MHA, LLC v. Amerigroup Corp.

• Decision Date: 17 May 2021
• Docket Number: Civ. No. 18-16042 (KM) (JSA)
• Citation: 539 F.Supp.3d 349
• Parties: MHA, LLC, Plaintiff, v. AMERIGROUP CORPORATION, Amerigroup New Jersey, Inc., ABC Companies 1–100, and John Does 1–100, Defendants.
• Court: U.S. District Court — District of New Jersey

539 F.Supp.3d 349

MHA, LLC, Plaintiff,

v.AMERIGROUP CORPORATION, Amerigroup New Jersey, Inc., ABC Companies 1–100, and John Does 1–100, Defendants.

Civ. No. 18-16042 (KM) (JSA)

United States District Court, D. New Jersey.

Signed May 17, 2021

Anthony K. Modafferi, III, Robert Anthony Agresta, The Agresta Firm, PC, Englewood, NJ, David Michael Estes, Eric D. Katz, Mazie, Slater, Katz & Freeman, LLC, Roseland, NJ, for Plaintiff.

Jenna Christine Hutchinson, Valerie Sirota, Troutman Pepper Hamilton Sanders LLP, New York, NY, for Defendants Amerigroup Corporation, Amerigroup New Jersey, Inc.

KEVIN MCNULTY, U.S.D.J.:

This is an action by the former owner of a hospital, MHA, LLC, against a health insurer, Amerigroup New Jersey, Inc., and Amerigroup Corporation ("Amerigroup"). MHA seeks to recover for alleged non-payment for services rendered by the hospital to Amerigroup enrollees. Amerigroup moves to dismiss for failure to state a claim, see Fed. R. Civ. P. 12(b)(6). (DE 56.)¹ For the following reasons, the motion is GRANTED IN PART and DENIED IN PART .

I. BACKGROUND

Amerigroup offers healthcare plans to individuals eligible for Medicaid and Medicare. (Compl. ¶ 12.)

Medicaid is a "cooperative federal-state program under which the federal government furnishes funding to states for the purpose of providing medical assistance to eligible low-income persons." Sabree ex rel. Sabree v. Richman , 367 F.3d 180, 182 (3d Cir. 2004) (citation omitted). To administer Medicaid, New Jersey enters into contracts with managed care organizations, "MCOs" including Amerigroup. Medicaid-eligible individuals enroll in plans with Amerigroup, and New Jersey pays Amerigroup "a fixed monthly fee per patient and the anticipated use of services (the ‘capitation payment’)." N.J. Primary Care Ass'n Inc. v. N.J. Dep't of Human Servs. , 722 F.3d 527, 530 (3d Cir. 2013). MCOs, in turn, contract with providers to provide medical services to the MCO's enrollees and pay the providers using the capitation funds. Id. ; Appalachian Reg'l Healthcare, Inc. v. Coventry Health & Life Ins. Co. , 714 F.3d 424, 426 (6th Cir. 2013). But if an enrollee receives care from a provider with which Amerigroup does not contract (an "out-of-network provider"), Amerigroup need only reimburse the provider in limited circumstances, mostly when the provider furnished emergency services. Appalachian , 714 F.3d at 426 ; Prince George's Hosp. Ctr. v. Advantage Healthplan Inc. , 985 F. Supp. 2d 38, 40 (D.D.C. 2013).

Amerigroup also administers a similar program under Medicare. In contrast with Medicaid, the federal government solely—not the states—administers Medicare to provide health insurance to older individuals. MHA, LLC v. Amerigroup Corp. , Civ. No. 18-16042, 2021 WL 226110, at *1 (D.N.J. Jan. 21, 2021). The federal Centers for Medicare and Medicaid Services ("CMS") contracts directly with Amerigroup and pays Amerigroup a capitation fee. Id. Amerigroup, in turn, uses that money to pay providers, with which Amerigroup contracts for covered services rendered to individuals enrolled in its "Medicare Advantage" plan. Id. Amerigroup operates its Medicare Advantage plan as a health maintenance organization ("HMO"). (See Compl. ¶¶ 41, 63.) An HMO is, to simplify, a health insurance plan that acts as a healthcare provider itself or contracts with providers to provide healthcare to its enrollees. See N.J. Stat. Ann. §§ 26:2J-2(f) ; 26:2J-5(a)(4); Butler v. Wu , 853 F. Supp. 125, 130 (D.N.J. 1994).

MHA owned a hospital, Meadowlands, that served patients with Amerigroup plans under Medicare and Medicaid. (Compl. ¶¶ 18–19.) From December 2010 until July 2014, MHA did so as an in-network provider, under a Network Agreement with Amerigroup. (Id. ¶ 18.) From July 2014 until January 2018 (when MHA sold Meadowlands), MHA did so as an out-of-network provider. (Id. ¶ 19.) For accounts billed during the in-network period, MHA alleges that Amerigroup owes $60,492,941.84. (Id. ¶ 92.) For accounts billed during the out-of-network period, MHA alleges that Amerigroup owes $27,563,277.35. (Id. ¶ 91.) (The precise reasons that Amerigroup failed to pay are not clear from the Complaint.)

