University of Wisconsin Hospital and Clinics Authority v. Southwest Catholic Health Network Corporation

Filing 20

OPINION and ORDER granting defendant Southwest Catholic Health Network Corporation d/b/a Mercy Care Plan's 7 Motion to Dismiss. Plaintiff's claims are dismissed without prejudice. The clerk of court is directed to close this case. Signed by District Judge William M. Conley on 3/31/2016. (kwf)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
UNIVERSITY OF WISCONSIN HOSPITAL
AND CLINICS AUTHORITY,
Plaintiff,

OPINION AND ORDER

v.
SOUTHWEST CATHOLIC HEALTH
NETWORK CORPORATION d/b/a
MERCY CARE PLAN,

14-cv-900-wmc

Defendant.
In this civil action, plaintiff University of Wisconsin Hospital and Clinics
Authority seeks payment for charges incurred in treating a patient insured by defendant
Southwest Catholic Health Network Corporation d/b/a Mercy Care Plan.

Before the

court is defendant’s motion to dismiss pursuant to Federal Rules of Civil Procedure
12(b)(1) and 12(b)(6). (Dkt. #7.) Because plaintiff failed to exhaust its administrative
remedies as required under Arizona law -- a fact that plaintiff does not dispute -- the
court lacks subject matter jurisdiction over plaintiff’s claims and will, therefore, grant the
motion to dismiss without prejudice.

ALLEGATIONS OF FACT
The University of Wisconsin Hospital and Clinics Authority (“UWHCA”) is a
Wisconsin non-profit corporation with its principal place of business in Dane County,
Wisconsin. Defendant Southwest Catholic Health Network Corporation d/b/a Mercy
Care Plan is an Arizona Corporation with its principal place of business in Phoenix,

Arizona. Mercy Care provides health insurance coverage, including to members enrolled
in the Arizona Health Care Cost Containment System (“AHCCCS”).
Amanda Durley is an adult citizen, currently residing in Arizona.

Durley is

AHCCCS eligible and enrolled with Mercy Care to receive health care services.
AHCCCS entered into a contract to provide health care insurance to Durley through
defendant Mercy Care.

The complaint alleges that the contract bore the subscriber

identification number A76320106-002, but that “[a] copy of the policy is in the
possession of the Defendant and is therefore not attached hereto.” (Compl. (dkt. #1-1)
¶ 6.)
On or about August 12, 2012, Durley was admitted to the UWHCA as a direct inpatient transfer from a hospital in Rockford, Illinois. From that date until September 4,
2012, UWHCA provided medical treatment to Durley. UWHC submitted at bill to
Mercy Care in the amount of $140,835.38, reflecting charges incurred in providing
medical treatment to Durley. Mercy Care denied coverage because the “services were not
provided or authorized by designated providers.” (Id. at ¶ 10.)
Following the denial, UWHCA “submitted several appeals through the appeals
process, asking that authorization be granted, but those appeals were denied.” (Id. at ¶
11.) To date, Mercy Care has made no payment toward the amount owed.
Plaintiff asserts claims for breach of an implied-in-fact contract, breach of quasi
contract and unjust enrichment, breach of implied covenant of good faith, and a claim for
interest under Wis. Stat. § 628.46.

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OPINION1
Defendant seeks dismissal of this action for lack of subject matter jurisdiction
pursuant to Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim
under Rule 12(b)(6). Since plaintiff has failed to exhaust its claim administratively, this
court lacks subject matter jurisdiction over this action. However, the court need not,
indeed, cannot, reach the merits of defendant’s motion to dismiss pursuant to Rule
12(b)(6). See Bradley v. Sabree, No. 14-2821, 594 Fed. Appx. 881, 883 (7th Cir. Feb. 23,
2015) (“Jurisdiction comes first, however, and so we begin (and end) with the dismissal
under Rule 12(b)(1).”); G & S Holdings LLC v. Continental Cas. Co., 697 F.3d 534, 543
(7th Cir. 2012) (“There was no reason to consider whether the claims could survive the
Rule 12(b)(6) standard as against Continental, because those claims had already been
dismissed under Rule 12(b)(1).”).2
Defendant argues, and plaintiff essentially agrees, that the court lacks subject
matter jurisdiction over plaintiff’s claims if plaintiff failed to exhaust its administrative
remedies as required under Arizona law. Ariz. Admin. Code §§ R9-34-401-405. (See
Def.’s Opening Br. (dkt. #8) 5-6 & 5 n.2; Pl.’s Opp’n (dkt. #11) 5 (acknowledging that
“[t]he legislation that established AHCC[C]S requires exhaustion”).)

