801 F. Supp. 2d 126
S.D.N.Y.2011Background
- HHC is a New York City public benefit corporation; it provides emergency medical services to WellCare enrollees as a non-contracted provider.
- WellCare contracted with CMS under Medicare Advantage; its provider obligations include compliance with 42 C.F.R. Part 422 Subpart E, including payment rules.
- HHC billed WellCare for emergency services using UB-04 forms, listing DRG (Original Medicare) and posted charges; WellCare had been paying the lesser of the two.
- HHC demanded the DRG amount and the difference for underpaid claims starting May 2008; CMS issued non-binding guidance and a dispute-resolution process in 2010.
- CMS letters in May and September 2010 advised disputes be resolved through CMS processes; HHC sought to enforce federal obligations via a state contract theory.
- The case was removed to federal court; WellCare moved to dismiss under Rule 12(b)(6) arguing lack of private right and preemption; the court granted in part and remanded the unjust enrichment claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether HHC can sue as a third-party beneficiary to enforce federal obligations | HHC asserts a third-party right to enforce CMS-imposed obligations. | No private right of action exists under the MMA; enforcement must be through the agency, not private suits. | Breach of contract claim dismissed for lack of private right. |
| Whether the breach claim is preempted by federal Medicare law | HHC seeks to enforce federal requirements embedded in CMS contract. | Preemption possible where private rights would undermine federal standards. | Court did not reach preemption as breach claim was dismissed on other grounds. |
| Whether the unjust enrichment claim is preempted by MMA | Unjust enrichment arises from non-contracted provider dispute over payment amounts. | Preemption could bar state-law fraud/claims overlapping with federal standards. | Unjust enrichment not express/field/conflict preempted; however jurisdictional remand follows. |
| What is the court's jurisdiction over the remaining claim and its disposition | Unjust enrichment claim remanded to state court; breach of contract claim dismissed. | ||
| Whether CMS dispute-resolution processes affect the viability of private remedies | CMS dispute-resolution availability weighs against private third-party remedy. |
Key Cases Cited
- Astra USA, Inc. v. Santa Clara County, California, 131 S. Ct. 1342 (2011) (private rights must be created by Congress; contracts cannot circumvent statute)
- Grochowski v. Phoenix Construction, 318 F.3d 80 (2d Cir. 2003) (cannot enforce federal statute via third-party contract if no private right exists)
- U.S. v. Sprietsma, 537 U.S. 51 (2002) (preemption clause did not express intent to preempt common law claims)
- Davis v. United Air Lines, Inc., 575 F. Supp. 677 (E.D.N.Y. 1983) (limits on third-party beneficiary enforcement where no remedy exists)
- New York SMSA Ltd. P'ship v. Town of Clarkstown, 612 F.3d 97 (2d Cir. 2010) (presumption against field preemption in health regulation)