Kaiser Found. Health Plan, Inc. v. Burwell

• Decision Date: 30 November 2015
• Docket Number: Case No. 14-cv-05255-EMC
• Citation: 147 F.Supp.3d 897
• Court: U.S. District Court — Northern District of California
• Parties: Kaiser Foundation Health Plan, Inc., Plaintiff, v. Sylvia Mathews Burwell, Defendant.

147 F.Supp.3d 897

Kaiser Foundation Health Plan, Inc., Plaintiff,

v.Sylvia Mathews Burwell, Defendant.

Case No. 14-cv-05255-EMC

United States District Court, N.D. California.

Signed November 30, 2015

Amy B. Briggs, Carri Maas, Joanna Lauren Allen, Manatt Phelps & Phillips, LLP, San Francisco, CA, Joanna Sobol McCallum, Gregory Neil Pimstone, Manatt Phelps & Phillips, LLP, Los Angeles, CA, for Plaintiff.

Jennifer S. Wang, United States Attorney's Office, San Francisco, CA, Peter Michael Bryce, United States Department of Justice, Civil Division, Washington, DC, for Defendant.

ORDER DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT; AND GRANTING DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT

EDWARD M. CHEN

, United States District Judge

I. INTRODUCTION

The issue in this case is whether Kaiser must pay for emergency care provided to its Medicare enrollee by an out-of-network hospital until the treating physician determines the enrollee is stable to be transferred even if Kaiser believes the physician was mistaken. The dispute centers on the governing Medicare regulation which provides: “[t]he physician treating the enrollee must decide when the enrollee may be considered stabilized for transfer or discharge, and that decision is binding on the MA organization.” 42 C.F.R. § 422.113(b)(3)

. The Secretary of Health & Human Services construes this regulation as making the treating physician's determination binding on Kaiser, effectively fixing Kaiser's financial responsibility. Kaiser contends that the Secretary has misinterpreted its own regulation, and that the treating physician's determination is subject to review; the Secretary's interpretation would violate Kaiser's Fifth Amendment right against Takings and Due Process. For the reasons stated herein, the Court finds Kaiser's arguments without merit.

II. FACTUAL & PROCEDURAL BACKGROUND

A. Medicare Framework

Medicare is a federal medical insurance program for the elderly and disabled. See 42 U.S.C § 1395 et seq .

; Compl. ¶ 9. The Secretary of Health and Human Services is responsible for the administration of Medicare through its Centers for Medicare & Medicaid Services (“CMS”). 42 U.S.C § 1395b–9 ; Compl. ¶ 9. Medicare consists of three parts of insurance: Parts A, B, and C. 42 U.S.C § 1395 et seq . Medicare Part C gives qualified Medicare individuals the option of participating in the Medicare Advantage (“MA”)¹ program. 42 U.S.C §§ 1395w–21 to -29 ; 42 C.F.R. § 422 et seq . The MA program allows eligible individuals to receive their Medicare benefits through Medicare Advantage organizations (“MAO”), which include health maintenance organizations plans (“HMO”) such as Kaiser. 42 U.S.C § 1395w–21(a)(2)(A)(i) ; Compl. ¶ 10. Part C HMOs are capitated plans, meaning that the federal government pays the plans a flat fee per enrollee, and the HMO then arranges for or pays providers for the services provided to those members. Compl. ¶ 11. In other words, when the MA program pays the MAO a fixed monthly rate per enrollee, the MAO assumes the risk of providing covered services to the enrollee. 42 U.S.C. §§ 1395w–23(a)(1) to -(a)(3).

Medicare payment decisions involve a multi-layer review beginning with a request with a provider, such as a hospital, for payment from the MAO organization. If dissatisfied with the initial determination, a provider may file with the MAO a request for standard reconsideration. 42 C.F.R. § 422.582

. A provider dissatisfied with the MAO's decision on reconsideration may appeal the adverse redetermination to a private independent contractor for a reconsideration. 42 C.F.R. § 422.592. After the contractor renders its decision, a party may appeal an adverse reconsideration decision and request a hearing before an administrative law judge (“ALJ”). 42 C.F.R. § 422.600. Subsequently, a party may request that the Medicare Appeals Council (“MAC”)² review the ALJ's decision. 42 C.F.R. § 422.608. The MAC conducts a de novo review of the ALJ's decision considering all the evidence of record and may adopt, modify or reverse the ALJ's decision or remand the case to an ALJ for further proceedings. 42 C.F.R. § 405.1100(c). The decision of the MAC constitutes the final decision of the Secretary. 42 C.F.R. § 405.1130. Thereafter, a party dissatisfied with the Secretary's final decision may seek judicial review. 42 C.F.R. §§ 405.1130, 405.1136.

