                                                      NO. 5-08-0578
                    N O TIC E
 O pinion   filed    M arch     14,   2011.
 M odified upon denial of rehearing
                                                         IN THE
 M ay 9, 2011.
                                              APPELLATE COURT OF ILLINOIS

                                                    FIFTH DISTRICT


COY CHIROPRACTIC HEALTH CENTER,                                       )   Appeal from the
INC., RICHARD COY, D.C., and FRANK C.                                 )   Circuit Court of
BEMIS & ASSOCIATES, d/b/a BEMIS                                       )   Madison County.
CHIROPRACTIC, Individually and on Behalf                              )
of Others Similarly Situated,                                         )
                                                                      )
            Plaintiffs-Appellees,                                     )
                                                                      )
v.                                                                    )   No. 05-L-151
                                                                      )
TRAVELERS CASUALTY AND SURETY                                         )
COMPANY and THE TRAVELERS                                             )
INDEMNITY COMPANY,                                                    )   Honorable
                                                                      )   Daniel J. Stack,
            Defendants-Appellants.                                    )   Judge, presiding.


            JUSTICE SPOMER delivered the judgment of the court, with opinion.
            Justices Stewart and Wexstten concurred in the judgment and opinion.

                                                      OPINION

            The defendants, Travelers Casualty and Surety Company and The Travelers Indemnity

Company (Travelers), appeal the October 14, 2008, order of the circuit court of Madison

County that granted the motion for a class certification filed by the plaintiffs, Coy

Chiropractic Health Center, Inc., Richard Coy, D.C., and Frank C. Bemis & Associates,

doing business as Bemis Chiropractic, individually and on behalf of others similarly situated.

In its order, the circuit court certified the following class:

            "All licensed healthcare providers in Illinois whose reimbursement for medical

            services covered by a workers' compensation policy was reduced by Travelers

            pursuant to a PPO discount since February 11, 2005."

            Upon the denial of a rehearing, we issue this modified opinion, and for the following

                                                           1
reasons, we reverse and remand for further proceedings not inconsistent with this opinion.

                                             FACTS

       According to the plaintiffs' first amended complaint, the plaintiffs entered into

contracts with First Health and its predecessor, Community Care Network (CCN), under

which the plaintiffs agreed to participate in a preferred provider network. Pursuant to these

preferred provider agreements, the plaintiffs agreed to accept discounted reimbursements

from payor insurance companies, health care plans, or claims administrators with whom First

Health and CCN had contracted. According to the plaintiffs, Travelers discounted bills from

the plaintiffs without steering patients to the plaintiffs by offering financial incentives to their

insureds for utilizing the plaintiffs as their provider. The plaintiffs' theory is that because,

in the context of workers' compensation, insurance companies cannot provide financial

incentives to patients to steer them toward a network provider and the use of financial

incentives is the only true method of steering patients, Travelers is not entitled to take

preferred provider organization (PPO) discounts on bills for workers' compensation patients

submitted by network providers such as the plaintiffs.

       In count I, the plaintiffs alleged that this practice of discounting bills without

providing financial incentives amounted to a violation of Illinois's Consumer Fraud and

Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq. (West

2004)) because Travelers misrepresented to the plaintiffs that they were entitled to a PPO

discount. In count II, the plaintiffs alleged unjust enrichment by Travelers as a result of this

practice. In count III, the plaintiffs alleged an alternative cause of action for a breach of

contract. Finally, in count IV, the plaintiffs alleged a civil conspiracy based on Travelers'

practice of entering into PPO networks with no intention to provide financial incentives to

its insureds for utilizing the network. The circuit court dismissed count IV prior to ruling on

the motion for a class certification. The order dismissing count IV is not a subject of this


                                                 2
appeal.

       Exhibit A to the first amended complaint is a preferred provider agreement entered

into between First Health and Richard Coy, one of the named plaintiffs in this action, dated

August 1, 2007. In section 1.5 of the preferred provider agreement, Dr. Coy agrees to the

following:

       "Provider understands that by execution of this Agreement, Provider agrees to

       participate in a Preferred Provider Panel (PPO Plan) being created by First Health.

