The Fifth Circuit ruled that an out-of-network medical provider that was assigned a patient’s rights to health insurance benefits has standing to sue a health plan that underpays its portion of the benefits due even if the plan participant portion is paid in full.  North Cypress Medical Ctr. Operating Co., et al. v. Cigna Healthcare, et al., No. 12-20695 (5th Cir. Mar. 10, 2015). 

CIGNA and the CIGNA plan participants share the cost of out-of-network care, and to facilitate payment, many patients expressly assign their right to benefits under the CIGNA plan to North Cypress Medical Center.  For purposes of calculating the amount owed by participants, the hospital discounted the rate charged to participants.  The hospital did not discount the amount charged to the plan.  When CIGNA learned of the hospital’s practice, it started making its proportional payments to the hospital based on the discounted rates.

The hospital filed suit against CIGNA under ERISA for recovery of the balance.  The district court granted summary judgment in favor of CIGNA.  In its view, the hospital lacked standing because participants who assigned their rights to the hospital did not incur any out-of-pocket expenses since the hospital did not bill its patients for the amounts CIGNA did not pay.

The Fifth Circuit vacated the district court’s ruling.  It reasoned that participants have the right to be reimbursed by CIGNA for medical costs incurred at an out-of-network provider, and the fact that participants assigned that right to the hospital “does not cause [the right] to disappear.” As an express assignee of the patients’ rights, the hospital had standing to sue for underpayment of benefits.  According to the Court, any argument that the hospital’s billing and discounting practices reduces or eliminates CIGNA’s payment obligations under the terms of the plans is a merits-based contention that does not affect the hospital’s standing to sue. The Fifth Circuit instructed the district court to consider that issue on remand.