United Behavioral Health v. Maricopa Integrated Health Sys.

237 Ariz. 559

354 P.3d 1118

715 Ariz. Adv. Rep. 19

UNITED BEHAVIORAL HEALTH, a California corporation and its subsidiary Pacificare Behavioral Health, Inc., Plaintiffs/Appellants

v.MARICOPA INTEGRATED HEALTH SYSTEM, an Arizona special taxing district, Defendant/Appellee.

Nos. 1 CA–CV 14–0027

1 CA–CV 14–0021.

Court of Appeals of Arizona, Division 1.

June 23, 2015.

Brownstein Hyatt Farber Schreck LLP, By John C. West, Robert M. Kort and Chase A. Bales, Phoenix, Counsel for Plaintiffs/Appellants.

Clark Hill PLC, By Russell A. Kolsrud and Mark S. Sifferman, Scottsdale, Counsel for Defendant/Appellee.

Presiding Judge ANDREW W. GOULD delivered the opinion of the Court, in which Judge MAURICE PORTLEY and Judge JON W. THOMPSON joined.

OPINION

GOULD, Judge:

¶ 1 This appeal presents the question of whether two health care providers, Aurora Behavioral Healthcare (“Aurora”) and Maricopa Integrated Health System (“MIHS”) (collectively the “Providers”), may compel arbitration of coverage claims arising under Medicare and ERISA health care plans. The Providers seek to compel arbitration pursuant to an arbitration clause in their agreement with United Behavioral Health (“UBH”), the entity which administers the subject Medicare and ERISA benefit plans. The arbitration clause is expressly governed by the Federal Arbitration Act (“FAA”). See 9 U.S.C. § 1, et seq.¹

¶ 2 UBH cannot be compelled to arbitrate the Providers' Medicare coverage claims. We conclude that Congress intended Medicare's administrative procedure to provide the exclusive remedy for resolving Medicare coverage claims, and that this procedure overrides the FAA's presumption favoring arbitration.

¶ 3 However, because the record is not clear as to whether Aurora has standing to assert its ERISA coverage claims, we do not address the arbitrability of Aurora's ERISA claims. We therefore vacate the trial court's order compelling arbitration of Aurora's ERISA claims, and remand for further proceedings consistent with this opinion.

FACTS AND PROCEDURAL HISTORY

¶ 4 UBH administers various types of health insurance plans, including Medicare and ERISA benefit plans. Aurora and MIHS are facilities that provide mental-health and substance-abuse treatment. The Providers each entered into a Facility Participation Agreement (“Facility Agreement”) with UBH allowing them to participate in UBH networks that provide mental-health and substance-abuse health care services. The Facility Agreement contains an arbitration clause that states the parties will “resolve any disputes about their business relationship,” and if they are unable to do so, the dispute will be submitted to binding arbitration.

¶ 5 In these consolidated cases, members of Medicare and ERISA plans administered by UBH received acute inpatient psychiatric care from the Providers. MIHS provided care to members with Medicare benefit plans; Aurora provided care to members with either Medicare or ERISA benefit plans.

¶ 6 The Providers obtained pre-authorization from UBH for an initial term of acute inpatient care for each member. When the Providers sought authorization to extend care beyond the initially authorized period, UBH denied coverage.

¶ 7 In its denial letters UBH stated that (1) coverage for services was determined by the terms of each member's benefit plan, and (2) in each instance acute inpatient care was not covered because it was not medically necessary. Despite receiving UBH's letters denying coverage, the Providers elected to continue providing acute inpatient care.

¶ 8 In order to obtain reimbursement for their services, the Providers sought to arbitrate the disputed claims, but UBH refused. As a result, the Providers filed actions in superior court to enforce the arbitration clause in the Facility Agreement. In response, UBH filed motions to stay arbitration on the grounds the claims were not arbitrable.

¶ 9 In MIHS' case, the trial court denied UBH's motion to stay arbitration, concluding that MIHS' claims were subject to the arbitration clause in the Facility Agreement. In Aurora's case, the trial court granted UBH's motion to stay arbitration, stating that Aurora's claims were “coverage disputes,” and therefore “must be decided by the terms of the various Benefit Plans and pursuant to the exclusive Medicare grievance procedures that apply to those claims.”

¶ 10 Both decisions were appealed separately; however, because these appeals present identical factual and legal issues, we have consolidated them on appeal.

DISCUSSION

I. The FAA and the Arbitration Clause

¶ 11 The Providers contend that the language of the arbitration clause in the Facility Agreement is extremely broad, requiring the parties to arbitrate any disputes about their business relationship. As a result, the Providers argue UBH is contractually bound to submit their claims to binding arbitration.

¶ 12 The Facility Agreement provides that the question of arbitrability is governed by the FAA. Under the FAA, “[d]eterminations of arbitrability, like the interpretation of any contractual provision, are subject to de novo review.” Simula, Inc. v. Autoliv, Inc., 175 F.3d 716, 719 (9th Cir.1999) ; see AT & T Tech., Inc. v. Commc'ns Workers of Am., 475 U.S. 643, 648, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986) (stating that arbitrability is, as a matter of contract, a question of law for a court to decide).

