Opinion
CIVIL ACTION NO. 00-5977.
November 5, 2001
MEMORANDUM AND ORDER
Plaintiff Howard Medical, Inc ["Howard Medical"] brings this action against the following defendants: Temple University Hospital t/a Temple University Dialysis ("Temple University"), University of Pennsylvania Hospital ("University of Pennsylvania"), Belmont Court Dialysis Inc. ("Belmont Court"), Delaware County Memorial Hospital ("Delaware County"), BMA Dialysis, Inc. d/b/a/ Parkview Outpatient Dialysis ("Parkview"), Gambro Healthcare, Inc. ("Gambro"), BMA Dialysis Inc. ("B.M.A"), BMA Dialysis Inc. d/b/a F.M.C. Abington Dialysis Center ("Abington") and Mount Airy Kidney Center ("Mount Airy"). Plaintiff's complaint was initially filed on October 19, 2000, in the Court of Common Pleas of Philadelphia County, alleging unjust enrichment (Count I) and negligent misrepresentation (Count II). However, on November 22, 2000, this action was removed to the United States District Court for the Eastern District of Pennsylvania. As a basis for removal, defendants alleged that plaintiff's state claims are preempted by Title XVII of the Social Security Act, commonly referred to as the Medicare Act, 42 U.S.C. § 1395 et. seq.
In the complaint, Gambro was erroneously sued as Community Dialysis Centers, Inc.
Presently before the court is B.M.A's motion to dismiss plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. (Doc. No. 29). Defendants, Delaware County, Belmont Court, University of Pennsylvania, Temple University, and Gambro have joined in this motion. (Doc. Nos. 30, 31, 32, 33, 34). The motion presents two rationales for dismissing the unjust enrichment and negligent misrepresentation claims asserted against defendants. First, defendants assert that both state law causes of action are preempted by the Medicare Act, thereby requiring Howard Medical to exhaust its administrative remedy prior to bringing suit in a judicial court. Second, defendants argue that the unjust enrichment and negligent misrepresentation claims fail as a matter of law. Because these claims are premised on the tortious behavior of defendants and involve neither a direct claim for Medicare benefits nor a claim that the determination to deny benefits was erroneous, I find that the Medicare Act does not preempt these state law causes of action. Moreover, Howard Medical's claim for negligent misrepresentation is sufficient as a matter of law. Howard Medical has failed, however, to state a claim for unjust enrichment. As a result, I will grant defendants' motions to dismiss Howard Medical's claim for unjust enrichment (Count I) but I will deny defendants' motions to dismiss Howard Medical's claim for negligent misrepresentation (Count II).
BACKGROUND
The Medicare Act establishes a federally funded subsidized program that reimburses for medical services provided to qualified elderly and disabled persons. 42 U.S.C. § 1395 et seq. The Medicare program consists of two parts. Medicare Part A covers inpatient hospital services. 42 U.S.C. § 1395c-1395i-2. Medicare Part B covers supplemental insurance benefits for other healthcare costs, including ambulance services. 42 U.S.C. § 1395k(a)(1); 1395k(a)(2)(B); 1395x(s)(7). An ambulance service seeking payment under Medicare Part B must submit its claim to the appointed Medicare carrier, which processes claims on behalf of the Secretary of the Department of Health and Human Services ("HHS"). 42 U.S.C. § 1395u(a)(1).
Medicare Part A services are not the subject of this case.
Plaintiff, Howard Medical, is an ambulance service provider participating under Part B of the Medicare Act. Compl. ¶ 1. From approximately June 1996 through July 1999, the named defendants utilized the ambulance services of Howard Medical for transporting its patients to and from their respective Medicare approved dialysis centers. Compl ¶¶ 3, 7. When a defendant required ambulance transportation for one of its patients, each defendant provided Howard Medical with certain information regarding the patient, such as the patient's name, address, telephone number, date and time of pick up, insurance information and medical history. Compl. ¶ 8. In addition, each defendant represented to Howard Medical that a physician had pre-determined that ambulance service for the patient was medically necessary because all other means of transportation had been contraindicated. Compl. ¶ 8. As to each patient, the defendants also either provided Howard Medical with a written authorization of medical necessity or promised that such an authorization would be forthcoming. Compl. ¶ 8.
Under the Medicare Act, ambulance service is not covered unless "the use of other methods of transportation is contraindicated by the individual's condition . . . ." 42 U.S.C. § 1395x(s)(7).
