Prime Healthcare Servs., Inc. v. Humana Ins. Co.

• Decision Date: 27 January 2017
• Docket Number: CV 16–01097–BRO (JEMx)
• Citation: 230 F.Supp.3d 1194
• Court: U.S. District Court — Central District of California
• Parties: PRIME HEALTHCARE SERVICES, INC. et al. v. HUMANA INSURANCE COMPANY, et al.

230 F.Supp.3d 1194

PRIME HEALTHCARE SERVICES, INC. et al.

v.HUMANA INSURANCE COMPANY, et al.

CV 16–01097–BRO (JEMx)

United States District Court, C.D. California.

Filed January 27, 2017

John Oliver Liu, John E. Nuelle, Troy Allyn Schell, Oliver De Castro Tomas, Prime Healthcare Management Inc., Ontario, CA, for Prime Healthcare Services, Inc. et al.

Jennifer S. Romano, Crowell and Moring LLP, Los Angeles, CA, Samrah R. Mahmoud, Daniel M. Glassman, Crowell and Moring LLP, Irvine, CA, for Humana Insurance Company, et al.

ORDER RE DEFENDANT'S MOTION TO DISMISS PLAINTIFFS' SECOND AMENDED COMPLAINT [32]

BEVERLY REID O'CONNELL, United States District Judge

I. INTRODUCTION

Pending before the Court is Defendant Humana Insurance Company's ("Defendant" or "Humana") Motion to Dismiss Plaintiffs Prime Healthcare Services, Inc. et al.'s¹ ("Plaintiffs") Second Amended Complaint ("SAC"). (Dkt. No. 32 ("Motion" or "Mot.").) After considering the papers filed in support of and in opposition to the instant Motion, the Court deems these matters appropriate for resolution without oral argument of counsel. See Fed. R. Civ. P. 78 ; C.D. Cal. L.R. 7–15. For the following reasons, the Court GRANTS Defendant's Motion.

II. FACTUAL AND PROCEDURAL BACKGROUND

A. The Medicare Act

The Medicare Act (hereinafter, the "Act" or "Medicare") was enacted in 1965 as a federal health insurance program primarily benefitting those 65 years of age and older. See 42 U.S.C. §§ 1395 et. seq. Courts in this district have noted that the Act has been described as "among the most completely impenetrable texts within human experience," requiring "dense reading of the most tortuous kind." See Prime Healthcare Huntington Beach, LLC v. SCAN Health Plan , No. SACV 16-01226-DFM, 210 F.Supp.3d 1225, 1227, 2016 WL 5745130, at *1 (C.D. Cal. Sept. 27, 2016) (citing Rehab. Ass'n of Virginia, Inc. v. Kozlowski , 42 F.3d 1444, 1450 (4th Cir. 1994) ).

At its enactment, Medicare consisted of only two parts, Parts A and B. But this case concerns Part C of the Medicare Act, enacted in 1997 and creating the Medicare Advantage ("MA") program. 42 U.S.C. §§ 1395w–21 –29. Under Part C, Medicare enrollees can receive Medicare benefits through private organizations called Medicare Advantage Organizations (individually "MAO", or collectively "MAOs") instead of the government. Id. The government pays MAOs monthly fees in exchange for assuming the risk of providing covered services to enrollees. 42 U.S.C. § 1395w–23. The amount that MAOs receive per enrollee is based on contracts with the Centers for Medicare and Medicaid Services ("CMS"), an agency within the Department of Health and Human Services. SCAN Health , 2016 WL 5745130, at *1 (citing 42 U.S.C. § 1395w–27 ).

MAOs contract with certain health care providers to provide Medicare services. SCAN Health , 2016 WL 5745130, at *1 (citing 42 U.S.C. § 1395w–22(d)(1) ). However, MAOs also must provide coverage for emergency services without regard to the emergency care provider's contractual relationship with the MAO. Id. MAOs reimburse non-contracting providers who provide these emergency services based on rates set by the Medicare Act and related regulations. SCAN Health , 2016 WL 5745130, at *2. Payment amounts due to a non-contracted emergency provider are limited to what "the provider would collect if the beneficiary were enrolled in original Medicare." 42 C.F.R. § 422.214(a). Conversely, contracting providers, who enter into signed agreements with MAOs, may "establish[ ] payment amounts for services furnished to a beneficiary enrolled in an MA coordinated care plan, an MSA plan, or an MA private fee-for-service plan" even above the Medicare cap. See 42 C.F.R. § 422.214. Title 42 U.S.C. § 405(h), made applicable to the Medicare Act by 42 U.S.C. § 1395ii, provides that 42 U.S.C. § 405(g) is "the sole avenue for judicial review" for claims " ‘arising under’ the Medicare Act." Heckler v. Ringer , 466 U.S. 602, 614–15, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984).

B. Factual Background

Plaintiffs and Humana entered into a series of Letters of Agreement (individually "LOA," and collectively "LOAs") under which Plaintiffs agreed to provide hospital services to Humana's Medicare Advantage health plan members ("MA Members"). (SAC ¶ 29.) In exchange, Humana was required to pay for the services rendered to its members. (SAC ¶ 29.)

