Tenet HealthSystem GB, Inc. v. Care Improvement Plus South Central Insurance Company
875 F.3d 584
| 11th Cir. | 2017Background
- Eleven noncontract hospitals provided services to Medicare Part C (Medicare Advantage) enrollees after receiving prior authorization and guarantees of payment from the MAO, Care Improvement Plus (CIP).
- Hospitals waived collection from enrollees (held them harmless) and accepted initial full payment from CIP; years later CIP recouped a large portion of those payments via offsets following an internal audit.
- Hospitals sued CIP in federal district court asserting unjust enrichment and quantum meruit to recover the recouped amounts; district court dismissed for lack of jurisdiction, holding plaintiffs failed to exhaust administrative remedies under the Medicare Act.
- Medicare Part C (MAO) regulations treat certain MAO payment/coverage decisions as "organization determinations," subject to a statutorily mandated administrative exhaustion scheme and judicial review only after final agency decision under 42 U.S.C. § 405(g).
- CMS regulations define an "assignee" to include a provider who agrees to waive payment from an enrollee; 42 C.F.R. § 422.214 limits noncontract providers to accepting Medicare-equivalent payment amounts (i.e., they cannot demand higher, orally promised rates).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether hospitals are "assignees" under the Medicare Part C regulations and thus parties to an organization determination subject to administrative exhaustion | Hospitals say they sue on state-law contract/quasi-contract rights (not as assignees of enrollees) and thus are not covered by Medicare exhaustion rules | CIP says hospitals waived enrollee claims (held enrollees harmless), making them assignees under 42 C.F.R. § 422.574(b), so they must exhaust administrative remedies | Court held hospitals are assignees and must exhaust administrative remedies before suing in federal court |
| Whether hospitals may pursue state-law claims for rates higher than Medicare-authorized amounts (avoiding Medicare scheme) | Hospitals contend CIP orally agreed to higher reimbursement; they seek recovery under quantum meruit/state law separate from Medicare rates | CIP and CMS regulations prohibit noncontract providers from charging/collecting more than Medicare-allowed amounts, so state-law claims seeking higher rates are preempted/invalid | Court held noncontract providers are limited to Medicare-equivalent payments under 42 C.F.R. § 422.214, so hospitals’ higher-rate state-law theory fails and exhaustion applies |
Key Cases Cited
- Heckler v. Ringer, 466 U.S. 602 (Supreme Court 1984) (administrative exhaustion under §405(g) is prerequisite to federal jurisdiction for Medicare claims)
- RenCare, Ltd. v. Humana Health Plan of Texas, Inc., 395 F.3d 555 (5th Cir. 2004) (distinguishes contract providers’ breach claims from noncontract provider disputes)
- Tataranowicz v. Sullivan, 959 F.2d 268 (D.C. Cir. 1992) (explains agency expertise and efficiency rationale for exhaustion)
- Zelaya v. United States, 781 F.3d 1315 (11th Cir. 2015) (standard of review for Rule 12(b)(1) dismissal)
- Harris v. Garner, 216 F.3d 970 (11th Cir. 2000) (court cannot rewrite statute when dissatisfied with effects)
- Badaracco v. Commissioner, 464 U.S. 386 (Supreme Court 1984) (courtly admonition about avoiding judicial rewriting of statutes)