Prince George's Hospital Center v. Advantage Healthplan Inc.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

_________________________________
)
PRINCE GEORGE’S HOSPITAL )
CENTER, )
)
Plaintiff, )
)
v. ) Civil Action No. 03-CV-2392 (KBJ)
)
ADVANTAGE HEALTHPLAN INC., )
)
Defendant. )
)
_________________________________ )

MEMORANDUM OPINION

Plaintiff Prince George’s Hospital Center (“PGHC”) originally filed this action

against Defendant Advantage Healthplan Inc. (“Advantage”) in the Superior Court of

the District of Columbia more than a decade ago. PGHC maintains that Advantage

breached agreements with the District of Columbia that required Advantage to

reimburse healthcare providers such as PGHC for the provision of emergency care

services to certain District residents. (Complaint (“Compl.”), ECF No. 1-1, ¶¶ 5-10.)

Before this Court at present is a motion for reconsideration that Advantage has filed.

Advantage asks this Court to reconsider the Court’s Opinion and Order of June 6, 2012

(ECF No. 17), which grants in part and denies in part Advantage’s motion to dismiss

the complaint. See Prince George’s Hosp. Ctr. v. Advantage Healthplan Inc., 865 F.

Supp. 2d 47, 48 (D.D.C. 2012) (Roberts, J.). In the challenged Opinion and Order, the

Court held that PGHC can proceed with a cause of action against Advantage as a third-

party beneficiary of the contracts between Advantage and the District. Id. at 59.

1
 For the reasons stated below, Advantage’s motion for reconsideration is

GRANTED, and so, too, is its motion to dismiss. Accordingly, as set forth in the

separate order that accompanies this opinion, this case is hereby DISMISSED in its

entirety.

I. BACKGROUND

This case arises out of certain provisions of Title XIX of the Social Security Act

pertaining to the federal Medicaid program, commonly known (and referred to herein)

as the “Medicaid statute.” See 42 U.S.C. §§ 1396-1396w. Pursuant to section 1396u-2

of the Medicaid statute (the “managed care provision”), a state may require Medicaid-

eligible individuals to enroll in certain health insurance plans that Managed Care

Organizations (“MCOs”) administer. Id. § 1396u-2(a)(1)(A)(i). States ordinarily enter

into contracts with MCOs to supply insurance to Medicaid-eligible individuals, 42

U.S.C. § 1396b(m), and the managed care provision imposes certain requirements on

the contractual agreements that states and MCOs form. See generally id. § 1396u-2.

Most importantly for present purposes, one section of the managed care provision

mandates that a contract between a state and an MCO must contain a term that requires

the MCO “to provide coverage for emergency services . . . without regard to prior

authorization or the emergency care provider’s contractual relationship with” the MCO.

Id. § 1396u-2(b)(2)(A)(i) (the “emergency services section” of the managed care

provision). 1

1
The Supreme Court has generally described Medicaid as “a cooperative federal-state program through
which the Federal Government provides financial assistance to States so that they may furnish medical
care to needy individuals.” Wilder v. Virginia Hosp. Ass’n, 496 U.S. 498, 502 (1990) (citations
omitted). “[P]articipating States must comply with certain requirements . . . [t]o qualify for federal
assistance[.]” Id. For example, “a State must submit to the Secretary [of Health and Human Services]
and have approved a ‘plan for medical assistance,’” and this state plan must include “a scheme for

2
 Defendant Advantage is an MCO that contracted with the District of Columbia in

2000 and 2002 to provide health insurance and related services to Medicaid-eligible

residents of the District of Columbia. Prince George’s Hosp. Ctr., 865 F. Supp. 2d at

49. 2 The contracts between Advantage and the District—pursuant to which enrolled

Medicaid-eligible District residents became “Advantage plan members”—generally

incorporated the requirements of the managed care provision of the Medicare statute.

See id. at 57-58. Moreover, in addition to contracting with the District to provide

insurance for Medicaid-eligible District residents, Advantage also entered into contracts

with a number of hospitals and healthcare providers in the greater D.C. metro area for

the provision of medical services to Advantage’s plan members. (Compl. ¶ 6.) The

hospitals and healthcare providers that had contracts with Advantage were known as

“in-network” providers under Advantage’s plan. (Id.) Hospitals and providers that had

no contract with Advantage—such as PGHC—were considered “out-of-network”

providers. (See id. ¶ 7.) Consistent with the emergency services section of the

managed care provision of the Medicaid statute, however, the contracts between

Advantage and the District specifically stated that Advantage “shall be responsible for

covering emergency services, as defined above, provided to Enrollees at either in-

network or out-of-network providers, without regard to prior authorization.” Prince

