Aylward v. SelectHealth, Inc et al

Filing 65

ORDER: Defendant SelectHealth, Inc.'s Motion for Summary Judgment against Plaintiff Naomi J. Aylward (ECF No. 43 ) is granted. Plaintiff Naomi J. Aylward's Motion for Partial Summary Judgment against Defendant SelectHealth, Inc. (ECF No. 44 ) is denied. Plaintiff Naomi J. Aylward's Motion to Strike (ECF No. 48 ) is denied as moot. Plaintiff Naomi J. Aylward's Renewed Motion to Exclude (ECF No. 49 ) is denied as moot. Signed by Judge William Q. Hayes on 6/1/2020. (ag)

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2967 Page 1 of 17

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

SOUTHERN DISTRICT OF CALIFORNIA

10
11
12
13

NAOMI J. AYLWARD
individually and as personal
representative for the Estate of
Philip Aylward,

Case No.: 3:18-cv-00494-WQH-MDD
ORDER
Plaintiff,

14
15

v.

16
17

SELECTHEALTH, INC., a Utah
corporation, dba SelectHealth; and
DOES 1-25 inclusive,

18

Defendants, and

19

JEFF AYLWARD, an individual, and
TODD AYLWARD, an individual,

20

Nominal Defendants.

21
22

HAYES, Judge:

23

The matters before the Court are Defendant SelectHealth, Inc.’s Motion for

24

Summary Judgment against Plaintiff Naomi J. Aylward (ECF No. 43); Plaintiff Naomi J.

25

Aylward’s Motion for Partial Summary Judgment against Defendant SelectHealth, Inc.

26

(ECF No. 44); Plaintiff Naomi J. Aylward’s Motion to Strike (ECF No. 48); and Plaintiff

27

Naomi J. Aylward’s Motion to Exclude (ECF No. 49).

28
1
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2968 Page 2 of 17

1
2

I.

PROCEDURAL BACKGROUND
Plaintiff is the wife of the deceased, Philip E. Aylward. On July 13, 2017, Plaintiff

3

was appointed personal representative for the Estate of Philip Aylward.

4

SelectHealth, Inc. dba SelectHealth (“SelectHealth”) is an insurance benefits company.

Defendant

5

On January 9, 2018, Plaintiff, individually and as personal representative for the

6

Estate of Philip Aylward, filed a Complaint in the Superior Court of California for the

7

County of San Diego, assigned case number 37-2018-00001278-CU-PO-CTL, against

8

Defendants SelectHealth and SelectHealth Benefit Assurance Company, Inc. Plaintiff

9

brought various claims against Defendants arising from their administration of Aylward’s

10
11
12

Medicare plan and Aylward’s death.
On March 7, 2018, Defendants removed the action to this Court on the basis of
diversity jurisdiction. (ECF No. 1).

13

On March 9, 2018, Defendants filed a Motion to Dismiss, or in the Alternative,

14

Transfer Venue. (ECF No. 2). On July 26, 2018, the Court denied Defendants’ Motion to

15

Dismiss, or in the Alternative, Transfer Venue. (ECF No. 13).

16

On November 12, 2018, Plaintiff filed a First Amended Complaint. (ECF No. 26).

17

Plaintiff alleges that, on October 28, 2016, Philip Aylward died in San Diego, California

18

“while waiting for a lung transplant.” Id. at 8. Plaintiff alleges the following nine causes

19

of action: (1) negligence (survivorship); (2) negligence (wrongful death); (3) negligent

20

misrepresentation

21

misrepresentation) (survivorship and wrongful death); (5) bad faith tort (survivorship and

22

wrongful death); (6) failure to properly investigate claim (survivorship and wrongful

23

death); (7) breach of duty to inform insured of rights (survivorship and wrongful death);

24

(8) negligent infliction of emotional distress (wrongful death); (9) intentional infliction of

25

emotional distress (wrongful death).

(survivorship

and

wrongful

death);

(4)

fraud

(intentional

26

Plaintiff seeks “money damages … as Personal Representative of the Estate of Philip

27

Aylward from Defendants as a survivorship action in a sum to be determined at trial and

28

representing funeral expenses, medical expenses, economic damages, punitive damages
2
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2969 Page 3 of 17

1

and attorney fees incurred as the direct and proximate result of Defendants’ conduct ….”

2

Id. at 24-25. Plaintiff further seeks “money damages … individually for the wrongful death

3

of Philip Aylward in a sum to be determined at trial and representing Plaintiff’s medical

4

expenses, funeral expenses, economic damages for loss of future support and household

5

contribution, as well as non-economic damages for loss of society, protection,

6

companionship, comfort and emotional distress, punitive damages and attorney fees

7

incurred as a direct and proximate result of Defendants’ conduct ….” Id. at 25.

