BERLIN MEDICAL ASSOCIATES, P.A., et al. v. CMI NEW JERSEY OPERATING CORPORATION, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3034-04T53034-04T5

BERLIN MEDICAL ASSOCIATES, P.A.,

BERLIN PHYSICAL THERAPY, JOSEPH

M. HASSMAN, D.O., DELRAN

CHIROPRACTIC, P.A., and LEONARD

STROBEL, D.O., on behalf of

themselves and all others

similarly situated,

Plaintiffs-Appellants,

v.

CMI NEW JERSEY OPERATING CORPORATION,

CONSUMER HEALTH NETWORK PLUS, LLC,

CONSUMER HEALTH NETWORK INC.,

ALLSATE NEW JERSEY INSURANCE COMPANY,

LIBERTY MUTUAL FIRE INSURANCE COMPANY,

LIBERTY MUTUAL INSURANCE GROUP,

LIBERTY MUTUAL INSURANCE COMPANY,

LIBERTY INSURANCE CORPORATION,

LIBERTY MUTUAL MANAGED CARE, INC.,

PRUDENTIAL PROPERTY AND CASUALTY

INSURANCE COMPANY OF NEW JERSEY,

SELECTIVE INSURANCE COMPANY OF

AMERICA and STATE FARM INDEMNITY

COMPANY,

Defendants-Respondents.

______________________________________

 

Argued May 9, 2006 - Decided August 3, 2006

Before Judges Skillman, Axelrad and Sabatino.

On appeal from the Superior Court of New Jersey, Law Division, Camden County, L-2972-03.

Ellen M. Doyle (Malakoff, Doyle & Finberg) of the Pennsylvania bar, admitted pro hac vice, Eric H. Weitz (Seidel Weitz Garfinkle & Datz) and Andrew D. Stern, argued the cause for appellants (Seidel Weitz Garfinkle & Datz, Ms. Doyle and Mr. Stern, attorneys; Mr. Weitz, Mr. Stern and Ms. Doyle, on the brief).

Joseph P. La Sala argued the cause for respondent State Farm Indemnity Company (McElroy, Deutsch, Mulvaney & Carpenter, attorneys; Mr. La Sala, of counsel and on the brief; Nancy McDonald and Walter R. Krzastek, on the brief).

David D'Aloia argued the cause for respondent Allstate New Jersey Insurance Company (Saiber, Schlesinger, Satz & Goldstein, attorneys; Mr. D'Aloia and Agnes I. Rymer, of counsel and on the brief).

Thomas P. Weidner argued the cause for respondents Consumer Health Network Plus, LLC and Consumer Health Network, Inc. (Windels Marx Lane & Mittendorf, attorneys; Mr. Weidner, of counsel and on the brief; David Swerdlow, on the brief).

David Menzel argued the cause for respondents Liberty Mutual Fire Insurance Company, Liberty Mutual Insurance Group, Liberty Insurance Corporation and Liberty Mutual Managed Care, Inc. (Cuyler Burk, attorneys; Mr. Menzel, of counsel and on the brief).

Robert J. Del Tufo argued the cause for respondent Prudential Property and Casuality Insurance Company of New Jersey (Skadden, Arps, Slate, Meagher & Flom, attorneys; Mr. Del Tufo and Andrew Muscato, of counsel and on the brief).

Brian T. Guthrie (Drinker, Biddle & Reath) of the Pennsylvania bar, admitted pro hac vice, argued the cause for respondent Selective Insurance Company of America (Drinker, Biddle & Reath, attorneys; Brian J. Waters and Mr. Guthrie, of counsel and on the brief).

PER CURIAM

Plaintiffs, four health care providers, appeal the Law Division's dismissal under R. 4:6-2(e) of their uncertified class action seeking additional compensation from a preferred provider organization ("PPO") and from various insurance companies within that PPO's network. We affirm the dismissal of plaintiffs' claims against the defendant insurers in their entirety and also affirm the dismissal of several counts of the complaint against the PPO, but vacate the dismissal of the remaining counts against the PPO and remand those discrete claims for discovery and further proceedings.

I.

The named plaintiffs are two physicians, a medical/physical therapy practice, and a chiropractic therapy practice. Plaintiffs respectively entered into contracts in the mid-to-late 1990s with defendant Consumer Health Network (CHN), a preferred provider organization, joining a network of over 11,000 doctors and other providers serving over 950,000 insured patients. The contracts related to plaintiffs' treatment of persons injured in automobile accidents and insurance payments made to those providers as part of the patients' Personal Injury Protection (PIP) benefits under New Jersey's automobile insurance laws. See N.J.S.A. 39:6A-1 et seq. By contracting with CHN, the providers obtained the advantages of referrals from a larger patient population and of faster payments, in exchange for accepting discounted rates for their services.

