• Cotton v. Starcare Medical Group: No. G040920, G041809 (Cal. Ct. App. Mar. 30, 2010)
  • May 13, 2010 | Authors: Matthew T. Fornataro; Arthur N. Lerner
  • Law Firm: Crowell & Moring LLP - Washington Office
  • The children of a deceased Medicare beneficiary and enrollee in the health plan SecureHorizons operated by PacifiCare brought several common law claims against PacifiCare, such as wrongful death, negligence-willful misconduct, constructive fraud, breach of fiduciary duty, and bad faith. Plaintiffs also brought suit against StarCare, a company that contracted with SecureHorizons for the provision of physician services to enrollees and for utilization review (the process of reviewing requests for authorization of medical services for medical appropriateness), alleging that StarCare breached its duty to conduct a utilization review without regard to the cost of the medical services requested.

    The deceased had underwent surgery to repair a broken leg and then was placed in St. Edna's nursing facility where Plaintiffs allege the deceased failed to receive adequate care resulting in "starvation, dehydration, infection, and emotional distress" ultimately causing his death. Following the deceased's treatment at St. Edna's, he was placed in a hospital in need of urgent care and Plaintiffs allege that the deceased was not provided with the necessary care because of a dispute between PacifiCare and its network providers, such as StarCare, with regard to financial responsibility for the deceased's treatment.

    Both StarCare and PacifiCare argued that the claims brought against them were preempted by 42 U.S.C. § 1395w-26(b)(3), preemption provisions of the Medicare Act. In response, the Court held that the Medicare Advantage law's preemption provision only expressly preempts state "laws and administrative regulations, but not the common law."

    With regard to implied preemption, the Court found that only the constructive fraud claim as to the physician incentive agreement between PacifiCare and its providers was impliedly preempted because of the existence of a federal regulation governing such agreements. Otherwise, the remaining claims either could not have been remedied by CMS's administrative review process, could have been proven without consideration of coverage determinations under CMS's standards, or were not specifically targeted by Medicare regulations.

    This ruling - that the common law is not within the class of "law" encompassed by Medicare Advantage's express preemption clause -- is potentially far-reaching.