of the financial ruin of various other home health care agencies, including St. Vincent's Memorial Hospital Home Health Care, Harrisburg Medical Center Home Health Agency, Alexian Brothers Home Health Care, and Beverly Home Health Care.
Aetna moves to dismiss the amended complaint, arguing that plaintiffs' claims are precluded by the statutory scheme of the Medicare Act, that Aetna is entitled to both official and sovereign immunity, that such immunity is absolute, and that plaintiffs' state law tort and federal RICO claims are preempted by the Medicare Act. Plaintiffs recognize, correctly, we believe, that those various doctrines are intertwined because all of them rest, ultimately, on a determination of the extent to which a provider can seek relief against a fiscal intermediary for the perceived wrongs of that agency, when that agency is performing an administrative function for the government. That determination is complicated here both because the legal concepts are complex, do not lend themselves to bright line standards, and often lead to somewhat conflicting judicial decisions and because a fiscal intermediary is a somewhat unique legal animal.
We have stated plaintiffs' allegations at some length because a characterization of those allegations is central to plaintiffs' ability to proceed here. Oversimplified, plaintiffs' contentions are that their suit is against private parties for RICO violations and common law tortious conduct beyond the scope of their authority and contrary to their contractual obligations to the government. Plaintiffs contend that they are attacking the defendants' methodology. Those violations and torts do not arise under the Medicare Act and have caused plaintiffs injury, independent of whatever reimbursement claims they may have for services provided. Defendants contend that the suit is, essentially, an action against an instrument of government, bottomed on claims that the providers were not properly paid for the services they provided -- claims which can only be reviewed through and to the extent provided by a statutory administrative process.
Can plaintiffs' allegations be teased into the legal model they present to escape dismissal? We think not.
First, we deal with certain matters which because of the views expressed here are not outcome-determinative. The Secretary seeks to intervene either as a matter of right or by permissive intervention. That petition fully sets forth the Secretary's position, the complaint seeks no relief against the government, and we are dismissing the complaint. In those circumstances we see no purpose to be served by considering that petition and we deny it as moot. Both plaintiffs and defendants try to use the indemnity provisions to bolster their positions, defendants by suggesting that the government and public monies are therefore more directly involved and plaintiffs by arguing that the indemnities indicate that the Secretary thought that fiscal intermediaries could be liable to providers and that therefore that must be so. Government cannot, however, extend a protective cloak by choosing to indemnify, Group Health Inc. v. Blue Cross Ass'n, 625 F. Supp. 69, 76 (S.D.N.Y. 1985), appeal dismissed, 793 F.2d 491 (2d Cir. 1986) (jurisdiction lacking), cert. denied, 480 U.S. 930, 94 L. Ed. 2d 758, 107 S. Ct. 1566 (1987); Kolpak v. Bell, 619 F. Supp. 359, 372 (N.D. Ill. 1985), and an indemnification obligation is far too weak a reed upon which to rest the creation of substantive obligations and remedies. No one disputes that defendants could be liable at least for constitutional torts. And in a complex and uncertain legal area simple prudence dictates that the ultimate burden of judgments be assigned in the event that some court should determine that there could be such judgments.
Further, we question whether sovereign immunity is directly implicated here. The government is not a defendant. Plaintiffs do not seek recovery from the public fisc nor request an injunction to compel or restrain Aetna in its official capacity. Sovereign immunity does not come into play since in "a suit against the officer to recover damages for the agent's personal actions . . . the judgment sought will not require action by the sovereign or disturb the sovereign's property." Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 687-88, 93 L. Ed. 1628, 69 S. Ct. 1457 (1949). Finally, the concepts of official immunity may be implicated, but we do not rest upon that concept. The policy considerations inherent in that concept, however, and inherent in sovereign immunity doctrine for that matter, also, are germane to the determining issue in this case, and that is preemption in various guises.
In broad terms, official immunity protects those who, as the government representatives, carry out the government's directives. The Federal Torts Claims Act adopts that model, although it does so through a limited waiver of sovereign immunity: a party suffering an injury at the hands of a government employee can sue the government within the parameters of the statute but cannot sue the employee. The official immunity doctrine arises from judicial decision rather than by statute but speaks to the same end, protecting the government's representative from having to justify his discretionary decisions in court so as not to inhibit the exercise of his judgment. That means, of course, that the wicked can go unpunished and the injured may be left without a remedy. If the representative is acting within the outer reaches of his scope of authority he is immune, even if the motives and purposes of his actions are improper and ignoble. In the absence of judicially-related immunity, however, he is still answerable for constitutional torts, but such are not alleged here.
The burden of defendants' contentions is that plaintiffs are, essentially, challenging benefits determinations; that the sole means of mounting that challenge is through the administrative mechanism, that 42 U.S.C. § 1395ff and 42 U.S.C. § 405(h), as well as the general doctrine of exhaustion of administrative remedies, expressly establish this administrative procedure as the exclusive mechanism for review of all benefit claims and of all actions "inextricably intertwined" with such claims, Heckler v. Ringer, 466 U.S. 602, 614-617, 80 L. Ed. 2d 622, 104 S. Ct. 2013 (1984). They further contend that while the present form of § 405(h) does not expressly refer to diversity actions or to RICO, the present form is a recodification of a prior enactment which did negate diversity actions, the recodification was enacted with the express representation that it resulted in no substantive changes, RICO was enacted subsequent to present § 405(h), and recognizing that later specific jurisdictional grant as a basis for this action would conflict with the congressionally-crafted administrative scheme. In short, defendants urge that Congress adopted a system for challenging benefit determinations and providers cannot, by creative lawyering, avoid the strictures of that system. We agree.
