Caris MPI, Inc. v. UnitedHealthcare, Inc.

108 F.4th 340

CARIS MPI, INCORPORATED,doing business as Caris Life Sciences, Plaintiff—Appellant, v. UNITEDHEALTHCARE, INCORPORATED; United Healthcare Services,Incorporated; UnitedHealthcare Community Plan of Texas, L.L.C.;UnitedHealthcare Benefits of Texas, Incorporated;Optum Incorporated, Defendants—Appellees.

No. 23-10901

United States Court of Appeals, Fifth Circuit

FILED July 16, 2024

Appeal from the United States District Court for the Northern District of Texas USDC No. 3:21-CV-3101, Brantley David Starr, U.S. District Judge

John Franklin Bash (argued), Quinn Emanuel Urquhart & Sullivan, L.L.P., Austin, TX, Daniel L. Tobey, Esq., Meagan Dyer Self, DLA Piper, L.L.P., Dallas, TX, Whitney Cloud, DLA Piper, L.L.P., Philadelphia, PA, for Plaintiff-Appellant.

Andrew George Jubinsky, Lance Vernon Clack, Donald Colleluori, Esq., (argued), Figari & Davenport, L.L.P., Dallas, TX, for Defendants-Appellees.

Before Clement, Engelhardt, and Wilson, Circuit Judges.

Cory T. Wilson, Circuit Judge:

Caris MPI, Inc. (Caris) sued UnitedHealthcare, Inc. (United) in Texas state court, alleging various state law claims. United removed the case, asserting federal officer jurisdiction under 28 U.S.C. § 1442(a)(1), and Caris moved to remand. The district court denied Caris's motion and then dismissed Caris's claims without prejudice for failure to exhaust administrative remedies under the Medicare Act, 42 U.S.C. §§ 1395-1395lll.

We agree that federal officer jurisdiction exists in this case. But the district court erred in dismissing Caris's claims because "the administrative review process attendant to [Medicare] Part C does not extend to claims in which an enrollee has absolutely no interest," such that there are no administrative remedies for Caris to exhaust. RenCare, Ltd. v. Humana Health Plan of Tex., Inc., 395 F.3d 555, 559 (5th Cir. 2004). Accordingly, we affirm in part, reverse in part, and remand for further proceedings.

I.

Caris is a private healthcare provider that specializes in cancer diagnostic testing. United is a private insurance company that contracts with the Centers for Medicare and Medicaid Services (CMS) to provide health insurance through the Medicare Advantage program. This case arises from United's attempt to recoup money it paid to Caris for services provided to United's Medicare Advantage enrollees. We briefly explain the relationship between providers, insurance companies, and CMS under Medicare Advantage and then detail the specific background of this case.

A.

Congress created the Medicare Advantage program, also known as Medicare Part C, as an alternative to traditional Medicare. See U.S. DEP'T OF HEALTH & HUM. SERVS., UNDERSTANDING MEDICARE ADVANTAGE PLANS 1 (2023), medicare.gov/Pubs/pdf/12026-Understanding-Medicare-Advantage-Plans.pdf. That program gives enrollees the choice to obtain benefits through private insurance companies rather than from the government. See id at 1-2. Private companies that insure Medicare Advantage enrollees are called Medicare Advantage Organizations (MAOs). 42 C.F.R. § 422.2. MAOs receive fixed payments from CMS based on the number of enrollees in the company's Medicare Advantage plan. 42 U.S.C. § 1395w-23(a)(1)(A).¹

MAOs are empowered to determine "whether an [enrollee] is entitled to receive a health service under [Medicare] and the amount (if any) that the individual is required to pay with respect to such service." Id. § 1395w-22(g)(1)(A). These are known as "organization determinations." 42 C.F.R. § 422.566. Organization determinations include an MAO's "refusal to provide or pay for services, in whole or in part, . . . that the enrollee believes should be furnished or arranged for" by the MAO. Id. § 422.566(b)(3). Parties to an organization determination are not limited to enrollees and MAOs. Id. § 422.574. Relevant to this case, "parties to [an] organization determination [include] . . . [a]n assignee of the enrollee (that is, a physician or other provider who has furnished a service to the enrollee and formally agrees to waive any right to payment from the enrollee for that service)." Id. § 422.574(b).

