Peters v. Aetna Inc. et al

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:15-cv-00109-MR
SANDRA M. PETERS, on behalf of )
herself and all others similarly )
situated, )
)
Plaintiff, )
) MEMORANDUM OF
vs. ) DECISION AND ORDER
)
AETNA INC., AETNA LIFE )
INSURANCE COMPANY, and )
OPTUMHEALTH CARE SOLUTIONS, )
INC., )
)
Defendants. )
________________________________ )
THIS MATTER is before the Court on the Plaintiff’s Motion for Class
Certification [Doc. 144].
I. PROCEDURAL BACKGROUND
On June 12, 2015, the Plaintiff Sandra M. Peters filed this putative
class action against the Defendants Aetna, Inc., Aetna Life Insurance
Company (collectively, “Aetna”), and OptumHealth Care Solutions, Inc.
(“Optum”), asserting claims pursuant to the Racketeer Influenced and
Corrupt Organizations Act, 18 U.S.C. § 1961, et seq. (“RICO”) and the
Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C.
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§ 1001, et seq. (“ERISA”). [Doc. 1]. In her Complaint, the Plaintiff alleged
that Aetna engaged in a fraudulent scheme with Optum and other
subcontractors, whereby insureds were caused to pay the subcontractors’
administrative fees because the Defendants misrepresented such fees as
medical expenses. The Plaintiff alleged that these misrepresentations
allowed Aetna to illegally (i) obtain payment of the subcontractors’
administrative fees directly from insureds when the insureds’ deductibles
have not been reached; (ii) use insureds’ health spending accounts to pay
for these fees; (iii) inflate insureds’ co-insurance obligations using
administrative fees; (iv) artificially reduce the amount of available coverage
for medical services when such coverage is subject to an annual cap; and
(v) obtain payment of the administrative fees directly from employers when
an insured’s deductible has been exhausted or is inapplicable. [Id.].
The Plaintiff asserted two claims based on RICO violations. In Count
I of the Complaint, the Plaintiff alleged that Aetna and its subcontractors,
including Optum, violated 18 U.S.C. § 1962(c) by engaging in acts of mail
and wire fraud in furtherance of a common purpose to collect administrative
fees from Aetna insureds and plans by improperly characterizing them as
payment for covered medical expenses, and as such, constitute an
associated-in-fact “enterprise” as defined in 18 U.S.C. § 1961(4).
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Alternatively, the Plaintiff alleged that Aetna has conducted multiple bilateral
association-in-fact RICO enterprises with each of its subcontractors. In
Count II of the Complaint, the Plaintiff alleged that the Defendants conspired
to violate 18 U.S.C. § 1962(c), in violation of 18 U.S.C. § 1962(d). The
Plaintiff also asserted two claims under ERISA, alleging that the Defendants
breached their fiduciary duties as plan administrators, in violation of 29
U.S.C. § 1132(a)(2) (Count III) and 29 U.S.C. § 1132(a)(1), (a)(3), and/or 29
U.S.C. § 1104 (Count IV).
Aetna and Optum moved to dismiss the action pursuant to Rules
12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, arguing that
the Plaintiff lacked standing to assert her claims and that her Complaint
otherwise failed to state claims upon which relief can be granted. [Docs. 37,
39]. On August 31, 2016, the Court entered an Order granting in part and
denying in part the Defendants’ motions. [Doc. 54]. Specifically, the Court
concluded that the Plaintiff had standing to assert claims regarding Aetna’s
actions with respect to Optum but that the Plaintiff lacked standing to assert
any claims with respect to Aetna’s interactions with other subcontractors. [Id.
at 18-20]. Further, the Court granted the Defendants’ motions with respect
to the Plaintiff’s RICO claims and dismissed those claims with prejudice. The
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Court denied the Defendants’ motions with respect to the Plaintiff’s ERISA
claims. [Id. at 34].
The Plaintiff now moves this Court to grant class certification pursuant
to Federal Rule of Civil Procedure 23(b)(1) and (b)(3), or in the alternative,
pursuant to Federal Rule of Civil Procedure 23(c)(4).
