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Sidlo v. Kaiser Permanente Ins. Co.

United States District Court, D. Hawaii

November 17, 2016

TOBY SIDLO, on behalf of himself, and all others similarly situated, Plaintiffs,
v.
KAISER PERMANENTE INSURANCE COMPANY, a California non-profit corporation, KAISER FOUNDATION HEALTHPLAN, INC., a foreign nonprofit corporation, and DOE DEFENDANTS 1-50, Defendants. KAISER FOUNDATION HEALTH PLAN, INC., a foreign non-profit corporation, Plaintiff,
v.
HAWAII LIFE FLIGHT CORPORATION, a Hawaii corporation, and AIR MEDICAL RESOURCE GROUP, INC., a Utah Corporation, Defendants. HAWAII LIFE FLIGHT CORPORATION, a Hawaii corporation, Counterclaim Plaintiff,
v.
KAISER FOUNDATION HEALTH PLAN, INC., a foreign non-profit corporation, Counterclaim Defendant.

          ORDER GRANTING KAISER FOUNDATION HEALTH PLAN, INC.'S MOTION TO DISMISS HAWAII LIFE FLIGHT CORPORATION'S COUNTERCLAIM

          Alan C. Kay Sr. United States District Judge.

         For the reasons set forth below, the Court GRANTS Kaiser Foundation Health Plan, Inc.'s Motion to Dismiss Hawaii Life Flight Corporation's Counterclaim Against Kaiser Foundation Health Plan, Inc. ECF No. 195.[1]

         PROCEDURAL BACKGROUND

         The Court and the parties are familiar with the extensive factual and procedural history of this case, and the Court will not repeat it here except as necessary.

         On February 18, 2016, Kaiser Foundation Health Plan, Inc. (“KFHP”) filed a Complaint against Hawaii Life Flight Corporation (“HLF”) and Air Medical Resource Group, Inc. (“AMRG”). KFHP's Compl. Against HLF and AMRG for Violation of 29 U.S.C. § 1132(a)(3) (“Complaint”), D. Haw., Civ. No. 16-00073 ACK-KSC, ECF No. 1. KFHP's claim arises out of the events underlying and comprising consolidated lawsuit Sidlo v. Kaiser Permanente Insurance Company, et al., Civ. No. 15-00269 ACK-KSC. In its Complaint, KFHP alleges HLF and AMRG have violated and attempted to violate an anti-assignment provision contained in KFHP's health plans within Hawaii, which are governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. Complaint ¶¶ 49-56. KFHP alleges that HLF and/or AMRG “have repeatedly attempted to procure broad assignments of members of the Plans' rights, interest, claims for money due, benefits and/or obligations under the Plans, in violation of the anti-assignment provision.” Id. ¶ 33. More specifically, KFHP asserts that the Sidlo litigation has been brought by HLF and/or AMRG in Sidlo's name, which constitutes a violation of the anti-assignment provision. Id. ¶ 35.

         HLF and AMRG filed an Answer to the Complaint on April 14, 2016. ECF No. 102. That same day, HLF filed a Counterclaim against KFHP. HLF's Countercl. Against KFHP (“Counterclaim”), ECF No. 103. HLF's Counterclaim asserts four counts: 1) unfair competition in violation of Hawaii Revised Statutes (“HRS”) § 480-2; 2) tortious interference with contract; 3) defamation; and 4) trade libel/disparagement. Id. ¶¶ 23-49. HLF asserts that KFHP, “in connection with its health insurance services, has made written and oral demands that hospitals arrange for emergency transportation of patients exclusively through or as designated by KFHP, even where those hospitals have contracts with HLF and contrary to the federal law that exclusively provides that emergency patient transport is arranged by the treating physician.” Id. ¶ 24. Further, HLF contends that KFHP has sent letters to patients that received air ambulance services from HLF, which letters contain “numerous falsehoods, misrepresentations, and otherwise disparaging and defamatory statements” regarding HLF. Id. ¶ 25.

