Opinion
CIVIL ACTION NO. 02-1335 SECTION "C"(3)
March 8, 2004
Before the Court are Plaintiffs Objections to the Magistrate Judge's Ruling (Rec. Doc. 69) and Defendants' Objections to the Magistrate Judge's Ruling (Rec. Doc. 76). After a thorough review of the law, the record, the Objections, and the memoranda filed in support thereof and in opposition thereto, Plaintiffs Objections to the Magistrate Judge's Ruling are DENIED and Defendants' Objections to the Magistrate Judge's Ruling are DENIED.
FACTUAL BACKGROUND
Plaintiff issues and administers group health plans that are governed by ERISA. Defendant provides polysomnography services to patients who are insured under the ERISA health plans issued and administered by Plaintiff. Plaintiff and Defendant do not have a contractual relationship between themselves. As such, Defendant is a non-participating provider whose services will be paid for by Plaintiff according to the reasonable and customary charge for the given region for which the health care provider is located. The services of participating providers, those health care providers who actually contract with Plaintiff, are paid at a different rate determined by contract.
Plaintiff claims that Defendant overcharged Plaintiff for the services Defendant provided to Plaintiff's insureds by unbundling. Polysomnography services consist of several individual components. Normally, according to Plaintiff, charges for polysomnography services should be billed at one set rate for the entire polysomnographic service. This one set rate is referred to as a bundle, and the process of billing only for these bundles is called bundling. Normally, according to Plaintiff, polysomnography services should be bundled and billed under the American Medical Association's CPT Manual Code Numbers 95810 and 95811. According to Plaintiff, Defendants billed Plaintiff for services provided to Plaintiffs insureds for each individual component of the polysomnography studies using Code Numbers representing the individual components rather than the Code Numbers representing the entire polysomnographic study. This process is referred to as unbundling, and, according to Plaintiff, entitles Plaintiff to damages in an amount close to three-quarters of a million dollars.
Accordingly, Plaintiff brought suit against the Defendant to recover for these alleged overcharges. Plaintiff alleges that Defendant intentionally and fraudulently misrepresented the actual services rendered and the total charge due and that Defendants were unjustly enriched by collecting the overcharges from Plaintiff. At about the same time as Plaintiff brought suit, Plaintiff began recalculating bills received from Defendant by bundling the unbundled charges and submitting payment only for what Plaintiff calculated the bundled portion to be. Accordingly, Defendant brought a counterclaim to recover the amount Plaintiff allegedly withheld from Defendant by recalculating the bills.
During the course of the litigation, Defendant made various requests for documents to Plaintiff. Defendant also requested that Plaintiff appoint a competent representative for Defendant to depose concerning various areas of inquiry. Plaintiff objected to many of these requests for documents and areas of inquiry and made a Motion to Quash and for a Protective Order heard by Magistrate Judge Knowles. On January 14, 2004, the Magistrate Judge denied Plaintiffs Motion to Quash and for a Protective Order. The Plaintiff appeals the Magistrate Judge's ruling. On January 15, 2004, Defendants deposed Plaintiffs corporate representative.
Before the Court could hear Plaintiff's Objections to the Magistrate Judge's Ruling, the Defendants filed a Motion to Compel to force Plaintiff to turn over more requested information. The Magistrate Judge denied in part the Defendants' Motion to Compel on February 9, 2004 on the grounds that the information requested was irrelevant. The Defendants, objecting to the Magistrate Judge's partial denial of their Motion, have appealed that decision. The Court expedited consideration of the Defendants' Objections to consider them at the same time it considered the Plaintiffs Objections to the January 14, 2004. Oral argument was heard on March 8, 2004.
The Magistrate Judge and the parties thought it appropriate to group the discovery requests according to the type of information sought and the specific objections to that information. Therefore, the Court will review the objections in a similar fashion.
STANDARD OF REVIEW
Before examining each area, it is necessary to examine the standard of review. A magistrate judge is afforded broad discretion in the resolution of non-dispositive pretrial matters. St. Paul Fire Marine Ins. Co. v. SSA Gulf Terminals, Inc., 2002 WL 31375611 (E.D. La. 2002). A district court may only reverse a magistrate judge's ruling where it finds the ruling to be "clearly erroneous or contrary to law." Fed.R.Civ.P. 72(a); Castillo v. Frank, 70 F.3d 382 (5th Cir. 1995). This highly deferential standard requires the court to affirm the decision of the magistrate judge unless on the entire evidence the court is left with a definite and firm conviction that a mistake has been committed. Benoit v. Nintendo of America, Inc., 2001 WL 1524510, at * 1 (E.D. La. 2001). This is a difficult standard to satisfy.
LAW AND ANALYSIS
Rule 26 of the Federal Rules of Civil Procedure provides, in pertinent part:
(b) Discovery Scope and Limits. Unless otherwise limited by order of the court in accordance with these rules, the scope of discovery is as follows:
(1) In General. Parties may obtain discovery regarding any matter, not privileged, that is relevant to the claim or defense of any party, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things and the identity and location of persons having knowledge of any discoverable matter. For good cause, the court may order discovery of any matter relevant to the subject matter involved in the action. Relevant information need not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. All discovery is subject to the limitations imposed by Rule 26(b)(2)(I), (ii), and (iii).