The nine insurer defendants are automobile insurance companies or their affiliates, who contracted with CHN to become payors for services provided to patients within the CHN network. The insurers joined the CHN network as a means of reducing the fees they would otherwise have to pay to health care providers for services covered by their insureds' PIP benefits. These arrangements are imprecisely described in the complaint, and in actual business practice, as CHN "leasing" to the defendant insurers its contractual right to pay the health care providers at discounted rates.

Plaintiffs styled their lawsuit as a class action, purporting to represent the following class:

All New Jersey healthcare providers (excluding hospitals) who are or have been members of CHN's preferred provider network, and have had, subsequent to the period beginning six years prior to plaintiffs' filing their complaint on May 21, 2003 (i) at least one bill for their services paid from PIP benefits provided by a New Jersey automobile insurance policy issued by one of the defendant insurers, and (ii) have had that payment reduced to conform with CHN's network fee schedule.

Plaintiffs' complaint was dismissed by the Law Division before a motion for class certification under R. 4:32-2 or any class-related discovery took place.

Plaintiffs' complaint was filed in May 2003. Among other things, it alleged that CHN had breached its contracts with plaintiffs at various times between 1995 and 2002 by (1) taking unauthorized payment discounts on multiple-procedure visits; (2) applying unauthorized discounts on so-called "off-schedule" services; (3) providing insufficient notice to plaintiffs of the addition of insurance payors to the CHN network; (4) supplying inadequate patient coverage verification documents; (5) adding new insurers to the network without written payor agreements; and (6) other miscellaneous breaches. Plaintiff attached to the complaint as exhibits various provider agreements between CHN and Berlin Medical Associates (effective September 29, 1995), Berlin Physical Therapy (effective September 29, 1995), Dr. Joseph Hassman (effective December 31, 1995), Delran Chiropractic (effective May 8, 1996) and Dr. Leonard Strobel (effective January 8, 1997 and July 19, 2000). Apart from these contractual claims, the complaint further included a count against CHN for alleged violations of the common-law covenant of good faith and fair dealing.

With respect to the defendant insurers, plaintiffs alleged that the insurers had been unjustly enriched by making payments to plaintiffs below those sums required under plaintiffs' contracts with CHN. Although plaintiffs were not in privity with the insurers, they further asserted claims against the insurers based upon alternative theories that plaintiffs are assignees of their insured patients' rights against their respective insurance carriers under the third-party beneficiary doctrine. Lastly, plaintiffs asserted parallel claims against the insurers for violating principles of good faith and fair dealing.

Before discovery, in September 2003, defendants filed a joint motion to dismiss the complaint under R. 4:6-2(e) based upon an alleged failure to state claims upon which relief may be granted. After the court permitted some modest amendments to the complaint, the dismissal motion was renewed. The motion judge eventually heard oral argument on the motion on January 14, 2005, and issued an oral opinion that same day dismissing the complaint in all respects. This appeal ensued.

Plaintiffs argue that the motion judge erred procedurally in granting dismissal to all defendants before discovery was completed. Substantively, plaintiffs contend that the court erred by finding that contractually-based claims and other grounds for relief were not legally viable. Defendants, on the other hand, argue that the plaintiffs' claims, which were largely predicated on contractual documents either attached to or referred to in the complaint, were properly disposed of prior to the completion of discovery. Defendants further contend that plaintiffs' various theories, stripped to their essence, have no legal merit. Defendants additionally contend that plaintiffs' claims for relief are time-barred, both under specific contractual provisions governing billing disputes, and also under general principles of laches and ratification.

We examine each of these arguments in turn.

II.

Plaintiffs first argue that the motion judge improperly dismissed their claims related to reductions (or "discounts") for what insurers in CHN's network would pay them, in circumstances where a plaintiff had provided more than one service to a patient on a particular day. Plaintiffs portray those multiple-procedure payment reductions as improper "double dipping" by the defendants.

The pertinent contract language on this issue, which evidently was commonly replicated in CHN's agreements with other providers during the relevant time frame, is presented in several provisions. As a general matter, Section 2.7, Standard Term 2, of CHN's provider agreement reads as follows:

2. Pursuant to the terms of the applicable Plan, Payor and its agent and the Eligible Person shall pay to Participating Provider the lesser of Participating Provider's charges customarily billed to other patients or the amounts set forth in the applicable Fee Schedule as full payment of any claim submitted by Participating Provider for Covered Services furnished to Eligible Persons pursuant to such Plan.

[Emphasis added.]