The Defendants oppose the Plaintiff’s motion for class certification,
arguing that: (1) the proposed classes do not satisfy Rule 23(a)’s
commonality requirement; (2) the Plaintiff cannot demonstrate through
classwide evidence that all proposed class members suffered injury; (3) the
proposed classes do not satisfy Rule 23(a)’s typicality and adequacy
requirements; (4) the Plaintiff does not specify what “equitable” relief the
proposed members seek or how they would prove their entitlement to it; (5)
the proposed classes do not satisfy Rule 23(b)(1); (6) the proposed classes
fail Rule 23(b)(3)’s predominance and superiority requirements because
individualized inquiries would overwhelm any “class” proceeding; and (7)
because the proposed classes are overrun with individualized issues of
liability, causation, and injury, there is no basis for issue certification under
Rule 23(c)(4). [Doc. 162].
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The Court held a hearing on the motion for class certification on March
1, 2019. Having been fully briefed and argued, this matter is ripe for
disposition.
II. STANDARD OF REVIEW
“The class action is an exception to the usual rule that litigation is
conducted by and on behalf of the individual named parties only.” Wal-Mart
Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011) (citation and internal
quotation marks omitted). To justify a departure from that usual rule, “a class
representative must be part of the class and possess the same interest and
suffer the same injury as the class members.” Id. at 348-49 (quoting East
Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403 (1977)). Thus,
in seeking the certification of a class action, a putative class representative
must demonstrate as a threshold matter that she is a member of the
proposed class and that the other class members are “readily identifiable” or
“ascertainable.” EQT Prod. Co. v. Adair, 764 F.3d 347, 358 (4th Cir. 2014)
(“A class cannot be certified unless a court can readily identify the class
members in reference to objective criteria.”).
Once this threshold determination has been made, the Court must then
determine whether the readily identifiable class should be certified. Rule
23(a) of the Federal Rules of Civil Procedure sets forth the four prerequisites
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that an action must satisfy in order to be certified as a class action: (1) the
class must be so numerous that joinder of all members is impracticable
(“numerosity”); (2) there must be questions of law or fact common to the
class (“commonality”); (3) the claims or defenses of the representative
parties must be typical of the claims and defenses of the class as a whole
(“typicality”); and (4) the representative party must fairly and adequately
protect the interests of the class (“adequacy of representation”). Fed. R. Civ.
P. 23(a). “Rule 23(a) ensures that the named plaintiffs are appropriate
representatives of the class whose claims they wish to litigate. The Rule’s
four requirements – numerosity, commonality, typicality, and adequate
representation – effectively limit the class claims to those fairly encompassed
by the named plaintiff’s claims.” Dukes, 564 U.S. at 349 (citations and
internal quotation marks omitted).
In addition to satisfying the requirements of Rule 23(a), “the class
action must fall within one of the three categories enumerated in Rule 23(b).”
Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 423 (4th Cir. 2003). Here,
the Plaintiff seeks certification under Rule 23(b)(1) and (3), which provide,
respectively, as follows:
(1) prosecuting separate actions by or against
individual class members would create a risk of:
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(A) inconsistent or varying adjudications with respect
to individual class members that would establish
incompatible standards of conduct for the party
opposing the class; or
(B) adjudications with respect to individual class
members that, as a practical matter, would be
dispositive of the interests of the other members not
parties to the individual adjudications or would
substantially impair or impede their ability to protect
their interests;
* * *
(3) the court finds that the questions of law or fact
common to class members predominate over any
questions affecting only individual members, and that
a class action is superior to other available methods
for fairly and efficiently adjudicating the controversy.
The matters pertinent to these findings include:
(A) the class members' interests in individually
controlling the prosecution or defense of separate
actions;
(B) the extent and nature of any litigation concerning
the controversy already begun by or against class
members;
(C) the desirability or undesirability of concentrating
the litigation of the claims in the particular forum; and
(D) the likely difficulties in managing a class action.
Fed. R. Civ. P. 23(b)(1), (3).
