Prince George's Hospital Center v. Advantage Healthplan Inc. , 865 F. Supp. 2d 47 ( 2012 )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
_____________________________
)
PRINCE GEORGE’S HOSPITAL )
CENTER, )
)
Plaintiff, )
)
v. ) Civil Action No. 03-2392 (RWR)
)
ADVANTAGE HEALTHPLAN INC., )
)
Defendant. )
_____________________________ )
MEMORANDUM OPINION
Plaintiff Prince George’s Hospital Center (“P.G. Hospital”)
filed this action claiming entitlement under the common law of
subrogation as a third-party beneficiary of contracts entered
into between defendant Advantage Health Plan, Inc. (“Advantage”),
a managed care organization (“MCO”), and the District of
Columbia, and otherwise, to reimbursement from Advantage for
emergency services provided between July 2001 and August 2002 to
five patients insured under defendant’s plan. Advantage has
moved to dismiss this case under Federal Rule of Civil Procedure
12(b)(6) for failure to state a claim and Rule 12(b)(1) for lack
of subject matter jurisdiction, and in the alternative, moved for
a more definite statement under Rule 12(e). Because
P.G. Hospital has not alleged facts to support a cause of action
for subrogation and there is no private cause of action under the
Medicaid statute, P.G. Hospital’s claim for subrogation and claim
that it is entitled by law to reimbursement will be dismissed.
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Because P.G. Hospital has alleged facts to support a cause of
action for breach of contract as a third-party beneficiary of the
MCO contracts and because P.G. Hospital has pled that it was not
properly advised of its administrative rights, Advantage’s motion
to dismiss will be denied as to that claim. Because P.G.
Hospital has alleged facts to support a cause of action with
respect to Eunice J. and Eugenia P., Advantage’s motion to
dismiss the claims on the basis that P.G. Hospital failed to
provide timely and proper notice of treatment as to Eunice J. and
Eugenia P. will be denied. Because P.G. Hospital has failed to
allege any statutory right to attorneys’ fees, Advantage’s motion
to dismiss P.G. Hospital’s claim for attorneys’ fees will be
granted.
BACKGROUND
Under the Medicaid statute,1 Advantage entered into MCO
contracts2 with the District of Columbia to provide medical
insurance to Medicaid-eligible residents of the District of
Columbia. (See Def.’s Mem. P. & A. Supp. Mot. Dismiss (“Def.’s
Mem.”), Exs. A & B.) In turn, Advantage entered into contracts
1
Congress enacted the Medicaid statute as part of Title XIX
of the Social Security Act. See 42 U.S.C. § 1396 et seq.
2
Advantage has attached the 2000 and 2002 MCO contracts to
its motion to dismiss. (See Def.’s Mem., Exs. A & B.) No 2001
MCO contract is in the record. According to Advantage, the 2000
MCO contract was in effect from March 31, 2000 until April 1,
2002, and the 2002 MCO contract was in effect from April 1, 2002
and at all times beyond that are relevant to this case. (Id.)
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with a number of District of Columbia hospitals and health care
providers to provide services to members of Advantage’s managed
care plan (“plan”). (See Compl. ¶ 7.) These hospitals and
providers are “in-network” providers under Advantage’s plan.
P.G. Hospital, located in Maryland, has no provider contract with
Advantage and therefore is considered an “out-of-network”
hospital under Advantage’s plan.
P.G. Hospital alleges that between July 2001 and
August 2002, it provided emergency services to five members of
Advantage’s plan.3 According to P.G. Hospital, it had not
realized that each of the patients was covered by Advantage due
to incorrect or incomplete information the patients had provided
to P.G. Hospital. (See Compl. ¶¶ 12, 16, 31-33, 40-41.)
P.G. Hospital states that upon learning of each patient’s
coverage under Advantage’s plan, P.G. Hospital notified Advantage
of the emergency admission and treatment and sought payment from
Advantage. (Id. ¶¶ 17, 27, 29, 33, 36, 42, 46, 54, 56.)
P.G. Hospital represents that Advantage denied payment in each
case, claiming that P.G. Hospital had failed to notify Advantage
of the admissions in a timely manner. (Id. ¶¶ 19, 29, 36, 46,
3
P.G. Hospital has submitted letters from Advantage to
P.G. Hospital in which each of the patients is identified by
Advantage as a member of its plan. (Pl.’s Opp’n, Ex. 7 (“Denial
Letters”).)
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56; Pl.’s Opp’n at 8, Ex. 7 (“Denial Letters”).)4 P.G. Hospital
asserts that once it notified Advantage of each patient’s
admission, Advantage made no request to have the patient
transferred to an in-network facility. (Pl.’s Opp’n at 8.)
P.G. Hospital also asserts that it appealed Advantage’s denials
of its requests for payment, but that those appeals were denied.
(Id.)