The "applicable Fee Schedule" referred to in Standard Term 2 above is later described in the standard CHN provider agreement as follows:

1. Fee Schedule. The schedule of maximum reimbursement amounts pursuant to which Payors shall pay Participating Providers to provide Medically Appropriate Covered Services shall be the lesser of the following:

1.1 the current Fee Schedule of CHN, samples of which are provided to Provider from time to time;

1.2 any applicable state, federal or other mandated fee schedule; or

1.3 the actual fees or charges of Provider.

[CHN Standard Provider Agreement, Section 2.8 Fee Schedule (emphasis added).]

Plaintiffs contend that, with respect to multiple-procedure visits, the defendant insurers in CHN's network paid plaintiffs less than the amounts prescribed by the contract provisions quoted above.

Specifically, plaintiffs allege that when a patient received multiple procedures in a single visit, the payors paid the discounted CHN fee schedule rate for the first procedure, but only fifty percent of the CHN rate for the second procedure and only twenty-five percent of the CHN rate for the third and any additional procedures. Such a "sliding-scale" of reduced payments for multiple-procedure visits substantially mirrors the standards applied to ordinary PIP reimbursements, pursuant to N.J.A.C. 11:3-29.4(f). That regulation prescribes that:

1. When multiple or bilateral procedures are performed on the same patient by the same provider at the same time or during the same visit, it is virtually never appropriate for the fee to be the sum of the fees for each procedure.

[N.J.A.C. 11:3-29.4(f)(1) (emphasis added).]

Instead, the regulation sets forth the following sliding scale:

The primary procedure at a single session shall be at [one hundred] percent of the eligible charge, the second procedure at no more than [fifty] percent of the upper limit in the fee schedule for that particular procedure, and if performed, any additional procedures at no more than [twenty-five] percent of the upper limits in the fee schedule for those particular procedures.

[Ibid. (emphasis added).]

Plaintiffs contend that defendants violated their contracts in calculating multiple-procedure payments by applying a similar 100%/50%/25% sliding scale to their already-discounted rates. By contrast, the PIP regulation applies the 100%/50%/25% percent sliding scale to a higher, market-based "eligible charge" which is set forth at the Appendix to N.J.A.C. 11:3-29. In essence, plaintiffs argue, defendants reduced their compensation twice: first by ratcheting down their rates to a discounted fee schedule below the normal PIP fee schedule, and then applying a sliding-scale discount to those already-lowered payment levels.

As a matter of contract interpretation, this issue boils down to the meaning of Sections 1.1, 1.2, and 1.3 of the contractual "Fee Schedule" provision we have quoted above. In summary, the contract specifies that the providers will be paid the lesser amount called for under three distinct categories of fees: (1) CHN's current fee schedule; (2) any applicable fee mandated by the government; or (3) the provider's actual fees. Plaintiffs interpret these provisions to mean that multiple-procedure discounts can only apply in the second category, i.e., to government rates such as those reflected in the PIP regulations in the New Jersey Administrative Code. Plaintiffs contend that, unless the government rates (as discounted for multiple procedures) are below CHN's rate schedule, the normal CHN rates must control. They further argue that multiple-procedure discounts are exclusive to the government rate category, and are not to apply to CHN's rates. Otherwise, plaintiffs claim, they will receive drastically-reduced payments for patient services rendered in a multiple-procedure scenario.

Defendants, on the other hand, contend that the contract language fully authorizes the application of multiple-procedure discounts to CHN rates. Defendants note that there is nothing in the contractual language that precludes such discounting. They also argue that multiple-procedure discounts are consistent with public policy by reducing automobile insurance premiums, and that otherwise the providers would reap windfalls in collecting their full charges when patients receive multiple procedures in the same visit, despite the fact that less time ordinarily would be expended in those visits than if the patient's need had been addressed in successive visits.

Faced with these competing interpretations, the motion judge granted CHN's motion to dismiss the complaint, even though no discovery had been taken on the issue. The motion judge's analysis was largely predicated on our earlier opinion regarding CHN's network in Seaview, supra, 366 N.J. Super. 501.

The issue before us in Seaview was whether CHN's general contractual arrangements for discounting payments to PIP providers within its network violated the PIP statute and regulations, or other facets of our State's automobile insurance laws. In Seaview we held that CHN's contracts did not violate those laws and regulations, and that the contracts are "entirely compatible with the no-fault scheme." Id. at 518. In that regard, we noted that CHN's PPO network "tend[s] to lessen the monetary obligations of insurers and insureds, a consequence which meets with the legislative intent of containing medical costs, lowering insurance premiums and benefiting New Jersey's consumers." Ibid.

