Date: 10-25-2013

Case Style: Tulsa Specialty Hospital LLC DBA Kindred Hospital Tulsa v. Boilermakers National Health and Welfare Fund

Case Number: CJ-2012-1662

Judge: Rebecca B. Nightingale

Court: District Court, Tulsa County, Oklahoma

Plaintiff's Attorney: Timothy L. Martin, Andrainne J. Simon

Defendant's Attorney: Steven R. Hickman, Charles R. Schwartz and Jason R. McClitis for Boilermakers National Health and Welfare Fund

Marjorie Cohen and Linda Patricia Wills for Connecticut General Corporation

Description: Tulsa Specialty Hospital LLC DBA Kindred Hospital Tulsa sued Boilermakers National Health and Welfare Fund on a fraud theory claiming:

1. This action arises out of the Fund’s misrepresentations to Kindred Hospital regarding the availability of insurance coverage for one of Kindred Hospital’s patients.

2. In reliance on the Fund’s verification of coverage and pre-authorization of the services to be provided to one of its subscribers (referred to herein only as the “Subscriber” for purposes of patient confidentiality), Kindred Hospital admitted the Subscriber into its facility and provided the Subscriber with medical care and treatment for over six months.

3. Despite the Fund’s verification of insurance coverage and pre-authorization of treatment to be provided by Kindred Hospital, it has not paid Kindred Hospital any amounts whatsoever for the services provided in good faith to the Subscriber.

4. As a result of the Fund’s misrepresentations, Kindred Hospital has sustained damages in an amount exceeding $700,000.

THE PARTIES

5. Plaintiff Kindred Hospital is a limited liability company organized and existing under the laws of the State of Delaware doing business at 3219 South 79th EastAvenue, Tulsa, Oklahoma, 74145.

6. Upon information and belief, the Fund is an employee welfare benefit plan organized and existing under the provisions of ERISA, 29 U.S.C. § 1001-1461, with its principal place of business located in Kansas City, Kansas.

VENUE AND IURISDICTION

7. This Court has jurisdiction overthe parties and subject matter pursuantto Article VII, Section 7, Oklahoma Constitution.

8. Pursuantto Article IX, Section 43, Oklahoma Constitution, andTitlel8, Section 471, Oklahoma Statutes, venue is proper in Tulsa County, Oklahoma, insofar as Kindred Hospital’s principal place of business is located, and the causes of action accrued, at 3219 South 79th East Avenue, Tulsa, Oklahoma, 74145.

FACTUAL BACKCROIJND

9. From April 28, 2010, to November 8, 2010, the Subscriber was a patient at Kindred Hospital. Prior to the Subscriber’s admission, on April 23, 2010, Regina of Kindred Hospital contacted the Fund’s agent and third-party administrator, Cigna Corporation (“Cigna”), to verify insurance coverage for the Subscriber. On the Fund’s behalf, a Cigna representative named Heather confirmed that the Subscriber was eligible for coverage, and that Kindred Hospital would receive 100 percent of the rate set forth in the contract between Kindred Hospital and Cigna, given that the deductible and out-of-pocket maximum had been met.

10. As directed by Cigna, Kindred Hospital then contacted Cigna’s case management department for pre-authorization of the services to be provided. A Cigna representative, Sue Bowers, authorized the services to be provided to the Subscriber.

11. In reliance on the representations of coverage made by the Fund’s agent, Kindred Hospital admitted the Subscriberand provided him with care and treatment. Kindred Hospital thereafter faxed medical updates to Ms. Bowers on an ongoing basis. In response, Ms. Bowers continuously authorized the services being provided.

12. On June 24, 2010, Ms. Bowers approved the Subscriber for another seven days of coverage, but stated that a discharge plan needed to be in place byJune 30. On June 29, 2010, Ms. Bowers advised Kindred Hospital that the Subscriber had exhausted his coverage as of June 14, and that she was closing her file. Kindred Hospital was unable to safely discharge the Subscriber at that time, as his condition was unstable and no safe discharge option was available.

13. Based on the representations of coverage and payment made by the Fund’s agent, Kindred Hospital billed the Fund for the care and treatment provided to the Subscriber, a total of $723,318.74.

14. When Kindred Hospital did not receive timely payment of its billed charges, it contacted Cigna, the Fund’s agent and third-party administrator, to request payment. Sheryl Cappa of Cigna responded to this request on August 8, 2011, notifying Kindred Hospital that Cigna had repriced Kindred Hospital’s claim to allow 194 days at the contractual per diem rate, andthattheclaim had been senttothe Fund forpayment. Ms. Cappafurtherstatedthat Kindred Hospital should contact the Fund regarding any failure to pay its claims.