George’s Hosp. Ctr., 865 F. Supp. 2d at 57. 3

reimbursing health care providers for the medical services provided to needy individuals.” Id. (citations
omitted).
2
For all purposes relevant to this case, the term “state” as used in the Medicaid statute includes the
District of Columbia. See, e.g., 42 U.S.C. § 1396a(e)(13)(F)(v)(I) (“The term ‘State’ means 1 of the 50
states or the District of Columbia.”).
3
As noted above, the emergency services section of the managed care provision of the Medicaid statute
requires that a participating MCO insure plan members for medical care that the member receives from

3
 PGHC’s complaint, which was originally filed in D.C. Superior Court on October

14, 2003, alleges that between July 2001 and August 2002, PGHC provided treatment

for emergency medical conditions to five District residents who were members of

Advantage’s plan under the managed care contracts. (Compl. ¶ 9.) The complaint

asserts that PGHC rendered these services without realizing that each of the patients

had Advantage insurance coverage, due to incorrect or incomplete information that the

patients provided to PGHC. (Id. ¶¶ 12, 16, 31-33, 40-41.) PGHC alleges that, upon

learning that each patient was an Advantage plan member, it promptly notified

Advantage of the patient’s emergency treatment and sought reimbursement (id. ¶¶ 17,

27, 29, 33, 36, 42, 46, 54, 56), but Advantage denied payment in each case (id. ¶¶ 19,

29, 36, 46, 56). The complaint claims that PGHC is entitled to payment from

Advantage for the medical care that PGHC provided to each of the patients on three

bases: (1) the equitable principle of subrogation, (2) the managed care provision of the

Medicaid statute itself, and (3) the common law theory that PGHC is a third-party

beneficiary of the contracts between Advantage and the District. (Id. ¶¶ 4, 18, 28, 35,

45, 55.) Advantage removed the case from D.C. Superior Court to federal district court

on November 19, 2003, pursuant to 28 U.S.C. § 1441. (Notice of Removal, ECF No. 1,

at 3). 4

a healthcare provider in an emergency, regardless of whether the emergency healthcare provider is in-
network or out-of-network for that MCO’s plan. 42 U.S.C. § 1396u-2(b)(2)(A)(i). Likewise, the
Emergency Medical Treatment and Active Labor Act (EMTALA) requires hospitals such as PGHC to
treat individuals who come to the hospital with an emergency medical condition, regardless of the
individual’s insurance coverage or ability to pay for the treatment. See 42 U.S.C. § 1395dd.

4
As a basis for removal jurisdiction, Advantage maintained that the action presents a federal question,
(Notice of Removal, ECF No. 1, at 2-3 (citing 28 U.S.C. § 1331)); namely, whether the Medicaid
statute required Advantage to reimburse PGHC for the emergency services that it had rendered. (See
Compl. ¶¶ 4, 5, 7.)

4
 On December 12, 2003, Advantage filed a motion to dismiss the complaint,

arguing that PGHC had failed to state a claim upon which the Court could grant relief.

(Def.’s Mem. of P. & A. in Supp. of its Mot. to Dismiss (“Def.’s Mem.”), ECF No. 7, at

1.) In its brief in support of the motion, Advantage attacked each of the theories of

recovery that PGHC articulated in its complaint. Advantage argued, first, that PGHC

had no right of subrogation because it had failed to plead facts necessary to establish

that PGHC had paid a “debt” to Advantage on behalf of the patients, or even that such a

debt existed. (Id. at 10.) Advantage further contended that PGHC had failed to identify

any statutory authority granting it a private right of action under the Medicaid statute or

otherwise. (Id. at 14-15.) Finally, Advantage asserted that PGHC could not proceed

with its third-party beneficiary theory of liability because PGHC was not an intended

beneficiary of the Medicaid-related contracts between Advantage and the District. (Id.

at 15-17.)

On June 6, 2012, the Court issued an opinion granting in part and denying in part

Advantage’s motion to dismiss. Prince George’s Hosp. Ctr., 865 F. Supp. 2d at 49.

The Court dismissed PGHC’s reimbursement claims based on the principle of equitable

subrogation primarily because PGHC had failed to demonstrate that “the patients would

have claims for monetary compensation against Advantage which would result in a

‘debt’ that [PGHC] extinguished[.]” Id. at 52. The Court also dismissed PGHC’s claim

for reimbursement based on the terms of the Medicaid statute. Id. at 56. Based on

substantial precedent, the Court reasoned that the Medicaid statute contained no implied

private right of action, id. at 54 (collecting cases and applying the four-factor test of

Cort v. Ash, 422 U.S. 66, 78 (1975)), which meant that PGHC could not bring a claim to

5
enforce Advantage’s obligations directly under the statutory provision that requires

MCOs to provide insurance for emergency health services that plan members receive.

Id. at 52-56.

With respect to PGHC’s third and final claim for reimbursement, however, the

Court held that PGHC was entitled to seek payment from Advantage as a third-party

beneficiary of the contract between Advantage and the District. Id. at 59. In reaching

this conclusion, the Court first noted that, under D.C. law, PGHC’s status as an alleged

third-party beneficiary turned on whether PGHC was an “intended” beneficiary of the

contract even though it was not a party to the contract. Id. at 57 (quoting Sealift

Bulkers, Inc. v. Republic of Armenia, No. 95-1293, 1996 WL 901091, at *4 (D.D.C.

