Tenet Healthsystem GB, Inc. et al v. Care Improvement Plus South Central Insurance Company
Filing
36
OPINION AND ORDER that Defendant Care Improvement Plus South Central Insurance Company's Motion to Dismiss Plaintiffs' Complaint 9 is GRANTED. IT IS FURTHER ORDERED that this action is DISMISSED. Signed by Judge William S. Duffey, Jr on 2/11/2016. (anc)
Medicare-eligible individuals enroll in Defendant’s health plan and, as Defendant’s
Insureds, receive coverage for benefits provided by traditional Medicare as well as
additional benefits not provided by Medicare. (Id.).
Under Medicare Part C, CMS pays Defendant a fixed amount each month
based on the number of Medicare enrollees it covers, and Defendant must use
those payments to provide for healthcare services rendered to Defendant’s
Insureds. Defendant is required to pay for the care provided to its Insureds
regardless of whether CMS’s monthly payments adequately cover those costs. (Id.
¶¶ 18-20).
Plaintiffs1 are eleven (11) hospitals that provide healthcare services to
Defendant’s Insureds. (Id. ¶¶ 2-12, 23). An MA organization typically has a
network of contracting providers, known as in-network providers, that are
reimbursed for the services they provide to members of the MA organization’s
1
Tenet Healthsystem GB, Inc., d/b/a Atlanta Medical Center and Atlanta
Medical Center South Campus; North Fulton Medical Center, Inc., d/b/a North
Fulton Regional Hospital; Tenet Healthsystem Spalding, Inc., d/b/a Spalding
Regional Medical Center; Tenet Healthsystem SGH, Inc., d/b/a Sylvan Grove
Hospital; Costal Carolina Medical Center, Inc., d/b/a Coastal Carolina Hospital;
East Cooper Community Hospital, Inc., d/b/a East Cooper Medical Center; Hilton
Head Health System, LP, d/b/a Hilton Head Hospital; Amisub of South Carolina,
Inc., d/b/a Piedmont Medical Center; Tenet Healthsystem DI, Inc., d/b/a Des Peres
Hospital; Tenet Healthsystem SL, Inc., d/b/a Saint Louis University Hospital;
AMISUB (SFH), Inc., d/b/a Saint Francis Hospital (collectively, “Plaintiffs”).
2
health plan under the terms of their respective contracts. (Id. ¶¶ 21-23). Plaintiffs
do not have written contracts with Defendant, but certain of Defendant’s Insureds
experienced medical conditions that required them to receive treatment at
Plaintiffs’ hospitals. (See id. ¶¶ 21-23).
Plaintiffs allege that, before treating Defendant’s Insureds, Plaintiffs
obtained authorizations from Defendant to provide the services at issue. In return,
Defendant promised Plaintiffs that it would reimburse them for the services
provided to Defendant’s Insureds. Based upon these promises, Plaintiffs provided
the required care. (Id. ¶¶ 24-26). Because of these promised payments, Plaintiffs
allege they waived their right to direct payment from Defendant’s Insureds to
whom they provided medical services. (Id. ¶ 36).
After the Defendant’s Insureds were discharged, Plaintiffs submitted bills to
Defendant for the authorized services, and Defendant paid the bills in full. Several
months, and sometimes years, after the payments, Defendant conducted
post-payment audits and “unilaterally recouped substantial sums from the
Plaintiff[s].” (Id. ¶ 34). Plaintiffs allege that they challenged Defendant’s
recoupment decisions, but that Defendant refused to return the payments to
Plaintiffs. (Id. ¶ 35). They allege that all efforts to resolve Defendant’s wrongful
actions have been exhausted, excused or waived, and as a result this action was
3
filed. (Id.). In their Complaint, Plaintiffs allege claims for unjust enrichment and
quantum meruit.2 (Id. ¶¶ 40-56).