Under the Medicare Act, a physician's certification that the services provided are medically necessary is required to obtain reimbursement. 42 U.S.C. § 1395n(a)(2). Any services that are not "reasonable and necessary" are not covered by Medicare. 42 U.S.C. § 1395y(a)(1)(A).
During the period in question, Howard Medical submitted a claim under Medicare for reimbursement of the costs of providing its ambulance services to defendants' patients. Compl. ¶ 10. HighMark, the carrier appointed by HHS to review Howard Medical's Medicare claim, denied Howard Medical reimbursement on the basis that the ambulance services it provided to defendants' patients were not medically necessary. Compl. ¶ 12. In response, Howard Medical requested that each defendant provide Medicare with a physician's certificate demonstrating the medical necessity of ambulance transportation for its patients. Compl. ¶ 13. Defendants never provided such documentation, and as a result Howard Medical has never been reimbursed for the ambulance services it provided to defendants' dialysis patients. Compl. ¶ 16.
On October 19, 2000, Howard Medical filed a complaint in the Court of Common Pleas of Philadelphia County, alleging unjust enrichment and negligent misrepresentation against named defendants. Subsequently, on November 22, 2000, defendants removed this action the United States District Court for the Eastern District of Pennsylvania.
STANDARD OF REVIEW
In ruling on a motion to dismiss for failure to state a claim upon which relief may be granted, the court must accept as true all well-pleaded allegations of fact, and any reasonable inferences that may be drawn therefrom, in the plaintiff's complaint and must determine whether "under any reasonable reading of the pleadings, the plaintiff may be entitled to relief." Nami v. Fauver, 82 F.3d 63, 65 (3d Cir. 1996) (citations omitted); Colburn v. Upper Darby Township, 838 F.2d 663, 665-66 (3d Cir. 1988), cert. denied, 489 U.S. 1065 (1989) (citations omitted). Although the court must construe the complaint in the light most favorable to the plaintiff, it need not accept as true legal conclusions or unwarranted factual inferences. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Claims should be dismissed under Rule 12(b)(6) only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief." Id.
DISCUSSION I. Preemption
Defendants argue that Howard Medical's state law claims are preempted by the Medicare Act 42 U.S.C. § 1395 et. seq. because the Medicare Act provides for an extensive administrative appeal process when a claim for reimbursement is denied and Howard Medical has not exhausted its administrative remedies. Def.'s Mem. Supp. Mot. to Dismiss (Doc. 29) at 8. Howard Medical counters that the underlying basis of its claims is not for Medicare reimbursement, but rather for damages that it incurred as a result of the defendants' misrepresentations that a physician had properly certified the medical necessity of ambulance transportation for its patients. Ptf.'s Mem. Opp'n Mot. to Dismiss (Doc. 35) at 4.
When analyzing preemption issues, there is an initial presumption against preemption in areas traditionally occupied by the states. Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996). The present action sounds in an area traditionally governed by the laws of the states. Howard Medical seeks tort and equitable remedies to compensate for defendants' alleged wrongful behavior in misrepresenting that ambulance transportation for defendants' patients had been certified as medically necessary. The provision of tort and equitable remedies is a subject matter traditionally within the purview of state supervision. Green v. Fund Asset Mgmt, L.P., 245 F.3d 214, 224 (3d Cir. 2001) (noting that states have traditionally occupied tort actions for fraud and actions for breach of fiduciary duty); Ferebee v. Chevron Chem. Co., 736 F.2d 1529, 1542 (D.C. Cir. 1984) ("The provision of tort remedies to compensate for personal injuries `is a subject matter of the kind [the] Court has traditionally regarded as properly within the scope of state superintendence.'") (quoting Florida Lime Avocado Growers, Inc. v. Paul, 373 U.S. 132, 144 (1963). The Supreme Court has stated that "because the States are independent Sovereigns in our federal system, we have long presumed that Congress does not cavalierly pre-empt state-law causes of action." Medtronic, 518 U.S. at 485-86. As a result, there is a presumption against preemption unless preemption was the clear and manifest purpose of Congress. Id. at 485; Green, 245 F.3d at 224.
