MHA, LLC v. HEALTHFIRST, INC. et al

Filing 38

OPINION. Signed by Judge Susan D. Wigenton on 2/27/15. (DD, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
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MHA, LLC, D/B/A MEADOWLANDS
HOSPITAL MEDICAL CENTER,
Plaintiff,
v.

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Civil Action No. 2:13-cv-06036-SDW-MCA

OPINION

HEALTHFIRST, INC., HEALTHFIRST
HEALTH PLAN OF NEW JERSEY,
INC., SENIOR HEALTH PARTNERS,
INC., MANAGED HEALTH, INC., HF
MANAGEMENT SERVICES, LLC,
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HEALTHFIRST PHSP, INC., and AND
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Companies 1-100, and JOHN DOES 1-100
Defendants.
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February 27, 2015

WIGENTON, District Judge.
Before this Court is a Motion to Dismiss filed by Defendants Healthfirst, Inc., Healthfirst
Health Plan of New Jersey, Inc., Senior Health Partners, Inc., Managed Health, Inc., HF
Management Services, LLC, Healthfirst PHSP, Inc. and ABC Companies 1-100, and John Does
1-100 (collectively referred to as “Defendants”) for failure to state a claim upon which relief may
be granted pursuant to Federal Rule of Civil Procedure 12(b)(6) (“Rule 12(b)(6)”), lack of personal
jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2) (“Rule 12(b)(2)”) and a Motion
to Strike pursuant to Federal Rule of Civil Procedure 12(f) (“Rule 12(f)”), and a Cross-Motion for
Leave to File the First Amended Complaint filed by Plaintiff MHA, LLC, d/b/a/ “Meadowlands
Hospital Medical Center” (“MHA” or “Meadowlands”).

1

This Court has jurisdiction pursuant to 28 U.S.C. § 1331. Venue is proper pursuant to 28
U.S.C. § 1391. This opinion is issued without oral argument pursuant to Federal Rule of Civil
Procedure 78. For the reasons stated below, this Court GRANTS Defendants’ Rule 12(b)(6)
Motion to Dismiss and DENIES Plaintiff’s Cross-Motion for Leave to File an Amended
Complaint.
BACKGROUND
The Parties
Plaintiff is a privately held, limited liability company, which operates a general acute
hospital in Secaucus, New Jersey. (Compl. ¶1-2.)
Defendant Health First, Inc. is a New York corporation that administers health care plans
around the country through its various wholly owned and controlled subsidiaries, including
Defendants HealthFirst PHSP, Inc., Managed Health, Inc., HF Management Services, LLC, Senior
Health Partners, Inc., and HealthFirst Health Plan of New Jersey, Inc. (Compl. ¶3.)
Defendant HealthFirst Health Plan of New Jersey, Inc. (“HFNJ”) is a wholly-owned
subsidiary of HealthFirst, Inc. (Kianovsky Cert. ¶2.) HFNJ is a not-for-profit managed care
organization (“MCO”), which provides insurance to eligible individuals in New Jersey through
Medicare and New Jersey Medicaid. (Id.) During the relevant time period, HFNJ contracted with
the State of New Jersey as an authorized Health Management Organization (“HMO”) to offer
Medicaid managed care plans and to provide coverage to New Jersey Medicaid beneficiaries. (See
Compl. ¶¶4, 96.)

2

Factual Allegations
Plaintiff’s claims are premised on Defendants’ alleged non-payment for medical services
provided by Plaintiff to HFNJ Medicaid beneficiaries. (Compl. ¶9.) Plaintiff was not under
contract with any of the Defendants. (Id. at 11.)
Plaintiff argues that Defendants underpaid, denied, or failed to timely pay Plaintiff’s claims
for services rendered. (Am. Compl. ¶3.) Plaintiff alleges that Defendants’ malfeasance involved
(a) denying coverage to patients who receive emergency care at Meadowlands, (b) downgrading
the state of emergency patient conditions in order to avoid coverage and payment obligations, (c)
refusing to properly pay legitimate claims for the treatment of the Defendants’ subscribers, and
enrollees, and (d) denying and/or improperly limiting the Plaintiff’s level of responsibility when
the Defendants’ enrollees and plan subscriber/participants receive emergency room treatment at
Meadowlands, as required by many of the relevant insurance plans and/or policies, by contract
with the State of New Jersey and applicable law. (Id. at ¶21.)
Plaintiff alleges during the period from December 2010 through May 2014, Defendants
paid $2,915,290.32 out of MHA invoices totaling $32,431,982.47, leaving a balance of
$29,516,692.15, including interest and other charges. (Am. Compl. ¶14.)
Procedural History
On September 6, 2013, Plaintiff filed its complaint in Bergen County Superior Court.
(Defs.’ Mot. to Dismiss (“Defs.’ Mot.”) 15). On October 10, 2013, Defendants removed the action
to this Court on the basis of federal question jurisdiction. (Dkt. No. 1.) Plaintiff initially opposed
removal and moved to remand back to state court but Plaintiff subsequently submitted an
application to withdraw its motion to remand, and the Court so ordered its application. (Defs.’
Mot. 15.)