8

On October 11, 2019, Defendant SelectHealth filed a Motion for Summary

9

Judgment against Plaintiff. (ECF No. 43). On the same day, Plaintiff filed a Motion for

10

Partial Summary Judgment against Defendant SelectHealth (ECF No. 44) and a Motion

11

for Entry of Default against Nominal Defendants (ECF No. 45). On November 4, 2019,

12

Defendant SelectHealth filed a Response in opposition to Plaintiff’s Motion for Partial

13

Summary Judgment. (ECF No. 46). On the same day, Plaintiff filed a Response in

14

opposition to Defendant SelectHealth’s Motion for Summary Judgment (ECF No. 47); a

15

Motion to Strike (ECF No. 48); and a Renewed Motion to Exclude (ECF No. 49). On

16

November 11, 2019, Plaintiff filed a Reply in support of her Motion for Partial Summary

17

Judgment. (ECF No. 53). On the same day, Defendant SelectHealth filed a Reply in

18

support of its Motion for Summary Judgment. (ECF No. 54).

19

On November 25, 1019, Defendant SelectHealth filed a Response in opposition to

20

Plaintiff’s Motion to Strike (ECF No. 56) and a Response in opposition to Plaintiff’s

21

Renewed Motion to Exclude (ECF No. 57). On December 2, 2019, Plaintiff filed a Reply

22

in support of her Motion to Strike (ECF No. 58) and a Reply in support of her Renewed

23

Motion to Exclude (ECF No. 59). On December 10, 2019, Plaintiff filed a Sur-Reply in

24

opposition to Defendant SelectHealth’s Motion for Summary Judgment. (ECF No. 61).

25

On January 9, 2020, the Court heard oral argument on Defendant SelectHealth’s

26

Motion for Summary Judgment and Plaintiff’s Motion for Partial Summary Judgment.

27

(ECF No. 64).

28
3
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2970 Page 4 of 17

1

II.

FACTS

2

In August of 2014, Philip E. Aylward (“Aylward”) was seen at the University of

3

Washington Medical Center and diagnosed “with pulmonary fibrosis, likely IPF”

4

(idiopathic pulmonary fibrosis). Ex. 1 to Rossman Decl., ECF No. 44-4 at 2, 9.

5

In the fall of 2015, Aylward enrolled in a SelectHealth Advantage insurance plan

6

(“the Plan”) with an effective date of January 1, 2016. “SelectHealth Advantage plans are

7

Medicare benefit and supplemental insurance plans which provide all the benefits to which

8

Aylward was entitled under Medicare and are administered privately by [Defendant]

9

SelectHealth.” Def. SelectHealth’s Resp. to Pl.’s Statement of Facts ¶ 3, ECF No. 46-1 at

10

2; Pl.’s Resp. to Def. SelectHealth’s Statement of Undisputed Facts ¶ 1, ECF No. 47-1 at

11

2. “The Plan adopts the standard ‘medical necessity’ definition under Medicare and

12

specifically provides that medical services are covered if medically necessary which means

13

‘services, supplies, or drugs are needed for prevention, diagnosis, or treatment of your

14

medical condition and meet accepted standards of medical practice.’” Def. SelectHealth’s

15

Resp. to Pl.’s Statement of Facts ¶ 3, ECF No. 46-1 at 2; Pl.’s Resp. to Def. SelectHealth’s

16

Statement of Undisputed Facts ¶ 1, ECF No. 47-1 at 2 (quoting Ex. 2 to Rossman Decl.,

17

ECF No. 44-5 at 59). The Plan covers “transplants” with “prior authorization.” Ex. 2 to

18

Rossman Decl., ECF No. 44-5 at 75, 44-6 at 1.

19

Defendant SelectHealth states in its Member Handbook that “[a] standard coverage

20

decision means [Defendant SelectHealth] will give [the patient] an answer within 14

21

calendar days after” the patient’s request is received. Id., ECF No. 44-7 at 44. The Member

22

Handbook further states that “[a] fast coverage decision means [Defendant SelectHealth]

23

will answer within 72 hours” “if using the standard deadlines could cause serious harm to

24

[the patient’s] health or hurt [the patient’s] ability to function.” Id. at 44-45. However, “if

25

… some information that may benefit [the patient] is missing …, or if [the patient] need[s]

26

time to get information to [Defendant SelectHealth] for the review,” a fast determination

27

can be extended “up to 14 more calendar days.” Id. at 44.

28
4
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2971 Page 5 of 17

1
2
3

In January 2016, Aylward’s treating physician in Boise, Idaho referred Aylward to
the University of California at San Diego (“UCSD”) for a lung transplant consultation.
On January 26, 2016, a preauthorization request for a lung transplant consultation at

4

UCSD was submitted to Defendant SelectHealth.

