Morrison v. Health Plan of Nev.

130 Nev., Advance Opinion 55
IN THE SUPREME COURT OF THE STATE OF NEVADA
LOUIS MORRISON, No. 61082
Appellant,
vs.
HEALTH PLAN OF NEVADA, INC.; FILED
SIERRA HEALTH SERVICES, INC.;
SIERRA HEALTH AND LIFE INSURANCE
JUL 1 0 2014
COMPANY, INC.; SIERRA HEALTH-CARE TRACIE K. LINDEMAN
RT
OPTIONS, INC.; UNITED HEALTHCARE
INSURANCE COMPANY; AND UNITED
HEALTHCARE SERVICES, INC.,
Respondents.
Appeal from a district court order dismissing a tort action.
Eighth Judicial District Court, Clark County; Rob Bare, Judge.
Affirmed.
Kemp, Jones & Coulthard, LLP, and Will Kemp and Eric M. Pepperman,
Las Vegas,
for Appellant.
Holland & Hart, LLP, and Constance L. Akridge and Matthew T. Milone,
Las Vegas; Bryan Cave LLP and Lawrence G. Scarborough, J. Alex
Grimsley, and Meridyth M. Andresen, Phoenix, Arizona,
for Respondents.
McDonald Carano Wilson LLP and Debbie A. Leonard and Seth T. Floyd,
Las Vegas; Crowell & Moring LLP and Arthur N. Lerner and April N.
Ross, Washington, D.C.,
for Amicus Curiae America's Health Insurance Plans, Inc.
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Matthew L. Sharp, Ltd., and Matthew L. Sharp, Reno; Gillock & Killebrew
and Gerald I. Gillock and Nia C. Killebrew, Las Vegas; Edward M.
Bernstein & Associates and Patti S. Wise and Gary W. Call, Las Vegas;
Friedman Rubin and Richard H. Friedman and William S. Cummings,
Bremerton, Washington,
for Amid Curiae Dolores J. Cappetto, Carole Grueskin, James London,
Rodolfo Meana, and Dorothy Rogers.
Fennemore Craig Jones Vargas and James L. Wadhams and Alexis L.
Brown, Las Vegas,
for Amicus Curiae Nevada Association of Health Plans.
BEFORE THE COURT EN BANC.'
OPINION
By the Court, HARDESTY, J.:
In this appeal, we are asked to determine whether a Medicare
beneficiary's state common law negligence claim against his private health
insurance company, through which he is receiving his Medicare benefits,
is preempted by the federal Medicare Act. Because we conclude that state
common law negligence claims regarding the retention and investigation
of contracted Medicare providers are expressly preempted by the Medicare
Act, we affirm the district court's order.
FACTS AND PROCEDURAL HISTORY
Respondents Health Plan of Nevada, Inc.; Sierra Health
Services, Inc.; Sierra Health and Life Insurance Company, Inc.; Sierra
'The Honorable Ron Parraguirre, Justice, voluntarily recused
himself from participation in the decision of this matter.
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Health-Care Options, Inc.; United Healthcare Insurance Company; and
United Healthcare Services, Inc. (collectively, HPN) are health insurance
businesses that specialize in health maintenance and/or managed care.
They are engaged in the joint venture of providing insurance, including
providing medical services to Medicare beneficiaries through the
administration of Medicare Advantage (MA) Plans. Appellant Louis
Morrison is a Medicare beneficiary who received his Medicare benefits
through an MA Plan offered by HPN. Under HPN's insurance contract,
Morrison was required to seek medical care from providers chosen by
HPN. Since at least 2004, HPN had contracted with the Endoscopy
Center of Southern Nevada, the Gastroenterology Center of Nevada, and
the doctors employed or associated with the Gastroenterology Center of
Nevada (collectively, the Clinic) 2 In 2006, Morrison was treated by the
Clinic based on its status as a contracted provider for HPN; as a result of
his treatment there, he became infected with hepatitis C.
Morrison's second amended complaint alleged that HPN
breached its duty to "use reasonable care to select its health care
providers" and "to inquire into the medical practices at the clinic" and was
negligent in directing him to seek treatment at the Clinic. 3 The complaint
2 It
appears that HPN contracted with the Clinic prior to 2004, but
the record fails to reveal the commencement date of the contract.
3 Morrison's original complaint contained allegations that HPN failed
to monitor medical practices at the Clinic and that it violated NRS
Chapter 695G, which establishes Nevada's quality assurance program.
