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. 03-2392 (RWR)
)
ADVANTAGE HEALTHPLAN INC., )
)
Defendant. )
_____________________________ )

MEMORANDUM OPINION

Plaintiff Prince George’s Hospital Center (“P.G. Hospital”)

filed this action claiming entitlement under the common law of

subrogation as a third-party beneficiary of contracts entered

into between defendant Advantage Health Plan, Inc. (“Advantage”),

a managed care organization (“MCO”), and the District of

Columbia, and otherwise, to reimbursement from Advantage for

emergency services provided between July 2001 and August 2002 to

five patients insured under defendant’s plan. Advantage has

moved to dismiss this case under Federal Rule of Civil Procedure

12(b)(6) for failure to state a claim and Rule 12(b)(1) for lack

of subject matter jurisdiction, and in the alternative, moved for

a more definite statement under Rule 12(e). Because

P.G. Hospital has not alleged facts to support a cause of action

for subrogation and there is no private cause of action under the

Medicaid statute, P.G. Hospital’s claim for subrogation and claim

that it is entitled by law to reimbursement will be dismissed.
 -2-

Because P.G. Hospital has alleged facts to support a cause of

action for breach of contract as a third-party beneficiary of the

MCO contracts and because P.G. Hospital has pled that it was not

properly advised of its administrative rights, Advantage’s motion

to dismiss will be denied as to that claim. Because P.G.

Hospital has alleged facts to support a cause of action with

respect to Eunice J. and Eugenia P., Advantage’s motion to

dismiss the claims on the basis that P.G. Hospital failed to

provide timely and proper notice of treatment as to Eunice J. and

Eugenia P. will be denied. Because P.G. Hospital has failed to

allege any statutory right to attorneys’ fees, Advantage’s motion

to dismiss P.G. Hospital’s claim for attorneys’ fees will be

granted.

BACKGROUND

Under the Medicaid statute,1 Advantage entered into MCO

contracts2 with the District of Columbia to provide medical

insurance to Medicaid-eligible residents of the District of

Columbia. (See Def.’s Mem. P. & A. Supp. Mot. Dismiss (“Def.’s

Mem.”), Exs. A & B.) In turn, Advantage entered into contracts

1
Congress enacted the Medicaid statute as part of Title XIX
of the Social Security Act. See 42 U.S.C. § 1396 et seq.
2
Advantage has attached the 2000 and 2002 MCO contracts to
its motion to dismiss. (See Def.’s Mem., Exs. A & B.) No 2001
MCO contract is in the record. According to Advantage, the 2000
MCO contract was in effect from March 31, 2000 until April 1,
2002, and the 2002 MCO contract was in effect from April 1, 2002
and at all times beyond that are relevant to this case. (Id.)
 -3-

with a number of District of Columbia hospitals and health care

providers to provide services to members of Advantage’s managed

care plan (“plan”). (See Compl. ¶ 7.) These hospitals and

providers are “in-network” providers under Advantage’s plan.

P.G. Hospital, located in Maryland, has no provider contract with

Advantage and therefore is considered an “out-of-network”

hospital under Advantage’s plan.

P.G. Hospital alleges that between July 2001 and

August 2002, it provided emergency services to five members of

Advantage’s plan.3 According to P.G. Hospital, it had not

realized that each of the patients was covered by Advantage due

to incorrect or incomplete information the patients had provided

to P.G. Hospital. (See Compl. ¶¶ 12, 16, 31-33, 40-41.)

P.G. Hospital states that upon learning of each patient’s

coverage under Advantage’s plan, P.G. Hospital notified Advantage

of the emergency admission and treatment and sought payment from

Advantage. (Id. ¶¶ 17, 27, 29, 33, 36, 42, 46, 54, 56.)

P.G. Hospital represents that Advantage denied payment in each

case, claiming that P.G. Hospital had failed to notify Advantage

of the admissions in a timely manner. (Id. ¶¶ 19, 29, 36, 46,

3
P.G. Hospital has submitted letters from Advantage to
P.G. Hospital in which each of the patients is identified by
Advantage as a member of its plan. (Pl.’s Opp’n, Ex. 7 (“Denial
Letters”).)
 -4-

56; Pl.’s Opp’n at 8, Ex. 7 (“Denial Letters”).)4 P.G. Hospital

asserts that once it notified Advantage of each patient’s

admission, Advantage made no request to have the patient

transferred to an in-network facility. (Pl.’s Opp’n at 8.)

P.G. Hospital also asserts that it appealed Advantage’s denials

of its requests for payment, but that those appeals were denied.

(Id.)

The complaint alleges that P.G. Hospital is “lawfully

subrogated to the cause of action of the members/patients,

entitled by law, and as a third-party beneficiary of the contract

between the District and the Defendant, to payment for services

rendered.” (Compl. at ¶¶ 18, 28, 35, 45 & 55.) Advantage

contends that P.G. Hospital cannot establish a cause of action

under these theories. Advantage now moves to dismiss this case

under Rules 12(b)(6) and 12(b)(1) for failure to state a claim

and for lack of subject matter jurisdiction, and in the

alternative, moves under Rule 12(e) for a more definite

statement.