5

SelectHealth denied the UCSD preauthorization request because Aylward “ha[d] not

6

utilized in network providers for [the] consultation.” Ex. 5 to Rossman Decl., ECF No. 44-

7

11 at 4. On January 31, 2016, Aylward faxed an appeal to Defendant SelectHealth. On

8

February 1, 2016, Defendant SelectHealth approved the preauthorization request for a lung

9

transplant consultation at UCSD.

On January 29, 2016, Defendant

10

On February 10, 2016, Aylward met with Dr. Gordon Yung, the lung transplant

11

specialist at UCSD, for a lung transplant evaluation. Dr. Yung described Aylward as “a

12

66-year-old male with progressive idiopathic pulmonary fibrosis despite treatment.” Ex. 8

13

to Def. SelectHealth’s Motion for Summary Judgment, ECF No. 43-3 at 138. Dr. Yung

14

recommended that Aylward “be evaluated for lung transplantation, but given his age, this

15

should be done as soon as possible.” Id.

16

On March 7, 2016, UCSD requested “evaluation/work-up for lung transplant”

17

including tests listed in an Evaluation/Work-up List. Ex. 6 to Rossman Decl., ECF No. 44-

18

12 at 2-7.

19

evaluation/work-up at UCSD.

On March 10, 2016, Defendant SelectHealth approved the request for

20

On August 22, 2016, UCSD requested preauthorization for a single lung transplant.

21

On August 23, 2016, Defendant SelectHealth received a preauthorization request for

22

consultation and evaluation of a possible lung transplant from Dr. Rajaj Walia at St.

23

Joseph’s Hospital and Medical Center in Phoenix, Arizona (“St. Joseph’s”). On the same

24

day, Defendant SelectHealth’s employee informed a St. Joseph’s employee over the phone

25

“that … Aylward’s plan did not generally provide for out-of-network benefits and that one

26

of the requested codes was not covered ….” Def. SelectHealth’s Resp. to Pl.’s Statement

27

of Facts ¶ 10, ECF No. 46-1 at 7; see also Pl.’s Resp. to Def. SelectHealth’s Statement of

28

Undisputed Facts ¶ 18, ECF No. 47-1 at 9. During the phone call, the St. Joseph’s
5
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2972 Page 6 of 17

1

employee asked that the St. Joseph’s request “be evaluated for potential out-of-network

2

services” and Defendant SelectHealth’s employee agreed to do so. Def. SelectHealth’s

3

Resp. to Pl.’s Statement of Facts ¶ 10, ECF No. 46-1 at 7.

4

On August 26, 2016, Aylward met with Dr. Yung at UCSD. During the meeting,

5

Aylward and Dr. Yung discussed the possibility of dual listing Aylward at UCLA/Cedars

6

and St. Joseph’s.

7

On August 30, 2016, Defendant SelectHealth approved UCSD’s preauthorization

8

request for a single lung transplant. On the same day, St. Joseph’s provider called

9

Defendant SelectHealth to check on the status of the preauthorization request for

10

consultation and evaluation at St. Joseph’s and was informed that the request was pending.

11

On August 31, 2016, Defendant SelectHealth’s case manager Karen Hudson worked

12
13
14
15
16
17
18
19
20
21
22

on the preauthorization request from St. Joseph’s and sent the case for physician review.
On September 1, 2016, Defendant SelectHealth denied the preauthorization request
for consultation and evaluation at St. Joseph’s stating:
Additional services out of network are not covered as the patient has already
been approved for out of network services and has had an evaluation and
work-up for lung transplant. Additional duplication services are not shown
to be medically necessary and are not covered.
Ex. 9 to Rossman Decl., ECF No. 44-15 at 9. On the same day, Hudson called Aylward to
inform him of the decision. During the phone call, Aylward informed Hudson that he
would appeal the decision.
On September 7, 2016, Aylward was listed at UCSD for a lung transplant.
On October 4, 2016, Aylward met with Dr. Yung at UCSD. Dr. Yung noted that

23

Aylward “would like to look into both UCLA/Cedars and St. Joseph in Arizona” for double

24

listing and “will contact [Dr. Yung’s] office once [a] decision is made.” Ex. 8 to Def.

25

SelectHealth’s Motion for Summary Judgment, ECF No. 43-3 at 27.

26
27

On October 7, 2016, Aylward faxed a letter to Defendant SelectHealth requesting
“double list[ing] and … a fast appeal” of Defendant SelectHealth’s denial of the

28
6
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2973 Page 7 of 17

1

preauthorization request for consultation and evaluation at St. Joseph’s. Ex. 19 to Rossman

2

Decl., ECF No. 44-25 at 2. Aylward stated in the letter that the requests were based on his

3

age, the rapid progression of his disease, and the “availability of sound lungs.” Id. Aylward

4

stated that Dr. Yung had encouraged the appeal and that “UCSD had completed only 10

5

lung transplants [while] St. Joseph’s had completed 90 based on lung availability” in 2016.