In response,

The court has jurisdiction over this action pursuant to 28 U.S.C. § 1332(a). Plaintiff is a citizen
of Wisconsin; defendant is a citizen of Arizona; and the amount in controversy exceeds $75,000.
(Not. of Removal (dkt. #1) ¶¶ 9-16.)
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If the court were to reach the other bases of dismissal, plaintiff provided no response to
defendant’s Rule 12(b)(6) motion. This failure is indicative of the oft repeated concerns raised by
plaintiff’s persistence with frivolous claims in this case and in other recent cases brought by
UWHCA in this court or removed to this court by defendants. The next such example is likely to
result in an order to show cause why UWHCA or its counsel should not be sanctioned.
2

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plaintiff simply asserts -- consistent with the allegations in its complaint -- that it
attempted to obtain reimbursement from Mercy Care, including appeal of that initial
denial, but then acknowledges that it failed to exhaust its administrative remedies by
appealing Mercy Care’s denial to AHCCCS, a state agency external to defendant. (Pl.’s
Opp’n (dkt. #11) 5.)
Plaintiff’s sole opposition to defendant’s motion rests, therefore, on its argument
that exhaustion would have been futile: “A further appeal of the decision by Mercy Care
would not have resulted in a different decision, because Mercy Care denied despite its
own notes indicating that UWHC was an eligible provider and that the claim was
authorized.” (Pl.’s Opp’n (dkt. #11) 5.) There are at least two problems with plaintiff’s
response. First, UWHCA fails to appreciate, or at least acknowledge, that the exhaustion
provision under Arizona law requires appeal to the AHCCCS administration, which is
external to Mercy Care’s own appeal process. Second, and even more problematic, to
demonstrate that the appeal would be futile, UWHCA must prove “it is certain that its
claim will be denied on appeal, not merely that [it] doubts that an appeal will result in a
different decision.” Lindemann v. Mobil Oil Corp., 79 F.3d 647, 650 (7th Cir. 1996).
Indeed, if plaintiff is correct that Mercy Care refused to pay its invoiced bill despite
recognizing that the claim was authorized, then plaintiff likely would have been
successful in a timely appeal to the AHCCCS.
Finally, defendant seeks dismissal with prejudice, but the law is clear that
dismissal for failure to exhaust is without prejudice. See Evans v. Greenfield Banking Co.,
774

F.3d

1117,

1119 (7th

Cir.

2014)
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(affirming

district

court’s

dismissal without prejudice where the court “lacked jurisdiction to decide the claims in
the complaint because the plaintiffs had not exhausted their administrative remedies”);
Farmer v. Levenson, No. 01–2186, 79 Fed. Appx. 918, 921, 2003 WL 22473862, at *3
(7th Cir. Oct. 30, 2003) (“[W]hen a suit is dismissed for a plaintiff’s failure to comply
with a precondition to the court’s consideration of the merits– e.g., lack of subject matter
jurisdiction–that dismissal should be made without prejudice.”). While it appears that
any effort to appeal now may be time-barred (Def.’s Opening Br., Ex. 2 (dkt. #8-2), that
is different than the appeal having been futile if timely pressed. Regardless, it is for the
AHCCCS to determine if UWHCA is now barred from pursuing an appeal given its
failure to seek a hearing within the thirty-day period provided under the regulations as
communicated by defendant in a letter denying plaintiff’s internal appeal.

ORDER
IT IS ORDERED that:
1) Defendant Southwest Catholic Health Network Corporation d/b/a Mercy Care
Plan’s motion to dismiss (dkt. #7) is GRANTED.
2) Plaintiff’s claims are dismissed without prejudice.
3) The clerk of court is directed to close this case.
Entered this 31st day of March, 2016.
BY THE COURT:
/s/
__________________________________
WILLIAM M. CONLEY
District Judge

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