Ansley v. Banner Health Network

• Decision Date: 09 March 2020
• Docket Number: No. CV-19-0077-PR,CV-19-0077-PR
• Citation: 248 Ariz. 143,459 P.3d 55
• Parties: Walter ANSLEY, et al., Plaintiffs/Appellees/Cross-Appellants, v. BANNER HEALTH NETWORK, et al., Defendants/Appellants/Cross-Appellees.
• Court: Arizona Supreme Court

248 Ariz. 143

459 P.3d 55

Walter ANSLEY, et al., Plaintiffs/Appellees/Cross-Appellants,

v.BANNER HEALTH NETWORK, et al., Defendants/Appellants/Cross-Appellees.

No. CV-19-0077-PR

Supreme Court of Arizona.

Filed March 9, 2020

Geoffrey M. Trachtenberg, Justin Henry, Levenbaum Trachtenberg, P.L.C., Phoenix; B. Lance Entrekin (argued), The Entrekin Law Firm, Phoenix, Attorneys for Walter Ansley, et al.

Richard B. Burnham, Cameron C. Artigue (argued), Christopher L. Hering, Gammage & Burnham, P.L.C., Phoenix, Attorneys for Banner Health Network, et al.

Stanley G. Feldman, Miller, Pitt, Feldman & McAnally, P.C., Tucson; Lincoln Combs, Gallagher & Kennedy, P.A., Phoenix; David L. Abney, Ahwatukee Legal Office, P.C., Phoenix, Attorneys for Amicus Curiae Arizona Association for Justice/Arizona Trial Lawyers Association

JUSTICE BOLICK authored the opinion of the Court, in which CHIEF JUSTICE BRUTINEL, VICE CHIEF JUSTICE TIMMER, and JUSTICES GOULD, LOPEZ, MONTGOMERY, and PELANDER (Retired)^* joined.

JUSTICE BOLICK, opinion of the Court:

¶1 The questions this case poses are whether Medicaid patients may sue to challenge Arizona statutes authorizing the recording of liens against third-party tortfeasors for hospitals to recover health care costs exceeding their Medicaid reimbursement; and if so, whether federal law preempts the lien statutes. We hold that the patients have a private right of action, and that A.R.S. §§ 33-931(A) and 36-2903.01(G)(4) are preempted to the extent hospitals utilize them against third-party tortfeasors for "balance billing" to recover costs exceeding Medicaid reimbursement.

BACKGROUND

¶2 Plaintiffs are patients who were treated at defendant hospitals under the Arizona Health Care Cost Containment System ("AHCCCS"), which is the state’s contract provider for the federal Medicaid program and negotiates reimbursement rates with hospitals. The hospitals recorded liens against the third-party tortfeasors who caused the patients’ injuries to recover the remainder of their customary fees beyond Medicaid reimbursement. Arizona Revised Statutes § 33-931(A) allows medical providers to secure "a lien for the care and treatment ... of an injured person" in an amount equal to their "customary charges for care." Section 36-2903.01(G)(4) provides that a "hospital may collect any unpaid portion of its bill from other third-party payors."

¶3 The patients filed this class action challenging the liens, contending that the authorizing statutes violate federal Medicaid law, specifically 42 U.S.C. § 1396a(a)(25)(C) and 42 C.F.R. § 447.15. The regulation, which implements the statute, provides that state Medicaid plans must limit participation to "providers who accept, as payment in full, the amounts paid by the agency plus any deductible, coinsurance or copayment required by the plan to be paid by the individual."

¶4 Some of the patients settled with the hospitals, agreeing to pay negotiated amounts in exchange for the hospitals releasing their liens and allowing the patients to receive their full personal injury awards. The settling patients then sued to set aside the agreements, arguing that Arizona’s lien statutes are preempted by federal law and thus unenforceable. In Abbott v. Banner Health Network , this Court upheld the trial court’s dismissal of those claims. 239 Ariz. 409, 372 P.3d 933 (2016). Although the Court assumed, without deciding, that the lien statutes were preempted by federal law, id. at 411 ¶ 2, 372 P.3d at 935, we determined that "at the time of the accord and satisfaction agreements here, no Arizona appellate court had addressed the enforceability of Arizona’s medical lien statutes against third-party settlements obtained by Medicaid patients," id. at 414 ¶ 17, 372 P.3d at 938, and thus the settlements were valid under Arizona law. Id. ¶ 18.

¶5 The non-settling class members, the patients here, continued to challenge the lien statutes. Moving for summary judgment in the trial court, the patients argued, among other things, (1) that the liens are an attempt to recover hospital costs in excess of Medicaid reimbursement ("balance billing") that is preempted by federal law under the Supremacy Clause, U.S. Const. Art. VI, cl. 2 ; and (2) that the hospitals’ contracts with AHCCCS incorporate federal law (which preempts balance billing) and as third-party beneficiaries of those contracts, the patients are entitled to enforce those provisions, precluding the liens.