Seaview did not, however, address the specific question, now before us, of the propriety of applying multiple-procedure billing discounts to CHN's already-discounted fee schedule. Hence, the motion judge's misimpression that Seaview resolved that specific issue in favor of the defendants was erroneous, and, indeed, defendants did not attempt on appeal to advance that position. At most, Seaview supplies a public-policy context for examining this discrete issue of discounting, but does not resolve it.

Because the applicable contractual fee provisions are susceptible to reasonable competing interpretations on how much plaintiffs were entitled to be paid for multiple procedure visits, the contract is ambiguous. The ambiguity lies in the meaning in Section 1 of the term "the lesser" fee, and whether that meaning allows or disallows discounting for multiple-procedures of charges shown on CHN's fee schedule. Given that ambiguity, it was premature for the motion judge to resolve the issue in favor of defendants before discovery and a potential trial to ascertain the intent of the parties. See Great Atlantic & Pacific Tea Co., Inc. v. Checchio, 335 N.J. Super. 495, 502 (App. Div. 2000).

Although it may be appropriate on a motion to dismiss for a court to consider exhibits attached to a complaint, see, e.g., City of Pittsburgh v. West Penn Power Co., 147 F.3d 256, 259 (3d Civ. 1998)(applying the cognate provision at Fed. R. Civ. P. 12(b)(6)), the applicable test for whether a complaint survives such a motion under R. 4:6-2(e) merely requires that the non-movant show that a cause of action is "suggested" by the pleaded facts. Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989). We must search "the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary." Id., (quoting Di Cristofaro v. Laurel Grove Mem'l Park, 43 N.J. Super. 244, 252 (App. Div. 1957). At the preliminary, pre-discovery stage of the litigation, the court should not be "concerned with the ability of plaintiffs to prove the allegation[s] contained in the complaint[,]" and "[f]or purposes of analysis plaintiffs are entitled to every reasonable inference of fact." Ibid.

Plaintiffs have offered in their complaint, as illustrated by the sample EOB forms they attached as exhibits, at least a plausible contention that the contract should not be read to authorize multiple-procedure discounts below CHN's already- discounted rates. We note, however, that defendants' competing interpretation also has logical force and ties in with the public policy benefits of overall medical cost containment.

We simply cannot tell from the face of the contract documents which interpretation is most faithful to the intent of the parties. We are also deprived of any parol evidence or other extrinsic proofs, such as deposition transcripts and other documentation, that might aid us in divining what was intended in the contract on this score. See, e.g., Conway v. 287 Corporate Center Associates, __ N.J. __, __ (July 13, 2006), (slip. op. at 11-13) (noting the potential value of extrinsic evidence in "determining the intent and meaning" of an ambiguous contract). We also cannot discern from the face of the pleadings whether the drastic multiple-procedure discounts reflected in the sample EOB forms attached to the complaint are aberrational or, conversely, representative. Those proofs should be developed through discovery, with the possibility of post-discovery summary judgment motions to evaluate whether any genuine issues of material fact persist.

Accordingly, we vacate the dismissal of those aspects of the amended complaint alleging that CHN breached its contractual obligations to plaintiffs by permitting insurers in CHN's network to apply excessive discounts for multiple-procedure visits. We remand that claim for further discovery and further proceedings.

III.

As a second claim of insufficient compensation, plaintiffs allege that CHN breached their contracts by allowing insurers in the CHN network to apply improper discounts for certain medical procedures that were not listed on the CHN fee schedule. Plaintiffs contend that Sections 1.1 through 1.3 of Section 2.8 Fee Schedule in the contract, quoted above in Part II of this opinion, require that where a rate for a specific procedure is absent from the CHN fee schedule, the network insurer was obligated to pay the provider either the provider's usual charge or the ordinary PIP rate, whichever would be the lower of the two.

Defendants contend that the contract does not expressly preclude such so-called "off-schedule" discounting. They also point out that the CHN fee schedule attached to each provider's contract was merely a "sample," and that the contract recites in Section 2.8 that CHN's "current" fee schedule would control. The contract also reflects that "sample [fee schedules] are [to be] provided to [p]rovider[s] from time to time," suggesting that the fee schedule is subject to unilateral and periodic changes by CHN, including potential expansion to embrace other medical procedures, and that providers have no reason to rely on those "samples" as controlling future compensation levels. CHN further contends that the fee schedule attached to plaintiffs' complaint was only a "partial" schedule, and that the discounted services at issue actually were listed on a "fuller" fee schedule not appended to the complaint.

The motion judge dismissed this claim as well, again citing to Seaview as support for that disposition. However, Seaview does not address this specific question either.

