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Kindred Hospitals East, LLC v. Horizon Healthcare Services, Inc.

United States District Court, D. New Jersey

February 14, 2019




         This is a breach of contract action wherein a medical provider alleges that it has been wrongfully denied reimbursement for rendering medical services by the defendant, Horizon Healthcare Services, Inc. (hereinafter, "Horizon"). (ECF No. 1.) In this instance, Horizon is acting as an administrator of a health plan for employees of the State of New Jersey (hereinafter, "the State Plan"). (ECF No. 40 at 13 (stating that Horizon is "a State-contracted claims administrator" of the State Plan).)

         Currently pending before the Court is Horizon's motion pursuant to Federal Rule of Civil Procedure (hereinafter, "Rule") 12(h)(3) to dismiss the remaining claims that are asserted against it (hereinafter, "the Remaining Claims") in this action. (ECF No. 28 through ECF No. 28-11; ECF No. 30 through ECF No. 30-7; ECF No. 40 through ECF No. 40-3.) The medical-provider plaintiff, Kindred Hospitals East, LLC (hereinafter, "the Hospital"), opposes the motion. (ECF No. 36 through ECF No. 36-3.)[1]

         The Court resolves the motion upon a review of the papers and without oral argument. See L. Civ. R. 78.1(b). For the following reasons, the Court grants the motion and dismisses the Remaining Claims.

         I. BACKGROUND

         The Court is concerned about setting forth the facts underlying this dispute in a vacuum and in the absence of the proper context. Therefore, a description of the manner in which the State Plan functions will be presented first.

         A. The State Plan

         The State of New Jersey offers and finances health benefits to its employees and their family members through the State Plan. See N J.S.A. 52:14-17.25 et seq. The State of New Jersey has entered into a contract with Horizon to act as an administrator of the State Plan on its behalf. (ECF No. 30 at 2.)[2]

         The New Jersey Legislature makes annual appropriations for the necessary funds to finance the State Plan. See N.J.S.A. 52:14-17.33. Those funds are then remitted to the State Treasury in order to pay claims for medical services that are rendered, and the State is obligated to pay claims only within the limits of those available appropriations. See Id. Any funds used to pay out claims under the State Plan come from the coffers of the Treasury of the State of New Jersey. See N.J.S.A. 52:14-17.30; see also N.J.S.A. 52:14-17.46a.

         The State Plan is completely exempt from the requirements of the Employee Retirement Income Security Act of 1974, because it is a "governmental plan" that is maintained "by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing." 29U.S.C. § 1002(32). As a result, an entity known as the State Health Benefits Commission (hereinafter, "the Commission") was created pursuant to the New Jersey State Health Benefits Program Act to oversee the State Plan. (ECF No. 30 at 2 (uncontested assertion of the same by Horizon).) The Commission has the authority to develop - and the Commission has indeed developed - the rules and regulations regarding the administration of the State Plan. See N.J.S.A. 52:14-17.27 through 17.28; see also N.J.A.C. 17:9-1.1 et seq. (the aforementioned regulations drafted by the Commission).

         Under the terms of the State Plan, Horizon will send out a written notice of a determination concerning a claim for medical benefits. In addition, under the terms of the State Plan, a process must be followed if a benefits determination is viewed as being adverse. Pursuant to the terms of that process, requests to appeal from an adverse benefits determination must be made in writing. See N.J.A.C. 17:9-1.3(a).

         There are two levels of appeals that a party must complete before bringing a lawsuit against the State Plan or Horizon. See N.J.A.C. 17:9-1.3. As to the first level of appellate remedies (hereinafter, "the First Appellate Level"), relief must be sought directly from Horizon itself. (ECF No. 28-1 at 10.) If the adverse benefit determination is not resolved after the First Appellate Level has been exhausted, then relief must be sought directly from the Commission (hereinafter, "the Second Appellate Level"). See N.J.A.C. 17:9-1.3(a). Upon exhaustion of the Second Appellate Level, a lawsuit against the State Plan may then be instituted in the New Jersey Appellate Division. See N.J.A.C. 17:9-1.3(d).

         B. Facts

         The Hospital was providing long-term medical treatment to a patient (hereinafter, "the Patient") insured by the State Plan. (ECF No. 1.) At one point during the course of the Patient's treatment at the Hospital, Horizon determined that it was no longer medically necessary for the Patient to receive the higher level of care that he was receiving at the Hospital, and that the Patient should be transferred to a different facility that provided a lower level of care. (ECF No. 28-1 at 5; see also ECF No. 30 at 3-4.) Despite this determination by Horizon, the Hospital opted to let the Patient remain admitted in the Hospital. (ECF No. 1 at 7.) As a result, the Patient remained under the care of the Hospital at the higher level of ...

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