76 F. Supp. 3d 1388
S.D. Fla.2014Background
- Associates Rehabilitation (provider) contracted with Humana (Medicare Advantage organization) to provide therapy services to Humana enrollees and submitted claims that Humana denied as not medically necessary.
- Humana is an MA organization that contracts with CMS to administer Medicare Part C (Medicare Advantage) benefits under federal law and regulations.
- Associates (via assignee plaintiff) sued Humana in Florida state court seeking damages and declaratory relief, alleging improper payment reductions and claim denials under their provider contract.
- Humana removed the case to federal court under the federal officer removal statute, then moved to dismiss for lack of subject matter jurisdiction because the plaintiff failed to exhaust administrative remedies under the Medicare Act; Humana alternatively argued preemption of state-law claims.
- The district court found removal proper, held the claims "arise under" the Medicare Act and are inextricably intertwined with reimbursement decisions, and dismissed the case without prejudice for failure to exhaust administrative remedies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether removal under the federal officer statute was proper | Ren-Care controls; matter is fundamentally a private contract dispute, not federal | Humana acted under CMS authority and federal regulations when denying claims, so removal under 28 U.S.C. § 1442(a)(1) is proper | Removal was proper: Humana is a person acting under a federal agency and asserted colorable federal defenses |
| Whether the claims “arise under” the Medicare Act requiring administrative exhaustion | Dispute governed by private provider–plan contract; no direct federal right at issue | Claims seek reimbursement for services to Medicare Advantage enrollees and are tied to Medicare coverage determinations | Court held claims arise under the Medicare Act (inextricably intertwined) and require exhaustion of administrative remedies |
| Whether plaintiff must exhaust DHHS/CMS administrative appeals before suing | Contract-based remedies available; exhaustion unnecessary | Medicare channeling rule and regulations require providers to use administrative appeals for claims affecting Medicare benefits | Court dismissed without prejudice to allow exhaustion per Medicare administrative scheme |
| Whether state-law claims should be dismissed as preempted | State contract law governs and Ren-Care supports non-preemption | Medicare statute and regulations preempt conflicting state-law claims | Court declined to decide preemption after ruling on exhaustion (left for later if necessary) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: factual allegations must plausibly state a claim)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for complaints)
- Heckler v. Ringer, 466 U.S. 602 (1984) (state-law claims may "arise under" federal statute if inextricably intertwined with federal benefits)
- Lifestar Ambulance Serv., Inc. v. HHS, 365 F.3d 1293 (11th Cir. 2004) (Medicare claims must generally proceed through administrative appeals first)
- Cochran v. U.S. Health Care Fin. Admin., 291 F.3d 775 (11th Cir. 2002) (same: exhaustion/channeling requirement under Medicare)
- Ren-Care, Ltd. v. Humana Health Plan of Tex., Inc., 395 F.3d 555 (5th Cir. 2004) (contrasting authority on whether MA contract disputes arise under Medicare)