Federal Court Sends Mixed Message On Hospital's Right To Payment For Out-Of-Network Services

Hospitals seeking reimbursement from a Medicaid managed care organization (MCO) for non-contracted services, and without the benefit of a single case agreement, need a legal basis to compel payment by the MCO. Hospitals have variously argued, for example, that by failing to pay, the plan has: been unjustly enriched; violated state statutes mandating payment for out-of-network emergency medical services or provisions of Title XIX of the Social Security Act (the Medicaid Statute); and/or breached its obligations under the contract with the state Medicaid agency pursuant to which the plan served as a Medicaid MCO. In a decision earlier this month that sent a mixed message to providers, a federal court refused to recognize a hospital's right to sue for reimbursement for out-of-network services either on a variant of the unjust enrichment theory or under the Medicaid Statute. The same court, however, allowed the hospital to maintain an action as a third-party beneficiary of the defendant Medicaid MCO's agreement with the state Medicaid agency.

Case Background

On June 6, 2012, the U.S. District Court in Washington D.C. denied in part and granted in part a motion by Advantage Health Plan Inc. (Advantage) to dismiss causes of action brought against it by Prince George's Hospital Center (P.G. Hospital). Prince George's Hosp. Ctr. v. Advantage Health Plan Inc., No. 03-2392, 2012 U.S. Dist. LEXIS 78257 (D.D.C.) (Memorandum Opinion). Advantage operated a Medicaid MCO under contracts with the District of Columbia and had entered into network contracts with various health care providers in the D.C. area. P.G. Hospital, which is located in Maryland in the suburbs of D.C., was not a part of the Advantage network.

P.G. Hospital provided emergency services to five Advantage members...