HPN filed a motion to dismiss the claim as preempted by federal law. The
district court agreed the claim was preempted, but it granted Morrison
leave to amend the complaint. In his first amended complaint, Morrison
still alleged a failure to monitor the Clinic but removed any references to
the Nevada statutes. HPN filed another motion to dismiss based on
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alleged that HPN failed to properly investigate the Clinic and knew or
should have known that since at least 2004 the Clinic engaged in unsafe
medical practices causing a high risk of transmission of blood borne
pathogens, such as hepatitis C, to patients at the Clinic The district court
ultimately dismissed Morrison's second amended complaint with
prejudice, finding that Morrison's claim was preempted by the federal
Medicare Act pursuant to this court's decision in Pacificare of Nevada, Inc.
v. Rogers, 127 Nev. , 266 P.3d 596 (2011). Morrison argues on appeal
that the district court erred in applying Rogers to dismiss his claim
because the Medicare Act's preemption statute does not apply to his state
common law negligence claim.
DISCUSSION
To resolve this appeal, we must determine whether state
common law negligence claims against Medicare plan providers are
preempted by the federal Medicare Act. 4 The Medicare Act, enacted as
Title XVIII of the Social Security Act and codified at 42 U.S.C. §§ 1395-
1395kkk (2012), "creates a federally subsidized nationwide health
...continued
preemption. The district court again agreed that the claim was preempted
because, despite the removal of references to the Nevada statutes, the
claim was still one for negligent implementation of a quality assurance
program. But the district court once again allowed Morrison to amend his
complaint.
4The dissent discusses at length, and cites to cases as well as the
Restatement (Second) of Torts, the proposition that one can sue an HMO
for negligence in its selection and retention of its providers. However, the
majority of the cases cited by the dissent involve a hospital's duty of care,
not an HMO's duty of care. Moreover, none of these cases involve
Medicare preemption, which is the issue in this case.
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insurance program for elderly and disabled individuals." Rogers, 127 Nev.
at , 266 P.3d at 598. Pursuant to Part C of the Act, beneficiaries may
receive Medicare benefits through MA plans provided by private entities
called MA organizations. Id. (citing 42 C.F.R. § 422.2 (2010)).
"MA Organizations and their plans contract with, and are
subject to extensive regulation by, the Centers for Medicare and Medicaid
Services (CMS)." Id.; see, e.g., 42 U.S.C. § 1395w-26(b)(1) (2012).
Importantly, each MA organization that maintains one or more MA plans
is required to adhere to a federally regulated quality improvement
program. 42 C.F.R. § 422.152(a) (2013). The regulations specifically
require that the MA organization "[Inlake available to CMS information
on quality and outcomes measures that will enable beneficiaries to
compare health coverage options and select among them." Id.
§ 422.152(b)(3)(iii). The quality improvement program also requires that
each MA organization "have written policies and procedures for the
selection and evaluation of providers." Id. § 422.204(a). An MA
organization must also ensure that each physician or other health care
professional be initially credentialed by review of verified "licensure or
certification from primary sources, disciplinary status, eligibility for
payment under Medicare, and site visits as appropriate." Id.
§ 422.204(b)(2)(i).
Although CMS does not directly select the physicians or
facilities that are included in an MA plan's network, federal regulations
require an MA organization to select and retain only those providers that
meet the qualifications specified in the Medicare Act. See id. § 422.204(b).
Furthermore, CMS has specified "requirements for relationships
between ... MA organizations [ I and the physicians and other health care
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professionals and providers with whom they contract to provide services to
Medicare beneficiaries enrolled in an MA plan." Centers for Medicare &
Medicaid Services, Medicare Managed Care Manual, Ch. 6, § 10 (Rev. 24,
June 6, 2003).
Morrison's common law negligence claim is expressly preempted by the
Medicare Act
The Medicare Act contains an express preemption clause
which states that
[t]he standards established under this part shall
supersede any State law or regulation (other than
State licensing laws or State laws relating to plan
solvency) with respect to MA plans which are
offered by MA organizations under this part.
42 U.S.C. § 1395w-26(b)(3) (2012). The scope of this preemption statute is
very broad, and the "MA standards set forth in 42 CFR 422 supersede any
State laws, regulations, contract requirements, or other standards that
would otherwise apply to MA plans," with the exception of laws relating to
licensing and plan solvency. Medicare Managed Care Manual, Ch. 6, §
30.1 (Rev. 101, August 18, 2011). "In other words, unless they pertain to
licensure and/or solvency, State laws and regulations that regulate health
plans do not apply to MA plans offered by MA organizations." Id.
When Congress explicitly conveys its intent to preempt in a
statute, express preemption exists. Rolf Jensen & Assocs., Inc. v. Eighth
Judicial Dist. Court, 128 Nev. „ 282 P.3d 743, 746 (2012) ("The
preemption doctrine emanates from the Supremacy Clause of the United
States Constitution, pursuant to which state law must yield when it
frustrates or conflicts with federal law."). "When a federal act contains an
express preemption provision, this court's primary task is to 'identify the
domain expressly pre-empted by that language." Rogers, 127 Nev. at ,
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266 P.3d at 600 (quoting Medtronic, Inc. v. Lohr, 518 U.S. 470, 484 (1996)).