On July 22, 2015, Defendant filed its Motion to Dismiss. In it, Defendant
argues: (1) the Court lacks subject-matter jurisdiction over Plaintiffs’ claims
because Plaintiffs failed to exhaust their administrative remedies; (2) the Medicare
Act preempts Plaintiff’s state common law claims; and (3) Plaintiffs fail to state a
claim upon which relief can be granted because Plaintiffs fail to identify which
laws are applicable to their claims.
II.
DISCUSSION
A.
Legal Standard
Rule 12(b)(1) of the Federal Rules of Civil Procedure permits a party to
move for dismissal when the court lacks jurisdiction over the subject matter of the
dispute. “If the court determines at any time that it lacks subject-matter
jurisdiction, the court must dismiss the action.” Fed. R. Civ. P. 12(h)(3).
2
Plaintiffs also allege that, in conducting the post-payment audits, Defendant
demanded Plaintiffs provide voluminous medical records for certain patient
accounts. (Compl. ¶ 32). Plaintiffs seek a declaratory judgment under 28 U.S.C.
§ 2201 that they are not required to comply with Defendant’s demands for medical
records, and that Defendant may not recoup any monies from Plaintiffs in
connection with or as a result of their requests to produce medical records. (Id.
¶¶ 57-64).
4
A motion to dismiss for lack of subject matter jurisdiction under Rule
12(b)(1) may be either a “facial” or “factual” attack. Morrison v. Amway Corp.,
323 F.3d 920, 924-25 n.5 (11th Cir. 2003). A facial attack challenges subject
matter jurisdiction on the basis of the allegations in a Complaint, and the district
court takes the allegations as true in deciding whether to grant the motion. Id.
Factual attacks challenge subject matter jurisdiction in fact. Id. When
resolving a factual attack, the Court may consider extrinsic evidence, such as
testimony and affidavits. Id. In a factual attack, the presumption of truthfulness
afforded a plaintiff under Federal Rule of Civil Procedure 12(b)(6) does not apply,
Scarfo v. Ginsberg, 175 F.3d 957, 960-61 (11th Cir. 1999). The plaintiff has the
burden to prove that jurisdiction exists. Elend v. Basham, 471 F.3d 1199, 1206
(11th Cir. 2006).
B.
Analysis
Defendant argues that the Court lacks subject-matter jurisdiction over this
action because Plaintiffs failed to exhaust their administrative remedies under the
Medicare Act.
The Medicare program, which provides medical insurance for the aged and
disabled, is administered by CMS, a division of the U.S. Department of Health and
5
Human Services (“HHS”).3 The Medicare Act, 42 U.S.C. §§ 1395-1395ggg,
consists of three parts, labeled Parts A, B, and C, that are relevant to the discussion
below. Congress established the MA program under Part C, 42 U.S.C. §§ 1395w21 to 1395w-28. The MA program allows eligible individuals to elect to receive
Medicare benefits directly from a private health plan, such as the one offered by
Defendant. 42 U.S.C. §§ 1395w-21, -22. Under the MA program, instead of using
the Part A traditional fee-for-service program, HHS pays MA organizations like
Defendant on a monthly, or capitated, basis for each Medicare beneficiary enrolled
in the plan. 42 U.S.C. §§ 1395w-21, -23 & -24. Because the MA organization
receives the same payment regardless of the number of times an enrollee needs
care, Medicare’s financial exposure is transferred to the MA plan. 42 U.S.C.
§ 1395w-22(a)(2)(A). The amount of the monthly payment is based on the
contract between the MA organization and CMS. 42 U.S.C. § 1395w-27.
The Medicare Act requires MA plans to cover emergency services provided
by non-contracted providers, like Plaintiffs. 42 U.S.C. § 1395w-22(d)(1)(E).
Payment amounts due to a non-contracted emergency provider are limited to what
3
The Court’s summary of the Medicare statutory and regulatory framework
borrows from the summary provided by the court in Doctors Med. Ctr. of Modesto,
Inc. v. Kaiser Found. Health Plan, Inc., 989 F. Supp. 2d 1009, 1014 (E.D. Cal.
2013).
6
“the provider would collect if the beneficiary were enrolled in original Medicare.”
