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June 13, 1984

BLUE CROSS ASSOCIATION and Blue Cross/Blue Shield of Greater New York, Defendants.

The opinion of the court was delivered by: SWEET

SWEET, District Judge.

Plaintiff Group Health Inc. ("GHI") has moved to remand this action to state court. The United States Department of Health and Human Services ("HHS") has moved for an order permitting it to intervene in the action as a defendant under Rule 24(a) or 24(b), Fed.R.Civ.P. For the reasons given below, GHI's motion is denied, and HHS's is granted.

 Defendant Blue Cross and Blue Shield of Greater New York ("Blue Cross") is a not-for-profit corporation organized under Article IX-C of the New York Insurance Law, N.Y.Ins.L. § 250 et seq. Blue Cross provides health insurance coverage to subscribers in the New York area. Defendant Blue Cross Association ("Association") is incorporated under the Illinois General Not-for-profit health service corporation organized under Article IX-C of the New York Insurance Law.

 In 1974, GHI purchased Hillcrest General Hospital ("Hillcrest"), which serves individuals insured by Blue Cross or by Medicare, 42 U.S.C. § 1395 et seq. Under 42 U.S.C. § 1395cc(a)(1)(A), providers of inpatient services to individuals eligible for Medicare must choose to be reimbursed either by HHS or by a "fiscal intermediary", a private organization under contract with HHS to serve as a conduit for federal money. The Association serves as a fiscal intermediary under contract with HHS, and subcontracts some of its duties as fiscal intermediary to Blue Cross. Hillcrest had agreed to have Blue Cross serve as its fiscal intermediary. In this role, Blue Cross was obligated: (1) to determine payments due providers under Medicare, 42 U.S.C. § 1395h; (2) to consider all necessary and proper expenses, including interest, in calculating the amounts due, 42 C.F.R. §§ 405.402(a), 405.419; (3) upon inquiry, to assist individuals with respect to matters pertaining to the fiscal intermediary agreement; and (4) to advise providers on application of reimbursement principles:

 In the interpretation and application of the principles of reimbursement, the fiscal intermediaries will be an important source of consultative assistance to providers and will be available to deal with questions and problems on a day-to-day basis.

 42 C.F.R. § 405.406(b). HHS may review the initial determinations regarding reimbursement made by fiscal intermediaries.

 Before GHI purchased Hillcrest, it requested Blue Cross's advice as to whether a return on mortgage funds used to purchase Hillcrest would be included in the calculation of Hillcrest's Medicare and Blue Cross reimbursement rates. Blue Cross advised that it would be. However, in 1978, after an audit, the position was reversed and Blue Cross denied the reimbursement. On September 19, 1980, the HHS Provider Reimbursement Review Board ("PRRB") affirmed the denial. The PRRB's decision became the final decision of the Secretary of HHS on October 28, 1980. GHI sought review of the determination in this court. GHI v. Schweiker, 80 Civ. 6163 (S.D.N.Y.). The Honorable Robert L. Carter, by opinion dated March 22, 1982, granted summary judgment for defendants. The Court of Appeals, by an unpublished opinion, affirmed the district court's order.

 GHI commenced the instant action in New York State Supreme Court on September 16, 1983. The complaint alleges that defendants were negligent in failing to consult with HHS before giving GHI advice concerning the Hillcrest reimbursement, in falsely advising GHI that the Hillcrest funds would be included in the reimbursement and in representing that they were acting as HHS's agent. The complaint also alleges that Blue Cross breached its contract with GHI and its statutory and regulatory duty as well as an implied covenant of good faith and fair dealing by denying the reimbursement. In addition, the complaint alleges that Blue Cross is estopped from changing its position regarding the reimbursement and that the Association was negligent in failing to supervise Blue Cross properly.

 Motion to Remand

 In their petition for removal, defendants cited 28 U.S.C. § 1442(a)(10, which states:

 (a) A civil action or criminal prosecution commenced in a State court against any of the following persons may be removed by them to the district court of the United States for the district and division embracing the place wherein it is pending:

 (1) Any officer of the United States or any agency thereof, or person acting under him, for any act under color of such office. . . .

 In support of its motion to remand, GHI contends that defendants do not satisfy the requirements of § 1442(a)(1) because the actions complained of were not taken "under color of" federal office and because § 1442(a)(1)'s protection is available only to individuals. Defendants contend to the contrary.

 The cases GHI has cited in support of its contention that the right to remove under § 1442(a)(1) is limited to individuals do not in fact help GHI's position. Lowe v. Norfolk & Western Railway Co., 529 F. Supp. 491, 494 (S.D.Ill.1982) and the other cases cited by GHI and cited in Lowe hold only that § 1442(a)(1) does not grant a right of removal to federal agencies. By contrast, at least two courts have held that corporate agents of HHS administering Medicare programs may remove under § 1442(a)(1). See Peterson v. Blue Cross/Blue Shield of Texas, 508 F.2d 55, 58 (5th Cir.), cert. denied, 422 U.S. 1043, 95 S. Ct. 2657, 45 L. Ed. 2d 694 (1975); Kuenstler v. Occidental Life Insurance Co., 292 F. Supp. 532, 533 (C.D.Cal.1968). Other courts have held that corporations and entities other than individuals were entitled to remove under § 1442(a)(1). See, e.g., Teague v. Grand River Dam Authority, 279 F. Supp. 703, 705 (N.D.Okla.1968), approved, 425 F.2d 130, 131 n. 1 (10th Cir. 1970) (dam ...

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