Regional Medical Transport, Inc. v. Highmark, Inc.

• Decision Date: 02 April 2008
• Docket Number: Civil Action No. 04-1969.
• Citation: 541 F.Supp.2d 718
• Parties: REGIONAL MEDICAL TRANSPORT, INC., Robert M. Sklar, and Scott C. Donohue, Plaintiff, v. HIGHMARK, INC., d/b/a HGS Administrators, Margery L. Glover, Laura L. Minter, Miranda Shaw, Stephen M. Walker, and Kimberly G. Warren, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

541 F.Supp.2d 718

REGIONAL MEDICAL TRANSPORT, INC., Robert M. Sklar, and Scott C. Donohue, Plaintiff, v. HIGHMARK, INC., d/b/a HGS Administrators, Margery L. Glover, Laura L. Minter, Miranda Shaw, Stephen M. Walker, and Kimberly G. Warren, Defendants.

Civil Action No. 04-1969.

United States District Court, E.D. Pennsylvania.

April 2, 2008.

David S. Dessen, Esq., Dessen Moses & Rossitto, Willow Grove, PA, for Plaintiff.

D. Brian Simpson, Esq., U.S. Attorney's Office, Harrisburg, PA, for Defendants.

MEMORANDUM

DuBOIS, District Judge.

I. INTRODUCTION

On April 7, 2004, plaintiffs Regional Medical Transport, Inc. ("RMT"), and Robert M. Sklar and Scott C. Donohue, both employees of RMT ("plaintiffs"), filed an action against Highmark, Inc. d/b/a HGS Administrators ("HGSA"), and HGSA employees Margery L. Glover, Laura L. Minter, Miranda Shaw, Stephen M. Walker, and Kimberly G. Warren ("defendants") in the Court of Common Pleas of Philadelphia, Pennsylvania. Defendants removed the case to this Court on May 6, 2004, pursuant to 28 U.S.C. § 1442(a)(1), the federal officer removal statute.

In their Complaint, plaintiffs assert claims for tortious interference with contractual relations, misfeasance, and negligent supervision. Presently before the Court are Plaintiffs' Motion to Remand and Defendants' Motion to Dismiss or in the Alternative for Summary Judgment. For the reasons set forth below, Plaintiffs' Motion to Remand is denied and Defendants' Motion to Dismiss is granted.

II. FACTS

The following facts are taken from the Complaint or are matters of public record, and are presented in the light most favorable to plaintiff.¹

A. Overview of Medicare Program

Title XVIII of the Social Security Act, 79 Stat. 291, as amended, 42 U.S.C. § 1395 et seq., commonly known as the Medicare Act, establishes a federally subsidized health insurance program to be administered by the Secretary of the Department of Health and Human Services (the "Secretary"). Heckler v. Ringer, 466 U.S. 602, 605, 104 S.Ct. 2013, 80 L.Ed.2d 622 (1984). Part A of the Act, 42 U.S.C. § 1395c et seq., provides insurance for the cost of hospital and related post-hospital services. Id. Part B of the Act, which encompasses the portions of the Medicare program at issue in this case, establishes a voluntary program of supplemental medical insurance covering expenses not covered by the Part A program, such as reasonable charges for physicians' services, medical supplies, and laboratory tests. 42 U.S.C. §§ 1395j-1395w-4.

The Secretary delegates responsibility for administering the Medicare program to the Centers for Medicaid and Medicare Services ("CMS"). CMS, in turn, delegates the administration of benefits pursuant to 42 U.S.C. § 1395u, which states that services under Part B of the Act shall be administered through contracts with private insurance contractors. The Secretary is authorized to indemnify these private contractors, called "Medicare carriers," for their actions in administering the Medicare program on behalf of CMS. 42 C.F.R. § 421.5(b).

Medicare carriers are bound by a detailed set of rules and regulations set out in the Medicare Act, CMS regulations, and other instructions issued by CMS, including the Medicare Carriers Manual and Program Integrity Manual. In addition to processing payments, Medicare carriers are charged with screening for fraud and initiating review or suspending payments when they have reliable evidence of wrongdoing. See, e.g., 42 U.S.C. § 1395ddd; 42 C.F.R. § 405.371.

A dissatisfied Medicare provider seeking reimbursement from CMS may request review of a Medicare carrier's initial determination. 42 C.F.R. § 405.807. After exhausting all appeals with the Medicare carrier, a claimant may, where the regulations permit, seek administrative review through CMS. 42 C.F.R. §§ 405.855-56. After exhausting all administrative appeals, a claimant who meets specified amount-in-controversy requirements may seek review in federal court. 42 U.S.C. §§ 405(g), 1395ff; 42 C.F.R. § 405.857.

B. Plaintiffs' Allegations

On April 7, 2004, plaintiffs filed a three-count Complaint against defendants in the Court of Common Pleas of Philadelphia. From at least January 1, 2000, through the time that plaintiffs filed the Complaint, RMT provided ambulance services to Pennsylvania residents. (Compl. ¶ 12.) During this time, HGSA contracted with CMS to process claims from Medicare Part B providers in Pennsylvania. (Id. ¶¶ 10, 11.) In its role as a regional Medicare carrier, HGSA processed claims submitted by RMT for services to participants in Part B of the Medicare program. (Id. ¶ 13.) HGSA was required to administer these claims in conformity with the applicable federal regulations, the Medicare Carriers Manual, and other bulletins and directives issued by CMS. (Id. ¶ 14.)