The complaint alleges that P.G. Hospital is “lawfully
subrogated to the cause of action of the members/patients,
entitled by law, and as a third-party beneficiary of the contract
between the District and the Defendant, to payment for services
rendered.” (Compl. at ¶¶ 18, 28, 35, 45 & 55.) Advantage
contends that P.G. Hospital cannot establish a cause of action
under these theories. Advantage now moves to dismiss this case
under Rules 12(b)(6) and 12(b)(1) for failure to state a claim
and for lack of subject matter jurisdiction, and in the
alternative, moves under Rule 12(e) for a more definite
statement.
DISCUSSION
“‘A complaint can be dismissed under Rule 12(b)(6) when a
plaintiff fails to state a claim upon which relief can be
4
Among the denial letters submitted by the P.G. Hospital is
a letter from Advantage to Willie C. Blair, M.D. stating that, in
considering Blair’s appeal, Advantage had “made an exception” for
Blair and authorized payment to Blair for his treatment of one of
the patients at issue in the complaint. (See Pl.’s Opp’n,
Ex. 7.)
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granted.’” Howard Univ. v. Watkins, Civil Action No. 07-492
(RWR), 2012 WL 1454487, at *2 (D.D.C. April 27, 2012) (quoting
Peavey v. Holder, 657 F. Supp. 2d 180, 185 (D.D.C. 2009) (citing
Fed. R. Civ. P. 12(b)(6))). Motions to dismiss under Rule
12(b)(6) test the legal sufficiency of a complaint.
Smith-Thompson v. Dist. of Columbia, 657 F. Supp. 2d 123, 129
(D.D.C. 2009).
To survive a motion to dismiss, a complaint must
contain sufficient factual matter, acceptable as true,
to “state a claim to relief that is plausible on its
face.” . . . A claim has facial plausibility when the
plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is
liable for the misconduct alleged.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 570 (2007)). “The
complaint must be construed in the light most favorable to the
plaintiff and “‘the court must assume the truth of all
well-pleaded allegations.’” Watkins, 2012 WL 1454487, at *2
(quoting Warren v. Dist. of Columbia, 353 F.3d 36, 39 (D.C. Cir.
2004)). “[A] complaint attacked by a Rule 12(b)(6) motion to
dismiss does not need detailed factual allegations[.]” Twombly,
550 U.S. at 555. However, “[w]here a complaint pleads facts that
are ‘merely consistent with’ a defendant's liability, it ‘stops
short of the line between possibility and plausibility of
entitlement to relief.’” Iqbal, 556 U.S. at 662 (quoting
Twombly, 550 U.S. at 557.
When assessing a motion brought under Rule 12(b)(6), a court
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avoids consideration of matters outside the pleadings, but may
consider “the facts alleged in the complaint, documents attached
as exhibits or incorporated by reference in the complaint,”
Gustave-Schmidt v. Chao, 226 F. Supp. 2d 191, 196 (D.D.C. 2002),
public records, and “documents ‘upon which the plaintiff's
complaint necessarily relies’ even if the document is produced
not by the plaintiff in the complaint but by the defendant in a
motion to dismiss[.]” Hinton v. Corr. Corp. of Am., 624 F. Supp.
2d 45, 46 (D.D.C. 2009) (quoting Parrino v. FHP, Inc., 146 F.3d
699, 706 (9th Cir. 1998)); Hartline v. Sheet Metal Workers’ Nat’l
Pension Fund, 134 F. Supp. 2d 1, 8 (D.D.C. 2000). Here, because
P.G. Hospital refers to MCO contracts which are central to its
claims, the MCO contracts may be considered in determining the
motion to dismiss upon which one of P.G. Hospital’s claims is
based.
I. SUBROGATION
P.G. Hospital asserts in its complaint that it is “lawfully
subrogated to the cause of action of the members/patients . . .
to payment for services rendered” and may collect those debts
from Advantage. (Compl. ¶¶ 18, 28, 35, 45 & 55.) Advantage
argues that P.G. Hospital has failed to establish the predicate
factors for a subrogation claim by failing to demonstrate that
the patients have a cause of action against Advantage, that
P.G. Hospital has paid a debt on behalf of the patients, or that
the patients had a debt to P.G. Hospital. (Def.’s Mem. at 10.)
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Advantage contends, then, that P.G. Hospital, standing in the
shoes of the patients, does not have any rights against
Advantage. (Id. at 11.)
P.G. Hospital argues in response that it has a claim of
equitable subrogation because public policy supports insuring
indigent persons and paying those providers and hospitals that
provide emergency services to indigent persons. (Pl.’s Opp’n at
12.) According to P.G. Hospital, because it has provided
treatment to patients covered by Advantage’s plan, it should be
substituted for the patients and able to exercise the patients’
rights to recover benefits under the plan. (Id. at 12-13.)
P.G. Hospital further contends that Advantage “in good
conscience” ought to pay because it has been unjustly enriched in
that it has received premiums from the District of Columbia and
the federal government to provide insurance, but has not
reimbursed P.G. Hospital for emergency services rendered to the
patients Advantage insures. (Id.)
