Community Hospital of The Monterey Peninsula v. Office of Personnel Management

Background

Community Hospital of the Monterey Peninsula brought one claim against the Office of Personnel Management (OPM) to recover benefits under the Federal Employees Health Benefit Act of 1959, 5 U.S.C. § 8904. The complaint alleged that the hospital treated a patient from April 18, 2018, until the patient died on June 5, 2018. The patient had signed an assignment of benefits to the hospital.

OPM operated and administered the patient’s federal employee health benefit plan and had contracted with Aetna Life Insurance Company to provide the plan’s benefits. Aetna authorized the patient’s admission and treatment through May 27, 2018, and later authorized inpatient hospice care beginning May 22. The hospital alleged that Aetna then denied payment for other treatment from May 28 forward as not medically necessary. The hospital submitted Aetna a bill for $80,902 for services from May 28 through June 5, 2018, but Aetna did not pay it.

The hospital alleged that it completed Aetna’s internal appeals process and submitted an appeal to OPM around March 5, 2019. OPM did not respond, and the balance remained unpaid. The hospital filed this action on December 23, 2020.

Motion to Dismiss

OPM moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), arguing that the court lacked subject-matter jurisdiction because the hospital had not alleged a waiver of sovereign immunity and lacked standing. OPM also moved under Rule 12(b)(6), arguing that the hospital lacked authority to pursue the appeal and had not exhausted the administrative remedies required by the governing regulations.

The court took judicial notice of the assignment of benefits filed in the administrative record. The assignment stated that, if the patient was entitled to hospital benefits under an insurance contract or other arrangement, those benefits were assigned to the hospital for application to the patient’s bill.

Court’s Analysis

The court read 5 C.F.R. § 890.105(a) to allow an entity acting for a covered individual to pursue the administrative claims process when it has the individual’s specific written consent. The court concluded that this permission applies not only to the carrier-review process but also to review by OPM. It also read 5 C.F.R. § 890.107 consistently with that provision, allowing an authorized entity to seek judicial review of OPM’s final action.

The court rejected OPM’s argument that only the covered individual could seek judicial review. It concluded that the assignment alleged in the complaint was sufficient at the pleading stage to show that Community Hospital was acting with the patient’s authorization to pursue payment of the disputed benefits.

The court also rejected OPM’s sovereign-immunity argument. It held that 5 U.S.C. § 8912 waives sovereign immunity for civil actions against the United States based on the Federal Employees Health Benefit Act and that the statute does not limit such suits to a particular type of plaintiff. The hospital’s claim sought payment of FEHBA benefits under an assignment, rather than damages independent of those benefits.

The court found that Community Hospital had adequately alleged standing because the assignment supported an alleged injury from nonpayment, and the hospital’s requested relief was traceable to OPM’s role in the final stage of the administrative review process. The court also rejected OPM’s argument that the hospital was seeking unavailable damages, noting that the complaint sought the emergency and medically necessary benefits allegedly due under the plan.

Finally, the court rejected OPM’s arguments that the assignment was merely boilerplate, conditional, or insufficiently specific. The court relied on the general rule that an assignee takes the assignor’s rights and may assert rights to recover unpaid benefits. It found that the assignment’s language was sufficient, in the absence of evidence showing that it was meant to be more limited.

Disposition

The court denied the Motion to Dismiss. It ordered OPM to answer the complaint by August 6, 2021, referred the matter to a magistrate judge for an early settlement conference, and set a case-management conference for August 30, 2021, at 2:00 p.m. The order did not decide whether Community Hospital was ultimately entitled to the disputed benefits.