MAOs "must provide meaningful procedures" for resolving disputes concerning organization determinations. 42 U.S.C. § 1395w-22(f); see 42 C.F.R. § 422.566(a). If an MAO decides that services are not covered by Medicare, the MAO must notify the enrollee in writing. 42 U.S.C. § 1395w-22(g)(1)(B). The enrollee may challenge the organization determination using the MAO's internal process. Id. § 1395w-22(g)(2); 42 C.F.R. § 422.582. If the MAO affirms its organization determination, "the issues that remain in dispute must be reviewed and resolved by an independent, outside entity." 42 C.F.R. § 422.592(a); see 42 U.S.C. § 1395w-22(g)(4). If the enrollee is dissatisfied with the independent entity's decision, the enrollee has a right to a hearing before CMS. 42 U.S.C. § 1395w-22(g)(5); 42 C.F.R. § 422.600. If the enrollee remains dissatisfied, he or she may seek judicial review of the organization determination, but only after the enrollee has completely exhausted his or her administrative remedies under the Medicare Act and its regulations. See 42 U.S.C. § 1395w-22(g)(5) (incorporating the judicial review procedure under 42 U.S.C. § 405(g)); Heckler v. Ringer, 466 U.S. 602, 617, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984) (noting that exhaustion is a "prerequisite to jurisdiction" under 42 U.S.C. § 405(g)). Notwithstanding the foregoing process, once "an enrollee has no further liability to pay for services that were furnished by an MA[O], a determination regarding th[ose] services is not subject to appeal." 42 C.F.R. § 422.562(c)(2).

MAOs engage healthcare providers to provide medical services enrollees need. 42 U.S.C. § 1395w-22(d)(1); 42 C.F.R. § 422.200. These relationships can be structured in two ways. First, an MAO may enter an "explicit agreement" with a provider, whereby the MAO agrees to pay pre-determined rates for specific treatments. See 42 U.S.C. § 1395w-22(j)(6). An MAO's payments to "contracted providers" are governed solely by the terms of the contract. 42 C.F.R. § 422.520(b)(2). Second, "[a]ny provider . . . that does not have in effect a contract establishing payment amounts for services furnished to a beneficiary enrolled in a[ ] [Medicare Advantage] plan" is a "noncontract provider." Id. § 422.214(a)(1). The MAO is required to pay noncontract providers the "amount the provider would have received under original Medicare." Id. §§ 422.100(b)(2), 422.216(a)(2).

Once an MAO determines that an enrollee is entitled to receive a health service under his or her Medicare Advantage plan and the enrollee has met his or her cost-sharing obligations (i.e., deductibles or co-pays), the Medicare Act limits the enrollee's liability for further payments. See id. § 422.504(g). The Act achieves this by requiring contracted providers to accept the pre-determined contract rates as "payment in full," and by requiring noncontracted providers to accept the Medicare rate as "payment in full." 42 U.S.C. § 1395w-22(k)(1), (k)(2)(A)(i). Further, if a noncontract provider participates in Medicare and receives payment, then the provider "may not collect from an enrollee more than the cost-sharing established by the [Medicare Advantage] fee-for-service plan." 42 C.F.R. § 422.216(b)(2). MAOs "must adopt and maintain arrangements satisfactory to CMS to protect its enrollees from incurring liability . . . for payment of any fees that are the legal obligation of the MA[O]." Id. § 422.504(g)(1). Consequently, MAOs are prohibited from recouping from enrollees any payments the MAO makes to providers. See id.

B.

Caris has provided cancer diagnostic services to United's Medicare Advantage customers for over ten years. Caris and United had no written contract during that period. Rather, they interacted "according to their longstanding course of dealings, representations . . . , and implied contracts."² Summarized, Caris obtained preauthorization from United before providing its services; based on that preauthorization, Caris provided patients the requested services; Caris then sent United requests for payment using agreed-upon billing codes; and United paid the claims.

In 2020, United audited Caris's past claims and determined that Caris had used incorrect billing codes between February 2016 and July 2018, resulting in overpayments of $1,276,711.29. United began recouping the purported overpayments by offsetting them against new payment claims from Caris. Caris timely followed United's internal process to challenge United's recoupment. After United rejected Caris's internal appeals, Caris filed suit against United in Texas state court. Caris alleged state law claims including breach of implied contract, unjust enrichment, conversion, and estoppel.

United then filed a notice of removal invoking federal officer jurisdiction under 28 U.S.C. § 1442(a)(1). As one of its colorable federal defenses justifying removal, United asserted that Caris was required to exhaust its administrative remedies through CMS before filing suit. Caris responded with a motion to remand. Considering Caris's motion, the district court raised the concern that, "should [it] deny the motion to remand," it might lack subject matter jurisdiction because Caris failed to exhaust its administrative remedies under the Medicare Act. The district court therefore directed the parties to conduct jurisdictional discovery on the issue.

After an evidentiary hearing, the district court denied Caris's motion to remand, concluding that federal officer jurisdiction existed. It then dismissed Caris's claims without prejudice, finding that Caris failed to exhaust its administrative remedies as required by the Medicare Act. Caris timely appealed.

II.

We review a district court's denial of a motion to remand de novo. Allen v. Walmart Stores, L.L.C., 907 F.3d 170, 182 (5th Cir. 2018). Likewise, we review a dismissal for lack of subject matter...