Nov. 22, 1996) (“Under general contract principles, a third-party beneficiary of a

contract may bring an action against the principal parties to that contract only when the

parties to the contract intended to create and did create enforceable contract rights in

the third party.”)). The Court then observed that “[u]nder the contracts [with the

District], Advantage ha[d] promised to provide payment to in-network and out-of-

network providers under certain circumstances[,]” and that “[t]hese promises to pay

providers establish that the parties intended in-network and out-of-network providers to

benefit from the contracts.” Id. (citations omitted). The Court continued:

In-network and out-of-network providers are intended beneficiaries
under the contracts because in order to effectuate the intention of
Advantage and the District of Columbia in the contract—for
Advantage to pay for emergency services provided by in-network
and out-of-network providers—the health care provider’s right to
payment must be recognized.

Id. at 58.

6
 After concluding that PGHC had a right to proceed against Advantage as a third-

party beneficiary, the Court also addressed, and rejected, Advantage’s additional

arguments that PGHC had failed to exhaust its administrative remedies, and that

PGHC’s complaint should be dismissed for failure to provide timely notice to

Advantage that PGHC had treated the patients in question. Id. at 59. Advantage’s

instant motion for reconsideration, now before this Court, concerns only the Court’s

conclusion that PGHC has a valid claim for reimbursement as a third-party beneficiary

of the agreements between Advantage and the District.

II. LEGAL STANDARDS

A. Motion for Reconsideration

Advantage has styled its motion for reconsideration as arising under Federal

Rule of Civil Procedure 54(b). Rule 54(b) “governs reconsideration of orders that do

not constitute final judgments in a case.” Clayton v. District of Columbia, No. 11-1889,

2013 WL 1154098, at *13 (D.D.C. Mar. 21, 2013) (quoting Cobell v. Norton, 224

F.R.D. 266, 271 (D.D.C. 2004)). Rule 54(b) is the appropriate procedural mechanism

for reconsideration where, as here, the challenged order grants in part and denies in part

a defendant’s motion to dismiss, and therefore does not constitute a final judgment.

See, e.g., Clayton, 2013 WL 1154098, at *13.

Relief under Rule 54(b) is available “as justice requires,” which “amounts to

determining, within the Court’s discretion, whether reconsideration is necessary under

the relevant circumstances.” Cobell v. Norton, 355 F. Supp. 2d 531, 539 (D.D.C.

2005). Generally, “a court will grant [the] motion . . . only when the movant

demonstrates: (1) an intervening change in the law; (2) the discovery of new evidence

7
not previously available; or (3) a clear error in the first order.” Zeigler v. Potter, 555

F. Supp. 2d 126, 129 (D.D.C. 2008) (internal quotation marks and citations omitted).

B. Motion to Dismiss

Advantage’s motion for reconsideration is premised on the contention that the

Court made a clear error in denying Advantage’s motion to dismiss for failure to state a

claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure

12(b)(6). Consequently, the legal standards for determining a Rule 12(b)(6) motion are

also implicated here. In short, a Rule 12(b)(6) motion tests the legal sufficiency of a

complaint. Browning v. Clinton, 292 F.3d 235, 242 (D.C. Cir. 2002). “To survive a

motion to dismiss, a complaint must contain sufficient factual matter . . . to state a

claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(internal quotation marks and citation omitted).

In deciding a motion to dismiss, the Court must “accept the plaintiff’s factual

allegations as true and construe the complaint liberally, grant[ing] plaintiff[] the benefit

of all inferences that can be derived from the facts alleged[.]” Browning, 292 F.3d at

242 (internal quotation marks omitted) (alterations in original). “But the Court need

not accept inferences drawn by plaintiff if those inferences are not supported by the

facts set out in the complaint, nor must the court accept legal conclusions cast as factual

allegations.” Hettinga v. U.S., 677 F.3d 471, 476 (D.C. Cir. 2012) Moreover, if the

facts as alleged and liberally construed fail to establish that a plaintiff has stated a

claim upon which relief can be granted, the Rule 12(b)(6) motion must be granted. See,

e.g., American Chemistry Council, Inc. v. U.S. Dep’t of Health & Human Servs., 922 F.

Supp. 2d 56, 61 (D.D.C. 2013).

8
III. DISCUSSION

Advantage seeks reconsideration of the Court’s conclusion that PGHC qualifies

as a third-party beneficiary of the Medicaid-related contracts between Advantage and

the District and, therefore, that PGHC’s complaint states a valid claim for entitlement to

reimbursement under those contracts. It is undisputed that PGHC’s ability to sue for

enforcement of the contractual reimbursement provisions at issue turns on whether the

contracting parties (Advantage and the District) intended to benefit third-party

healthcare providers like PGHC. See Oehme, van Sweden & Assocs., Inc. v. Maypaul

Trading & Servs. Ltd., 902 F. Supp. 2d 87, 100 (D.D.C. 2012) (“Third-party beneficiary

status requires that the contracting parties had an express or implied intention to benefit

directly the party urged to be a third-party beneficiary.” (internal quotation marks and

citation omitted)). Therefore, this Court must first examine the specific contractual

provisions at issue to determine the intent of the contracting parties in this regard.