15. On August 8, 2011, Kindred Hospital contacted the Fund and requested payment of its claims as authorized by the Fund’s third-party administrator. In response, the Fund claimed that the Subscriber’s coverage had terminated as of July 21, 2010, and that the Subscriber’s lifetime maximum had been exhausted by the time the Fund received Kindred Hospital’s claims. The Fund refused, however, to provide Kindred Hospital with any documentation to support these assertions.

16. To date, Kindred Hospital has not been paid a dime for the services it rendered to the Subscriber in good faith from April 28, 2010 to November 8, 2010.

COUNT I - FRAU DUIINT MISREPRESENTATION

17. Kindred Hospital repeats and realleges the allegations contained in paragraphs 1 through 16, inclusive, and incorporates the same as though set forth in full.

18. Priorto the time thatthe Subscriber was admitted into Kindred Hospital, Kindred Hospital contacted the Fund, through its agent and third-party administrator, to verify coverage.

19. The Fund’s agent verified that the Subscriberwas eligiblefor insurance coverage and that Kindred Hospital would receive 100 percent of the contract rate for providing care and treatment to the Subscriber. The Fund’s agent also continuously authorized the services provided by Kindred Hospital to the Subscriber.

20. Based upon the representations of the Fund, Kindred Hospital admitted the Subscriber into its facility and provided the Subscriber with medical care and treatment.

21. If the Fund’s stated basis for denial of payment is correct, the Fund’s representations were false, and, on information and belief, the Fund knew that they were false or was recklessly indifferent to their falsity at the time they were made. Kindred Hospital is informed and believes, and on that basis alleges, that the Fund at all times intended to manufacture an excuse designed to reduce, delay, and/or deny payment to Kindred Hospital.

22, Kindred Hospital is informed and believes, and on that basis alleges, that the Fund, through its agent, verified, pre-authorized, and continuously authorized coverage so that Kindred Hospital would provide care and treatment to the Subscriber and with the intent that Kindred Hospital would rely upon the misrepresentations to its detriment.

23. In reliance on the Fund’s misrepresentations, Kindred Hospital provided the Subscriber with care and treatment. Kindred Hospital’s reliance was justifiable, insofar as the Fund verified coverage and did not contend that the Subscriber did not actually have insurance coverage until after the Subscriber’s discharge.

24. Kindred Hospital did not and could not have known of the falsity of the Fund’s representations, and it would not have admitted the Subscriber had it known that the Fund had misrepresented and concealed these and other facts.

25, As a direct and proximate result of the Fund’s fraudulent representations, Kindred Hospital has suffered damages in an amount exceeding $700,000, insofar as, among other things, it provided care and services to the Subscriber for which it has not been compensated, was deprived of interest income on those amounts during this period of nonpayment, and lost opportunity costs associated with its treatment of the Subscriber rather than other patients.

26. The Fund has acted fraudulently and with a conscious disregard of the rights of Kindred Hospital by making the foregoing misrepresentations and concealing material facts. Kindred Hospital will upon further proffer seek exemplary and punitive damages from the Fund.

WHEREFORE, Kindred Hospital prays for an Order of this Court awarding it fair and reasonable damages against the Fund in an amount exceeding $700,000 to be proven at trial, all pre-judgment and post-judgment interest on the above amounts at the maximum rate permitted by law, for its costs and attorneys’ fees incurred herein to the extent permitted by law, and for such other and further relief as the Court deems just and proper.

COUNT II - NEGLIGENT MISREPRESENTATION

27. Kindred Hospital repeats and realleges the allegations contained in paragraphs 1 through 16, inclusive, and incorporates the same as though set forth in full.

28, Priorto the time thatthe Subscriberwas admitted into Kindred Hospital, Kindred Hospital contacted the Fund, through its agent and third-party administrator, to verify coverage.

29. The Fund’s agent provided Kindred Hospital with verification of insurance coverage, as well as continuing authorizations for services provided to the Subscriber.

30. Based upon the representations of the Fund, Kindred Hospital admitted the Subscriber into its facility and provided the Subscriber with medical care and treatment.

31. On information and belief, the Fund believed its representations to be true, but, if the Fund’s current position is correct, such representations were in fact false.