Subrogation is “[t]he substitution of one party for another
whose debt the party pays, entitling the paying party to rights,
remedies, or securities that would otherwise belong to the
debtor.” Thrasher-Lyon v. Illinois Farmers Ins. Co., No.
11-4473, 2012 WL 983774, at *8 n.1 (N.D. Ill. March 20, 2012)
(quoting Black’s Law Dictionary (9th ed. 2009)); see also Group
Hospitalization and Medical Svcs., Inc. v. Richardson, 946 F.
Supp. 50, 53 (D.D.C. 1996). Equitable subrogation, also known as
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legal subrogation, “arises by operation of law or by implication
in equity to prevent fraud or injustice.” Black’s Law Dictionary
(9th ed. 2009). Equitable subrogation may arise “when (1) the
paying party has a liability, claim, or fiduciary relationship
with the debtor, (2) the party pays to fulfill a legal duty or
because of public policy, (3) the paying party is a secondary
debtor, (4) the paying party is a surety, or (5) the party pays
to protect its own rights or property.” Id. “Where one party
has paid the debt of another, justice requires that the payor be
able to recover his loss from the one who should have paid it, to
prevent unjust enrichment . . .. The rights of the party who
paid the debt in no way depend upon showing a contract provision
or formal assignment; evidence of payment is sufficient.” Nat’l
Union Fire Ins. Co. v. Riggs Nat’l Bank, 646 A.2d 966, 968 (D.C.
1994).
Under District of Columbia law, equitable subrogation may be
appropriate where each of the following conditions is satisfied:
(1) Payment [was] made by the subrogee to protect his
own interest. (2) The subrogee [has] not . . . acted
as a volunteer. (3) The debt paid [was] one for which
the subrogee was not primarily liable. (4) The entire
debt [has] been paid. (5) Subrogation [would] not work
any injustice to the rights of others.
In re Stevenson, No. 06-00306, 2008 WL 748927, *5 (Bankr. D.C.
Mar. 17, 2008) (quoting Eastern Sav. Bank, FSB v. Pappas, 829
A.2d 953, 961 (D.C. 2003)).
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P.G. Hospital has not sufficiently pled a claim for
equitable subrogation because it has not demonstrated that the
patients would have claims for monetary compensation against
Advantage which would result in a “debt” that P.G. Hospital
extinguished, nor has P.G. Hospital identified existing claims
that the patients make against Advantage for which P.G. Hospital
could step into their shoes to advance. Cf. Group
Hospitalization, 946 F. Supp. at 53 (determining that an insurer
had no right to subrogation where nothing in the record indicated
that payments by the insurer for medical care were for a debt of
the alleged insured). P.G. Hospital alleges that it provided
emergency services to the patients under the Emergency Medical
Treatment and Active Labor Act (“EMTALA”),5 and it now seeks to
be reimbursed for the cost of those services. But P.G. Hospital
5
The pertinent provision of the EMTALA provides:
If any individual (whether or not eligible for benefits
under this subchapter) comes to a hospital and the
hospital determines that the individual has emergency
medical condition, the hospital must provide either–
(A) within the staff and facilities available
at the hospital, for such further medical
examination and such treatment as may be
required to stabilize the medical condition,
or
(B) for transfer of the individual to another
medical facility in accordance with
subsection (c) of this section.
42 U.S.C. § 1395dd(b)(1). The EMTALA extends to anyone who seeks
emergency room assistance, without distinction between persons
with and without insurance. Gatewood v. Washington Healthcare
Corp., 933 F.2d 1037, 1040 (D.C. Cir. 1991).
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cites no case law to support a subrogation claim in which the
party seeking to be subrogated to the rights of another has
merely rendered services rather than satisfied a debt.
Accordingly, Advantage’s motion to dismiss P.G. Hospital’s claim
for subrogation will be granted.6
II. CAUSE OF ACTION UNDER THE MEDICAID STATUTE
Advantage argues that P.G. Hospital cannot state a private
cause of action against it under the Medicaid statute.
P.G. Hospital responds that the Medicaid laws have been construed
to grant providers of emergency services with a cause of action
for nonpayment. (Pl.’s Opp’n at 17.)
The Medicaid statute, enacted as part of Title XIX of the
Social Security Act, 42 U.S.C.A. § 1396 et seq.,
is a cooperative federal-state program through
which the Federal Government provides financial
assistance to States so that they may furnish
medical care to needy individuals. Although
participation in the program is voluntary,
participating States must comply with certain
requirements imposed by the Act and regulations
promulgated by the Secretary of Health and Human
Services (“Secretary”). To qualify for federal
assistance, a State must submit to the Secretary
and have approved a ‘plan for medical
assistance,’ that contains a comprehensive
statement describing the nature and scope of
the State’s Medicaid program. The state plan is
required to establish, among other things, a
6
Advantage argues in the alternative that the court “lacks
subject matter jurisdiction to hear any claim based on rights
that P.G. Hospital may have by subrogation” because the patients
did not exhaust their administrative remedies with respect to
payment denials. (Def.’s Mem. at 11.) Because the subrogation
claim will be dismissed, this issue is moot.
