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Eagle Air Med Corp. v. Sentinel Air Medical Alliance LLC

United States District Court, D. Utah, Central Division

January 25, 2018

EAGLE AIR MED CORPORATION; and VALLEY MED FLIGHT, INC., Plaintiffs,
v.
SENTINEL AIR MEDICAL ALLIANCE, LLC, and JEFFREY FRAZIER, Defendants.

          ORDER AND MEMORANDUM DECISION

          TENA CAMPBELL U.S. DISTRICT COURT JUDGE

         Plaintiffs Eagle Air Med Corporation (Eagle) and Valley Med Flight, Inc. (Valley) (collectively “Plaintiffs”) operate air ambulance services. According to the Plaintiffs, Defendants Sentinel Air Medical Alliance, LLC, and Jeffrey Frazier, who review bills submitted by medical air transport companies to health care insurers, injured Eagle when they recommended that insurers pay only some, or none, of the Plaintiffs' bills. Those statements, according to Plaintiffs, were defamatory.

         The Defendants have filed a motion for partial judgment on the pleadings asking the court to dismiss claims for general and presumed damages associated with the Plaintiffs's defamation cause of action[1] because the allegations do not support an award of such damages. For the reasons set forth below, the motion is denied.

         STANDARD OF REVIEW

         Under the Federal Rules of Civil Procedure, a Rule 12(c) motion for judgment on the pleadings is reviewed under the standard applicable to Rule 12(b)(6) motions to dismiss. Atlantic Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1160 (10th Cir. 2000). The court must accept all well-pleaded factual allegations as true and view them in a light most favorable to the non-movant, while giving no weight to labels and legal conclusions. Sanchez v. United States Dep't of Energy, 870 F.3d 1185, 1199 (10th Cir. 2017). To survive the motion, the Plaintiffs must allege a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is plausible on its face if the facts alleged allow the court to reasonably infer that the defendant is liable for the misconduct described in the complaint. Id.

         FACTUAL ALLEGATIONS [2]

         Eagle and Valley, who provide air ambulance services, specialize in emergency care and transport of patients in need of such transportation from small rural area hospitals to larger care facilities in metropolitan areas. They provide care and transport to a patient only after the treating physician has determined that such transport is medically necessary and has summoned Eagle and Valley for that purpose.

         Eagle and Valley submit their bills to the patient's insurance company, which then reviews the claim through an insurance adjuster or ERISA[3] plan administrator. In some instances, the plan administrator[4] hires a consultant to review the provider's bill and opine on whether the billed services are “Usual, Customary, and Reasonable” (a term of art in ERISA). Defendant Sentinel Air Medical Alliance (Sentinel) provides such consulting services to plan administrators who review air ambulance bills like those submitted by the Plaintiffs.

         In this case, Sentinel reviewed a series of Eagle's and Valley's bills and strongly recommended that the plan administrators either not pay the bills or reduce payment significantly because the charges were not reasonable or necessary. According to Eagle and Valley, plan administrators “have failed to pay a total of at least $816, 716.38 towards invoices for air transport services rendered by Eagle and Valley on behalf of patients covered by the Plans based on similar determinations and recommendations made by Sentinel and Frazier.” (First Am. Compl. ¶ 33.) They allege that the plan administrators' “refusal to pay in full for Eagle's and Valley's services is based upon Sentinel's and Frazier's multiple material misrepresentations of Eagle's and Valley's operational costs and the medical necessity of Eagle's and Valley's services.” (Id. ¶ 36.) These representations “falsely stated or implied that Eagle and Valley are dishonest, unethical, and fraudulent in their billing and other business practices.” (Id. ¶ 36.)

         In their defamation claim, the Plaintiffs allege approximately $689, 000 in special damages. (Id. ¶ 82.) But they also claim presumed damages (available under a “defamation per se” theory) and general damages (i.e., “damage to their reputations and loss of goodwill and competitive position in the air ambulance industry as a result of Sentinel's and Frazier's defamation statements and implications” (id.).)

         The Plaintiffs focus on Sentinel's comments to several plan administrators as well as statements to others in the air ambulance industry, including “patients, hospitals, doctors and other health care providers.” (Id. ¶ 85.) They specifically allege the following:

• Defendants accused them of significantly over-billing patients and submitting charges to the insurers that “are among the most egregious in the industry.” (Id. ¶ 48.) Allegedly the Defendants grossly understated Plaintiffs' operating costs to the plan administrators, quoting an amount approximately ten times less than the Plaintiffs' actual costs. (Id. ¶ 43.) For example, a plan administrator, who hired the Defendants to determine whether Valley's charges were reasonable, said the Defendants' “‘analysis revealed that [Valley's] charges amount to over 560 percent of the Medicare reimbursement rate'” and “‘over 500 percent of the cost of providing the service[.]'” (Id. ¶ 32 (emphasis added).) Another plan administrator, similarly citing to a report from the Defendants, determined that Eagle's charges were unreasonable and egregious because they “‘represent almost 1100 percent of the Medicare reimbursement rate and almost 1600 percent of the cost of providing the service.'” (Id. ¶ 31 (emphasis added).)
• Defendants falsely represented that the Plaintiffs transport patients when it is not medically necessary, bill for the unnecessary service, and then try to explain the medical necessity of their transports and defend the charges by using “a bunch of smoke” and “a lot of bluster.” (Id. ¶ 48.)
• Defendants told plan administrators that the Plaintiffs “‘notify the beneficiary and let them know they are on the hook for the [balance], in the hopes they will be scared into coercing their employer into paying the ...

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