Abrons Family Practice and Urgent Care, PA v. North Carolina Dept. of Health and Human Services, 14 CVS 635
| Decision Date | 12 June 2015 |
| Docket Number | 14 CVS 635 |
| Citation | 2015 NCBC 60 |
| Court | Superior Court of North Carolina |
| Parties | ABRONS FAMILY PRACTICE AND URGENT CARE, PA; NASH OB-GYN ASSOCIATES, PA; HIGHLAND OBSTETRICAL-GYNECOLOGICAL CLINIC, PA; CHILDREN'S HEALTH OF CAROLINA, PA; CAPITAL NEPHROLOGY ASSOCIATES, PA; HICKORY ALLERGY & ASTHMA CLINIC, PA; HALIFAX MEDICAL SPECIALISTS, PA and WESTSIDE OB-GYN CENTER, PA, Individually and on Behalf of All Others Similarly Situated, Plaintiffs, v. NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, and COMPUTER SCIENCES CORPORATION, Defendants |
Williams Mullen by Camden R. Webb, Esq. and Elizabeth C. Stone, Esq., for Plaintiffs.
Brooks, Pierce, McLendon, Humphrey & Leonard, LLP by Jennifer K. Van Zant, Esq., Charles F. Marshall III, Esq., and Bryan Starrett, Esq., and Baker Botts LLP by Bryant C. Boren, Jr., Esq., Van H. Beckwith, Esq., and Ryan Bangert, Esq., for Defendant Computer Sciences Corporation.
North Carolina Department of Justice by Olga E. Vysotskaya de Brito, Esq., Amar Majmundar, Esq., and Iain Stauffer, Esq., for Defendant North Carolina Department of Health and Human Services.
Gregory P. McGuire Special Superior Court Judge for Complex Business Cases.
THIS CAUSE, designated a mandatory complex business case by Order of the Chief Justice of the North Carolina Supreme Court, pursuant to N.C. Gen. Stat. § 7A-45.4(b) (), and assigned to the undersigned Special Superior Court Judge for Complex Business Cases, comes before the Court upon Defendant North Carolina Department of Health and Human Services' ("Department" or "DHHS") Motion to Dismiss ("DHHS' Motion to Dismiss"), and Defendant Computer Science Corporation's ("CSC") Motion to Dismiss ("CSC's Motion to Dismiss, " together with DHHS' Motion to Dismiss, "Motions to Dismiss"). On April 15, 2015, the Court held a hearing on the Motions to Dismiss.
THE COURT, after reviewing the motions, briefs in support of and in opposition to the motions, the record evidence filed by the parties, the arguments of counsel, and other appropriate matters of record, FINDS and CONCLUDES as stated herein.
1. Plaintiffs Abrons Family Practice and Urgent Care, PA; Nash OB-GYN Associates, PA; Highland Obstetrical-Gynecological Clinic, PA; Children's Health of Carolina, PA; Capital Nephrology Associates, PA; Hickory Allergy & Asthma Clinic, PA; Halifax Medical Specialists, PA; and Westside OB-GYN Center, PA (collectively, "Plaintiffs"), initiated this action on January 16, 2014, on behalf of themselves and all others similarly situated. On January 21, 2014, Plaintiffs filed their First Amended Class Action Complaint ("Amended Complaint"), asserting the following causes of action: Claim One (Negligence against CSC); Claim Two (Unfair and Deceptive Trade Practices against CSC); Claim Three (Breach of Contract against Department); Claim Four (Declaratory Judgment); and Claim Five (Violation of North Carolina Constitution, Art. I, § 19).[1]
2. On April 4, 2014, CSC filed its Motion to Dismiss pursuant to Rule 12 of the North Carolina Rules of Civil Procedure ("Rule(s)"). On the same date, the Department filed its Motion to Dismiss pursuant to Rule 12. Plaintiffs and Defendants also filed numerous affidavits in support of their respective positions regarding the exhaustion of administrative remedies and this Court's subject matter jurisdiction over the claims in this action.