Defendants rely on the Supreme Court's decision in Buckman Company v. Plaintiff's Legal Committee to overcome the presumption against preemption. 121 S.Ct. 1012 (2001). This reliance, however, is misplaced. In Buckman, the plaintiff's state law cause of action was premised on an allegation that the defendant perpetrated fraud on the Food and Drug Administration ("FDA"). Id. at 1016. In considering whether this state law claim was preempted by the FDA, the Court found that no presumption of preemption applies when a state law cause of action concerns "the relationship between a federal agency and the entity it regulates." Id. at 1017. In the present action the state law causes of action do not concern the negligence of defendants with regard to the HHS. Rather, the state law claims arise from the alleged wrongful behavior of one Medicare service provider in its interaction with another Medicare service provider. As the alleged negligence in this action was perpetrated on a private party and not a federal agency, Buckman is not analogous to the present action, and therefore Buckman does not support defendants' contention that the presumption against preemption does not obtain in this case.
The clear and manifest purpose of Congress to preempt state law exists in three scenarios. First, Congress may enact an explicit statutory provision for preemption. Scheidewind v. ANR Pipeline Co. and ANR Storage Co., 485 U.S. 293, 299 (1988). Second, in the absence of an express provision, preemption may be inferred when Congress fully occupies a field to the exclusion of state law. Field preemption occurs "where the federal interest in the field is sufficiently dominant." Id. at 300. Finally, state law is preempted when it conflicts with federal law. Id. Such a conflict exists when it impossible to simultaneously comply with both the federal and state law or when the state law presents an obstacle to the accomplishment of the purposes and objectives of Congress. Id.
A. Field Preemption
The Medicare Act does not expressly preempt Howard Medical's state law actions. However, defendants argue that Howard Medical's state law claims are barred by field preemption principles. Doc. No. 29 at 17. In making this argument, defendants assert that Howard Medical's claims for unjust enrichment and negligent misrepresentation are merely a guise for a Medicare reimbursement claim.
With the number of Medicare claims that are filed each year and the need for uniform eligibility determinations, the Medicare Act and its corresponding regulations serve as the ultimate guidepost for processing these reimbursement claims and determining Medicare eligibility. The Medicare Act provides an extensive administrative appeal process for review of a reimbursement denial. Judicial review is available only after all administrative remedies have been exhausted. 42 U.S.C. § 1395ff(b); 42 C.F.R. § 405.801(a). This comprehensive scheme may indicate that Congress has fully occupied the field of determining and reviewing Medicare claims, and that if, as defendants contend, the underlying premise of Howard Medical's state law claims is the erroneous denial of Medicare coverage, preemption is mandated. I will not decide, however, whether field preemption operates in such circumstances, as Howard Medical's state law claims are not premised on an entitlement to Medicare coverage.
There are three requirements that must be met before an ambulance service provider will be entitled to Medicare coverage. First, the use of other methods of transportation must be contraindicated by the patient's condition. 42 U.S.C. § 1395x(s)(7). The corresponding regulations impose numerous additional requirements concerning the vehicle, its staffing, and the types of trips eligible for medicare coverage. 42 C.F.R. § 410.40. Second, ambulance service must be "reasonably necessary for the diagnosis or treatment of illness or injury." 42 U.S.C. § 1395y(a)(1)(A). Third, a physician must certify that the ambulance service is "medically required." 42 U.S.C. § 1395n (a)(2).
The Medicare Act establishes a four-step administrative claims review process, which ultimately leads to a final decision by the secretary of the Department of Health and Human Services. The first three stages of review make a de novo determination of the validity of the disputed claim, considering all of the facts and circumstances. 42 U.S.C. § 1395ff(a)-(b); 42 C.F.R. § 405.807 et. seq. The fourth stage of the appeals process is a discretionary review of discrete issues by the Departmental Appeals Board. 42 C.F.R. § 405.801(a)
The essence of Howard Medical's state law claims is that it was tortiously misled by defendants' representation that a physician had certified the medical necessity of transporting defendants' patients, when in fact no physician certificates had been prepared. Compl. ¶ 16. This claim is not an attempt to have its reimbursement eligibility determined by the courts, but rather an attempt to gain relief for the damages Howard Medical suffered as a result of defendants' wrongful behavior. The mere fact that Howard Medical's complaint refers to the payments that it thought it would receive from Medicare does not automatically convert Howard Medical's state law tort and equity claims into a claim for medicare reimbursement. In re U.S. Healthcare, Inc., 193 F.3d 151, 164 (3d Cir. 1999) (finding a state law claim for negligence not preempted by ERISA merely because plaintiff mentioned entitlement to benefits in their complaint). As the Medicare Act does not regulate the tortious behavior committed by one service provider on another and Howard Medical's state law claims can be pursued without disrupting the comprehensive and elaborate administrative process set forth by the Medicare Act, the federal interest or the comprehensiveness of the federal regulation in this field does not preclude supplementation by state law. Therefore, I find that field preemption principles do not apply to the pending action.
