KDCO, Inc et al v. Healthlink, Inc. et al

Filing 93

MEMORANDUM AND ORDER..granting re: 54 MOTION to Remand Case to State Court and Memorandum in Support to Twenty-First Judicial Circuit Court of Missouri, County of St. Louis filed by Plaintiff KDCO, Inc, Plaintiff Renal Care Group of the Midwest, Inc. IT IS FURTHER ORDERED that all other pending motions are DENIED without prejudice.. Signed by District Judge Audrey G. Fleissig on 11/30/16. (MRS)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
SOUTHEASTERN DIVISION
KDCO, INC., and RENAL CARE
GROUP OF THE MIDWEST, INC.,
Plaintiffs,
vs.
HEALTHLINK, INC., et al.,
Defendants.

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Case No. 1:16CV00212 AGF

MEMORANDUM AND ORDER
This matter is before the Court on the motion (Doc. No. 54) of Plaintiffs KDCO,
Inc., and Renal Care Group of the Midwest, Inc., to remand the case to the state court in
which it was filed. Three pairs of Defendants remain in the case: (1) Healthlink, Inc.,
and Healthlink HMO, Inc. (jointly, “Healthlink”); (2) Health Systems, Inc., Employee
Health Plan and Health Systems, Inc. (jointly, “HSI”); and (3) Southeast Missouri
Hospital Association Employee Health Plan and Southeast Missouri Hospital
Association (jointly, “SEM”). HIS and SEM are employee benefit plans regulated by
the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1132(a), et seq.
(“ERISA”), and their administrators. For the reasons set forth below, the motion to
remand will be granted.
BACKGROUND
The case arises out of the alleged underpayment by ERISA-governed benefit
plans for medical services provided to plan beneficiaries. Plaintiffs are two facilities

that provide dialysis treatments to patients. In their state court petition, they assert that
they were parties to two “Network Agreements” with Healthlink, which operates a
preferred provider organization (“PPO”) network, a mechanism that brings healthcare
providers, such as Plaintiffs, and healthcare payers, such as HSI and SEM, together to
establish reimbursement rates and payment terms. According to the petition,
Healthlink, like other network operators, contracts on the one hand with healthcare
providers, and separately, with health plans, administrators, and other payers. The
network agreements entered into between Healthlink and Plaintiffs promised that the
reimbursement rates listed in the agreements’ fee schedules would be paid by network
payers, which included HSI and SEM.
Plaintiffs allege that beginning in 2013, HSI and SEM reduced the amounts paid
for dialysis treatments Plaintiffs provided to three patients (Patients A, B, and C) below
the Healthlink network rates. Plaintiffs assert three alternative claims against HSI and
SEM: (a) breach of the Healthlink network agreements for failing to pay pursuant to
network rates; (b) breach of an implied contract between Plaintiffs and the payer
Defendants that network rates would be paid for medical services provided; and (c)
promissory estoppel based on promises that network rates would be paid. Plaintiffs
also assert two claims against Healthlink: breach of contract and breach of the duty of
good faith and fair dealing, for allowing the slashing of payments below network rates.
Plaintiffs seek $2.2 million in damages for alleged underpayments (“lost additional
reimbursement”) for services rendered to Patients A, B, and C.
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HSI removed the case to this Court, asserting federal question jurisdiction on the
theory that Plaintiffs’ claims arose under, and were completely preempted by, ERISA.
Plaintiffs now move to remand the case, maintaining that there is no federal question
jurisdiction as they are only asserting state law claims. HSI and SEM oppose the
motion, reasserting that Plaintiffs’ claims are completely preempted by ERISA and that
hence, removal was proper.
DISCUSSION
“A defendant may remove a state law claim to federal court only if the action
originally could have been filed there.” In re Prempro Products Liability Litig., 591 F.3d
613, 619 (8th Cir. 2010). Federal courts have, per statute, “original jurisdiction of all
civil actions arising under the Constitution, laws, or treaties of the United States.” 28
U.S.C. § 1331. Pursuant to the “well-pleaded complaint rule,” a plaintiff is considered
master of the complaint and a court typically decides whether a claim “arises under”
federal law by examining the allegations in the Complaint. Aetna Health Inc. v. Davila,
542 U.S. 200, 207 (2004). Where, however, Congress has completely preempted a
particular area of law, claims asserted in that area will be considered federal whether they
are pleaded as federal or not. Id. It is the removing party’s burden to demonstrate the
existence of federal subject matter jurisdiction. In re Bus. Men’s Assur. Co. of Am., 992
F.2d 181, 183 (8th Cir. 1993)
In Davila, the Supreme Court set forth a two-prong test to determine whether a
state-law claim is completely preempted by ERISA, so as to confer federal subject matter
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jurisdiction sufficient to support removal: “If an individual, at some point in time, could
have brought his claim under ERISA § 502(a)(1)(B), and where there is no other
independent legal duty that is implicated by a defendant’s actions, then the individual’s
cause of action is completely pre-empted by ERISA § 502(a)(1)(B).” Id. at 210.
As Plaintiffs argue, where medical providers sue payers and/or network operators
for payments at the rates set out in network agreements, as Plaintiffs do here, courts
routinely find that neither prong of the Davila test is satisfied, and remand the case. The
courts reason that the medical providers could not bring their rate-of-payment claims
under ERISA’s civil enforcement provision, and that there is a duty of payer network
participants to honor their network agreements, independent of ERISA. See, e.g., Lone
Star OB/GYN Assocs. v. Aetna Health Inc., 579 F.3d 525, 530 (5th Cir. 2009) (“A claim
that implicates the rate of payment as set out in the Provider Agreement, rather than the
right to payment under the terms of the benefit plan, does not run afoul of Davila and is
not preempted by ERISA.”) (citing cases from the Third and Ninth Circuits); The
Nebraska Methodist Hosp. v. State Law Enf’t Bargaining Council Employee Health, No.
8:15CV216, 2015 WL 8328158, at *2 (D. Neb. Dec. 7, 2015); cf. Plastic Surgery Grp.,
P.C. v. United Healthcare Ins. Co. of N.Y., 64 F. Supp. 3d 459, 465 (E.D.N.Y. 2014)
(“While right-to-payment claims implicate coverage and benefits established by the terms
of the ERISA benefit plan, which may be brought under § 502(a)(1)(B), amount-ofpayment claims are typically construed as independent contractual obligations between
the provider and the benefit plan.”) (citation omitted).
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The Court finds these cases to be well-reasoned.
CONCLUSION
Accordingly,
IT IS HEREBY ORDERED that Plaintiffs’ motion to remand the case to the
state court in which it was filed is GRANTED. (Doc. No. 54.)
IT IS FURTHER ORDERED that all other pending motions are DENIED
without prejudice.

AUDREY G. FLEISSIG
UNITED STATES DISTRICT JUDGE
Dated this 30th day of November, 2016.

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