Plaintiffs maintain that from January 1, 2012 through February 29, 2016, Defendant underpaid and failed to pay for emergency and other health care services that Plaintiffs provided to approximately 1,300 of Defendants' commercial (PPO and HMO) health plan members and MA Members. (SAC ¶ 1.) Plaintiffs claim that Defendant achieved such underpayment by unilaterally, systematically altering codes related to the medical services for which Plaintiffs had billed Defendant, and replacing those codes with codes pertaining to lower-cost services or procedures. (SAC ¶¶ 1, 32.) Such billing manipulation allegedly resulted in reduction of payments for the actual services provided by Plaintiffs to Defendant's commercial health plan members ("CP Members") and MA Members. (SAC ¶ 1.) Plaintiffs also claim that Defendant "failed to pay properly Plaintiffs for the inpatient medical services Plaintiffs had provided to Defendants' [CP Members and MA Members]." (SAC ¶ 33.)

As a result of the alleged billing manipulations, Plaintiffs contend that they have been damaged in an amount not less than $8,356,400. (SAC ¶ 36.) In light of the alleged damages, Plaintiffs seek a judgment as follows: (1) the principal sum of $8,356,400; (2) interest on such principal sum at a rate of 15% per annum (pursuant to Cal. Health & Safety Code § 1371 and 1371.5 ), or 10% per annum (pursuant to Cal. Civ. Code § 3289 ) for the claims relating to CP Members; (3) interest at the applicable rate under 28 U.S.C. § 1961 and 42 C.F.R. § 405.378 for the claims relating to MA Members (the "MA Claims"); (4) permanent injunctive relief to enjoin Defendants from engaging in the alleged acts; (5) costs of this suit; and, (6) other relief as the Court deems just and proper. (SAC at 17–18.)

C. Procedural Background

Plaintiffs initiated this action on May 25, 2016, filing their original Complaint with this Court. (Dkt. No. 1.) Plaintiffs filed the First Amended Complaint, (Dkt. No. 19 ("FAC")), on August 31, 2016, alleging the following six claims against Defendant: (1) breach of written contract, (FAC at 9); (2) breach of oral contract, (FAC at 10); (3) breach of implied-in-fact contract, (FAC at 11); (4) breach of implied covenant of good faith and fair dealing, (FAC at 12); (5) negligent misrepresentation, (FAC at 12); and, (6) violation of California Unfair Competition Law ("UCL"), Bus. & Prof. Code § 17200, (FAC at 14). On September 14, 2016, Defendant filed its Motion to Dismiss the Plaintiffs' First Amended Complaint, (Dkt. No. 22), which the Court granted on November 4, 2016. (Dkt. No. 30 ("Dismissal Order").)

Plaintiffs filed their operative Second Amended Complaint on November 18, 2016, re-alleging the same causes of action. (SAC.) On December 2, 2016, Defendant filed the instant Motion to Dismiss Plaintiffs' Second Amended Complaint. (Mot.) Attached to Defendant's Motion is the Declaration of Daniel Glassman, (Dkt. No. 32–2 ("Glassman Decl.")), wherein Glassman reiterates Defendant's prior request for judicial notice, (see Dkt. No. 23), of fourteen Letters of Agreement (individually, "LOA," collectively, "LOAs"), which the Court previously noticed in its Dismissal Order as being incorporated by reference,² (see Dismissal Order at 4–5). Plaintiffs opposed Defendant's Motion on January 3, 2017, (Dkt. No. 33), attaching a Request for Judicial Notice, (Dkt. Nos. 34 ("PRJN")). Finally, Defendant filed a Request for Judicial Notice on January 13, 2017. (Dkt. No. 38 ("DRJN").)

III. REQUESTS FOR JUDICIAL NOTICE

In considering matters presented by the parties, a court may properly take judicial notice of (1) material which is included as part of the complaint or relied upon by the complaint, and (2) matters in the public record. See Marder v. Lopez , 450 F.3d 445, 448 (9th Cir. 2006) ; Lee v. City of Los Angeles , 250 F.3d 668, 688–89 (9th Cir. 2001). Under Federal Rule of Evidence 201(b), a judicially noticed fact must be one "not subject to reasonable dispute in that it (1) is generally known within the territorial jurisdiction of the trial court; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned." Further, a court "must take judicial notice if a party requests it and the court is supplied with the necessary information." See Fed. R. Evid. 201(c)(2) ; In re Icenhower , 755 F.3d 1130, 1142 (9th Cir. 2014). However, a court may not take judicial notice of a fact that is ‘subject to reasonable dispute.’ " Lee , 250 F.3d 668 (quoting Fed. R. Evid. 201(b) ).

Specifically, Plaintiffs ask the Court to take judicial notice of the following documents: (1) Defendant Humana Insurance Company's "Provider Manual For Physicians, Hospitals And Healthcare Providers" (the "Manual"); and, (2) a page from Defendant's website (the "Web Page") regarding "Medicare Part C Reconsideration (Appeal)." (PRJN at 3.) Defendant does not oppose the request.

Plaintiffs argue that because the Manual and Web Page are available to the public on Defendant's web site, the website's authenticity is not in dispute and "is capable of accurate and ready determinations," the Court may take judicial notice of this information publicly announced in the Manual and Web Page on Defendant's website. (PRJN at 3 (citing Doron Precision Systems, Inc. v. FAAC, Inc. , 423 F.Supp.2d 173, 179 n.8 (S.D.N.Y. 2006) ).)

The documents at issue are matters in the public realm. When a court takes judicial notice of publications like websites and newspaper articles, the court merely notices what was in the public realm at the time, not whether the contents of those articles were in fact true....