       Provider further understands that First Health will offer to certain Payors the

       opportunity to contract with First Health to utilize the services of the health care

       providers participating in the Preferred Provider Panel. Payors may elect to use some

       or all of the providers participating in First Health's PPO plan. First Health will

       supply Provider with a list of all Payors that have entered into Agreements with First

       Health to utilize Provider's services."

       Section 3.1 of the preferred provider agreement reads as follows:

       "Subject to Provider's available facilities and service capability, Provider shall provide

       Covered Medical Services to Participating Patients promptly and in the same manner

       as services are provided to all patients. In providing services to Participating Patients

       under the Workers' Compensation Program, Provider agrees to cooperate with the

       Payor to expedite the Participating Patient's return to work, consistent with Provider's

       professional judgment." (Emphasis added.)

       In section 3.6 of the preferred provider agreement, Dr. Coy agrees to "use his best

efforts, in accordance with accepted professional standards for rendering quality care, to

make referrals of Participating Patients only to other health care practitioners and facilities

that participate in a First Health PPO Plan." In section 4.3 of the preferred provider

agreement, Dr. Coy "agrees to accept the reimbursement amounts specified in Appendix A


                                                 3
as payment in full for Covered Medical Services rendered to Participating Patients."

Appendix A shows reimbursement discount rates for all types of medical services, including

a provision for reimbursement from workers' compensation payors for services rendered to

occupationally ill or injured employees. No provision in the preferred provider agreement

promises Dr. Coy any steerage or financial incentives.

       Although the preferred provider agreement between Dr. Frank Bemis and First

Health's predecessor, CCN, is not appended to the first amended complaint in the record on

appeal, it does appear elsewhere in the record. The form of this agreement differs from that

of the Coy/First Health Network agreement. However, there is a similar provision whereby

Dr. Bemis promises to provide services to patients and to accept discounted reimbursements

from those health plans and insurance companies that CCN contracts with as payors. Dr.

Bemis also promises to refer patients within the network whenever possible. It is also clear

from the Bemis/CCN agreement that workers' compensation services are within its scope.

Again, no provision in that agreement promises Dr. Bemis any steerage or financial

incentives.

       In affidavits attached to the complaint, both Dr. Bemis and Dr. Coy averred that they

had no knowledge of whether Travelers had a payor agreement with First Health or CCN.

However, a "Managed Care Services Agreement" (payor agreement) dated March 28, 1996,

between Travelers and HealthCare Compare, another predecessor corporation to First Health,

appears in the record under seal. The initial term of the payor agreement was for five years

and nine months beginning on March 28, 1996, and ending on December 31, 2001, to be

automatically renewed for consecutive three-year terms unless terminated by either party.

In this payor agreement, Travelers was promised, for a substantial fee, access to the network

and medical cost management services for its workers' compensation claims. Nowhere in

this contract does Travelers promise to provide financial incentives to any patient to utilize


                                              4
a network provider. The only promises Travelers makes in the payor agreement are to

distribute materials to customers, educate employers on how to access the network, and direct

claimants to contract providers to the extent permitted under applicable law. The payor

agreement also specifies that there are no intended third-party beneficiaries.

       Documents entitled "Explanation of Reimbursement" (EOR) that Travelers sent to the

plaintiffs explaining the PPO discount were also appended to the complaint. Each EOR

states that the bills submitted to Travelers were being "reimbursed in accordance with the

First Health Network contract (formerly Affordable)." Hundreds of pages of deposition

testimony and exhibits from various employees of Travelers and First Health, as well as the

named plaintiffs, are also contained in the record and may be referred to if necessary

throughout this opinion.

       On October 14, 2008, after considering all the pleadings and oral argument by

counsel, the circuit court entered an order granting the motion for a class certification. After

this court denied Travelers' petition for leave to appeal, the Illinois Supreme Court issued a

supervisory order on May 28, 2009, directing this court to consider the matter on its merits.

