New York City Health & Hosp. Corp. v. Wellcare of New York, Inc.

• Decision Date: 15 December 2011
• Citation: 937 N.Y.S.2d 540,2011 N.Y. Slip Op. 21468,35 Misc.3d 250
• Parties: NEW YORK CITY HEALTH AND HOSPITALS CORPORATION, Plaintiff, v. WELLCARE OF NEW YORK, INC., Defendant.
• Court: New York Supreme Court

2011 N.Y. Slip Op. 21468

35 Misc.3d 250

937 N.Y.S.2d 540

NEW YORK CITY HEALTH AND HOSPITALS CORPORATION, Plaintiff,

v.WELLCARE OF NEW YORK, INC., Defendant.

Supreme Court, New York County, New York.

Dec. 15, 2011.

Sabita Krishnan, Esq., Alan H. Kleinman, Esq., for plaintiff.

Harold N. Iselin, Esq., Cynthia Neidl, Esq., for defendant.

ANIL C. SINGH, J.

This is a dispute over rates paid to a health care provider by an insurance company. Defendant moves to dismiss plaintiff's unjust enrichment claim pursuant to CPLR 3211(a)(7), contending that: 1) an equitable claim has no place in the Medicare regulatory scheme; 2) plaintiff is prohibited under state law from bringing a private lawsuit for violation of a statute; and 3) plaintiff conferred no benefit upon defendant. Plaintiff opposes the motion and cross-moves to amend and supplement the complaint pursuant to CPLR 3025(b). Defendant opposes the cross-motion.

Plaintiff New York City Health and Hospitals Corporation (“HHC”) is a public benefit corporation that operates and maintains the municipal hospitals of New York City (65 N.Y.Jur.2d Hospitals section 96). It provides medical services through 11 acute care hospitals (www. nyc. gov/ html/ hhc). HHC is the largest municipal healthcare organization in the United States ( Id.).

Defendant WellCare of New York, Inc. (“WellCare”) is private insurer authorized under federal law to provide benefits to Medicare recipients. WellCare has a contract with the federal Centers for Medicare & Medicaid Services (“CMS”) to provide services to Medicare enrollees. Defendant is licensed under Article 44 of the New York Public Health Law to administer a Medicare Advantage (“MA”) plan.

CMS is the federal agency responsible for implementation of the MA program (www. cms. gov). Medicare Advantage plans (like HMOs) are health plans run by Medicare-approved private insurance companies (www. medicare. gov). “Medicare Advantage plans (also called Part C”) include Part A [Hospital Insurance], Part B [Medical Insurance], and usually other coverage like Medicare prescription drug coverage (Part D) ... ( Id.). Under Medicare Advantage, managed care organizations, such as WellCare, must reimburse out-of-network health care providers, such as HHC, for services rendered to MA enrollees.

MA organizations typically enter into agreements with health care providers (“contracted providers”) in order to provide services to their enrollees. Providers that do not have a contract with the MA organization are non-contracted providers.

Neither HHC nor any of the HHC hospitals have a contract with WellCare, so they are non-contracted providers.

MA organizations may require that Medicare enrollees receive their Medicare benefits through contracted providers, but they must allow enrollees to obtain emergency medical services “without regard to ... the emergency care provider's contractual relationship with the [MA] organization” (42 U.S.C. 1395(d)(1)(E); 42 C.F.R. 422.113).

Under the federal Emergency Medical Treatment and Active Labor Act (“EMTALA”) (42 U.S.C. 1395dd), any hospital that accepts payment from Medicare must treat patients who seek emergency services without inquiry into the patient's insurance coverage or ability to pay until the patient's condition has been stabilized.

Under the federal statute, Medicare provider hospitals—including those operated by plaintiff HHC—are compelled to provide treatment and stabilization for any patients who arrive at their emergency rooms ( see, for example, Carodenuto v. New York City Health & Hospitals Corp., 156 Misc.2d 361, 593 N.Y.S.2d 442 [Sup.Ct., Bronx Cty., 1992] ). The statute provides for a civil monetary penalty against a hospital for a violation of EMTALA ( Id.). “In addition, an individual who suffers personal harm may maintain a civil action against the participating hospital” ( Almond v. Town of Massena, 237 A.D.2d 94, 96, 667 N.Y.S.2d 475 [3d Dept., 1998] ).

MA organizations are responsible for paying providers, whether contracted providers or non-contract providers, for services provided to stabilize an emergency condition (42 C.F.R. 422.113).

Non-contracted providers that provide services to enrollees of a MA organization do not receive any payments from CMS for those services. An MA organization must pay non-contracted providers that provide emergency services to Medicare enrollees the “amount the provider would have received under original Medicare” (42 C.F.R. 422.100).