DISCUSSION

“‘A complaint can be dismissed under Rule 12(b)(6) when a

plaintiff fails to state a claim upon which relief can be

4
Among the denial letters submitted by the P.G. Hospital is
a letter from Advantage to Willie C. Blair, M.D. stating that, in
considering Blair’s appeal, Advantage had “made an exception” for
Blair and authorized payment to Blair for his treatment of one of
the patients at issue in the complaint. (See Pl.’s Opp’n,
Ex. 7.)
 -5-

granted.’” Howard Univ. v. Watkins, Civil Action No. 07-492

(RWR), 2012 WL 1454487, at *2 (D.D.C. April 27, 2012) (quoting

Peavey v. Holder, 657 F. Supp. 2d 180, 185 (D.D.C. 2009) (citing

Fed. R. Civ. P. 12(b)(6))). Motions to dismiss under Rule

12(b)(6) test the legal sufficiency of a complaint.

Smith-Thompson v. Dist. of Columbia, 657 F. Supp. 2d 123, 129

(D.D.C. 2009).

To survive a motion to dismiss, a complaint must
contain sufficient factual matter, acceptable as true,
to “state a claim to relief that is plausible on its
face.” . . . A claim has facial plausibility when the
plaintiff pleads factual content that allows the court
to draw the reasonable inference that the defendant is
liable for the misconduct alleged.

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell

Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 570 (2007)). “The

complaint must be construed in the light most favorable to the

plaintiff and “‘the court must assume the truth of all

well-pleaded allegations.’” Watkins, 2012 WL 1454487, at *2

(quoting Warren v. Dist. of Columbia, 353 F.3d 36, 39 (D.C. Cir.

2004)). “[A] complaint attacked by a Rule 12(b)(6) motion to

dismiss does not need detailed factual allegations[.]” Twombly,

550 U.S. at 555. However, “[w]here a complaint pleads facts that

are ‘merely consistent with’ a defendant's liability, it ‘stops

short of the line between possibility and plausibility of

entitlement to relief.’” Iqbal, 556 U.S. at 662 (quoting

Twombly, 550 U.S. at 557.

When assessing a motion brought under Rule 12(b)(6), a court
 -6-

avoids consideration of matters outside the pleadings, but may

consider “the facts alleged in the complaint, documents attached

as exhibits or incorporated by reference in the complaint,”

Gustave-Schmidt v. Chao, 226 F. Supp. 2d 191, 196 (D.D.C. 2002),

public records, and “documents ‘upon which the plaintiff's

complaint necessarily relies’ even if the document is produced

not by the plaintiff in the complaint but by the defendant in a

motion to dismiss[.]” Hinton v. Corr. Corp. of Am., 624 F. Supp.

2d 45, 46 (D.D.C. 2009) (quoting Parrino v. FHP, Inc., 146 F.3d

699, 706 (9th Cir. 1998)); Hartline v. Sheet Metal Workers’ Nat’l

Pension Fund, 134 F. Supp. 2d 1, 8 (D.D.C. 2000). Here, because

P.G. Hospital refers to MCO contracts which are central to its

claims, the MCO contracts may be considered in determining the

motion to dismiss upon which one of P.G. Hospital’s claims is

based.

I. SUBROGATION

P.G. Hospital asserts in its complaint that it is “lawfully

subrogated to the cause of action of the members/patients . . .

to payment for services rendered” and may collect those debts

from Advantage. (Compl. ¶¶ 18, 28, 35, 45 & 55.) Advantage

argues that P.G. Hospital has failed to establish the predicate

factors for a subrogation claim by failing to demonstrate that

the patients have a cause of action against Advantage, that

P.G. Hospital has paid a debt on behalf of the patients, or that

the patients had a debt to P.G. Hospital. (Def.’s Mem. at 10.)
 -7-

Advantage contends, then, that P.G. Hospital, standing in the

shoes of the patients, does not have any rights against

Advantage. (Id. at 11.)

P.G. Hospital argues in response that it has a claim of

equitable subrogation because public policy supports insuring

indigent persons and paying those providers and hospitals that

provide emergency services to indigent persons. (Pl.’s Opp’n at

12.) According to P.G. Hospital, because it has provided

treatment to patients covered by Advantage’s plan, it should be

substituted for the patients and able to exercise the patients’

rights to recover benefits under the plan. (Id. at 12-13.)

P.G. Hospital further contends that Advantage “in good

conscience” ought to pay because it has been unjustly enriched in

that it has received premiums from the District of Columbia and

the federal government to provide insurance, but has not

reimbursed P.G. Hospital for emergency services rendered to the

patients Advantage insures. (Id.)

