BENTON – U.S. District Judge Philip Gilbert didn't just read briefs as he pondered whether to dismiss a class action suit against Travelers Insurance.

He dug into reports of the U.S. Senate, Congress and national associations of doctors and hospitals.

On that firm foundation, he dismissed the suit.

Here are excerpts of his July 24 order:

"Health insurance plans can be broadly divided into two large categories: indemnity plans (also referred to as 'reimbursement' plans), and managed care plans.

"Indemnity plans reimburse the patient for his medical expenses regardless of who provides the service. Managed care plans, on the other hand, involve an arrangement between the insurer and a selected network of health care providers…

"A Preferred Provider Organization (PPO) is a managed care technique that has risen in popularity in recent years. Parties to a typical PPO include a health care provider, a PPO network administrator, and various kinds of payors…

"The contract between the provider and the PPO network administrator is the 'provider agreement.' The contract between the PPO network administrator is the 'payor agreement'...

"A silent PPO is a term of art for a kind of PPO abuse. Essentially, a silent PPO occurs when a payor receives a PPO discount to which he is not entitled...

"In a silent PPO, after the patient pays his share of the bill and the provider submits the outstanding balance to the payor for payment, the payor…proceeds to pay the provider at the PPO discounted rate, instead of the usual and customary rate.

"If the payor and provider are both members of the PPO, this discount payment may constitute a breach of the PPO contract…

"Plaintiff Kathleen Roche is a licensed health care provider who signed an agreement with First Health Group…

"Defendant The Travelers Indemnity Company signed a payor agreement with First Health…

"Roche contends that the provider agreement and the payor agreement together constitute a contract between herself and TIC. One term of the payor contract is that TIC will 'to the extent permitted under law, direct claimants to contract providers…

"In 2003, Roche treated a patient, who was a covered claimant under a TIC worker's compensation insurance policy…neither TIC nor First Health referred the patient…

"TIC tendered payment to Roche at the PPO discounted rate...

"Roche contends that TIC was not entitled to take the PPO discount and is liable to her for the difference between her usual and customary rate and the PPO rate TIC paid.

"Roche advances the alternate theories of breach of contract, unjust enrichment, and violation of the Illinois Consumer Fraud Act…

"TIC contends that if the Court does not dismiss Roche's claims, it should at least refer them to the Industrial Commission.

"Courts should refer claims to the Industrial Commission when the Commission's technical expertise would help resolve the controversy. However, issues of law, such as contract disputes, are 'the particular province of the courts…

"TIC argues that the Court should dismiss Roche's breach of contract claims because Roche was neither a party nor a third party beneficiary to the payor agreement…

"Roche counters that the provider agreement and the payor agreement must be read together, as one instrument. Therefore, Roche argues, she is a party to the contract she alleges was breached…

"Applying Illinois law, the Court concludes that Roche cannot maintain her breach of contract claims.

"Under Illinois law, 'different instruments executed by the same parties, at the same time, for the same purpose, and in the course of the same transaction, are regarded as one instrument and will be read and construed together…

"Here, the provider agreement was entered into in March 1996 and the payor agreement was entered into in November 1999, over three years apart. The only party in common to the two agreements is First Health, which is not a party to the case at bar.

"Although the two agreements refer to the existence of each other, neither of them identifies who will be party to the other…

"In sum, Roche asks the Court to read documents executed years apart together in such a way as to form a contract between parties who were unaware of the identity of each other at the time the documents were executed and in contravention of the express language of the documents.

"In Illinois, one who is not a party to the contract she seeks to enforce must sue under a third party beneficiary theory…

"Indeed, as TIC points out, the payor agreement expressly disclaims any intent to create any third party beneficiary status or any rights in any person not a party to the contract.

"Because Roche does not allege third party beneficiary status and because she is not a party to the contract whose terms were breached, the Court dismisses Count I of the third amended complaint, alleging breach of contract…

"Plaintiffs are permitted to plead alternative, even inconsistent, theories of recovery. Therefore, the mere fact that Roche alleges both breach of contract (based on an express contract) and unjust enrichment (based on an implied contract) dealing with the same subject matter is not grounds for dismissal…

"First, Roche incorporates the allegations of her breach of contract count into her unjust enrichment count. Second, Roche alleges that TIC was unjustly enriched when it 'failed to provide the bargained for exchange to plaintiff and the class by retaining the PPO discounts.'

"This is merely a reiteration of plaintiff's earlier breach of contract claim. Therefore, the Court finds that this count was not properly pled.

"However, the court will allow plaintiff an opportunity to correct the deficient pleading…The court grants Roche 30 days from entry of this order in which to file an amended complaint properly pleading unjust enrichment.

"Roche alleges that TIC violated the Illinois Consumer Fraud Act…TIC contends that Roche's claims…are improperly based on an alleged breach of contract, and that they are insufficient as a matter of law…

"Here, Roche realleges that TIC claimed it was entitled to the PPO discount, knowing that it was in breach of its contractual obligations. While this may be 'unfair' in the colloquial meaning of the word, these allegations cannot support an ICFA claim.

"Roche also alleges that TIC's operation of a silent PPO oppressively reduces the reasonable reimbursement of health care providers without the reciprocal steerage in violation of public policy.

"In other words, the fact that TIC purports to be part of a PPO but does not provide steerage to the providers of that PPO is an unfair or deceptive practice, because without steerage there is no legitimate PPO.

"In the context of the Lanham Act, the Seventh Circuit roundly rejected this contention.

"The Seven Circuit distinguished between 'directed PPOs," those that steer patients toward network providers, and 'non-directed PPOs' that do not. Both may properly use the term 'PPO'…

"TIC belongs to a PPO network which allegedly employs the business model of a non-directed PPO.

"Because the use of the term PPO is an accurate description of such a business model, TIC has not engaged in fraudulent conduct by purporting to be a member of a PPO.

"To the extent that Roche asserts that Illinois law requires a PPO payor to provide steerage, this argument, too, must fail.

"The Illinois Health Care Reimbursement Reform Act of 1985…clearly allows PPOs to provide incentives for patients to use certain providers. However, the language is permissive only, not mandatory...

"Therefore, even accepting as true all factual allegations in the complaint, Roche has not alleged any conduct by TIC that violates Illinois law or policy or that constitutes an unfair or deceptive practice.

"Therefore, Count III fails to state a claim under the ICFA. Accordingly, the Court dismisses Count III.

"The Court dismisses Counts I and III with prejudice. The Court dismisses Count II without prejudice."

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