6

Id. On the same day, Defendant SelectHealth created an appeal file for its denial of the

7

preauthorization request for consultation and evaluation at St. Joseph’s.

8

Schonrock, Defendant SelectHealth’s medical director, testified that she denied Aylward’s

9

request for an expedited appeal and designated the appeal as “standard” “because

10

[Aylward] was already on a transplant list” at UCSD. Schonrock Dep., ECF No. 44-27 at

11

5.

Dr. Krista

12

On October 14, 2016, Defendant SelectHealth granted Alyward’s appeal and

13

allowed “for consultation only” at St. Joseph’s but made “no exception” for the requested

14

evaluation and testing. Ex. 22 to Rossman Decl., ECF No. 44-28.

15

On October 17, 2016, Defendant SelectHealth informed St. Joseph’s of the decision.

16

On the same day, St. Joseph’s requested preauthorization for “a set of different, non-

17

duplicative, tests it wanted to perform.” Def. SelectHealth’s Resp. to Pl.’s Statement of

18

Facts ¶ 17 ECF No. 46-1 at 21; see also Pl.’s Resp. to Def. SelectHealth’s Statement of

19

Undisputed Facts ¶ 32, ECF No. 47-1 at 15.

20

On October 22, 2016, Dr. Schonrock approved the preauthorization request from St.

21

Joseph’s but only for “any testing that has not been previously done ….” Ex. 23 to

22

Rossman Decl., ECF No. 44-29 at 3.

23

On October 24, 2016, Dr. Yung at UCSD referred Aylward to Dr. Walia at St.

24

Joseph’s for lung transplant evaluation. Dr. Yung explained that “the purpose of this

25

referral is for double-listing” and that Aylward “is currently actively listed at [UCSD].”

26

Ex. 8. to Def. SelectHealth’s Motion for Summary Judgment, ECF No. 43-3 at 151.

27
28
7
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2974 Page 8 of 17

1

On October 26, 2016, Defendant SelectHealth sent Aylward a letter authorizing the

2

“consult[ation] and testing for a lung transplant” at St. Joseph’s. Ex. 25 to Rossman Decl.,

3

ECF No. 44-31 at 2.

4
5

On October 28, 2016, Aylward died in San Diego.
III.

CONTENTIONS OF THE PARTIES

6

Defendant SelectHealth requests that the Court enter judgment in Defendant

7

SelectHealth’s favor as to all of Plaintiff’s claims. Defendant SelectHealth contends that

8

Plaintiff’s claims arise under the Medicare Act and must be administratively exhausted

9

prior to judicial review. Defendant SelectHealth contends that it was not obligated to

10

authorize Aylward’s consultation and evaluation at St. Joseph’s, a second out-of-network

11

facility. Defendant SelectHealth contends that its actions did not cause Aylward’s death.

12

Defendant SelectHealth contends that Plaintiff fails to state a claim for infliction of

13

emotional distress. Defendant SelectHealth contends that Plaintiff’s claims for bad faith

14

based on alleged failure to inform, fraud, and negligent misrepresentation fail.

15

Plaintiff contends that her claims do not arise under the Medicare Act and do not

16

require administrative review. Plaintiff contends that Aylward’s preauthorization request

17

for consultation and evaluation at St. Joseph’s was covered under the Plan and that the

18

request was medically necessary. Plaintiff contends that there is no genuine issue of

19

material fact that Defendant SelectHealth engaged in bad faith by breaching its duty to

20

properly investigate Aylward’s preauthorization request for consultation and evaluation at

21

St. Joseph’s. Plaintiff contends that Defendant SelectHealth would have discovered that

22

the preauthorization request was medically necessary had it conducted a reasonable

23

investigation in August or early September of 2016. Plaintiff requests that the Court grant

24

partial summary judgment in Plaintiff’s favor as to Plaintiff’s fifth cause of action for bad

25

faith tort.

26

IV.

STANDARD OF REVIEW

27

“A party may move for summary judgment, identifying each claim or defense—or

28

the part of each claim or defense—on which summary judgment is sought.” Fed. R. Civ.
8
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2975 Page 9 of 17

1

P. 56(a). “The court shall grant summary judgment if the movant shows that there is no

2

genuine dispute as to any material fact and the movant is entitled to judgment as a matter

3

of law.” Id. A material fact is one that is relevant to an element of a claim or defense and

4

whose existence might affect the outcome of the suit. See Matsushita Elec. Indus. Co., Ltd.

5

v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The materiality of a fact is determined

6

by the substantive law governing the claim or defense. See Anderson v. Liberty Lobby,

7

Inc., 477 U.S. 242, 248 (1986).