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scheme for reimbursing health care providers for
the medical services provided to needy individuals.
Wilder v. Virginia Hospital Ass’n, 496 U.S. 498, 503 (1990)
(citations omitted). The Medicaid statute includes a waiver
provision which permits a state to contract with MCOs to provide
health care services to medicaid recipients. See 42 U.S.C.
§§ 1396n, 1396u-2(1). “Under the waiver provision, if a state
requests and receives a waiver from the Secretary of Health and
Human Services pursuant to 42 U.S.C. § 1396n(c), a state may
enter into contracts with MCOs to provide health care services to
qualifying recipients.” See Solter v. Health Partners of
Philadelphia Inc., 215 F. Supp. 2d 533, 535 (E.D. Pa. 2002).
MCOs, in turn, are permitted to enter into contracts with other
health care organizations. See 42 U.S.C. § 1396u-2; 42 C.F.R.
§ 438.210.
With respect to emergency services, the Medicaid statute
requires that an MCO provide coverage for emergency services
“without regard to prior authorization or the emergency care
provider’s contractual relationship with the organization or
manager . . ..” 42 U.S.C. § 1396u-2(b)(2)(A)(I). The Medicaid
statute also provides that “[e]ach medicaid managed care
organization shall establish an internal grievance procedure
under which an enrollee who is eligible for medical assistance
under the State plan under the subchapter, or a provider on
behalf of such an enrollee, may challenge the denial of coverage
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of or payment for such assistance.” 42 U.S.C. § 1396u-2(b)(4).
The section of the statute concerning payment of health care
providers states that:
[a] contract under section 1396b(m) of this title with
a medicaid managed care organization shall provide
that the organization shall make payment to health
care providers for items and services which are
subject to the contract and that are furnished to
individuals eligible for medical assistance under
the State plan under this subchapter who are enrolled
with the organization on a timely basis consistent
with the claims payment procedures described in
section 1396a(a)(37)(A) of this title, unless the
health care provider and the organization agree to an
alternate payment schedule.
42 U.S.C. § 1396u-2(f).
P.G. Hospital argues that there is an implied private cause
of action under the Medicaid statute for health care providers
against MCOs for nonpayment, citing Mallo v. Public Health Trust
of Dade County, Florida, 88 F. Supp. 2d 1376 (S.D. Fla. 2000),
Wilder, 496 U.S. at 498, and Ohio Hospital Ass’n v. Ohio Dep’t of
Human Serv., 579 N.E.2d 695 (Ohio 1991), cert. denied, 503 U.S.
940 (1991). However, in each of those cases, the question was
whether the Medicaid statute created a federal right enforceable
against a State or its agencies under 42 U.S.C. § 1983.7 These
7
The Supreme Court has held that the Boren Amendment to the
Medicaid statute creates a federal right that is enforceable by
health care providers against a state under § 1983. Wilder, 496
U.S. at 524 (concluding that health care providers had an
enforceable federal right under § 1983 to reasonable and adequate
Medicaid rates in their state plans). A number of other courts
have also found that portions of the Medicaid statute are
enforceable under § 1983 against state officials. See Ohio
Hospital Ass’n, 579 N.E.2d at 698-99; Amisub (PSL), Inc. v.
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cases are inapplicable here because P.G. Hospital has sued a
private company, to which § 1983 is inapplicable. Furthermore,
an MCO is not deemed a state actor by virtue of its contract with
the state. See Taormina v. Suburban Woods Nursing Homes, 765 F.
Supp. 2d 667, 672 (E.D. Pa. 2011); Karen L. ex rel. Jane L. v.
Physicians Health Services, Inc., 202 F.R.D. 94, 104-05 (D. Conn.
2001).
Because the Medicaid statute does not expressly authorize a
private cause of action to enforce its provisions, P.G. Hospital
must establish that Congress intended to create a private remedy
under the Medicaid statute. See Suter v. Artist M., 503 U.S.
347, 363-64 (1992). To determine whether the Medicaid statute
impliedly authorizes a private cause of action, a court must
apply the four-prong test laid out in Cort v. Ash, 422 U.S. 66,
78 (1975): (1) whether the statutes were created for the
plaintiff’s special benefit, (2) whether there is evidence of
legislative intent to create a private remedy, (3) whether a
private remedy would be consistent with legislative purposes, and
Colorado Dep’t of Social Servs., 879 F.2d 789, 793-94 (10th Cir.
1989) (holding that Title XIX providers have federal rights
enforceable in a § 1983 action); Westside Mothers v. Haveman, 289
F.3d 852, 863 (6th Cir. 2002) (finding that professional medical
organizations had standing to assert a § 1983 claim against state
officials for violation of the Medicaid statute provisions
requiring early and periodic screening, diagnosis, and treatment
for Medicaid-eligible children); Mallo, 88 F. Supp. 2d at 1391(holding that patient could sue state agency under § 1983 for
breaching its obligation under the balance billing provision of
the Medicaid statute).