Coy Chiropractic Health Center, Inc. v. Travelers Casualty & Surety Co., 232 Ill. 2d 578

(2009). After briefing and oral argument, we filed an opinion on March 14, 2011, reversing

the order granting class certification and remanding for further proceedings not inconsistent

with our opinion. On March 25, 2011, the plaintiffs filed a petition for a rehearing. Upon

the denial of a rehearing, we now issue this modified opinion.

                                         ANALYSIS

       Section 2-801 of the Illinois Code of Civil Procedure sets forth the prerequisites

needed in order to maintain a class action. 735 ILCS 5/2-801 (West 2006). These were

recently summarized by the Illinois Supreme Court as follows:

       "(1) the class is so numerous that joinder of all members is impracticable; (2) there


                                               5
       are questions of fact or law common to the class, which common questions

       predominate over any questions affecting only individual members; (3) the

       representative parties will fairly and adequately protect the interests of the class; and

       (4) the class action is an appropriate method for the fair and efficient adjudication of

       the controversy." Barbara's Sales, Inc. v. Intel Corp., 227 Ill. 2d 45, 71-72 (2007).

       "The decision regarding class certification is within the discretion of the trial court and

will not be disturbed on appeal unless the trial court abused its discretion or applied

impermissible legal criteria." Cruz v. Unilock Chicago, Inc., 383 Ill. App. 3d 752, 761

(2008) (citing Smith v. Illinois Central R.R. Co., 223 Ill. 2d 441, 447 (2006)). "The

proponent of the class action bears the burden to establish all four of the prerequisites set

forth in section 2-801." Cruz, 383 Ill. App. 3d at 761 (citing Avery v. State Farm Mutual

Automobile Insurance Co., 216 Ill. 2d 100, 125 (2005)). However, as indicated by the

Illinois Supreme Court in Barbara's Sales, Inc., there is no need to determine whether the

prerequisites of the class action are satisfied if, as a threshold matter, the record establishes

that the plaintiffs have not stated an actionable claim. 227 Ill. 2d at 72.

       Although the first amended complaint first alleges a violation of the Consumer Fraud

Act in count I based on a purported misrepresentation by Travelers that it was entitled to take

a PPO discount, in oral argument, the plaintiffs stated that this is really an alternative theory

to their breach-of-contract claim in count III. According to the plaintiffs' representations at

oral argument, their alternative theories in count I and count III can be stated as follows:

Travelers breached its contract with the plaintiffs by taking the PPO discounts from the

plaintiffs' bills while knowing that it did not provide a financial incentive to the workers'

compensation claimants to utilize the plaintiffs' services; alternatively, in the absence of a

contract, Travelers misrepresented its status as a network provider to the plaintiffs when it

took the PPO discounts, thus violating the Consumer Fraud Act. Based on the plaintiffs'


                                                6
representations regarding their theory of their case, we begin by examining the breach-of-

contract claim.

       Concerning the plaintiffs' claim for a breach of contract, the record is clear that the

plaintiffs and Travelers never entered into a contract directly. Instead, the plaintiffs entered

into preferred provider agreements with First Health and its predecessor, CCN, promising

to accept payments at discounted rates from any payor with whom First Health contracted.

Neither Bemis's preferred provider agreement with CCN nor Coy's preferred provider

agreement with First Health contained provisions promising any particular steerage or

financial incentive to the plaintiffs. Even if it could be said that the plaintiffs are third-party

beneficiaries to the payor agreement, the payor agreement does not contain any language

mandating that Travelers provide financial incentives to a patient in order to take a PPO

discount. Rather, in the payor agreement, Travelers pays First Health a substantial fee to

access the network. The only promises that Travelers makes in the payor agreement are to

educate employers, maintain provider directories, and steer claimants to network providers

"as permitted by applicable law." Assuming that the term "steer" can be defined to require

the use of financial incentives, the plaintiffs' theory is that because Illinois workers'

compensation law makes it impossible to provide financial incentives to injured workers to

utilize a certain provider, taking the discounts is unlawful. This theory is belied by the

provision in the payor agreement that Travelers must only direct patients to network

providers "as permitted by applicable law."

