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Physicians Home Health Infusion, P.C. v. Unitedhealthcare of Midwest, Inc.

United States District Court, E.D. Missouri, Eastern Division

November 18, 2019




         This matter is before the Court[1] on Defendant United Healthcare of the Midwest, Inc.'s (“UHC's”) motion to dismiss amended complaint [ECF No. 40]. Plaintiff Physicians Home Health Infusion, P.C., (“PHHI”) opposes the motion [ECF No. 49]. Also pending are PHHI's motion for sanctions related to a deposition [ECF No. 62] and PHHI's motion to compel discovery responses [ECF No. 77]. The Court stayed discovery pending resolution of UHC's motion to dismiss [ECF No. 85]. Therefore, the Court first resolves UHC's motion to dismiss.

         I. Background

         In its first amended complaint, PHHI seeks from UHC monetary and injunctive relief based on claims for breach of contract (Count I), negligent misrepresentation (Count II), quantum meruit (Count III), unjust enrichment (Count IV), and “preliminary and permanent injunction” (Count V).[2] PHHI makes the following allegations in support of its claims.

         PHHI is “a home healthcare agency employing physicians and nurses to provide pain management services [through ‘continuous spinal infusion of pain medication'] to patients diagnosed with chronic pain.” Id ¶¶ 7, 18. More specifically, PHHI provides trained nurses, available twenty-four hours a day, for “specialized services related to spinal infusion, ” including “pump management, rate adjustments, refills, troubleshooting, consultations and training.” Id ¶ 8.

         UHC “is a private health insurance agency that[, in relevant part, ] provides Medicare Advantage plans” that “are approved by [the] Centers for Medicare & Medicaid Services (‘CMS').” Id ¶ 11. PHHI is a “non-participating” or “out-of-network” provider under the terms of UHC's group health insurance policies for individuals participating in Medicare Advantage (also referred to as “members” or “enrollees”). Id ¶¶ 11, 12. Before PHHI renders its services, each of its patients signs an “Admission Service Agreement and Patient Health Information Consent Form, ” which grants PHHI “the right to directly receive the[ patient's] health benefit payments” as the patient's assignee. Id ¶¶ 14-17.

         After providing services to a patient, PHHI submits a request for reimbursement to UHC, billing “the usual and customary amount of $2400 for the services rendered under the Healthcare Common Procedure Coding System (HCPCS) codes S9325 and S9328.” Id ¶¶ 19, 20. Those two codes “identify services of home infusion therapy and pain management infusion.” Id ¶¶ 20, 21. PHHI alleges that, regardless of whether it has obtained UHC's prior authorization to provide the services under codes S9325 and S9328, UHC does not consistently approve PHHI's claims for reimbursement of its pain management services.[3] Id. ¶¶ 23-25, 28. When UHC approves the services coded S9325 and S9328, “UHC reimburse[s PHHI] $600 per service claim.” Id. ¶ 31.

         On occasion, when UHC provides an explanation for its denial of PHHI's claims under codes S9325 and S9328, UHC states “that the codes are not valid.” Id. ¶ 25. PHHI appeals “UHC's denials for reimbursement . . . to UHC's Claims Department, UHC's Appeals and Grievance Department, and other UHC departments.” Id. ¶ 26. As a result of these appeals, UHC occasionally reverses the initial denial and reimburses PHHI “for the services rendered . . . under the codes S9325 and S9328, ” and issues letters “recognizing that its initial denial was a ‘clerical error' and making clear that the service is reimbursable and the codes are valid.”[4] Id. ¶¶ 27, 28. PHHI “has relied on [UHC's] statements, corrections, and reimbursements in continuing to provide services to . . . UHC [Medicare Advantage] Patients.” Id. ¶ 29.