32. In making the foregoing misrepresentations to Kindred Hospital, the Fund intended and expected that Kindred Hospital would rely on its statements. Indeed, the Fund is well aware that Kindred Hospital routinely contacts insurers to determine whether coverage exists and whether treatment is authorized in order to decide whether to admit a particular patient. The Fund therefore had a duty to make accurate representations regarding coverage to Kindred Hospital. By misrepresenting Subscriber’s coverage, the Fund breached this duty to Kindred Hospital.

33. Kindred Hospital is informed and believes, and on that basis alleges, that the Fund advised Kindred Hospital that the Subscriber’s medical care was covered by its policy so that Kindred Hospital would admit the Subscriber and provide the Subscriber with care and treatment.

34. In reliance on the Fund’s misrepresentations, Kindred Hospital admitted the Subscriber into its facility and provided the Subscriber with care and treatment. Kindred Hospital’s reliance was justifiable, insofar as the Fund verified coverage and did not contend that the Subscriber did not in fact have coverage under the insurance policy until after the Subscriber was discharged from Kindred Hospital.

35. Kindred Hospital did not and could not have known of the falsity of the Fund’s representations, and it would not have admitted and treated the Subscriber had it known that the Fund had misrepresented these and other facts.

36. As a direct and proximate result of the Fund’s misrepresentations, Kindred Hospital has suffered damages in an amount exceeding $700,000, insofar as, among other things, it provided care and services to the Subscriber for which it has not been compensated, was deprived of interest income on those amounts during this period of non-payment, and lost opportunity costs associated with its treatment of the Subscriber rather than other patients.

WHEREFORE, Kindred Hospital prays for an Order of this Court awarding it fair and reasonable damages against the Fund in an amount exceeding $700,000 to be proven at trial, all pre-judgment and post-judgment interest on the above amounts at the maximum rate permitted by law, for its costs and attorneys’ fees incurred herein to the extent permitted by law, and for such other and further relief as the Court deems just and proper.

COUNT Ill — FALSE INFORMATION NEGLIGENTLY SUPPLIED FOR THE GUIDANCE OF OTHERS

37. Kindred Hospital repeats and realleges the allegations contained in paragraphs 1 through 16, inclusive, and incorporates the same as though set forth in full.

38. Priorto the time thatthe Subscriberwas admitted into Kindred Hospital, Kindred Hospital contacted the Fund, through its agent and third-party administrator, to verify coverage.

39. The Fund’s agent, acting in the course of its business, profession, or employment, provided Kindred Hospital with verification of insurance coverage, as well as continuing authorizations for services provided to the Subscriber.

40. Based upon these representations, Kindred Hospital admitted the Subscriber into its facility and provided the Subscriber with medical care and treatment for several months.

41. The Fund intentionally provided this information and took these steps for the guidance of Kindred Hospital in connection with services to be provided to the Subscriber.

42. Due to the Fund’s failure to exercise reasonable care or competence in communicating this information, the Fund’s representations (if the Fund’s current position is correct) were false. The Fund confirmed that the Subscriber was eligible for coverage, and did not contend that the Subscriber did not in fact have coverage under the insurance policy until after the Subscriber had been discharged.

43. The Fund intended to supply the false information for the benefit and guidance of Kindred Hospital in its business transactions, so that Kindred Hospital could decide whether to admit and treat the Subscriber. The Fund in fact intended the false information to influence Kindred Hospital in this decision.

44. In reliance on the Fund’s false information, Kindred Hospital admitted the Subscriber and provided the Subscriber with care and treatment. Kindred Hospital’s reliance was justifiable, insofar as the Fund verified coverage and did not contend that the services being provided to the Subscriber were not covered under the insurance policy until after the Subscriber’s discharge. Kindred Hospital did not and could not have known of the falsity of the Fund’s representations, and it would not have admitted and treated the Subscriber had it known that the Fund had misrepresented these and other facts.

45. As a direct and proximate result of the Fund’s false information, Kindred Hospital has suffered damages in an amount exceeding $700,000, insofar as, among other things, it provided care and services to the Subscriber for which it has not been compensated, was deprived of interest income on those amounts during this period of non-payment and lost opportunity costs associated with its decision to treat the Subscriber rather than other patients.

WHEREFORE, Kindred Hospital prays for an Order of this Court awarding it fair and reasonable damages against the Fund in an amount exceeding $700,000 to be proven at trial, all pre-judgment and post-judgment interest on the above amounts at the maximum rate permitted by law, for its costs and attorneys’ fees incurred herein to the extent permitted by law, and for such other and further relief as the Court deems just and proper.

COUNT IV - PROMISSORY [STOPPEL

46. Kindred Hospital repeats and realleges the allegations contained in paragraphs 1 through 16, inclusive, and incorporates the same as though set forth in full.

