Emergency Physician Services of New York v. UnitedHealth Group, Inc.

Background

Five emergency-room physician practice groups sued UnitedHealth Group, Inc. and Multiplan, Inc. The plaintiffs alleged that United and Multiplan created and operated a payment-repricing system that systematically reduced payments for emergency medical services provided to United’s insureds by out-of-network providers. According to the complaint, United supplied target prices, Multiplan used its Data iSight and Data iSight Professional systems to calculate lower rates, and United paid the lowest of the target price, the billed amount, or the calculated rate. The plaintiffs alleged that the defendants concealed the system through payment letters, an online portal, and other communications.

The complaint asserted federal claims under the Racketeer Influenced and Corrupt Organizations Act, commonly called RICO, including a RICO-conspiracy claim. It also asserted New York claims against United for breach of an implied-in-fact contract and unjust enrichment, and sought a declaration concerning United’s obligation to pay reasonable rates. The defendants moved to dismiss under the federal rule governing failure to state a legally sufficient claim. The court considered the complaint’s well-pleaded factual allegations as true for purposes of the motions.

RICO claims

The court dismissed the RICO claim and the RICO-conspiracy claim against both defendants. It held that the plaintiffs had not plausibly pleaded proximate cause, meaning a sufficiently direct connection between the alleged fraud and the plaintiffs’ injuries. Although first-person reliance on a misrepresentation is not always required for a RICO mail- or wire-fraud claim, the court explained that some person’s reliance generally must be shown to connect the alleged misrepresentation to the injury. The plaintiffs did not plead facts showing that anyone relied on the alleged misrepresentations, and they did not provide an alternative theory linking those misrepresentations to their payment losses.

Because the plaintiffs asserted only RICO claims against Multiplan, the court dismissed Multiplan from the suit.

ERISA preemption

The court rejected United’s argument that the plaintiffs’ New York claims were preempted by the Employee Retirement Income Security Act of 1974, or ERISA. The court held that the claims were not expressly preempted because United’s alleged payment obligation arose from state law and did not depend on a particular employee-benefit plan’s terms. The claims also were not completely preempted under the two-part test for claims that could have been brought under ERISA and that involve no independent legal duty. The plaintiffs were out-of-network healthcare providers, not plan participants or beneficiaries, and their claims concerned the amount of payment rather than the right to payment. The court also found that the claims were based on duties arising independently from the plans, including alleged duties under an implied-in-fact contract and unjust-enrichment principles.

New York claims

The court dismissed the implied-in-fact-contract claim against United. Under New York law, such a contract requires the usual elements of a contract, including consideration and mutual agreement on essential terms. The court concluded that the plaintiffs’ treatment of patients pursuant to a pre-existing legal obligation was not consideration for an implied contract with United. It also concluded that the complaint did not allege a meeting of the minds about the price of the services, which was an essential contract term.

The court allowed the unjust-enrichment claim to proceed. It held that the plaintiffs plausibly alleged that United received a benefit when the physicians provided emergency care to United’s insureds, because the care discharged obligations United owed to its insureds. The court also allowed the declaratory-judgment claim to proceed, finding that the alleged dispute over United’s payment obligations presented a sufficiently immediate and real controversy. The court found it premature to decide whether that claim duplicated the other claims.

Disposition

The court granted in part and denied in part the defendants’ motions to dismiss. It dismissed Counts One and Two, the RICO and RICO-conspiracy claims, against both defendants; dismissed Count Three, the implied-in-fact-contract claim, against United; and did not dismiss the unjust-enrichment or declaratory-judgment claims. The court denied the plaintiffs’ request for leave to amend after noting that they had already been given an opportunity to amend. The court stated that it continued to have jurisdiction, ordered United to answer by October 19, 2021, and directed the parties to submit a proposed case-management plan by that date.