanders that she could not determine which was primary and to contact LHI. Ms. Sanders called LHI and was told that the medical director, Dr. Howe, would have to review the claim, but nothing was mentioned by either party about pre-authorization.

[354]*354LHI’s business manager, Peter Sharami-taro, learned that Mr. Lowry was hospitalized. On October 24, 1988, Mr. Sharamita-ro wrote a memo to Dr. Howe inquiring what coverage should be made primary. Dr. Howe responded with a memo that Medicare should be primary, Granite City Steel secondary and LHI/Blue Cross would cover anything not already covered.

On January 16, 1989, Faith Hospital billed Blue Cross $160,150.60 for the care provided to William Lowry. Blue Cross contacted LHI’s business manager who responded in a letter to Blue Cross on March 8, 1989, denying the claim. Faith Hospital received a notice, dated March 17, 1989, that Blue Cross had rejected the bill. This letter cited rejection codes that signified that the care was not authorized by LHI.

Rita Miller Sanders called Blue Cross for an explanation of the rejection and was told that pre-authorization was not required. Ms. Sanders sent a letter confirming this phone conversation with Blue Cross. On March 28, 1989, a Blue Cross employee called in response to the letter from Ms. Sanders and confirmed that William Lowry was covered by insurance and that there was no pre-authorization. Blue Cross did not pay the bill and this law suit followed.

Faith Hospital filed suit against Blue Cross for breach of contract on November 20, 1989, in the Circuit Court of the City of St. Louis. On January 2, 1990, Blue Cross attempted to remove the case to the United States District Court for the Eastern District of Missouri. Blue Cross specifically asserted that the case involved a claim for benefits under an employee benefit plan and therefore was governed by ERISA.

On May 15, 1990, the federal district court granted Faith Hospital’s motion to remand on the grounds that this claim was not a federal ERISA claim, was not preempted by ERISA law and was, therefore, not removable from state court. The district court explained that Faith Hospital, a health care provider, was not a party “empowered by 29 U.S.C. § 1132 to bring any civil action under ERISA” and Faith Hospital had no cause of action which would be subject to the federal question jurisdiction of the federal court.

Upon remand of the case back to the state circuit court, Blue Cross filed a motion for summary judgment. On January 24, 1991, the trial court denied the motion for summary judgment and specifically rejected Blue Cross’ argument based on ERISA preemption. A jury trial commenced on January 16, 1992. The jury returned a verdict in favor of Faith Hospital and against Blue Cross in the amount of $157,380.00 on January 22, 1992.

The trial court entered judgment on the verdict. Blue Cross filed a motion for judgment notwithstanding the verdict, or in the alternative, for a new trial. Faith Hospital filed a motion to increase the jury award and enter judgment for Faith Hospital in the full amount of the bill, $160,-150.60, plus interest, $43,240.66. By its order of April 30, 1992, the trial court denied the motions of both parties. Blue Cross appeals seeking either reversal of the judgment based on ERISA preemption or a new trial based on the alleged error in the verdict director. Faith Hospital cross-appeals on the amount of damages awarded.

I. ERISA Preemption

The federal district court’s remand order determined that the federal court did not have original jurisdiction over Faith Hospital’s claims. The order concluded that Faith Hospital was not a proper party1 empowered to bring a civil action in federal court under ERISA.

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857 S.W.2d 352, 17 Employee Benefits Cas. (BNA) 2562, 1993 Mo. App. LEXIS 712, 1993 WL 158419, Counsel Stack Legal Research, https://law.counselstack.com/opinion/faith-hospital-assn-v-blue-cross-blue-shield-of-missouri-moctapp-1993.