         When UHC denies an appeal by PHHI, UHC has “instructed [PHHI] that it will not reimburse [PHHI] for the services rendered.” Id. ¶ 32. PHHI responds with letters and telephone calls seeking reimbursement and “an explanation for why UHC arbitrarily denied some appeals while accepting others.” Id. ¶ 33. PHHI alleges that “UHC has not provided any information to adequately or even plausibly explain its arbitrary and contradictory conclusions regarding the reimbursement of services properly coded under the codes S9325 and S9328.” Id. ¶ 34. Recently, PHHI asserts, UHC claimed “that all or a portion of the improper and arbitrary actions by UHC are the result of recklessly hired and/or retained contractors that UHC has failed to appropriately supervise.” Id. ¶ 35.

         From January 1, 2016, to March 31, 2018, PHHI billed UHC over $2, 674, 000.00 “for services rendered to UHC [Medicare Advantage patients]. This amount represents the value of the services provided” by PHHI. Id. ¶ 36. PHHI alleges “UHC has failed to reimburse [PHHI] for well over half . . . of th[e] billed amount” and the “amount continues to accrue, as [PHHI] continues to rely on UHC's past reimbursement of services coded S9325 and S9328 . . . to render pain management services to [UHC's Medicare Advantage] patients.” Id. ¶ 37. PHHI further alleges that, “[i]n continuing to provide services to UHC's [Medicare Advantage] patients, [PHHI] has purchased products, hired and paid employees, forgone other profitable endeavors, and expended time, energy, and effort in reliance on UHC's representations.” Id. ¶ 38. Moreover, PHHI alleges, it “has incurred lost time and profits” because, between January 1, 2016 and February 20, 2019, it and its employees “have spent approximately thirty hours per week appealing UHC's denials of reimbursement for services coded under S9325 and S9328.” Id. ¶ 39.

         For its breach of contract claim in Count I, PHHI alleges that UHC's Medicare Advantage patients have “a valid and enforceable written contract with UHC . . . [for UHC] to provide the UHC [Medicare Advantage p]atients health insurance under UHC's Medicare Advantage plan” and those patients assign their benefits to PHHI, “instruct[ing] UHC to reimburse [PHHI] for health services” it renders. Id. ¶¶ 42, 43. PHHI asserts it “fully and adequately performed” by treating UHC's Medicare Advantage patients and “properly submitting requests for reimbursement to UHC for CMS and UHC-approved health services rendered to” those patients. Id. ¶ 44. UHC, however, “breached the health insurance contract by refusing to reimburse [PHHI] for . . . services [PHHI] rendered to the UHC [Medicare Advantage p]atients.” Id. ¶ 45. Because it is the assignee under the UHC Medicare Advantage patients' contracts, PHHI alleges it “has suffered damages equal to the amount of unpaid claims [it] submitted to UHC that remain unpaid, plus pre-judgment interest, which has been and is herein again demanded.” Id. ¶ 47. PHHI alleges “[t]he total amount of damages continues to accrue, but is well in excess of $500, 000.” Id. In addition to seeking monetary relief, [5] PHHI asks the Court to enter a

preliminary and/or permanent injunction preventing UHC from wrongfully denying claims for services coded as S9325 and S9328 and ordering UHC to apply the same standards and provide a full and fair review to [PHHI]'s claims for services coded as S9325 and S9328 at each stage of the review process.

Id. at 8, subparagraph (a) of the WHEREFORE paragraph for Count I.

         In the negligent misrepresentation claim in Count II, PHHI seeks only monetary relief[6] for UHC's “negligent and reckless behavior.” Id. ¶ 49. In particular, PHHI alleges that in the course of their dealing, UHC has: (1) represented that claims coded as S9325 and S9328 are reimbursable, (2) reimbursed PHHI for services with those codes, (3) given “written prior approval for the services to be provided to specific patients” for those codes, and (4) reversed its initial denials of PHHI's requests for reimbursement submitted under those codes as “‘incorrect' and the result of a ‘clerical error.'” Id. ¶¶ 50-53. PHHI alleges that UHC “now arbitrarily and sporadically changes its position and refuses to reimburse [PHHI] for service codes S9325 and S9328.” Id. ¶ 54.