The interaction between Medicare healthcare providers is an area that the Medicare Act has left virtually unregulated. The only statutory provision that regulates the activities between service providers imposes criminal penalties when a provider receives remuneration in return for arranging any service covered by Medicare. 42 U.S.C. § 1320a-7b(b)(1)(B). Although defendants may be correct in their contention that it would be illegal for defendants to pay Howard Medical a portion of the Medicare payments that defendants received for rendering dialysis services, Howard Medical does not claim an entitlement to defendants' Medicare payments. Rather, Howard Medical's claim is for damages that it incurred when relying on defendants misrepresentation of the medical necessity of the ambulance services it provided to defendants' patients. Therefore, the prohibition of section § 1320a-7b(b)(1)(B) is not applicable to the present action.
Defendants argue that the recent case of Congress of California Seniors v. Catholic Healthcare West, demonstrates that field preemption of the state law claims is appropriate in the pending action. 104 Cal.Rptr.2d 655 (Cal.App. 2d 2001). In California Seniors, a union brought state-law claims against a hospital, alleging that the hospital's inclusion of "anti-union" expenses in the cost reimbursement reports constituted an unfair business practice. In preempting the state law claim, the court concluded that the "field of Medicare provider cost reporting and reimbursement is so fully and completely occupied by federal law . . . that there remains no room for state action." Id. at 657. Although I agree that state law actions sounded in an allegation of improper cost reporting may be preempted by the Medicare Act's comprehensive regulation on this subject, the present action does not involve such a claim. Therefore, the reasoning of the state court in California Seniors does not inform my decision in this case.
B. Conflict Preemption
Defendants argue that Howard Medical's state law claims are preempted because they conflict with the Medicare Act and its regulations. Doc. 29 at 25. To support this contention, defendants claim that in deciding the merits of Howard Medical's state law claims, a judge must make a determination of whether Medicare reimbursement was appropriately denied, thereby interfering with the comprehensive Medicare administrative process. Doc. 29 at 27. Such a determination, however, would not be necessary. It is the tortious behavior of defendants, and not HighMark's decision to deny Medicare coverage, that underlies Howard Medical's unjust enrichment and negligent misrepresentation claims. The determination of whether defendants misrepresented the existence of a physician's certificate will not require this court to decide whether HighMark's denial of Medicare coverage was erroneous or unreasonable. Thus, the court can reach the merits of Howard Medical's unjust enrichment and negligent misrepresentation claims without disturbing the decision by HighMark that Howard Medical was not entitled to Medicare reimbursement. Thus, preemption is not mandated by a clear conflict between Howard Medical's state law claims and the Medicare Act.Defendants further argue that conflict preemption is appropriate because Howard Medical's state law claims are merely an attempt to obtain Medicare reimbursement while circumventing the administrative procedure that Congress has created for the determination of Medicare claims. Doc. 29 at 29. In support of this contention, defendants quote the Supreme Court's observation that "compliance with the intent of Congress cannot be avoided by mere artful pleading." Chicago and North Western Trans. Co. v. Kalo Brick Tile Co., 450 U.S. 311, 323 (1981). In Kalo Brick, the Court considered whether the Interstate Commerce Commission ("ICC") preempted a state common law claim that the plaintiff, a common rail carrier, had negligently maintained its roadbed. The Court held that the state claims were preempted by the ICC. However, it was not the plaintiff's artful pleading that the Court found to be dispositive. Rather, the Court found it dispositive that the ICC, in approving the carrier's application to abandon its line, had determined that the carrier's roadbed maintenance had not been negligent. Id. at 327. As the ICC has exclusive authority to rule on a carrier's decision to abandon lines, the Court found that state claims raising issues of negligent rail-line maintenance or tortious abandonment were preempted by the ICC's previous determinations of such matters. Id. at 325-26. Thus, under the Kalo Brick precedent, even if Howard Medical's tort and equity action is really a guise for its Medicare reimbursement claim, such clever pleading alone will not mandate preemption of the state law claims. Rather, Kalo Brick requires the court to preempt Howard Medical's state law claims only if in deciding these claims the court would need to consider matters already decided by HighMark when it denied Howard Medical's Medicare claim.