       In their petition for a rehearing, the plaintiffs contend that this court has

misapprehended their theory and that Travelers was, in fact, permitted by applicable law in

Illinois to provide financial incentives to patients to choose a particular provider from the

network in the workers' compensation context. The plaintiffs refer this court to section 8(a)

of the Workers' Compensation Act (820 ILCS 305/8(a) (West 2008)), which provides that


                                                7
the employee may at any time elect to secure his own physician, surgeon, or hospital services

at the employer's expense but provides for the following alternative arrangement for the

selection of a second physician if the employee is not satisfied with the physician first

selected:

               "Upon agreement between the employer and the employees, or the employees'

       exclusive representative, and subject to the approval of the Illinois Workers'

       Compensation Commission, the employer shall maintain a list of physicians, to be

       known as a Panel of Physicians, who are accessible to his employees. The employer

       shall post this list in a place or places easily accessible to his employees. The

       employee shall have the right to make an alternative choice of physician from such

       Panel if he is not satisfied with the physician first selected."

       The plaintiffs also refer this court to the provision in section 8(a) of the Workers'

Compensation Act (820 ILCS 305/8(a) (West 2008)) that limits the employee to two choices

of providers and then provides, "Thereafter the employer shall select and pay for all

necessary medical, surgical and hospital treatment and the employee may not select a

provider of medical services at the employer's expense ***."

       The plaintiffs argue that in the foregoing situations, where the employees and

employer have agreed to have the employer choose a panel for second-choice providers or

where the employee has exhausted his or her two choices of provider, Travelers would have

the ability to provide financial incentives to the employee because if the employee chooses

a different provider, the employee will have to pay the full cost of treatment. However, the

existence of these limited situations where steerage may be feasible does not render the

plaintiffs' cause of action for a breach of contract against Travelers a viable one. The

plaintiffs do not allege that these situations applied in either of their cases and that Travelers

failed to provide steerage despite the existence of these situations. In addition, the class is


                                                8
not defined to include only those providers who treated patients in those situations. To the

extent that the plaintiffs argue that they expected that discounts would only be taken in these

situations and not in employee-choice situations, this expectation is belied by the contract

language. Again, the provider agreements state that the plaintiffs will provide treatment to

workers' compensation beneficiaries at a discounted rate. The provider agreements do not

delineate that the providers only need to accept a discount rate in those situations where there

has been some type of steerage. The payor agreements only required Travelers to provide

steerage "as permitted by applicable law." The contracts at issue simply do not support a

breach-of-contract claim based on the plaintiffs' theory.

       Finally, the plaintiffs argue in their petition for a rehearing that because the payor

agreements at issue in this case only required Travelers to steer "to the extent permitted by

applicable law," the agreements are contrary to how a PPO is meant to operate and what

Illinois administrative regulations require of PPO arrangements. Specifically, the plaintiffs

point to section 2051.55(c)(1)(A) of Title 50 of the Illinois Administrative Code (50 Ill.

Adm. Code §2051.55(c)(1)(A), amended at 22 Ill. Reg. 5126, eff. Dec. 9, 1997, and repealed

at 34 Ill. Reg. 161, eff. Dec. 16, 2009), which provided that the payor agreement "shall

contain terms requiring that incentives be provided to the insured or beneficiary to utilize the

services of a provider that has entered into an agreement with the administrator." The new

requirements for payor agreements, found at section 2051.280(a) of Title 50 of the Illinois

Administrative Code (50 Ill. Adm. Code §2051.280(a), adopted at 34 Ill. Reg. 163, 177, eff.

Dec. 16, 2009) provide that they must contain "[t]erms requiring and specifying all incentives

to be provided to the beneficiary to utilize services of a provider that has entered into an

agreement with the administrator."