In doing so, we must 'focus on the plain wording of the clause, which
necessarily contains the best evidence of Congress' pre-emptive intent."
Id. (quoting CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664 (1993)).
Even when there is no statutory language expressly preempting state law,
preemption may be implied if Congress intended to thoroughly occupy the
field or when the federal law conflicts with state law. Rolf Jensen, 128
Nev. at , 282 P.3d at 746. "Whether state law claims are preempted by
federal law is a question of law that we review de novo, without deference
to the findings of the district court." Id.
With respect to Medicare Act preemption, we previously
considered this clause in Rogers. 127 Nev. at , 266 P.3d at 600. In that
case, the plaintiff filed suit against Pacificare, her Medicare provider, for
injuries resulting from treatment she received at a Pacificare-approved
facility under its MA plan. Id. at , 266 P.3d at 598. Similar to this
case, the plaintiff asserted that Pacificare was liable for her injuries
because it neglected to employ a proper quality assurance program Id.
We did not address whether her claims were preempted by the Medicare
Act, however, because Pacificare argued that an arbitration provision
included in the parties' contract governed, necessitating dismissal of
plaintiffs claims, and thus the question before us was whether Nevada's
common law unconscionability doctrine is preempted by the Medicare Act.
In resolving that issue, we considered the express language
and legislative history of the Medicare Act's preemption provision. Id. at
, 266 P.3d at 600-01. We stated that "[p]rior to 2003, Congress
recognized a presumption against preemption unless a state law was in
conflict with a Medicare requirement or fell within one of four express
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categories of preempted standards." Rogers, 127 Nev. at , 266 P.3d at
601. We then noted, however, that the 2003 amendment of the Act
broadened the preemption coverage by stating that state laws are
presumed to be preempted unless the law in question falls within two
specific categories: state licensing requirements or state laws related to
plan solvency. Medicare Program; Establishment of the Medicare
Advantage Program, 69 Fed. Reg. 46866, 46904 (proposed Aug. 3, 2004) (to
be codified at 42 C.F.R. pt. 417 and 422); see Rogers, 127 Nev. at , 266
P.3d at 601. Thus, we concluded that the "legislative history shows that
the Act's preemption provision has been specifically amended to include
generally applicable common law." Rogers, 127 Nev. at , 266 P.3d at
601; see Estate of Ethridge v. Recovery Mgmt. Sys., Inc., P.3d ,
No. 1 CA-CV-12-0740, 2014 WL 1911006, at *4 (Ariz. Ct. App. May 13,
2014) ("The amendment was intended to 'clarif[y] that the MA program is
a federal program operated under Federal rules. State laws, do not, and
should not apply, with the exception of state licensing laws or state laws
related to plan solvency." (alteration in original) (quoting H.R. Rep. No.
108-391, at 557 (2003), reprinted in 2003 U.S.C.C.A.N. 1808, 1926)).
Thus, as we concluded in Rogers, the Medicare preemption
statute "demonstrates a legislative intent to broaden the preemption
provision beyond those state laws that are simply inconsistent with
enumerated categories of standards." Rogers, 127 Nev. at 266 P.3d at
601. Therefore, 'all [s]tate standards, including those established through
case law, are preempted to the extent they specifically would regulate MA
plans.'" Id. (alteration in original) (quoting Do Sung Uhm v. Humana,
Inc., 620 F.3d 1134, 1156 (9th Cir. 2010) (internal quotations omitted)).
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Federal standards exist regarding the conduct at issue in Morrison's
common law negligence claim
Morrison argues that Congress intended for state laws and
regulations to be preempted only when an express Medicare standard
exists. And because no published Medicare standard exists that would
supersede his common law negligence claim that HPN negligently directed
him to receive treatment at the Clinic, he contends, the district court erred
in concluding that it was expressly preempted. We disagree.
We have already concluded that a state law need not be
"inconsistent" with the federal standard to be preempted, but rather, as
long as a federal standard exists regarding the conduct at issue "all fs] tate
standards, including those established through case law, are preempted to
the extent they specifically would regulate MA plans." Rogers, 127 Nev. at
, 266 P.3d at 601 (alteration in original) (emphasis omitted) (quoting
Do Sung Uhm, 620 F.3d at 1156). But even if we accepted Morrison's
argument that state law claims are preempted only where express
Medicare standards exist, Morrison's claim would be preempted. "While
the term 'standard' is not defined in the Act, 'a "standard" within the
meaning of the preemption provision is a statutory provision or a
regulation promulgated under the Act and published in the Code of
Federal Regulations." Id. at 600 (quoting Do Sung Uhm, 620 F.3d at 1148
n.20).