To recover for the alleged non-payment, MHA sued Amerigroup in New Jersey Superior Court, asserting claims for (1) violations of New Jersey regulations requiring coverage for emergency services; (2) violation of the Healthcare Information Networks and Technologies Act ("HINT Act"), N.J. Stat. Ann. § 17B:26-9.1 ; (3) fraudulent and negligent misrepresentation, and equitable and promissory estoppel; (4) unjust enrichment; (5) quantum meruit; (6) breach of contract based on a repudiation of the Network Agreement; (7) negligent misrepresentation; and (8) breach of contract as a third-party beneficiary of the Amerigroup-New Jersey Medicaid contract. (Compl. ¶¶ 94–173.) Amerigroup removed the case to this Court. (DE 1.)² Amerigroup now moves to dismiss the complaint.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 8(a) does not require that a pleading contain detailed factual allegations but "more than labels and conclusions." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The allegations must raise a claimant's right to relief above a speculative level, so that a claim is "plausible on its face." Id. at 570, 127 S.Ct. 1955. That standard is met when "factual content [ ] allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Rule 12(b)(6) provides for the dismissal of a complaint if it fails to state a claim. The defendant bears the burden to show that no claim has been stated. Davis v. Wells Fargo , 824 F.3d 333, 349 (3d Cir. 2016). I accept facts in the complaint as true and draw reasonable inferences in the plaintiff's favor. Morrow v. Balaski , 719 F.3d 160, 165 (3d Cir. 2013) (en banc).

III. DISCUSSION

I discuss whether each claim is adequate overall, and then, as to the surviving claims, discuss Amerigroup's cross-cutting arguments for dismissal of portions of those claims.

A. Count 1

In Count 1, MHA alleges that Amerigroup's non-payment violated regulations requiring Amerigroup to cover out-of-network emergency services, N.J.A.C. §§ 10:74-9.1 (applying to Medicaid plans), 11:24-5.3(b) (applying to HMOs), and services referred by an HMO, id. § 11:24-5.1(a)(1). (Compl., Count 1.) Amerigroup argues that MHA lacks a private right of action to seek damages for such regulatory violations. (Mot. at 16–19.)

There is no express provision allowing a claimant to bring a damages suit based on violations of those regulations. In such a case, "a private cause of action would have to be implied from the statutory scheme involved or the administrative regulations promulgated thereunder." Jalowiecki v. Leuc , 182 N.J.Super. 22, 440 A.2d 21, 24 (1981). To decide whether to imply a private right of action from a statute, New Jersey courts use a three-part test adopted from Cort v. Ash , 422 U.S. 66, 78, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). See Jarrell v. Kaul , 223 N.J. 294, 123 A.3d 1022, 1029 (2015). A version of this test has been applied in New Jersey to decide whether to imply a private right of action from administrative regulations, in the context of the enabling statute. Jalowiecki , 440 A.2d at 26, cited favorably in R.J. Gaydos Ins. Agency, Inc. v. Nat'l Consumer Ins. Co. , 168 N.J. 255, 773 A.2d 1132, 1144 (2001).³ So I ask whether (1) the plaintiff is "one of the class for whose especial benefit the statute [or regulation] was enacted," (2) "there is any evidence that the Legislature [or agency with delegated authority] intended to create a private cause of action," and (3) "implication of a private cause of action in this case would be consistent with the underlying purposes of the legislative scheme." Jarrell , 123 A.3d at 1029 (cleaned up); See Jalowiecki , 440 A.2d at 26–27.

New Jersey courts apply this test against a general background reluctance to imply a private right of action. Gaydos , 773 A.2d at 1142. Compounding that reluctance here, federal courts will generally avoid expanding state-law liability in ways not foreshadowed by state-court precedent. City of Philadelphia v. Beretta U.S.A. Corp. , 277 F.3d 415, 421 (3d Cir. 2002). It follows that federal courts "should be even less inclined" than state courts to imply private rights of action from state statutes and regulations.

Beye v. Horizon Blue Cross Blue Shield of N.J. , 568 F. Supp. 2d 556, 571–72 (D.N.J. 2008).

I begin with the regulation that imposes obligations on Amerigroup to cover emergency services as to Medicaid enrollees, N.J.A.C. § 10:74-9.1, and then the regulations that impose similar obligations as to Medicare insureds, see id. §§ 11:24-5.1(a)(1), 11:24-5.3(b).

1. N.J.A.C. § 10:74-9.1

N.J.A.C. § 10:74-9.1 requires MCOs to reimburse out-of-network providers that provide emergency services to their enrollees. The New Jersey Department of Human Services ("NJDHS") promulgated this regulation under its authority to promulgate rules to implement New Jersey's Medicaid program. See id. § 10:74-1.2; N.J. Stat. Ann. § 30:4D-7 ; In re A.N. , 430 N.J.Super. 235, 63 A.3d 764, 769 (2013).

On the first factor, the purpose of the New Jersey Medicaid statutory scheme is "to provide medical assistance ... on behalf of persons whose resources are determined to be inadequate to enable them to secure quality medical care at their own expense." N.J. Stat. Ann. § 30:4D-2. The regulatory chapter that houses N.J.A.C. § 10:74-9.1 likewise expresses its purpose to "set forth the manner in which" MCOs "shall provide covered health services to eligible persons." N.J.A.C. § 10:74-1.1. Thus, generally, New Jersey's Medicaid program and managed care approach were enacted for the benefit of enrollees, not providers as such.

Zooming in on N.J.A.C. § 10:74-9.1, its language speaks of obligations on MCOs, not...