Dialysis facility’s breach of contract claims pre-empted

A medical facility that provided regular, life-sustaining dialysis treatments lost its appeal seeking to recover more than $1.5 million from its patients’ benefit plans when the Indiana Court of Appeals found the facility’s claims were pre-empted by the Employee Retirement Income Security Act.

FMS Nephrology Partners North Central Indiana Dialysis Centers provided between one to three years of dialysis for seven patients with benefit plans from Beacon Health System Group Benefit and Group-Union and Notre Dame CHA HMO, HMO and PPO.

In 2016, FMS filed a complaint of breach of contract and promissory estoppel against both the Beacon Health and Notre Dame plans, arguing they paid amounts relating to patient services that fell drastically short of the network rates previously agreed upon among the parties. Specifically, FMS targeted the plans’ claims administrator, Meritain, alleging its practices were improper when it ignored the network contracts and dictated payment rates. 

Upon FMS’ request for partial summary judgment, the plans filed for cross summary judgment asserting they were entitled to summary judgment against FMS’s claims due to their pre-emption under the ERISA. A trial court agreed, finding the appellees were entitled to summary judgment.

FMS then appealed the decision by arguing that the claims involved only contract and quasi-contract claims, which FMS asserted should be resolved in the state courts. It further indicated that it sought recovery damages under two non-ERISA-regulated contracts, rather than the Beacon or Notre Dame Plans, and that the trial court only should have considered the non-ERISA-regulated contracts to resolve its claims.

The Indiana Court of Appeals noted FMS’S claims were based on an alleged failure to pay sums due for services covered by an ERISA-regulated plan, similar to Midwest Sec. Life Ins. Co. v. Stroup, 730 N.E.2d 163, 165 (Ind. 2000) and Ray Klein, Inc. v. Board of Trustees of the Alaska Electrical Health & Welfare Fund, 307 F. Supp. 3d 984 (D. Alaska 2018). But it ultimately sided with the Beacon Health and Notre Dame plans, in FMS Nephrology Partners North Central Indiana Dialysis Centers, LLC v. Meritain Health, Inc., et al., 18A-PL-1349.

“Review of the parties’ arguments and designated evidence demonstrates that, despite FMS’s assertion to the contrary, the trial court would have had to refer to and interpret the Beacon and Notre Dame Plans to determine (1) whether proper payment had been rendered, and, (2) if not, how much additional payment FMS was entitled to receive,” Judge Cale Bradford wrote for the court.

“For each of the seven patients, designated evidence illustrates that questions remain as to FMS’s right to recover additional payment. Like the trial court, we do not believe that it is possible to adequately answer these remaining questions without referencing and interpreting the Beacon and Notre Dame Plans,” Bradford continued. “We therefore conclude that the trial court correctly determined that FMS’s claims against the Beacon and Notre Dame Appellees were preempted by ERISA.”

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