Meridian Treatment Services v. United Behavioral Health

Background

Plaintiffs Desert Cove Recovery, LLC, Meridian Treatment Center, Inc., and Hollywood Harmony, LLC are behavioral healthcare providers that provide substance-abuse and mental-health treatment. They alleged that United Behavioral Health formed oral or implied contracts with them when its employees verified benefits or obtained pre-authorization for treatment of United Behavioral Health’s insureds. Plaintiffs alleged that United Behavioral Health agreed during those calls to reimburse medically necessary services based on generally accepted standards of medical care, but later denied claims.

Plaintiffs also brought a promissory-estoppel claim and sought the value of covered claims that they said were wrongfully denied, using the payment methodology quoted during the relevant verification-of-benefits call. They asked the court to certify a class of providers with unreimbursed or under-reimbursed mental-health or substance-use-disorder claims denied by United Behavioral Health using its Guidelines between May 22, 2011, and January 31, 2019, involving insurance plans not subject to the Employee Retirement Income Security Act.

Class-Certification Standards

The court applied Federal Rule of Civil Procedure 23. Plaintiffs had to show that the proposed class satisfied Rule 23(a)’s requirements, including numerosity, common questions, typical claims, and adequate representation. They also had to satisfy at least one Rule 23(b) category. Under Rule 23(b)(3), relevant here, common legal or factual questions must predominate over individual questions, and a class action must be superior to other methods of resolving the dispute.

Court’s Analysis

The court concluded that Plaintiffs had not shown common questions capable of resolving the central issues for the class in one stroke. To prevail on their contract claims, Plaintiffs would have to prove mutual assent—an objective agreement shown by the parties’ words and conduct. To prevail on promissory estoppel, they would have to prove that United Behavioral Health made a clear and unambiguous promise.

Plaintiffs alleged that the contracts and promises were formed during verification-of-benefits and pre-authorization calls. The court found, however, that the evidence showed meaningful differences among those calls. The content of the calls could vary based on the individual member’s policy, the information provided was not necessarily a guarantee that services would be approved, and different facilities asked different questions or gathered different information. The court therefore concluded that a fact finder would need to examine individual calls to determine whether United Behavioral Health’s representatives signaled an intent to enter a transaction or made a clear and unambiguous promise.

The court also found that determining whether the Guidelines complied with generally accepted standards of medical care would require individualized inquiries into the reasons for particular denials. Plaintiffs had not shown that their claims were based on the same Guidelines or that the relevant Guidelines had been conclusively found more restrictive than generally accepted standards. They also had not shown that the patients’ insurance plans used a standard definition of medical necessity.

Finally, the court reasoned that Plaintiffs’ requested remedy would require deciding whether individual class members were actually entitled to benefits. That inquiry would involve the medical necessity of coverage and the specific terms of each member’s insurance plan. Those individualized liability issues would predominate over any common questions.

Disposition

The court denied Plaintiffs’ motion for class certification. It ordered the parties to appear for a further case-management conference on March 22, 2024, at 11:00 a.m., and to file an updated joint case-management-conference statement by March 15, 2024. Judge Jeffrey White signed the order.