The opinion of the court was delivered by: David G. Larimer United States District Judge
Plaintiffs in this action are four not-for-profit corporations, and one municipal corporation, that operate emergency ambulance services. Plaintiffs commenced this action in New York State Supreme Court, Monroe County, in January 2009, alleging that they have provided emergency ambulance services to defendants Rochester Area Health Maintenance Organization, Inc. d/b/a Preferred Care ("Preferred Care"), and MVP Health Care, Inc., and that defendants have wrongfully withheld a portion of certain payments that are due to plaintiffs for those ambulance services.
Plaintiffs seek to recover the amount of those withheld payments, as well as an order declaring that defendants have no right to withhold any part of the monies that are due to plaintiffs.
The complaint sets forth ten causes of action, most of which are based on state or common law. One cause of action, the tenth, is on its face based on federal statutory law, and alleges that "[t]o the extent that any of the amounts paid by Preferred Care to Plaintiffs represent overpayments, Plaintiffs were each 'without fault' in receiving the overpayments," and that therefore, under the federal Medicare statutes, specifically 42 U.S.C. § 1395gg(b)(1)(B), § 1395cc "or other applicable sections" of Title 42, plaintiffs are not obligated to repay those amounts to Preferred Care. Complaint (Dkt. #1-3) ¶ 88.
Defendants removed the action to this Court shortly after it was filed, on the basis of federal question jurisdiction. The notice of removal states that this Court has original jurisdiction under 28 U.S.C. § 1331 over plaintiffs' claims under §§ 1395gg and 1395cc, apparently based on the complaint's reference to the federal statutes referred to above. Defendants also note that the complaint cites a number of federal Medicare regulations, and that plaintiffs have alleged that defendants denied them due process of law. See, e.g.,Complaint ¶¶ 10, 31, 81.
Defendants have moved for summary judgment dismissing the complaint. Plaintiffs have moved for summary judgment on the issue of liability, and for leave to amend the complaint.
Subsequent to oral argument on the motions, the Court, by way of letter to both counsel, raised the question of whether the Court has subject matter jurisdiction over plaintiffs' claims, for reasons that will be explained in detail below. See Dkt. #77. In their responses, counsel for both sides have taken the position that federal question jurisdiction exists, on the ground that the resolution of plaintiffs' claims requires an interpretation of the federal Medicare statutes and regulations. See Dkt. #73, #74.
Despite the parties' agreement that subject matter jurisdiction exists, the Court cannot simply accept that assertion unquestioningly. It is well established that parties cannot stipulate or consent to subject matter jurisdiction where it otherwise would not exist. See, e.g., Ahmed v. Holder, 624 F.3d 150, 154 (2d Cir. 2010) ("we may not exercise jurisdiction that we otherwise lack simply because the parties will allow it"); United States v. Ceja-Prado, 333 F.3d 1046, 1049 (9th Cir. 2003) ("We have repeatedly recognized that federal jurisdiction cannot be created by the parties ... in cases in which jurisdiction otherwise does not exist"); Drake v. Minnesota Min. & Mfg. Co., 134 F.3d 878, 883 (7th Cir. 1998) ("It is a basic principle ... that the parties cannot stipulate to the subject-matter jurisdiction of the federal courts"). In addition, regardless of whether the parties agree that subject matter jurisdiction exists, federal courts have an ongoing duty to ensure that subject matter jurisdiction exists over the matters before them. See Dean v. Blumenthal, 577 F.3d 60, 64 (2d Cir. 2009) ("we address our subject-matter jurisdiction over this appeal, which we have an independent obligation to evaluate even in the absence of a challenge from any party"), cert. denied, 130 S.Ct. 2347 (2010); In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 488 F.3d 112, 121 (2d Cir. 2007) (noting court's "independent obligation to satisfy ourselves of the jurisdiction of this court and the court below").
After considering the matter, I conclude that this Court lacks subject matter jurisdiction over the parties' claims, and that this action must therefore be dismissed. See Mehlenbacher v. Akzo Nobel Salt, Inc., 216 F.3d 291, 295 (2d Cir. 2000) ("because a challenge to subject matter jurisdiction cannot be waived, and because where jurisdiction is lacking, dismissal is mandatory," court was obligated to consider whether requirements for subject matter jurisdiction existed), dismissed on remand, 207 F.Supp.2d 71 (W.D.N.Y. 2002).
