Glob. Rescue Jets LLC v. Kaiser Found. Health Plan, Inc.

GLOBAL RESCUE JETS LLC, Plaintiff, v. KAISER FOUNDATION HEALTH PLAN, INC., Defendant.

Case No.: 19cv1737-L-NLS

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA

November 30, 2020

ORDER GRANTING DEFENDANT'S MOTION TO DISMISS (doc. no. 12)

Pending before the Court is Defendant's motion to dismiss (doc. no. 12) Plaintiff's first amended complaint for failure to exhaust administrative remedies under the Medicare Act. Plaintiff filed an opposition and Defendant replied. The Court decides the motion on the briefs without oral argument. See Civ. L. R. 7.1 (d.1). For the reasons stated below, Defendants' motion to dismiss is granted.

I. BACKGROUND

Plaintiff Global Rescue Jets, Inc. provided medically-necessary transportation for Patient X from Yahualica, Jalisco, Mexico to Kaiser Permanente Medical Center in San Diego, California incurring charges of $283,500. It provided medically-necessary transport for Patient Y from Mazatlan, Mexico to the same hospital in San Diego, incurring charges of $232,700. Patients X and Y ("Patients") were enrolled in Medicare Advantage Plans ("MA plans") to which Defendant Kaiser Foundation Health Plan, Inc. ("Kaiser") was a party.

As alleged in the operative complaint, the Patients' MA plans provided for coverage of life-saving international air ambulance transportation, which was not covered by Medicare, but was an optional supplemental benefit¹ provided under the plans for which the Patients paid higher premiums to Kaiser. Under the plans, Kaiser agreed to reimburse them for such charges. When Plaintiff provided air ambulance services to the Patients, they assigned their claims against Kaiser. Kaiser has refused to fully reimburse Plaintiff for its charges. It paid what it considers the "applicable Medicare rate" (Kaiser Mem. of P.&A. in Supp. of Mot. to Dismiss, doc. no. 12-1, at 5), which represents approximately 8% of the charges.

Plaintiff filed a complaint in State court against Kaiser. Kaiser removed the action to this Court. In the operative complaint Plaintiff alleges, in its capacity as the Patients' assignee, or, alternatively, third party beneficiary, breach of contract, breach of duty of good faith and fair dealing, quantum meruit, and unfair competition. It seeks damages, disgorgement and restitution of Kaiser's revenues associated with unfair competition, and injunctive relief.

II. DISCUSSION

Kaiser moves to dismiss under Federal Rule of Civil Procedure 12(b)(1), for failure to exhaust administrative remedies under the Medicare Act. Federal courts are courts of limited jurisdiction. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994).² They presumptively lack jurisdiction over civil actions and the burden ofestablishing the contrary rests upon the party asserting it. Id. As here, a Rule 12(b)(1) motion may be framed as a "facial" attack on the allegations in the complaint. See Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir.2004). In a facial attack, the challenger asserts that the allegations contained in a complaint are insufficient on their face to invoke federal jurisdiction. Id.

Kaiser argues that Plaintiff is not entitled to judicial review of Kaiser's alleged failure to fully reimburse Plaintiff's air ambulance charges because Plaintiff failed to exhaust administrative remedies under the Medicare Act. The Medicare Act, 42 U.S.C. § 1395 et seq., "establishes a federally subsidized health insurance program to be administered by the Secretary [of Health and Human Services]." Heckler v. Ringer, 466 U.S. 602, 605 (1984).

The Act is divided into four parts. See 42 U.S.C. § 1395 et seq. Parts A and B constitute "Original Medicare." In 1997, Congress enacted Part C, Medicare+ Choice Program, which gives Medicare beneficiaries the option to contract with private health plans to obtain benefits normally available under Parts A and B, as well as additional supplemental coverage. Part D is Voluntary Prescription Drug Benefit Program.

Private health plans administered under Part C are referred to as Medicare Advantage ("MA") plans, and private organizations providing them are referred to as MA organizations. 42 U.S.C. § 1395w-21. Kaiser is an MA organization.

Part C obligates MA organizations to provide basic benefits covered by Parts A and B of the Medicare Act. 42 C.F.R. § 422.100(a), (c)(1). It further authorizes MA organizations to provide mandatory and optional supplemental benefits that are not covered by Medicare 42 U.S.C. § 1395w-22(a)(3)(B); 42 C.F.R. § 422.100(c)(2).

MA organizations contract with Centers for Medicare and Medicaid Services ("CMS")³ to provide MA plans to persons eligible for Medicare, who exchange theirbenefits under Part A and B for enrollment in an MA plan. 42 U.S.C. § 1395w-21. MA organizations must comply with the standards set forth in Part C. 42 U.S.C. § 1395w-27(a). The government pays MA organizations monthly fees to provide covered services to the enrollees. 42 U.S.C. § 1395w-23.

