A Different Kind of 'Excessive Fees' Case…

December 4, 2008 (PLANSPONSOR.com) - The U.S. District Court for the Nortern District of Texas has denied class action certification for a case in which a hospital employee accused her employer of causing an employees' health care plan to pay the hospital excessive fees for medical services it rendered to plan participants.

Joan Ned-Sthran alleges in her suit that Methodist Hospitals of Dallas, MedHealth, Methodist Transplant Physicians, Physician Associates of Southwest Dallas, Timothy M. Meeks, and John F. Lacy breached their fiduciary duties under Sections 404, 405, and 406 of the Employee Retirement Income Security Act (ERISA) by engaging in self-dealing and prohibited transactions that resulted in excessive charges for health services and caused losses to the self-funded health plan and its participants.

Ned-Sthran further alleges that her employer artificially increased required contributions to the Methodist Employee Group Health Plan and charged participants amounts in excess of those allowed by the Consolidated Omnibus Budget Reconciliation Act (COBRA), effectively denying participants their COBRA rights.

In denying the request for class certification, U.S. District Judge Ed Kinkeade said the need to conduct individualized inquiries on issues of liability and injury – in addition to individual damages – creates a situation in which every issue prior to damages is not common. Kinkeade added that determining the injuries of participants would require individualized examinations of their employment, contributions to and participation in the plan, and extensive damages calculations for each participant.

“[For monetary damages, there is no formula to be applied to the whole, and indeed, each putative class member’s damages could be very different. Many participants in the Plan could gain nothing,” the opinion said.

In addition, Kinkeade noted that Ned-Sthran requests significant, specific injunctive relief to restructure the entire plan, which would affect participants in different ways, and “could be procedurally unfair to those participants who are satisfied with the Plan as presently structured.”