Having now considered the matter ourselves, we conclude that the propriety of plaintiffs' claims regarding payment for "off-schedule" services is not ripe for disposition. We reach that conclusion for several reasons. First, there appears to be a significant factual dispute between the parties, one not amenable to a motion to dismiss or a pre-discovery motion for summary judgment, see Printing Mart, supra, 116 N.J. at 746, as to whether any so-called "off-schedule" discounting occurred at all, or whether plaintiffs are simply mistaken about the inclusivity of the prevailing fee schedule. Second, even if such discounting occurred, the contract again is ambiguous as to whether such discounting is permissible. We recognize that the goal of the CHN network is to manage medical costs while affording providers access to a wider network of insured patients, but those general objectives do not solve the particular question of whether off-schedule discounts were authorized, and, if so, how deep those discounts could be.

Accordingly, we likewise remand this discrete issue of alleged contractual breach for discovery and further proceedings.

IV.

Apart from their claims alleging insufficient compensation, plaintiffs also asserted what might be termed as "procedural" breaches by CHN in its administration of their respective contracts. In particular, plaintiffs allege that CHN breached their contracts by (1) failing to notify them of the addition of new insurer payors and of modifications from CHN's standard payment terms that CHN at times allowed for such new payors; (2) leasing network discounts without executing payor agreements; (3) failing to provide their patients with sufficient documentation identifying them as insureds of CHN network payors, and (4) failing to assure that their payors made timely payments and timely refunded improperly-taken discounts. Each of these claims were dismissed by the motion judge without extensive discussion.

All of these procedural claims are tied to specific provisions in CHN's provider agreements with plaintiffs. With respect to the addition of new payors, section 3.1.3 of the provider contracts specified:

3.1.3 If an additional Payor executes a Payor Agreement with CHN or an existing Payor revises a Payor Agreement and Section 3.1.2 applies, CHN shall provide notice to Provider of the identity of the Payor and any other information necessary for Provider to fulfill the obligations of Provider hereunder.

The contracts do not, however, specify any remedy if CHN failed to provide such timely notice to providers of a new payor's entry into the network.

Additionally, plaintiffs were entitled to receive notice of any modifications to CHN's standard payment terms which CHN granted to any payor, a right expressed in Section 3.2.1:

During the term of this Agreement, CHN may (i) modify the Standard Terms; (ii) create separate terms for various CHN programs; or (iii) negotiate individual terms with a Payor. CHN shall submit the modified or negotiated terms to Provider. Provider shall have the option to reject the negotiated terms by serving written notice of such rejection upon CHN within thirty (30) days of the effective date of the notice from CHN.

Unlike Section 3.1.3, this provision concerning contract modification did contain a remedy for lack of notice, namely, the right of a provider to reject the negotiated modification within thirty days. If the provider communicated such a timely objection to CHN, then Section 3.2.3 of the contract would relieve the provider of the obligation to accept patients covered by such a payor:

If [a] Provider rejects any terms negotiated with an Individual Payor, Provider shall not be required to provide Covered Services to Eligible Persons of such Payor.

Although the motion judge dismissed these lack-of-notice claims for slightly different reasons, we concur with his determination that they are not cognizable in these circumstances. As noted above, the provider contracts afforded plaintiffs no remedy for failing to receive notice of the entry of a new payor expected to abide by CHN's standard payment terms. Significantly, Section 3.1.3, as contrasted with Section 3.2.3, makes no mention of a provider's right to object to such a new payor, or to opt out of accepting that new payor's patients. The absence of this particular form of notice, one which may well have been included simply as an administrative courtesy to the providers, carries with it no corresponding remedy in the contract.

Plaintiffs rather abstractly argue that they were damaged by the entry of new payors into the network, without receiving advance notice of such entry, in that they each had standing relationships with some or all of those payors as PIP insurers. This meant that plaintiffs were, in some instances, sustaining a reduction in the PIP fees they were accustomed to receiving from those insurers, because the payors switched from the PIP fee schedule to the discounted CHN fee schedule. This reduction in the applicable fees is broadly identified in plaintiffs' complaint as a source of harm.

However, the complaint does not allege that, on balance, plaintiffs sustained a net loss of compensation when new payors were added to the CHN network. Indeed, the objective of the network was to offer providers a wider source of referrals and greater efficiencies in collecting payments, in exchange for accepting discounts on their fees. See Seaview, supra, 366 N.J. Super. at 507. Although plaintiffs may have received lower fees per each patient procedure when such payors joined the network, they also should have received the offsetting advantages of gaining access to a greater number of enrollees and the potential economies of scale associated with what is claimed to be "the largest preferred provider organization (PPO) in New Jersey." Ibid. The complaint does not allege that plaintiffs suffered a net detriment when additional payors were added to the network. As a matter of general contract law, a breach only gives rise to a cause of action where the obligee actually sustains injury. See Cumberland County Improvement Auth. v. GSP Recycling Co., 358 N.J. Super. 484, 503 (App Div.) certif. denied, 177 N.J. 222 (2003); Cromartie v. Carteret Sav. & Loan 277 N.J. Super. 88, 104 (App. Div. 1994). Here, the complaint falls short because it fails to allege that the fee discounts applied by the new payors exceeded the positive benefits to the providers flowing from the simultaneous expansion of the CHN referral network.