Subrogation is “[t]he substitution of one party for another

whose debt the party pays, entitling the paying party to rights,

remedies, or securities that would otherwise belong to the

debtor.” Thrasher-Lyon v. Illinois Farmers Ins. Co., No.

11-4473, 2012 WL 983774, at *8 n.1 (N.D. Ill. March 20, 2012)

(quoting Black’s Law Dictionary (9th ed. 2009)); see also Group

Hospitalization and Medical Svcs., Inc. v. Richardson, 946 F.

Supp. 50, 53 (D.D.C. 1996). Equitable subrogation, also known as
 -8-

legal subrogation, “arises by operation of law or by implication

in equity to prevent fraud or injustice.” Black’s Law Dictionary

(9th ed. 2009). Equitable subrogation may arise “when (1) the

paying party has a liability, claim, or fiduciary relationship

with the debtor, (2) the party pays to fulfill a legal duty or

because of public policy, (3) the paying party is a secondary

debtor, (4) the paying party is a surety, or (5) the party pays

to protect its own rights or property.” Id. “Where one party

has paid the debt of another, justice requires that the payor be

able to recover his loss from the one who should have paid it, to

prevent unjust enrichment . . .. The rights of the party who

paid the debt in no way depend upon showing a contract provision

or formal assignment; evidence of payment is sufficient.” Nat’l

Union Fire Ins. Co. v. Riggs Nat’l Bank, 646 A.2d 966, 968 (D.C.

1994).

Under District of Columbia law, equitable subrogation may be

appropriate where each of the following conditions is satisfied:

(1) Payment [was] made by the subrogee to protect his
own interest. (2) The subrogee [has] not . . . acted
as a volunteer. (3) The debt paid [was] one for which
the subrogee was not primarily liable. (4) The entire
debt [has] been paid. (5) Subrogation [would] not work
any injustice to the rights of others.

In re Stevenson, No. 06-00306, 2008 WL 748927, *5 (Bankr. D.C.

Mar. 17, 2008) (quoting Eastern Sav. Bank, FSB v. Pappas, 829

A.2d 953, 961 (D.C. 2003)).
 -9-

P.G. Hospital has not sufficiently pled a claim for

equitable subrogation because it has not demonstrated that the

patients would have claims for monetary compensation against

Advantage which would result in a “debt” that P.G. Hospital

extinguished, nor has P.G. Hospital identified existing claims

that the patients make against Advantage for which P.G. Hospital

could step into their shoes to advance. Cf. Group

Hospitalization, 946 F. Supp. at 53 (determining that an insurer

had no right to subrogation where nothing in the record indicated

that payments by the insurer for medical care were for a debt of

the alleged insured). P.G. Hospital alleges that it provided

emergency services to the patients under the Emergency Medical

Treatment and Active Labor Act (“EMTALA”),5 and it now seeks to

be reimbursed for the cost of those services. But P.G. Hospital

5
The pertinent provision of the EMTALA provides:

If any individual (whether or not eligible for benefits
under this subchapter) comes to a hospital and the
hospital determines that the individual has emergency
medical condition, the hospital must provide either–

(A) within the staff and facilities available
at the hospital, for such further medical
examination and such treatment as may be
required to stabilize the medical condition,
or
(B) for transfer of the individual to another
medical facility in accordance with
subsection (c) of this section.

42 U.S.C. § 1395dd(b)(1). The EMTALA extends to anyone who seeks
emergency room assistance, without distinction between persons
with and without insurance. Gatewood v. Washington Healthcare
Corp., 933 F.2d 1037, 1040 (D.C. Cir. 1991).
 -10-

cites no case law to support a subrogation claim in which the

party seeking to be subrogated to the rights of another has

merely rendered services rather than satisfied a debt.

Accordingly, Advantage’s motion to dismiss P.G. Hospital’s claim

for subrogation will be granted.6

II. CAUSE OF ACTION UNDER THE MEDICAID STATUTE

Advantage argues that P.G. Hospital cannot state a private

cause of action against it under the Medicaid statute.

P.G. Hospital responds that the Medicaid laws have been construed

to grant providers of emergency services with a cause of action

for nonpayment. (Pl.’s Opp’n at 17.)

The Medicaid statute, enacted as part of Title XIX of the

Social Security Act, 42 U.S.C.A. § 1396 et seq.,

is 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. Although
participation in the program is voluntary,
participating States must comply with certain
requirements imposed by the Act and regulations
promulgated by the Secretary of Health and Human
Services (“Secretary”). To qualify for federal
assistance, a State must submit to the Secretary
and have approved a ‘plan for medical
assistance,’ that contains a comprehensive
statement describing the nature and scope of
the State’s Medicaid program. The state plan is
required to establish, among other things, a

6
Advantage argues in the alternative that the court “lacks
subject matter jurisdiction to hear any claim based on rights
that P.G. Hospital may have by subrogation” because the patients
did not exhaust their administrative remedies with respect to
payment denials. (Def.’s Mem. at 11.) Because the subrogation
claim will be dismissed, this issue is moot.
 -11-

scheme for reimbursing health care providers for
the medical services provided to needy individuals.