8

The party moving for summary judgment “bears the [initial] burden of establishing

9

the basis for its motion and identifying evidence that demonstrates the absence of a genuine

10

issue of material fact.” Davis v. U.S., 854 F.3d 594, 598 (9th Cir. 2017) (citing Celotex

11

Corp. v. Catrett, 477 U.S. 317, 323 (1986)). For “an issue on which the nonmoving party

12

bears the burden of proof,” the movant discharges its summary judgment burden by

13

“pointing out … an absence of evidence to support the nonmoving party’s case” and not

14

by “negating the opponent’s claim.” Celotex, 477 U.S. at 323, 325 (emphasis in original).

15

The burden then shifts to the nonmovant to provide admissible evidence, beyond the

16

pleadings, of specific facts showing a genuine issue for trial. See Anderson, 477 U.S. at

17

256. To survive summary judgment, the nonmovant cannot rest solely on conclusory

18

allegations of fact or law. See Berg v. Kincheloe, 794 F.2d 457, 459 (9th Cir. 1986). “If

19

the [nonmovant] stated only conclusions, and not ‘such facts as would be admissible in

20

evidence,’ then it would be too conclusory to be cognizable ….” U.S. v. Shumway, 199

21

F.3d 1093, 1103-04 (9th Cir. 1999) (citing Fed. R. Civ. P. 56(e)). Instead, the nonmovant

22

must designate which specific facts show that there is a genuine issue for trial. See

23

Anderson, 477 U.S. at 256. “In short, what is required to defeat summary judgment is

24

simply evidence ‘such that a reasonable juror drawing all inferences in favor of the

25

respondent could return a verdict in the respondent’s favor.’” Zetwick v. Cty. of Yolo, 850

26

F.3d 436, 441 (9th Cir. 2017) (quoting Reza v. Pearce, 806 F.3d 497, 505 (9th Cir. 2015)).

27

The nonmoving party’s evidence is to be believed, and all justifiable inferences are

28

to be drawn in their favor. See Anderson, 477 U.S. at 256. The nonmoving party’s
9
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2976 Page 10 of 17

1

declaration or sworn testimony “is to be accepted as true….” Leslie v. Grupo ICA, 198

2

F.3d 1152, 1159 (9th Cir. 1999) (ellipsis in original).

3

V.

DISCUSSION

4

Defendant SelectHealth contends that Plaintiff’s claims arise under the Medicare

5

Act and must be exhausted through Medicare administrative processes before proceeding

6

to judicial review. Defendant SelectHealth contends that the Court must analyze and apply

7

the Medicare Act to determine whether Defendant SelectHealth delayed approval of the

8

preauthorization requests by incorrectly determining that the requests were duplicative and

9

medically unnecessary. Defendant SelectHealth further contends that the Court must

10

analyze and apply the Medicare Act to determine whether Defendant SelectHealth failed

11

to provide proper notice to Aylward of his right to appeal. Defendant SelectHealth

12

contends that Plaintiff’s claims are preempted and that the Court lacks subject matter

13

jurisdiction over this action.

14

Plaintiff contends that her claims do not arise under the Medicare Act and that

15

administrative review is not required. Plaintiff asserts that no claims have been brought

16

for payment of benefits pursuant to the Plan. Plaintiff contends that the claims are not

17

preempted and that the court has subject matter jurisdiction over this action. Plaintiff

18

contends that claims arising from the denial of benefits are not preempted because Plaintiff

19

is not seeking to recover benefits.

20

a. Administrative Review

21

“The [Medicare] Act’s exhaustion requirement, 42 U.S.C. § 405(h), makes judicial

22

review under a related provision, 42 U.S.C. § 405(g), ‘the sole avenue for judicial review’

23

for claims ‘arising under the Medicare Act.’” Do Sung Uhm v. Humana, Inc., 620 F.3d

24

1134, 1140 (9th Cir. 2010) (quoting Heckler v. Ringer, 466 U.S. 602, 614-15 (1984))

25

(internal quotations omitted).

26
27
28

The Supreme Court has held that the exhaustion requirement of § 405(g)
consists of a non-waivable requirement that a claim for benefits shall have
been presented to the Secretary, and a waivable requirement that the
administrative remedies prescribed by the Secretary be pursued fully by the
10
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2977 Page 11 of 17

1
2
3
4

claimant. Only once the Secretary has issued a final decision may the
individual seek judicial review of that determination. A final decision is
rendered only after the individual has pressed his claim through all levels of
administrative review. In sum, jurisdiction over cases arising under Medicare
exists only under 42 U.S.C. § 405(g), which requires an agency decision in
advance of judicial review.