We also reject plaintiffs' claims pertaining to notice, both relative to the addition of new payors as well as relating to selective modifications allegedly afforded to some of those payors, given the ensuing considerable passage of time. Even though plaintiffs may not, as they allege in the complaint, have received formal notice that a new payor had been added and that the new payor may have negotiated with CHN a modification from the standard fee schedule, the EOB forms routinely transmitted to the providers with payments would have given plaintiffs actual notice of such developments. The EOB forms attached to plaintiffs' complaint as representative samples clearly show the identities of the payor insurance companies. The EOB forms also reflect which patient charges were approved, which payments were not approved, and the amount of each approved reimbursement. Despite that actual notice, plaintiffs each remained in the CHN network for many years and continued to accept patients and payments without invoking their right under Section 3.2.3 to abstain from treating patients from that referral source. Such inaction on the part of the plaintiffs, which does not appear to be disputed, undercuts any potential legal merit to plaintiffs' contention that they were truly harmed by the absence of formal notice from CHN.

Plaintiffs criticisms of CHN regarding inadequate patient documentation and untimely payments and refunds are likewise insufficient in these circumstances to support a viable cause of action for contractual breach.

On the documentation issue, we note that Section 2.7, Standard Term 6 ("Verification of Eligible Persons") of the provider contract only requires "appropriate written documentation" to be presented by each patient at the time of treatment. It is patent from the pleadings and their attachments that plaintiffs and their billing departments were well aware of the particular insurance companies covering their patients. Indeed, the underpayment claims presented in the complaint are founded upon a factual assumption that the providers pursued compensation from the identified insurers of each such patient, but received back less than what plaintiffs contend they deserved. There was no mystery regarding which insurers were involved. The in-network or out-of-network status of the payor insurance company would have been self-evident through review of the EOB Forms. We thus perceive no reason to set aside the motion judge's dismissal of those documentation claims.

With respect to alleged untimeliness of payments, credits and refunds, plaintiffs fail to support their claims of breach with citations to any particular promises or assurances from CHN on those timing matters in the provider contracts. Although the contracts do specify in Section 2.7, Standard Term 5 ("Time for Payments") a forty-five day period for payors to make payments, followed by a ninety-day period for the payor or the provider to obtain "recourse," the contracts are bereft of any specific provisions requiring CHN to respond to complaints of untimeliness within any particular time frame. The contracts do contain a very general provision obligating CHN to "administer" the provider network, but plaintiffs can point to no language in the contracts in which CHN was itself bound to act on administrative matters within any specified time frames. Moreover, if plaintiffs are successful in proving that they were undercompensated on the two particular issues we have remanded, they may have an ancillary claim for prejudgment interest, an issue that has not been briefed and one that we do not resolve at this time.

In sum, a careful examination of the pleadings, the relevant contract provisions, and other materials attached by plaintiffs as exhibits to their complaint, reveals no genuine legal basis for plaintiffs' claims for damage based upon CHN's alleged procedural lapses, particularly given plaintiffs' undisputed failure to cease doing business with CHN promptly after such alleged shortcomings would have been apparent. We therefore sustain the motion judge's dismissal of these discrete claims against CHN.

V.

In addition to alleging various contractual breaches by CHN, plaintiffs attempt in Count II of the complaint to plead an independent claim for breach of the implied covenant of good faith and fair dealing. Relying on the same general factual allegations recited in Count I, plaintiffs contend that CHN violated the implied covenant by failing to administer its network properly and by failing to take reasonable measures to prevent or remedy the alleged deficiencies. We sustain the dismissal of this claim.

To be sure, our courts have long recognized that there "is an implied covenant of good faith and fair dealing" in every contract. Onderdonk v. Presbyterian Homes of N.J., 85 N.J. 171, 182 (1981); see also Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396, 420 (1997). However, this implied duty of fair dealing does not "alter the terms of a written agreement." Rudbart v. N. Jersey Dist. Water Supply Comm'n, 127 N.J. 344, 366, cert. denied, 506 U.S. 871, 113 S. Ct. 203, 121 L. Ed. 2d 145 (1992).