Wilder v. Virginia Hospital Ass’n, 496 U.S. 498, 503 (1990)

(citations omitted). The Medicaid statute includes a waiver

provision which permits a state to contract with MCOs to provide

health care services to medicaid recipients. See 42 U.S.C.

§§ 1396n, 1396u-2(1). “Under the waiver provision, if a state

requests and receives a waiver from the Secretary of Health and

Human Services pursuant to 42 U.S.C. § 1396n(c), a state may

enter into contracts with MCOs to provide health care services to

qualifying recipients.” See Solter v. Health Partners of

Philadelphia Inc., 215 F. Supp. 2d 533, 535 (E.D. Pa. 2002).

MCOs, in turn, are permitted to enter into contracts with other

health care organizations. See 42 U.S.C. § 1396u-2; 42 C.F.R.

§ 438.210.

With respect to emergency services, the Medicaid statute

requires that an MCO provide coverage for emergency services

“without regard to prior authorization or the emergency care

provider’s contractual relationship with the organization or

manager . . ..” 42 U.S.C. § 1396u-2(b)(2)(A)(I). The Medicaid

statute also provides that “[e]ach 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 the subchapter, or a provider on

behalf of such an enrollee, may challenge the denial of coverage
 -12-

of or payment for such assistance.” 42 U.S.C. § 1396u-2(b)(4).

The section of the statute concerning payment of health care

providers states that:

[a] contract under section 1396b(m) of this title with
a medicaid managed care organization shall provide
that the organization shall make payment to health
care providers for items and services which are
subject to the contract and that are furnished to
individuals eligible for medical assistance under
the State plan under this subchapter who are enrolled
with the organization on a timely basis consistent
with the claims payment procedures described in
section 1396a(a)(37)(A) of this title, unless the
health care provider and the organization agree to an
alternate payment schedule.

42 U.S.C. § 1396u-2(f).

P.G. Hospital argues that there is an implied private cause

of action under the Medicaid statute for health care providers

against MCOs for nonpayment, citing Mallo v. Public Health Trust

of Dade County, Florida, 88 F. Supp. 2d 1376 (S.D. Fla. 2000),

Wilder, 496 U.S. at 498, and Ohio Hospital Ass’n v. Ohio Dep’t of

Human Serv., 579 N.E.2d 695 (Ohio 1991), cert. denied, 503 U.S.

940 (1991). However, in each of those cases, the question was

whether the Medicaid statute created a federal right enforceable

against a State or its agencies under 42 U.S.C. § 1983.7 These

7
The Supreme Court has held that the Boren Amendment to the
Medicaid statute creates a federal right that is enforceable by
health care providers against a state under § 1983. Wilder, 496
U.S. at 524 (concluding that health care providers had an
enforceable federal right under § 1983 to reasonable and adequate
Medicaid rates in their state plans). A number of other courts
have also found that portions of the Medicaid statute are
enforceable under § 1983 against state officials. See Ohio
Hospital Ass’n, 579 N.E.2d at 698-99; Amisub (PSL), Inc. v.
 -13-

cases are inapplicable here because P.G. Hospital has sued a

private company, to which § 1983 is inapplicable. Furthermore,

an MCO is not deemed a state actor by virtue of its contract with

the state. See Taormina v. Suburban Woods Nursing Homes, 765 F.

Supp. 2d 667, 672 (E.D. Pa. 2011); Karen L. ex rel. Jane L. v.

Physicians Health Services, Inc., 202 F.R.D. 94, 104-05 (D. Conn.

2001).

Because the Medicaid statute does not expressly authorize a

private cause of action to enforce its provisions, P.G. Hospital

must establish that Congress intended to create a private remedy

under the Medicaid statute. See Suter v. Artist M., 503 U.S.

347, 363-64 (1992). To determine whether the Medicaid statute

impliedly authorizes a private cause of action, a court must

apply the four-prong test laid out in Cort v. Ash, 422 U.S. 66,

78 (1975): (1) whether the statutes were created for the

plaintiff’s special benefit, (2) whether there is evidence of

legislative intent to create a private remedy, (3) whether a

private remedy would be consistent with legislative purposes, and

Colorado Dep’t of Social Servs., 879 F.2d 789, 793-94 (10th Cir.
1989) (holding that Title XIX providers have federal rights
enforceable in a § 1983 action); Westside Mothers v. Haveman, 289
F.3d 852, 863 (6th Cir. 2002) (finding that professional medical
organizations had standing to assert a § 1983 claim against state
officials for violation of the Medicaid statute provisions
requiring early and periodic screening, diagnosis, and treatment
for Medicaid-eligible children); Mallo, 88 F. Supp. 2d at 1391
(holding that patient could sue state agency under § 1983 for
breaching its obligation under the balance billing provision of
the Medicaid statute).
 -14-