42 C.F.R. § 422.214(a). The Medicare Act further provides that where the MA
organization is made a secondary payer, as defined by 42 U.S.C. § 1395y(b)(2)(A),
the MA organization may charge the primary plan. 4 2 U.S.C. § 1395w-22(a)(4);
42 C.F.R. § 422.108. An MA organization becomes a secondary payer where
“payment has been made or can reasonably be expected to be made . . . under an
automobile or liability insurance policy or plan (including a self-insured plan) or
under no fault insurance.” 42 U.S.C. § 1395y(b)(2)(A)(ii).
Title 42 U.S.C. § 405(h), made applicable to the Medicare Act by 42 U.S.C.
§ 1395ii, provides that 42 U.S.C. § 405(g) is “the sole avenue for judicial review”
for claims “‘arising under’ the Medicare Act.” Heckler v. Ringer, 466 U.S. 602,
614-15 (1984). CMS regulations provide an administrative appeal process that
allows a provider that furnishes services to an enrollee to request an “organization
determination,” a determination “with respect to . . . [p]ayment for any . . . health
services furnished by a provider other than the MA organization that the enrollee
believes are covered under Medicare.” 42 C.F.R. § 422.566(b)(2)(I). After the
MA organization renders its organization determination regarding payment, any
party to the organization determination, including “[a]ny other provider or entity
(other than the MA organization) determined to have an appealable interest in the
7
proceeding,” may seek reconsideration of the organization determination. Id.
§§ 422.574, 422.582. After reconsideration of the organization determination, any
party to the reconsideration may request a hearing before an administrative law
judge (“ALJ”). Id. § 422.600. After the ALJ renders a decision, any party to the
hearing may request a review by the Medicare Appeals Council. Id. § 422.608.
After the Medicare Appeals Council makes its final decision, a party may seek
judicial review in federal court. 42 U.S.C. § 405(g); 42 U.S.C. § 1395w-22(g)(5);
42 C.F.R. § 422.612(c).
The Eleventh Circuit has recognized that a lawsuit that seeks to recover on
any claim “arising under” the Medicare Act must first be brought through the HHS
administrative appeals process before it can be taken to federal court. Lifestar
Ambulance Serv., Inc. v. HHS, 365 F.3d 1293, 1296 (11th Cir. 2004); Cochran
v. U.S. Health Care Fin. Admin., 291 F.3d 775, 778-79 (11th Cir. 2002). “This
nearly absolute channeling requirement serves important governmental interests in
administrative efficiency and judicial economy, and assures the agency greater
opportunity to apply, interpret, or revise policies, regulations, or statutes.”
Lifestar, 365 F.3d at 1296 (internal quotation marks omitted). Claims presented
under state law may be construed as “arising under” the Medicare Act if (1) the
standing and substantive basis for presentation of the claim are the Medicare Act,
8
or (2) a claim is inextricably intertwined with a claim for reimbursement of
medical benefits. Heckler, 466 U.S. at 623.
At the outset, the Court notes that the parties do not cite to—and the Court is
unable to find—binding precedent on the issues presented by the parties. The
Court thus looks to persuasive authority in reaching its conclusion.
Plaintiffs argue that the payment decisions at issue were not “organization
determinations,” and therefore there are no Medicare administrative appeals
processes that apply to their claims. In support of this argument, Plaintiffs
primarily rely on the Fifth Circuit’s decision in RenCare, Ltd. v. Humana Health
Plan of Tex., Inc., 395 F.3d 555 (5th Cir. 2004). In RenCare, a kidney dialysis
provider sued an MA organization for reimbursement of services provided to the
MA organization’s members under a contract between the provider and the MA
organization. Id. at 556. The Fifth Circuit held that, because the provider’s claims
for breach of contract, detrimental reliance, fraud, and violations of state law were
not “inextricably intertwined with a claim for Medicare benefits,” those claims did
not arise under the Medicare Act. Id. at 560. In reaching this holding, the Fifth
Circuit contrasted the claims in RenCare with the claims brought in Heckler. First,
the Fifth Circuit noted that, unlike in Heckler, there were “no enrollees seeking
Medicare benefits.” Id. at 558. Next, the Fifth Circuit noted that the government
9
did not have any financial interest in the outcome of RenCare because it paid the
insurance company a flat rate under Part C of Medicare, but it had a financial
interest in Heckler because the enrollees were seeking benefits to be paid by the
government itself under Parts A or B of Medicare. Id. The Fifth Circuit also
emphasized that, under Part C:
the [MA] organization assumes responsibility and full financial risk
for providing and arranging healthcare services for [MA]
beneficiaries, sometimes contracting health care providers to furnish
medical services to those beneficiaries. Such contracts between [MA]
organizations and providers are subject to very few restrictions;
generally, the parties may negotiate their own terms.
