Eaglemed, LLC v. Travelers Ins.

424 P.3d 532

EAGLEMED, LLC, Appellee,

v.TRAVELERS INSURANCE, Appellant.

117,903

117,904

117,905

117,906

Court of Appeals of Kansas.

Opinion filed June 15, 2018.

William L. Townsley, Lyndon W. Vix, and Nathaniel T. Martens, of Fleeson, Gooing, Coulson & Kitch, L.L.C., of Wichita, for appellant.

J. Phillip Gragson, of Henson, Hutton, Mudrick, Gragson and Vogelsberg, LLP, of Topeka, and Joshua L. Fuchs, of Jones Day, of Houston, Texas, for appellee.

Before Bruns, P.J., Hill, J., and Walker, S.J.

Bruns, J.:

This is a consolidated appeal of four workers compensation cases arising out of a fee dispute between EagleMed, LLC (EagleMed)—an air ambulance service provider—and Travelers Insurance (Travelers)—a workers compensation insurance carrier. Although Travelers admits that it provides coverage, it contends that the amounts charged by EagleMed for transporting the four injured workers by air ambulance are unreasonable. On appeal, both parties agree the federal Airline Deregulation Act of 1978 expressly preempts actions taken by states that have a connection to the prices charged by air carriers—including air ambulances. However, they disagree on the scope of the federal preemption as well as its application in these workers compensation cases.

We find that preemption under the Airline Deregulation Act is express, broad, and sweeping. We also find that Congress intended for market forces—not state agencies—to determine the prices charged by air carriers. Because an air ambulance provider is an air carrier under the Act, we conclude that federal preemption prevents the Division of Workers Compensation from making any decisions relating to the prices charged by such providers. Thus, we affirm in part, reverse in part, and remand with directions that the fee dispute proceeding commenced under K.S.A. 2017 Supp. 44-510j be dismissed.

FACTUAL AND PROCEDURAL HISTORY

EagleMed is an accredited critical care transport provider operating a fleet of medically equipped aircraft in Kansas and other states. The aircraft—commonly called air ambulances—include both helicopters and airplanes that are furnished with supplies and equipment necessary for providing in-flight medical care for patients. The air ambulances are also staffed with flight crews that include pilots, paramedics, and nurses. The flight crews are on-call 24 hours a day to be available to respond to medical emergencies—often in rural areas. They also transport patients from smaller community hospitals to larger medical centers that can provide a higher level of patient care.

This appeal arises out of four workers compensation cases. Each of the workers compensation cases arises out of the air ambulance services provided by EagleMed to workers who were injured during the course of their employment at various times between March and June 2013. Each of the injured workers was transported by air ambulance from hospitals in rural Kansas to medical facilities in Wichita or Garden City. In each instance, Travelers was the workers compensation insurance carrier for the injured worker's employer.

EagleMed submitted invoices to Travelers for air ambulance services rendered to the four injured workers in amounts ranging from $21,597.27 to $33,042.95. The amount charged differed from worker to worker depending on the miles flown as well as the medical services provided by the flight crew en route. After receiving the invoices, Travelers challenged the amount billed and offered to pay EagleMed a lower amount based on the Medicare fee schedule applicable to air ambulance transport services. However, this offer was not accepted and EagleMed initiated a fee dispute proceeding with the Director of the Division of Workers Compensation under K.S.A. 2017 Supp. 44-510j.

From the outset of the proceedings, EagleMed and Travelers agreed that the Airline Deregulation Act of 1978 expressly preempts Kansas workers compensation law as it relates to setting prices to be charged by air ambulance providers. However, EagleMed and Travelers disagree about the scope of the federal preemption. In particular, they disagree over the role that the Division of Workers Compensation can play—if any—in resolving their fee dispute.

Initially, a hearing officer determined that the Division of Workers Compensation had the authority to resolve the fee dispute between EagleMed and Travelers. After noting the express preemption provision in the Airline Deregulation Act, the hearing officer found the doctrine of "reverse preemption" to be applicable to these cases. The hearing officer based his decision on the McCarran-Ferguson Act, 15 U.S.C. § 1011 (2012) et seq., which generally grants States the power to regulate the business of insurance.