5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

Id. (internal quotations marks, brackets, and citations omitted).
“The key inquiry in determining whether § 405(h) requires exhaustion before [this
Court] can exercise jurisdiction is whether the claim ‘arises under’ the [Medicare] Act.”
Id. at 1141 (quoting Ardary v. Aetna Health Plans of California, Inc., 98 F.3d 496, 499
(9th Cir. 1996)). “The Supreme Court has identified two circumstances in which a claim
‘arises under’ the Medicare Act: (1) where the ‘standing and the substantive basis for the
presentation of the claims’ is the Medicare Act; and (2) where the claims are ‘inextricably
intertwined’ with a claim for Medicare benefits.” Id. (quoting Heckler, 466 U.S. at 61415). In this case, the Medicare Act is not the standing and substantive basis for Plaintiff’s
claims because Plaintiff brings state common law claims. See ECF No. 26 at 8-24.
However, “even a state law claim may ‘arise under’ the Medicare Act.” Do Sung Uhm,
620 F.3d at 1142 (quoting Kaiser v. Blue Cross of California, 347 F.3d 1107, 1113-15 (9th
Cir. 2003)).

Therefore, the Court must determine whether Plaintiff’s claims are

“inextricably intertwined” with a claim for Medicare benefits. Id. at 1141 (quoting
Heckler, 466 U.S. at 614).
“One category of claims that … courts have found to ‘arise under’ the Act are those
cases that are ‘[c]leverly concealed claims for benefits.’” Id. (quoting Kaiser, 347 F.3d at
1112) (second alteration in original). “[W]hether or not plaintiffs seek reimbursement of
benefits is not ‘strongly probative’ of whether a claim ‘arises under’ the Medicare Act”
because “the remedy sought [is not] dispositive of the ‘arising under’ question.” Id. at
1142 (quoting Kaiser, 347 F.3d at 1112). “In sum, … where, at bottom, a plaintiff is
complaining about the denial of Medicare benefits … the claim ‘arises under’ the Medicare
Act.” Id. at 1142-43.
11
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2978 Page 12 of 17

1

In Ardary, plaintiffs, the surviving family members of a deceased Medicare

2

beneficiary, alleged that defendant, a private Medicare provider, explicitly promised the

3

Medicare beneficiary and her family that under defendant’s plan, should the need arise,

4

defendant would immediately authorize transfer to a larger hospital for emergency care

5

because the Medicare beneficiary lived in a relatively isolated area. See Ardary, 98 F.3d

6

at 497. The complaint alleged that the Medicare beneficiary enrolled in defendant’s plan

7

based on these representations and that defendant refused to authorize airlift transportation

8

to a larger hospital when the Medicare beneficiary subsequently suffered a heart attack.

9

See id. at 497-98. Plaintiffs, the deceased Medicare beneficiary’s heirs, filed a wrongful

10

death suit alleging negligence, intentional and/or negligent infliction of emotional distress,

11

intentional and/or negligent misrepresentation, and professional negligence. See id. at 498.

12

The Court of Appeals set out the following jurisdictional question:

13

does the Medicare Act, which provides for exclusive administrative review
of all claims “arising under” that Act, apply to preclude the heirs of a
deceased Medicare beneficiary from bringing state law claims for wrongful
death against a private Medicare provider when those claims do not seek
recovery of Medicare benefits but instead seek compensatory and punitive
damages on the grounds that the provider both improperly denied emergency
medical services and misrepresented its managed care plan to the
beneficiary?

14
15
16
17
18
19

Id. at 499. The Court of Appeals held that even though plaintiffs’ “wrongful death

20

complaint [wa]s ‘predicated on’ [defendant]’s failure to authorize the airlift transfer, the

21

claims [we]re not ‘inextricably intertwined’ because [plaintiffs] [we]re at bottom not

22

seeking to recover benefits” and the death “[could not] be remedied by the retroactive

23

authorization or payment of the airlift transfer.” Id. at 500 (emphasis in original) (citation

24

omitted); see also Hofler v. Aetna US Healthcare of California, Inc., 296 F.3d 764, 766,

25

769-70 (9th Cir. 2002), abrogated by Martin v. Franklin Capital Corp., 546 U.S. 132

26

(2005) (wrongful death claim alleging that defendant’s Medicare HMO “promised ‘more

27

benefits than Medicare and most Medicare Supplements combined’” and that “the care Mr.

28
12
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2979 Page 13 of 17

1

Hofler received ‘did not match [defendant]’s promises’” was not subject to the exhaustion

2

requirement).

3

In Ardary, the Court of Appeals determined that the question of whether defendant

4

“both improperly denied emergency medical services and misrepresented its managed care

5

plan to the beneficiary” could be answered “largely independent of the underlying

6

Medicare law” because defendant made an explicit representation to the beneficiary that

7

an emergency transfer would immediately be authorized. Ardary, 98 F.3d at 497, 499;

8

Kaiser, 347 F.3d at 1115. In this case, Plaintiff brings this action to recover on claims that

9

Defendant breached its obligations to Aylward and Plaintiff in the handling of Aylward’s

10

claim for benefits under the Plan by failing to conduct any investigation into the request

11

for preauthorization submitted by St. Joseph’s on August 23, 2016 and failing to timely

12

process Aylward’s October 7, 2016 appeal. See ECF No. 47 at 7. There is no evidence in

13

this case of any additional action on Defendant’s part that would support claims “wholly

14

collateral” to the decision to approve Aylward’s preauthorization request for consultation

15

and evaluation at St. Joseph’s. Heckler, 466 U.S. at 618 (internal quotation marks omitted).

