Fairfield Cnty. Med. Ass'n v. United Healthcare of New England

• Decision Date: 05 December 2013
• Docket Number: No. 3:13–cv–1621 (SRU).,3:13–cv–1621 (SRU).
• Citation: 985 F.Supp.2d 262
• Parties: FAIRFIELD COUNTY MEDICAL ASSOCIATION, et al., Plaintiffs, v. UNITED HEALTHCARE OF NEW ENGLAND, et al., Defendants.
• Court: U.S. District Court — District of Connecticut

985 F.Supp.2d 262

FAIRFIELD COUNTY MEDICAL ASSOCIATION, et al., Plaintiffs,

v.UNITED HEALTHCARE OF NEW ENGLAND, et al., Defendants.

No. 3:13–cv–1621 (SRU).

United States District Court, D. Connecticut.

Dec. 5, 2013.

Roy W. Breitenbach, Garfunkel Wild, P.C., Stamford, CT, for Plaintiffs.

Brian D. Boone, Alston & Bird LLP, Charlotte, NC, Kyle G.A. Wallace, William H. Jordan, Alston & Bird, LLP, Atlanta, GA, Theodore J. Tucci, Robinson & Cole, LLP, Hartford, CT, for Defendants.

RULING AND ORDER GRANTING PLAINTIFFS' MOTION FOR A TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION

STEFAN R. UNDERHILL, District Judge.

On November 15, 2013, plaintiffs Fairfield County Medical Association and Hartford County Medical Association, Inc.¹ (collectively “the Associations”), submitted their emergency motion for a temporary restraining order and preliminary injunction seeking to enjoin defendants United Healthcare of New England, Inc., United Healthcare Insurance Company, Inc., United HealthCare Services, Inc., and Unitedhealth Group, Inc. (collectively “United”), from implementing the termination of approximately 2,200 physicians from United's Medicare Advantage program. The Associations request an order (1) enjoining United from terminating any of the affected physicians from United's Medicare Advantage network; (2) enjoining United from notifying its Medicare Advantage customers that certain physician members will be terminated from the Medicare Advantage Network as of February 1, 2014; and (3) compelling United to reinstate, advertise, and market the affected physicians in their 2014 directories for the Medicare Advantage Network. Pls.' Emerg. Mot. TRO 1–2 (doc. 13).

United responded to the Associations' motion, and I held oral argument on the merits of both interim remedies on December 3, 2013. Based upon a review of the entire record, the Associations' request for a preliminary injunction is GRANTED.

I. Background

United is a health insurance provider that offers private coverage to elderly and disabled Medicare beneficiaries under the Medicare Part C ² scheme provided in the Social Security Act, 42 U.S.C. §§ 1395w–21 et seq. Defs.' Mem. Opp'n TRO 5 (doc. 29). As the largest private Medicare insurer in Connecticut, United contracts with thousands of physicians to provide medical care for its Medicare Advantage ³ customers. Ashe Aff. ¶ 7 (doc. 29); Compl. ¶ 21 (doc. 1). The majority of Connecticut physicians who participate in United's Medicare Advantage plan do so through an “all products” agreement that governs physicians' service of customers across all of United's health insurance plans. Compl. ¶¶ 24–25. Although Medicare Advantage patients may visit “out-of-network” physicians without a referral, those patients often do so at a greater cost than if they utilized a United network physician. ⁴ Defs.' Mem. Opp'n TRO Ex. D, at 15 n.* (“The benefit level for non-emergency services from out-of-network physicians and other providers will generally be less than for services from network physicians and other providers.”).

Around October 2 and October 31, 2013, United issued letters to more than 2,000 physicians in Connecticut notifying those physicians that they would be removed from United's Medicare Advantage Network, effective February 1, 2014. ⁵ Compl. ¶ 5; Pls.' Mem. Supp. TRO 1 (doc. 20). United characterized these removals as an “amendment” to its contract with each provider. Compl. Ex. B, at 1 (“UnitedHealthcare is amending your Agreement ... to discontinue your participation in the Medicare Advantage network ... This Amendment does not require your signature.”).⁶ For purposes of triggering the terminated physicians' appeal rights, however, United described its removal of physicians from the Medicare Advantage plan as a “termination without cause.” Id. at 2.

Shortly after issuance of the October 31, 2013 notices, the Associations filed this lawsuit, alleging United had denied the terminated physicians' substantive and procedural due process rights under the Medicare Act, 42 U.S.C. §§ 1305 et seq., and United had breached the individual contracts with each terminated physician. Compl. ¶¶ 33–56 (doc. 1).