3

On July 11, 2014, Defendants filed a Motion to Dismiss pursuant to Federal Rules of Civil
Procedure 12(b)(6), 12(b)(2) or, in the alternative, 12(f). (Dkt. No. 26.) On August 26, 2014,
Plaintiff filed its opposition and a Cross-Motion for Leave to Amend the Complaint. (Dkt. No.
32.)
LEGAL STANDARD
In deciding a motion under Rule 12(b)(6), a district court is “required to accept as true all
factual allegations in the complaint and draw all inferences in the facts alleged in the light most
favorable to the [plaintiff].” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008).
“[A] complaint attacked by a . . . motion to dismiss does not need detailed factual allegations.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, the plaintiff’s “obligation to
provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and
a formulaic recitation of the elements of a cause of action will not do.” Id. (internal citations
omitted). “[A court is] not bound to accept as true a legal conclusion couched as a factual
allegation.” Papasan v. Allain, 478 U.S. 265, 286 (1986). Instead, assuming that the factual
allegations in the complaint are true, those “[f]actual allegations must be enough to raise a right to
relief above a speculative level.” Twombly, 550 U.S. at 555.
A complaint will survive a motion to dismiss if it contains sufficient factual matter to “state
a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing
Twombly, 550 U.S. at 570). “A claim has facial plausibility when the pleaded factual content
allows the court to draw the reasonable inference that the defendant is liable for misconduct
alleged.” Id. “Determining whether a complaint states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw on its judicial experience and
common sense.” Smith v. Barre, 517 F. App’x. 63, 65 (3d Cir. 2013) (internal citations omitted).

4

“[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of
misconduct, the complaint has alleged—but it has not ‘shown’—that the pleader is entitled to
relief.” Iqbal, 556 U.S. at 679.
In Fowler v. UPMC Shadyside, the Third Circuit devised “a two-part analysis.” 578 F.3d
203, 210 (3d Cir. 2009). First, the court must separate the complaint's factual allegations from its
legal conclusions. Id. at 210-11. Having done that, the court must take only the factual allegations
as true and determine whether the plaintiff has alleged a “plausible claim for relief.” Id. (quoting
Iqbal, 566 U.S. at 679).
DISCUSSION
As a threshold matter, Plaintiff voluntarily dismisses its initial claims for negligent
misrepresentation (Count Three) and violation of the Unfair Claim Settlement Practices section of
the Insurance Trade Practices Act (Count Six). (Pl.’s Opp. 2-3; See Compl.) Plaintiff also
dismisses its claims against Defendants Healthfirst, Inc., Senior Health Partners, Inc., Managed
Health, Inc., and Healthfirst PHSP. 1 (Id.) As such, this Court will address the remaining Counts
in relation to the remaining Defendants.
Plaintiff’s Medicaid-Based Claims: Counts One, Two, Four, and Five
Medicaid is a federal and state government program that provides financial benefits to lowincome individuals. See U.S.C. §§ 1396 et seq. New Jersey participates in Medicaid and its
beneficiaries enroll in MCOs pursuant to a contract between the MCO and the State of New Jersey.

