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MSP Recovery Claims, Series LLC v. Auto-Owners Insurance Company

United States District Court, S.D. Florida, Miami Division

April 24, 2018

MSP RECOVERY CLAIMS, SERIES LLC, a Delaware entity, Plaintiff,
v.
AUTO-OWNERS INSURANCE COMPANY, a foreign profit corporation, Defendant. MSP RECOVERY CLAIMS, SERIES LLC, a Delaware entity, Plaintiff,
v.
AUTO-OWNERS INSURANCE COMPANY, a foreign profit corporation, Defendant. MSP RECOVERY CLAIMS, SERIES LLC, a Delaware entity, Plaintiff,
v.
OWNERS INSURANCE COMPANY, a foreign profit corporation, Defendant. MSP RECOVERY CLAIMS, SERIES LLC, a Delaware entity, Plaintiff,
v.
SOUTHERN-OWNERS INSURANCE COMPANY, a foreign profit corporation, Defendant.

          ORDER GRANTING MOTION TO DISMISS WITH PREJUDICE

          PATRICIA A. SEITZ, UNITED STATES DISTRICT JUDGE.

         THIS MATTER is before the Court on Defendants' Motion to Dismiss Plaintiffs Consolidated Complaint. [DE 54]. In the Consolidated Complaint [DE 48], Plaintiff alleges it is entitled to reimbursement from Defendants for payments made on behalf of Medicare beneficiaries pursuant to the Medicare Secondary Payer Act (MSPA), 42 U.S.C. § 1395y(b). Defendants move to dismiss for lack of standing and for failing to state a claim. Fed.R.Civ.P. 12(b)(1), 12(b)(6). Plaintiff filed a response [DE 57] to which Defendants replied [DE 58]. Plaintiff also filed an Affidavit of Michael Keeler [DE 60] which Defendants moved to strike as an unauthorized sur-reply [DE 62].

         Standing is a threshold question that the Court must address to ensure it has subject-matter jurisdiction over the claim. While the Consolidated Complaint pleads additional facts compared to the original complaints, the allegations still fail to establish Plaintiff has standing as recognized under the MSPA. Therefore, because Plaintiff fails to allege standing to sue and the Court has already provided Plaintiff with numerous opportunities[1] to properly plead its claims, the Motion to Dismiss is granted with prejudice.

         I. RELEVANT BACKGROUND

         Plaintiff is an entity whose business model involves obtaining assignments from Medicare Advantage Organizations, first-tier entities and downstream entities to recover reimbursement for payments made for the medical expenses of Medicare beneficiaries that should have been made by a private insurer pursuant to the Medicare Secondary Payer Act (MSPA), 42 U.S.C. § 1395y(b). [DE 48 ¶ 89]. Plaintiff filed this class action as the assignee of two entities-Health First Administrative Plans, Inc. and Verimed IP A, LLC-to seek reimbursement from Defendants pursuant to the MSPA. [DE 48 ¶¶ 14, 29]. Therefore, the Court must consider whether Health First Administrative Plans, Inc. and Verimed IP A, LLC have standing under the private cause of action in the MSPA, § 1395y(b)(3)(A).

         A. The Medicare Secondary Payer Act (MSPA)

         Congress enacted the Medicare Act'in 1965 to establish a health insurance program for the elderly and disabled. At that time, Medicare paid for medical expenses even when Medicare beneficiaries were also enrolled in third-party insurance policies that covered those same costs. See MSP Recovery, LLC v. Allstate Ins. Co., 835 F.3d 1351, 1354 (11th Cir. 2016). In an effort to reduce costs, Congress passed the MSPA in 1980 which made Medicare the secondary payer, rather than the primary payer, for medical services provided to its beneficiaries when they are covered for the same services by a private insurer. See § 1395y(b)(2). Thus, the private insurer becomes the primary payer, as defined by the statute, [2] for medical services. However, when a primary payer cannot be expected to make a payment for a service promptly, Medicare may make conditional payments. § 1395y(b)(2)(B)(i). Once notified of its responsibility for a payment, a primary payer must reimburse Medicare for any payment made within 60 days. § 1395y(b)(2)(B)(ii). In an effort to enforce this scheme, the MSPA created a private cause of action for double damages when a primary plan fails to provide payment. See § 1395y(b)(3)(A).

         B. Medicare Advantage Organizations, First-Tier Entities and Downstream Entities

         In 1997, Congress created Medicare Part C to give Medicare beneficiaries the option of receiving Medicare benefits through private insurers known as Medicare Advantage Organizations (MAOs). See 42 U.S.C. § 1395w-21. MAOs contract directly with Medicare to administer benefits for a Medicare beneficiary. See Humana Medical Plan Inc., v. Western Heritage Ins. Co., 832 F.3d 1229, 1235 (11th Cir. 2016).

