Emergency Physician Servs. of N.Y. v. UnitedHealth Grp.

OPINION & ORDER

ALISON J. NATHAN, District Judge:

Plaintiffs Emergency Physician Services of New York, Buffalo Emergency Associates, Exigence Medical of Binghamton, Exigence Medical of Jamestown, and Emergency Care Services of New York are hospital-based emergency room physicians who practice medicine in the State of New York. They bring this action against Defendants UnitedHealth Group, Inc. and Multiplan, Inc., alleging that Defendants conspired to create a healthcare claim repricing mechanism in order to systematically underpay invoices submitted to them, in violation of the federal Racketeer Influenced and Corrupt Organizations Act and New York law. Defendants have moved to dismiss the Complaint. For the reasons that follow, Defendants' motions are granted in part and denied in part.

I. Background

For the purpose of resolving Defendants' motions to dismiss, the Court accepts all well-pled facts in the Complaint as true, and draws all reasonable inferences in Plaintiffs' favor. See Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007). The following account is therefore taken from Plaintiffs' factual allegations contained in the Complaint.

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A. Factual background

Plaintiffs are all physician practice groups who staff the emergency rooms of numerous hospitals across New York. Compl. ¶¶ 24-29, Dkt. No. 1. They are out-of-network healthcare providers with United and regularly provide emergency medical services to United's insureds. Id. ¶¶ 24-29. Defendant United is the parent company of over 1, 200 wholly owned subsidiaries, including non-parties United Healthcare Services, Inc., UnitedHealthcare of New York, Inc., UnitedHealthCare Insurance Company of New York, UnitedHealthcare, Inc., and Optum Group, LLC. Id. ¶ 30. Defendant MultiPlan develops and operates healthcare provider networks and offers related cost-management products to insurance companies and other payers of health benefits. Id. ¶ 34. Among these products is Data iSight, which Multiplan is offers to United and other payers. Id.

1. The relevant legal structure

As emergency room physicians, Plaintiffs have a professional obligation to render treatment on their patients even if they are unable to verify a patient's insurance benefits and obtain authorization for treatment from insurance companies like United. Id. ¶¶ 38-42. As a result, Plaintiffs rely on health insurance companies to comply with their legal obligations to pay a “reasonable” rate to providers after treatment is rendered, including providers (like Plaintiffs) who are not “in-network” or “participating” providers. Id. ¶ 43. In order to implement this system, hospitals that provide emergency services obtain the patient's insurance information and demographics and send the patient's demographics, medical records, and insurance information to Plaintiffs. Id. ¶¶ 44-45. Plaintiffs' billing departments transcribe the medical charts into standardized billing codes, generate invoices with standard charges, medical coding, and patient demographics, and send those invoices to United through interstate wire communications. Id.

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¶¶ 45-48. All invoices are submitted through a common United portal, regardless of which United subsidiary or entity administers a particular patient's plan. Id.

Both Plaintiffs and United are bound by legal obligations to engage in this system in good faith. On Plaintiffs' side, Plaintiffs are required under state and federal law to provide treatment to all patients who present at emergency departments. The federal Emergency Medical Treatment and Labor Act (“EMTALA”) provides that hospitals and physicians who staff hospital emergency rooms have a duty to “provide for an appropriate medical screening examination” when an individual comes to the emergency department. 42 U.S.C. §§ 1395dd(a)-(b), (d), (h). If “the individual has an emergency medical condition, ” Plaintiffs are required to “stabilize the medical condition” without inquiry into “the individual's method of payment or insurance status.” Id.; see also Compl. ¶¶ 69-71. Under New York law, “[a]ny licensed medical practitioner who refuses to treat a person arriving at a general hospital to receive emergency medical treatment . . . shall be guilty of a misdemeanor and subject to a term of imprisonment not to exceed one year and a fine not to exceed one thousand dollars.” N.Y. Pub. Health Law § 2805-b(2)(b); see also Compl. ¶ 72 & n.9.

United is also bound by legal obligations to participate in this system in good faith. At the federal level, some courts have interpreted EMTALA's requirement and purpose as requiring compensation at reasonable rates, for in the absence of such an obligation, “an insurance company is unjustly enriched if it fails to pay the hospital in full for the costs incurred in rendering the necessary treatment to the insurer's enrollees.” N.Y.C. Health & Hosps. Corp. v. Wellcare of N.Y., Inc., 937 N.Y.S.2d 540, 545 (Sup. Ct. 2011); Compl. ¶ 81. State law similarly requires that health insurance companies pay a reasonable amount for the services of out-of-network emergency medical providers. N.Y. Fin. Serv. Law § 605(a); Compl. ¶ 80.

