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

United States District Court, District Circuit

October 21, 2013

PRINCE GEORGE’S HOSPITAL CENTER, Plaintiff,
v.
ADVANTAGE HEALTHPLAN INC., Defendant.

MEMORANDUM OPINION

KETANJI BROWN JACKSON, United States District Judge

Plaintiff Prince George’s Hospital Center (“PGHC”) originally filed this action against Defendant Advantage Healthplan Inc. (“Advantage”) in the Superior Court of the District of Columbia more than a decade ago. PGHC maintains that Advantage breached agreements with the District of Columbia that required Advantage to reimburse healthcare providers such as PGHC for the provision of emergency care services to certain District residents. (Complaint (“Compl.”), ECF No. 1-1, ¶¶ 5-10.) Before this Court at present is a motion for reconsideration that Advantage has filed. Advantage asks this Court to reconsider the Court’s Opinion and Order of June 6, 2012 (ECF No. 17), which grants in part and denies in part Advantage’s motion to dismiss the complaint. See Prince George’s Hosp. Ctr. v. Advantage Healthplan Inc., 865 F.Supp.2d 47, 48 (D.D.C. 2012) (Roberts, J.). In the challenged Opinion and Order, the Court held that PGHC can proceed with a cause of action against Advantage as a third-party beneficiary of the contracts between Advantage and the District. Id. at 59.

For the reasons stated below, Advantage’s motion for reconsideration is GRANTED, and so, too, is its motion to dismiss. Accordingly, as set forth in the separate order that accompanies this opinion, this case is hereby DISMISSED in its entirety.

I. BACKGROUND

This case arises out of certain provisions of Title XIX of the Social Security Act pertaining to the federal Medicaid program, commonly known (and referred to herein) as the “Medicaid statute.” See 42 U.S.C. §§ 1396-1396w. Pursuant to section 1396u-2 of the Medicaid statute (the “managed care provision”), a state may require Medicaid-eligible individuals to enroll in certain health insurance plans that Managed Care Organizations (“MCOs”) administer. Id. § 1396u-2(a)(1)(A)(i). States ordinarily enter into contracts with MCOs to supply insurance to Medicaid-eligible individuals, 42 U.S.C. § 1396b(m), and the managed care provision imposes certain requirements on the contractual agreements that states and MCOs form. See generally Id . § 1396u-2. Most importantly for present purposes, one section of the managed care provision mandates that a contract between a state and an MCO must contain a term that requires the MCO “to provide coverage for emergency services . . . without regard to prior authorization or the emergency care provider’s contractual relationship with” the MCO. Id. § 1396u-2(b)(2)(A)(i) (the “emergency services section” of the managed care provision).[1]

Defendant Advantage is an MCO that contracted with the District of Columbia in 2000 and 2002 to provide health insurance and related services to Medicaid-eligible residents of the District of Columbia. Prince George’s Hosp. Ctr., 865 F.Supp.2d at 49.[2] The contracts between Advantage and the District—pursuant to which enrolled Medicaid-eligible District residents became “Advantage plan members”—generally incorporated the requirements of the managed care provision of the Medicare statute. See Id . at 57-58. Moreover, in addition to contracting with the District to provide insurance for Medicaid-eligible District residents, Advantage also entered into contracts with a number of hospitals and healthcare providers in the greater D.C. metro area for the provision of medical services to Advantage’s plan members. (Compl. ¶ 6.) The hospitals and healthcare providers that had contracts with Advantage were known as “in-network” providers under Advantage’s plan. (Id.) Hospitals and providers that had no contract with Advantage—such as PGHC—were considered “out-of-network” providers. (See Id . ¶ 7.) Consistent with the emergency services section of the managed care provision of the Medicaid statute, however, the contracts between Advantage and the District specifically stated that Advantage “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.” Prince George’s Hosp. Ctr., 865 F.Supp.2d at 57.[3]