Both parties requested review of the hearing officer's decision by the Kansas Workers Compensation Appeals Board. In reversing the hearing officer's decision, the Appeals Board concluded that "the [Workers Compensation] Fee Schedule is preempted by the [Airline Deregulation Act] and the [McCarran-Ferguson Act] does not reverse-preempt the [Airline Deregulation Act] in this instance." The Appeals Board noted that the workers compensation fee schedule set no fee for air ambulance services but simply referred to the Airline Deregulation Act, which "sets no pricing for air ambulance services." Although its directions were unclear, the Appeals Board remanded the fee dispute to the hearing officer for further proceedings.

On remand, the hearing officer found that the Division of Workers Compensation is

"without authority to set the rate of payment for air ambulance services in workers compensation claims, either through the rate-setting regulatory process or through administrative decision rendered in a specific case regarding whether contested charges are reasonable and necessary. In either course of action, the state is setting the ‘price ... of an air carrier,’ and such action is expressly preempted by the Airline Deregulation Act."

Still, the hearing officer ordered Travelers to pay EagleMed the full amount charged for transporting the four injured workers. Shortly thereafter, Travelers sought review of the hearing officer's order by the Appeals Board.

The Workers Compensation Appeals Board found that it lacked jurisdiction to determine if the Medicare fee schedule applicable to air ambulance transport services should be applied in workers compensation cases. Moreover, the Appeals Board found that the Division of Workers Compensation "does not have the jurisdiction to make any ruling on the reasonableness of air ambulance charges that has the effect of reducing the amount owed to EagleMed." Thus, the Appeals Board affirmed the order of the hearing officer and Travelers filed a timely notice of appeal.

ANALYSIS

Federal Preemption of State Law

The Supremacy Clause of Article VI of the United States Constitution establishes the doctrine of federal preemption:

"This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; ... shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const. art. VI, cl. 2.

Consequently, the Supremacy Clause invalidates state laws and actions that interfere with or are contrary to federal law. Board of Miami County Comm'rs v. Kanza Rail-Trails Conservancy, Inc. , 292 Kan. 285, 294, 255 P.3d 1186 (2011) ; Wichita Terminal Ass'n v. F.Y.G. Investments, Inc. , 48 Kan. App. 2d 1071, 1078, 305 P.3d 13 (2013).

Whether federal preemption exists and the scope of the preemption are questions of congressional intent. See Cipollone v. Liggett Group, Inc. , 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L. Ed. 2d 407 (1992) ; see also Goodspeed Airport v. East Haddam Inland Wetlands , 634 F.3d 206, 210-11 (2d Cir. 2011). In determining whether Congress intended for federal preemption to apply in a given case, we must first look to the language of the preemption statute. See Medtronic, Inc. v. Lohr , 518 U.S. 470, 485-86, 116 S.Ct. 2240, 135 L. Ed. 2d 700 (1996). Because federal preemption involves an interpretation of law, our review is unlimited. See Northern Natural Gas Co. v. ONEOK Field Services Co. , 296 Kan. 906, Syl. ¶ 1, 296 P.3d 1106 (2013) ; see also In re Korean Air Lines Co., Ltd. , 642 F.3d 685, 691 n.3 (9th Cir. 2011) (Because it is a question of law, we review de novo a district court's conclusion about the extent of federal preemption.).

The Kansas Supreme Court has identified several categories and subcategories of federal preemption:

"Broadly speaking, a preemption analysis divides into two principal categories: express and implied preemption. Implied preemption is further divided into two analytical subcategories: field preemption and conflict preemption. Then, yet a third strata of analytical subcategories is used when examining claims of conflict preemption: per se conflict and obstacle preemption. [Citations omitted.] Even though it is analytically helpful to consider the relationship of these categories, it must be remembered that these analytical categories are not ‘rigidly distinct.’ English , 496 U.S. at 79 n.5 [110 S.Ct. 2270]. For example, ‘field pre-emption may be understood as a species of conflict pre-emption: A state law that falls within a pre-empted field conflicts with Congress' intent (either express or plainly implied) to exclude state regulation.’ English , 496 U.S. at 79 n.5, 110 S.Ct. 2270." Board of Miami County Comm'rs , 292 Kan. at 294-95, 255 P.3d 1186.

In the present appeal, we are dealing with an issue of express federal preemption because Congress has made "its intent known through explicit statutory language." 292 Kan. at 295, 255 P.3d 1186 (citing English v. General Electric Co. , 496 U.S. at 79, 110 S.Ct. 2270 ). Even so, even in cases of express preemption, courts must also look to the scope of the preemption to determine whether the state action "sufficiently interferes with federal...