[Source: Health Lawyers Weekly, Vol. 4, Issue 47]
Two physicians who alleged that a health insurer systematically and arbitrarily denied payments to them and other similarly situated doctors cannot sue, but instead must submit to binding arbitration in accordance with their participating provider agreements, the Court of Appeals of Tennessee ruled November 29.
Zachary Rosenberg, M.D. and Dewayne P. Darby M.D. (plaintiffs) entered into participating provider agreements with BlueCross BlueShield of Tennessee (BCBST). These agreements set forth a dispute resolution process requiring the parties to submit unresolved claims to binding arbitration, in accordance with the Tennessee Uniform Arbitration Act.
Plaintiffs sued BCBST, alleging breach of contract, unfair or deceptive business practices, and other claims based on fourteen different types of allegedly improper conduct, including bundling, downcoding, and physician profiling.
In their complaint, plaintiffs sought relief not only for payments denied them, but also for punitive damages and injunctive relief on behalf of the class of all BCBST participating providers.
BCBST moved to compel arbitration. Plaintiffs opposed, arguing that the arbitration procedure contained in their participating provider agreements was unenforceable because it was cost prohibitive. In particular, plaintiffs argued that the cost of arbitrating the physicians’ small individual claims would be cost prohibitive, so as to deny them a viable remedy.
The trial court rejected that view and ruled plaintiffs failed to demonstrate that the cost of arbitration would be prohibitively more expensive than a judicial forum.
On interlocutory appeal, the Court of Appeals of Tennessee opined, “Seldom has a time-honored rule of common law been so decisively reversed and supplanted by an even stronger statutory mandate to the contrary than is evidenced by the present exalted status of arbitration.”
Reviewing the arbitrability issue de novo, the court cited the U.S. Supreme Court decision in Green Tree Financial v. Randolph, 531 U.S. 79 (2000), as a “starting point,” and conducted a close review of federal and state law concerning the impact of potentially cost-prohibitive arbitration.
The party seeking to avoid arbitration must bear the burden of proving that arbitration is cost prohibitive, the appeals court explained.
In the case at bar, plaintiffs asserted that their claims are of minimal value, even if aggregated over two years. If that were the case, the appeals court reasoned, “it would be easy enough to say on very limited proof that arbitration was cost prohibitive. The complaint, however, asserts no such small claims but rather alleges a pattern of improper and deceptive conduct and business practices,” costing millions of dollars, plus punitive damages, fees, and permanent injunctive relief.
“What might be prohibitive when a $4,000 claim is in issue would certainly not be prohibitive when millions of dollars and vast injunctive relief are actually in issue,” the appeals court determined. Thus, plaintiffs failed to meet their burden of proof.
“A party challenging the arbitration provisions of a contract, particularly when those provisions are clear and unambiguous, faces a figurative tsunami of case law, both federal and state, ever strengthening and reinforcing the favored status of arbitration.”
Because federal and state law strongly favor arbitration, and the participating provider agreement requires all disputes to be subject to binding arbitration, the appeals court agreed with the trial court, which had granted the motion to compel arbitration.
Rosenberg v. BlueCross BlueShield of Tenn., No. M2005-01070-COA-R9-CV (Tenn. Ct. App. Nov. 29, 2006).
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Note:
Tennessee's Uniform Arbitration Act:
Tenn. Code, Title 29, Ch.5, Part 3, §§ 301 to 320