As noted above, CMS has promulgated regulations for MA
organizations to adhere to when selecting and contracting with providers
for its MA plans. See, e.g., 42 C.F.R. § 422.4(a)(1)(i) (2013) (providing that
CMS will approve the network of providers to confirm that all federal
standards, including quality of care, are being met); id. § 422.204 (setting
forth the general standards for MA organizations regarding "[pirovider
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selection and credentialing"); id. § 422.152(a) (requiring MA organizations
to maintain quality improvement programs for each MA plan, which must
include ongoing evaluation and quality assessment); id. § 422.152(f)(3)
(requiring that "[for each plan, the organization must correct all problems
that come to its attention through internal surveillance, complaints, or
other mechanisms")
CMS has specified "requirements for relationships
between. . . MA organizations H and the physicians and other health care
professionals and providers with whom they contract to provide services to
Medicare beneficiaries enrolled in an MA plan." Centers for Medicare &
Medicaid Services, Medicare Managed Care Manual, Ch. 6, § 10 (Rev. 82,
April 27, 2007). In particular,
Fain MA organization's site visit policy must
include procedures for detecting deficiencies and
have mechanisms in place to address those
deficiencies.. . . The MA organization must
develop and implement policies that address the
ongoing monitoring of sanctions and grievances
filed against health care professionals. . In the
event that an MA organization finds an incidence
of poor quality or any type of sanction activity
against a health care professional, it should
intervene and correct the situation appropriately.
Id. § 60.3. Furthermore, in interpreting its regulations, CMS has stated
that state laws which "set forth ongoing marketing, quality assurance, or
network adequacy requirements for MA plans" are preempted. Id., Ch. 10,
§ 30.1.
Thus, federal law provides standards that MA organizations
must adhere to in conducting the relationship with their contracted
providers. A state law action asserting that HPN was negligent in
directing its insureds to the Clinic could result in the imposition of
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additional state law requirements on the quality assurance regime
regulated by CMS. Thus, we conclude that even if the Medicare
preemption provision applied only when express Medicare provisions exist,
Morrison's state common law negligence claims would still be preempted.
See Rogers, 127 Nev. at , 266 P.3d at 601.
The dissent argues that the federal regulations we cite do not
immunize providers from liability and "fain ] to touch on the generally
applicable negligence claim at issue here." Dissenting opinion post. at 7.
The dissenting justices' argument maintains that the minimum standards
do not immunize providers from liability without exploring why they are
not standards that "supersede any State law or regulation (other than
State licensing laws or State laws relating to plan solvency) with respect
to MA plans." 42 U.S.C. § 1395w-26(b)(3) (2012).
Furthermore, the dissent mischaracterizes the nature of
Morrison's claim, referring to it as a "negligent selection claim."
Dissenting opinion post. at 2. Certainly, Morrison's second amended
complaint stated that HPN failed "to use reasonable care to select its
health care providers" and "to inquire into the medical practices at the
clinic." But our review of the record reveals that Morrison argued to the
district court and to this court that he sought damages for HPN's
negligence in directing its insureds to the Clinic after HPN became aware
that patients undergoing procedures at the Clinic had contracted hepatitis
C. Thus, Morrison's claim was not one of negligent selection, but rather,
was based on HPN's failure to monitor its provider. This is a negligent
quality assurance claim that is specifically covered by the federal
regulatory scheme. Interestingly, the dissent admits that the Medicare
standards we cite "might preempt Nevada's quality assurance standards,
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established by NRS 695G.180," dissenting opinion post. at 6, yet the
dissenting justices fail to distinguish why a common law claim based upon
the same conduct would not be preempted. Even assuming that the claim
is not directly related to quality assurance, as we noted earlier in this
opinion, supra at 10, Medicare has established standards that broadly
regulate an MA organization's conduct and relationship with the providers
to whom it sends its insureds, and such regulations preempt Morrison's
claim related to that relationship. See, e.g., 42 C.F.R. § 422.152(0(3)
(requiring that "[for each plan, the organization must correct all problems
that come to its attention through internal surveillance, complaints, or
other mechanisms").
The Medicare Act's preemption clause applies to claims against MA
organizations
Morrison also argues that even if the Medicare Act's
preemption provision applies to state common law negligence claims, it
does not apply in this matter because his claim is asserted against his MA
organization, not his MA plan. He claims that the Medicare Act
preemption clause only expressly preempts "any State law or
regulation . . . with respect to MA plans," and therefore the preemption
statute does not apply to his claim against his MA organization. 42 U.S.C.
§ 1395w-26(b)(3) (2012). In addition, he argues that this court has already
held in Munda v. Summerlin Life & Health Insurance Co., 127 Nev. ,
267 P.3d 771 (2011), that a plaintiffs identical negligence claim is not
preempted by ERISA and that the "with respect to" language in the
Medicare Act should be interpreted in the same way as the language in
ERISA which preempts state laws that "relate to" employee benefit plans.