       The plaintiffs argue that the aforementioned regulations should be read into the payor

agreements at issue as an implied term. There are two problems with this argument. First,


                                               9
in order to give the effect to the regulations that the plaintiffs endorse, that financial

incentives are required in every situation, this court would have to nullify the language of the

contract that steerage is only required "as permitted by applicable law." The plaintiff has

provided no authority, and this court is aware of none, that would permit such a rewriting of

the contracts. Second, assuming that the payor agreements at issue somehow violated these

administrative regulations due to the limiting language requiring Travelers to steer only "to

the extent permitted by applicable law," the remedy for that violation is not a cause of action

for a breach of contract against Travelers.        The regulations set forth by the Illinois

Department of Insurance govern the PPO administrators, who drafted the provider and payor

agreements. In addition, the administrators are required to place samples of all payor

agreements and provider agreements with the Illinois Department of Insurance as a part of

their registration process. See 50 Ill. Adm. Code §2051.260, adopted at 34 Ill. Reg. 163, 175,

eff. Dec. 16, 2009. It is the province of the Department of Insurance, and not this court, to

determine whether the payor agreements met the requirements of the regulations. For all of

these reasons, the plaintiffs do not have an actionable claim against Travelers for a breach

of contract.

       We next examine the plaintiffs' claim for a violation of the Consumer Fraud Act. The

Consumer Fraud Act prohibits the use of unfair or deceptive business practices, "including

but not limited to the use or employment of any deception, fraud, false pretense, false

promise, misrepresentation or the concealment, suppression or omission of any material fact."

815 ILCS 505/2 (West 2006). The elements of a Consumer Fraud Act action are as follows:

       "(1) a deceptive act or practice by the defendant, (2) the defendant's intent that the

       plaintiff rely on the deception, (3) the occurrence of the deception in the course of

       conduct involving trade or commerce, and (4) actual damage to the plaintiff (5)

       proximately caused by the deception." Avery, 216 Ill. 2d at 180.


                                              10
       In the first amended complaint, the plaintiffs allege that Travelers misrepresented to

them that Travelers was entitled to a PPO discount. To the extent that the plaintiffs are

arguing that Travelers was not entitled to a PPO discount because it failed to steer the

patients to the plaintiffs as required by any purported contracts, the plaintiffs are simply

realleging a breach of contract, which is not actionable under the Consumer Fraud Act.

Avery, 216 Ill. 2d at 169. To the extent that the plaintiffs are alleging that Travelers

misrepresented the fact that it belonged to the First Health workers' compensation network,

it is clear from the record that Travelers did belong to that network. Again, the preferred

provider agreements plainly show that the plaintiffs contracted to receive discounted

reimbursements for workers' compensation claims from payors that contract with First

Health. The payor agreement produced under seal between Travelers and First Health's

predecessor, HealthCare Compare, reveals that Travelers was a part of the workers'

compensation network. In a deposition, Brian Jans of First Health also recognized Travelers

as being a part of First Health's workers' compensation network, and the record includes First

Health's workers' compensation client lists, which include Travelers as an Illinois workers'

compensation payor. There is absolutely no dispute regarding whether Travelers and First

Health had a payor agreement covering workers' compensation claims at the time that

Travelers took the PPO discounts on the plaintiffs' bills. Accordingly, Travelers' statement

to the plaintiffs on the EORs that it took a discount in accordance with the First Health

network contract is not an actionable misrepresentation under the Consumer Fraud Act.

       We next address the plaintiffs' claim for unjust enrichment. Although the decision in

Roche v. Travelers Property Casualty Insurance Co., No. 07-cv-302-JPG (S.D. Ill. 2009)

(unpublished order), is not precedential, we find Judge Gilbert's analysis to be highly

persuasive. As Judge Gilbert recognized, in order to recover under a theory of unjust

enrichment, a plaintiff must allege that the defendant unjustly retained a benefit to the


                                             11
plaintiff's detriment and that the defendant's retention of the benefit violates fundamental

principles of justice, equity, and good conscience. Roche, No. 07-cv-302-JPG, order at 3

(citing B&B Land Acquisition, Inc. v. Mandell, 305 Ill. App. 3d 1068, 1073 (1999)). Here,

the plaintiffs allege that Travelers retained a benefit to their detriment by not paying the full

amount of the bills the plaintiffs submitted to Travelers on behalf of the injured workers

and/or their employers. However, as explained above, the plaintiffs promised to accept those

reimbursements from any payor in the First Health network, and the record establishes that