The party seeking class certification bears the burden of demonstrating
compliance with Rule 23. “A party seeking class certification must do more
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than plead compliance with the aforementioned Rule 23 requirements.
Rather, the party must present evidence that the putative class complies with
Rule 23.” EQT Prod. Co, 764 F.3d at 357 (internal citations omitted). While
the plaintiff bears the burden of demonstrating compliance with Rule 23, the
Court “has an independent obligation to perform a ‘rigorous analysis’ to
ensure that all of the prerequisites have been satisfied.” Id. at 358 (quoting
in part Dukes, 564 U.S. at 350-51). To satisfy this obligation, the Court may
“probe behind the pleadings before coming to rest on the certification
question.” Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013) (citation and
internal quotation marks omitted). Ultimately, the decision to certify a class
action is within the discretion of the Court. Gunnells, 348 F.3d at 424.
III. FACTUAL BACKGROUND
Aetna insures, underwrites, and administers health benefits plans.
[Doc. 56 at ¶ 5]. Aetna’s responsibilities under its plans including processing
and administering claims, as well as entering into network participation
agreements with providers. [Id. at ¶ 21]. Aetna receives compensation from
plan sponsors of self-funded1 plans in exchange for providing these
1 “Self-funded” or “self-insured” plans are ones in which employers are “financially
responsible for payment of benefits owed under the terms of the plan.” [Id. at ¶ 4].
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administrative services. Those fees are set forth in “administrative services
agreements.” [Id. at ¶ 14].
In 2011, Aetna issued a “request for proposal” to several companies
(including Optum) with networks of physical therapists seeking to lower costs
for employers and members. [Doc. 163-1: Aetna 30(b)(6) Dep. at 22; see
also Doc. 163-4: Kilpinen Dep. at 30]. After “carefully evaluat[ing]” the “pros
and cons” of the various responses, Aetna concluded that “Optum had a very
solid network” and could generate millions of dollars in “medical cost savings
for [Aetna’s] members and plan sponsors.” [Doc. 163-1: Aetna 30(b)(6) Dep.
at 44; see also Doc. 163-8: Kessler Report at ¶¶ 59-64 (discussing Aetna’s
contemporaneous savings analyses)].
That analysis showed two types of savings. First, the program would
generate “unit cost savings” -- essentially lower rates -- because the Aetna-
Optum contract rate was on average lower than the pre-Optum rates that
Aetna’s plans and members were paying. Second, the program would
generate “treatment cost savings due to control of unnecessary
visits/utilization.” [Doc. 163-13: HOPP Intake at 4; Doc. 163-1: Aetna
30(b)(6) Dep. at 45]. The lion’s share of those savings flowed to self-insured
plans and their members because comparatively few members are enrolled
in Aetna-insured plans. [Doc. 163-8: Kessler Report at ¶¶ 64-66].
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In 2012, Aetna and Optum entered into a series of agreements relating
to Optum’s physical-therapy network, including a Provider Agreement [Doc.
146-3]; a Contract Oversight Claims Management Agreement [Doc. 146-4];
a Delegated Patient Management Agreement [Doc. 146-5]; and a Delegated
Credentialing Agreement [Doc. 146-6]. Just over a year later, they entered
into a similar series of contracts with respect to Optum’s chiropractor
network. [Docs. 146-7, 146-8, 146-9]. Under these agreements, Optum
became responsible for credentialing, utilization management, and payment
of the physical therapy and chiropractic providers who provide services to
Aetna plan participants.