In general, our case law has recognized the potential for such an independent cause of action based upon the covenant of good faith and fair dealing in three situations: (1) to allow the inclusion of additional terms and conditions not expressly set forth in the contract, but consistent with the parties' contractual expectations; (2) to allow redress for a contracting party's bad-faith performance of an agreement, when it is a pretext for the exercise of a contractual right to terminate, even where the defendant has not breached any express term; and (3) to rectify a party's unfair exercise of discretion regarding its contract performance. See Seidenberg v. Summit Bank, 348 N.J. Super. 243, 257, 260 (App. Div. 2002). Viewing plaintiffs' complaint with liberality under R. 4:6-2(e), we nevertheless are satisfied that the motion judge did not err in dismissing Count II of plaintiffs' complaint invoking the implied covenant.

Plaintiffs, in essence, contend that they were treated shabbily by CHN in order for CHN to reap a commercial advantage by expanding its network with more providers and more payors while overlooking the proper administration of its contracts. Even assuming, for the sake of argument, such irresponsible behavior on the part of CHN, we perceive no analytic reason why plaintiffs' surviving contract-based claims seeking additional compensation would not suffice, if proven on remand, to achieve a just result.

We discern no basis in the complaint to impute additional terms to the detailed contracts between CHN and its various providers. Nor does the complaint, as pleaded, offer sufficiently extreme facts to sustain a cause of action based upon a theory that CHN was performing its contractual duties in a "pretextual" manner to induce plaintiffs to terminate the relationship. If anything, it would appear that CHN would have a business motivation to keep providers such as plaintiffs within its network, not to expel them. Lastly, there are no portions of the standard provider contract cited by plaintiffs in which CHN was expressly reposed with discretion, thereby eliminating a covenant-based theory that CHN had abused its discretion.

In sum, plaintiffs' invocation of the implied covenant of good faith and fair dealing appears to be redundant and, at best, analytically tenuous. We therefore affirm the dismissal of Count II and leave plaintiffs to their surviving claims against CHN, predicated upon breaches of specific contractual terms regarding provider compensation.

VI.

We turn to plaintiffs' assorted claims against the defendant insurers. Although their complaint espouses various legal theories against the insurers, the essence of these claims is that the insurers allegedly should have paid more money to plaintiffs for treating their insured patients. Since the insurers were not in privity with plaintiffs, but rather dealt with plaintiffs under the umbrella of CHN's network, plaintiffs resort to legal doctrines other than contractual breach as their pleaded grounds for recovery against the insurers. In particular, plaintiffs invoke notions of unjust enrichment or quasi-contract; assignment; the implied covenant of good faith and fair-dealing; and the third-party beneficiary doctrine. The substance of those claims, however, is founded upon the same factual underpinnings presented in plaintiffs' claims against CHN.

We sustain the motion judge's dismissal of the claims against the insurers in their entirety. Even viewing, as we must, the complaint and the attached contractual documents in a generous fashion consistent with Printing Mart, supra, and R. 4:6-2(e), we agree with the motion judge that the claims against the insurers are not viable and that plaintiffs' recourse, if any, lies solely against CHN.

Plaintiffs' contracts with CHN require that any billing disputes between the providers and the payors shall be addressed with dispatch. More specifically, we note that Section 2.7, Standard Term 5.2 of the CHN standard provider contract established a mutual ninety-day deadline, both for providers and payors, to pursue any recourse against one another over billing disputes:

5.2 Payment by Payor of any claim shall be final ninety (90) days after payment and neither Payor or Provider shall have further recourse.

This plain language thus deems payment by the defendant insurers to plaintiffs as "final," declaring that neither the provider nor the payor would have further "recourse" following ninety days after the receipt of such a payment for a particular patient service. This time limitation, of course, offered reciprocal advantages to the plaintiffs, as they were able to rely upon the finality of payment revenues received from the payors after ninety days had elapsed without fear of demands for reimbursement or disgorgement.

Despite this contractually-specified time bar, plaintiffs attempt to resurrect their payment grievances with the insurers in this lawsuit filed in May 2003, complaining about payments on services provided as long ago as 1995 through 2001, by which point, according to the complaint, all of the named plaintiffs had left CHN's network. The motion judge appropriately recognized the pleaded claims against the insurers as an improper attempt to circumvent the bargained-for contractual time limits. There is nothing unconscionable about enforcing those time constraints particularly where, as here, plaintiffs are not individual patients but rather healthcare professionals and business enterprises. Simply stated, plaintiffs' claims against the insurers for additional payments are way out of time.