Travelers was a part of that network. Moreover, the services the plaintiffs rendered were to

the injured workers and/or their employers, not to Travelers. To the extent that a quasi-

contract arose for the reasonable price of the plaintiffs' services, it arose between the

plaintiffs and the injured workers and/or their employers, who are obligated by virtue of

Illinois workers' compensation law to pay for the injured workers' treatment. To the extent

that the plaintiffs are asserting their patients' right to workers' compensation coverage from

Travelers, as the employer's insurer, they are bound to the exclusive remedy provisions of the

Illinois Workers' Compensation Act (820 ILCS 305/18 (West 2006) (workers' compensation

payment disputes must be submitted for determination to the Illinois Workers' Compensation

Commission)).

       As explained above, the record establishes that Travelers had a legal basis for taking

the PPO discounts placed at issue by the named plaintiffs in this case in that the plaintiffs

promised First Health or its predecessor, CCN, in their preferred provider agreements that

they would accept reimbursements at discounted rates from payors, including workers'

compensation payors, that First Health contracted with to be a part of its network. Despite

their deposition testimony that they expected that every patient for whom discounts would

be taken would be steered to them by the payor by the use of financial incentives, no such

promise was contained in the preferred provider agreements or in the payor agreement


                                               12
between Travelers and First Health's predecessor, HealthCare Compare. Because the

plaintiffs have not stated a valid claim for relief against Travelers, the circuit court abused

its discretion in certifying the class. See Barbara's Sales, Inc. v. Intel Corp., 227 Ill. 2d 45,

72 (2007).

                                       CONCLUSION

       For the foregoing reasons, the order of the circuit court of Madison County granting

the plaintiffs' motion for a class certification is reversed, and this cause is remanded for

further proceedings not inconsistent with this opinion.



       Reversed; cause remanded.




                                               13
                                         NO. 5-08-0578

                                            IN THE

                               APPELLATE COURT OF ILLINOIS

                                  FIFTH DISTRICT
___________________________________________________________________________________

      COY CHIROPRACTIC HEALTH CENTER,                    )     Appeal from the
      INC., RICHARD COY, D.C., and FRANK C.              )     Circuit Court of
      BEMIS & ASSOCIATES, d/b/a BEMIS                    )     Madison County.
      CHIROPRACTIC, Individually and on Behalf           )
      of Others Similarly Situated,                      )
                                                         )
            Plaintiffs-Appellees,                        )
                                                         )
      v.                                                 )     No. 05-L-151
                                                         )
      TRAVELERS CASUALTY AND SURETY                      )
      COMPANY and THE TRAVELERS                          )
      INDEMNITY COMPANY,                          )     Honorable
                                                  )     Daniel J. Stack,
           Defendants-Appellants.                 )     Judge, presiding.
___________________________________________________________________________________

Opinion Filed:                                 March 14, 2011
Modified Opinion on Denial of Rehearing Filed: May 9, 2011
___________________________________________________________________________________

Justices:          Honorable Stephen L. Spomer, J.

                 Honorable Bruce D. Stewart, J., and
                 Honorable James M. Wexstten, J.,
                 Concur
___________________________________________________________________________________

Attorneys        Troy A. Bozarth, HeplerBroom LLC, 130 North Main Street, P.O. Box 510,
for              Edwardsville, IL 62025, Robert C. Johnson, Sonnenschein, Nath & Rosenthal LLP,
Appellant        7800 Sears Tower, 233 South Wacker Drive, Chicago, IL 60606, Lisa M. Lilly,
                 Lisa M. Lilly, LLC, 20 South Clark Street, Suite 410, Chicago, IL 60603
___________________________________________________________________________________

Attorneys        Robert W. Schmieder, II, LakinChapman, LLC, 300 Evans Ave., P.O. Box 229,
for              Wood River, IL 62095-0229, Timothy F. Campbell, Campbell & McGrady
Appellee         Law Office, 3017 Godfrey Road, P.O. Box 505, Godfrey, IL 62035
___________________________________________________________________________________