There is no such overlap in the present action. The processing of Medicare claims is extremely regulated, as a determination of Medicare eligibility is made according to a comprehensive set of guidelines. These guidelines, however, do not require the carrier to determine whether a service provider wrongfully misled another service provider as to its Medicare eligibility. In denying Howard Medical Medicare coverage, HighMark did not consider whether the defendants were negligent in representing that a physician's certificate of medical necessity had been prepared or was forthcoming. HighMark denied Howard Medical coverage simply because the requisite showing of medical necessity had not been made.
The absence of medical necessity, however, is not the only determination that was made by HighMark in denying Howard Medical's claim for Medicare reimbursement. The Medicare Act allows for reimbursement when a service provider did not and could not know that its services were not reasonable or medically necessary. 42 U.S.C. § 1395pp(a). Defendants argue that the fact that Howard Medical was entitled to such an accommodation indicates that HighMark considered and rejected, either implicitly or explicitly, a claim by Howard Medical that it was ignorant of the lack of medical necessity of ambulance transportation for defendants' patients. Doc. No. 29 at 27. However, even if HighMark, in not allowing Howard Medical a reprieve for its lack of knowledge, implicitly decided that Howard Medical's ignorance was inexcusable, this determination does not dispose of Howard Medical's unjust enrichment and negligent misrepresentation claims.
The complaint does not indicate whether HighMark determined that Howard Medical knew or could have known of the lack of medical necessity.
HighMark's determination that Howard Medical, as an ambulance service provider for dialysis patients, could have known of the lack of medical necessity for transporting defendants' patients, may prevent Howard Medical from obtaining Medicare coverage, but this conceivable knowledge is not dispositive of Howard Medical's state law claims. HighMark did not consider whether defendants wrongfully represented that medical necessity had been properly certified or whether Howard Medical was justified in relying on defendants' representations, two important inquiries in considering Howard Medical's state law claims. Thus, the Kalo Brick precedent of preemption is not applicable to Howard Medical's state law claims.
The underlying statutory purpose of the Medicare Act, to encourage physicians to treat Medicare patients, would not be undermined by allowing Howard Medical to maintain its state law claims. Pennsylvania Med. Soc'y v. Marconis, 942 F.2d 842, 853 (3d Cir. 1991) (finding the Medicare Act preempts a Pennsylvania statute that bans physicians from billing patients for the excess costs not covered by Medicare because such a ban interfered with the goal of encouraging physicians to treat the elderly). Holding the defendants responsible for their representations that a physician's certificate of medical necessity had been prepared, will not make these dialysis centers less willing to treat Medicare patients. Rather, it will only assure that a physician has actually found ambulance travel to be medically necessary before a representation of such is made. Clearly, this practice will not prevent patients from receiving dialysis treatment, as those for whom ambulance travel is medically necessary will continue to be transported by ambulance, while those without a medical necessity will reach the dialysis centers by another means of transportation. Given the recent federal scrutiny of the provision of ambulance services under Medicare, and the recognition that Medicare payments for ambulance services are exploding, limiting the provision of ambulance services to those for whom it is deemed medically necessary cannot be said to be against the goals and intentions of Congress. Department of Health and Human Resources, Office of Inspector General, Review of Medical Necessity for Ambulance Services (October 1992) (Doc. No. A-01-91-00513) (concluding that controls are needed to ensure reimbursement for ambulance services is justified); Department of Health and Human Resources, Office of Inspector General, Ambulance Services for Medicare End-Stage Renal Disease Beneficiaries: Payment Practices (March 1994) (Doc. No. OEI-03-90-02131) (recommending strategies for obtaining greater accuracy in monitoring Medicare covered ambulance services); Department of Health and Human Services, Office of Inspector General, Follow-up to Review of Medical Necessity for Ambulance Services (June 1995) (Doc. No. A-01-94-00528) (noting the increase in Medicare allowed ambulance charges and indicating the need to limit the availability of Medicare Part B to those with a medical necessity). Since Howard Medical's state law claims can be pursued without undermining the purposes and goals of Congress, I find no conflict between the Medicare Act and Howard Medical's state law claims that requires preemption.
