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Morrison v. Health Plan of Nevada, Inc.

Supreme Court of Nevada

July 10, 2014


Appeal from a district court order dismissing a tort action. Eighth Judicial District Court, Clark County; Rob Bare, Judge.

Kemp, Jones & Coulthard, LLP, and Will Kemp and Eric M. Pepperman, Las Vegas, for Appellant.

Holland & Hart, LLP, and Constance L. Akridge and Matthew T. Milone, Las Vegas; Bryan Cave LLP and Lawrence G. Scarborough, J. Alex Grimsley, and Meridyth M. Andresen, Phoenix, Arizona, for Respondents.

McDonald Carano Wilson LLP and Debbie A. Leonard and Seth T. Floyd, Las Vegas; Crowell & Moring LLP and Arthur N. Lerner and April N. Ross, Washington, D.C., for Amicus Curiae America's Health Insurance Plans, Inc.

Matthew L. Sharp, Ltd., and Matthew L. Sharp, