Pacific Recovery Solutions v. Cigna Behavioral Health, Inc.

• Court: District Court, N.D. California
• Decided: February 16, 2021
• Docket: 5:20-cv-02251
• Status: Unknown

Opinion

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8 SAN JOSE DIVISION 9 PACIFIC RECOVERY SOLUTIONS, et al., 10 Case No. 5:20-cv-02251-EJD Plaintiffs, 11 ORDER DENYING MOTION TO v. CONSOLIDATE 12 CIGNA BEHAVIORAL HEALTH, INC., et Re: Dkt. No. 63 13 al., 14 Defendants.

15 This case is one of three related cases pending before the Court in which a Cigna entity is 16 alleged to have reneged on its agreement to reimburse mental health provider claims at the usual, 17 customary, and reasonable (“UCR”) rates. Cigna Behavioral Health, Inc. (“Cigna”) moves to 18 consolidate this case, hereinafter referred to as “Pacific Recovery,” with Summit Estate, Inc. v. 19 Cigna Health and Life Insurance Co., No. 20cv4697 EJD (“Summit”), pursuant to Federal Rule of 20 Civil Procedure 42(a). Dkt. No. 63. Plaintiffs in the Pacific Recovery case, Pacific Recovery 21 Solutions, Miriam Hamideh, Bridging the Gaps, Inc., and Summit Estate Inc. (“Plaintiffs”) filed 22 an opposition. Dkt. No. 65. Cigna filed a reply. Dkt. No. 68. The motion is scheduled for hearing 23 on February 11, 2021. The Court finds it appropriate to take the motion under submission for 24 decision without oral argument pursuant to Civil Local Rule 7-1(b) and General Order 72. For the 25 reasons stated below, the Court will deny Cigna’s motion. 26 27 1 I. BACKGROUND1 2 A. Summit, Case No. 20cv4697 3 Summit Estate, Inc. (“Summit”) initiated the Summit action against Cigna Health and Life 4 Insurance Company (“Cigna Health and Life”) in July of 2020. This lawsuit encompasses only the 5 claims and patients that were the subject of a prior lawsuit entitled Summit Estate v. Cigna, No. 6 17cv3871 LHK, that the parties agreed to dismiss, subject to a tolling agreement, so that they 7 could engage in efforts to reprocess medical insurance coverage claims for substance abuse 8 treatment for ten patients. Compl. ¶¶ 4-5. The Complaint alleges that within the past two years, 9 Summit took steps to verify available benefits for substance abuse for the patients and was advised 10 through telephone communications that Cigna Health and Life would pay for treatment at the 11 UCR rates. Id. ¶ 6. In reasonable reliance on Cigna Health and Life’s representations and 12 agreements, Summit provided services to the ten patients. Id. ¶ 7. Cigna Health and Life breached 13 their agreements by refusing to pay Summit at the UCR rates and paying instead a different and 14 significantly lower amount for treatment. Id. ¶ 8. Summit further alleges that at the time benefits 15 were verified, Cigna Health and Life was using and planning on using a third-party repricing 16 company to make unreasonably low claim payments and/or to negotiate lower claim payments 17 after the fact. Id. Based on the foregoing, Summit asserts claims for “Breach of Contract-Pre- 18 Admission Oral Agreement”; intentional misrepresentation; negligent misrepresentation; 19 fraudulent concealment; negligent failure to disclose; promissory estoppel; and breach of implied 20 contract. 21 B. Pacific Recovery, Case No. 20cv2251 22 Plaintiffs in Pacific Recovery are a group of four out-of-network behavioral health care 23 providers that provide Intensive Outpatient Program treatment (“IOP”) in the United States. 24 Compl. at 4, ¶¶ 67-70. Pacific Recovery Solutions d/b/a Westwind Recovery (“Westwind”), is 25 a California Limited Liability Company and a duly licensed behavioral health treatment provider 26

27 1 The Background is a brief summary of the allegations in the Summit and Pacific Recovery operative complaints. 1 with a primary place of business in Los Angeles, CA. Id. ¶ 68. Miriam Hamideh PhD Clinical 2 Psychologist Inc. d/b/a PCI Westlake Centers (“PCI Westlake”), is a California corporation and a 3 duly licensed behavioral health treatment provider with a primary place of business in Westlake 4 Village, CA. Id. ¶ 69. Bridging the Gaps, Inc. (“BTG”), is Virginia corporation and a duly licensed 5 behavioral health treatment provider with a primary place of business in Winchester, VA. Id. ¶ 70. 6 Summit Estate Inc. d/b/a Summit Estate Outpatient, is a California corporation and duly licensed 7 behavioral health treatment provider with a primary place of business in Saratoga, CA 95070. Id. ¶ 8 70. They seek to represent a class of similarly situated providers against Cigna, a Minnesota 9 corporation with its principal place of business in Eden Prairie, MN, and Viant, Inc. (“Viant”), a 10 third-party “repricer” incorporated in Nevada with its principle place of business in Naperville, IL. 11 Id. ¶¶ 1, 18, 71-72. 12 Prior to providing treatment to patients insured by Cigna, Plaintiffs confirmed with Cigna 13 during an initial Verification of Benefits (“VOB”) call that the patient had active coverage and 14 benefits for out of network IOP treatment services. Id. ¶¶ 3, 22, 30. For all the insurance claims at 15 issue, Cigna represented that the claims would be paid at a percentage of the UCR rates, which 16 Cigna would calculate by using either Cigna’s “Maximum Reimbursable Charge” (“MRC”) I or II 17 methodologies. Id. ¶¶ 9-12. Alternatively, Cigna would arrive at the UCR rates “based on rates 18 charged by similar providers in a similar geographic area.” Id. ¶ 12. During the VOB call, none of 19 the Plaintiffs were told by Cigna that their claims could be subject to third-party pricing by Viant. 20 Id. ¶ 36. Rather, Plaintiffs specifically asked and were told that a patient’s claims were not subject 21 to third party repricing. Id. ¶¶ 233-34. 22 In reliance upon Cigna’s representations, Plaintiffs agreed to treat Cigna’s insured and 23 timely submitted bills on industry standard forms and in keeping with industry practices. Id. ¶¶ 12, 24 140, 142. Pursuant to contract, patients were responsible for paying Plaintiffs the difference 25 between the amount Plaintiffs billed and the amount Cigna reimbursed. Id. ¶¶ 157, 161, 243. 26 Contrary to Cigna’s representations, Cigna did not pay at the UCR rates. Id. ¶ 18. Instead, 27 Cigna engaged Viant to negotiate reduced reimbursements with IOP treatment providers. Id. 1 Cigna sent claims to Viant via an Electronic Data Interchange (“EDI”), which included a “repriced 2 rate” that represented the maximum that Viant was authorized to negotiate with providers. Id. ¶ 3 112. After Viant received the EDI, it sent providers a proposed payment for claims at reduced 4 reimbursement rates. Id. ¶ 114. These reduced reimbursement rates are not derived from a 5 calculation of the UCR rates, notwithstanding Viant’s representations to the contrary. Id. ¶¶ 18, 6 46, 116. Nor are they set based on the insured’s plan terms or language. Id. ¶¶ 43-44. Rather, 7 Plaintiffs allege on information and belief that the reduced reimbursement rates represent the 8 lowest payment amount that a Viant representative convinced a provider to accept and are 9 “arbitrary, capricious and unreasonably low.” Id. ¶¶ 97, 117. At no point have Cigna or Viant 10 disclosed their pricing methodologies. Id. ¶¶ 175, 246. Viant only tells Plaintiffs that pricing is 11 determined by a “proprietary database.” Id. ¶ 254-55. 12 At the time Viant made its offers to Plaintiffs, it also sent a “patient advocacy letter” 13 (“PAD” letter) to the patient, claiming to represent the patient in a negotiation to reduce the billed 14 amount. Id. ¶ 118. Viant, however, does not have patient authorization to negotiate billed charges 15 on behalf of patients. Id. ¶ 235. 16 Cigna then paid the claims at issue at the reduced Viant rate, which often resulted in 17 patients left to pay for more than ninety percent of their care. Id. ¶ 19. Cigna and Viant allegedly 18 “collude[d] to illegally withhold these out-of-network benefits” to avoid paying tens, and 19 sometimes hundreds, of thousands of dollars per patient and to drive out-of-network providers out 20 of business. Id. ¶¶ 20, 41. The amounts that should have been paid to health care providers were 21 allegedly unjustly retained and used to pay a “kick-back” to Viant. Id. ¶ 20. 