II. Merits of Howard Medical's State Law Claims
Defendants argue that even if this court does not preempt Howard Medical's claims for unjust enrichment and negligent misrepresentation, these claims must be dismissed as they fail as a matter of law. Doc. No. 29 at 38.
A. Count I — Unjust Enrichment
In order to maintain a claim of unjust enrichment, Howard Medical must sufficiently plead the following elements: (1) benefits it conferred on defendants, (2) appreciation of these benefits by defendants, and (3) acceptance and retention of these benefits under circumstances in which it would be unjust. Allegheny General Hospital v. Phillip Morris, Inc., 228 F.3d 429, 447 (3d Cir. 2000). Howard Medical's complaint asserts that by transporting defendants' patients to each defendant's dialysis center, Howard Medical conferred a substantial benefit on each defendant by enabling it to be paid for the dialysis services provided to its patients. Compl. ¶ 21. The complaint further alleges that each defendant has received payment for the dialysis treatment that it rendered to the patients transported by Howard Medical to its respective centers. Compl. ¶ 22. Finally, the complaint alleges that allowing defendants to retain the payments it received for services rendered to its patients would be unjust because defendants "did not properly represent the medical necessity" of ambulance transportation. Compl. ¶ 34.
These pleadings sufficiently establish the first two elements of an unjust enrichment claim. Howard Medical conferred a benefit on each defendant, and in being paid for its services, each defendant appreciated this benefit. Howard Medical has failed, however, to sufficiently plead the third element of an unjust enrichment claim. The doctrine of unjust enrichment "does not apply simply because the defendant may have benefitted as a result of the actions of the plaintiff." Duquesne Litho, Inc. v. Roberts Jaworski, Inc., 661 A.2d 9, 12 (Pa.Super.Ct. 1995). Rather, it must be shown that the enrichment of the defendants is unjust. Id. The facts alleged in the complaint do not allow this court to draw a reasonable inference that it would be unjust for the defendants to retain the payments that they received as a result of the services rendered to their dialysis patients. First, Howard Medical and the defendants are separate healthcare providers, each with an independent duty to the dialysis patients and an independent right to payment for their medical services. Defendants' receipt of payment for their medical services has no bearing on Howard Medical's Medicare eligibility. The benefit conferred by Howard Medical upon defendants, transporting their patients to their respective dialysis centers for treatment, was merely incidental to Howard Medical's performance of its own duties to these patients as an ambulance service provider. Allegheny, 228 F.3d at 447 (incidental nature of benefit conferred showed that benefit was not unjust). Second, Howard Medical did not expect payment from the defendants for its services; rather, Howard Medical expected payment from Medicare. Id. (lack of expectation of payment from defendants showed that benefit was not unjust). Moreover, even if Howard Medical had not provided ambulance service to defendants' patients, these patients would not have been prevented from obtaining treatment at the defendants' dialysis centers. The patients simply would have been required to find another means of transportation to reach the defendants' centers. Given that ambulance travel for these patients was determined not to be medically necessary, it is likely that another means of transportation could have been arranged. Thus, defendants' ability to provide dialysis treatment and receive payment for its services is not absolutely dependent on Howard Medical's ambulance transportation. As Howard Medical has failed to establish how it would be unjust to allow defendants to retain the payments received for rendering dialysis services, I will grant defendants' motions to dismiss Count I of Howard Medical's complaint.
B. Negligent Misrepresentation
In order to maintain an action for negligent misrepresentation, the plaintiff must prove: (1) a misrepresentation of material fact; (2) the person making the representation knew or should have known of the falsity of the representation; (3) intent of the representer to induce another to act on the misrepresentation; and (4) resulting injury on the party acting in justifiable reliance. Gibbs v. Ernst, 647 A.2d 882, 890 (Pa. 1994). In addition, as with any action in negligence, a negligent misrepresentation action cannot be maintained unless there is a duty owed by one party to another. Bortz v. Noon, 729 A.2d 555, 560 (Pa. 1999). Howard Medical's complaint sufficiently pleads all the requisite elements of a negligent misrepresentation claim.