Congress authorized the Secretary to establish guidelines to promote the “efficient and timely coordination of appropriate maintenance and post-stabilization care.” 42 U.S.C. § 1395w-22(d)(2)

. Pursuant to this authority, the Secretary has promulgated a regulation delineating special rules for emergency and other related services. 42 C.F.R. § 422.113.

Section 1395w-22(d)(1)(E) of the Social Security Act³ states that the MA organization must provide coverage for emergency services without regard to prior authorization or the emergency care provider's contractual relationship with the organization. 65 Fed. Reg. 40, 170, 40, 201 (June 29, 2000)

. “Implicit in this requirement is the fact that the [MAO] may not require the provider to call for approval of services prior to the point of stabilization.” Id. at 40, 201. Accordingly, the implementing regulation 42 C.F.R. § 422.113(b) prohibits an MAO from instructing enrollees to seek prior authorization for emergency or urgently needed services.

Although the regulation sets forth certain limitations on the MAO's financial responsibilities,⁴ the regulation explicitly provides that the MAO is financially responsible for emergency services provided to evaluate or stabilize an enrollee's emergency medical condition. Title 42 of the Code of Federal Regulations, section 422.113(b)(2)

states:

(2) MA organization financial responsibility. The MA organization is financially responsible for emergency and urgently needed services—

(i) Regardless of whether the services are obtained within or outside the MA organization;

(ii) Regardless of whether there is prior authorization for the services.

(A) Instructions to seek prior authorization for emergency or urgently needed services may not be included in any materials furnished to enrollees (including wallet card instructions), and enrollees must be informed of their right to call 911.

(B) Instruction to seek prior authorization before the enrollee has been stabilized may not be included in any materials furnished to providers (including contracts with providers);

(iii) In accordance with the prudent layperson definition of emergency medical condition regardless of final diagnosis;

(iv) For which a plan provider or other MA organization representative instructs an enrollee to seek emergency services within or outside the plan; and

(v) With a limit on charges to enrollees for emergency department services that CMS will determine annually, or what it would charge the enrollee if he or she obtained the services through the MA organization, whichever is less.

42 C.F.R. § 422.113(b)(2)

.

The regulation defines an emergency medical condition as:

(i) [A] medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that a prudent layperson, with an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in—

(A) Serious jeopardy to the health of the individual or, in the case of a pregnant woman, the health of the woman or her unborn child;

(B) Serious impairment to bodily functions; or (C) Serious dysfunction of any bodily organ or part.

Id. at 422

.113(b)(1)(i). Emergency services are “covered inpatient and outpatient services that are—(A) Furnished by a provider qualified to furnish emergency services; and (B) Needed to evaluate or stabilize an emergency medical condition.” Id. at 422.113(b)(1)(ii).

The regulation further addresses care services provided after an emergency medical condition is stabilized: “Post-stabilization care services means covered services, related to an emergency medical condition, that are provided after an enrollee is stabilized in order to maintain the stabilized condition, or, under the circumstances described in [422.113(c)(2)(iii) ], to improve or resolve the enrollee's condition.” Id. at 422

.113(c)(1). Section 422.113(c)(2)(iii) states:

(2) MA organization financial responsibility. The MA organization—

(iii) Is financially responsible for post-stabilization care services obtained within or outside the MA organization that are not pre-approved by a plan provider or other MA organization representative, but administered to maintain, improve, or resolve the enrollee's stabilized condition if—

(A) The MA organization does not respond to a request for pre-approval within 1 hour;

(B) The MA organization cannot be contacted; or

(C) The MA organization representative and the treating physician cannot reach an agreement concerning the enrollee's care and a plan physician is not available for consultation. In this situation, the MA organization must give the treating physician the opportunity to consult with a plan physician and the treating physician may continue with care of the patient until a plan physician is reached or one of the criteria in § 422.113(c)(3)

is met ....

42 C.F.R. § 422.113(c)(2)(iii)

.

B. Procedural Background

Kaiser is a Medicare Advantage Organization (“MAO”) that provides Medicare-covered services to its enrollees through a Medicare Advantage (“MA”) plan. Compl. ¶ 5. Defendant Sylvia Mathews Burwell is the Secretary of the Department of Health and Human Services, which is statutorily responsible for the administration of the Medicare Program under the Social Security Act. Compl. ¶ 6. The Medicare Appeals Council acts under a delegation of authority from the Secretary. Compl. ¶ 6. See Title 42 of the Code of Federal Regulations § 405.1138

(“When a Federal district court remands a case to the Secretary for further consideration, unless the court order specifies otherwise, the MAC, acting on behalf of the Secretary, may make a decision, or it...