¶6 The trial court enjoined the hospitals from "filing or asserting any lien or claim against a patient’s personal injury recovery, after having received any payment from AHCCCS for the same patient’s care." The court rejected the patients’ third-party beneficiary argument, but ruled that A.R.S. § 36-2903.01(G)(4) is preempted by federal law. The court awarded attorney fees to the patients under the private attorney general doctrine. See Arnold v. Ariz. Dep’t of Health Servs. , 160 Ariz. 593, 609, 775 P.2d 521, 537 (1989).

¶7 The court of appeals affirmed but applied different reasoning. Ansley v. Banner Health Network , 246 Ariz. 240, 437 P.3d 899 (App. 2019).¹ The court first concluded that §§ 33-931(A) and 36-2903.01(G)(4) are preempted and "invalid to the extent they allow a hospital to impose a lien on a patient’s tort recovery for the balance between what the hospital accepted from AHCCCS for treating the patient and what it might have charged another patient." Id. at 249 ¶ 22, 437 P.3d at 908. The court then held that the patients were not precluded from asserting a private right of action under the Medicaid Act by Armstrong v. Exceptional Child Center, Inc. , 575 U.S. 320, 135 S.Ct. 1378, 191 L.Ed.2d 471 (2015). Ansley , 246 Ariz. at 254 ¶ 43, 437 P.3d at 913. Additionally, the court determined that the patients could raise the preemption argument as third-party beneficiaries for breach of the contract between AHCCCS and the hospitals. Id. at 256 ¶ 53, 437 P.3d at 915. The court affirmed most of the attorney fees awarded by the trial court and granted attorney fees the patients incurred in the court of appeals, but predicated the awards not on the private attorney general doctrine, which it did not reach, but on A.R.S. § 12-341.01(A), which authorizes a fee award for the successful party in a contract action. Id. at 257, 259 ¶¶ 60, 74, 437 P.3d at 916, 918.

¶8 We granted the hospitals’ petition for review because whether the lien statutes are preempted for balance billing purposes is a recurring issue of statewide concern. We have jurisdiction pursuant to article 6, section 5, clause 3 of the Arizona Constitution. The issues raised present solely questions of law, which we review de novo. Conklin v. Medtronic, Inc. , 245 Ariz. 501, 504 ¶ 7, 431 P.3d 571, 574 (2018).

DISCUSSION

I. PRIVATE RIGHT OF ACTION

¶9 We first address whether the patients may maintain this action. In their arguments, the patients repeatedly blur the lines between whether the lien statutes are preempted and whether the patients have a cause of action to raise that claim. The two questions overlap but are analytically distinct. Even if the lien statutes are preempted, it does not necessarily follow that the patients have a private right of action. We therefore initially consider whether the patients have a private right of action to enforce the Medicaid provisions concerning balance billing.

¶10 Contrary to the patients’ repeated assertions, the United States Supreme Court has not expressly recognized a general private right of action to enforce rights and duties under Medicaid. Nor, contrary to the hospitals’ contention, did the Court categorically foreclose such an action in Armstrong . Because the patients sued hospitals, not state officials, to prevent enforcement of the lien statutes, we are not dealing with the familiar framework applicable to such an action as set forth in Ex Parte Young , 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), which held that courts’ inherent power to enjoin state action in violation of federal law was not eliminated by the Eleventh Amendment. Instead, we are dealing with a highly unusual situation where one group of private parties, the hospitals, is invoking a state-law procedure that may violate federal law provisions that protect another group of private parties, the patients. Determining whether the patients may sue to enforce federal protections against private parties who are invoking and defending state statutes thus involves atypical parties but an otherwise familiar legal setting.

¶11 Under the Supremacy Clause, federal statutes enacted pursuant to a power conferred by the Constitution preempt conflicting state laws. Armstrong , 575 U.S. at 324, 135 S.Ct. 1378. However, the Supremacy Clause is not the source of any rights, "and certainly does not create a cause of action. It instructs courts what to do when state and federal law clash, but is silent regarding who may enforce federal laws in court, and in what circumstances they may do so." Id. at 325, 135 S.Ct. 1378.

¶12 The patients rely on 42 C.F.R. § 447.15 as the primary source of a federally protected interest against balance billing. As we discuss infra ¶ 33, a federal regulation adopted pursuant to congressional authorization can preempt a conflicting state law, but a regulation cannot create a private right of action. Rather, "private rights of action to enforce federal law must be created by Congress." Alexander v. Sandoval , 532 U.S. 275, 286, 121 S.Ct. 1511, 149 L.Ed.2d 517 (2001). Thus, "it is most certainly incorrect to say that language in a regulation can conjure up a private cause of action that has not been authorized by Congress. Agencies may play the sorcerer’s apprentice but not the sorcerer himself." Id. at 291, 121 S.Ct. 1511.

¶13 Our task, then, "is to interpret the statute Congress has passed to determine whether it displays an intent to create not just a private right but also a private remedy. Statutory intent on this latter point is determinative." Id. at...