Under these agreements, the claims process works as follows: An
Aetna plan participant visits an Optum-contracted chiropractor or physical
therapist. That downstream provider performs a service for the Aetna plan
participant and submits a claim to Optum. If the claim is timely and includes
the required information, then Optum forwards the claim to Aetna, adding a
Current Procedural Terminology (“CPT”) medical billing code to the claim in
order to insert the rate contracted by Aetna and Optum for that service. Aetna
determines whether to cover the claim and (if covered) calculates the amount
due as well as the participant’s responsibility based on the Aetna-Optum
contract rate (“Aetna Bundled Payment rate”) rather than the contracted rate
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between Optum and that provider (“Optum Downstream rate”). Aetna then
sends its determination back to Optum. Optum then pays the treating
provider the Optum downstream rate (minus the amount that Aetna
calculated as the participant’s financial responsibility). [Doc. 163-14: Eichten
Dep. at 111, 124; Doc. 162-18: Optum 30(b)(6) Dep. at 62, 117]. Aetna then
sends an Explanation of Benefits (an “EOB”) to the member identifying
Optum as the “provider” for the service. The EOB reports a total “Amount
Billed” that includes Optum’s charge and its CPT code. The EOB also states
the plan’s and the participant’s responsibility to pay, which Aetna bases on
the Aetna-Optum contract rate, not the amount the downstream provider
agreed to receive from Optum.
On the whole, the Aetna-Optum relationship has yielded millions of
dollars in savings for Aetna plans and participants. [Doc. 163-1: Aetna
30(b)(6) Dep. at 48; Doc. 163-7: Aetna SE – Physical Health Value Review;
Doc. 163-8: Kessler Report at ¶¶ 59–64]. As with many flat-rate
arrangements, however, results vary across the range of benefits claims, in
light of different plan language, benefit design, participant obligations (co-
insurance, co-pay, or deductible), downstream providers, and the like. [Doc.
163-1: Aetna 30(b)(6) Dep. at 135]. Depending on the benefits claim, Aetna
may pay Optum an amount that is greater than or less than the amount
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Optum pays the downstream provider. [Doc. 163-14: Eichten Dep. at 124-
25]. Further, if the claim is within the participant’s deductible, Optum
receives nothing and the Aetna plan participant pays only the contracted rate
between Optum and the downstream provider. [Doc. 162-18: Optum
30(b)(6) Dep. at 126-28].
The Plaintiff is a member of a self-insured health insurance plan
offered through her husband’s former employer, Mars, Inc. (“the Mars Health
Care Plan”). The Mars Health Care Plan is one of approximately 1,600 self-
insured plans that Aetna administers. The Plaintiff received chiropractic care
and physical therapy services from Optum providers from 2013 through
2015. [Doc. 1 at ¶¶ 40-56]. She contends that the Aetna-Optum
arrangement wrongfully allowed Optum to “bury” its administrative fees in
claims, and that Aetna misled her by representing these administrative fees
as medical expenses. [Id.].
The Plaintiff seeks the following relief under ERISA: (1) a declaration
that Aetna breached its fiduciary duties of care and loyalty when it caused
members and plans to bear responsibility for Optum’s administrative fees
and misrepresented Optum’s fees in EOBs; and that Aetna engaged in
prohibited transactions by using plan assets to pay Optum’s administrative
fees; (2) a declaration that Optum is liable for its role in aiding Aetna’s
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fiduciary violations; and (3) equitable and injunctive relief for the Defendants’
misconduct, including but not limited to enjoining further misconduct,
requiring the Defendants to issue accurate EOBs, restoring of monetary
losses to self-insured plans and insureds, including interest, imposing a
surcharge for the improper gains obtained in breach of the Defendants’
duties, and removal of the Defendants as administrators of the plans.2 [See
Doc. 1 at 26]. The Plaintiff seeks to represent the following class for
purposes of her claims under 29 U.S.C. §1132(a)(2) and (a)(3):
• Plan Claim Class: All participants or beneficiaries of
self-insured ERISA health insurance plans
administered by Aetna for which plan responsibility
for a claim was assessed using an agreed rate
between Optum and Aetna that exceeded the
provider’s contracted rate with Optum for the
treatment provided.
