MEDICAL DIAGNOSTIC LABORATORIES, LLC v. HORIZON HEALTHCARE SERVICES, INC. et al

Filing 11

OPINION. Signed by Judge William J. Martini on 4/24/18. (gh, )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
MED. DIAGNOSTIC LABS., LLC,
Civ. No. 2:18-616 (WJM)

Plaintiff,
v.

OPINION

HORIZON HEALTHCARE SERVS., INC., et
al.,
Defendants.

WILLIAM J. MARTINI, U.S.D.J.:
Plaintiff Medical Diagnostic Laboratories, LLC (“MDL”) brings this action against
Horizon Healthcare of New Jersey d/b/a Horizon NJ Health (“HNJH”) and its affiliates,
alleging unlawful discrimination when HNJH denied MDL’s application to join its
Medicaid network, in violation of 42 U.S.C. § 1396u–2(b)(7) (the Medicaid Act’s
antidiscrimination provision). This matter comes before the Court on HNJH’s Federal
Rule of Civil Procedure 12(b)(6) motion to dismiss. No oral argument was held. FED. R.
CIV. P. 78(b). For the reasons below, HNJH’s motion to dismiss is GRANTED and
MDL’s Complaint is DISMISSED WITH PREJUDICE.
I.

BACKGROUND

A managed care organization (“MCO”), HNJH has a contract with the State of New
Jersey to administer its Medicaid Program. Compl. ¶¶ 1, 8–9, ECF No. 1. MDL is an
outpatient medical laboratory specializing in tests for sexually transmitted infections. Id.
¶¶ 2, 4. As an in-network provider for the State and its contracted Medicaid program
MCOs, MDL mainly serves high-risk populations, such as pregnant or at-risk women of
becoming pregnant. Id. ¶¶ 6, 8–9.
MDL alleges HNJH had no legitimate business reason to deny access to its Medicaid
network. Id. ¶ 49. As a consequence, MDL claims the denial decision represents unlawful
discrimination because it deprives high risk HNJH Medicaid insureds access to MDL’s
specialized testing services. Id. ¶¶ 7, 11. Also, MDL claims HNJH has yet to provide
reimbursement for laboratory tests performed on HNJH Medicaid insureds. Id. ¶ 56.
HNJH now moves to dismiss the Complaint, arguing it neither violated federal law
nor its contract with the State’s Medicaid program when it declined MDL’s application to
join its Medicaid network. Mot. to Dismiss Br. 4, ECF No. 8-2. And even if HNJH’s
refusal of MDL’s application to join its Medicaid provider network was discriminatory
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under the Medicaid Act, such violation of federal law provides MDL no private cause of
action. See id. at 4–13.
MDL responds, arguing HNJH’s unlawful network participation decision arises under
the Medicaid Act and its implementing regulations because MCOs like HNJH cannot
discriminate against providers that serve high-risk populations. MDL Opp’n Br. 15–19,
ECF No. 9. Thus, MDL claims Congress intended to create a private right of action that
enables providers to sue MCOs over network participation decisions. Id. at 15. In reply,
HNJH reiterates MDL has no private right of action since Medicaid exists to benefit the
infirm whom the providers serve, rather than benefit of the providers themselves. HNJH
Reply Br. 3, ECF No. 10.
II.

LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in
whole or in part, if the plaintiff fails to state a claim upon which relief can be granted.
The moving party bears the burden of showing that no claim has been stated. Hedges v.
United States, 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss under
Rule 12(b)(6), a court must take all allegations in the complaint as true and view them in
the light most favorable to the plaintiff. See Warth v. Seldin, 422 U.S. 490, 501 (1975).
III.

DISCUSSION

HNJH claims the sole count in MDL’s Complaint, asserting unlawful discrimination
under Section 1396u–2(b)(7) of the Medicaid Act, must be dismissed because the
provision affords providers like MDL no private right of action. The Court agrees.
“The question whether a statute creates a cause of action, either expressly or by
implication, is basically a matter of statutory construction . . . . [And] what must
ultimately be determined is whether Congress intended to create the private remedy
asserted. . . .” Transamerica Mort. Advisors, Inc. v. Lewis, 444 U.S. 11, 16 (1979) (citing
Touche Ross & Co. v. Redington, 442 U.S. 560, 568 (1979)); see also Am. Trucking
Ass’ns, Inc. v. Del. River Joint Toll Bridge Comm’n, 458 F.3d 291, 296 (3d Cir. 2006). In
the absence of express statutory authorization, Supreme Court precedent shows continued
reluctance to create private causes of action. See Touche Ross & Co., 442 U.S. at 560
(noting the Court will create a private right of action only upon showing evidence of
affirmative congressional intent to do so); Cort v. Ash, 422 U.S. 66 (1975); J.I. Case Co.
v. Borak, 377 U.S. 426 (1964). Thus, the court’s inquiry is confined to answering two
questions: (1) “who would benefit from the [Medicaid Act’s antidiscrimination
provision], and “whether Congress intended to confer federal rights upon those
beneficiaries.” Am. Trucking Ass’ns, Inc., 458 F.3d at 297 (citing Calif. v. Sierra Club,
451 U.S. 287, 294 (1981)).
As to the first question, MDL cannot maintain its private cause of action against
HNJH because the Medicaid Act antidiscrimination provision MDL relies upon is
phrased in terms of benefitting Medicaid insureds, not providers. See Armstrong v.
Exceptional Child Ctr., Inc., 135 S. Ct. 1378, 1387 (2015) (citing 42 U.S.C. § 1396u–
2(b)(7)). And as to the second question, the “rights-creating language” in a statute to sue
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over discrimination must indicate an “unmistakable focus on the benefitted class.” See
Gonzaga Univ. v. Doe, 536 U.S. 273, 287 (2002) (citation omitted). The Medicaid statute
at issue here gives MCOs like HNJH the right to manage their networks “to meet the
needs of [their] enrollees . . . .” 42 U.S.C. § 1396u–2(b)(7). And that same provision falls
under the heading “Beneficiary protections.” Id. Thus, as to providers, the statute “gives
no express indication of a desire to create a right of action to enforce the
[antidiscrimination] standard.” Am. Trucking Ass’ns, Inc., 458 F.3d at 297.
Further, MDL’s argument that the Medicaid Act antidiscrimination provision’s
implementing regulation contains a private right to sue is without merit. That is because a
federal regulation alone cannot create a private cause of action unless the enabling statute
creates such right or else authorizes the appropriate regulatory agency to do so. See Three
Rivers Ctr. for Indep. Living v. Hous. Auth. of the City of Pitt., 382 F.3d 412, 424 (3d Cir.
2004) (citing Alexander v. Sandoval, 532 U.S. 275, 291 (2001)). Therefore, because
MDL has failed to show how the Medicaid Act’s antidiscrimination provision affords a
private right of action, any amendment to the Complaint here would be futile. See
Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002).
IV.

CONCLUSION

Accordingly, HNJH’s motion to dismiss is GRANTED. MDL’s Complaint is
DISMISSED WITH PREJUDICE. An appropriate order follows.

/s/ William J. Martini
WILLIAM J. MARTINI, U.S.D.J.
Date: April 24, 2018

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