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That basic structure governs all of the claims at issue in this litigation. Plaintiffs did not have a written contract with United that would establish a contractual rate of payment for their services. Compl. ¶¶ 65-66. So what Plaintiffs are owed comes down to reasonableness. As relevant here, a “reasonable” rate is calculated as the lesser of Plaintiffs' billed charges or the “usual and customary rates” for similar providers in the same geographic area. Id. ¶¶ 67-68.

2. The alleged RICO enterprise

Plaintiffs allege that Defendants conspired to implement a repricing mechanism that would systematically underpay Plaintiffs for the claims they submitted. According to Plaintiffs, this is not the first time that United has engaged in such a scheme. Just over a decade ago, a United subsidiary, Ingenix, was investigated by the New York Attorney General for allegedly running a fraudulent payment system. Id. ¶¶ 83-87. United paid around $400 million in settlements in 2009, including $50 million that went to the establishment of the FAIR Health database and website. Id. ¶¶ 84, 93. The settlement agreement also indicated that United must use FAIR Health as the basis for determining the Allowed Amounts for Covered Out-Of-Network Services or Supplies. Id. ¶ 87.

Also in 2009, the New York Attorney General's Office announced the result of its investigation into Ingenix in an agreement titled “Assurance of Discontinuance Under Executive Law § 63(15).” Id. ¶ 88. It detailed that the prices generated by Ingenix were inadequate and it required the insurance industry to cease using Ingenix and to create a new, independent database for the purpose of determining fair and accurate reimbursement rates. Id. ¶¶ 88-92. The settlement led to the creation of FAIR Health, Inc., a non-profit that was funded by insurance companies that included United Group. Id. ¶ 93. As relevant here, FAIR Health operated a database that uses information directly from insurers to estimate what providers charge, and what

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insurers pay, for providing healthcare to patients. Id. ¶¶ 131-33. The purpose of the database is to prevent insurers from using skewed methodologies to calculate payments. Id. ¶ 134. In 2015, United's legal obligation to utilize FAIR Health under the 2009 Agreement ended. Id. ¶¶ 97, 137.

Shortly thereafter, United sought out the services of MultiPlan for purposes of determining rates. Id. ¶¶ 98, 138-40. The agreement between the two companies forms the basis of the RICO enterprise that Plaintiffs allege exists. According to Plaintiffs, United and MultiPlan formed an ongoing informal organization with the common purpose of developing and implementing a scheme to underpay out-of-network emergency medical services. Id. ¶¶ 101-04. Plaintiffs claim that the enterprise formed by the two companies shared a common purpose that includes financial gain as the direct result of the scheme. Id. ¶ 108. Plaintiffs also claim that the two companies have a relationship that includes contracts, coordination of efforts, and money-sharing plans, which are detailed in “Whitepapers” that provide the roadmap for how the companies reached the rates they charged. Id. ¶¶ 109-12.

As detailed in the Complaint, United would send “target prices” to MultiPlan, and MultiPlan would then arrive at a number under that rate. See Id. ¶¶ 113, 142-61. It does so by sending claim information to MultiPlan through an electronic data interchange program that allows United to communicate claims information, “[r]outing to designated repricing tool, ” the benchmark target price; and the percentile of Data iSight's proprietary database to use to set a benchmark rate. Id. ¶ 183. The key to this enterprise is MultiPlan's Data iSight, which Plaintiffs allege provides the mechanism by which MultiPlan achieves the new benchmark prices while ignoring the usual and customary rates that were supposed to be used; in the process, Plaintiffs argue, MultiPlan relies on purposely faulty data. Id. ¶¶ 114, 152-58, 180-86. Data iSight first

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sorts claims information based on type of care. Id. ¶¶ 187-89. From there, it implements an algorithm that “edits” and recalculates payment rates through a process known internally at MultiPlan as “DiP, ” or “Data iSight Professional.” Id. ¶¶ 188-212. After receiving a number through the DiP process, that rate is compared to a target payment amount provided by United, known as the “meet or beat” price. Id. ¶¶ 181-82, 221. United would then pay the lowest of three numbers: the target price, the billed amount, or the DiP...