The Plaintiff also seeks to represent the following class for purposes of
her claims under 29 U.S.C. § 1132(a)(1)(B) and (a)(3):
2 The Plaintiff seeks class-wide relief under 29 U.S.C. § 1132(a)(1)(B), (a)(2), and (a)(3).
Section 1132(a)(1)(B) provides that a plan participant or beneficiary may bring a civil
action under ERISA in order “to recover benefits due to him under the terms of his plan,
to enforce his rights under the terms of the plan, or to clarify his rights to future benefits
under the terms of the plan….” 29 U.S.C. § 1132(a)(1)(B). Section 1132(a)(2) provides
that a plan participant, beneficiary or fiduciary may also seek “appropriate relief” under 29
U.S.C. § 1109. 29 U.S.C. § 1132(a)(2). Finally, section 1132(a)(3) provides that a plan
participant, beneficiary or fiduciary may bring a civil action “(A) to enjoin any act or practice
which violates any provision of this subchapter or the terms of the plan, or (B) to obtain
other appropriate equitable relief (i) to redress such violations or (ii) to enforce any
provisions of this subchapter or the terms of the plan….” 29 U.S.C. § 1132(a)(3).
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• Member Claim Class: All participants or
beneficiaries of ERISA health insurance plans
insured or administered by Aetna for whom
coinsurance responsibility for a claim was assessed
using an agreed rate between Optum and Aetna that
exceeded the provider’s contracted rate with Optum
for the treatment provided.
[Doc. 144].
IV. DISCUSSION
As noted above, the Plaintiff must, as a threshold matter, demonstrate
that she is a member of the proposed classes and that the other members
of the proposed classes are “readily identifiable” or “ascertainable.” EQT
Prod. Co., 764 F.3d at 358. “The plaintiff bears the burden of offering a
reliable and administratively feasible mechanism for determining whether
putative class members fall within the proposed class definition.” Krakauer
v. Dish Network L.L.C., 311 F.R.D. 384, 390 (M.D.N.C. 2015) (quoting in part
Hayes v. Wal-Mart Stores, Inc., 725 F.3d 349, 355 (3d Cir. 2013). A class
action is inappropriate where identifying the class members would require
“extensive and individualized fact-finding or ‘mini-trials.’” EQT Prod. Co., 764
F.2d at 358 (citation and internal quotation marks omitted).
To identify the members of the potential classes, the Plaintiff relies on
the report of Dr. Constantijn Panis, an economist who, at the instruction of
Plaintiff’s counsel, reviewed and identified the claims for which self-insured
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plans and self-insured plan participants were “overcharged,” that is, where
the assessed Aetna Bundled Payment Rate exceeded the Optum
Downstream Rate. Plaintiff’s counsel instructed Dr. Panis to identify claims
where “the combined responsibility of the plan and the member was equal to
the Aetna-allowed amount and exceed the provider-allowed amount.” [Doc.
146-22: Panis Report at ¶ 39]. Dr. Panis calculated that this occurred in
70.6% of the claims at issue in this matter, and thus excluded the remaining
29.4% of claims (approximately 300,000 claims) from his analysis. [See id.;
see also Doc. 163-23: Panis Dep. at 130-32]. Restricting his analysis to only
the portion of the claims identified by counsel’s rule as stated above, Dr.
Panis calculated what he called an “overcharge” for each claim equal to the
difference between the Aetna Bundled Payment Rate (what Aetna paid) and
the Optum Downstream Rate (what Optum paid). [Doc. 146-22: Panis
Report at ¶ 41]. Dr. Panis then allocated each claim’s “overcharge” as
follows: “(1) If the member was responsible for a copayment and the plan for
the remainder, the entire overcharge was borne by the plan. (2) Otherwise,
I assume that the plan and the members were overcharged in proportion to
their responsibility of the Aetna-allowed amount.” [Id. at ¶ 42]. Dr. Panis
then calculated that the plans were “overcharged” a total of $13.7 million and
as a result the participants were “overcharged” a total of $1 million. [Id. at
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¶¶ 43-44]. He further concluded that Optum’s “gain” on claims for which it
was paid more than it paid the downstream providers was $15 million.3 [Id.
at ¶ 37]. Dr. Panis, however, did not calculate any set off against these
“overcharges” based upon the remaining 29.4% of the claims in which the
Aetna payment to Optum was less than Optum’s payment to the downstream
provider. Thus, the amount of any net loss to the plans and participants (if
there was such loss) is not before the Court.