See 29 U.S.C. § 1144(a) (2012).
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First, we look to the plain language of the Medicare Act's
preemption provision which states that "[t]he standards established under
this part shall supersede any State law or regulation . . . with respect to
MA plans which are offered by MA organizations under this part." 42
U.S.C. § 1395w-26(b)(3) (2012) (emphasis added). In looking at the plain
language of the provision as a whole, we determine that because MA plans
can only be offered by MA organizations, the two are linked such that a
claim regarding one is necessarily a claim regarding both. Morrison would
have no claim against HPN if not for the MA plan. Moreover, in Rogers
we failed to see a distinction between a claim brought against the MA
organization and a claim brought against the MA plan. 127 Nev. at
n.4, 266 P.3d at 601 n.4 (IN] othing in the statutory text of the Act
suggests that a state law or regulation must apply only to [an MA plan] in
order to constitute a law "with respect to" an MA plan." (second alteration
in original) (quoting Do Sung Uhm, 620 F.3d at 1150 n.25)). Finally,
reading the statute in the way Morrison urges would lead to an absurd
result, as the insured could simply name its MA organization, and not the
MA plan, as the defendant in order to avoid preemption. We thus
conclude that Morrison's argument regarding the language of the
Medicare Act fails. 5 Las Vegas Taxpayer Accountability Comm. v. City
5 Morrison additionally argues that his case is distinguishable from
Rogers because the negligence common law under which he is bringing his
claim does not regulate MA plans, only the corporate choices of his
insurer. We reject this argument, as the conduct identified in Morrison's
common law negligence claim is the same conduct that is specifically
regulated by the Medicare Act. As such, if Morrison is allowed to argue
that a different state standard should be applied to the MA organization,
the federal regulation of MA plans would be frustrated, and we must yield
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Council of Las Vegas, 125 Nev. 165, 177, 208 P.3d 429, 437 (2009)
("[W hen interpreting a statute, the language of the statute should be
given its plain meaning. . . .").
We also conclude that Morrison's argument regarding our
interpretation of the preemption clause in ERISA fails to support his
position. Morrison relies upon Munda v. Summerlin Life & Health
Insurance Co., 127 Nev. , 267 P.3d 771, 776 (2011), where this court
ultimately determined that the insureds' claim that their insurer was
negligent in failing to comply with quality assurance standards was not
preempted by ERISA. In Munda, we discussed that generally "ERISA
preempts [state] suits that are predicated on administrative decisions
made in administering an ERISA plan," which include decisions regarding
the selection and retention of providers. 127 Nev. at , 267 P.3d at 775.
However, we concluded that the plaintiffs' claim was not preempted
because they alleged facts to show that their insurer/managed care
organization (MCO) was not acting in its capacity as an administrator of
the ERISA plan when it selected and oversaw its providers, but rather, in
...continued
to the federal law. See Rolf Jensen & Assocs., Inc. v. Eighth Judicial Dist.
Court, 128 Nev. „ 282 P.3d 743, 746 (2012).
Finally, Morrison argues that this case is distinguishable from
Rogers because there is no risk of an inconsistent result by allowing his
negligence claim to survive. Morrison reasons that if HPN is found
negligent, it would not run afoul of any Medicare standard because there
is no standard that allows an HMO to direct an insured to a provider it
knows or should know uses unsafe practices. This argument is
unavailing. The concern in Rogers, that federal and state standards will
differ and lead to inconsistent results, is applicable here. See Pacificare of
Nev., Inc. v. Rogers, 127 Nev. , 266 P.3d 596, 601 (2011).
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its independent role as an insurer. 127 Nev. at , 267 P.3d at 776.
Thus, the duty on which the claim was based existed outside of the
insurer's relationship with the ERISA plan. Id.
Morrison contends that his case is analogous to Munda
because HPN contracted with its providers in its independent role as
insurer, not in its special capacity as an MA organization. All of its
insureds were directed to use its providers, whether they were under a
Medicare plan or not. However, Morrison's argument fails because ERISA
and Medicare are fundamentally different programs and cannot be
analyzed in the same way. Unlike ERISA, the Medicare Act has
established standards that regulate an MA organization's selection of
providers and implementation of a quality assurance regime. No state law
may intercede in that regime. The ERISA program does not have
analogous standards regulating the insurers for quality assurance.
CONCLUSION
The Medicare preemption provision contained in 42 U.S.C. §
1395w-26(b)(3) is very broad, and we have previously determined that it
applies beyond those state laws that are simply inconsistent with the
express standards set out in the Medicare Act: it preempts all state
standards to the extent that they would regulate MA plans, other than
laws and regulations related to licensing and plan solvency, including
those established through case law. Rogers, 127 Nev. at , 266 P.3d at
601. Morrison's state law negligence claim would seek to regulate how
contracted providers for MA plans are monitored, and thus, Morrison's
claim is expressly preempted by 42 U.S.C. § 1395w-26(b)(3). And
Morrison's arguments on appeal do not provide any basis for finding that
his claims fall outside of the Medicare preemption provision. Accordingly,
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for the reasons set forth in this opinion, we affirm the district court's order
dismissing Morrison's state common law negligence action.
