981 F.3d 664
9th Cir.2020Background
- DaVita (plaintiff provider) treated Patient 1, an Amy's Kitchen employee-plan beneficiary with end-stage renal disease (ESRD), who received routine maintenance dialysis from DaVita.
- Amy's Kitchen's group health Plan covers dialysis for all underlying conditions but in 2017 implemented a "Dialysis Benefit Preservation Program" that eliminated the in‑network/out‑of‑network distinction for dialysis and set dialysis reimbursement by a new "Usual and Reasonable Charge" formula based on market averages.
- After the 2017 change DaVita received substantially lower reimbursements and sued as assignee of Patient 1, alleging violations of the Medicare-as-Secondary-Payer (MSP) statute, ERISA, and state law; the district court dismissed the federal claims and declined supplemental jurisdiction over state-law claims.
- The MSP bars (1) taking into account an individual’s Medicare eligibility during the 30‑month coordination period and (2) differentiating plan benefits between persons with ESRD and other enrollees on the basis of ESRD or need for dialysis.
- The Plan pays the same rate for all dialysis regardless of whether the beneficiary has ESRD or is Medicare‑eligible; DaVita argued this produced an unlawful disparate impact on ESRD beneficiaries.
- The Ninth Circuit affirmed dismissal of the federal claims, holding the Plan did not "take into account" Medicare eligibility and did not "differentiate" benefits under the MSP; it also held DaVita (as assignee) could bring a benefits claim but not equitable ERISA claims based on the assignment language.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Plan "took into account" Medicare eligibility in violation of 42 U.S.C. § 1395y(b)(1)(C)(i) | DaVita: Plan’s dialysis reimbursement scheme effectively considered Medicare and reduced payments to Medicare-eligible ESRD patients. | Amy's: Plan reimburses all dialysis uniformly regardless of Medicare eligibility; it does not consider an individual’s Medicare status. | Held: Plan did not "take into account" Medicare eligibility because reimbursement is uniform for all dialysis patients. |
| Whether Plan "differentiates" benefits in violation of 42 U.S.C. § 1395y(b)(1)(C)(ii) (including whether disparate‑impact liability applies) | DaVita: Even facially neutral rules that disproportionately burden ESRD patients (disparate impact) violate the MSP. | Amy's: MSP prohibits only differential benefits between ESRD and non‑ESRD persons; uniform dialysis rules do not differentiate. | Held: MSP forbids differential benefits for ESRD persons but does not encompass a broad disparate‑impact theory; the Plan treats dialysis uniformly and therefore does not differentiate. |
| Whether DaVita (as assignee) may sue under ERISA § 502(a)(1)(B) to recover benefits | DaVita: Assignment from Patient 1 authorizes suit to recover benefits under the Plan. | Amy's: — (dispute focuses on scope of assignment) | Held: Assignment permits DaVita to pursue the beneficiary’s claim for benefits. |
| Whether the assignment transferred equitable ERISA claims (injunctive or other equitable relief) | DaVita: Assignment of "any cause of action" includes equitable ERISA remedies. | Amy's: Assignment form and context indicate transfer of rights to payment only, not equitable claims. | Held: Assignment covered only claims to recover benefits, not equitable ERISA claims; equitable claims dismissed. |
Key Cases Cited
- Daewoo Elecs. Am., Inc. v. Opta Corp., 875 F.3d 1241 (9th Cir. 2017) (de novo review and treating complaint allegations as true)
- Marietta Mem'l Hosp. Empl. Health Benefit Plan v. DaVita, Inc., 978 F.3d 326 (6th Cir. 2020) (analyzed scope of disparate-impact theory under MSP)
- Texas Dep't of Hous. & Cmty. Affairs v. Inclusive Communities Project, Inc., 576 U.S. 519 (2015) (framework for assessing whether statute encompasses disparate-impact liability)
- Griggs v. Duke Power Co., 401 U.S. 424 (1971) (disparate-impact recognition in Title VII)
- Smith v. City of Jackson, 544 U.S. 228 (2005) (disparate-impact recognition under ADEA)
- Spinedex Physical Therapy USA, Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282 (9th Cir. 2014) (non‑participant provider cannot bring ERISA benefit claims absent assignment)
- DB Healthcare, LLC v. Blue Cross Blue Shield of Ariz., Inc., 852 F.3d 868 (9th Cir. 2017) (assignment interpretation turns on parties’ intent and document language)
- Curtiss‑Wright Corp. v. Schoonejongen, 514 U.S. 73 (1995) (plan sponsors may amend welfare plans)
- Zinman v. Shalala, 67 F.3d 841 (9th Cir. 1995) (MSP provisions aimed at reducing Medicare costs)