The initial step in a proper economic analysis of injury and damages is
to define the “but-for world”, i.e. the arrangement as it would exist without the
allegedly improper elements. This “but-for world” is then compared to the
economic conditions in the actual world, with its allegedly offending
elements. As Dr. Daniel P. Kessler, the Defendants’ economic expert,
explained: “Such a comparison is necessary to determine whether the
challenged conduct caused injury and, if so, the extent of that injury.” [Doc.
163-8: Kessler Report at ¶ 10]. If the economic conditions in the actual world
are equal to or better for the Plaintiff than those in the “but-for world,” then
no injury occurred as a result of the Defendants’ arrangement.
33 Dr. Panis explained that the difference between the $14.7 million in “overcharges”
($13.7 million + $1 million) and Optum’s “gain” of $15 million is due to “rounding.” [Id. at
¶ 37 n.4].
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Consequently, determining the existence of an economic harm and the
magnitude of such harm depends on properly defining the “but-for world.”
Dr. Panis testified that the appropriate “but-for world” for determining
whether plans and participants were harmed by the Defendants’ conduct
would be an alternative world in which there were no agreements between
Optum and Aetna at all, but rather that plan participants were charged the
rates negotiated between Optum and its downstream providers, i.e., the
Optum Downstream Rate. [Doc. 163-23: Panis Dep. at 218]. In other words,
the Plaintiff seeks to compare the alleged improper arrangement with a
hypothetical one in which Aetna was able to contract with the downstream
providers at the same rate as what Optum was able to arrange with its own
Network members.
This “but-for world,” however, is not based on recognized economic
principles. Dr. Panis was instructed by Plaintiff’s counsel to assume an
impossible scenario. It is undisputed that Optum’s role was crucial in
lowering the amounts charged by the downstream providers. [Doc. 146-22:
Panis Report at ¶ 39]. Without Optum arranging the streamlining and
bundling of services, Aetna would have been charged more than the rate Dr.
Panis assumes it would have in his “but-for world.” Thus, the hypothetical
savings Dr. Panis posits are illusory. Either the services provided by Optum
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would have to have been provided (by someone) for no charge4 or the
downstream providers would have continued to charge Aetna the higher
rates. Theoretically, Aetna could have done for itself what Optum did, but it
is contrary to all economic logic that it could have done so at no cost to itself.
Thus, in such a scenario the participants would have paid the price in the
form of higher premiums. [See Doc. 163-8: Kessler Report at ¶ 50]. For all
these reasons, the Court is compelled to disregard entirely Dr. Panis’s “but-
for world.”
The more appropriate “but-for world” for determining whether the
Aetna-Optum contractual arrangements caused injury to any plans or
participants would be to assume a world where the challenged agreements
were not entered into in the first place. In such a situation, Aetna plans and
participants would be subject to the rates that Aetna charged prior to its
contractual arrangement with Optum (“pre-agreement rates”). Dr. Kessler
demonstrates in his report, however, that these pre-agreement rates were
on the whole higher than the Aetna Bundled Payment Rates negotiated by
Optum and thus would not have resulted in any substantial savings for any
Aetna plans or their participants. [See Doc. 163-8: Kessler Report at ¶¶ 56-
4 It is undisputed that Optum invested significant resources in developing and maintaining
its Network and providing services. [See Doc. 163-8: Kessler Report at ¶ 49]. It therefore
would make no economic sense for Optum to offer such services to Aetna free of charge.
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66]. For these reasons, the Court concludes that the Plaintiff has failed to
demonstrate that there exists a class of participants who have actually been
harmed by the Aetna-Optum arrangement.