A. The 2000 and 2002 Medicaid-Related Contracts Between Advantage
and the District
As noted above, Advantage entered into two contracts with the District in 2000

and 2002 pursuant to the managed care provisions of the Medicaid statute. The

contracts, which were negotiated individually, cover not only the basic rights and

obligations of the contracting parties, but also contain a number of provisions that the

Medicaid statute requires states to include in contracts with MCOs. In relevant part, the

2000 contract states that Advantage “shall at all times . . . meet the conditions of

participation” outlined in the Medicaid statute (including the emergency services

section of the managed care provision), and that Advantage must “reimburse emergency

facilities,” whether in-network or out-of-network, for emergency services that those

9
facilities provide to Advantage plan members. (See Ex. 1 to Def.’s First Mot. to

Dismiss (2000 Contract between Advantage and the District) (“2000 Contract”), ECF

No. 6-1, at 3, 7.) 5 The contract that Advantage and the District signed in 2002 similarly

incorporates the emergency services section of the managed care provision, stating that

Advantage “shall be responsible for covering emergency services. . . provided to

Enrollees at either in-network or out-of-network providers, without regard to prior

authorization.” (See Ex. 2 to Def.’s First Mot. to Dismiss (2002 Contract between

Advantage and the District) (“2002 Contract”), ECF No. 6-2, at 75.) Notably, although

Advantage plainly promises to reimburse healthcare providers for emergency medical

services provided to members of Advantage’s plan under the terms of these contractual

agreements, no healthcare provider is a signatory to either of these contracts. (See 2000

Contract at 1 (title and signature page); 2002 Contract at 2 (same).)

Advantage now maintains that healthcare provider PGHC cannot sue as a third-

party beneficiary to enforce the insurance provisions of these agreements, and that the

Court erred when it previously held otherwise. As discussed below, Advantage relies

primarily on two recent cases that, in its view, provide particular insight into whether a

third party has a cause of action as a beneficiary of a health services contract between a

governmental entity and a provider of such services. (See Def.’s Mem. Of P. & A. in

Supp. Of Reconsideration (“Def.’s Br.”), ECF No. 22, at 2 (citing Astra USA, Inc. v.

Santa Clara County, 131 S. Ct. 1342 (2011)); id. at 11-12 (citing Medevac MidAtlantic,

LLC v. Keystone Mercy Health Plan, 817 F. Supp. 2d 515 (E.D. Pa. 2011)).)

5
The contracts submitted as exhibits to Advantage’s original motion to dismiss have several different
sets of page numbers. This Opinion cites to the page numbers of the ECF document, not the original
contract.

10
 B. Healthcare Providers As Third-Party Beneficiaries In Health Services
Contracts: Astra USA, Inc. v. Santa Clara County, California and
Medevac MidAtlantic, LLC v. Keystone Mercy Health Plan

In Astra USA, Inc. v. Santa Clara County, 131 S. Ct. 1342 (2011), the Supreme

Court considered a provision of the Public Health Services Act (“PHSA”) that capped

the amount that pharmaceutical companies could charge certain qualifying health

service providers (mainly public hospitals and community health centers that treat

disadvantaged communities) for drugs used to treat those providers’ patients. See 42

U.S.C. § 256b. This program is generally referred to as the 340B Program, and the

healthcare providers whose pharmaceutical costs are capped under the program are

known as “340B Entities.” Astra, 131 S. Ct. at 1345. The 340B Program was designed

to enable healthcare providers that deliver health services to low-income people to

obtain important drugs at a controlled cost that is lower than what the drugs would cost

on the open market. Id. at 1346. Under the statutes and regulations that implement the

340B Program, drug manufacturers’ participation in state Medicaid programs (and thus

their eligibility for federal Medicaid dollars in other areas) is conditioned on their

participation in the 340B Program. Id. at 1345-46. Moreover, in order to opt into the

340B Program, drug manufacturers must sign a form contract with the Department of

Health and Human Services (“HHS”) detailing the terms of their participation,

including formulas for determining the price caps for drugs provided to qualifying

health service providers. Id. at 1348.

At issue in Astra was whether Santa Clara County, as the operator of several

340B Entities, had the right to sue Astra (a drug manufacturer) for allegedly

overcharging the Entities for certain drugs, in violation of the program requirements

11
and Astra’s contract with HHS. Id. at 1347. While the litigants conceded that there

was no statutory private right of action under the PHSA, Santa Clara asserted that it had

a right to sue as a third-party beneficiary of the contract between Astra and HHS. Id.