         On June 8, 2016, KFHP filed a Motion to Dismiss HLF's Counterclaim (“Motion”). ECF No. 195. KFHP argues that HLF's claims are preempted by ERISA; are barred by the litigation privilege; and fail to state a claim upon which relief can be granted. Id. at 1-2. HLF filed a Memorandum in Opposition to KFHP's Motion on October 14, 2016 (“Opposition”), ECF No. 473; and KFHP filed a Reply in Support of KFHP's Motion (“Reply”) on October 24, 2016, ECF No. 481.

         The Court held a hearing regarding the Motion on November 7, 2016.

         FACTUAL BACKGROUND

         KFHP serves as a claim fiduciary of certain group health plans within the State of Hawaii that are governed by ERISA. Counterclaim ¶ 31; Complaint ¶¶ 3, 6. Included in the health plan documents is a Hawaii Region Group Medical and Hospital Service Agreement (“Service Agreement”), which lists KFHP as “a fiduciary to review claims under [the] Service Agreement, ” and indicates that KFHP “has the authority to review claims and determine whether a Member is entitled to the benefits of [the] Service Agreement.”[2] Service Agreement, Ex. A to KFHP's Req. for Judicial Notice in Supp. of Mot. at KFHP 000004, ECF No. 196-2. At all relevant times, Consolidated Plaintiff Toby Sidlo and a group of proposed class members were participants in or beneficiaries of these plans.[3] FAC ¶¶ 3, 11.

         HLF provides air ambulance services throughout the State of Hawaii, transporting patients via helicopter or fixed wing aircraft to hospitals and medical centers throughout the islands. Counterclaim ¶¶ 1, 12. HLF asserts that it is not a self-dispatching service; rather, pursuant to the Emergency Medical Treatment and Active Labor Act (“EMTALA”), 42 U.S.C. § 1395dd, attending physicians and hospitals dispatch HLF when an emergency arises. Counterclaim ¶ 15. The Centers for Medicare & Medicaid Services (“CMS”) have issued interpretive guidelines for EMTALA, which state, “It is the treating physician at the transferring hospital who decides how the individual is transported to the recipient hospital and what transport service will be used, since this physician has assessed the individual personally.”[4] See CMS, State Operations Manual, Appendix V, at 66, available at https://www.cms.gov/Regulations-and-Guidance/Guidance/Manuals/Downloads/som107apvemerg.pdf.

         HLF contends that “[m]any Hawaii hospitals contract with HLF to provide air ambulance services because they and their physicians believe that the nature of HLF's services . . . best serve the medical needs of, and minimize[] risk to, their patients.” Counterclaim ¶ 20. As a result, HLF asserts, these hospitals have entered into first call agreements with HLF, which require the hospitals to first call upon HLF to provide necessary air ambulance services in an emergency situation. Id.

         Subsequent to the hearing on KFHP's Motion, HLF, with the consent of KFHP, submitted to the Court three of the first call agreements it has with hospitals. The first agreement is a “Right of First Refusal” contract that HLF entered into with Kona Community Hospital (“KCH”) on the Big Island. See Ex. 4 to HLF's Submission of Exs., ECF No. 505-4. The agreement provides that HLF, “without charge to KCH, will transport, without regard for ability to pay, medically necessary patients from KCH to medical facilities in Hawaii, in accordance with physician's instructions.” Id. In certain situations, such as when a patient requires specialty care not provided by HLF or HLF has a delayed estimated time of arrival, KCH may request transport from another provider. Id. The term of the agreement is five years, beginning November 1, 2012. Id. Thus, the agreement is still valid, expiring on October 31, 2017.

         The second agreement is also a “Right of First Refusal” contract between HLF and Wilcox Memorial Hospital (“WMH”), a facility located on Kauai. See Ex. 5 to HLF's Submission of Exs., ECF No. 505-5. The agreement contains substantially similar provisions as the first agreement, and has a three year term beginning February 1, 2013. Id. This initial three year term has expired, but the agreement provides that it “shall automatically renew each year for one year periods.” Id.

