Third Cir. Holds Hospitals May Sue Health Insurers Directly

Before September 11 the Third Circuit Court of Appeals had been out of step with its sister federal circuits when it came to the right of hospitals, physicians and other health providers to sue health insurers that failed to cover patient obligations.

So back in 2014 when North Jersey Brain & Spine Center sued Aetna for failing to cover the medical bills of three of its insured patients, the District Court dismissed the case.  The court’s reasoning rested on the distinction between assignment of a patient’s right to payment, which is what the Spine Center received, and assignment of a legal claim or right to sue, which in the court’s view the Center did not have.  In other words, the court required that the assignment document—typically, part of the admission packet—include the words “legal claim” or “right to sue.”

But on September 11 the Third Circuit reversed the dismissal and reinstated the case.  In the court’s view, the lower court was relying on a distinction without a difference.  To mean anything to a provider, an assignment of payment must carry with it an implicit assignment of the right to sue the insurer.  Otherwise, a provider couldn’t have the confidence necessary to proceed with treatment of the patient.  Besides, providers are almost invariably in a better position than patients to pursue legal claims against insurance companies.

The case is North Jersey Brain & Spine v. Aetna, No. 2-13-cv-05286 (3d Cir. 2015).

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