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(4) whether the area is one traditionally relegated to the
states. P.G. Hospital does not address these factors in its
opposition to Advantage’s motion to dismiss. In any event, a
number of federal courts have declined to find a private right of
action under the Medicaid statute. See e.g., Baum v. Northern
Dutchess Hosp., 764 F. Supp. 2d. 410, 415 (N.D.N.Y. 2011)
(holding that the Medicaid statute, as amended by the Federal
Nursing Home Reform Amendments, did not create a private cause of
action for nursing home residents against nursing homes); Duncan
v, Johnson-Mathers Health Care, No. 5:09-CV-00417, 2010 WL
3000718, at *9-10 (E.D. Ky. July 28, 2010) (holding that the
Medicaid statute did not create an enforceable cause of action
against a private health care facility); Solter, 215 F. Supp. 2d
at 540 (holding that a patient did not have a private right of
action under the Medicaid statute against an MCO to enforce
Medicaid guidelines and waiver provisions); Stewart v. Bernstein,
769 F.2d 1088, 1093-94 (5th Cir. 1985) (holding that a Medicaid
recipient who was involuntarily removed from private nursing did
not have a private right of action under the Medicaid statute
against a nursing home); Brogdon v. Nat’l Healthcare Corp., 103
F. Supp. 2d 1322, 1326 (N.D. Ga. 2000) (concluding that residents
of a long-term health care facility did not have a private right
of action against a nursing home under the Medicaid statute);
Ayres v. Beaver, 48 F. Supp. 2d 1335, 1339-40 (M.D. Fla. 1999)
(finding that nursing home residents did not have a private right
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of action against a nursing home under the Medicaid statute);
Fuzie v. Manor Care Inc., 461 F. Supp. 689, 696 (N.D. Ohio 1977)
(stating that no private remedy may be implied under the Medicaid
statute); Slovinic v. Illinois Dept. of Human Services, No. 02-C-
4124, 2005 WL 442555, at *7 (N.D. Ill. February 22, 2005)
(dismissing plaintiff’s claim in part because the Medicaid
statute did not provide a private right of action); Carroll v.
Butterfield Health Care, Inc., No. 02-4903, 2003 WL 22462604, at
*3 (N.D. Ill. Oct. 29, 2003) (stating that the Medicaid statute
does not create a private cause of action).
In Solter, the court addressed whether Congress intended to
create a private right of action to enforce the Medicaid
guidelines and waiver provisions. Medicaid recipients argued
that the MCO’s decision not to approve dental surgery denied them
“medically necessary” services in violation of the Medicaid
guidelines and waiver provisions. The court applied the four
factors in Cort v. Ash and determined that there was no implied
right of action under the Medicaid statute. In so holding, the
court first determined that Medicaid recipients were intended
beneficiaries of the guidelines and waiver provisions of the
Medicaid statute. Solter, 215 F. Supp. 2d at 537. The court
then noted as to the second Cort factor that there was no
indication of Congressional intent to create a private remedy for
a Medicaid patient to bring a private action under the statute,
id. at 537-38, and that the Medicaid statute’s provision for an
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administrative process created by the participant state for
beneficiaries to seek redress for benefit determinations provided
evidence that Congress “anticipated that the states would provide
the remedy for vindication of the guidelines and waiver
provisions of the Medicaid Act.” Id. at 539. The court held
under the third Cort factor that an implied right of action under
the statute was not consistent with the Medicaid legislative
scheme, which places “administration of the program under the
Medicaid Act in the hands of the states.” Id. at 540. Lastly,
the court addressed the fourth Cort factor, and determined that
the causes of action at issue -- negligence, breach of contract
and breach of fiduciary duty -- are historically determined by
state courts. Id.Similarly, applying the Cort v. Ash factors to the instant
case, there is no implied cause of action under the Medicaid
statute for reimbursement for emergency services allegedly
provided to Medicaid beneficiaries. With respect to the first
factor, there is evidence that both health care providers and
Medicaid recipients, and not the healthcare providers alone, are
the intended beneficiaries of the relevant provisions. For
example, the section entitled “Timeliness of Payment” provides:
A contract under section 1396b(m) of this title with
a medicaid managed care organization shall provide
that the organization shall make payment to health
care providers for items and services which are
subject to the contract and that are furnished to
individuals eligible for medical assistance under
the State plan under this subchapter who are enrolled
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with the organization on a timely basis consistent
with the claims payment procedures described in
section 1396a(a)(37)(A) of this title, unless the
health care provider and the organization agree to an
alternate payment schedule.
42 U.S.C. § 1396u-2(f). Also, the “Beneficiary protections”
include a number of protections for the plan enrollees, including
the requirement that the MCO provide coverage for emergency
services without prior authorization or the emergency care
provider’s contractual relationship with the MCO. See 42 U.S.C.
§ 1396u-2(b)(2)(A)(I). The section also provides that the MCO
establish an internal grievance procedure through which an
enrollee or a health care provider may challenge denial of
coverage. See 42 U.S.C. § 1396u-2(b)(4).