The Associations and United dispute the timing, adequacy of notice, and effective date of termination for physicians facing removal from the Medicare Advantage program. The Associations allege that United (1) unilaterally terminated service provider contracts with physicians enrolled in its Medicare Advantage program in October 2013, in violation of the Medicare Act, 42 U.S.C. §§ 1305 et seq.; (2) violated the substantive and procedural rights of affected physicians to appeal United's terminations; (3) failed to provide sufficient and proper notice to terminated physicians, rendering such notice invalid; and (4) breached the explicit terms of their contracts with physician providers, breached the implied covenant of good faith and fair dealing, and rendered its contracts with terminated physicians unenforceable through a failure to provide proper consideration. Compl. ¶¶ 33–56.

The parties primarily disagree about whether an insurance company providing Medicare Part C coverage may unilaterally remove, without cause or consent, any physician in its network. United asserts that it may amend its agreements with physicians to change a physician's participation in its different health plan products so long as it abides by the Medicare Act's regulations governing the notice and appeal rights of terminated physicians. Defs.' Mem. Opp'n TRO 6. The Associations argue that the plain language of United's Physician Contract and the language in United's termination notices should be characterized as terminations of the agreement, not as amendments, and that the terminations are subject to the timeline provided in the contracts' termination clause. Compl. ¶¶ 30, 34, 45–46.

The Physician Contract's amendment clause offers United broad discretion to unilaterally alter its agreements with physicians, allowing amendments to take place so long as United provides at least 90 days' notice. The effective date of an amendment is 90 days after a physician receives notice of the amendment and a copy of the amended agreement:

We can amend this agreement or any of the appendices on 90 days written or electronic notice by sending you a copy of the amendment. Your signature is not required to make the amendment effective. However, if you do not wish to continue your participation with our network as changed by an amendment that is not required by law or regulation but that includes a material adverse change to this agreement, then you may terminate this agreement on 60 days written notice to us....

Compl. Ex. A, at 4; Defs.' Mem. Opp'n TRO Ex. C, at 4.

The contract does not grant United the same discretion to terminate a physician without cause. In order to terminate an agreement without cause, United must provide written notice by certified mail to the terminated physician at least 90 days prior to the anniversary date of a physician's agreement by certified mail. Compl. Ex. A, at 4; Defs.' Mem. Opp'n TRO Ex. C, at 4 (“[Y]ou or we can terminate this agreement, effective on an anniversary of the date this agreement begins, by providing at least 90 days prior written notice.... We both agree that termination notices under this agreement must be sent by certified mail, return receipt requested.”). The termination clause limits the effective date of a termination without cause to the anniversary date of United's agreement with the physician being terminated. Compl. Ex. A, at 4; Defs.' Mem. Opp'n TRO Ex. C, at 4. Finally, the Medicare Act's regulations require that United provide an appeals process by which physicians can challenge their terminations with or without cause. 42 C.F.R. § 422.202(d).

II. Jurisdiction and Standing

United makes numerous arguments that this court lacks the authority to hear this case and that plaintiffs lack standing to bring these claims. Each of United's principal arguments is addressed below.

A. Subject Matter Jurisdiction

This court has subject matter jurisdiction to hear this dispute under 28 U.S.C. sections 1331 and 1367. The Associations assert two causes of action. The first cause of action alleges that United has failed to comply with the procedural requirements of the Medicare Act, 42 U.S.C. §§ 1305 et seq. The second cause of action alleges broadly that United has taken actions that constitute a material breach of contract under Connecticut common law. At the same time, United's standard contract with physicians states that, because the agreement implicates interstate commerce, it is subject to federal jurisdiction. Compl. Ex. A, at 5; Defs.' Mem. Opp'n TRO Ex. C, at 5. The court exercises original jurisdiction over the federal questions presented under the Medicare Act, 28 U.S.C. § 1331, and it may exercise supplemental jurisdiction to hear the Associations' related state law claims, 28 U.S.C. § 1367.

United argues that, notwithstanding the fact that the Associations have brought claims based on federal law, federal question jurisdiction does not exist because the federal claims in this case lack merit. In short, United asserts that a federal district court must analyze whether federal claims will survive a motion to dismiss for failure to state a claim before it can exercise federal question jurisdiction. SeeFed.R.Civ.P. 12(b)(6). That is simply not the law, and United provides no citation to suggest it is.

The “well-pleaded complaint” rule provides that a federal court has subject matter jurisdiction over a complaint that sets forth a federal claim on the face of the complaint. Vaden v. Discover Bank, 556 U.S. 49, 59–61, 129 S.Ct. 1262, 173 L.Ed.2d 206 (2009); Rivet v. Regions Bank of La., 522 U.S. 470, 475–76, 118 S.Ct. 921, 139 L.Ed.2d 912 (1998); Merrell Dow Pharms. Inc. v. Thompson, 478 U.S. 804, 808, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986); Franchise Tax Bd. v. Constr. Laborers...