First, the misrepresentations of medical necessity were material. Howard Medical asserts that it would not have provided its ambulance services in the absence of such representations. Compl. ¶ 36. Second, Howard Medical asserts that defendants should have known that the absence of a physician's certificate of medical necessity would prevent Howard Medical from obtaining Medicare coverage. Compl. ¶ 16. Howard Medical further alleges that as healthcare professionals, defendants knew or should have known of the requirements set forth by the Medicare Act and its regulations as to what constitutes a medical necessity. Compl. ¶¶ 9, 38. Third, the complaint alleges that each defendant intended that Howard Medical rely on its representations as Howard Medical agreed to transport defendants' patients to each defendant dialysis center only after it was assured that ambulance transportation was medically necessary. Compl. ¶ 39. Finally, Howard Medical alleges that defendants were in a superior position to assess the medical necessity of transporting its patients by ambulance, and therefore Howard Medical was justified in relying on the defendants' representations regarding this matter. Compl. ¶¶ 17, 40.
Defendants argue that Howard Medical's reliance was not justified because a claim of negligent misrepresentation cannot be based upon a prediction about the future actions of HHS. Doc. 29 at 40. Howard Medical's negligent misrepresentation claim, however, does not allege that defendants represented that the HHS would grant Howard Medical's claim for Medicare reimbursement. Rather, Howard Medical bases its negligent misrepresentation claim on the defendants' representation that a physician had pre-determined that ambulance service for its dialysis patients was medically necessary. Compl. ¶ 8. The representation that medical necessity had been certified is not a matter that concerns the HHS, and as such the reliance by Howard Medical on this representation may be justified.
Defendants also argue that Howard Medical cannot justifiably rely on defendants' representation as to what the Medicare Act will or will not provide. Doc. 29 at 42. Again, this argument is not responsive to the underlying basis of Howard Medical's negligent misrepresentation claim. Howard Medical does not allege that it was misled as to the application of the Medicare Act, but rather that it relied on defendants' misrepresentations that a physician had certified the medical necessity of transporting its patients by ambulance.
Howard Medical has alleged facts sufficient to show that defendants owed Howard Medical a duty of care. Doc. 29 at 42. Under Pennsylvania law, the state law underlying Howard Medical's negligent misrepresentation claim, a person who voluntarily engages in business with another owes that person the duty to execute such business with reasonable care. Pascarella et al. v. Kelley et al., 105 A.2d 70, 73 (Pa. 1954). ("[I]f a party make a gratuitous engagement and so negligently does it from want of care that another suffers damage thereby, an action will lie for misfeasance."). The facts alleged in the complaint are sufficient to establish the voluntary assumption of a duty owed by defendants to Howard Medical. The complaint alleges that when ambulance service for one of its patients was required, defendants would provide Howard Medical with information and a representation that a physician had pre-determined that ambulance transport for this patient was medically necessary. Compl. ¶ 8. By voluntarily providing information and making representations to Howard Medical, defendants assumed the duty to do so with reasonable care. Howard Medical has sufficiently plead all the requisite elements of a negligent misrepresentation claim, and therefore I will deny defendants' motions to dismiss Count II of Howard Medical's complaint.
III. Conclusion
This court will not dismiss Howard Medical state law claims for unjust enrichment and negligent misrepresentation on the basis that such claims are preempted by the Medicare Act. There is no express Medicare provision mandating preemption and neither field nor conflict preemption principles are applicable to Howard Medical's pending state law claims. Therefore, the presumption against preemption will be maintained. However, as a matter of law Howard Medical has failed to state a cause of action for unjust enrichment, requiring this court to dismiss Count I of Howard Medical's complaint. The complaint alleges sufficient facts to support a claim for negligent misrepresentation, and therefore defendants' motions to dismiss Count II of Howard Medical's complaint are denied.
An appropriate order follows.
Order
And now, this day of November, 2001, upon consideration of the plaintiff's complaint (Doc. No. 1, Ex. A); B.M.A.'s motion to dismiss (Doc. 29); Delaware County's motion to dismiss (Doc. 30); Belmont Court's motion to dismiss (Doc. 31); University of Pennsylvania's motion to dismiss (Doc. 32); Temple University's motion to dismiss (Doc. 33); and Gambo's motion to dismiss (Doc. 34); it is hereby ORDERED that all pending motions to dismiss are GRANTED as to Count I of plaintiff's complaint. It is further ORDERED that all pending motions to dismiss are DENIED as to Count II of plaintiff's complaint.