Shands Teaching Hosp v. Beech Street Corp.

• Decision Date: 13 April 2000
• Docket Number: No. 99-10114,99-10114
• Citation: 208 F.3d 1308
• Parties: (11th Cir. 2000) SHANDS TEACHING HOSPITAL AND CLINICS, INC., Plaintiff-Appellant, v. BEECH STREET CORPORATION, Unisys Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1308

208 F.3d 1308 (11th Cir. 2000)

SHANDS TEACHING HOSPITAL AND CLINICS, INC., Plaintiff-Appellant, v. BEECH STREET CORPORATION, Unisys Corporation, Defendants-Appellees.

No. 99-10114.

United States Court of Appeals, Eleventh Circuit.

April 13, 2000.

Appeal from the United States District Court for the Northern District of Florida.(No. 98-00087-1:CIV-MMP), Maurice M. Paul, Judge.

Before CARNES, BARKETT and MARCUS, Circuit Judges.

BARKETT, Circuit Judge:

Shands Teaching Hospital and Clinics, Inc. appeals the dismissal of its complaint against Unisys Corporation and Beech Street Corporation. Shands sued Unisys and Beech Street for the non-payment of monies due to Shands for medical services provided to employees of the State of Florida pursuant to the state health insurance plan. The district court concluded that although the State of Florida was not named as a defendant in the suit, a judgment granting the relief sought by Shands would have to be satisfied from the state coffers, and thus the suit is barred by the Eleventh Amendment. Accordingly, the district court dismissed the claim pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief can be granted.

BACKGROUND

Shands Hospital provides health care services to enrollees in the Florida State Group Health Insurance Plan. The plan, established in accordance with Florida Statutes § 110.123 for the benefit of state officers, employees, retirees and their eligible dependents, is a self-insured plan funded by annual appropriations from the state legislature and premium payments by enrollees. Under the statute, the Department of Management Services ("DMS") is responsible for contract management and day-to-day management of the state program, including the determination of health care benefits to be provided, and the negotiation of contracts for health care and health care administrative services. See Fla. Stat. Ann. § 110.123(3)(d) (West 1992 & Supp.2000). The statute authorizes the DMS to employ a professional administrator to process claims, and in 1995, after a competitive bidding process, the DMS contracted with Unisys to fulfill this function. Although Unisys is responsible for employee enrollment, premium collection, payment to health care providers and other administrative functions related to the program, the DMS retains final decision-making authority concerning the existence of coverage or benefits under the plan. Id. at § 110.123(5)(c).

In addition to serving as third party administrator, Unisys is also required under the contract with the State to provide a preferred provider organization (PPO) network. To fulfill the PPO component of its contract, Unisys, with the approval of the State, entered into a subcontract with Beech Street, a national managed care company that maintains a network of health care service providers with whom it has negotiated preferred rates.¹ Shands had been a provider in the Beech Street PPO network since 1989. Thus, by virtue of the contract between Beech Street and Unisys, Shands became a covered hospital for state plan enrollees.

The gravamen of Shands' claims against Unisys and Beech Street is that Shands has not been paid for medical services in accordance with its PPO network agreement with Beech Street or in accordance with Unisys' administrative responsibilities pursuant to Unisys' agreement with the State. The district court found, however, that any judgment for Shands would necessarily come from state funds, and thus that the State's Eleventh Amendment immunity bars this suit. Accordingly, the district court dismissed Shands' complaint pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Shands now appeals.

We review the dismissal of a complaint for failure to state a claim de novo, construing all allegations in the complaint as true and in the light most favorable to the plaintiff. See Lowell v. American Cyanamid Co., 177 F.3d 1228, 1229 (11th Cir.1999). Dismissal under Rule 12(b)(6) is appropriate "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations" of the complaint. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984).

