Medical providers often have a patient/ERISA plan participant assign rights under an ERISA health care plan to allow the medical provider to seek payment for medical services provided.

But what if the patient/plan participant never was billed for the medical services? What rights are there to assign?

Is that an effective assignment?  YES.

Here’s the case of Univ. of Wisconsin Hospital and Clinics, Inc. v. Aetna Life Ins. Co., __ F.Supp. 2nd __, 2014 WL 2565284(W.D. Wis. June 6, 2014) (Derivative standing allows hospital to obtain reimbursement for medical services provided).

FACTS: ADP provided a health plan to employees, including James Vana. UW Hospital performed a heart catheterization for Vana, costing $14,000. Aetna paid $1,919 of the bill, but refused to pay the rest because Vana and the hospital failed to get precertification for the procedure.

Vana assigned his rights to reimbursement to UW Hospital, and the Hospital sued for reimbursement. Aetna argued: UW Hospital lacks standing to sue because Vana never received a bill.

ISSUE: Whether the hospital lacked standing to sue because the patient/plan participant never was billed for medical services, and thus had no rights to assign?

DISTRICT COURT HELD:  Assignment effective — hospital had “derivative standing.”

  1. UW Hospital had standing to sue. “[D]erivative standing. . .[furthers] the purposes of ERISA ‘to protect the interests of participants in employee benefit plans and their beneficiaries.’” Op. at 8-9.
  2. “If provider-assignees cannot sue the ERISA plan for payment, they will bill the participant or beneficiary directly for the insured medical bills, and the participant or beneficiary will be required to bring suit against the benefit plan when claims go unpaid.” Op. at 9 (citations omitted).
  3. “[P]roviders …are better situated and financed to pursue an action for benefits owed for their services [and] the interests of ERISA participants and beneficiaries are better served by allowing provider-assignees to sue ERISA plans.” Op. at 9 (citations omitted).
  4. Aetna’s denial of reimbursement was arbitrary and capricious because: (a) Vana would “plainly be entitled to benefits under the plan”; (b) Aetna failed to articulate “to UW Hospital a legitimate reason for its denial”; and (c) Aetna “interpreted its policy in an unreasonably contradictory manner.”  Op. at 10.