         To support its negligent misrepresentation claim, PHHI further alleges that UHC “failed to exercise reasonable care and provided [PHHI] with false information that service codes S9325 and S9328 were reimbursable, ” and intended that PHHI would rely on the representations and course of conduct between the parties “when [PHHI] elected to provide services to UHC [Medicare Advantage p]atients.” Id. ¶¶ 55, 56. Relying justifiably on “UHC's representations and course of conduct[, PHHI alleges it] render[ed] services to UHC [Medicare Advantage p]atients and bill[ed] UHC under the service codes S9325 and S9328, ” and “continue[s] to provide services to UHC's [Medicare Advantage p]atients, . . . purchase[] products, hire[] and pa[y] employees, forg[o] other profitable endeavors, and expend[] time, energy, and effort in reliance on UHC's representations.” Id. ¶¶ 58, 59. As a result of UHC's representations and course of conduct, PHHI alleges:

since January 2016, [PHHI] has incurred hours of time and thousands of dollars of lost profits by dedicating approximately thirty hours per week to seeking reimbursement from UHC for claims of service submitted under the codes S9325 and S9328.
. . . [B]etween January 2016 and March 31, 2018, [PHHI] billed UHC a total of [more than $2, 674, 000.00], which represents billed value of services rendered, and well over half of this billed amount remains outstanding. To date [PHHI] continues to bill and continues to incur amounts outstanding for services [it] rendered to UHC [Medicare Advantage p]atients.

Id. ¶¶ 59, 60.

         In Count III, based on quantum meruit, PHHI asserts (1) it “provides services to UHC [Medicare Advantage p]atients at the request of and with the knowledge of UHC, ” (2) PHHI's services have “reasonable value, ” (3) PHHI “bills UHC the customary and reasonable amount for each service coded S9325 and S9328, ” and (4) “[o]n numerous occasions, UHC “employees acknowledged over the phone and in letters that [PHHI] should be reimbursed for services coded S9325 and S9328.” Id. ¶¶ 62-67. Therefore, PHHI alleges, UHC made “an implied promise to reimburse [PHHI] for the services [it] rendered to” UHC Medicare Advantage patients but has refused to pay PHHI “despite [PHHI]'s numerous appeals.” Id. ¶¶ 68, 69. PHHI further claims that it is “entitled to be paid . . . a fair and reasonable amount for the goods and services it provided to UHC [Medicare Advantage p]atients, ” and seeks monetary relief[7] from UHC. Id. ¶ 70.

         In its unjust enrichment claim in Count IV, PHHI alleges it “conferred a benefit upon UHC” by providing services to UHC Medicare Advantage patients, and UHC “appreciated a benefit” by its Medicare Advantage patients “accepting the services rendered by” PHHI. Id. ¶ 73. Furthermore, PHHI alleges, “UHC accepted and retained the benefit conferred upon it by [PHHI] under inequitable and/or unjust circumstances by failing to make the required payments to” PHHI for the services it rendered, and PHHI has suffered damages “[a]s a result of the benefit conferred upon UHC.” Id. ¶¶ 74, 75. In particular, PHHI asserts that it “has billed UHC a total of [more than $2, 674, 000.00] and UHC failed to reimburse [PHHI] for well over half of this . . . billed amount. To date, [PHHI] continues to bill and continues to incur amounts outstanding for services [it] rendered to UHC [Medicare Advantage p]atients.” Id. ¶ 76. PHHI seeks an award of monetary relief.[8] WHEREFORE paragraph for Count IV of Pl's first am. compl. [ECF No. 38 at 13].