DISCUSSION

In its complaint, Shands asserts two different claims: (1) that Unisys refused to reimburse Shands for certain medical services which Shands contends are "covered services" under the state plan; and (2) that Unisys made only partial payment for some medical services rendered. Shands argues that its cause of action is directed against the two private corporations, not against the State, and that Eleventh Amendment immunity does not extend to Unisys or Beech Street under such circumstances.

The Eleventh Amendment provides that:

The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against any one of the United States by Citizens of another State or by Citizens or Subjects of any Foreign State.

U.S. Const. amend. XI. The Eleventh Amendment largely shields states from being sued in federal court without their consent, leaving parties with claims against a State to bring them, if the State permits, in the State's own tribunals. See Hess v. Port Authority Trans-Hudson Corp., 513 U.S. 30, 48, 115 S.Ct. 394, 130 L.Ed.2d 245 (1994). The amendment is rooted in a recognition that the States, although a union, maintain certain attributes of sovereignty, including sovereign immunity. See Hans v. Louisiana, 134 U.S. 1, 13, 10 S.Ct. 504, 33 L.Ed. 842 (1890). It is well established that Eleventh Amendment immunity encompasses not only cases in which the State itself is named as a defendant, but also certain actions against state agents and state instrumentalities. See Regents of the Univ. of Cal. v. Doe, 519 U.S. 425, 429, 117 S.Ct. 900, 137 L.Ed.2d 55 (1997).

Shands recognizes that Eleventh Amendment immunity may extend to defendants other than the State based upon: (1) how state law defines the entity; (2) what degree of control the State maintains over the entity; and (3) from where the entity derives its funds and who is responsible for judgments against the entity. See Stewart v. Baldwin County Board of Education, 908 F.2d 1499, 1509 (11th Cir.1990); Tuveson v. Florida Governor's Council on Indian Affairs, Inc., 734 F.2d 730, 732 (11th Cir.1984). However, Shands argues that Unisys and Beech Street cannot be deemed arms of the state under any of these analytical prongs because they are autonomous private corporations that are not controlled by the State of Florida, and do not derive their funding from the State of Florida.

Shands' argument misses the mark. The pertinent inquiry is not into the nature of a corporation's status in the abstract, but its function or role in a particular context. Thus the question in this case is whether and to what extent these corporations are contractually acting as representatives of the State. Under the laws of Florida and the contractual provisions between the parties, it is clear that Unisys and Beech Street are simply administrators acting at the behest of the State with reference to Florida's health insurance program. The program is funded through annual legislative appropriations, and the State of Florida retains virtually complete control over the actions of its administrators.² Although we have found no case directly on point that has accorded Eleventh Amendment immunity to a private corporation such as Unisys, in analogous circumstances courts have found that sovereign immunity bars suits against private corporations acting as fiscal intermediaries in actions relating to federal Medicare reimbursement. See e.g., Pani v. Empire Blue Cross Blue Shield, 152 F.3d 67, 72 (2d Cir.1998); Anderson v. Occidental Life Ins. Co., 727 F.2d 855, 856 (9th Cir.1984); Pine View Gardens, Inc. v. Mutual of Omaha Ins. Co., 485 F.2d 1073, 1074-75 (D.C.Cir.1973); see also Matranga v. Travelers Ins. Co., 563 F.2d 677, 677 (5th Cir.1977); Peterson v. Weinberger, 508 F.2d 45, 51 (5th Cir.1975). Thus, although these are private corporations that are neither controlled nor funded by the state, they are protected by governmental immunity when they are clearly acting as agents of the state. This is not to say that an agent of the government, be it federal or state, is totally immune to liability either in tort or in contract, or for actions exceeding their authority to act on the government's behalf. These cases do not extend blanket immunity to Medicare fiscal intermediaries, rather, immunity has been granted only to the extent that a judgment would expose the government to financial liability or interfere with the administration of government programs.

In line with the reasoning of these cases, we look to "the effect of the relief sought," Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 107, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984) in...