The Supreme Court unanimously disagreed. 6 In reaching its decision, the

Supreme Court (Ginsburg, J.) first emphasized that there was “no right of action under

§ 340B itself.” Id.; see also id. (“Congress vested authority to oversee compliance with

the 340B Program in HHS and assigned no auxiliary enforcement role to covered

entities.”). The County argued that it could nevertheless sue to enforce the price-cap

agreements in the contracts, which the County maintained must have been intended to

benefit the Entities as the purchasers of those pharmaceuticals and therefore gave rise to

a cause of action for such third-party beneficiaries. Id. at 1347-48. But the Court

observed that the contracts merely incorporated the price-cap requirements that are set

forth in the statute. Id. at 1348 (“The statutory and contractual obligations, in short, are

one and the same.”). Thus, the contracts themselves did not evidence any intention on

the part of the contracting parties to benefit the Entities apart from the statutory

requirements. Id. (“Repeatedly, the County acknowledged that § 340B is the source of

the contractual term allegedly breached.”). Nor could the contract’s provisions

reasonably be construed to give rise to a third-party beneficiary cause of action to

enforce the price caps because “[p]ermitting such a suit, it is evident, would allow third

parties to circumvent Congress’s decision not to permit private enforcement of the

statute.” Id. at 1348 n.4. In other words, the Supreme Court reasoned that, even if the

Entities benefitted from the contract’s wholesale adoption of the statutory price-cap

requirements, the Entities could not be deemed third-party beneficiaries with a right to
6
Justice Kagan took no part in the decision.

12
bring suit to enforce those price-cap requirements under circumstances in which

Congress had conferred no such right. See Astra, 131 S. Ct. at 1348 (“A third-party suit

to enforce an HHS-drug manufacturer agreement . . . is in essence a suit to enforce the

statute itself[,]” and “[t]he absence of a private right to enforce the statutory ceiling

price obligations would be rendered meaningless if the 340B entities could overcome

that obstacle by suing to enforce the contract’s ceiling price obligations instead.”); see

also id. (“[W]hen a government contract confirms a statutory obligation, ‘a third-party

private contract action [to enforce that obligation] would be inconsistent with . . . the

legislative scheme . . . to the same extent as would a cause of action directly under the

statute[.]’” (alterations in original) (quoting Grochowski v. Phoenix Constr., 318 F.3d

80, 86 (2d Cir. 2003)).

In addition to concluding that it would be inconsistent with the lack of a private

right of action under a statute to permit a third-party suit to enforce a contractual

provision that merely incorporates a requirement of that statute, the Court also noted

that, from a public policy perspective, allowing third-party suits would undermine

HHS’s “efforts to administer [the 340B Program] harmoniously and on a uniform,

nationwide basis[,]” and thus would further contravene congressional intent. Id. at

1349. The Court pointed out that HHS had previously reported that it “lacks the

oversight mechanisms and authority to ensure that” pharmaceutical companies comply

with 340B, and that Congress’s response had been to “strengthen and formalize

[HHS’s] enforcement authority” through the implementation of a “new adjudicative

framework,” rather than providing for third-party suits. Id. at 1350. In the Supreme

Court’s view, then, the conclusion that no third-party suit could be maintained followed

13
from a combination of factors—to wit, the fact that (1) the contract provisions that the

third-party plaintiff sought to enforce merely incorporated statutory requirements; (2)

there was no private right of action to enforce the statutory requirement that was the

basis for the contract provision at issue, and (3) there was an administrative remedy

apart from private lawsuits.

For different reasons, the district court in Medevac MidAtlantic, LLC v. Keystone

Mercy Health Plan, 817 F. Supp. 2d 515 (E.D. Pa. 2011)—the second third-party

beneficiary case that Advantage relies upon in making its argument that this Court

should reconsider the prior third-party beneficiary ruling—reached the same result.

The plaintiff in Medevac was an emergency services provider that, much like PGHC

here, sued an MCO under a third-party beneficiary theory to recover alleged non-

payments. Id. at 518, 532. Plaintiff Medevac was a provider of emergency air

transportation services from trauma scenes to medical facilities, and the defendant,

Keystone Mercy Health Plan (“KMHP”), was an MCO under the Pennsylvania Medicaid

plan. Id. at 518-19. Medevac was not an in-network provider to KMHP, but provided

emergency services to KMHP members. Id. at 518. KMHP refused to pay Medevac for

the services rendered to the MCO’s members, even though under the terms of the

contract that KMHP had with the Pennsylvania Department of Public Works, it was

required to pay providers (whether or not they were in-network) for emergency medical

transportation services. Id. To recover the allegedly withheld payments, Medevac then

brought suit alleging (among other things) a cause of action to enforce the contract as a

third-party beneficiary of the agreement between KMHP and the Pennsylvania

Department of Public Works. Id. at 519-520.