         In Count V, PHHI seeks a preliminary and permanent injunction, as well as an award of “[r]easonable attorneys' fees and court costs, ” due to the “flawed process” provided by UHC, because “further participation in that process would be futile” and no adequate remedy at law exists for PHHI. Pl.'s first am. compl. WHEREFORE ¶ and ¶¶ 79-84 [ECF No. 38 at 15, 14]. Specifically, PHHI alleges UHC's “flawed process” consists of:

(1) UHC acting “recklessly and/or negligently, and . . . fail[ing] to appropriately follow non-arbitrary procedures for analyzing and paying [PHHI]'s claims for reimbursement for services properly rendered to UHC's [Medicare Advantage p]atients”;
(2) UHC responding to PHHI's attempts “to engage in a legitimate reconsideration and appeal process with UHC” by “provid[ing] contradictory, incomplete, and long- delayed responses”;[9] and
(3) UHC “recklessly hir[ing] and/or retain[ing] contractors that UHC has failed to appropriately supervise.”

Id. ¶¶ 78, 79, 80, 82.

         In response to PHHI's first amended complaint, UHC filed a motion to dismiss.

         II. Discussion

         A. Motion to dismiss

         UHC moves to dismiss PHHI's first amended complaint under Federal Rule of Civil Procedure 12(b)(1) on the ground this Court lacks subject matter jurisdiction over the complaint and under Rule 12(b)(6) on the ground the first amended complaint fails to state a claim upon which relief can be granted. UHC first argues that PHHI's state law claims are “inextricably intertwined” with a claim for Medicare benefits and, therefore, arise under the Medicare Act. Because PHHI's claims arise under the Medicare Act, UHC urges, PHHI is required to, but failed to, exhaust available administrative remedies before pursuing its claims in federal court and, therefore, the Court must dismiss the claims. PHHI counters that its claims do not arise under the Medicare Act because (1) no enrollees have been refused services, (2) “the Court need not rely on the Medicare Act to determine if [UHC] owe[s relief] to” PHHI, and (3) PHHI “seeks equitable and legal relief due to UHC's” own “careless (or intentional) misrepresentations” and “tortious actions.” PHHI's opp'n mot. dismiss at 2-3, 5 [ECF No. 49]. If the Court concludes PHHI's claims are subject to the Medicare Act and an administrative exhaustion prerequisite to judicial review, PHHI asserts that prerequisite is waived and inapplicable under the circumstances because: (1) PHHI's state law claims are collateral to a claim for benefits and this litigation “involves [PHHI]'s procedural rights, ” (2) PHHI's exhaustion of administrative remedies would be futile, and (3) PHHI will suffer irreparable harm if the Court requires it to pursue administrative remedies. Id. at 10-15. UHC responds that PHHI does not meet any of the criteria for waiver of the exhaustion requirement.

         Alternatively, UHC contends that PHHI's state law claims are preempted by the Medicare Advantage statute's broad preemption provision, 42 U.S.C. § 1395w-26(b)(3), that supersedes all state laws and regulations except those pertaining to licensing and plan solvency. UHC argues this statutory provision preempts all of PHHI's state law claims, which do not focus on state licensing and plan solvency issues. PHHI responds that the statutory provision on which UHC relies preempts state law only with respect to “standards established under” the Medicare Advantage program and PHHI “is not trying to replace or supersede the Medicare standards with state law standards, ” but instead “seeks recovery for UHC's failure to follow [the applicable Medicare] rules.” PHHI's opp'n mot. dismiss at 16 [ECF No. 49].

         (1) Standard of review

         a. Rule 12(b)(1) motion to dismiss

         A Rule 12(b)(1) motion challenges the federal court's subject matter jurisdiction over a cause of action. Subject matter jurisdiction is the power of a federal court to decide the claim before it. Lightfoot v. Cendant Mortg. Corp., 137 S.Ct. 553, 562 (2017). “If the asserted basis of federal [subject matter] jurisdiction is patently meritless, then dismissal for lack of [subject matter] jurisdiction is appropriate.” Biscanin v. Merrill Lynch & Co., 407 F.3d 905, 907 (8th Cir. 2005); accord Hagans v. Lavine, 415 U.S. 528, 536-37 (1974) (district courts “are without power to entertain claims otherwise within their jurisdiction if they are so attenuated and unsubstantial as to be absolutely devoid of merit”) (internal citations and quotation marks omitted); Rule 12(h)(3) (“[i]f the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action”).