1

Accordingly, there is no need to address Defendants’ arguments for dismissal pursuant to Federal
Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction regarding these voluntarily
dismissed Defendants.
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New Jersey Primary Care Ass’n Inc. v. New Jersey Dep’t of Human Servs., 722 F.3d 527, 529-30
(3d Cir. 2013); N.J.A.C. § 10:74-1.2(a)-(c).
In 2006, the State of New Jersey enacted the Health Claims Authorization, Processing and
Payment Act (“HCAPPA”), which essentially calls for an administrative resolution to claims
disputes between providers and HMOs. See N.J.S.A. § 26:2J-8.1(e)(1). HCAPPA requires that
organizations such as Defendant “establish an internal appeal mechanism to resolve any disputes
raised by a health care provider.” N.J.S.A. § 26:2J-8.1(e)(1). If a healthcare provider initiates an
appeal, “[t]he payer shall conduct a review of the appeal.” Id. If the dispute is not resolved through
the payer’s internal appeal mechanism, the statute provides that the appeal “may be referred to
arbitration.” N.J.S.A. § 26:2J-8.1(e)(2). The statute further provides that the Commissioner of the
Department of Banking and Insurance (“DOBI”) must contract with an “organization that
specializes in arbitration to conduct the arbitration proceedings.” § 26:2J-8.1(e)(2). The result of
this decision is “nonappealable and binding on all parties to the dispute.” N.J.S.A. § 26:2J-8.1
(e)(4)(c).
Here, when Plaintiff sought to dispute Defendant’s alleged failure to make adequate
payments, Defendant referred Plaintiff to a third-party claims administrator to resolve the dispute.
(Am. Compl. ¶ 71.) Plaintiff became frustrated with the attempts to reconcile the alleged unpaid
and underpaid claims. (Id. at ¶¶ 72-73.) Plaintiff claims it “was unable to satisfy the outstanding
claims or achieve any meaningful progress in the appeals process.” (Id. at ¶ 70.) This is all that
Plaintiff alleges regarding its attempts to appeal Defendant’s alleged failure to make adequate
payments. (See id. at ¶¶ 69-73.) Although Plaintiff asserts that it sought initial appeals through
Defendant’s internal appeal mechanism, Plaintiff does not allege that they continued through the
statutory appeal procedures. (See Am. Compl. ¶¶ 69-73.) Furthermore, Plaintiff does not set forth
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in its Complaint nor the proposed amended complaint that it sought to resolve its appeal within the
90-day period “following the receipt of the determination which is the basis of the appeal.”
N.J.S.A. § 26:2J-8.1(e)(2). (See Am. Compl. ¶¶ 69-73.) Finally, Plaintiff provides no indication
that it has participated in DOBI-sponsored arbitration or that pursuing arbitration would have been
futile. (See Am. Compl. ¶¶ 69-73.)
Accordingly, this Court finds that Plaintiff’s Medicaid-based claims are dismissed because
neither the Complaint nor the proposed amended complaint aver that Plaintiff availed itself of—
or exhausted all of—the statutorily available procedures for resolving the disputed claims. See
Gregory Surgical Services, LLC, v. Horizon Blue Cross Blue Shield of New Jersey, Inc., No. 060462, 2009 WL 749795, *4 (D.N.J. Mar. 19, 2009) (granting the defendant’s motion to dismiss a
nonparticipating provider’s common law claims against a health insurer for failure to exhaust
administrative remedies). Because Plaintiff does not allege sufficient factual matter to state a claim
for relief that is plausible on its face, Plaintiff’s Medicaid-based claims are dismissed.
Plaintiff’s Medicare-Based Claims: Counts One, Two, Four, and Five 2
Medicare is a federally-funded program that provides health insurance to the elderly and
disabled. 42 U.S.C. § 1395c. Organizations such as Defendants provide benefits to Medicare
beneficiaries under Medicare Part C, also known as Medicare Advantage (“MA”). In re Avandia
Mktg., Sales Practices and Products Liab. Litig., 685 F.3d 353, 357 (3d Cir. 2012). The MA
statute provides, in relevant part:

2

Defendants’ Motion to Strike Plaintiff’s Medicare-based claims as “immaterial” pursuant to
Federal Rule of Civil Procedure 12(f) is moot. Contrary to Plaintiff’s position in its motion to
remand to state court, Plaintiff is now seeking recovery related to its Medicare beneficiaries. (See
Pl.’s Opp. 35; Dkt. No. 13.)
7

The standards established under this part shall supersede 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 organizations under this part.

42 U.S.C. § 1395w-26(b)(3).
Plaintiff voluntarily dismisses its Medicare-based claims as to Counts One and Two of the
Complaint. (Pl.’s Opp. 36.) In relation to Counts Four (unjust enrichment) and Five (quantum
meruit), Plaintiff argues that the MA statute is not as broad as Defendants suggest, as it does not
preempt all state laws and regulations that establish standards for MA organizations. (Pl.’s Opp.
36-39.) In support, Plaintiff primarily relies on New York City Health and Hosps. Corp. v.
Wellcare of New York, Inc., 801 F. Supp. 2d 126 (S.D.N.Y. 2011). Defendants counter that the
Wellcare court acknowledged the MA statute preempts at least some common law claims. (Defs.’
Reply 23.)
This Court finds that under the present facts, the MA statute preempts Plaintiff’s common
law claims of unjust enrichment and quantum meruit. The Medicare regulations specifically
encompass Plaintiff’s common law allegations because the regulations list services for which an
MA organization must reimburse a provider, cap the rates for non-participating providers, and
include standards for the timing of claims. See 42 C.F.R. § 422.100(b)(1); See also 42 C.F.R. §
422.214(b). Here, Plaintiff’s common law claims are expressly preempted by the MA statute
because Plaintiff’s allegations are directly controlled by federal standards. See Do Sung Uhm v.
Humana Inc., 620 F.3d 1134, 1154-55 (9th Cir. 2010).

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CONCLUSION
For the reasons stated above, this Court GRANTS Defendants’ Rule 12(b)(6) Motion to
Dismiss and DENIES Plaintiff’s Cross-Motion for Leave to File an Amended Complaint. 3

s/ Susan D. Wigenton, U.S.D.J.

Orig:
cc:

Clerk
Parties
Magistrate Judge Steven C. Mannion

3

For the reasons stated in the 12(b)(6) discussion of this Opinion, Plaintiff is not granted leave to
amend. Overall, this Court finds that an amended complaint would be futile in light of Plaintiff’s
failure to exhaust the administrative remedies available to it. Further, the MA statute preempts
Plaintiff’s unjust enrichment and quantum meruit claims.
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