The absence of proof of injury is not the only shortcoming in the
Plaintiff’s evidence. Even if the Court were to accept Dr. Panis’s “but-for
world,” the Plaintiff has not presented any methodology by which the Court
could identify who the members of the proposed classes are. In order to
certify the proposed classes, the Court must be able to identify, on a class-
wide basis, those plans and participants who were actually injured by the
Defendants’ conduct and the materiality of any such injury. See Hayes, 725
F.3d at 355. In his analysis, Dr. Panis ignored those claims where plans and
participants actually benefited from the Agreements, even though he found
these instances comprised nearly a third of all claims. As such, he failed to
offset any alleged “overcharges” with instances in which the same plan or
participant was “undercharged” (i.e., benefited financially) as a result of the
Aetna-Optum arrangement. Dr. Panis agreed in his deposition that a class
member who was charged less on a particular claim was “undercharged”
under his theory, and that “[a]s an economist,” he believes that in order to
“look at the impact of the Aetna-Optum relationship on a member, you would
have to look at that member’s complete claims experience and the evolution
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of claims over the course of the year.” [Doc. 163-23: Panis Dep. at 174-75].
Dr. Panis, however, did not conduct such an analysis, and therefore he has
not offered a methodology by which the Court can assess the impact of the
Defendants’ arrangement on any plan or participant, much less all plans and
participants in the purported classes.
Dr. Panis’s “overcharge” calculation not only fails to quantify any
purported loss, it also fails to identify who should be included in the class. It
does not distinguish those plans or participants suffering a purported injury
from those actually benefiting from the challenged conduct. Many plans and
participants actually received “undercharges” and therefore benefited from
the Agreements but are nevertheless classified by Dr. Panis as having
suffered injury. For example, a participant who had one claim where the
Bundled Payment Rate was greater than the Optum Downstream Rate (and
therefore was “overcharged”), but also had a claim where the Bundled
Payment Rate was less than the Optum Downstream Rate (and therefore
had a financial benefit) would be classified by the Plaintiff as having suffered
an injury regardless of whether the “undercharge” exceeded the
“overcharge.” In doing so, however, the Plaintiff simply ignores the claims
for which the participant benefited. To determine the actual impact of the
Defendants’ challenged conduct on a participant, the Court must consider
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both claims where the participant’s responsibility was based on lower rates
and claims where the participant’s responsibility was based on higher rates.
In other words, the Court must consider all the claims incurred by the
participant in any given plan year, including those for which the participant
benefited as well as those for which the participant was allegedly harmed.
Without considering the entirety of a participant’s claim history for the entire
year, a participant who, over the history of his or her claim history benefited
from the Agreements, would be incorrectly classified as having been
harmed.
In other words, even employing Dr. Panis’s simplistic and unrealistic
definition of the “injury” as the difference between what Aetna paid Optum
and what Optum paid the providers, Dr. Panis compounds this error by
excluding from his analysis all the situations where the payment by Optum
to the provider exceeds the payment by Aetna to Optum. As a result, he
counts a participant who had a small loss that is more than offset by a larger
gain as one who was nonetheless “injured” – notwithstanding such
participant’s net gain. Thus, Dr. Panis’s method is of no use in identifying
members of a class of participants who were actually injured.
The inconsistency between Dr. Panis’s “overcharge” calculation and
economic reality is clearly illustrated in the case of the named Plaintiff. Dr.
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Panis calculates that the Plaintiff was “overcharged” by $151.42 in 2013 and
2014. This calculation, however, is not a measure of any actual economic
injury because it ignores the offsetting benefits the Plaintiff received from the
alleged improper arrangement. When considering the entirety of the
Plaintiff’s claims history for these years, Dr. Kessler calculates that the
Plaintiff’s participant responsibility for those years was actually a net gain of
$114.71. [Doc. 163-8: Kessler Report at ¶ 105]. As a result, the Plaintiff
benefited from the Agreements, even using Dr. Panis’s flawed definition of
injury based on his economically unrealistic “but-for world.”
As illustrated by the case study of the Plaintiff, a detailed individualized
inquiry is needed to assess the impact of the challenged conduct on each
individual participant in each of the 1,600+ different plans in order to
determine whether they come within the bounds of the proposed class. Dr.
Panis, however, has not conducted such an inquiry. Instead, he has offered
a faulty methodology that improperly ignores a substantial portion of claims
and their impact on the participants’ claims history, thereby classifying some
putative class members as “overcharged” when they actually benefited —
including the named Plaintiff herself. As a result, Dr. Panis’s methodology
does not reliably identify a common injury or damage among putative class
members such that they could be readily identifiable or ascertainable.
