On Monday, Judge Edward J. Davila signed an order granting Cigna Behavioral Health Inc.’s and Viant Inc.’s motions to dismiss one of three similar cases pending before the Northern District of California. The plaintiffs, four out-of-network (OON) mental health care providers, alleged that Cigna and Viant colluded to illegally withhold benefit payments to avoid remunerating tens, and sometimes hundreds, of thousands of dollars per patient and to drive OON providers like themselves out of business.
The opinion explained that the plaintiffs provide intensive outpatient program treatment to individuals, namely recovering drug addicts and mentally ill persons, some of who are insured by Cigna. Allegedly and per the plaintiffs’ agreements with Cigna, the care facilities are meant to be reimbursed at the usual, customary, and reasonable (UCR) rate for services rendered to Cigna members. However, the plaintiffs alleged that Cigna did not honor its commitment to reimburse at the UCR rate, but instead contracted with defendant Viant, a third-party “repricer,” that handled the plaintiffs’ benefit claims on Cigna’s behalf.
Viant reportedly repriced the plaintiffs’ claims and offered them “the lowest payment amount that a Viant representative convinced a provider to accept.” This allegedly left patients to pay the remaining balance, which was often upwards of 80% of the treatment cost. Purportedly, and because the patients were unable to pay, the defendants’ actions saddled each of the plaintiffs with six-figure unpaid balances.
In their first complaint, the plaintiffs brought a breach of contract claim against Cigna and against both defendants, a Racketeer Influenced and Corrupt Organizations Act (RICO), a Sherman Act, and other state and common law business tort claims.
The court first ruled that the treatment providers’ state law claims were preempted by the Employee Retirement Income Security Act of 1974 (ERISA). Judge Davila reasoned that because the claims depended upon ERISA healthcare plans and their terms, they were sufficiently “related” thereto, and thus barred by the doctrine of conflict preemption.
As to the plaintiffs’ RICO claim, the court found several flaws that undermined its viability. First, it held that the plaintiffs lacked standing, and second, that they did not suffer direct harm because theirs was derivative of their patients’ injury.
The court then turned to the plaintiffs’ Sherman Act claim. It held that because the defendants are not competitors, the claim’s pleading deficiencies could not “‘possibly be cured by the allegation of other facts.’” Judge Davila then dismissed the antitrust claim with prejudice, unlike the others, which he permitted the plaintiffs to amend by Apr. 19.
The plaintiffs are represented by Napoli Shkolnik PLLC and DL Law Group. Cigna is represented by McDermott Will & Emery LLP, and Viant by Phelps Dunbar LLP and Sheppard, Mullin, Richter & Hampton.