         The last agreement is entitled an “Agreement for Purchase of Goods and Services, ” entered into by HLF and Hilo Medical Center (“HMC”) on the Big Island. See Ex. 6 to HLF's Submission of Exs., ECF No. 505-6. Under the contract, HLF agrees to keep a “base of operation” at the hospital in order to quickly transport “urgent and emergent patients.” Id. The contract states that HLF “will serve as the preferred air transport service provider, so long as performance and quality indicators are met as determined by HMC Administration and Emergency Medical Staff.” Id. It also requires HLF to provide a plan detailing the service it will provide, including “alternate patient transport options for [sic] (a) while the helicopter is in use and a second need arises, (b) when helicopter use is not practical due to the weight of the patient or the need for additional life support equipment during transport; or (c) when weather conditions preclude the use of the helicopter.” Id. The agreement has a three year term beginning April 10, 2013, and provides that the agreement “may be renewed for subsequent renewal terms as agreed to by both parties through a written amendment.” Id. The initial three-year term has expired, and it is unclear at this point whether the parties agreed to renew the agreement.

         HLF alleges that KFHP, “in connection with its health insurance services, has made written and oral demands that hospitals arrange for emergency transportation of patients exclusively through or as designated by KFHP, even where those hospitals have contracts with HLF and contrary to the federal law that exclusively provides that emergency patient transport is arranged by the treating physician.” Id. ¶ 5. HLF asserts that KFHP requires hospitals to utilize the air ambulance services of HLF's competitors, “who are aligned with, or otherwise have relationships with, KFHP.” Id.

         HLF, with the consent of KFHP, has also submitted to the Court two letters counsel for KFHP sent to Hawaii Health Systems Corporation (“HHSC”) concerning KCH's use of HLF's air ambulance services. According to the communications, KCH is a part of HHSC. See Ex. 2 to HLF's Submission of Exs., ECF No. 505-2. KCH is also the hospital with which HLF has a first call agreement set to expire on October 31, 2017.

         The first communication is a cease and desist letter sent on March 19, 2015. See id. KFHP asserts that KCH's Dr. Richard McDowell “has not been permitting Kaiser hospital staff to coordinate the air ambulance transportation through Kaiser's first call air ambulance contractor, AMR; and has been directing ER staff at [KCH] to use [HLF] exclusively for air transport, over the requests and objections of Kaiser's hospital staff.” Id. The letter states that KCH, through Dr. McDowell's actions, is in breach of a contract between HHSC and Kaiser Foundation Hospitals, whereby HHSC is required to notify Kaiser when one of its members presents at a HHSC facility; cooperate with Kaiser on the transfers of its members; and provide services in a cost effective manner. Id. The letter also notes that Dr. McDowell's conduct is interfering with KFHP's first call agreement with American Medical Response (“AMR”). Id.

         The letter also states that any EMTALA concerns do not apply, since the air ambulance transports with which KFHP is concerned involve patients who are in stable condition. Id. The letter reads, “In such instances, we disagree that [KCH] or HHSC should dictate the mode of transportation, especially when Kaiser has medical and financial responsibility for the patient's post stabilization care.” Id.

         In a follow-up communication sent to HHSC on July 15, 2015, counsel for KFHP writes:

We recognize that there may be circumstances where the immediate transfer of an unstabilized patient is necessary and that a transfer by rotor vehicle may be medically necessary in the opinion of the treating physician. Your citation to EMTALA and the State Operations Manual addresses the requirements for transporting such unstabilized patients. Kaiser is not challenging that decision for unstabilized patients being transported by air ambulance from the KCH emergency department. However, the vast majority of Kaiser members at issue . . . do not involve unstabilized patients in an emergent condition . . . . Most of the cases in the last year have concerned stabilized Kaiser members who are being transferred for continuity of care of the patient at their Kaiser hospital. In these cases EMTALA does not apply.

Ex. 3 to HLF's Submission of Exs., ECF No. 505-3.

         The letter reiterates that AMR is KFHP's first call provider and that KFHP is responsible for controlling the medical expenses of ...


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