PGHC’s complaint, which was originally filed in D.C. Superior Court on October 14, 2003, alleges that between July 2001 and August 2002, PGHC provided treatment for emergency medical conditions to five District residents who were members of Advantage’s plan under the managed care contracts. (Compl. ¶ 9.) The complaint asserts that PGHC rendered these services without realizing that each of the patients had Advantage insurance coverage, due to incorrect or incomplete information that the patients provided to PGHC. (Id. ¶¶ 12, 16, 31-33, 40-41.) PGHC alleges that, upon learning that each patient was an Advantage plan member, it promptly notified Advantage of the patient’s emergency treatment and sought reimbursement (id. ¶¶ 17, 27, 29, 33, 36, 42, 46, 54, 56), but Advantage denied payment in each case (id. ¶¶ 19, 29, 36, 46, 56). The complaint claims that PGHC is entitled to payment from Advantage for the medical care that PGHC provided to each of the patients on three bases: (1) the equitable principle of subrogation, (2) the managed care provision of the Medicaid statute itself, and (3) the common law theory that PGHC is a third-party beneficiary of the contracts between Advantage and the District. (Id. ¶¶ 4, 18, 28, 35, 45, 55.) Advantage removed the case from D.C. Superior Court to federal district court on November 19, 2003, pursuant to 28 U.S.C. § 1441. (Notice of Removal, ECF No. 1, at 3).[4]

On December 12, 2003, Advantage filed a motion to dismiss the complaint, arguing that PGHC had failed to state a claim upon which the Court could grant relief. (Def.’s Mem. of P. & A. in Supp. of its Mot. to Dismiss (“Def.’s Mem.”), ECF No. 7, at 1.) In its brief in support of the motion, Advantage attacked each of the theories of recovery that PGHC articulated in its complaint. Advantage argued, first, that PGHC had no right of subrogation because it had failed to plead facts necessary to establish that PGHC had paid a “debt” to Advantage on behalf of the patients, or even that such a debt existed. (Id. at 10.) Advantage further contended that PGHC had failed to identify any statutory authority granting it a private right of action under the Medicaid statute or otherwise. (Id. at 14-15.) Finally, Advantage asserted that PGHC could not proceed with its third-party beneficiary theory of liability because PGHC was not an intended beneficiary of the Medicaid-related contracts between Advantage and the District. (Id. at 15-17.)

On June 6, 2012, the Court issued an opinion granting in part and denying in part Advantage’s motion to dismiss. Prince George’s Hosp. Ctr., 865 F.Supp.2d at 49. The Court dismissed PGHC’s reimbursement claims based on the principle of equitable subrogation primarily because PGHC had failed to demonstrate that “the patients would have claims for monetary compensation against Advantage which would result in a ‘debt’ that [PGHC] extinguished[.]” Id. at 52. The Court also dismissed PGHC’s claim for reimbursement based on the terms of the Medicaid statute. Id. at 56. Based on substantial precedent, the Court reasoned that the Medicaid statute contained no implied private right of action, id. at 54 (collecting cases and applying the four-factor test of Cort v. Ash, 422 U.S. 66, 78 (1975)), which meant that PGHC could not bring a claim to enforce Advantage’s obligations directly under the statutory provision that requires MCOs to provide insurance for emergency health services that plan members receive. Id. at 52-56.

With respect to PGHC’s third and final claim for reimbursement, however, the Court held that PGHC was entitled to seek payment from Advantage as a third-party beneficiary of the contract between Advantage and the District. Id. at 59. In reaching this conclusion, the Court first noted that, under D.C. law, PGHC’s status as an alleged third-party beneficiary turned on whether PGHC was an “intended” beneficiary of the contract even though it was not a party to the contract. Id. at 57 (quoting Sealift Bulkers, Inc. v. Republic of Armenia, No. 95-1293, 1996 WL 901091, at *4 (D.D.C. Nov. 22, 1996) (“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.”)). The Court then observed that “[u]nder the contracts [with the District], Advantage ha[d] promised to provide payment to in-network and out-of-network providers under certain circumstances[, ]” and that “[t]hese promises to pay providers establish that the parties intended in-network and out-of-network providers to benefit from the contracts.” Id. (citations omitted). The Court continued:

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.

Id. at 58.

After concluding that PGHC had a right to proceed against Advantage as a third-party beneficiary, the Court also addressed, and rejected, Advantage’s additional arguments that PGHC had failed to exhaust its administrative remedies, and that PGHC’s complaint should be dismissed for failure to provide timely notice to Advantage that PGHC had treated the patients in question. Id. at 59. Advantage’s instant motion for reconsideration, now before this Court, concerns only the Court’s conclusion that PGHC has a valid claim for reimbursement as a third-party beneficiary of the agreements between Advantage and the District.

II. LEGAL STANDARDS

A. Motion for Reconsideration


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