3. The Motions to Dismiss have been fully briefed and argued, and are ripe for determination.
Among other things, the Amended Complaint alleges that:
4. Plaintiffs are medical practices across the State of North Carolina, all of which provide care to Medicaid-eligible patients and all of which have Medicaid contracts with the State of North Carolina. Additionally, Plaintiffs were all "of the category of persons known to Defendants prior to July 1, 2013[, ] to be an intended end user of NCTracks."[2]
5. DHHS is an administrative agency of the State of North Carolina and is the sole state agency designated in this State to "administer or to supervise the administration of the North Carolina state Medicaid plan."[3]
6. CSC is a Nevada corporation with its principal office in Falls Church, Virginia. CSC was responsible for the design and development of NCTracks, and currently operates that system.[4]
7. The North Carolina Medicaid system serves approximately 1.5 million low-income or disabled North Carolinians. Through this system, DHHS, or its vendors, contractors, or agents, processes approximately 88 million Medicaid claims annually.[5] To process this volume of claims, DHHS and providers rely on an electronic payment system to reimburse care providers who treat Medicaid-eligible patients.[6]
8. In 2003, the federal Centers for Medicare and Medicaid Services ("CMS") required the State of North Carolina to replace its antiquated Medicaid Management Information System ("MMIS"). That year, the State of North Carolina issued a Request for Proposal ("RFP") for a new MMIS. After the initial MMIS replacement project failed, the State issued another RFP in 2007. This RFP "contemplated that the State would purchase a single, comprehensive computer system that would handle all Medicaid provider enrollments and claims processing."[7] In December 2008, the State awarded the MMIS contract to CSC, under which CSC would design and develop, and ultimately operate, the new system, NCTracks. Part of CSC's obligation to operate the NCTracks system included the establishment and operation of a call center to answer questions from Medicaid providers about NCTracks and Medicaid reimbursement procedures under this system.[8]
9. In performing its contract to develop NCTracks, Plaintiffs allege that CSC made a number of critical errors in the design and development of that system that "doomed the success of NCTracks."[9] Plaintiffs allege that CSC, as developer of NCTracks, owed Plaintiffs, intended users of NCTracks, a duty "to exercise reasonable care in the design, development, and implementation of the system."[10] Plaintiffs allege that this duty is separate and apart from any contractual duty or requirement under its contract to develop NCTracks.[11] Plaintiffs allege that CSC has taken a number of actions that have breached this duty of reasonable care and have caused damage to Plaintiffs.
10. Plaintiffs allege that CSC based NCTracks on an outdated computer programming language called Common Business-Oriented Language ("COBOL"). This programming language, Plaintiffs allege, was a factor in the failure of a New York MMIS system designed and implemented by CSC in the early 2000s. Despite knowledge of the failed New York MMIS and COBOL, CSC elected to base NCTracks on the New York MMIS system "for its own financial benefit."[12]
11. Moreover, Plaintiffs allege that CSC made a number of miscalculations regarding the amount of code from the New York MMIS system that could be used in NCTracks. The result of these miscalculations was that CSC was required to "develop significantly more code from scratch than it had initially represented, " causing delays in the implementation of NCTracks.[13]
12. Additionally, prior to the NCTracks system "going live, " CSC was responsible for setting "acceptance criteria, " by which the operational readiness of the system would be measured. Plaintiffs allege that CSC set these criteria based on "its own desire to complete the project, regardless of the quality of the software, " instead of basing acceptance criteria on the needs of the end users.[14] Based on the acceptance criteria set by CSC, the State terminated its contract for the legacy MMIS system, thereby eliminating any possible backup system should NCTracks fail upon going live.
13. Plaintiffs also allege that CSC failed to adequately test NCTracks, particularly as to the volume of Medicaid providers that would use the system at any given time.[15]Additionally, due to CSC's setting of its own acceptance criteria, Plaintiffs allege that the testing process, to be performed by SLI Global Solutions, INC. ("SLI"), was inherently flawed.[16] SLI, in turn, also failed to properly test NCTracks, including a failure to conduct approximately 285 of 834 "critical" test cases.[17]
14. In May of 2013, the Office of the State Auditor released a report documenting "serious problems with the NCTracks project and warn[ing] against implementation" of the software on the scheduled go-live date, July 1, 2013, unless the problems were resolved. The report indicated that NCTracks "had not been properly tested, the testing process was highly flawed, no defined test plan or testing acceptance criteria had been established, CSC was allowed to set its own testing criteria, and no formal criteria to determine if NCTracks was ready for go-live had been established."[18]
15. Despite this warning, on July 1, 2013, and after CSC misrepresented the status of the system, NCTracks became operational. Plaintiffs allege that, almost immediately, "they experienced, and continue to experience, catastrophic software errors and design problems with NCTracks."[19] Plaintiffs contend that they experienced a number of technical issues, including system inaccessibility due to high demand, [20] the inability of the system to process certain claims, [21] and the failure of a number of NCTracks features.[22] As a result, Plaintiffs have suffered financial harm in the form of improperly denied claims, reimbursements that were paid at a lower rate than that required, and damages to the Plaintiffs' businesses, including time and expenses associated with addressing the issues with NCTracks.
16. In addition, Plaintiffs allege that CSC has failed to exercise reasonable care in operating NCTracks and in failing to correct the defects in the system. Namely, Plaintiffs allege that CSC has failed...
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