(2) Limitations. By order, the court may alter the limits in these rules on the number of depositions and interrogatories or the length of depositions under Rule 30. By order or local rule, the court may also limit the number of requests under Rule 36. The frequency or extent of use of the discovery methods otherwise permitted under these rules and by any local rule shall be limited by the court if it determines that: (I) the discovery sought is unreasonably cumulative or duplicative, or is obtainable from some other source that is more convenient, less burdensome, or less expensive; (ii) the party seeking discovery has had ample opportunity by discovery in the action to obtain the information sought; or (iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties1 resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues. The court may act upon its own initiative after reasonable notice or pursuant to a motion under Rule 26(c).
Also, before the Court begins to examine the objections, it is important to outline the claims and defenses that are relevant. The Magistrate Judge and both parties agree that the relevant inquiries in this case involve (1) whether Defendant improperly submitted unbundled claims to Plaintiff and (2) what is the reasonable and customary charge for a polysomnography study.
The scope of discovery determined by the pleadings (i.e., the claims and defenses of each party) is actually broader than the two inquiries listed by the parties and the Magistrate Judge. However, as each area is relevant to at least one of these topics, it is unnecessary to explore the claims and defenses of the parties in their entirety.
1) Plaintiffs Objection: Areas of Inquiry and Document Request Numbers 7, 8, 13-16
Area 1 concerns information related to whether and how Plaintiff made performance guarantees to its plan sponsors (i.e., the employers). Plaintiff contends that this information concerning the contracts entered into by Plaintiff, its insureds, and the plan sponsors is irrelevant because this case involves only the billing practices of Defendant. However, as the Magistrate Judge and Defendants correctly point out, this information is certainly relevant to develop Defendants' theory of the case that performance guarantees made by Plaintiff to plan sponsors prompted this lawsuit rather than Defendants' alleged over-billing. When negotiating with plan sponsors to provide third party administration services or its insured product, Plaintiff made contractual agreements regarding overall health care dollar savings it will guarantee to those plan sponsors. Whether these guarantees were made to plan sponsors for members that have claims at issue in this litigation is relevant to this litigation insofar as it may reveal Plaintiffs motivation in attempting to pay a significantly lesser amount than actually billed.
2) Plaintiffs Objection: Area of Inquiry and Document Requests Numbers I9and 25
Plaintiff has agreed to produce these documents but has not done so to date, according to Defendant. Defendant wants the Court to set a date when the documents must be produced. However, compelling the production of documents is within the realm of the Magistrate Judges and should be taken up with the Magistrate Judge by means of a Motion to Compel.
3) Plaintiffs Objections: Document Requests Numbers 5, 17, 20 and 22-24
Plaintiff argues that every document request in area 3, except document request 5, is irrelevant to the claims or defenses of the parties and that Document Request 20, 22, 23, and 24 are overly broad. However, each request deals with Defendants' theory that Plaintiff is challenging the charges not because they are unreasonable but because of guarantees made by Plaintiff to plan sponsors.
Document Request 5 seeks any and all documents evidencing Aetna's policy and/or practice of recognizing and/or reimbursing as a secondary payer. Although Plaintiff has appealed this Document Request, he has not given any reasons why he has appealed this request. As such, since he did not give any reasons for objecting to this request before the Magistrate Judge either, his objection is now and was then properly rejected.
Document Request 17 requests any and all documents evidencing the policy and/or practice of "flagging" a claim or provider for review of any HCFA 1500 submitted (the request includes specific document requests). Flagging refers to the practice of marking a claim or bill from a participating or non-participating provider as out of the ordinary. Depending on when Plaintiff flagged Defendants' charges, the information could provide credence to Defendants' theory that Plaintiff is challenging the charges not because they are unreasonable but because of guarantees made by Plaintiff to plan sponsors.
Document Request 20 requests any and all documents evidencing the methodology for developing the Explanation of Benefits for members, specifically including the policy, procedure and practice of advising the providers of any change in coding represented by the Explanation of Benefits. Again, this is relevant to Defendants' theory that Plaintiff is challenging the charges not because they are unreasonable but because of guarantees made by Plaintiff to plan sponsors. Defendants must be apprised of what promises Plaintiff actually made to providers and members (employees).
Document Request 22 requests any and all documents evidencing the policy and/or practice of transitioning (sic) and integrating Plaintiff acquired and/or merged affiliates to Plaintiffs billing and payment logic from January 1997 to the present. Again, this is relevant to Defendants' theory that Plaintiff is challenging the charges not because they are unreasonable but because of guarantees made by Plaintiff to plan sponsors, in this case, guarantees made by acquired and merged affiliates.
Document Request 23 seeks any and all documents evidencing the policy and/or practice of recovering overpayments to (1) Plaintiff regarding participating and non-participating providers and (2) management of disputes from Plaintiff regarding participating and non-participating providers. This is relevant to defendants' theory of the case.