Plaintiffs allege that HGSA failed to follow Medicare regulations in administering claims submitted by RMT. First, plaintiffs allege that HGSA failed to provide timely notice of the results of an overpayment investigation, in violation of the duty imposed by 42 C.F.R. § 405.372(c). (Id. ¶¶ 20-23, 26.) 42 C.F.R. § 405.372(c) provides, in relevant part, that "[a]s soon as the [overpayment] determination is made, the intermediary or carrier informs the provider ... [of] the determination."

Second, plaintiffs allege that HGSA acted improperly in administering RMT's Medicare provider number, a prerequisite for submitting Medicare claims. (Id. ¶¶ 30-43.) Specifically, plaintiffs allege that HGSA failed to provide RMT timely notice of a provider number suspension, notify RMT of its right to appeal, or promptly reinstate RMT's provider number when its appeal was successful. (Id. ¶¶ 34, 37, 40.) Plaintiffs also allege that HGSA improperly compelled RMT to complete Medicare form 855B. (Id. ¶ 39.)

Third, plaintiffs allege that during its prepayment review of claims submitted by RMT, HGSA sought medical records from third-party healthcare providers for Medicare beneficiaries transported by RMT. (Id. ¶¶ 44, 46.) Plaintiffs allege that HGSA improperly withheld payments because of the failure of these third-party providers to produce the requested records. (Id. ¶¶ 46-49.)

Fourth, plaintiffs allege that defendants misconstrued the scope of an Order from this Court in a related case filed by the United States against RMT, Ronald Sklar, and Scott Donohue alleging violations of the False Claims Act, common law fraud, and unjust enrichment. (Id. ¶¶ 62-63.) Plaintiffs allege that because the case filed by the United States was pending, defendants improperly refused all communication with RMT, including communication concerning Medicare Part B claims not the subject of the United States' lawsuit. (Id. ¶¶ 65-69.)

Based on these facts, plaintiffs assert three common law tort claims. First, plaintiffs assert a claim for tortious interference with contractual relations, alleging that defendants "made RMT's performance of its contracts [with Medicare beneficiaries] more expensive and burdensome." (Id. ¶¶ 70-77.) Second, plaintiffs assert a claim against HGSA for misfeasance, alleging that RMT was a third-party beneficiary of HGSA's contract with CMS, and that HGSA's violations of the Medicare regulations underlying that contract caused RMT harm. (Id. ¶¶ 78-84.) Third, plaintiffs assert a claim for negligent supervision, alleging that the individual defendants failed to properly supervise their employees, allowing them to engage in the conduct giving rise to the first two claims. (Id. ¶¶ 85-97.) With respect to damages, plaintiffs claim that defendants' misconduct forced them to borrow and expend substantial sums of money and adversely affected RMT's creditworthiness. (Id. ¶¶ 91-96.)

III. PROCEDURAL HISTORY

The instant case is one of three related cases currently pending before this Court; it was the second of the three cases to be filed. The first of the cases, United States v. Regional Medical Transport, et al, Civil Action No. 01-5227, was filed by the United States on October 15, 2001. In that case, the United States alleges that RMT, Robert Sklar, and Scott Donohue, the plaintiffs in this matter, filed fraudulent claims for Medicare reimbursement. The Government seeks treble damages and civil penalties under the False Claims Act and damages under theories of common law fraud, unjust enrichment, and fraudulent misrepresentation.

The third case, Regional Medical Transport, Inc. v. Leavitt, Civil Action No. 05-5670, was filed on October 25, 2005. That case involves an appeal by RMT of a final order by the Secretary denying payment for services under Part B of the Medicare program. RMT seeks payment of $120,961.31, plus interest and costs of suit, for claims that RMT alleges were improperly denied by the Administrative Law Judge ("ALJ").

By Order dated October 28, 2002, the Court stayed all proceedings in Civil Action No. 01-5227 and transferred the case to the Civil Suspense file. The Court did so because of the United States' ongoing criminal investigation into the conduct of RMT, Robert Sklar, and Scott Donohue. By Order dated October 12, 2004, the Court also stayed proceedings in this case and transferred it to the Civil Suspense file because of the relationship of this case to the government's ongoing criminal investigation.

By letter dated March 2, 2005, the government informed the Court that the United States Attorney's office for the Eastern District of Pennsylvania had declined prosecution of RMT, Robert Sklar, and Scott Donohue. Thereafter, by Order dated March 3, 2005, the Court directed that this case and Civil Action No. 01-5227 be transferred from the Civil Suspense file to the Court's active docket. The Court further ordered the parties to report to the Court on or before April 8, 2005 on the status of their ongoing settlement discussions.

The parties continued their settlement discussions concerning this case and Civil Action No. 01-5227. The settlement discussions...