47. Prior to the time that the Subscriber was admitted into Kindred Hospital, Kindred Hospital contacted the Fund, through its agent and third-party administrator, to verify coverage.

48. The Fund’s agent provided Kindred Hospital with verification of insurance coverage, as well as continuing authorizations for services provided to the Subscriber,

49. In making the representations set forth herein, the Fund did so with the reasonable expectation that Kindred Hospital would be induced to rely on the Fund’s representations, in that it would admit the Subscriber into its facility and provide the Subscriber with care and treatment.

50. Kindred Hospital, in reasonable reliance on the Fund’s representations, admitted the Subscriber and provided the Subscriber with medica[ care and treatment. The Fund’s representations and promises, however, were not fulfilled. Instead, after the Subscriber was discharged, the Fund told Kindred Hospital that — contrary to what the Fund’s agent had previously represented — the Subscriber was not covered under the pertinent insurance policy after all. The Fund ultimately refused to pay Kindred Hospital any amount for the services provided to the Subscriber. Under the circumstances, injustice can be avoided only by enforcement of the Fund’s promise that Kindred Hospital is entitled to payment under the policy for Subscriber’s medical care and treatment.

51. As a direct and proximate result of the Fund’s misrepresentations, Kindred Hospital has suffered damages in an amount exceeding $700,000, insofar as, among other things, it provided care and services to the Subscriber for which it has not been compensated, was deprived of interest income on those amounts during this period of nonpayment, and lost opportunity costs associated with its decision to treat the Subscriber rather than other patients.

WHEREFORE, Kindred Hospital prays for an Order of this Court awarding it fair and reasonable damages against the Fund in an amount exceeding $700,000 to be proven at trial, all pre-judgment and post-judgment interest on the above amounts at the maximum rate permitted by law, for its costs and attorneys’ fees incurred herein to the extent permitted by law, and for such other and further relief as the Court deems just and proper.

IURY TRIAL DEMAND

52, Plaintiff demands trial by jury on all issues so triable.

Defendant appeared and answered as follows:

1. With respect to the allegations contained in paragraph I of CIGNA’s Counterclaim, the Fund admits it entered into a Service Agreement with CIGNA. The Fund denies the remaining allegations contained in paragraph 1 of CIGNA’s Counterclaim.

2. Paragraph 2 of CIGNA’s Counterclaim calls for legal conclusions which do not lend themselves to admissions or denials. To the extent paragraph 2 of CIGNA’s Counterclaim is construed as factual allegations, the Fund denies the same.

3. The Fund denies each and every material allegation of CIGNA’s Counterclaim that is not specifically admitted herein. Third-Party Plaintiffs Defenses and Affirmative Defenses

1. CIGNA’s Counterclaim fails to state a claim upon which relief can be granted.

2. CIGNA’s Counterclaim is barred by the doctrines of estoppel, unclean hands, accord and satisfaction, and waiver.

3. CIGNA’s Counterclaim is barred by the terms of the contract cited in the Fund’s Third-Party Complaint.

4. CIGNA’s Counterclaim is barred by the terms of 12 O.S. § 2013.

5. CIGNA’s Counterclaim was filed without probable cause or reasonable investigation and it is frivolous and insubstantial, entitling the Fund to costs.

6. The Fund denies that CIGNA is entitled to any damages, attorneys’ fees, andlor costs, and further denies CIGNA is entitled to the relief requested in the ad damnum clause contained in CIGNA’s Counterclaim,

7. The Fund reserves the right to assert any further defenses which may become apparent during the course of discovery.

WHEREFORE, Defendant/Third-Party Plaintiff Boilermakers National Health and Welfare Fund demands judgment against Third-Party Defendant CIGNA for all sums that may be adjudged against the Fund and in favor of Plaintiff Tulsa Specialty Hospital, LLC, d/b/a Kindred Hospital Tulsa on Plaintiffs Petition and subsequent pleadings, prays the Court deny Third-Party Defendant CIGNA’s Counterclaim, and prays for an award of its costs and reasonable attorneys’ fees incurred in defending Plaintiffs action and bringing its third-party action, all interest due, and such other relief as the Court deems fair, just and equitable.

Outcome: COMES NOW Plaintiff, Tulsa Specialty Hospital, LLC d/b/a Kindred Hospital Tulsa, and dismisses its claims and causes of action against Defendant, Boilermakers National Health and Welfare Fund, with prejudice to any future action.

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Defendant's Experts:

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