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LLC v. Right Choice Managed Care

United States Court of Appeals, Eighth Circuit

April 26, 2016

32nd Street Surgery Center, LLC Plaintiff- Appellant
Right Choice Managed Care; HMO Missouri, Inc. Defendants-Appellees

Submitted: November 18, 2015

Appeal from United States District Court for the Western District of Missouri - Joplin

Before COLLOTON, GRUENDER, and SHEPHERD, Circuit Judges.

GRUENDER, Circuit Judge.

32nd Street Surgery Center, LLC ("32nd Street") sued insurance provider HMO Missouri, Inc. and administrator RightCHOICE Managed Care, Inc. (collectively, "insurers")[1] for quantum meruit, unjust enrichment, vexatious refusal to pay an insurance claim, and injunctive relief arising out of medical services provided to the insurers' insureds. The district court[2] granted the insurers' motion for summary judgment and denied 32nd Street's motion to compel discovery. 32nd Street now appeals. We affirm.


The insurers issue health insurance policies to groups and individuals. These policies establish the method and rates for the reimbursement of insureds' medical claims. All of the insurers' policies contain essentially the same language regarding the maximum allowable amount at which the insurers will reimburse claims, with the amount differing only as between network providers and non-network providers. A network provider is a medical-service provider who has negotiated a contract to participate in one or more of an insurer's coverage networks, while a non-network provider does not have such a contract. The benefits of participating in an insurer's networks include increased patient volume and marketing and promotion by the insurer. In exchange for these benefits, a network provider generally agrees to receive discounted reimbursement rates.

In the relevant geographical area, the in surers offer six different networks: Blue Access, Blue Access Choice, Blue Preferred/Blue Preferred Plus, Blue Traditional, Medicare Advantage HMO, and Medicare Advantage PPO. When an insured receives services from a non-network provider, the insurers reimburse the insured directly. However, when a service provider is a network provider, the insurers reimburse the provider directly, pursuant to the network-provider contract.

Medical-service provider 32nd Street has operated as an outpatient ambulatory surgical center in Joplin, Missouri since July 2008. Until May 22, 2011, 32nd Street was a non-network provider with respect to the insurers. During that time, the insurers reimbursed their insureds directly for services provided by 32nd Street according to the maximum allowable amount in each insured's policy. On May 22, 2011, 32nd Street entered into an ancillary-provider agreement with the insurers to become a network provider. The agreement defines a network provider as "a provider who [insurer] has designated to participate in one or more Networks . . . as designated on the signature page and/or the Plan Compensation Schedule." The signature page of the ancillary-provider agreement provides that 32nd Street "will be designated as a Network Provider in the following Programs: . . . Blue Traditional." Central to the current dispute, the agreement also contains an out-of-network-compensation provision, specifying the compensation that applies when an ancillary service provider renders services to insureds who belong to any of the insurers' networks for which the provider is not a network provider.

After 32nd Street joined the Blue Traditional network pursuant to the ancillary-provider agreement, the insurers began to pay 32nd Street directly. The insurers paid 32nd Street the maximum allowable amount at the Blue Traditional rate, even for non-Blue-Traditional insureds' claims. 32nd Street, believing that it was entitled to receive "reasonable rates" and that the Blue Traditional rates were not reasonable, responded by using the insurers' appeals system to appeal every claim in which the insurers paid Blue Traditional rates for insureds belonging to non-Blue-Traditional networks. When these appeals proved unsuccessful, 32nd Street responded by filing this action in federal district court in December 2012.

In its complaint, 32nd Street asserted seven counts: (1) breach of reimbursement obligations pursuant to 29 U.S.C. § 1132, (2) quantum meruit, (3) unjust enrichment, (4) breach of contract – breach of duty of good faith and fair dealing, (5) declaratory judgment, (6) injunctive relief, and (7) vexatious refusal. The district court granted the insurers' motion to dismiss with respect to the breach-of-reimbursement-obligation, breach-of-contract, and declaratory-judgment claims. After discovery, the insurers moved for summary judgment as to the remaining counts, while 32nd Street filed a motion to compel the insurers to produce data and work papers from 2003, 2008, and 2012 and to produce memoranda from 2003, 2005, 2008, and 2012. 32nd Street asserted that these documents were relevant to uncovering the methodologies the insurers used to determine the maximum-allowable rates for out-of-network providers. The court denied the motion to compel, finding the 2003, 2008, and 2012 documents irrelevant and the 2005 memorandum protected by attorney-client privilege. The court also granted the insurers' motion for summary judgment on the claims of quantum meruit, unjust enrichment, vexatious refusal, and injunctive relief. 32nd Street now appeals.


We review de novo a district court's grant of summary judgment. Evance v. Trumann Health Servs., LLC, 719 F.3d 673, 677 (8th Cir. 2013). Summary judgment is appropriate only when, viewing the facts in the light most favorable to the nonmoving party, there is no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Raines v. Safeco Ins. Co. of Am., 637 F.3d 872, 874 (8th Cir. 2011).

The district court found that contracts governed the rates at which the insurers were obligated to reimburse services 32nd Street rendered to insureds both before and after the ancillary-provider agreement. The court concluded that, before the ancillary-provider agreement, the insurance policies established the rate at which the insurers would reimburse their insureds' claims. Later, the ancillary-provider agreement set forth the maximum rates at which 32nd Street would be reimbursed for services provided to all insureds covered by the insurers, not only Blue Traditional insureds. The district court found that, through the ancillary-provider agreement, 32nd Street had agreed to accept reimbursement at the Blue Traditional rate even when the insureds belonged to one of the insurers' other networks. The district court concluded that these express contracts barred 32nd Street's quantum meruit and unjust enrichment claims. Similarly, the court concluded that 32nd Street's vexatious-refusal claim failed because the insurers had paid the amounts due under those contracts. Finally, the court found that, because 32nd Street did not go into business until 2008 and because the 2011 ancillary-provider agreement controlled how the insurers reimbursed 32nd Street for claims of insureds from both the Blue Traditional and the insurers' other networks, all the work papers and memoranda 32nd ...

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