Plaintiffs concede that the administrative benefits determination procedure is exclusive, but they contend that they do not challenge determinations or seek to recover claims here. They characterize their complaint as one against defendants for their own private wrongdoing: the failure to provide advice, to inform them of procedures and interpretations and to safeguard and act upon submissions; the improper use of hypertechnical formulations of the claims ("buzzwords"); the arbitrary changes in the time standard; and the fraudulent motives that pervaded the whole process. They insist that they can prove a pattern or practice without proving their entitlement to specific determinations through computer models, sampling or the like. They point out that they cannot appeal administratively many claims, particularly unskilled claims, when the linked skilled claims have been paid under the Secretary's waiver system.
Although plaintiffs thus characterize their complaint, we conclude that their claims are, at bottom, for a review of the intermediary's benefits determinations. First, plaintiffs' damages flow directly from benefit denials and defendants are entitled to dispute plaintiffs' conclusions claim-by-claim. Congress intended to preclude federal review of such individual determinations. Second, the underlying allegations concerning Aetna's actions provide a basis for plaintiffs' administrative challenges under § 1395ff. True, the Secretary cannot adjudicate plaintiffs' claims under RICO and the common law; yet RICO and the common law would simply provide plaintiffs with theories to recover the value of lost benefits and consequential damages in a case where the underlying facts could be raised in the administrative process. This case is therefore unlike Bowen v. Michigan Academy of Family Physicians, 476 U.S. 667, 678, 90 L. Ed. 2d 623, 106 S. Ct. 2133 (1986), where the plaintiffs were foreclosed from challenging the Secretary's regulations administratively.
Third, and most important, to prove their claims plaintiffs must rely in a dispositive manner on the standards of the Medicare Act and Aetna's contract with the Secretary. The underlying claim of fraud would necessitate a showing that defendants violated a duty owed to them, and the contours of that duty are found in the Act and the regulations. Plaintiffs must also rely on the denial of an entitlement under the Act to establish the injury required by standing doctrine. Since "both the standing and the substantive basis for the presentation" of plaintiffs' claims are, in considerable part, the Medicare Act, § 405(h) precludes jurisdiction. See Weinberger v. Salfi, 422 U.S. 749, 760-61, 45 L. Ed. 2d 522, 95 S. Ct. 2457 (1975).
Plaintiffs argue that they are attacking "methodology" rather than benefit determinations. This very claim was rejected by the Supreme Court in Ringer, 466 U.S. at 614, where the plaintiffs claimed that the Secretary employed an unlawful presumption that certain surgical operations could not be reimbursed under the Act. In the cases that followed Michigan Academy, courts have made clear that while jurisdiction is proper to adjudicate challenges to the Secretary's regulations, it is lacking when the claim is merely that the intermediary or carrier misapplied or misinterpreted valid rules or regulations. See, e.g., Kuritzky v. Blue Shield of Western New York, 850 F.2d 126 (2d Cir. 1988), cert. denied, 488 U.S. 1006, 57 U.S.L.W. 3452, 102 L. Ed. 2d 778, 109 S. Ct. 787 (1989); McCuin v. Secretary of HHS, 817 F.2d 161, 164-66 (1st Cir. 1987); Linoz v. Heckler, 800 F.2d 871, 876 (9th Cir. 1986); Neiman v. Secretary of HHS, Medicare & Medicaid Guide (CCH) para. 37,569 (E.D.N.Y. Sept. 21, 1988); Griffith v. Bowen, 678 F. Supp. 942 (D. Mass. 1988). As stated in Kuritzky, "method" does not mean carrier practice, but the method set forth in the Secretary's regulatory scheme. 850 F.2d at 128.
Aetna acted in its capacity as fiscal intermediary when it reviewed plaintiffs' claims, even if it reviewed them improperly for base and fraudulent reasons. Plaintiffs' charges here are therefore inextricably intertwined with benefit determination and must first be processed through the system Congress and the Secretary chose. Although that system may not provide review for all determinations, and may not provide plaintiffs' compensation for consequential damages, this court cannot now make its own determination that thousands of services were reasonable and necessary and that therefore thousands of benefits should have been paid.
We conclude that plaintiffs' claims are inextricably intertwined with Medicare benefit determinations -- claims which Congress intended to confine to the administrative process. We therefore grant defendants' motion, and this cause is dismissed. The government's motion to intervene is denied as moot.
JUDGMENT IN A CIVIL CASE - February 9, 1989, Filed
Decision by Court. This action came to trial or hearing before the Court. The issues have been tried or heard and a decision has been rendered.
IT IS ORDERED AND ADJUDGED
We therefore grant defendants' motion, and this cause is dismissed. (See Memorandum and Order dated 2-8-89)