¶ 13 The FAA “embodies a strong federal policy in favor of arbitration.” CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 173 (3d Cir.2014) (quoting Sweet Dreams Unltd., Inc. v. Dial–A–Mattress Int'l, Ltd., 1 F.3d 639, 641 (7th Cir.1993) ). “Congress, however, may override the [FAA's] presumption favoring arbitration agreements by a contrary provision in another statute. The burden of demonstrating such congressional intent rests with the party opposing arbitration.” Bird v. Shearson Lehman/Am. Express, Inc., 926 F.2d 116, 119 (2d Cir.1991) (citing Shearson/Am. Express, Inc. v. McMahon, 482 U.S. 220, 226, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987) ). Congress' intent “ ‘will be deducible from [the statute's] text or legislative history,’ or from an inherent conflict between arbitration and the statute's underlying purposes.” McMahon, 482 U.S. at 227, 107 S.Ct. 2332.

¶ 14 In this case, the language of the arbitration clause is extremely broad; it reaches beyond the Facility Agreement to encompass all aspects of the parties' business relationship. See Lakeland Anesthesia, Inc. v. United Healthcare of La., Inc., 871 So.2d 380, 392 (La.Ct.App.2004) (stating that an arbitration provision that covers “any disputes about their business relationship” is not limited in scope to the agreement itself); Aztec Med. Servs., Inc. v. Burger, 792 So.2d 617, 623–24 (Fla.Dist.Ct.App.2001) (same).

¶ 15 Based on the broad language of the arbitration clause and the FAA's presumption favoring arbitration, we conclude the Providers may compel arbitration unless there is a contrary provision in Medicare or ERISA expressing Congress' intent that these claims are nonarbitrable.

II. Medicare Statutory Scheme

¶ 16 In determining whether arbitration of the Providers' claims conflicts with the Medicare Act, we must examine the text and legislative history of the Act. See McMahon, 482 U.S. at 227, 107 S.Ct. 2332.

¶ 17 “Medicare is a federal health insurance program benefitting individuals who are over 65, or have a disability, or are suffering from end-stage renal disease.” Estate of Ethridge v. Recovery Mgmt. Sys., Inc., 235 Ariz. 30, 33, ¶ 7, 326 P.3d 297, 300 (App.2014) ; see 42 U.S.C. § 1395c. The Medicare program is administered by the Centers for Medicare and Medicaid Services (“CMS”), a division of the Department of Health and Human Services (“HHS”). 42 U.S.C. §§ 1395hh, –1395kk ; Estate of Ethridge, 235 Ariz. at 33, ¶ 7, 326 P.3d at 300. Medicare provides two options for hospital and medical benefits: (1) Medicare Parts A and B, or traditional Medicare, and (2) Medicare Part C, known as Medicare Advantage. 42 U.S.C. § 1395w–21 ; Estate of Ethridge, 235 Ariz. at 34, ¶ 10, 326 P.3d at 301.

A. Medicare Part C

¶ 18 Here, UBH administered Medicare Part C plans. Medicare Part C provides Medicare beneficiaries with the option of contracting with a private insurance company to obtain Medicare benefits. 42 U.S.C. §§ 1395w–21, 1395w–27 ; Estate of Ethridge, 235 Ariz. at 34, ¶ 10, 326 P.3d at 301. Under Medicare Part C, CMS contracts with private insurers, or Medicare Advantage Organizations (“MAOs”), to provide medical benefits for Medicare beneficiaries; in return, the MAOs receive a fixed monthly capitation payment for each Medicare beneficiary enrolled in their benefit plan. 42 U.S.C. §§ 1395w–21, –23(a), –1395w–27, –1395w–28 ; Estate of Ethridge, 235 Ariz. at 35, ¶ 16, 326 P.3d at 302. MAOs then contract with health care providers to furnish medical services. 42 U.S.C. § 1395w–23(a)(1)(A) ; RenCare, Ltd. v. Humana Health Plan of Tex., Inc., 395 F.3d 555, 557–59 (5th Cir.2004) ; 42 C.F.R. § 422.2. Under an MAO's contract with CMS, a capitation fee is paid regardless of the value of services provided to the beneficiary, and the MAO assumes full financial risk for providing Medicare benefits to the beneficiary. 42 U.S.C. § 1395w–25(b) ; RenCare, 395 F.3d at 557–59.

¶ 19 Despite the differences in traditional Medicare and Medicare Part C, the benefits under both options are Medicare benefits. 42 U.S.C § 1395w–21(a). Medicare Part C is a “federal program operated under [f]ederal rules,” and thus, while Part C participants may elect to “opt out” of traditional Medicare, they do not opt out of Medicare. H.R.Rep. No. 108–391, at 557 (2003) 2003 U.S.C.C.A.N. 1808, 1926 ; see Estate of Ethridge, 235 Ariz. at 33, ¶ 10, 326 P.3d at 300. The Medicare Trust fund subsidizes the benefits for both Part C and traditional Medicare. 42 U.S.C. § 1395w–23(f) ; 42 C.F.R. § 422.322 ; see RenCare, 395 F.3d at 558–59 (discussing traditional Medicare payments). Thus, Part C does not offer beneficiaries private insurance or private...