16

Plaintiff’s claims require a determination that Plaintiff was entitled to the preauthorization

17

request for consultation and evaluation at St. Joseph’s prior to October 26, 2016 and that

18

Defendant was wrong to deny approval prior to October 26, 2016. The facts relevant to

19

Plaintiff’s claims of failure to investigate are “inextricably intertwined” to a benefits

20

decision. Ardary, 98 F.3d at 500; see e.g., Kaiser, 347 F.3d at 1115 (“Hearing most of the

21

[plaintiff]s’ claims would necessarily mean redeciding [defendant’s related] Medicare

22

decisions.”); Shakespeare v. SCAN Health Plan, Inc., No. 3: 17-CV-568-BTM-MDD, 2018

23

WL 340422, at *4 (S.D. Cal. Jan. 8, 2018) (“Plaintiff’s claims of breach of contract,

24

negligence, willful misconduct, and breach of covenant of good faith and fair dealing

25

would all require a determination that Plaintiff was entitled to the Watchman Device and

26

Defendant was wrong to deny approval prior to October 12, 2016. Plaintiff’s claims are

27

therefore inextricably tied to a claim for Medicare benefits.”). The Court finds that

28
13
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2980 Page 14 of 17

1

Plaintiff’s claims arise under the Medicare Act and that 42 U.S.C. § 405(h) and (g) require

2

exhaustion of administrative remedies before judicial review.

3

Under the facts of this case, Aylward is deceased and the administrative review

4

process will not provide money damages in a survivorship action or money damages for

5

Aylward’s wrongful death. However, even if “the administrative action may in some sense

6

be futile for [plaintiffs] (if the administrative process cannot provide the damages

7

[plaintiffs] seek), administrative exhaustion of [plaintiff]s’ claims would still serve the

8

purpose of exhaustion and not be futile in the context of the system.” Kaiser, 347 F.3d at

9

1115. The Court of Appeals has explained that

10
11
12
13
14
15
16
17
18
19
20
21
22
23

[C]ases may “arise under” Medicare under § 405(h) and yet contain issues
which are not suitable for resolution by the [administrative review process].
This disconnect, while at first puzzling, makes sense in the context of the
purposes of exhaustion. “Exhaustion is generally required as a matter of
preventing premature interference with agency processes, so that the agency
may function efficiently and so that it may have an opportunity to correct its
own errors, to afford the parties and the courts the benefit of its experience
and expertise, and to compile a record which is adequate for judicial review.”
If a court were to prematurely tackle a question inextricably intertwined with
an issue properly resolved by an agency, the court would defeat the purposes
of § 405(g) and (h) even if the question was not one that the agency has the
authority to answer fully. More specifically, even if the claims raised here are
broader than those suitable for resolution by the [administrative review
process], deciding [plaintiff]s’ claims would mean also passing judgment on
questions which are appropriately first answered by the [administrative
review process]. This is why all inextricably intertwined claims must first be
raised in an administrative process. In that process, the agency, with the
benefit of its experience and expertise, can resolve whatever issues it can,
limiting the number of issues before judicial review (and limiting review on
those issues according to the appropriate standard of deference).

24

Id. at 1116 n.4 (internal citation omitted); see also Shalala v. Illinois Council on Long Term

25

Care, Inc., 529 U.S. 1, 10, 23 (2000) (42 U.S.C. § 405(g) and (h) preclude federal court

26

review of claims “arising under” the Medicare Act before administrative remedies have

27

been exhausted. “The fact that the agency might not provide a hearing for [a] particular

28

contention, or may lack the power to provide one is beside the point because it is the
14
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2981 Page 15 of 17

1

‘action’ arising under the Medicare Act that must be channeled through the agency.”). In

2

this case, allowing the administrative review process to address whether it was proper for

3

Defendant to deny approval of Aylward’s preauthorization request for consultation and

4

evaluation at St. Joseph’s prior to October 26, 2016 fulfills the purpose of § 405(g) and (h)

5

exhaustion. The review of approval of a claim for benefits prior to October 26, 2016

6

involves agency expertise appropriately raised first in an administrative process. The Court

7

finds that exhaustion of administrative remedies is required pursuant to 42 U.S.C. § 405(g)

8

and (h).