(4) whether the area is one traditionally relegated to the

states. P.G. Hospital does not address these factors in its

opposition to Advantage’s motion to dismiss. In any event, a

number of federal courts have declined to find a private right of

action under the Medicaid statute. See e.g., Baum v. Northern

Dutchess Hosp., 764 F. Supp. 2d. 410, 415 (N.D.N.Y. 2011)

(holding that the Medicaid statute, as amended by the Federal

Nursing Home Reform Amendments, did not create a private cause of

action for nursing home residents against nursing homes); Duncan

v, Johnson-Mathers Health Care, No. 5:09-CV-00417, 2010 WL

3000718, at *9-10 (E.D. Ky. July 28, 2010) (holding that the

Medicaid statute did not create an enforceable cause of action

against a private health care facility); Solter, 215 F. Supp. 2d

at 540 (holding that a patient did not have a private right of

action under the Medicaid statute against an MCO to enforce

Medicaid guidelines and waiver provisions); Stewart v. Bernstein,

769 F.2d 1088, 1093-94 (5th Cir. 1985) (holding that a Medicaid

recipient who was involuntarily removed from private nursing did

not have a private right of action under the Medicaid statute

against a nursing home); Brogdon v. Nat’l Healthcare Corp., 103

F. Supp. 2d 1322, 1326 (N.D. Ga. 2000) (concluding that residents

of a long-term health care facility did not have a private right

of action against a nursing home under the Medicaid statute);

Ayres v. Beaver, 48 F. Supp. 2d 1335, 1339-40 (M.D. Fla. 1999)

(finding that nursing home residents did not have a private right
 -15-

of action against a nursing home under the Medicaid statute);

Fuzie v. Manor Care Inc., 461 F. Supp. 689, 696 (N.D. Ohio 1977)

(stating that no private remedy may be implied under the Medicaid

statute); Slovinic v. Illinois Dept. of Human Services, No. 02-C-

4124, 2005 WL 442555, at *7 (N.D. Ill. February 22, 2005)

(dismissing plaintiff’s claim in part because the Medicaid

statute did not provide a private right of action); Carroll v.

Butterfield Health Care, Inc., No. 02-4903, 2003 WL 22462604, at

*3 (N.D. Ill. Oct. 29, 2003) (stating that the Medicaid statute

does not create a private cause of action).

In Solter, the court addressed whether Congress intended to

create a private right of action to enforce the Medicaid

guidelines and waiver provisions. Medicaid recipients argued

that the MCO’s decision not to approve dental surgery denied them

“medically necessary” services in violation of the Medicaid

guidelines and waiver provisions. The court applied the four

factors in Cort v. Ash and determined that there was no implied

right of action under the Medicaid statute. In so holding, the

court first determined that Medicaid recipients were intended

beneficiaries of the guidelines and waiver provisions of the

Medicaid statute. Solter, 215 F. Supp. 2d at 537. The court

then noted as to the second Cort factor that there was no

indication of Congressional intent to create a private remedy for

a Medicaid patient to bring a private action under the statute,

id. at 537-38, and that the Medicaid statute’s provision for an
 -16-

administrative process created by the participant state for

beneficiaries to seek redress for benefit determinations provided

evidence that Congress “anticipated that the states would provide

the remedy for vindication of the guidelines and waiver

provisions of the Medicaid Act.” Id. at 539. The court held

under the third Cort factor that an implied right of action under

the statute was not consistent with the Medicaid legislative

scheme, which places “administration of the program under the

Medicaid Act in the hands of the states.” Id. at 540. Lastly,

the court addressed the fourth Cort factor, and determined that

the causes of action at issue -- negligence, breach of contract

and breach of fiduciary duty -- are historically determined by

state courts. Id.

Similarly, applying the Cort v. Ash factors to the instant

case, there is no implied cause of action under the Medicaid

statute for reimbursement for emergency services allegedly

provided to Medicaid beneficiaries. With respect to the first

factor, there is evidence that both health care providers and

Medicaid recipients, and not the healthcare providers alone, are

the intended beneficiaries of the relevant provisions. For

example, the section entitled “Timeliness of Payment” provides:

A contract under section 1396b(m) of this title with
a medicaid managed care organization shall provide
that the organization shall make payment to health
care providers for items and services which are
subject to the contract and that are furnished to
individuals eligible for medical assistance under
the State plan under this subchapter who are enrolled
 -17-

with the organization on a timely basis consistent
with the claims payment procedures described in
section 1396a(a)(37)(A) of this title, unless the
health care provider and the organization agree to an
alternate payment schedule.

42 U.S.C. § 1396u-2(f). Also, the “Beneficiary protections”

include a number of protections for the plan enrollees, including

the requirement that the MCO provide coverage for emergency

services without prior authorization or the emergency care

provider’s contractual relationship with the MCO. See 42 U.S.C.

