St. Mary's Hosp. v. Carefirst of Maryland, Inc.

• Decision Date: 01 March 2002
• Docket Number: No. CIV.A.WMN-01-1260.,CIV.A.WMN-01-1260.
• Citation: 192 F.Supp.2d 384
• Parties: ST. MARY'S HOSPITAL v. CAREFIRST OF MARYLAND, INC.
• Court: U.S. District Court — District of Maryland

192 F.Supp.2d 384

ST. MARY'S HOSPITAL v. CAREFIRST OF MARYLAND, INC.

No. CIV.A.WMN-01-1260.

United States District Court, D. Maryland.

March 1, 2002.

Malinda S. Siegel, Linda M. Fotheringill, Siegel and Fotheringill LLC, Towson, MD, for Plaintiff.

Charles J. Steele, Washington, DC, Mark B. McCoy, Owings Mills, MD, Anthony F. Shelley, Miller and Chevalier Chtd., Washington, DC, for Defendant.

MEMORANDUM

NICKERSON, District Judge.

Before the Court is Defendant's Motion for Partial Summary Judgment (Paper No. 11). The motion has been fully briefed and is ripe for decision. Upon review of the pleadings and applicable case law, the Court determines that no hearing is necessary (Local Rule 105.6) and that the motion will be granted.

I. BACKGROUND

Plaintiff is a hospital incorporated and licensed in Maryland. Defendant is a Blue Cross Blue Shield health insurance company operating in Maryland. In 1986 and 1995, Plaintiff entered into written agreements with Defendant, whereby Plaintiff would provide medical services to eligible subscribers of Defendant's health benefit plans, in return for payment from Defendant. In this lawsuit, Plaintiff alleges that Defendant breached the 1995 agreement by not providing full payment for services rendered by Plaintiff to 24 CareFirst subscribers during 1999 and 2000. Specifically, Plaintiff claims that Defendant wrongfully denied payment for a portion of the hospital services received by each patient, on the ground that the duration of services had been longer than medically necessary. See, Pl.'s Opp. at 6. Plaintiff asserts that the services were medically necessary, and that Defendant's failure to pay for them in full constitutes a breach.

The instant motion relates only to 7 of the 24 hospital patients. Those 7 patients were enrollees in a nationwide government health plan for federal employees, called the Service Benefit Plan ("SBP" or "the Plan"). The SBP was created pursuant to the Federal Employees Health Benefits Act (FEHBA), which authorizes the United States Office of Personnel Management (OPM) to contract with insurers (referred to as "carriers") to provide health benefits for federal employees. 5 U.S.C. §§ 8901-8914. The Plan was formed by contract between OPM and an association of Blue Cross Blue Shield companies. Defendant is the Blue Cross Blue Shield company administering the Plan in Maryland.

Federal employees enrolled in the SBP receive benefits under the terms of the government contract between OPM and the Blue Cross Blue Shield association, but are not themselves party to the contract. See, Caudill v. Blue Cross and Blue Shield of North Carolina, 999 F.2d 74, 76 (4th Cir.1993). Under FEHBA, OPM issues to all enrollees a "Statement of Benefits," which sets forth the "benefits, including maximums, limitations, and exclusions," the "procedure for obtaining benefits," and the "principal provisions of the plan affecting the enrollee and any eligible family members." 5 U.S.C. § 8907(b). The Statement of Benefits for the SBP is incorporated by reference into the contract between OPM and the Blue Cross Blue Shield association, and is the official description of benefits terms. See, 1999 Statement of Benefits (Def.'s Exh. A); 2000 Statement of Benefits (Def.'s Exh. B). One limitation contained in the SBP's Statement of Benefits is that "[b]enefits are provided only for services and supplies that are medically necessary." 1999 Statement at 13; 2000 Statement at 41. The statements go on to define criteria for determining whether services are "medically necessary." 1999 Statement at 51; 2000 Statement at 53.

Under the provisions of FEHBA, OPM has established a mandatory administrative remedy for those who believe that a carrier has wrongfully denied benefits. 5 C.F.R. § 890.105. The remedy is to be invoked after the exhaustion of all internal appeals with the carrier. Id. If OPM finds that the carrier incorrectly denied benefits, the carrier is contractually obligated to pay the benefits. 5 U.S.C. § 8902(j). A party who is dissatisfied with OPM's findings may sue the agency in federal court. See, 5 C.F.R. §§ 890.107(c), 890.107(d)(1). These regulations providing for OPM review "appl[y] to covered individuals and to other individuals or entities who are acting on behalf of a covered individual and who have the covered individual's specific written consent to pursue payment of the disputed claim." 5 C.F.R. § 890.105(a)(2). This remedial scheme is also outlined in the SBP Statements of Benefits. 1999 Statement at 38-39; 2000 Statement at 12-14.