J.
Hardesty
J.
J.
J.
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CHERRY, J., with whom GIBBONS, C.J., agrees, dissenting:
Today the majority holds that federal statutes and regulations
preempt a Medicare recipient's claim against his Medicare Advantage
organization for negligently selecting and retaining a contracted provider
who infected the Medicare recipient with hepatitis C. It does so for two
reasons: (1) Medicare regulations already set forth standards covering
Medicare Advantage organizations' selection of contracted providers; and
(2) any state tort law imposing a duty of care in selecting contracted
providers would constitute a state law "with respect to" Medicare plans,
which is expressly preempted under 42 U.S.C. § 1395w-26(b)(3). I
respectfully dissent because I disagree with both rationales.
Medicare Advantage
As explained by the majority, Medicare Part C created the
Medicare Advantage program, whereby health insurance organizations
may contract with Medicare to provide federally subsidized health plans to
Medicare enrollees. Medicare's regulatory agency, CMS, refers to these
health insurance organizations (which can be health maintenance
organizations, preferred provider organizations, religious fraternal benefit
plans, or other organizations) as Medicare Advantage (MA) organizations.
MA organizations can be private entities that also offer health
plans apart from the Medicare plans. MA organizations operate just as
any non-Medicare health insurance organization would operate. For
example, MA HMOs, like non-Medicare HMOs, contract with a network of
providers to provide medical services. Health Plan of Nevada (HPN) is an
HMO that also offers a Medicare Advantage plan.
CMS comprehensively regulates the MA plans offered by MA
organizations. It approves the MA organizations' advertising materials,
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the providers with whom the organizations contract, and the terms of
those contracts. It requires that MA organizations implement quality
improvement programs. And it also requires that MA organizations
establish grievance procedures, which enrollees may use to complain about
the services offered by an MA organization and its providers.
Negligent selection claims
As an HMO, HPN contracted with and directed its insureds to
a particular provider that, appellant Louis Morrison asserts, HPN knew or
should have known was dangerous and unsafe. Morrison's claim against
HPN for negligent selection and retention of a contracted provider is not a
novel claim. 1 The following analysis of negligent selection claims will
provide a useful background for preemption analysis.
Negligent selection and retention claims are based on the
theory that, when an HMO holds out a physician as competent by making
that physician a contracted provider, the HMO's failure to investigate the
physician's skill and qualifications creates a foreseeable and unreasonable
risk of harm to patients.
An HMO's duty of care in selecting and retaining contracted
providers evolved out of the hospital context, where hospitals must
determine which physicians may practice at their facilities. See Barry R.
'The majority states that "Morrison's claim was not one of negligent
selection, but rather, was based on HPN's failure to monitor." Majority
opinion ante at 11. But the second amended complaint alleges that
"Defendants owed a duty to Plaintiff. . . to use reasonable care to select its
health care providers" and that "Defendants breached this duty by failing
to direct the Plaintiff to seek medical care at reasonably safe facilities." In
these statements Morrison clearly alleges the duty and breach elements of
a negligent selection claim.
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Furrow, Managed Care Organizations and Patient Injury: Rethinking
Liability, 31 Ga. L. Rev. 419, 457, 461-62 (1997). Courts have held that
"the failure to investigate a medical staff applicant's qualifications for the
privileges requested gives rise to a foreseeable risk of unreasonable harm
and. . . a hospital has a duty to exercise due care in the selection of its
medical staff." Johnson v. Misericordia Cmty. Hosp., 301 N.W.2d 156, 164
(Wis. 1981). In Moore v. Board of Trustees of Carson-Tahoe Hospital, 88
Nev. 207, 495 P.2d 605 (1972), this court recognized both the changing role
of the hospital and the concept of a hospital's "corporate responsibility for
the quality of medical care." Id. at 211-12, 495 P.2d at 608.
The Missouri Court of Appeals in Harrell v. Total Health Care,
Inc., No. WD 39809, 1989 WL 153066, at *4-5 (Mo. Ct. App. Apr. 25, 1989),
affirmed, 781 S.W.2d 58 (Mo. 1989), determined that HMOs have assumed
a role sufficiently similar to that of a hospital to justify extending liability
to HMOs. In that case, the court agreed with arguments that HMOs owe
a duty of care to properly vet their contracted providers. The court
reasoned that, in order for patients to realize the benefit of their health
insurance, they must be treated by physicians approved by their plan. Id.
at *5. In this arrangement "there is an unreasonable risk of harm to
subscribers if the physicians listed ... include doctors who are unqualified
or incompetent." Id. The court held that the presence of this risk gives
rise to a duty owed by the insurance company to ensure that contracted
physicians are qualified and competent. Id.
