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Prince George's Hospital ) Center v. Advantage Healthplan Inc

June 6, 2012

PRINCE GEORGE'S HOSPITAL ) CENTER, PLAINTIFF,
v.
ADVANTAGE HEALTHPLAN INC., DEFENDANT.



The opinion of the court was delivered by: Richard W. Roberts United States District Judge

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.

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,*fn1 Advantage entered into MCO contracts*fn2 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 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.*fn3 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, 56; Pl.'s Opp'n at 8, Ex. 7 ("Denial Letters").)*fn4 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 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 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.)

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 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 ...


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