Id. at 559 (internal citations omitted).
Defendant argues that RenCare does not apply here, including because the
parties in RenCare entered into a provider contract. (Reply at 10-11). Defendant
argues that the Fifth Circuit in RenCare turned to the contract to resolve the
dispute, but, in the absence of a contract, “the only way to determine if [Defendant]
owes Plaintiffs money is to look at the Medicare regulations.” (Id. at 8, 10-11).
Defendant urges the Court to adopt the reasoning of the court in Doctors Med. Ctr.
of Modesto, Inc. v. Kaiser Found. Health Plan, Inc., 989 F. Supp. 2d 1009, 1014
(E.D. Cal. 2013).
In Kaiser, the court found that, whereas the parties in RenCare were bound
by a contract, “[i]n this case . . . the Hospital does not allege that it had an express
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written contract . . . [and] the dispute over [the MA organization]’s payment
obligation turns on the standards provided by the Medicare Act and CMS
regulations for paying non-contracted emergency providers when a primary payer
may be liable.” Id. at 1014-15 (citing 42 U.S.C. § 1395w-22(d)(1)(E); 42 C.F.R.
§§ 422.214, 422.108, and 422.566). In dismissing the plaintiff’s state law claims,
the court explained, “[a]lthough, as in RenCare, the government’s risk has been
extinguished by its monthly capitation payments to [the MA organization], the
Hospital’s claims for reimbursement . . . are still ‘inextricably intertwined’ with the
Medicare Act and are subject to its exhaustion requirements.” Id. at 1015 (citing
Heckler, 466 U.S. at 615).
The Southern District of New York, in a case involving related legal issues,
reached a conclusion similar to the one reached by the Kaiser court, which noted
the importance of a contractual relationship in deciding if a dispute was within or
without the Medicare Act and the CMS regulations. In New York City Health and
Hosps. Corp. v. WellCare of New York, Inc., 769 F. Supp. 2d 250, 258 (S.D.N.Y.
2011), the court explained: “The RenCare court emphasized that contracts
between MA Organizations and Contracted Providers are subject to very few
restrictions, and that the contracting parties can generally negotiate their own
terms. By contrast, the parties here had no contractual relationship and
11
reimbursement is governed by a complex federal regulatory scheme.”4 The
Southern District of New York noted that CMS has “enhanced regulatory authority
over matters involving Non-Contracted Providers as compared to Contracted
Providers.” New York City Health and Hosps. Corp. v. WellCare of New York,
Inc., 801 F. Supp. 2d 126, 139 (S.D.N.Y. 2011).5
The Court finds the Kaiser6 and WellCare courts’ reasoning sound. It is
critical here that Plaintiffs are non-contracting providers under the MA program,
because Medicare regulations provide the standards governing their relationship
with Defendant, including the standards governing Plaintiffs’ claims. See Kaiser,
989 F. Supp. 2d at 1014 (finding that MA organization’s payment obligation with
respect to non-contracting hospitals “turns on” Medicare Act and CMS
4
The Wellcare court analyzed RenCare in the context of a motion to remand,
rather than a motion to dismiss, and the issues before the court in WellCare thus
were different than those presently before the Court. The WellCare court’s
reasoning with respect to RenCare is, nevertheless, similar to what is required here.