Other courts have since upheld a plaintiffs ability to bring a
negligent selection claim against an HMO. See Petrovich v. Share Health
Plan of Ill., Inc., 696 N.E.2d 356, 360-61 (Ill. App. Ct. 1998) (holding that
HMOs can be liable for "corporate negligence as a result of negligent
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selection and control of the physician who rendered care"); McClellan v.
Health Maint. Org. of Pa., 604 A.2d 1053, 1059 (Pa. Super. Ct. 1992)
("HMOs have a non-delegable duty to select and retain only competent
primary care physicians."). Some courts have also found that HMOs owe a
duty of care in selecting contracted providers under the Restatement
(Second) of Torts § 323 (1965), which states that
[o]rie who undertakes, gratuitously or for
consideration, to render services to another which
he should recognize as necessary for the protection
of the other's person or things, is subject to
liability to the other for physical harm resulting
from his failure to exercise reasonable care to
perform his undertaking, if (a) his failure to
exercise such care increases the risk of such harm,
or (b) the harm is suffered because of the other's
reliance upon the undertaking.
See, e.g., McClellan, 604 A.2d at 1059.
In this case, HPN is a Nevada-licensed HMO that selects and
contracts with medical providers. Morrison should not be prevented from
enforcing the duty of care that HPN may owe to him simply because
Morrison is a Medicare recipient, while HPN's non-Medicare customers
may do so. As explained below, no such unequal treatment is created by
the Medicare Act's preemption clause.
Preemption
"When a federal act contains an express preemption provision,
this court's primary task is to 'identify the domain expressly pre-empted
by that language." Pacificare of Nev., Inc. v. Rogers, 127 Nev.
266 P.3d 596, 600 (2011) (quoting Medtronic, Inc. v. Lohr, 518 U.S. 470,
484 (1996)). Under the Medicare Act, the standards established by the
federal Medicare statutes and regulations "supersede any state
law .. . with respect to MA plans which are offered by MA organizations,"
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except for licensing and solvency requirements. 42 U.S.C. § 1395w-
26(b)(3) (2012); 42 C.F.R. § 422.402 (2013). Thus, to determine whether
the domain is expressly preempted, one must consider (1) if there are
federal standards superseding state negligent selection and retention law
and (2) if negligent selection claims may result in laws "with respect to"
MA plans
Federal standards
The majority states that lailthough CMS does not directly
select the physicians . . . federal regulations require an MA organization to
select and retain only those providers that meet the qualifications
specified in the Medicare Act." Majority opinion ante at 5. The majority
goes on to list several federal regulations that the majority contends
preempt negligent selection claims. It reasons that such claims, although
not necessarily inconsistent with the federal standards, "could result in
the imposition of additional state law requirements on the quality
assurance regime regulated by CMS." Id. at 10-11. I do not believe that
those regulations create standards regulating the negligent selection of
providers.
The majority first points to 42 C.F.R. § 422.4(a)(1)(i), which
states that an MA organization's "network [of providers] is approved by
CMS to ensure that all applicable requirements are met, including access
and availability, service area, and quality." Nevertheless, the fact that
CMS approves of a provider's inclusion in the network does not mean that
negligent selection claims against the MA organization are preempted.
For instance, 42 C.F.R. §§ 416.1-200 creates standards regulating certain
providers, but the existence of those standards does not make the
providers immune to negligence suits. In fact, Medicare regulations
specifically acknowledge that a Medicare provider may be sued for
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malpractice. 42 C.F.R. § 424.530(a)(3)(i)(C) (2013) (stating that CMS may
deny a provider's Medicare reenrollment if the provider is convicted of
"[a]ny felony that placed the Medicare program or its beneficiaries at
immediate risk (such as a malpractice suit that results in a conviction of
criminal neglect or misconduct)"). Just as CMS's provider standards do
not preempt providers' malpractice liability, CMS's approval of an MA
organization's provider selection does not preempt MA organizations'
negligence liability.
The majority then considers 42 C.F.R. § 422.204(a), which
states that "[a]n MA organization must have written policies and
procedures for the selection and evaluation of providers. These policies
must conform with the credential and recredentialing requirements set
forth in paragraph (b) of this section and with the antidiscrimination
provisions set forth in § 422.205." But the existence of minimum
requirements for participation in Medicare Advantage does not preempt
MA organizations' tort liability. Despite the existence of minimum
procedural requirements, it is still the MA organization that "select[s] the
practitioners that participate in its plan provider networks." 42 C.F.R. §
422.205(a) (2013). It is that discretionary selection that Morrison alleges
HPN negligently performed—a selection that an HMO such as HPN may
also make in a non-Medicare capacity.