Second, there is no language in the statute which expresses
a legislative intent to create a private remedy. P.G. Hospital
relies in large part on letters interpreting the Medicaid
provisions that the Centers for Medicare & Medicaid Services
(CMS) issued to state medicaid directors. (Pl.’s Opp’n at 2-4.)
A February 20, 1998 letter includes an attachment entitled
“Clarification of Beneficiary Access and MCO Financial
Responsibilities for Emergency Services” which provides that
“MCOs may not require prior authorization for emergency services.
This applies to out-of-network as well as to in-network services
which a beneficiary seeks in an emergency.” (Pl.’s Opp’n, Ex. 3
at 3.) An April 18, 2000 letter provides that the applicable law
“prohibits prior authorization for coverage of emergency
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services. This means that services that meet the definition of
emergency services must be covered, and beneficiaries must not be
charged for these services, except for any permissible nominal
cost-sharing amounts. Therefore, . . . an MCO, may [not] make
payment for emergency services contingent on the beneficiary
providing the . . . MCO with notification, either before or after
receiving emergency services.” (Pl.’s Opp’n, Ex. 4 at 2.)
Notably absent from the statutory language and the language
in the CMS letters is any indication that a care provider has a
private cause of action against an MCO. In addition, P.G.
Hospital cites no law to support its implicit contention that the
CMS letters are legally binding. Even if P.G. Hospital had, P.G.
Hospital points to no language in the statute or letters that
provides that an out-of-network health care provider may have a
cause of action against an MCO for failure to pay for covered
emergency services. Rather, the only language regarding an MCO’s
failure to pay involves the sanctions available to the State in
the event an MCO does not comply with the statute. See 42 U.S.C.
§ 1396u-2(e). The same February 20, 1998 CMS letter cited by
P.G. Hospital interprets this language as well, stating that
where an MCO fails to cover emergency screening or stabilization
services, it may be subject to intermediate sanctions or
termination by the State. The letter also provides that HCFA may
impose sanctions “if the failure to cover emergency services as
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required . . . adversely affects . . . a Medicaid beneficiary.”
(Pl.’s Opp’n, Ex. 3 at 2.)
As to the third Cort factor, a private right of action is
not consistent with the underlying purposes of the legislative
scheme for the same reasons it was not in Solter, namely, that
with respect to a participating state’s decision to contract with
an MCO, the legislative scheme leaves the administration of the
program to the state. In the case at hand, the statutory
language requiring an MCO to develop a grievance procedure for
beneficiaries and providers who wish to challenge a denial
supports a finding that Congress intended the states to
administer this program, which would not be consistent with
having a private right of action under the statute.
Under the fourth Cort factor, the cruxes of the causes of
action alleged in this case are subrogation and breach of
contract. These are traditionally state law claims, and
therefore, it would be inappropriate to infer a cause of action
based on such state law claims to be redressed by federal law.
Solter, 215 F. Supp. 2d at 540.
Because P.G. Hospital has not established under the four
factors of Cort v. Ash that there is an implied private right of
action under the Medicaid statute, and because P.G. Hospital can
point to no case law or language in the Medicaid statute to
support a finding that an out-of-network provider has a private
cause of action under the statute against an MCO which fails to
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reimburse it for emergency services, P.G. Hospital has not
established a viable cause of action under the Medicaid statute.
III. THIRD-PARTY BENEFICIARY OF THE MCO CONTRACT
P.G. Hospital argues that it has a cause of action against
Advantage for non-payment as a third-party beneficiary of the MCO
contract. (Pl.’s Opp’n at 19.) In its motion to dismiss,
Advantage contends P.G. Hospital’s claim fails because P.G.
Hospital is not an intended third-party beneficiary under the MCO
contracts.
“Under general contract principles, a third party
beneficiary of a contract may bring an action against the
principal parties to that contract only when the parties to the
contract intended to create and did create enforceable contract
rights in the third party.” Sealift Bulkers, Inc. v. Repub. of
Armenia, Civ. Action No. 95-1293 (PLF), 1996 WL 901091, at *4
(D.D.C. Nov. 22, 1996); Monument Realty LLC v. Wash. Metro. Area
Transit Auth., 535 F. Supp. 2d 60, 70 (D.D.C. 2008) (stating that
“one who is not a party to a contract may nonetheless sue to
enforce the contract’s provisions if the contracting parties
intend the third party to benefit directly thereunder”).
“Government contracts by their nature benefit the public, but
only in rare circumstances will courts deem individual members of
the public to be intended beneficiaries empowered to enforce
those contracts in court.” Edwards v. Aurora Loan Servs., 791 F.
Supp. 2d 144, 151 (D.D.C. 2011). “Government contracts often
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benefit the public, but individual members of the public are
treated as incidental beneficiaries unless a different intention
is manifested.” Id. (quoting Restatement (Second) of Contracts
§ 313(2), cmt. a (1981)); see also Moore v. Gaither, 767 A.2d
278, 287 (D.C. 2001)).