Document Request 24 asks for any and all documents evidencing the policy and/or practice of establishing payment guidelines by plan sponsor and by product. Again, this is relevant to Defendants' theory that the payment guidelines or guarantees established by Plaintiff created pressure on Plaintiff to challenge Defendants' charges. This request is relevant to establish what is a reasonable and customary charge.
4) Plaintiffs Objection: Area 5: Document Requests Numbers 10, 11, 12 and 18
Request Number 10 seeks documents evidencing the policy and practice by Plaintiff of approving the use of an out-of-network provider. This information is relevant to establish if Plaintiff knew ahead of time what defendants' billing practices were and still approved them thereby lending credence to Defendants' assertion that their charges are reasonable and customary.
Requests Number 11 and 12 seek documentation related to whether Plaintiff has any agreements with its plan sponsors regarding payment of claims by non-participating providers. This information is certainly relevant to develop Defendants' theory of the case that performance guarantees made by Plaintiff to plan sponsors prompted this lawsuit rather than Defendants' alleged over-billing.
Request Number 18 seeks documentation related to the manner in which Plaintiff identifies claims that are not to be paid and the manner in which those claims are resolved. If Plaintiff properly identified Defendants' claims as properly payable earlier and only recently `changed its mind', then Plaintiff's allegations that Defendants' charges are not reasonable and customary are subject to some doubt.
5) Defendant's Objection to Interrogatory Number 4
Interrogatory Number 4 asked Plaintiff to provide the following information:
Please state the amount that Plaintiff paid to contracted providers for sleep diagnostic studies under the bundled codes that Plaintiff describes as appropriate for the services performed by the Total Sleep Entities from January 1, 1998 to the present in each of the jurisdictions where the Total Sleep Entities conducted business. For each payment, please identify the contracted provider, the address of the provider, the amount of the provider's claim, the code under which the claim was submitted, dates of service, the amount paid, and the code under which payment was made.
The Magistrate Judge refused to compel Plaintiff to answer Interrogatory Number 4 because Plaintiff was already in the process of providing adequate information in response to the January 14, 2004 Minute Entry that was relevant and sufficient.
Interrogatory Number 4 asks for information related to Contracted Providers. As stated earlier, Plaintiff and Defendants do not have a Contract. The Magistrate Judge concluded that the calculation of a negotiated price is affected by factors beyond what is simply a reasonable and customary charge for noncontractual services. The Magistrate Judge was not clearly wrong in making that distinction.
6) Plaintiff's Objection to Area of Inquiry and Corresponding Document Request Number 2 and Defendant's Objection to Requests for Production Numbers 9 and 11
The MagistrateJudge allowed Defendants to obtain discovery in the area Plaintiff now objects to, specifically, the Area of Inquiry and Corresponding Document Request No. 2. However, he denied discovery for Request for Production Number 9 and Request for Production Number 11. These requests are similar.
Area of Inquiry and Corresponding Document Request No. 2 seeks:
the nature and description of Plaintiffs methodology for provider contracting, including the determination of proposed negotiated reimbursement amounts for CPT codes 95810 and 95811 in participating provider contracts for the time period from January 1997 to the present, in the geographical regions where each of the defendant Total Sleep Diagnostic entities are located.
Request for Production Number 9 sought the following documents:
Please produce copies of any and all contracted reimbursements with each independent clinic and hospital for services covering the period from January 1, 1997 to the present.
Request for Production Number 11 sought the following documents:
Please provide any and all documentation evidencing the total number of sleep studies billed by providers other than the Total Sleep Entities, for the time period from January 1, 1997 to the present, that shows this data by year, state, provider type and product for amounts billed and paid.
This information does not implicate Defendants' theory that Plaintiff is challenging the charges not because they are unreasonable but because of guarantees made by Plaintiff to plan sponsors. Whether or not this information is relevant is determinable solely by the inquiry whether the amounts charged to Plaintiff by Contracting Providers is relevant to the reasonable and customary charge due to Plaintiff by Defendant.
Plaintiffs charges to Contracting Providers is based on a bulk rate that is negotiated ahead of time to facilitate a business relationship profitable because of the bulk of business done. If the Defendants were cognizant of the methodology (Request No. 2) considered by Plaintiff in provider contracting, the Defendants might be able to better discern what factors are used by Plaintiff to determine the reasonable and customary rate, since it is from that rate that Plaintiff must deviate to reach its rate for provider contracting. Schwartz v. Oxford Health Plans, Inc., 175 F. Supp.2d 581, 589-90 (S.D.N.Y. 2001).
The court cannot say, however, that the Magistrate Judge erred in deciding that the actual reimbursements and the actual documentation evidencing the number of sleep studies billed by providers other than the Defendants could not aid Plaintiff in determining the reasonable and customary rate. Even if the information were marginally relevant, discovery should still not be had because the burden and expense of the proposed discovery outweighs its likely benefit.
CONCLUSION
The Court is unable to say that the Magistrate Judge abused his discretion with respect to any of the rulings to which either Plaintiff or Defendants object. Accordingly, Plaintiffs Objections to the Magistrate Judge's Ruling are DENIED and Defendants' Objections to the Magistrate Judge's Ruling are DENIED.