22 Every claim at issue in Pacific Recovery is for IOP behavioral health treatment for which 23 Cigna failed to pay at the UCR rates. Id. ¶¶ 21, 164. Coverage for the underlying medical 24 treatment is not in dispute; only the amount to be paid for the covered treatment is in dispute. Id. ¶ 25 32. Plaintiffs do not have contractual relationships with Cigna or Viant. Id. ¶¶ 87, 94. Plaintiffs 26 did not agree to the reduced rates arrived at by Viant. Id. ¶¶ 19, 152-53, 241. When Plaintiffs or 27 patients contacted Cigna to dispute or challenge Viant’s reimbursement rates, Cigna refused to 1 handle or process the claim. Id. ¶ 120. Plaintiffs ultimately had no choice but to “balance bill” 2 their patients for the amounts that they were owed as a result of Cigna’s underpayment. Id. ¶ 161. 3 If Plaintiffs did not “balance bill,” Cigna would assert that Plaintiffs waived patient responsibility 4 and therefore, Cigna had no further obligation to pay any additional amounts on claims. Id. ¶ 247- 5 48, 259. For all the claims at issue in Pacific Recovery, Plaintiffs’ patients were unable to pay 6 Cigna’s shortfall. Id. ¶ 181. 7 Westwind has treated more than 10 patients for whom claims for payment of IOP 8 services were repriced by Viant. Id. ¶ 194. Viant’s repricing resulted in partial payments that, in 9 sum, averaged only 11% of billed charges. Id. ¶ 197. Westwind has not been paid the remaining 10 89% of the billed amounts owed. Id. Westwind estimates that it has been underpaid by at least 11 $177,317.45. Id. ¶ 198. 12 PCI Westlake has treated more than 9 Cigna patients for whom claims for payment of IOP 13 services were repriced by Viant. Id. ¶ 201. Viant’s pricing resulted in partial payments that, in 14 sum, averaged only 14% of billed charges. Id. ¶ 204. PCI Westlake has not been paid the 15 remaining 86% of the billed amounts owed. Id. PCI Westlake estimates that it has been underpaid 16 by at least $238,108.22. Id. ¶ 205. 17 BTG has treated more than 21 patients for whom claims for payment of IOP services were 18 repriced by Viant. Id. ¶ 208. Viant’s pricing resulted in partial payments that, in sum, averaged 19 only 14% of billed charges. Id. ¶ 211. BTG has not been paid the remaining 86% of the billed 20 amounts owed. Id. BTG estimates that it has been underpaid by at least $736,998.47. Id. ¶ 212. 21 Summit Estate Inc. d/b/a Summit Estate Outpatient has treated more than 10 Cigna patients 22 for whom claims for payment of IOP services were repriced by Viant. Id. ¶ 215. Viant’s pricing 23 resulted in partial payments that, in sum, averaged only 15% of billed charges. Id. ¶ 218. Summit 24 has not been paid the remaining 85% of the billed amounts owed. Id. Summit Estate Inc. d/b/a 25 Summit Estate Outpatient estimates that it has been underpaid by at least $325,000.00. Id. ¶ 219.2 26

27 2 The Complaint alleges that Summit Estate Inc. d/b/a Summit Estate Outpatient has been “overpaid” by at least $325,000.00. Id. ¶ 219. The Court assumes that “overpaid” is a 1 Based on the foregoing, Plaintiffs assert the following claims: (1) unfair and unlawful 2 business acts and practices in violation of California Business & Professions Code § 17200 against 3 Cigna (id. ¶¶ 261-69) and Viant (id. ¶¶ 270-78); (2) intentional misrepresentation and fraudulent 4 inducement against Cigna and Viant (id. ¶¶ 279-94); (3) negligent misrepresentation against Cigna 5 and Viant (id. ¶¶ 295-301); (4) civil conspiracy against Cigna and Viant (id. ¶¶ 302-14): (5) breach 6 of oral and/or implied contract against Cigna (id. ¶¶ 315-35); (6) promissory estoppel against 7 Cigna and Viant (id. ¶¶ 336- 49); (7) violations of the Racketeer Influenced and Corrupt 8 Organizations Act (“RICO”) against Cigna and Viant (id. ¶¶ 350-95); and (8) violations of section 9 1 of the Sherman Act against Cigna and Viant (id. ¶396-415). 