14
 The District Court rejected Medevac’s third party beneficiary claims on two

distinct grounds. First, the court noted that the contract between KMHP and the

Department of Public Works “expressly disclaims any intent to create third-party

beneficiaries[.]” Id. at 528-29 (the contract included both KMPH’s promise to

reimburse for emergency care services and the statement that “[t]his agreement does

not, nor is it intended to, create any rights, benefits or interest to any third party, person

or organization.”). Second, the court considered whether the contractual provisions that

the parties adopted pursuant to the emergency services section of the managed care

provision of the Medicaid statute (emergency care contract provisions that mirror those

at issue here) should control over the express disclaimer as evidence of the parties’

intent to benefit third parties. The court concluded that “[c]ontractual provisions

ensuring compliance with existing statutory or regulatory provisions do not indicate

mutual intent to benefit a non-party; [instead] they evince intent to comply with

applicable law.” Id. at 529.

C. Analysis

As the parties have framed it, the central issue for this Court to decide in ruling

on Advantage’s motion for reconsideration is whether and to what extent the analyses

of Astra and Medavac apply. In Advantage’s view, Astra and Medevac both strongly

support the conclusion that the Court erred in its previous finding that PGHC may sue

as a third-party beneficiary. Advantage reads Astra as holding that “third-party

beneficiary status cannot be conferred by contractual terms that adopt mandatory

requirements found in the law, and that permitting such claims is inappropriate where

the statute does not allow a private cause of action.” (Def.’s Br. at 4-5.) Advantage

15
further contends that Medevac is the only case on record to consider the question of

whether a healthcare provider may sue an MCO on a third-party beneficiary theory, and

it arrived at essentially the same conclusion. (Def.’s Br. at 11-12.)

PGHC counters that Astra is distinguishable in at least three significant ways:

first, the Court in Astra construed a different statute than the one at issue here (Pl.’s

Opp’n to Mot. for Reconsideration (“Pl.’s Br.”), ECF No. 23, at 3-4); second, the

contracts at issue in Astra were standard-form contracts that HHS wrote and dispersed

and are therefore unlike the highly negotiated contracts between Advantage and the

District (id. at 4-5); and third, the relevant statute in Astra (the PHSA) established an

independent federal regulatory body to adjudicate disputes such that no private right of

action was necessary, whereas no such body exists to handle the managed care dispute

here (id. at 5). With respect to Medevac, PGHC maintains that the Medevac court

recognized the possibility of a third-party beneficiary cause of action but declined to

find such a cause of action under the facts of that particular case because the contract at

issue in Medevac included an express disclaimer of any third-party beneficiary rights.

(Id. at 7-10.)

Given the facts and circumstances of Astra and Medevac—cases that were not

raised or considered in the course of this litigation prior to the instant reconsideration

motion—this Court concludes that Advantage has the better argument. First of all, it is

clear that Advantage drew its contractual promise to reimburse providers for emergency

medical services delivered to Advantage plan members directly from the emergency

services section of the managed care provision of the Medicaid statute. As noted

above, the emergency services section states that an MCO is required

16
 to provide coverage for emergency services (as defined in
subparagraph (B)) without regard to prior authorization or the
emergency care provider’s contractual relationship with the
[managed care] organization or manager[.]

42 U.S.C. § 1396u-2(b)(2)(A)(i); see also Prince George’s Hosp. Ctr., 865 F. Supp. 2d.

at 53. This statutory section establishes a duty that is virtually indistinguishable from

the obligation set forth in the contracts between Advantage and the District, which, as

explained above, state that Advantage

shall be responsible for covering emergency services, as defined
above, provided to Enrollees at either in-network or out-of-network
providers, without regard to prior authorization.

(2002 Contract at 75 (Section C.8.3.2.3)); see also Prince George’s Hosp. Ctr., 865 F.

Supp. 2d. at 57. In addition, the definition of “emergency medical condition” in the

2002 Contract (the term used to define “emergency services” in the contract) is

identical to that found in the statute. Compare 42 U.S.C. § 1396u-2(b)(2)(C), with

2002 Contract at 75 (Section C.8.3.2.1). And lest there be any remaining doubt about

the provenance of the relevant contractual provisions, the 2002 Contract expressly

acknowledges that its emergency care provisions were adopted “in accordance with

Section 1932(b)(2)(B) of the Balanced Budget Act of 1997.” (2002 Contract at 75.) 7

Despite the clear parity between the contractual emergency care provisions at

issue here and the statutory emergency care requirement, PGHC maintains that

Advantage’s contracts with the District were heavily negotiated, unlike the form

contract at issue in Astra; and to this end, PGHC even provides an exhibit that

catalogues various alterations that the District and Advantage made in the contracting

7
The Balanced Budget Act of 1997 was the law that enacted the emergency services section of the
managed care provision of the Medicaid statute. See Pub. L. No. 105-33 § 1932(b)(2)(B), 111 Stat. 251
(1997).