5
In response to a payment dispute between a contracted provider and an MA
organization, CMS wrote: “the existence of provider contracts that can be
enforced by the courts is why the Congress limited [CMS]’s regulatory authority in
comparison to those afforded non-contracted providers.” Christus Health Gulf
Coast v. Aetna, Inc., 237 S.W.3d 338, 340-41 (Tex. 2007) (quoting Letter from
Acting Director of the CMS Medicare Managed Care Group to Plaintiffs (Mar. 30,
2001)).
6
In their Response, Plaintiffs incorrectly state that the Kaiser court found that
a provider’s state law claims were not subject to the exhaustion requirement.
(Resp. at 10 n.14). As explained above, Kaiser stands for the exact opposite
proposition.
12
regulations); Wellcare, 769 F. Supp. 2d at 258 (because there is no contract,
“reimbursement is governed by a complex federal regulatory scheme”). Mindful
that the “channeling of virtually all legal attacks through the [DHS] . . . serves
important governmental interests in administrative efficiency and judicial
economy,” Lifestar, 365 F.3d at 1296 (internal quotation marks omitted), the Court
finds that, under these circumstances, Plaintiffs’ claims are inextricably intertwined
with the Medicare Act, and are subject to its exhaustion requirements. See
Heckler, 466 U.S. at 615; Kaiser, 989 F. Supp. 2d at 1015.
Defendant next argues that Assocs. Rehabilitation Recovery, Inc.
v. Humana Med. Plan, Inc., 76 F. Supp. 3d 1388 (S.D. Fla. 2014)7 provides an
independent basis for dismissal of Plaintiffs’ claims for lack of subject-matter
jurisdiction. In Assocs. Rehabilitation, the court noted that the regulations in place
at the time of the Fifth Circuit’s RenCare decision had changed, altering the way
MA organizations are paid. Id. at 1392 (citing 42 USC § 1395w-24(a)(1)(A)). The
Assocs. Rehabilitation court explained:
Under the new framework, MA organizations must now submit a bid
estimating its costs for the following year. Decisions on whether
payments should or should not be made affect the estimated medical
expenses for the following year, which in turn affect the government’s
7
Plaintiffs incorrectly state that the Assocs. Rehabilitation decision is
unpublished. (Resp. at 16).
13
savings and the enrollee’s premiums and benefits received.
Therefore, the way in which claims for benefits are resolved will have
a financial impact on the government and enrollees.
Id. The court concluded, in light of the new framework, that a plaintiff’s claims
were “inextricably intertwined with a claim for reimbursement of medical
benefits” where “a health care provider[] provided medical treatment to Medicare
enrollees and is now seeking reimbursement for services rendered to those
enrollees.” Id. at 1393. The court found that RenCare did not apply even though
the MA organization and the healthcare provider entered into a contract. See id.
In Ohio State Chiropractic Ass’n v. Humana Health Plan, Inc., No.
5:14CV2313, 2015 WL 350391, at *3 (N.D. Ohio Jan. 26, 2015), the Northern
District of Ohio agreed with the Assocs. Rehabilitation court’s reasoning. The
facts of Ohio State Chiropractic are strikingly similar to the case before the Court.
There, as here, the plaintiff was a non-contracted provider to an MA organization.
Id. at *2. Plaintiff claimed that the MA organization, Humana, attempted to recoup
alleged overpayments by deducting amounts from bills later submitted by plaintiff.
Id. Plaintiff sought a declaratory judgment, and raised claims of unjust enrichment
and breach of implied contract, among other state law claims. Plaintiff relied on
RenCare to support its argument that payment disputes between an MA
organization and providers are not properly construed as claims for Medicare
14
benefits, and are not subject to the exhaustion requirement. See id. Relying on
Assocs. Rehabilitation, the court found that, under the new framework, “any
resolution of whether Humana has a right to recover . . . alleged repayments will
have a direct financial impact on the federal government,” because a “ruling in
Plaintiffs’ favor will alter the estimated medical expenses for Humana moving
forward, in turn affecting the government’s savings and enrollees’ premiums.”