Plaintiff filed this lawsuit in the Circuit Court for St. Mary's County, asserting claims of breach of contract, relief from forfeiture, and quantum meruit. Within 30 days, Defendant removed the action to this Court. Paper No. 1. In support of removal, Defendant argued that Plaintiff's claims regarding the 7 Plan enrollees "arise under" federal law, either because they are governed by federal common law, or alternatively, because Plaintiff's state law causes of action are completely preempted by FEHBA.¹ Stating those same alternative grounds, Defendant now moves for summary judgment as to the 7 Plan enrollees, arguing that because Plaintiff did not comply with FEHBA's mandatory remedial scheme of administrative review, its claims must fail as a matter of law.

Plaintiff opposes Defendant's motion on the ground that there is no federal jurisdiction over this matter. Although Plaintiff had not previously opposed removal, a party may challenge subject matter jurisdiction at any point during litigation, see Fed.R.Civ.P. 12(h)(3), and the Court will necessarily address the problem of jurisdiction at the outset.

II. FEDERAL JURISDICTION OVER THIS MATTER

The federal removal statute provides that "any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant" to district court. 28 U.S.C. § 1441. District courts have original jurisdiction over, inter alia, "all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Generally, whether the plaintiff's claims "arise under" federal law is governed by the "well-pleaded complaint rule." Franchise Tax Board of California v. Construction Laborers Vacation Trust, 463 U.S. 1, 10, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983) (citing Taylor v. Anderson, 234 U.S. 74, 75-76, 34 S.Ct. 724, 58 L.Ed. 1218 (1914)). Under this rule, a case may not be removed to federal court on the basis of a federal defense, including the defense of preemption, even if "the defense is the only question truly at issue in the case." Id. at 14, 103 S.Ct. 2841.

One exception to the well-pleaded complaint rule is the doctrine of "complete preemption." Caterpillar, Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). This doctrine applies when the preemptive force of a federal cause of action is so strong that it "converts an ordinary state common law complaint into one stating a federal claim ...". Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). There are two requirements for complete preemption: (1) the statute must contain "civil enforcement provisions" that encompass the allegations in the case, and (2) Congress must have clearly manifested an intent to preempt the field. Id. at 65-66, 107 S.Ct. 1542.

Prior to 1999, the Fourth Circuit had held that claims regarding the denial of benefits under FEHBA are governed by "federal common law." Caudill, 999 F.2d 74. In so deciding, the court declined to answer whether FEHBA completely preempts state law claims. Id. at 77. The Caudill opinion, however, strongly emphasizes the "uniquely federal interest" in regulating the provision of health care and benefits to federal employees. Id. at 78. The court also observed that the application of state law to FEHBA claims would undermine the uniformity envisioned by Congress when it enacted FEHBA, by creating a "patchwork quilt" of benefits that "varied from state to state under the same contract." Id. at 79.

The principles enunciated in Caudill have been echoed in more recent district court cases, in this circuit and elsewhere, holding that FEHBA completely preempts state law in suits involving the nature and extent of coverage and benefits under FEHBA plans. See, Kight v. Kaiser Foundation Health Plan of the Mid-Atlantic States, 34 F.Supp.2d 334 (E.D.Va. 1999); Zukor v. INOVA Health Servs., No. CA-99-01909-A, Mem. Op. at 8-10 (E.D.Va. Feb. 23, 2000); Farrow v. Kaiser Found. Health Plan of the Mid-Atlantic States, Inc., No. 00-24-A, Mem. Op. at 5-7 (E.D.Va. Feb. 26, 2000); Doyle v. Blue Cross Blue Shield of Illinois, 149 F.Supp.2d 427, 432-33 (N.D.Ill.2001); Rievley v. Blue Cross Blue Shield of Tenn., Inc., 69 F.Supp.2d 1028, 1031-37 (E.D.Tenn.1999); Carter v. Blue Cross Blue Shield of Fla., Inc., 61 F.Supp.2d 1237, 1240-41 (N.D.Fla.1999).

Courts finding complete preemption have been particularly compelled to do so by a 1998 amendment to FEHBA's preemption provision. The amended provision reads as follows:

The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.

5 U.S.C. § 8902(m)(1) (as amended 1998). The amendment eliminated language that had previously limited preemption "to the extent that such [state] law or regulation is inconsistent with such contractual provisions." § 8902(m)(1) (1996). Courts have found this change in language to be persuasive evidence of congressional intent to completely preempt state law.

Courts have been further persuaded by the legislative history of the 1998 amendment, when considered along with the amended language, as a manifestation of congressional...