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Doctors Medical Center of Modesto, Inc., A California Corporation v. Kaiser Foundation Health Plan

February 13, 2013


On July 17, 2012, Plaintiff Doctors Medical Center of Modesto, Inc. (the "Hospital") filed a Complaint in the Stanislaus County Superior Court against Defendants Kaiser Foundation Health Plan, Inc. ("Kaiser") and Does 1 through 25. The Complaint seeks reimbursement for health care treatment rendered to six Kaiser members.*fn1 The Complaint alleges the care provided to Patients 1 through 5 is covered under its commercial contracts with Kaiser. Patient 6, however, was enrolled under a Kaiser Medicare Advantage plan, and the Hospital seeks reimbursement under the Medicare Act as well as pursuant to California law. The first cause of action alleges a breach of contract as to Patients 1-2. The second cause of action alleges breach of contract as to Patients 3-5. The third cause of action alleges breach of contract as to Patient 6. The fourth cause of action alleges violations of 42 U.S.C. § 1395w-22(d)(1)(C) and (E), 42 C.F.R. § 422.113(b)(2), Health and Safety Code § 1371.4(b), and 28 C.C.R. § 1300.71.4(a), as to Patient 6. The fifth cause of action alleges the Hospital has kept an accurate accounting of the services rendered to Patients 1 through 6, and that one or more items are unsettled. The sixth cause of action alleges the Hospital sent invoices to Defendants and that Defendants agreed with the Hospital on the amount due from them, and expressly and/or impliedly promised to pay the amounts due.

On August 22, 2012, Kaiser removed the action to this court based on federal question jurisdiction under the Medicare Act, 42 U.S.C. § 1395 et seq. On October 9, 2012, Kaiser filed the instant motion to dismiss the third, fourth, fifth, and sixth causes of action pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn2 See Court's Docket, Doc. No. 11. For the reasons stated herein, that motion will be granted.


The Hospital is an acute care medical facility located in the city of Modesto, California. Compl. ¶ 1. Kaiser is a California corporation and a licensed health care service plan. Id. ¶ 2. Kaiser has entered into a contract with the federal Medicare program administered by the Centers for Medicare and Medicaid Services ("CMS") and the Social Security Administration ("SSA") (the "Medicare contract"), to cover Medicare recipients who enroll in Kaiser's Medicare Advantage ("MA") plan. Id. ¶ 60. Patient 6 is a member of Kaiser's MA plan. Id. ¶ 65-66.

Patient 6 presented to the Hospital's emergency room following injuries sustained during a drunk driving accident in which Patient 6 was a passenger in a car driven by a person who was arrested for driving under the influence and/or driving while intoxicated. Id. ¶ 65. The Hospital notified Kaiser of Patient 6's admission, verified Patient 6's eligibility as a Kaiser MA plan member, and requested authorization for treatment. Id. ¶ 66. Kaiser informed the hospital that no authorization was needed because Patient 6's admission was emergent. Id. The Hospital provided Patient 6 medically necessary and physician-ordered medical services for four inpatient days at the intensive care unit level of care for treatment of a traumatic brain injury. Id. ¶ 65.

Thereafter, the Hospital billed Kaiser for medical services rendered to Patient 6 and expected total reimbursement of $17,335.65 for the services provided under the Medicare rate. Id. ¶ 67. Kaiser requested information from the Hospital and Patient 6 about any potential automobile insurance policy that Patient 6 may have had at the time of the accident. Id. ¶ 68. Patient 6 did not respond to Kaiser's request for such information due to the severity of her injuries, from which she ultimately died. Id. The Hospital was unable to provide any information regarding Patient 6's automobile insurance policy and had no means of obtaining such information. Id. In response to the Hospital's inquiries regarding payment, Kaiser repeatedly informed the Hospital that it had "pended" payment on the claim until it finished its investigation of the possible availability of other insurance which might be primary. Id. ¶ 69. Kaiser never discovered any information to indicate that Patient 6 was the car owner or driver, or that any party involved in the accident had automobile insurance that covered the health care services Patient 6 received. Id. ¶ 71. Kaiser failed to pay the Hospital's claim for reimbursement as to Patient 6, despite written appeals requesting further payment. Id. ¶ 71-73.


Under Federal Rule of Civil Procedure 12(b)(6),a claim may be dismissed because of the plaintiff's "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A complaint must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Where the plaintiff fails to allege "enough facts to state a claim to relief that is plausible on its face," the complaint may be dismissed for failure to allege facts sufficient to state a claim upon which relief may be granted. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 1974, 167 L.Ed.2d 929 (2007); see Fed. R. Civ. P. 12(b)(6). "A claim has facial plausibility," and thus survives a motion to dismiss, "when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1940, 173 L.Ed.2d 868 (2009). On a Rule 12(b)(6) motion to dismiss, the court accepts all material facts alleged in the complaint as true and construes them in the light most favorable to the plaintiff. Knievel v. ESPN, 393 F.3d 1068, 1072 (9th Cir. 2005). However, the court need not accept conclusory allegations, allegations contradicted by exhibits attached to the complaint or matters properly subject to judicial notice, unwarranted deductions of fact or unreasonable inferences. Daniels--Hall v. National Educ. Ass'n, 629 F.3d 992, 998 (9th Cir.2010). "Dismissal with prejudice and without leave to amend is not appropriate unless it is clear . . . the complaint could not be saved by amendment." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).


Kaiser contends the Medicare Act does not create a private right of action allowing providers to sue to recover from MA organizations like Kaiser. Therefore, Kaiser argues, the Hospital cannot bring suit as a third-party beneficiary to Kaiser's federal Medicare contract. Kaiser contends the Hospital also cannot rely on state statutes or regulations to recover, as these laws are expressly preempted by the Medicare Act and CMS regulations. Similarly, Kaiser argues the MA statute and regulations expressly preempt the Hospital's state common law recovery claims because they depend on a determination of whether the services rendered are covered benefits under the Medicare Act. Finally, Kaiser contends the Hospital was required to present the plan coverage dispute to the Medicare administrative grievance and appeals process for review and a final decision before suing in federal court. Because the Hospital did not exhaust its administrative remedies, Kaiser argues its third and fourth causes of action, as well as its fifth and sixth causes of action insofar as those causes of action seek recovery for the treatment of Patient 6, should be dismissed.

The Hospital does not oppose Kaiser's motion to dismiss the third cause of action for breach of the Medicare contract and fourth cause of action for violation of federal and state statutes. See Court's Docket, Doc. No. 15 at n.1. Accordingly, the Court will grant Kaiser's motion to dismiss those claims. However, the Hospital contends that exhaustion of administrative remedies under the Medicare Act is not a prerequisite to bringing its fifth cause of action for open book account and sixth cause of action for account stated.

A. Timeliness

As a preliminary matter, the Hospital contends that Kaiser's motion is untimely. On August 27, 2012, the parties filed a stipulation extending Kaiser's time to respond the Complaint "up to and through Monday, September 24, 2012." See Court's Docket, Doc. No. 7. On September 20, 2012, the parties filed a second stipulation further extending Kaiser's time to respond "up to and through Monday, October 8, 2012." See Court's Docket, Doc. No. 9. Kaiser filed the instant motion to dismiss on Tuesday, October 9, 2012. The Hospital contends the motion is therefore untimely. October 8, 2012, however, was Columbus Day, a legal holiday. See Fed. R. Civ. P. 6(a)(6). Under Federal Rule of Civil Procedure 6, when calculating a filing deadline, "if the last day is a Saturday, Sunday, or legal ...

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