Finally, the majority refers to the quality improvement
program that CMS requires MA organizations to implement. See 42
C.F.R. 422.152(a) (2013). I agree that this program might preempt
Nevada's quality assurance standards, established by NRS 695G.180.
And CMS's interpretation of its regulations says that states may not set
forth ongoing quality assurance requirements. Medicare Managed Care
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Manual, ch. 10, § 30.1 (Nov. 4, 2011). Yet CMS states in the same text
that "[o]ther State health and safety standards, or generally applicable
standards, that are not specific to health plans are not preempted." Id.
§ 30.2. A general duty of care is just such a generally applicable
standard. 2
Thus, each federal standard cited by the majority fails to touch
on the generally applicable negligence claim at issue here. In addition,
any concern that tort liability may indirectly increase costs to MA
organizations, thereby impacting their ability to comply with regulations,
is irrelevant. The Supreme Court of the United States has stated, in the
ERISA context, that state laws that are otherwise not preempted and that
"affect only indirectly the relative prices of insurance policies, a result no
different from myriad state laws in areas traditionally subject to local
regulation," are not preempted. N.Y. State Conference of Blue Cross &
Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 668 (1995). The
same logic applies to this case.
"With respect to"
Even if federal regulations provided standards governing the
negligent selection of providers, it is not clear that negligent selection
2 The majority argues that we do not distinguish conduct violating
quality assurance requirements from conduct that might violate a duty of
care. The distinction is obvious. An insurance organization violates NRS
695G.180's quality assurance standards when it fails to establish the
procedures and record-keeping that constitute a quality insurance
program. An insurance organization breaches a general duty of care when
it commits tortious acts against its customers. One set of conduct
concerns procedures and paperwork; the other concerns actual negligent
acts that cause injury.
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liability creates state law "with respect to" MA plans. This court has
interpreted similar language in the ERISA context. Under ERISA, all
state laws that "relate to" certain employee benefit plans are expressly
preempted. 29 U.S.C. § 1144(a) (2012). In Munda v. Summerlin Life &
Health Insurance Co., 127 Nev. „ 267 P.3d 771, 773 (2011), the
appellants argued that federal ERISA regulations did not "relate to" their
claim for negligence, which alleged that the respondent "failed to identify
the unsafe practices of or terminate its contract with the" provider. This
court agreed, stating that ERISA's express preemption provision "does not
preempt claims that are brought against Summerlin in its capacity as [a
managed care organization], instead of in its capacity as an ERISA plan
administrator." Id. at , 267 P.3d at 776. I believe that this case is
analogous.
Here, Morrison alleges that HPN committed negligence in its
capacity as an HMO. In other words, Morrison alleges that HPN
negligently selected an unsafe provider—an activity that an HMO may
perform without any connection to Medicare Advantage. The fact that
Medicare contracted to compensate HPN on behalf of Morrison does not
change the fact that HPN, exercising the discretion afforded it under
federal regulations, chose the provider.
The majority contends that Munda is distinguishable because,
in that case, "the plaintiffs' claim was not preempted because they alleged
facts to show that their insurer. . . was not acting in its capacity as an
administrator of the ERISA plan when it selected and oversaw its
providers, but rather, in its independent role as an insurer." Majority
opinion ante at 14-15. Yet this case is identical: HPN functions as a
Nevada-licensed HMO by contracting with providers for medical care,
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regardless of whether Medicare is involved. 3 See NRS 695C.030(6), (7)
("Health maintenance organization' means any person which provides or
arranges for provision of a health care service or• services and is
responsible for the availability and accessibility of such service or services
to its enrollees." "Provider' means any physician, hospital or other person
who is licensed or otherwise authorized in this state to furnish health care
services."). It shouldn't matter whether HPN is compensated by Medicare,
by the enrollee, or by other sources.
In sum, Medicare's standards do not cover general health and
safety issues like negligence claims. Furthermore, under Munda,
Morrison's claim for negligent selection of a provider is not "with respect
to" Medicare and is therefore not expressly preempted. The Medicare
'The majority also argues that, "[u]nlike ERISA, the Medicare Act
has established standards that regulate an MA organization's selection of
providers." Majority opinion ante at 15. As stated above, I do not agree
that there are standards governing the selection of providers. CMS
regulations state that "an MA organization . . . select[s] the practitioners
that participate in its plan provider networks," subject only to
nondiscrimination rules and the satisfaction of procedural requirements.
42 C.F.R. § 422.205(a) (2013).
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Act's text does not show that Congress intended the unequal result that
Medicare enrollees cannot have legal recourse against a negligent HMO
while non-Medicare patients may. Accordingly, I respectfully dissent.
J.
Gibbons
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