In Moore, the D.C. Court of Appeals held that a management
agreement between the District of Columbia Department of
Corrections (“DC DOC”) and a private facility did not create in
inmates a right to representation at disciplinary hearings.
Moore, 767 A.2d at 287-88. Although the management agreement
required the facility to follow a statute which required
representation at disciplinary hearings, the facility had secured
a written waiver from the DC DOC of its obligation to adhere to
the statute. Id. at 287. The court held that because the
management agreement expressly stated that its provisions “are
for the sole benefit of the Parties hereto and shall not be
construed as conferring any rights on any other person[,]” it was
clear the inmates were merely incidental beneficiaries to the
contract and could not enforce the contract. Moore, 767 A.2d at
287 (emphasis omitted).
The District of Columbia and Advantage, an MCO, are parties
to the contracts at issue. As an initial matter, unlike the
agreement in Moore, there is no express language in the MCO
contracts precluding third-party beneficiary rights. The 2000
MCO contract provides that the MCO “shall reimburse facilities at
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the contracted rate for network facilities and at the current
Medicaid rate for non-network facilities for the following
services: (1) the evaluation of an emergency medical condition
[and] . . . (2) all medically necessary care and services
furnished prior to the time an enrolled becomes stabilized . .
..” (Def.’s Mot., Ex. A at 6.) The 2002 MCO contract provides
that the MCO “shall be responsible for covering emergency
services, as defined above, provided to Enrollees at either in-
network or out-of-network providers, without regard to prior
authorization.” (Def.’s Mot., Ex. B at 61.) It further provides
that the MCO “shall cover all emergency services provided by out-
of-network providers.” (Pl.’s Opp’n, Ex. 8 at 9.)
Under the contracts, Advantage has promised to provide
payment to in-network and out-of-network providers under certain
circumstances. These promises to pay providers establish that
the parties intended in-network and out-of-network providers to
benefit from the contracts. See Beckett, 995 F.2d at 288; Hook,
972 F.2d at 1015. The Second Restatement provides
(1) Unless otherwise agreed between promisor and
promisee, a beneficiary of a promise is an intended
beneficiary if recognition of a right to performance
in the beneficiary is appropriate to effectuate the
intention of the parties and either
(a) the performance of the promise will satisfy an
obligation of the promisee to pay money to the
beneficiary; or
(b) the circumstances indicate that the promisee
intends to give the beneficiary the benefit of the
promised performance.
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(2) An incidental beneficiary is a beneficiary who
is not an intended beneficiary.
Restatement (Second) of Contracts § 302. In-network and out-of-
network providers are intended beneficiaries under the contracts
because in order to effectuate the intention of Advantage and the
District of Columbia in the contract -- for Advantage to pay for
emergency services provided by in-network and out-of-network
providers -- the health care provider’s right to payment must be
recognized. In addition, if P.G. Hospital’s allegations are
later established to be true, Advantage’s payment to
P.G. Hospital will satisfy the District of Columbia’s obligation
to reimburse health care providers of emergency-related services
to Medicaid recipients. The language of the contracts at issue
creates an obligation in the MCO to pay those health care
providers that render emergency treatment to the MCO’s enrollees.
The Second Restatement of Contracts further provides that
A promise in a contract creates a duty in the promisor
to any intended beneficiary to perform the promise, and
the intended beneficiary may enforce the duty.
Restatement (Second) of Contracts § 304. As a result of
Advantage’s promise to the District of Columbia under the MCO
contracts, Advantage has a duty to make certain payments to
providers, as third-party beneficiaries, which may be enforced by
the providers against Advantage as the alleged breaching
promisor.
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Because P.G. Hospital has alleged a cause of action as a
third-party beneficiary under the MCO contracts, Advantage’s
motion to dismiss for failure to state a claim will be denied as
to this claim.
Advantage argues that even if P.G. Hospital is an intended
third party beneficiary under the MCO contracts, P.G. Hospital’s
claim fails because P.G. Hospital failed to exhaust its
administrative remedies by not requesting a fair hearing under 42
U.S.C. § 1396a(a)(3) and 42 C.F.R. § 431.220 within 90 days of
the notice of denied payment. (Def.’s Mot. at 12.) Section
1396a(a)(3) provides that the state Medicaid plan must “provide
for granting an opportunity for a fair hearing before the State
agency to any individual whose claim for medical assistance under
the plan is denied or is not acted upon with reasonable
promptness . . ..” Section 431.220 of the regulations provides
that the State must provide an opportunity for hearing to “[a]ny
applicant who requests it because his claim for services is
denied or is not acted upon with reasonable promptness.”
The MCO contracts provide that Advantage is to establish a
claims and appeals process for providers. The 2002 MCO contract
provides that
The Contractor shall allow network and non-network
providers to submit an initial claim for covered
and, if required, prior authorized services for a
maximum period of ninety (90) days following the
provision of such services.
