Northbay Healthcare Grp., Inc. v. Kaiser Found. Health Plan, Inc.
| Decision Date | 07 December 2017 |
| Docket Number | Case No. 17-cv-05005-LB |
| Parties | NORTHBAY HEALTHCARE GROUP, INC., et al., Plaintiffs, v. KAISER FOUNDATION HEALTH PLAN, INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
Re: ECF No. 29, 39
Plaintiffs NorthBay Healthcare Group and NorthBay Healthcare Corporation (collectively, "NorthBay") operate two hospitals in Solano County, California. NorthBay brings this action against (1) Kaiser Foundation Health Plan, Inc. ("Kaiser Health Plan"), a health insurance plan; (2) Kaiser Foundation Hospitals, Inc. ("Kaiser Hospitals"), the operator of two other hospitals in Solano County; and (3) the Permanente Medical Group, Inc. ("Permanente"), which manages doctors that work at Kaiser Hospitals' hospitals. The defendants have moved to dismiss NorthBay's complaint.1
NorthBay's primary grievance is that Kaiser Health Plan has been underpaying NorthBay when NorthBay's hospitals treat Kaiser Health Plan enrollees. NorthBay attempts to characterize this dispute as an antitrust conspiracy, bringing a claim under Section 2 of the Sherman Antitrust Act alleging that the defendants have conspired to monopolize the healthcare insurance and services market in Solano County. But NorthBay has failed to allege facts that support its attempt to recast the defendants' interactions with NorthBay specifically into an antitrust conspiracy to monopolize healthcare generally. NorthBay has therefore failed to plead a cognizable claim under Section 2, and the court dismisses this claim.
The rest of NorthBay's claims are state-law claims between non-diverse parties. The court lacks original jurisdiction over those claims and declines to exercise supplemental jurisdiction over them, and therefore dismisses NorthBay's complaint in full. NorthBay may file an amended complaint on or before Thursday, January 11, 2018.
Defendant Kaiser Health Plan is the largest health-care-service plan in the United States.3 Over 11.8 million people in nine states and the District of Columbia are enrolled in health insurance from Kaiser Health Plan.4 In Northern California, over 4.1 million people are enrolled in Kaiser Health Plan.5 Kaiser Health Plan has more than 75% of the commercial-health-insurance market in Solano County.6
Defendant Kaiser Hospitals operates hospitals throughout the United States, including two hospitals with emergency departments in Solano County: Kaiser Permanente Vallejo MedicalCenter in Vallejo and Kaiser Permanente Vacaville Medical Center in Vacaville.7 Kaiser Hospitals' Vacaville hospital is the county-designated Level II Trauma Center for Solano County.8
Defendant Permanente is a medical group comprised of physician-owned, for-profit partnerships and professional corporations.9 Permanente provides and manages the physicians who service Kaiser Health Plan enrollees at Kaiser Hospitals' hospitals, including Kaiser Hospitals' Vallejo and Vacaville hospitals.10
Kaiser Health Plan, Kaiser Hospitals, and Permanente are separate legal entities, and each pursues its own economic interest.11 They are parties to legal agreements with one another, however, whereby Permanente services Kaiser Health Plan enrollees at Kaiser Hospitals.12 The three defendants collectively use the registered trademark or trade name "Kaiser Permanente."13 As Kaiser Hospitals has observed, "Kaiser Permanente is organized in each operating region by three separate but closely cooperating entities: comprised of [Kaiser Hospitals] and [Kaiser Health Plan] . . . and a separate Permanente Medical Group (PMG) in each region in which Kaiser Permanente operates."14 Kaiser Hospitals has further noted that "separate legal entities are responsible for managing the integrated health care system in California: [Kaiser Health Plan]; [Kaiser Hospitals]; and The Permanente Medical Group, Inc. (TPMG), which contracts with [Kaiser Health Plan] in Northern California."15
NorthBay operates two hospitals in Solano County; both provide general hospital and emergency services: NorthBay Medical Center in Fairfield and NorthBay VacaValley in Vacaville.16 NorthBay's Fairfield hospital is the county-designated Level III Trauma Center.17
2.1 The Cancellation of the Agreement Between NorthBay and Kaiser Health Plan Regarding Payment for Emergency Services that NorthBay's Hospitals Provide to Kaiser Health Plan Enrollees
NorthBay's hospitals provide emergency medical services to patients, including Kaiser Health Plan enrollees.18 Since 2010, the number of Kaiser Health Plan enrollees treated by NorthBay each year has steadily increased, rising from more than 540 patients in 2010 to over 770 patients in 2016.19
In 2010, NorthBay and Kaiser Health Plan entered into an agreement ("Agreement") that set forth the rates that Kaiser Health Plan would pay NorthBay for services NorthBay provided to Kaiser Health Plan enrollees.20 Under the Agreement, NorthBay agreed to accept a standardized percentage of its "charge master rate" (the standard rate a hospital charges for the services it provides) for Kaiser Health Plan enrollees, instead of its full charge-master rate.21
