United States District Court, D. Hawaii
ORDER DENYING DEFENDANTS KAISER FOUNDATION HEALTH
PLAN, INC. AND KAISER FOUNDATION HOSPITALS' MOTION TO
DISMISS COMPLAINT, ECF NO. 9
MICHAEL SEABRIGHT CHIEF UNITED STATES DISTRICT JUDGE
Kaiser Foundation Health Plan, Inc. (“KFHP” or
the “Plan”) and Kaiser Foundation Hospitals
(“KFH”) (collectively “Kaiser
Foundation”) move to dismiss the complaint filed
against them by Plaintiff, Liberty Dialysis-Hawaii LLC
(“Liberty”). ECF No. 9. Kaiser Foundation
contends that this court lacks subject-matter jurisdiction
because Liberty's claims arise under the Medicare Act and
Liberty has neither presented its claims to the Secretary of
the Department of Health and Human Services nor exhausted
administrative remedies under the Act. Id. The court
finds that the claims do not arise under the Medicare Act and
therefore DENIES the motion to dismiss.
Basic Statutory Framework
Advantage, which was established in 1997 as Medicareਚ≱
under Part C of the Medicare Act,  is an alternative to the
original fee-for-service option that is included in Parts A
and B of the Act (referred to as “traditional” or
“original” Medicare). 42 U.S.C. §
1395w-21(a). Under the Medicare Advantage option, Medicare
beneficiaries elect to receive Medicare benefits through a
plan offered by a Medicare Advantage Organization
(“MAO”), generally a private insurer, that
contracts with the Centers for Medicare and Medicaid
(“CMS”) to administer Medicare benefits to plan
enrollees. 42 U.S.C. § 1395w-21, 27. The MAO assumes the
risk of providing benefits to its enrollees in exchange for
fixed payments from CMS that are based on the number of
beneficiaries enrolled in the plan or plans. See 42
U.S.C. § 395w-23, -25(b); 42 CFR § 422.208(a).
may select third-party providers to treat its enrollees, and
these providers may or may not have contractual relationships
with the MAO. See 42 U.S.C. § 395w-22(d)(1),
-25(b)(4). Those that do are called “contract
providers, ” and the MAO pays them at contractually
agreed-upon rates. “The Medicare Act permits these
types of contracts, and provides very few limitations on how
they can be drafted.” Tenet Healthsystem GB, Inc.
v. Care Improvement Plus S. Cen. Ins. Co., 2017 WL
3567819 at *2 (11th Cir. Aug. 18, 2017) (citing as an example
42 C.F.R. § 422.520(b), requiring contracts between MAOs
and providers to contain a prompt-payment provision);
RenCare, Ltd. v Humana Health Plan of Tex.,
Inc., 395 F.3d 555, 559 (2004) (same). But an MAO
must pay providers with whom it has no contract
(“noncontract providers”) the same rates set by
the Medicare Act and its regulations. 42 U.S.C. §
1395w-22(a)(2)(A); 42 C.F.R. § 422.214(a).
a Medicare Advantage Organization. Compl. ¶ 8, ECF No.
1-2; Notice of Removal ¶ 5, ECF No. 1. Under the terms
of a 2007 letter of agreement (the “Agreement”)
between Liberty and KFH, Liberty agreed to provide outpatient
renal dialysis and related services to KFHP members,
including the Plan's Medicare Advantage members. Compl.
¶ 7. KFH agreed to pay Liberty for such treatment and
services according to a rate table appended to the Agreement.
Id. ¶¶ 7-9. According to Liberty,
beginning in January 2011, Kaiser Foundation stopped paying
Liberty on time and at the contracted rates for services
provided to KFHP's members, including, but not limited
to, its Medicare Advantage plan members. Compl. ¶ 17. It
reduced its payments for some services, stopped paying
altogether for others, and extended its payment cycle. Compl.
¶ 17. Liberty contends that Kaiser Foundation's
actions coincided with changes to the Medicare reimbursement
structure that have no bearing on its contract with KFH.
Compl. ¶¶ 18-19.
filed a state-court action asserting claims for breach of
contract, accounting, and declaratory judgment. Compl.
¶¶ 41-56. Kaiser Foundation removed the case to
federal court. Notice of Removal, ECF No. 1. On July 20,
2017, Kaiser filed this Motion to Dismiss Complaint for Lack
of Subject Matter Jurisdiction. ECF No. 9. Liberty filed an
Opposition on September 18, 2017, ECF No. 22, and Kaiser
Foundation filed its Reply on September 11, 2017. ECF No. 24.
A hearing was held on September 25, 2017.
STANDARD OF REVIEW
Rule of Civil Procedure 12(b)(1) authorizes a court to
dismiss claims over which it lacks subject-matter
jurisdiction. The moving party “should prevail [on a
Rule 12(b)(1) motion to dismiss] only if the material
jurisdictional facts are not in dispute and the moving party
is entitled to prevail as a matter of law.”
Casumpang v. Int'l Longshoremen's &
Warehousemen's Union, 269 F.3d 1042, 1060-61 (9th
Cir. 2001) (citation and quotation marks omitted); Tosco
Corp. v. Cmtys. for a Better Env't, 236 F.3d 495,
499 (9th Cir. 2001).
12(b)(1) challenge may be either facial or factual. Safe
Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir.
2004). In a facial attack such as the one here, the court may
dismiss a complaint when the allegations of and documents
attached to the complaint are insufficient to confer
subject-matter jurisdiction. See Savage v. Glendale Union
High Sch. Dist. No. 205, 343 F.3d 1036, 1039 n.2 (9th
Cir. 2003). When determining whether subject-matter
jurisdiction exists, all allegations of material fact are
taken as true and ...