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(Pl.’s Opp’n, Ex. 8 at C.11.1.2.) The contract also provides
that
The Contractor shall reconsider a decision to deny,
reduce, terminate, or delay authorization of a
requested covered service or payment denial in
response to an a [sic] grievance to request
submitted by an Enrollee or a provider on behalf
of an Enrollee. Should the Enrollee disagree with
the Contractor’s response to a grievance, the
Enrollee or a provider on the Enrollee’s behalf,
may appeal the Contractor’s decision.
(Pl.’s Opp’n, Ex. 8 at C.14.3.1.) The contract requires that
Advantage, in its denial of a payment request, notify the
enrollee of its “right to file a complaint or grievance with the
Contractor and the right to request a Fair Hearing at any time
. . ..” (Def.’s Mot., Ex. B at C.14.3.2.2.) The contract
further requires that Advantage “notify the Enrollee or the
Enrollee’s designee of the right to a fair hearing with a
District hearing officer, each time notification of an adverse
decision on a complaint, grievance, or appeal is sent to an
Enrollee or the Enrollee’s designee.” (Def.’s Mot., Ex. B at
C.14.4.1.) The regulations also provide that notice of the right
to hearing be included in the adverse decision. See 42 C.F.R.
§ 438.404.
Despite the requirement under the MCO contracts that
Advantage notify a denied provider of the right to a fair
hearing, the letters from Advantage to P.G. Hospital denying P.G.
Hospital’s claims do not provide any information regarding the
right to a fair hearing. (Pl.’s Opp’n, Ex. 7 (“Denial
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letters”).) Advantage, then, should not be heard to complain of
any failure by P.G. Hospital to exhaust administrative rights
about which Advantage failed to notify P.G. Hospital.
Accordingly, Advantage’s motion to dismiss P.G. Hospital’s third-
party beneficiary claim for failure to exhaust its administrative
remedies will be denied.
IV. TIMELINESS OF REQUESTS FOR PAYMENT
Advantage argues that P.G. Hospital’s claims as to patients
Eunice J. and Eugenia P. should be dismissed because
P.G. Hospital failed adequately to plead that it provided timely
notice of treatment as to Eunice J. and that the requests for
payment were proper as to Eugenia P. (Def.’s Mot. at 17.)
Advantage bases its argument on the fact that P.G. Hospital
stated in its complaint that timely and proper notice was
provided as to all other patients, and that P.G. Hospital has
pled itself out of court with respect to Eunice J. and Eugenia P.
due to the omission of the word “timely” as to Eunice J. and the
word “proper” as to Eugenia P. Advantage fails to identify any
contract provision that requires P.G. Hospital to notify it of
emergency services within a certain time frame or in a certain
manner. Therefore, Advantage has not shown that P.G. Hospital
has failed to allege plausible claims as to Eunice J. and Eugenia
P. Accordingly, Advantage’s motion to dismiss the claims as to
Eunice J. and Eugenia P. on the basis that P.G. Hospital failed
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timely and properly to notify Advantage of treatment of these
patients will be denied.
V. ATTORNEYS’ FEES
Advantage seeks to dismiss P.G. Hospital’s claim for
attorneys’ fees because P.G. Hospital has failed to establish any
statutory right to attorneys’ fees. “‘In the United States,
parties are ordinarily required to bear their own attorney’s fees
-- the prevailing party is not entitled to collect from the
loser. . . . Under this American Rule, we follow a general
practice of not awarding fees to a prevailing party absent
explicit statutory authority.’” Dist. of Columbia v. Straus, 705
F. Supp. 2d 14, 15 (D.D.C. 2010) (quoting Buckhannon Bd. and Care
Home, Inc. v. West Virginia Dep’t of Health & Human Resources,
532 U.S. 598, 602 (2001) (internal quotation omitted)). Here,
there is no explicit statutory authority which permits an award
of attorneys’ fees. Accordingly, Advantage’s motion to dismiss
will be granted as to P.G. Hospital’s claim for attorneys’ fees.
CONCLUSION
P.G. Hospital has not alleged a statutory right to
attorneys’ fees or facts sufficient to support a cause of action
for subrogation, and P.G. Hospital has no private cause of action
under the Medicaid statute. Thus, Advantage’s motion to dismiss
will be granted as to P.G. Hospital’s claims for subrogation and
attorneys’ fees, and claim that it is entitled by law to
reimbursement. Because P.G. Hospital has alleged facts
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sufficient to support a cause of action for breach of contract as
a third-party beneficiary of the MCO contracts and because the
record suggests that P.G. Hospital was not properly advised of
its administrative rights to appeal, Advantage’s motion to
dismiss will be denied as to P.G. Hospital’s claim for breach of
contract as a third-party beneficiary. Because P.G. Hospital has
alleged facts to support a cause of action with respect to Eunice
J. and Eugenia P., Advantage’s motion to dismiss the claims on
the basis that P.G. Hospital failed to provide timely and proper
notice of treatment as to Eunice J. and Eugenia P. will be
denied.
SIGNED this 6th day of June, 2012.
___/s/______________________
RICHARD W. ROBERTS
United States District Judge