The events giving rise to this case involve certain dealings between plaintiffs and Preferred Care. Although Preferred Care has now been succeeded by MVP Health Plan, Inc., which is a subsidiary of defendant MVP Health Care, Inc., most of the relevant events took place at a time when Preferred Care was still operating under that name, and so for the sake of convenience the Court will generally refer simply to "Preferred Care" as the operative party.
Preferred Care is a health maintenance organization ("HMO") that is also a "Medicare Advantage organization" ("MAO"), meaning that it administers a Medicare Advantage insurance program pursuant to Medicare Part C. As summarized by the Second Circuit, Medicare, the federal government's health insurance plan for the elderly and certain persons with disabilities, automatically provides coverage to qualifying individuals for inpatient treatment and related services under Medicare Part A. Medicare Part B, which covers visits to doctors and certain other outpatient treatment, is "a voluntary program offering supplemental insurance coverage for those persons already enrolled in the Medicare 'Part A' program." ... Medicare Part C ... allows a managed care organization to enter into a "risk contract" to provide an enrollee a full range of Medicare services in exchange for monthly payments that the organization receives from the government.
Matthews v. Leavitt, 452 F.3d 145, 147 n.1 (2d Cir. 2006) (quoting Furlong v. Shalala, 238 F.3d 227, 229 (2d Cir. 2001)) (other citations omitted).
Part C, then, the current version of which was enacted by Congress in 1997, and amended in 2003, "provides beneficiaries with an option to ... obtain the benefits available under Parts A and B as well as some additional benefits through a health insurance plan, known as a 'Medicare Advantage Plan,' administered by a private company." Dial v. Healthspring of Alabama, Inc., 541 F.3d 1044, 1046 (11th Cir. 2008). See also First Medical Health Plan, Inc. v. Vega-Ramos, 479 F.3d 46, 47 (1st Cir. 2007) (explaining that "[u]nder Part C, beneficiaries can, inter alia, enroll in 'Medicare Advantage' plans, privately-run managed care plans that provide coverage for both inpatient and outpatient services"). The stated purpose of Part C was to "allow beneficiaries to have access to a wide array of private health plan choices in addition to traditional fee-for-service Medicare ... [and to] enable the Medicare program to utilize innovations that have helped the private market contain costs and expand health care delivery options." H. Conf. Rep. No. 105-217, at 585 (1997), reprinted in 1997 U.S.C.C.A.N. 176, 205-06.
Some Preferred Care members are also Medicare Advantage enrollees. Preferred Care receives payments to cover the cost of services rendered to those enrollees from the Centers for Medicare and Medicaid Services ("CMS"), which administers the Medicare program. Those payments are not based on the actual services provided, but are paid on a per-enrollee basis. In other words, Preferred Care receives the same payments from CMS, based on the number of Preferred Care enrollees who are Medicare Part C enrollees, regardless of what services are actually rendered to those members/enrollees. Preferred Care then uses those funds to reimburse health care providers, such as ambulance services, hospitals, physicians, etc., for services rendered to the members in question. See Hofler v. Aetna US Healthcare of California, Inc., 296 F.3d 764, 766 (9thCir. 2002), abrogated on other grounds by Martin v. Franklin Capital Corp., 546 U.S. 132 (2005); Minnesota Senior Fed'n, Metro. Region v. United States, 273 F.3d 805, 807 (8th Cir. 2001), cert. denied, 536 U.S. 939 (2002); NME Hospitals, Inc. v. Bowen, Civ. A. No. 87-1450, 1987 WL 12000, at *1 (D.D.C. May 29, 1987).
Since at least 2006, each of the plaintiffs has provided emergency ambulance services to Preferred Care members. None of the plaintiffs have had a written contract with Preferred Care. Typically, one of plaintiffs' ambulances would be dispatched following a 911 call, and if the person receiving the ambulance service was a Preferred Care member, the plaintiff would then submit a bill to Preferred Care, which would remit payment to the plaintiff. According to the complaint, Preferred Care would not necessarily pay the full amount of the bill, but would pay "a reasonable amount," which plaintiffs would accept without objection. Complaint ¶ 84.
That arrangement apparently worked well until November 2008, when Preferred Care mailed an "Explanation of Benefits" to each plaintiff's billing company. That letter stated that Preferred Care had discovered that it had "overpaid" plaintiffs for certain ambulance services rendered to Medicare Advantage enrollees during 2007 and 2008. The notice further stated that Preferred Care intended to recoup those overpayments by ...