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The complexity of determining a participant’s injury, or even whether a
participant has been injured, goes beyond correcting for the Plaintiff’s
simplistic failure to count participants’ gain arising from the Aetna-Optum
arrangement. For example, whether a participant actually suffered injury will
also depend on the amount of coinsurance responsibility that the
participant’s particular downstream provider actually collected from the
participants, a factor that varies among both providers and participants.
Additionally, in those cases where the downstream provider did not in fact
collect or pursue payment from the participant, the participant suffered no
injury and thus could not be included in the class. An individual inquiry on a
claim-by-claim basis would be necessary to determine whether this occurred
for any particular claim.
Further, a participant’s responsibility on one claim may depend on the
participant’s and the plan’s responsibility on the participant’s previous claims.
Because of the impact of plan terms such as the deductible and out-of-pocket
maximum, the impact of the Defendants’ challenged conduct on any
particular participant or claim can only be assessed through a detailed
analysis of an individual participant’s claims history considered in the context
of that participant’s particular plan. Thus, it is not possible to calculate what
a participant’s (or plan’s) responsibility for a claim would have been in any
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“but-for world” without considering all of a participant’s previous claims
incurred in that same plan year. Dr. Panis, however, fails to conduct the
individualized inquiry that is necessary to determine how a participant’s
earlier claims history would have been different in his “but-for world”
compared to the actual world, and how that would have affected the
participant’s responsibility on later claims.5
For all these reasons, the Court concludes that the Plaintiff has not
offered the Court a “reliable and administratively feasible mechanism for
determining” which plans and participants fall within the proposed class
definitions. Krakauer, 311 F.R.D. at 390. To ascertain the members of the
proposed classes, the Court would be forced to engage in a highly
individualized inquiry of every plan, every participant and every claim in those
participants’ claim histories, taking into account the impact of each
participant’s deductible, copayments, coinsurance, and out-of-pocket
5 While the Plaintiff is proposing to serve as a class representative for both plans and
participants affected by the Defendants’ arrangement, the interests of those plans and
participants can easily conflict economically under the Plaintiff’s theory. For example, a
participant could exhaust her deductible more quickly in the actual world than she would
have in Dr. Panis’s “but-for world,” thereby saving her money. That participant’s plan
would begin bearing responsibility for her claims more quickly in the actual world than it
would have in Dr. Panis’s “but-for world.” In this scenario, the benefit to the participant
comes at the expense of the plan, meaning that under the Plaintiff’s theory, plans and
participants have conflicting interests that can only be reconciled with individualized
inquiry. This, of course, begs the question of how the Plaintiff can serve as class
representative of a class of plans of which Plaintiff is not a member. The Court, however,
need not reach these issues.
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maximum. As the Fourth Circuit has noted, certification of a class action is
inappropriate where identifying the class members would require “extensive
and individualized fact-finding or ‘mini-trials.’” EQT Prod. Co., 764 F.2d at
358 (citation and internal quotation marks omitted).
Moreover, the Plaintiff’s flawed methodology for determining class
membership also reflects a lack of commonality among the putative class
members. “Commonality requires the plaintiff to demonstrate that the class
members have suffered the same injury.” Dukes, 564 U.S. at 349-50
(citation and internal quotation marks omitted). Here, the evidence indicates
that, in the aggregate, the Aetna-Optum contracts saved plans and their
participants millions of dollars. Indeed, many proposed class members
would be worse off if their claims were reassessed using the Plaintiff’s
methodology of using only the Optum Downstream Rates. A proposed class
challenging conduct that did not harm -- and in fact benefitted -- some
proposed class members fails to establish the commonality required for
certification.
For all these reasons, the Court in the exercise of its discretion denies
the Plaintiff’s motion for class certification.
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O R D E R
IT IS, THEREFORE, ORDERED that the Plaintiff’s Motion for Class
Certification [Doc. 144] is DENIED.
IT IS SO ORDERED.
Signed: March 29, 2019
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