10 II. STANDARDS 11 “If actions before the court involve a common question of law or fact, the court may . . . 12 consolidate the actions.” Fed. R. Civ. P. 42(a)(2). District courts have broad discretion under this 13 rule to consolidate cases pending in the same district. Investors Research Co. v. U.S. Dist. Court 14 for Cent. Dist. of Cal., 877 F.2d 777, 777 (9th Cir. 1989). In deciding whether consolidation is 15 appropriate under Rule 42(a), the court must “weigh[ ] the saving of time and effort consolidation 16 would produce against any inconvenience, delay, or expense that it would cause.” Huene v. United 17 States, 743 F.2d 703, 704 (9th Cir. 1984). The party seeking consolidation bears the burden to 18 show that consolidation is desirable. See DMF, Inc. v. AMP Plus, Inc., 2019 WL 9077477, at *6 19 (C.D. Cal. Dec. 13, 2019). 20 III. DISCUSSION 21 The two suits share a common issue, i.e., whether Cigna failed to abide by its agreement to 22 pay at the UCR rates. The existence of common issues, however, does not compel consolidation. 23 Dodaro v. Standard Pac. Corp., 2009 WL 10673229, at *3 (C.D. Cal. Nov. 16, 2009). Beyond this 24 common issue, the two cases involve significant differences in fact and law such that 25 consolidation of the cases would be unduly prejudicial to plaintiff in Summit. First, although both 26

27 typographical error. 1 cases involve a Summit entity3 and a Cigna-affiliated entity, Summit is an individual action and 2 Pacific Recovery is a putative class action suit. In Summit, a single plaintiff healthcare provider, 3 Summit, seeks compensation for services rendered to ten patients. In Pacific Recovery, a group of 4 four healthcare providers collectively seek compensation for services rendered to at least sixty 5 patients and propose to represent an unknown number of “similarly situated out-of-network 6 behavioral health providers” that provide IOP in the United States. Dkt. No. 6 at 4. Thus, the two 7 suits clearly involve different provider plaintiffs and different patients. Moreover, Viant is a 8 named defendant in Pacific Recovery, but not in Summit. These differences alone suggest that 9 Pacific Recovery is likely to be far more expansive, expensive, and time-consuming than Summit, 10 which weighs against consolidation. 11 Second, the two suits involve different treatment. The Summit insurance claims are mainly 12 for Residential and Partial Hospitalization treatment, with only a small percentage of Intensive 13 Outpatient claims remaining because Cigna has already investigated, litigated and negotiated 14 certain Intensive Outpatient claims with Summit. Opp’n at 3. In contrast, the Pacific Recovery 15 insurance claims are exclusively for IOT. The differences in the parties and the services at issue 16 will impact the nature and scope of discovery such that consolidation is likely to lead to 17 inconvenience and delay for the relatively smaller Summit case rather than promote efficiencies. 18 Third, the two suits involve different time frames. In Summit, the insurance claims are for 19 treatment provided between September of 2014 and August of 2017. The complaint in Pacific 20 Recovery does not define a class period. Thus, Summit is confined to a relatively manageable 21 period of three years, whereas Pacific Recovery has no time limitation at all. A different time 22 period alone may not necessarily weigh against consolidation. See Medina v. Mealing, 2006 WL 23 8443382, at *2 (N.D. Cal. Feb. 2, 2006) (consolidating two cases with common questions of law 24