§ 1396u-2(b)(2)(A)(I). The section also provides that the MCO

establish an internal grievance procedure through which an

enrollee or a health care provider may challenge denial of

coverage. See 42 U.S.C. § 1396u-2(b)(4).

Second, there is no language in the statute which expresses

a legislative intent to create a private remedy. P.G. Hospital

relies in large part on letters interpreting the Medicaid

provisions that the Centers for Medicare & Medicaid Services

(CMS) issued to state medicaid directors. (Pl.’s Opp’n at 2-4.)

A February 20, 1998 letter includes an attachment entitled

“Clarification of Beneficiary Access and MCO Financial

Responsibilities for Emergency Services” which provides that

“MCOs may not require prior authorization for emergency services.

This applies to out-of-network as well as to in-network services

which a beneficiary seeks in an emergency.” (Pl.’s Opp’n, Ex. 3

at 3.) An April 18, 2000 letter provides that the applicable law

“prohibits prior authorization for coverage of emergency
 -18-

services. This means that services that meet the definition of

emergency services must be covered, and beneficiaries must not be

charged for these services, except for any permissible nominal

cost-sharing amounts. Therefore, . . . an MCO, may [not] make

payment for emergency services contingent on the beneficiary

providing the . . . MCO with notification, either before or after

receiving emergency services.” (Pl.’s Opp’n, Ex. 4 at 2.)

Notably absent from the statutory language and the language

in the CMS letters is any indication that a care provider has a

private cause of action against an MCO. In addition, P.G.

Hospital cites no law to support its implicit contention that the

CMS letters are legally binding. Even if P.G. Hospital had, P.G.

Hospital points to no language in the statute or letters that

provides that an out-of-network health care provider may have a

cause of action against an MCO for failure to pay for covered

emergency services. Rather, the only language regarding an MCO’s

failure to pay involves the sanctions available to the State in

the event an MCO does not comply with the statute. See 42 U.S.C.

§ 1396u-2(e). The same February 20, 1998 CMS letter cited by

P.G. Hospital interprets this language as well, stating that

where an MCO fails to cover emergency screening or stabilization

services, it may be subject to intermediate sanctions or

termination by the State. The letter also provides that HCFA may

impose sanctions “if the failure to cover emergency services as
 -19-

required . . . adversely affects . . . a Medicaid beneficiary.”

(Pl.’s Opp’n, Ex. 3 at 2.)

As to the third Cort factor, a private right of action is

not consistent with the underlying purposes of the legislative

scheme for the same reasons it was not in Solter, namely, that

with respect to a participating state’s decision to contract with

an MCO, the legislative scheme leaves the administration of the

program to the state. In the case at hand, the statutory

language requiring an MCO to develop a grievance procedure for

beneficiaries and providers who wish to challenge a denial

supports a finding that Congress intended the states to

administer this program, which would not be consistent with

having a private right of action under the statute.

Under the fourth Cort factor, the cruxes of the causes of

action alleged in this case are subrogation and breach of

contract. These are traditionally state law claims, and

therefore, it would be inappropriate to infer a cause of action

based on such state law claims to be redressed by federal law.

Solter, 215 F. Supp. 2d at 540.

Because P.G. Hospital has not established under the four

factors of Cort v. Ash that there is an implied private right of

action under the Medicaid statute, and because P.G. Hospital can

point to no case law or language in the Medicaid statute to

support a finding that an out-of-network provider has a private

cause of action under the statute against an MCO which fails to
 -20-

reimburse it for emergency services, P.G. Hospital has not

established a viable cause of action under the Medicaid statute.

III. THIRD-PARTY BENEFICIARY OF THE MCO CONTRACT

P.G. Hospital argues that it has a cause of action against

Advantage for non-payment as a third-party beneficiary of the MCO

contract. (Pl.’s Opp’n at 19.) In its motion to dismiss,

Advantage contends P.G. Hospital’s claim fails because P.G.

Hospital is not an intended third-party beneficiary under the MCO

contracts.

“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.” Sealift Bulkers, Inc. v. Repub. of

Armenia, Civ. Action No. 95-1293 (PLF), 1996 WL 901091, at *4

(D.D.C. Nov. 22, 1996); Monument Realty LLC v. Wash. Metro. Area

Transit Auth., 535 F. Supp. 2d 60, 70 (D.D.C. 2008) (stating that

“one who is not a party to a contract may nonetheless sue to

enforce the contract’s provisions if the contracting parties

intend the third party to benefit directly thereunder”).

“Government contracts by their nature benefit the public, but

only in rare circumstances will courts deem individual members of

the public to be intended beneficiaries empowered to enforce

those contracts in court.” Edwards v. Aurora Loan Servs., 791 F.

Supp. 2d 144, 151 (D.D.C. 2011). “Government contracts often
 -21-

benefit the public, but individual members of the public are

treated as incidental beneficiaries unless a different intention

is manifested.” Id. (quoting Restatement (Second) of Contracts

§ 313(2), cmt. a (1981)); see also Moore v. Gaither, 767 A.2d

278, 287 (D.C. 2001)).