Although it is not necessary to our analysis, we also note that we harbor serious doubts about the substantive viability of plaintiffs' legal theories against the defendant insurers. Plaintiffs' unjust enrichment/quasi-contract theory against the insurers is contrary to the general, although not immutable, principle that "there is no ground for imposing an additional obligation [under quasi-contract or unjust enrichment] when there is a valid unrescinded contract that governs [the parties'] rights." Shalita v. Twp of Washington, 270 N.J. Super. 84, 90-91 (App Div. 1994). Even if that obstacle were overcome, we perceive no conduct by the insurers here that was so patently unjust as to warrant an independent cause of action, particularly if plaintiff may obtain recourse on the discrete remanded underpayment issues against CHN.

As to plaintiffs' claim that they may pursue relief from the insurers as assignees of these patients' interests, we note that the statute of limitations to recover PIP benefits is two years, see N.J.S.A. 39:6A-13.1, and that plaintiffs' complaint filed in May 2003 would appear to be more than two years after most, if not all, of the payments were rendered to plaintiffs by the insurers for the services they provided between 1995 and 2001. See Lech v. State Farm Ins. Co., 335 N.J. Super. 254, 258 (App Div. 2000) ("an assignee's rights can be no greater than those of the assignor").

We also perceive no indication that plaintiffs would have been intended as third-party beneficiaries in CHN's contracts with the various insurer defendants, and that the providers' legal status concerning those contracts is, at best, merely incidental. See Reider Communities, Inc. v. N. Brunswick Twp., 227 N.J. Super. 214, 222 (App. Div.), certif. denied, 113 N.J. 638 (1988) (incidental third-party beneficiaries have no cause of action to enforce contractual promises).

Lastly, we reject plaintiffs' claims of breach of the implied covenant of good faith and fair dealing by the defendant insurers for similar reasons as those expressed concerning CHN in Part V of this opinion.

Hence, we affirm the dismissal of the insurer defendants, there being no timely assertion by plaintiffs against the insurers of claims upon which relief against those defendants may be granted. R. 4:6-2(e).

Affirmed as to the dismissal of the claims against insurer defendants; affirmed in part and vacated in part as to the claims against defendant CHN; remanded for further proceedings consistent with this opinion.

 
 

Plaintiffs specifically are Berlin Medical Associates, P.A., Delran Chiropractic, P.A., Joseph Hassman and Leonard Strobel. A fifth original plaintiff, Berlin Physical Therapy, was deleted when the complaint was amended. Because the legal analysis herein turns on no facts specific to any of the individually named plaintiffs we shall refer to them generically as "plaintiffs" throughout this opinion.

See generally our prior overview of CHN's contractual scheme in Seaview Orthopaedics v. Nat'l Healthcare Resources, Inc., 366 N.J. Super. 501, 505-507 (App. Div. 2004). For sake of brevity, we incorporate by reference here the factual background recited in Seaview.

The insurer defendants are Allstate New Jersey Insurance Company, Prudential Property and Casualty, Insurance Company of America, Selective Insurance Company, Liberty Mutual Insurance Company, and four Liberty Mutual affiliates (Liberty Mutual Fire Insurance Company, Liberty Mutual Insurance Group, Liberty Insurance Corporation and Liberty Mutual Managed Care, Inc.)

When plaintiffs amended the complaint in March 2004, they attached to it additional exhibits, including CHN's New Jersey Fee Schedule (effective June 1, 1998) and three sample Explanation of Benefit ("EOB") forms transmitted by several of the defendant insurers to Berlin Medical Associates in April, May, July and September 2000.

In a chart presented in their brief, which tracks a sample EOB Form involving three multiple procedures, plaintiffs depict how a $31.00 charge would get discounted down to only $4.50 if such "double-dipping" were permitted.

The miscellaneous documents supplied in the record by CHN, all of which are extraneous to the complaint, do not eliminate the need for a remand. The excerpt from CHN's 1996 Provider Manual does not specify the discount percentages that apply to multiple procedures, nor the interplay between the CHN rates and the PIP rates in that context. Also, CHN's December 17, 1997 letter notifying plaintiffs about the multiple-procedure discounts for physical therapy, effective February 1, 1998, does not resolve the propriety of such discounts taken for procedures not involving physical therapy, nor resolve the propriety of any discounts taken before February 1, 1998. The enforceability of that letter notice and its consistency with the contract language is also not self-evident on this incomplete record.

For similar reasons, we reject plaintiffs' effort in predicating a cause of action for contractual breach based upon the alleged absence of formal written agreements with certain new payors when they joined the network.

The complaint alludes to conduct by CHN as late as 2002, a time frame that presumably includes periods of claims administration after the contract terms ended.

This disposition makes it unnecessary for us to reach the insurer defendants' affirmative defenses of ratification and laches.

(continued)

(continued)

33

A-3034-04T5

August 3, 2006