In September 2016, Kaiser Health Plan terminated the Agreement.22 For a period of time after that, Kaiser Health Plan paid NorthBay at the percentage specified in the Agreement, but after a few months of paying that rate, Kaiser Health Plan began paying NorthBay at less than half of the prior Agreement rate.23 Kaiser Health Plan also began refusing to pay certain claims submitted byNorthBay entirely.24 NorthBay claims that following the termination of the Agreement, Kaiser Health Plan was no longer entitled to pay NorthBay anything less than 100% of NorthBay's charge-master rate for emergency services provided to Kaiser Health Plan enrollees.25 NorthBay calculates that since the termination of the Agreement, Kaiser Health Plan has underpaid it more than $21.7 million for services it provided to Kaiser Health Plan enrollees.26 NorthBay claims that Kaiser Health Plan's termination of the Agreement is contrary to its own self-interest and therefore cannot be explained but for an anticompetitive goal.27
2.2 Allegations That the Defendants "Steer" Kaiser Health Plan Enrollees to or Away From Kaiser Hospitals' Hospitals
NorthBay also claims that the defendants "steer" patients enrolled in Kaiser Health Plan insurance to or away from Kaiser Hospitals' hospital emergency rooms based not on the health condition of these patients but on the defendants' financial incentives.28 In support of this claim, NorthBay alleges that makes the following factual allegations:
First, NorthBay alleges that "Kaiser" demands that NorthBay contact Kaiser's "Emergency Prospective Review Program" ("EPRP"), which is staffed by Permanente physicians, each time a Kaiser Health Plan enrollee appears at a NorthBay hospital emergency room.29 (The complaint does not specify whether it is referring to Kaiser Health Plan, Kaiser Hospitals, or both.) In one instance, a NorthBay surgeon assessed and determined that a Kaiser Health Plan enrollee at a NorthBay hospital was not stable and required ongoing emergency medical care, but a doctor with Kaiser's EPRP determined that the enrollee was stable.30 The EPRP doctor aggressively pressured the NorthBay surgeon to transfer the patient.31 The NorthBay surgeon refused.32 The EPRP doctorsent a facsimile to the NorthBay doctor stating that the patient "is clinically stable and can be transferred to a facility that we designate for all further necessary care" and that any further care that NorthBay provided to the patient would be "unauthorized" "post-stabilization care."33 (The complaint does not allege what condition this patient had, whether he or she was transferred, or what happened to him or her after this exchange.)
Second, NorthBay alleges two instances where a Kaiser Health Plan enrollee ended up at a Kaiser Hospitals hospital when NorthBay believes that he or she should have ended up at a NorthBay hospital.34 In one instance, an ambulance drove a Kaiser Health Plan enrollee who was involved in a pedestrian-versus-car accident past NorthBay's Fairfield hospital to Kaiser Hospitals' Vacaville hospital; the patient ultimately died.35 In another instance, Kaiser Hospitals' Vacaville hospital transferred a Kaiser Health Plan enrollee from Vacaville to Kaiser Hospitals' Vallejo hospital instead of to NorthBay's Fairfield hospital; after the transfer, the patient had to wait nine days for cardiac treatment and was permanently disabled.36 NorthBay alleges "upon information and belief" that "Kaiser" transferred these patients thusly so that Kaiser Health Plan could avoid paying NorthBay for the two enrollees' treatment.37 (The complaint does not specify whether it is referring to Kaiser Health Plan, Kaiser Hospitals, or both, and does not allege any more specific facts to support its conclusion about Kaiser's motives, other than the fact of the enrollees' movements.)
Third, NorthBay alleges that when a treating physician determines that a Kaiser Health Plan enrollee's condition is stable and the "Defendants" elect to transfer the enrollee to a Kaiser Hospitals facility, Kaiser Hospitals refuses to effectuate the transfer within "a reasonable amount of time" and instead requires NorthBay to hold the enrollee for hours or days until the KaiserHospitals facility is ready to receive him or her.38 NorthBay further alleges that the Kaiser Hospitals hospital does not pay NorthBay's charge-master rates for any non-emergency-but-medically-necessary care that NorthBay provides to the enrollee.39 (The complaint does not specify to which defendants NorthBay is referring and, if "Defendants" is meant to include Kaiser Hospitals, how it is that Kaiser Hospitals is both electing to transfer the enrollee and refusing to transfer the enrollee.)
2.3 Allegations That the Defendants...
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