In Moore, the D.C. Court of Appeals held that a management

agreement between the District of Columbia Department of

Corrections (“DC DOC”) and a private facility did not create in

inmates a right to representation at disciplinary hearings.

Moore, 767 A.2d at 287-88. Although the management agreement

required the facility to follow a statute which required

representation at disciplinary hearings, the facility had secured

a written waiver from the DC DOC of its obligation to adhere to

the statute. Id. at 287. The court held that because the

management agreement expressly stated that its provisions “are

for the sole benefit of the Parties hereto and shall not be

construed as conferring any rights on any other person[,]” it was

clear the inmates were merely incidental beneficiaries to the

contract and could not enforce the contract. Moore, 767 A.2d at

287 (emphasis omitted).

The District of Columbia and Advantage, an MCO, are parties

to the contracts at issue. As an initial matter, unlike the

agreement in Moore, there is no express language in the MCO

contracts precluding third-party beneficiary rights. The 2000

MCO contract provides that the MCO “shall reimburse facilities at
 -22-

the contracted rate for network facilities and at the current

Medicaid rate for non-network facilities for the following

services: (1) the evaluation of an emergency medical condition

[and] . . . (2) all medically necessary care and services

furnished prior to the time an enrolled becomes stabilized . .

..” (Def.’s Mot., Ex. A at 6.) The 2002 MCO contract provides

that the MCO “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.” (Def.’s Mot., Ex. B at 61.) It further provides

that the MCO “shall cover all emergency services provided by out-

of-network providers.” (Pl.’s Opp’n, Ex. 8 at 9.)

Under the contracts, Advantage has promised to provide

payment to in-network and out-of-network providers under certain

circumstances. These promises to pay providers establish that

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

benefit from the contracts. See Beckett, 995 F.2d at 288; Hook,

972 F.2d at 1015. The Second Restatement provides

(1) Unless otherwise agreed between promisor and
promisee, a beneficiary of a promise is an intended
beneficiary if recognition of a right to performance
in the beneficiary is appropriate to effectuate the
intention of the parties and either

(a) the performance of the promise will satisfy an
obligation of the promisee to pay money to the
beneficiary; or

(b) the circumstances indicate that the promisee
intends to give the beneficiary the benefit of the
promised performance.
 -23-

(2) An incidental beneficiary is a beneficiary who
is not an intended beneficiary.

Restatement (Second) of Contracts § 302. 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. In addition, if P.G. Hospital’s allegations are

later established to be true, Advantage’s payment to

P.G. Hospital will satisfy the District of Columbia’s obligation

to reimburse health care providers of emergency-related services

to Medicaid recipients. The language of the contracts at issue

creates an obligation in the MCO to pay those health care

providers that render emergency treatment to the MCO’s enrollees.

The Second Restatement of Contracts further provides that

A promise in a contract creates a duty in the promisor
to any intended beneficiary to perform the promise, and
the intended beneficiary may enforce the duty.

Restatement (Second) of Contracts § 304. As a result of

Advantage’s promise to the District of Columbia under the MCO

contracts, Advantage has a duty to make certain payments to

providers, as third-party beneficiaries, which may be enforced by

the providers against Advantage as the alleged breaching

promisor.
 -24-

Because P.G. Hospital has alleged a cause of action as a

third-party beneficiary under the MCO contracts, Advantage’s

motion to dismiss for failure to state a claim will be denied as

to this claim.

Advantage argues that even if P.G. Hospital is an intended

third party beneficiary under the MCO contracts, P.G. Hospital’s

claim fails because P.G. Hospital failed to exhaust its

administrative remedies by not requesting a fair hearing under 42

U.S.C. § 1396a(a)(3) and 42 C.F.R. § 431.220 within 90 days of

the notice of denied payment. (Def.’s Mot. at 12.) Section

1396a(a)(3) provides that the state Medicaid plan must “provide

for granting an opportunity for a fair hearing before the State

agency to any individual whose claim for medical assistance under

the plan is denied or is not acted upon with reasonable

promptness . . ..” Section 431.220 of the regulations provides

that the State must provide an opportunity for hearing to “[a]ny

applicant who requests it because his claim for services is

denied or is not acted upon with reasonable promptness.”

The MCO contracts provide that Advantage is to establish a

claims and appeals process for providers. The 2002 MCO contract

provides that

The Contractor shall allow network and non-network
providers to submit an initial claim for covered
and, if required, prior authorized services for a
maximum period of ninety (90) days following the
provision of such services.
 -25-

(Pl.’s Opp’n, Ex. 8 at C.11.1.2.) The contract also provides

that

The Contractor shall reconsider a decision to deny,
reduce, terminate, or delay authorization of a
requested covered service or payment denial in
response to an a [sic] grievance to request
submitted by an Enrollee or a provider on behalf
of an Enrollee. Should the Enrollee disagree with
the Contractor’s response to a grievance, the
Enrollee or a provider on the Enrollee’s behalf,
may appeal the Contractor’s decision.