Ohio State Chiropractic, 2015 WL 350391, at *3. The court concluded that the
plaintiff’s claims “are inextricably intertwined with a claim for Medicare benefits,”
and “must be administratively exhausted before they are presented to a District
Court for review.” Id.
Plaintiffs argue that the court’s reasoning in Assocs. Rehabilitation is
flawed, because “the possibility that decisions on current claims might affect bids
in future years is beyond speculative,” and contend that, with respect to their
claims, “the government’s risk was extinguished by its capitated payments to
[Defendant].” (Resp. at 16). Plaintiffs note that “[n]umerous courts have
continued to cite RenCare as authoritative long after the 2006 Medicare Advantage
amendments. (Id. at 17 (citing cases)).
The Court acknowledges that several district courts have applied RenCare
after the 2006 MA amendments. See, e.g., Main & Assocs., Inc. v. Blue Cross and
15
Blue Shield of Ala., 776 F. Supp. 2d 1270, 1280 (M.D. Ala. 2011) (“The dispute
here is between a private [healthcare] provider . . . and [an MA organization].
Neither the government, nor any Medicare enrollees are parties to this
action . . . [and] no government funds are at risk . . . .”).8 In the absence of
controlling authority, and after a review of the relevant legal and regulatory
framework, the Court finds the reasoning in Assocs. Rehabilitation and Ohio State
Chiropractic compelling and applies it in this matter.
The Court disagrees with Plaintiffs’ argument that “the possibility that
decisions on current claims might affect bids in future years is beyond
speculative.” (Resp. at 16). As the Third Circuit explained:
If an MA plan provides CMS with a bid to cover Medicare-eligible
individuals for an amount less than the benchmark amount calculated
by CMS, it must use seventy-five percent of that savings to provide
additional benefits to its enrollees. 42 U.S.C. § 1395w-24(b)(1)(C)(i),
(b)(3)(C), (b)(4)(C). The remaining twenty-five percent of the
savings is retained by the Medicare Trust Fund. Accordingly, when
MA[ organizations] spend less on providing coverage for their
enrollees, as they will if they recover efficiently from primary payers,
the Medicare Trust Fund does achieve cost savings . . . [and] that
savings results in additional benefits to enrollees not covered by
traditional Medicare.
In re Avandia Mktg., Sales Practices & Prods. Liab. Litig., 685 F.3d 353, 364-65
8
The Court notes that the Main & Assocs. court ultimately granted plaintiff’s
motion to remand on the ground that plaintiff’s state law claims did not provide a
sufficient basis for the exercise of federal jurisdiction. Id. at 1281.
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(3d Cir. 2012). The Avandia court’s explanation of the interests and factors at
issue further supports that “a ruling in Plaintiffs’ favor will alter the estimated
medical expenses for [Defendant] moving forward, in turn affecting the
government’s savings and enrollees’ premiums.” Ohio State Chiropractic, 2015
WL 350391, at *3.9
For these additional reasons, the Court concludes that Plaintiffs’ claims “are
inextricably intertwined with a claim for Medicare benefits,” and “must be
administratively exhausted before they are presented to a District Court for
review.” Id.10
III.
CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that Defendant Care Improvement Plus South
Central Insurance Company’s Motion to Dismiss Plaintiffs’ Complaint [9] is
GRANTED.
IT IS FURTHER ORDERED that this action is DISMISSED.
9
Though the Avandia court addressed issues different than those presently
before the Court, its explanation of the regulatory scheme supports the concrete
effect this litigation will have on Defendant’s future bids, on the Medicare Trust
Fund, and on enrollees’ benefits.
10
Because the Court concludes that it lacks subject-matter jurisdiction over
this action, the Court does not reach Defendant’s other grounds for dismissal.
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SO ORDERED this 11th day of February, 2016.
_______________________________
WILLIAM S. DUFFEY, JR.
UNITED STATES DISTRICT JUDGE
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