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The Mount Sinai Hospital v. Crossroads Healthcare Management Limited Liability Co.

United States District Court, S.D. New York

January 18, 2018

THE MOUNT SINAI HOSPITAL, Plaintiff,
v.
CROSSROADS HEALTCHARE MANAGEMENT LIMITED LIABILITY COMPANY and ALLIED WELFARE FUND LOCAL 338 PLAN OF BENEFITS, Defendants.

          OPINION AND ORDER

          LORNA G. SCHOFIELD UNITED STATES DISTRICT JUDGE

         This action, removed from the Supreme Court of the State of New York, New York County, concerns payment for an operation performed at Mount Sinai Hospital (“Mount Sinai”). Plaintiff Mount Sinai moves to remand the case to state court. For the following reasons, the motion to remand is granted.

         I. BACKGROUND

         Defendant Allied Welfare Fund Local 338 Plan of Benefits (“Allied”) is a self-insured employee welfare benefit plan that provides health benefits to individuals who work for certain employers. Allied maintains an office in Nassau County, New York. The Allied Welfare Fund Summary Plan Description Plan A (“SPD”) is the document that governs the administration of the claim at issue. The SPD requires that all hospitals seeking payment from the fund obtain preadmission certification and continued stay review. Per the SPD, failure to obtain pre-admission certification will lead to a 50% reduction in payment. Defendant Crossroads Healthcare Management LCC (“Crossroads”) is a third-party administrator and healthcare management company, which has agreed with Allied to administer the Allied fund. Allied also contracts with MagnaCare Administrative Services, LLC (“MagnaCare”), so that fund participants can access doctors and hospitals that are part of MagnaCare's network at a discounted rate. Mount Sinai is one of the hospitals in that network, and it contracts with MagnaCare to provide healthcare services at agreed upon prices.

         E.D. was a participant in Allied's benefits plan. On December 21, 2014, E.D. was transferred from Saint Luke's Hospital to Mount Sinai for emergency surgery. When E.D. arrived at Mount Sinai, he was already in a coma, and he died in the hospital two days later without ever regaining consciousness.

         Mount Sinai submitted a UB-04 claim form to Crossroads, which stated (via a box with a “Y” inserted for “yes”) that E.D. had assigned his benefits under the Allied plan to Mount Sinai. Mount Sinai attests that it is the hospital's “regular practice . . . to obtain an assignment of benefits, which is why all UB-04s indicate benefits were assigned, but there are instances when a patient has not been asked to assign his/her benefits or cannot do so.”

         Allied and Crossroads paid Mount Sinai $ 47, 440.26, or half the billed amount of $94, 880.52, discounting by 50% on account of the failure to receive precertification authorization. Mount Sinai states that it is owed the price it had negotiated with MagnaCare for the type of surgery E.D. received, $664, 727.46.

         II. LEGAL STANDARDS

         A. Removal

         Under 28 U.S.C. § 1441, “[t]he defendant, as the party seeking removal and asserting federal jurisdiction, bears the burden of demonstrating that the district court has original jurisdiction.” McCulloch Orthopaedic Surgical Servs., PLLC v. Aetna Inc., 857 F.3d 141, 145 (2d Cir. 2017). Federal courts are directed to “construe removal statutes strictly and resolve doubts in favor of remand.” Purdue Pharma L.P. v Kentucky, 704 F.3d 208, 220 (2d Cir. 2013). Accordingly, Crossroads and Allied have the burden of proving that the case should not be remanded.

         In this instance, the Complaint raises only state law claims, and the parties are not diverse. Consequentially, the sole basis for federal jurisdiction -- which was the basis for removal -- is if Mount Sinai's state law claims are preempted by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq.

         B. ERISA Preemption

         In Aetna Health Inc. v. Davila, 542 U.S. 200 (2004), the Supreme Court established a two-prong test for determining whether ERISA preempts state law claims. Under that test, ERISA displaces a state law claim where: “(1) an individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B) and (2) where no other independent legal duty is implicated by a defendant's actions . . .” Id. at 210 (numbering added). The “Davila test is conjunctive -- a state-law claim is completely preempted by ERISA only if both prongs of the test are satisfied.” McCulloch Orthopaedic, 857 F.3d at 146 (citing Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 328 (2d Cir. 2011)).

         The Second Circuit has divided the first prong of the Davila test into two subparts. McCulloch Orthopaedic, 857 F.3d at 146. Courts are to analyze “(1) whether the plaintiff is the type of party that can bring a claim pursuant to § 502(a)(1)(B) and also (2) whether the actual claim that the plaintiff asserts can be construed as a colorable ...


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