MA organizations contract with health care providers for services to their MA plan enrollees and agree on the reimbursement rate for the services. MA plans must provide coverage for emergency services even if the provider who rendered them had no contract with the MA organization. 42 C.F.R. § 422.100(b)(1). Providers who are not contracted to the MA organization are referred to as "noncontracting providers." 42 C.F.R. § 422.100(b). Medicare regulations have been promulgated to regulate the relationship between noncontracting providers and MA organizations. 42 C.F.R. § 422.100-422.133.

"The Medicare Act authorizes the Secretary to determine what claims are covered by the Act in accordance with the regulations proscribed by him." Heckler, 466 U.S. at 605. "Judicial review of claims arising under the Medicare Act is available only after the Secretary renders a final decision on the claim in the same manner as is provided in 42 U.S.C. § 405(g)." Id.; see also 42 U.S.C. § 405(g) (judicial review "after any final decision of the Commissioner of Social Security made after a hearing"). "[A] final decision is rendered on a Medicare claim only after the individual claimant has pressed its claim through all designated levels of administrative review." Heckler, 466 U.S. at 606.

The Act mandates MA organizations to provide "meaningful procedures for hearing and resolving grievances between the organization . . . and enrollees," including grievances regarding the amount the enrollee is required to pay for a service under the plan. 42 U.S.C. § 1395w-22(f)-(g). It also provides that section 405(g) applies to the MA organization's review process. Id. § 1395w-22(g)(5).

The administrative review process for grievances under an MA plan is outlined in 42 CFR § 422.560 et seq. (Grievances, Organization Determinations and Appeals for the Medicare Advantage Program). For example, at the outset each MA organization "musthave a procedure for making timely organization determinations (in accordance with the requirements of this subpart) regarding the benefits an enrollee is entitled to receive under an MA plan, including basic benefits as described under § 422.100(c)(1) and mandatory and optional supplemental benefits as described under § 422.102, and the amount, if any, that the enrollee is required to pay for a health service." 42 C.F.R. § 422.566(a).

A. Government Officer or Employee

Plaintiff argues that although the Act and the regulations provide for an administrative review process, the process is optional because section 405(g) does not limit other avenues of review, and section 405(h) precludes judicial review only for claims against the government or its officers or employees. See 28 U.S.C. § 405(g); see also 28 U.S.C. § 405(h) ("No action against the United States, the Commissioner of Social Security, or any officer or employee thereof shall be brought under section 1331 or 1346 of Title 28 to recover on any claim arising under this subchapter."). Plaintiff further argues that MA organizations are not federal officers or employees for purposes of the exhaustion requirement. In this regard, Plaintiff raises an issue of first impression.

In the absence of binding authority on point, the Court finds persuasive the reasoning of Prime Healthcare Huntington Beach v. SCAN, 210 F. Supp. 3d 1225 (C.D. Cal. 2016). As here, Prime involved a claim by a noncontracting provider of ambulance services against an MA organization under Part C of Medicare Act for full reimbursement of charges for emergency ambulance services provided to MA plan enrollees. Id. at 1228. As Plaintiff here, Prime Healthcare filed the action as an assignee and/or third-party beneficiary and asserted essentially the same state claims. Id. As Kaiser here, SCAN, an MA organization, moved to dismiss for failure to exhaust administrative remedies under the Medicare Act. Id.

Based on facts similar to those present here and a thorough analysis of appellate case law instructive on the issue, Prime Healthcare addressed the threshold question whether an MA organization is a government officer or employee for purposes of section405(h). 210 F. Supp. 3d at 1229-31. It held that "even where suit is brought against an MAO, § 405(h) limits this Court's jurisdiction over unexhausted claims to those that do not 'arise under' Medicare." Id. at 1231. This Court adopts Prime Healthcare's holding.

B. Arising Under

The bar to judicial review provided by section 405(h) applies only to "claim[s] arising under" the Medicare Act. 42 U.S.C. § 405(h); see also Heckler, 466 U.S. at 605. The "arising under" standard is construed "quite broadly." Heckler, 466 U.S. at 615.

The Supreme Court has identified two circumstances in which a claim "arises under" the Medicare Act: (1) where the "standing and the substantive basis for the presentation of the claims" is the Medicare Act; and (2) where the claims are "inextricably intertwined" with a claim for Medicare benefits.

Uhm v. Humana, Inc., 620 F.3d 1134, 1141 (9th...