         Rule 12(b)(1) movants “may assert either a ‘facial' or [a] ‘factual' attack on [a federal court's subject matter] jurisdiction.” Moss v. United States, 895 F.3d 1091, 1097 (8th Cir. 2018); see also Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993) (a Rule 12(b)(1) movant may challenge a pleading either “on its face or on the factual truthfulness of its averments”). A federal court deciding a motion under Rule 12(b)(1) “must distinguish between a facial attack - where it looks only to the face of the pleadings - and a factual attack - where it may consider matters outside the pleadings.” Croyle by and through Croyle v. United States, 908 F.3d 377, 380 (8th Cir. 2018).

         For a facial attack, the 12(b)(1) movant “asserts that the [challenged pleading] fails to allege sufficient facts to support subject matter jurisdiction.” Davis v. Anthony, Inc., 886 F.3d 674, 679 (8th Cir. 2018) (internal quotation marks and citation omitted). In resolving “a facial attack, the court restricts itself to the face of the pleadings, and the non-moving party receives the same protections as it would defending against a motion brought under Rule 12(b)(6).” Id. (internal quotation marks and citation omitted). Therefore, a court considering a facial attack on the court's subject matter jurisdiction must: (1) evaluate “whether the asserted jurisdictional basis is patently meritless by looking to the face of the [pleading] . . . and drawing all reasonable inferences in favor of the” pleader, Biscanin, 407 F.3d at 907 (internal citations omitted); and (2) presume “all of the factual allegations concerning jurisdiction are . . . true, ” Titus, 4 F.3d at 593. The 12(b)(1) motion presenting a facial challenge to a federal court's subject matter jurisdiction “is successful if the [pleader] fails to allege an element necessary for subject matter jurisdiction.” Id.

         b. Rule 12(b)(6) motion to dismiss

         When resolving a Rule 12(b)(6) motion to dismiss for a pleader's failure to state a claim upon which relief can be granted, a federal court must regard as true the facts alleged in the challenged pleading and determine whether they are sufficient to raise more than a speculative right to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007); accord Hager v. Arkansas Dep't of Health, 735 F.3d 1009, 1013 (8th Cir. 2013) (under Rule 12(b)(6), “the factual allegations in the [challenged pleading] are accepted as true and viewed most favorably to the” pleader). The court does not, however, accept as true any allegation that is a legal conclusion. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); accord Hager, 735 F.3d at 1013 (“[c]ourts must not presume the truth of legal conclusions couched as factual allegations. Papasan v. Allain, 478 U.S. 265, 286 (1986)”).

         The pleading must set forth “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570; accord Iqbal, 556 U.S. at 678; Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009). “Although [the pleader] need not allege facts in painstaking detail, the facts alleged ‘must be enough to raise a right to relief above the speculative level.' Twombly, 550 U.S. at 555.” Kulkay v. Roy, 847 F.3d 637, 642 (8th Cir. 2017). “[T]he [challenged pleading] should be read as a whole, not parsed piece by piece to determine whether each allegation, in isolation, is plausible.” Braden, 588 F.3d at 594. “The plausibility standard requires a [pleader] to show at the pleading stage that success on the merits is more than a sheer possibility.” Id. (internal quotation marks and citation omitted). If the claims are only conceivable, not plausible, the court must dismiss the pleading under Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Twombly, 550 U.S. at 570; accord Iqbal, 556 U.S. at 679.

         Because UHC pursues a facial attack against the Court's subject matter jurisdiction, the Court applies the same standard whether resolving the motion to dismiss under Rule 12(b)(1) or 12(b)(6). Specifically, the Court accepts factual allegations in the first amended complaint as true, construes all inferences in favor of PHHI, and reviews only the allegations in that complaint to ascertain whether, for Rule 12(b)(1), they establish a basis for this Court to exercise ...

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