         An MAO may then separately contract with third-parties, known as first-tier entities and downstream entities, to provide health care or administrative services to the Medicare beneficiaries in the MAO's plan.[3] See 42 C.F.R. § 422.2. The MAO pays first-tier entities and downstream entities certain rates for certain categories of treatments. Tenet Healthsystem GB, Inc. v. Care Improvement Plus South Central Ins. Co., 875 F.3d 584, 586 (11th Cir. 2017). Plaintiff alleges these first-tier entities and downstream entities take on the "full risk" for a Medicare beneficiary's medical care. [DE 48 ¶¶ 85, 87].

         C. Relevant Allegations of the Consolidated Complaint

         Plaintiff as assignee[4] of two entities-Health First Administrative Plans, Inc. ("HFAP") and Verimed IPA, LLC ("Verimed")-alleges Defendants are primary payers[5] which failed to perform their statutory obligation pursuant to the MSPA to reimburse Plaintiffs assignors for medical payments made on behalf of Medicare beneficiaries. [DE 48 ¶¶ 2, 4]. The relevant alleged facts as to Plaintiffs HFAP and Verimed claims are:

1. HFAP: As assignee of HFAP, Plaintiff brings three representative claims. Medicare beneficiaries J.L, J.W and P.G. were each enrolled in a Medicare Advantage plan issued and managed by HFAP, an MAO. [DE48 ¶¶ 8, 35, 45]. The medical providers issued bills to HFAP for the medical expenses of J.L, J.W. and P.G. which HFAP paid. [DE 48 ¶¶ 11, 39, 49].
2. Verimed: As assignee of Verimed, Plaintiff brings two representative claims. Medicare beneficiaries S.H. and P.L. were each enrolled in a Medicare Advantage plan issued and managed by Optimum HealthCare, Inc. ("Optimum"), an MAO. [DE 48 ¶¶ 19, 55]. Optimum contracted with a first-tier entity, Verimed, to provide services to S.H. and P.L., in exchange for a fixed fee. [DE 48 ¶¶ 20, 56]. Under its contract with Optimum, Verimed: (1) incurred the cost of S.H.'s medical services provided by Springhill Regional Hospital and SDI Diagnostic Imaging; and (2) reimbursed Optimum for services P.L. received at Polk County, Central Florida Imaging Associates, and Publix. [DE 48 ¶¶ 20, 26, 60; DE 48-7; DE 48-18].

         Plaintiff alleges HFAP and Verimed assigned their rights to recover conditional payments made on behalf of Medicare beneficiaries. [DE 48 ¶¶ 14, 15, 29, 30]. Both assignment agreements contain identical boilerplate language describing HFAP and Verimed broadly as a "Health Maintenance Organization, Maintenance Service Organization, Independent Practice Association, Medical Center, and/or other health care organization and/or provider ...." [DE 48-4; DE 48-8].

         For each representative claim, Plaintiff contends HFAP and Verimed conditionally paid for medical services that Defendants should have paid as primary payers under the MSPA. Plaintiff seeks double damages under § 1395y(b)(3)(A), as well as a reimbursement of damages under 42 C.F.R. § 411.24(e)[6] because of Defendants' alleged failure to properly reimburse Plaintiffs assignors.

         II. STANDARD OF REVIEW

         Standing is the threshold question that must be addressed prior to, and independent of, the merits of a party's claim because it addresses the Court's jurisdiction to adjudicate the claim. DiMaio v. Democratic Nat'l Comm., 520 F.3d 1299, 1301 (11th Cir. 2008). The party invoking federal jurisdiction bears the burden of establishing standing by showing: (1) that it suffered an injury-in-fact that is (a) concrete and particularized, and (b) actual or imminent; (2) a causal connection between the injury and the conduct complained of (and not the result of the independent action of some third party not before the court); and (3) that it is likely, not merely speculative, that the injury will be redressed by a favorable decision. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). Plaintiff must support each element of standing in the same way as any other matter on which the plaintiff bears the burden of proof, with the manner and degree of evidence required at the successive stages of litigation. Id.

         The Court is required to carefully examine the allegations to ascertain whether a plaintiff is entitled to an adjudication of the claims asserted. DiMaio, 520 F.3d at 1301. There is no standing where the Court can only imagine an injury from the facts in the complaint. Id. The Court should not speculate concerning standing; if a ...


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