17
process. (Pl.’s Br. at 4; see also Pl.’s Br. at Ex. 1.) However, PGHC has also conceded

that the relevant contract terms were merely “taken from the Medicaid statute and

incorporated into the MCO contract at issue” (Pl.’s Br. at 4), and the Court cannot

discern—nor does PGHC provide—any rationale for why other parts of the contract,

even if highly negotiated, matter here.

Ultimately, then, the Court has no difficulty concluding that the contracts

between Advantage and the District incorporated a term that required Advantage to

reimburse healthcare providers for emergency medical services as a matter of statutory

obligation, and thus that the inclusion of such term in the managed care contracts is not

indicative of any intent on the part of the signatories to benefit PGHC beyond the

requirements of the Medicaid statute. See Astra, 131 S. Ct at 1348 & 1348 n.4 (noting

that the plaintiffs had not claimed a violation of “any independent substantive

obligation arising only from the [contract]” and declining to infer an authorization for

third-parties to sue “where a contract simply incorporates statutorily required terms and

otherwise fails to demonstrate any intent to allow beneficiaries to en-force [sic] those

terms”); see also Medevac, 817 F. Supp. 2d. at 529 (“Contractual provisions ensuring

compliance with existing statutory or regulatory provisions do not indicate mutual

intent to benefit a non-party[.]”). As previously explained, under D.C. law, “‘[t]hird-

party beneficiary status requires that the contracting parties had an express or implied

intention to benefit directly’ the party urged to be a third-party beneficiary.”

Oehme, 902 F. Supp. 2d at 100 (quoting Fort Lincoln Civic Ass’n v. Fort Lincoln New

Town Corp., 944 A.2d 1055, 1064 (D.C. 2008)). This Court cannot divine any such

intent in the contractual emergency care provision at issue here.

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 Additionally, the Court finds that allowing PGHC to proceed with its third-party

beneficiary action would frustrate the intent of Congress in enacting the Medicaid

statute for substantially the same reasons that the Supreme Court in Astra found such

suits would contravene congressional intent in establishing the 340B Program.

Specifically, in this case as in Astra, Congress did not provide for a private right of

action to enforce the provisions of the statute, and it also established an alternative

procedure through which aggrieved parties in PGHC’s position can seek to vindicate

their rights. See Astra, 131 S. Ct. at 1348-50.

Neither party has challenged the Court’s prior ruling that there is no private right

of action to enforce the emergency care reimbursement obligation directly under the

Medicaid statute, Prince George’s Hosp. Ctr., 865 F. Supp. 2d at 52-56, and this Court

sees no need to retread that same ground here. However, it is worth pointing out in the

context of Defendant’s instant motion for reconsideration that, as the Supreme Court

stated in Astra, “[t]he absence of a private right to enforce the statutory . . . obligations

would be rendered meaningless” if PGHC could simply circumvent that obstacle by

suing as a third-party beneficiary to enforce the emergency care provision of the statute,

as incorporated into the contracts between Advantage and the District. 131 S. Ct. at

1348. Astra’s logic makes clear that a third-party beneficiary suit brought under these

circumstances would impermissibly permit PGHC to sue to enforce statutory

requirements in contravention of Congress’s decision not to provide a private remedy

for aggrieved parties in PGHC’s position.

Also telling is the fact that Congress has devised an alternative system by which

third-party health service providers can pursue reimbursement for emergency services

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provided to an MCO’s plan members when the MCO refuses to make such payments

despite its statutory and contractual obligations to do so. The managed care provision

contains a section that specifically provides:

Each medicaid managed care organization shall establish an
internal grievance procedure under which an enrollee who is
eligible for medical assistance under the State plan under this
subchapter, or a provider on behalf of such an enrollee, may
challenge the denial of coverage of or payment for such assistance.
42 U.S.C. § 1396u-2(b)(4) (emphasis added). Because the managed care provision also

provides that an individual Medicaid enrollee may not be held responsible for payments

due to emergency treatment, id. § 1396u-2(b)(6), the reference to “payment” in this

section can only refer to payments owed to a healthcare provider. See also id. § 1396u-

2(a)(5)(B)(iii) (MCOs shall make information available regarding, among other things,

“[t]he procedures available to an enrollee and a health care provider to challenge or

appeal the failure of the [managed care] organization to cover a service” (emphasis

added)). It is evident, therefore, that in enacting the managed care provision, Congress

considered the circumstances of jilted healthcare providers such as PGHC, and with

respect to such providers, established what—in Congress’s view—was the appropriate

remedy for an MCO’s denial of payment for emergency services or other treatment.

PGHC’s position is thus no different than the 340B Entities in Astra, and in that case,

the Supreme Court found that the existence of an extra-judicial dispute resolution

system, coupled with the lack of a private right of action under the relevant statute, was

conclusive evidence that Congress had foreclosed third parties from bringing “a

multitude of dispersed and uncoordinated lawsuits” to enforce the terms of the statute.

Astra, 131 S. Ct. at 1349.