25 3 In Summit, Summit Estate, Inc. is the plaintiff. In Pacific Recovery, Summit Estate Inc. d/b/a Summit Estate Outpatient is one of four plaintiffs. Summit Estate Inc. d/b/a Summit Estate 26 Outpatient represents that the two entities “are, functionally, predecessor and successor entities and are distinct companies.” Opp’n at 2. The management and ownership of the successor is 27 different from the predecessor. Id. at 4. Further, the predecessor entity is not accredited by the Joint Commission, where as the successor is. Id. at 2. 1 and fact, even though the lawsuits each covered a different time period). Here, however, the 2 different time period for each case is one of several other differences between Summit and Pacific 3 Recovery that weigh against consolidation. 4 Fourth, although the two cases involve a number of the same legal claims, Pacific 5 Recovery includes much more expansive claims for violations of RICO, the Sherman Act, and 6 civil conspiracy. These additional claims may increase the scope of discovery and motion practice 7 in Pacific Recovery far beyond what is required for Summit. Cigna argues that the differences in 8 claims does not matter because they all rely on the same factual predicates, and further asserts that 9 the Court need find only one issue of law or fact in common to permit consolidation, citing Power 10 Integrations, Inc. v. Chan-Woong Park, 2019 WL 119969, at *2 (N.D. Cal. Jan. 7, 2019). In 11 Power Integrations, however, the parties were identical and there was a substantial overlap of 12 underlying facts. Unlike Power Integrations, the two cases before this Court do not involve 13 identical parties or a substantial overlap of underlying facts mainly because Pacific Recovery 14 includes expansive claims against Viant that are not present in Summit. Cigna’s reliance on 15 Hutchens v. Alameda County Social Servs. Agency, 2008 WL 927899, at *2 (N.D. Cal. Apr. 4, 16 2008) is also misplaced. In Hutchens, the motion to consolidate was unopposed. 17 The different procedural posture of each case also weighs against consolidation, even 18 though the two cases are at the pleading stage. This is because the parties in Summit were involved 19 in an earlier filed suit, engaged in settlement discussions, and then discovery, followed by 20 mediation. Eventually the parties in Summit agreed to a dismissal without prejudice so that the 21 parties could attempt to negotiate a resolution. Previous versions of the Summit complaint have 22 already been subject to two motions to dismiss, and the operative Summit complaint now consists 23 of only those claims that survived. In contrast, the Pacific Recovery complaint is the subject 24 separate motions to dismiss by Cigna and Viant. Because Summit has progressed farther than 25 Pacific Recovery, consolidation is likely to produce inconvenience, delay and expense to plaintiff 26 in the Summit case. 27 The Court recognizes that there is a potential for inconsistent judgments, particularly as to 1 the Summit entities’ reimbursement claims for IOP treatment. Consolidation of Summit and 2 Pacific Recovery, however, is not the answer because the Summit entities’ reimbursement claims 3 || for IOP treatment represent only a small fraction of the total claims at issue in the two cases. 4 || Further, the insurance claims at issue in Summit are mainly for Residential and Partial 5 Hospitalization treatment and therefore, may raise factual issues not present in Pacific Recovery. 6 || Thus, consolidation for all purposes is not appropriate. See Hughes v. Experian Info. Sols., Inc., 7 2017 WL 975969, at *2 (N.D. Cal. Mar. 13, 2017) (declining to consolidate for all purposes where 8 || the merits of each plaintiff's case could potentially turn on case-specific facts). 9 |} IV. CONCLUSION 10 The Cigna entities have not carried their burden of showing that consolidation of Summit 11 and Pacific Recovery “will aid in the efficient and economic disposition of the case.” Klauber 12 Bros., Inc. v. Forever 21 Retail, Inc., 2015 WL 12720307, at *2 (C.D. Cal. Apr. 9, 2015). The 13 motion to consolidate the cases for all purposes is DENIED. IT IS SO ORDERED. 3 15 Dated: February 16, 2021 eV. EDWARD J. DAVILA 17 United States District Judge 18 19 20 21 22 23 24 25 26 27 28 || Case No.: 5:20-cv-02251-EJD ORDER DENYING MOTION TO CONSOLIDATE