Medicare law requires that non-contracted providers accept the amount that they would receive through original Medicare as payment for services provided to Medicare enrollees of a Medicare Advantage Plan (42 U.S.C. 1395cc(a)(1)(O); 42 U.S.C. 1395w–22(K)(1); 42 U.S.C. 422.214(b)).

HHC filed a verified amended complaint in the Supreme Court in September 2010. The complaint alleges that HHC hospitals provided emergency services to Wellcare's Medicare enrollees, fulfilling WellCare's obligation to ensure that its enrollees received such services. Plaintiff alleges further that, as a result, WellCare had a duty to pay for those services, with its own funds, and has been unjustly enriched by its calculated underpayment. Plaintiff contends that it seeks only the amount it expected to be paid—and the amount it billed WellCare—even if the fact-finder finds that the reasonable value of HHC's services is higher.

The amended complaint asserts two causes of action: 1) breach of contract, and 2) unjust enrichment.

On September 10, 2010, WellCare removed this action from state court to the United States District Court, Southern District of New York.

WellCare moved to dismiss both claims on the grounds that: 1) HHC's claims were preempted by federal law; 2) HHC's claims represented an impermissible attempt to enforce a federal law that does not provide for a private right of action; and 3) both claims failed as a matter of law.

In an Opinion and Order dated May 10, 2011, the federal court granted WellCare's motion to dismiss as to the breach of contract claim. The unjust enrichment claim was remanded to this Court.

Defendant is moving now to dismiss the unjust enrichment claim and the complaint pursuant to CPLR 3211(a)(7). Plaintiff is cross-moving to have the amended complaint reflect the “viable” claim before this Court.

Discussion

“It is well settled that a motion to dismiss a complaint for failure to state a cause of action pursuant to CPLR 3211(a)(7) must be denied if from the pleadings' four corners factual allegations are discerned which taken together manifest any cause of action cognizable at law” ( Maldonado v. Olympia Mechanical Piping & Heating Corp., 8 A.D.3d 348, 349–350, 777 N.Y.S.2d 730 [2d Dept. 2004] (internal quotation marks and citations omitted)). “The court must accept as true the facts alleged in the pleading and submissions in opposition to the motion, and accord the plaintiff the benefit of every possible favorable inference” ( Id.).

“A person is enriched if he or she has received a benefit” (22A N.Y.Jur.2d Contracts section 528). “To state a cause of action for unjust enrichment, a plaintiff must allege that it conferred a benefit upon the defendant, and that the defendant will obtain such benefit without adequately compensating plaintiff therefor” ( Smith v. Chase Manhattan Bank, 293 A.D.2d 598, 600, 741 N.Y.S.2d 100 [2d Dept. 2002], quoting Nakamura v. Fujii, 253 A.D.2d 387, 390, 677 N.Y.S.2d 113 [1st Dept. 1998] ). “Whether there is unjust enrichment may not be determined from a limited inquiry confined to an isolated transaction; it must be a realistic determination based on a broad view of the human setting involved” (22A N.Y.Jur.2d Contracts section 528).

This is an apparent case of first impression in the State of New York. “New York law is in accordance with the general rule which requires unjust enrichment and a benefit conferred upon the recipient by the claimant as prerequisites for the enforcement of restitution” (22A N.Y.Jur.2d Contracts section 527, citing Am.Jur.2d, Restitution and Implied Contracts, sections 8, 10, 15). Because the law of New York with respect to unjust enrichment is in agreement with the law of our sister states, we will examine analogous decisions in three other states for guidance.

Courts in Pennsylvania, Tennessee and Texas have permitted an equitable remedy under similar circumstances because the hospitals were required to provide services to the enrollees.

For example, in Temple University Hospital, Inc. v. Healthcare Management Alternatives, Inc., 832 A.2d 501 [Pa.Super., 2003], a teaching hospital, which had entered into a contractual agreement with a managed care company to provide services to certain Medicare recipients, commenced an action to recover the difference between published charges and the lesser amount actually paid by the managed care company.

The Superior Court of Pennsylvania found that all of the elements of unjust enrichment were present. It wrote:

We believe the circumstances herein compel a finding that unjust enrichment has occurred. In reaching this conclusion, we note that the Hospital was compelled under federal law to provide services to individuals under the HealthPass program; conversely, Healthcare [the managed care company] did not have the ability to prevent its members from seeking emergency treatment at the Hospital. As a result, the parties virtually were compelled to operate in this manner; equitable principles are therefore particularly appropriate here.

...

Healthcare maintains that it adequately compensated the Hospital for services provided.... We disagree. Dr. Dobson testified that Medicaid covered only eighty to eighty-three percent of the costs incurred by hospitals that treat indigent patients. Thus, Healthcare retained a benefit in this instance because it did not pay reasonable value for the services rendered. Accordingly, we find that all of the elements of unjust enrichment were established, and that...