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 The same conclusion follows inescapably here. To be sure, as PGHC points out

(Pl.’s Br. at 5), the grievance procedure that is available to it under the managed care

provision is not as robust as the one that propelled the Supreme Court to its unanimous

conclusion in the Astra case. Compare Astra, 131 S. Ct. at 1350 (noting that the

statutory scheme at issue “directed [an agency of HHS] to create a formal dispute

resolution procedure, institute refund and civil penalty systems, and perform audits of

manufacturers”), with 42 U.S.C. § 1396u-2(b)(4) (requiring MCOs to establish internal

grievance procedures for members or providers). However, the lack of an independent

dispute resolution system or any additional grievance procedures for healthcare

providers who seek reimbursement from MCOs for emergency services rendered is

surely a difference of degree, not type. The salient inquiry is whether Congress has

provided an extra-judicial mechanism for resolving such disputes, see Astra, 131 S. Ct.

at 1350, and for the reasons set forth above, it is clear that Congress intended disputes

related to MCO reimbursements to be addressed by those entities’ statutorily-mandated

grievance procedures, not through the courts.

As a final observation, this Court notes that the fact that PGHC cannot sue

Advantage as a third-party beneficiary does not necessarily mean that there is no

recourse for flagrant violations of the terms of the emergency care reimbursement

agreements that MCOs such as Advantage make with states. The managed care

provision of the Medicaid statute sets forth extensive sanctions for non-compliance that

must be included as a term in any contract between a state and an MCO. See 42 U.S.C.

§ 1396u-2(e). These sanctions include statutory damages, financial and administrative

penalties, and termination of the contract between an MCO and a local government. Id.

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And, as required by law, Advantage’s contracts with the District expressly incorporate

these provisions. (See 2000 Contract at 44-45; 2002 Contract at 182.) What is more,

the contracts between Advantage and the District also require Advantage to provide

regular reports to the District regarding Advantage’s grievance procedures. (See, e.g.,

2000 Contract at 11 (providing, in Section E.4, that “[Advantage] shall furnish to the

District on a quarterly basis . . . [a] description of each grievance filed and the status

and timing of the resolution”).) The threat of sanctions and the reporting requirements

permit the District to monitor Advantage’s performance, and these mechanisms are

clearly designed to incentivize compliance with the terms of the contractual agreement.

Indeed, there is no shortage of examples throughout the country of states using

sanctions to enforce compliance. See, e.g., Jasir Jawaid, NY Fines Excellus Health

Plan, SNL Insurance Daily, Apr. 23, 2012, available at 2012 WLNR 8899773 (insurer

fined nearly $1 million for denying emergency services claims); State Briefs, Managed

Care Week, Sept. 13, 1999, available at 1999 WLNR 8251398 (insurer in Washington

state fined $250,000 for improper denial of emergency coverage); see also Bob

LaMendola, Florida Fines Humana $3.4 Million for Slow Reports of Suspected Fraud,

Sun-Sentinel, Aug. 18, 2011, available at 2011 WLNR 16450486 (fine imposed on an

insurer where the insurer’s “failure to disclose the fraud violate[d] the terms of its

contract as a Medicaid [MCO]”).

The fact that the Medicaid statute expressly authorizes such sanctions further

underscores that it was Congress’s intent for states themselves—rather than private

third parties—to police compliance with the requirements of the Medicaid program.

See 42 U.S.C. § 1396u-2(e). PGHC has not demonstrated that the result should be any

22
different where, as here, Congress not only enacted the statutory requirement at issue

(e.g., the emergency services section of the managed care provision) but also mandated

that this requirement be incorporated into the contractual agreements that states make

with managed care providers. The contracts between the Advantage and the District do

no more than incorporate the emergency services section of the Medicaid statute’s

managed care provision—a provision that is not enforceable by private right of action

under the statute. Consequently, a third-party suit to enforce Advantage’s contractual

promise to honor the statutory emergency services requirement cannot be countenanced.

IV. CONCLUSION

The contracts between Advantage and the District evidence no intention to

benefit third parties such as PGHC apart from the Medicaid statute’s emergency care

reimbursement requirement, and to allow PGHC’s third-party claim would undermine

the congressionally-mandated system for an MCO’s compliance with the managed care

provision of the Medicaid statute. Therefore, the Court’s prior conclusion that PGHC

can proceed in it claim against Advantage as a third-party beneficiary is clearly

erroneous and Advantage’s Motion for Reconsideration must be GRANTED.

Moreover, given that the Court has already dismissed PGHC’s other causes of

action, PGHC is left with no grounds upon which this Court can grant the relief

requested in the complaint. Thus, even taking all of PGHC’s factual allegations as true,

PGHC has not pled a plausible legal theory under which it can recover. Accordingly, as

23
set forth in the separate order issued concurrently with this opinion, PGHC has failed to

state a claim upon which relief can be granted, and the case must be DISMISSED in its

entirety.

Date: October 21, 2013 Ketanji Brown Jackson
KETANJI BROWN JACKSON
United States District Judge

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