(Pl.’s Opp’n, Ex. 8 at C.14.3.1.) The contract requires that

Advantage, in its denial of a payment request, notify the

enrollee of its “right to file a complaint or grievance with the

Contractor and the right to request a Fair Hearing at any time

. . ..” (Def.’s Mot., Ex. B at C.14.3.2.2.) The contract

further requires that Advantage “notify the Enrollee or the

Enrollee’s designee of the right to a fair hearing with a

District hearing officer, each time notification of an adverse

decision on a complaint, grievance, or appeal is sent to an

Enrollee or the Enrollee’s designee.” (Def.’s Mot., Ex. B at

C.14.4.1.) The regulations also provide that notice of the right

to hearing be included in the adverse decision. See 42 C.F.R.

§ 438.404.

Despite the requirement under the MCO contracts that

Advantage notify a denied provider of the right to a fair

hearing, the letters from Advantage to P.G. Hospital denying P.G.

Hospital’s claims do not provide any information regarding the

right to a fair hearing. (Pl.’s Opp’n, Ex. 7 (“Denial
 -26-

letters”).) Advantage, then, should not be heard to complain of

any failure by P.G. Hospital to exhaust administrative rights

about which Advantage failed to notify P.G. Hospital.

Accordingly, Advantage’s motion to dismiss P.G. Hospital’s third-

party beneficiary claim for failure to exhaust its administrative

remedies will be denied.

IV. TIMELINESS OF REQUESTS FOR PAYMENT

Advantage argues that P.G. Hospital’s claims as to patients

Eunice J. and Eugenia P. should be dismissed because

P.G. Hospital failed adequately to plead that it provided timely

notice of treatment as to Eunice J. and that the requests for

payment were proper as to Eugenia P. (Def.’s Mot. at 17.)

Advantage bases its argument on the fact that P.G. Hospital

stated in its complaint that timely and proper notice was

provided as to all other patients, and that P.G. Hospital has

pled itself out of court with respect to Eunice J. and Eugenia P.

due to the omission of the word “timely” as to Eunice J. and the

word “proper” as to Eugenia P. Advantage fails to identify any

contract provision that requires P.G. Hospital to notify it of

emergency services within a certain time frame or in a certain

manner. Therefore, Advantage has not shown that P.G. Hospital

has failed to allege plausible claims as to Eunice J. and Eugenia

P. Accordingly, Advantage’s motion to dismiss the claims as to

Eunice J. and Eugenia P. on the basis that P.G. Hospital failed
 -27-

timely and properly to notify Advantage of treatment of these

patients will be denied.

V. ATTORNEYS’ FEES

Advantage seeks to dismiss P.G. Hospital’s claim for

attorneys’ fees because P.G. Hospital has failed to establish any

statutory right to attorneys’ fees. “‘In the United States,

parties are ordinarily required to bear their own attorney’s fees

-- the prevailing party is not entitled to collect from the

loser. . . . Under this American Rule, we follow a general

practice of not awarding fees to a prevailing party absent

explicit statutory authority.’” Dist. of Columbia v. Straus, 705

F. Supp. 2d 14, 15 (D.D.C. 2010) (quoting Buckhannon Bd. and Care

Home, Inc. v. West Virginia Dep’t of Health & Human Resources,

532 U.S. 598, 602 (2001) (internal quotation omitted)). Here,

there is no explicit statutory authority which permits an award

of attorneys’ fees. Accordingly, Advantage’s motion to dismiss

will be granted as to P.G. Hospital’s claim for attorneys’ fees.

CONCLUSION

P.G. Hospital has not alleged a statutory right to

attorneys’ fees or facts sufficient to support a cause of action

for subrogation, and P.G. Hospital has no private cause of action

under the Medicaid statute. Thus, Advantage’s motion to dismiss

will be granted as to P.G. Hospital’s claims for subrogation and

attorneys’ fees, and claim that it is entitled by law to

reimbursement. Because P.G. Hospital has alleged facts
 -28-

sufficient to support a cause of action for breach of contract as

a third-party beneficiary of the MCO contracts and because the

record suggests that P.G. Hospital was not properly advised of

its administrative rights to appeal, Advantage’s motion to

dismiss will be denied as to P.G. Hospital’s claim for breach of

contract as a third-party beneficiary. Because P.G. Hospital has

alleged facts to support a cause of action with respect to Eunice

J. and Eugenia P., Advantage’s motion to dismiss the claims on

the basis that P.G. Hospital failed to provide timely and proper

notice of treatment as to Eunice J. and Eugenia P. will be

denied.

SIGNED this 6th day of June, 2012.

___/s/______________________
RICHARD W. ROBERTS
United States District Judge