Judge Says Air Ambulance Fee Disputes Don't Belong in Federal Court System
Thursday, August 18, 2016 | 0
A federal trial judge in Texas has booted from his court room lawsuits involving the ability of the state to regulate the prices charged by two air ambulance providers.
While air ambulance providers across the country have relied on the pre-emptive effect of the federal Airline Deregulation Act to invalidate limits imposed by state workers' compensation fee schedules, U.S. District Court Judge Sam Sparks on Monday found that a dispute over the exact amounts that a group of insurance companies had to pay PHI Air Medical did not involve a federal question.
He ordered that Texas Mutual Insurance Co. v. PHI Air Medical be remanded to the state court system. Sparks also dismissed a declaratory relief action on the pre-emption issue last Thursday, saying Air Evac EMS could not challenge the state's caps on the rates it got paid.
Texas has a maximum allowable reimbursement rate for medical services, which is a constraint on how much a carrier pays an air ambulance provider — not a restriction on the providers themselves, Sparks said.
Thus, Sparks said, there was "no realistic scenario" in which Air Evac could "violate" the regulations.
Although Sparks acknowledged that there is a Texas law prohibiting air ambulance providers from collecting the unpaid balance of their bills from injured workers if their bills exceed the statutory maximum they can get from a comp carrier, he said this limitation did not provide Air Evac with a viable claim for relief because there was no evidence the state had attempted to enforce the law.
But Air Evac is not going down that easily. The day after Sparks showed it the door, the company filed a notice that it was seeking review of his ruling by the U.S. 5th Circuit Court of Appeals.
Air Evac had initiated its challenge to the Texas regulations in February. The company claims to have the world's largest fleet of air ambulances, and it is registered with the U.S. Department of Transportation as an "air carrier" providing interstate transportation.
Because it is an "air carrier," Air Evac contended that its rates were off-limits to state regulation, as the federal Airline Deregulation Act forbids the states from enacting any law "related to a price, route or service of an air carrier."
Federal trial judges in North Dakota and Wyoming earlier this year found that the ADA pre-empted the ability of the comp systems in those states to impose fee schedules on air ambulance companies.
Last October, a federal trial judge in Florida ruled that the ADA barred a class-action suit over air ambulance service providers' billing and collection practices.
And two years ago, California's 2nd District Court of Appeals declined to disturb a decision by the Workers' Compensation Appeals Board finding a state regulation setting the specific rates of reimbursement that a carrier must pay for air and ground ambulance services ran afoul of the ADA.
But many jurisdictions — including Alabama, Alaska, Georgia, Hawaii, Illinois, Ohio, Tennessee, Washington and the District of Columbia — have nevertheless set reimbursement rates to air ambulance providers.
Texas law doesn't actually affix a price for air ambulance services — it simply provides that the Division of Workers’ Compensation must determine “a fair and reasonable reimbursement amount” for air ambulance service providers that have transported an injured worker.
Last year, an administrative law judge for the State Office of Administrative Hearings decided that payment at 149% of the rate set by Centers for Medicare and Medicaid Services for air ambulance transportation generated an appropriate fee for the service.
The judge determined that PHI was entitled to more than the amounts it had been paid by eight different insurance carriers for transporting 33 injured workers, but it was not entitled to the full amount it had billed.
PHI and the carriers both appealed the ruling to the Travis County District Court, but PHI removed the case to the federal court system, and it wound up on Sparks' docket.
The carriers from the PHI case protested the transfer to federal court, and they also intervened in the Air Evac declaratory relief action to become co-defendants with the state.
The carriers and the state then moved to dismiss the Air Evac complaint for want of jurisdiction. Sparks granted the motion last Thursday.
He said there was no federal authority that granted Air Evac the right to sue for a violation of the ADA, but this wasn't fatal to the carrier's claim.
The problem was sovereign immunity.
Generally, state actors are not subject to suit in the federal courts, Sparks explained.
There is an exception to this general rule if a litigant is trying to stop a state official who has been specially charged with the duty to enforce an unlawful statute from carrying out a threat to enforce that statute, but Sparks said Air Evac couldn't fit through this loophole because the DWC's enforcement of the state's allegedly unlawful restrictions on air ambulance fees would not involve the air ambulance provider.
Under the Texas comp scheme, Sparks explained, "insurers are disallowed from paying Air Evac any more for its services than the state permits."
So the state is not stopping Air Evac from charging high rates — the state has simply prohibited others from paying the provider at the rate that it wants to be paid, Sparks said.
While the state actually does restrict Air Evac from "balance billing" injured workers, Sparks said the evidence in the record didn't demonstrate any effort by the DWC against Air Evac to enforce the law that bars the practice.
Sparks on Monday also issued a ruling saying he couldn't retain jurisdiction over the PHI case because there was no basis for it to have been removed from the state court.
"(O)nly actions that originally could have been filed in federal court can be removed to federal court," and the only actions that can be filed in federal court involve parties who are citizens of different states, or actions that involve disputes over federal law, he explained.
Because the parties in the PHI case did not allege a diversity of citizenship, Sparks said the only way it could remain in the federal court would be if it involved a "federal question."
Federal question jurisdiction doesn't arise just because there's an issue of federal law involved — there must be a federal question "present on the face of the plaintiff's well-pleaded complaint," he said.
The PHI case involved an appeal of an SOAH ruling, which is "plainly a state claim," and a claim for declaratory relief concerning pre-emption under the ADA, Sparks noted.
As the pre-emption question "would arise only in the context of a state claim where an air ambulance service provider (or some other medical provider operating in the aviation space) or a workers' compensation insurer paying such a provider challenged the amount of reimbursement it received or was required to remit," Sparks reasoned that it was a "state claim" as well.
Accordingly, Sparks ordered that the PHI case be sent back to Judge Stephen Yelenosky of the Travis County District Court.
Mary Nichols, general counsel for the Texas Mutual Insurance Co., on Wednesday said that remand orders generally are not appealable, so she expects the parties will now have to develop a briefing schedule and get a hearing date.
She also said she believed that any air ambulance company that wants to engage in "sky-high billing" ought to take notice of what has happened in the two Texas cases, as "their game may be limited by these decisions."
While Sparks did not address the ADA pre-emption issue, Nichols said, that question was already answered during the State Office of Risk Management proceedings underlying the PHI case, and as things now stand, Texas law is not pre-empted.
Boyce Cabaniss of Graves Dougherty Hearon & Moody, one of the attorneys representing the Texas Mutual in the Air Evac proceedings, said he was "pretty comfortable" with the odds of the 5th Circuit agreeing with Sparks, as there was U.S. Supreme Court precedent "directly on point" to support Sparks' ruling.
Fellow defense attorney James M. Loughlin of Stone, Loughlin & Swanson said he thought Sparks "correctly applied the law in both cases."
Loughlin had represented the Zenith Insurance Co., the Hartford Underwriters Insurance Co., the Twin City Fire Insurance Co., the Transportation Insurance Co., the Valley Force Insurance Co. and the Truck Insurance Exchange in the PHI and Air Evac litigation.
The attorneys for PHI and Air Evac could not be reached for comment Wednesday, nor could a spokesman for PHI.
Air Evac spokeswoman Shelly Schneider said her company does not comment on pending litigation. Kayleigh Lovvorn, a spokeswoman for the Texas attorney general's office, said she could not offer immediate comment on Sparks' decisions.
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