9

b. Preemption

10

The Secretary of Health and Human Services delegated to the Centers for Medicare

11

& Medicaid Services (“CMS”), the responsibility for administering Medicare. Under Part

12

C of the Medicare Act, CMS contracts with Medicare Advantage Organizations (“MAOs”)

13

to provide Medicare Advantage (“MA”) plans to eligible Medicare beneficiaries. See 42

14

U.S.C. § 1395w-23. MAOs are required to comply with the standards set forth under Part

15

C of the Medicare Act. See 42 U.S.C. § 1395w-27(a). In making Medicare benefits

16

decisions, MAOs follow a specified procedure on the standards they must adhere to:

17
18
19
20
21
22
23
24
25

CMS issues national coverage determinations (NCDs) that specify whether
certain items, services, procedures or technologies are reasonable and
necessary under § 1862(a)(1)(A) of the Act. In the absence of an NCD,
[MAOs] are responsible for determining whether services are reasonable and
necessary. If no local coverage determination (LCD) exists for a particular
item or service, the [MAO] shall consider an item or service to be reasonable
and necessary if the item or service meets [a specified set of criteria].
See Medicare Program Integrity Manual, CMS Pub. 100-08, ch. 3 (November 9, 2017).
The Medicare Act’s preemption provision states that “[t]he standards established
under this part shall supercede any State law or regulation (other than State licensing laws
or State laws relating to plan solvency) with respect to MA plans which are offered by MA

26

organizations under this part.” 42 U.S.C. § 1395w-26(b)(3). “The plain language of the

27

statute therefore provides that CMS ‘standards’ supersede ‘any State law or regulation …

28
15
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2982 Page 16 of 17

1

with respect to’ a [MA plan] offered by a [MAO].” Do Sung Uhm, 620 F.3d at 1148-49

2

(first alteration in original). “[C]ommon law claims fall within the ambit of the Act’s

3

preemption clause ….” Id. at 1156.

4

In Do Sung Uhm, plaintiffs’ fraud and fraud in the inducement claims were based on

5

allegations that defendant’s Medicare marketing materials were misleading. See id. at

6

1150. The Court of Appeals held that plaintiffs’ claims were preempted by 42 U.S.C. §

7

1395w-26(b)(3) because “CMS promulgated detailed regulations governing how Part D

8

sponsors market their plans” and had to “approve all PDP marketing materials before they

9

[were] made available to Medicare beneficiaries.” Id. at 1150-51 (citations omitted). The

10
11
12
13
14
15
16

Court of Appeals stated that
[I]n order to determine whether [defendant] committed a fraud or fraud in the
inducement, a court would necessarily need to determine whether the written
and oral statements were misleading. Were a state court to determine that
[defendant]’s marketing materials constituted misrepresentations resulting in
fraud or fraud in the inducement, it would directly undermine CMS’s prior
determination that those materials were not misleading and in turn undermine
CMS’s ability to create its own standards for what constitutes “misleading”
information about Medicare Part D. Thus, the [plaintiff]s’ fraud and fraud in
the inducement claims must be preempted.

17
18
19
20
21
22
23
24
25
26
27

Id. at 1157 (internal citation omitted).
In this case, in order to adjudicate Plaintiff’s claims, the Court would necessarily
need to determine whether Aylward was entitled to the preauthorization request for
consultation and evaluation at St. Joseph’s in the first place, a decision that is governed by
detailed CMS standards. Beyond contending that Defendant’s benefit decision was wrong,
Plaintiff fails to allege any other action on Defendant’s part that would support Plaintiff’s
claims. Deciding Plaintiff’s claims would directly undermine the standards set by CMS
when a preauthorization request for consultation and evaluation at a second facility after
an initial listing is covered by Medicare. The Court concludes that Plaintiff’s claims are
preempted.

28
16
3:18-cv-00494-WQH-MDD

Case 3:18-cv-00494-WQH-MDD Document 65 Filed 06/02/20 PageID.2983 Page 17 of 17

1
2
3

VI.

CONCLUSION

IT IS HEREBY ORDERED that Defendant SelectHealth, Inc.’s Motion for
Summary Judgment against Plaintiff Naomi J. Aylward (ECF No. 43) is GRANTED.

4

IT IS HEREBY FURTHER ORDERED that Plaintiff Naomi J. Aylward’s Motion

5

for Partial Summary Judgment against Defendant SelectHealth, Inc. (ECF No. 44) is

6

DENIED.

7
8
9
10
11
12
13

IT IS HEREBY FURTHER ORDERED that Plaintiff Naomi J. Aylward’s Motion
to Strike (ECF No. 48) is DENIED as moot.
IT IS HEREBY FURTHER ORDERED that Plaintiff Naomi J. Aylward’s Renewed
Motion to Exclude (ECF No. 49) is DENIED as moot.
The Clerk of the Court shall enter judgment for Defendant SelectHealth, Inc. and
against Plaintiff Naomi J. Aylward.
Dated: June 1, 2020

14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
17
3:18-cv-00494-WQH-MDD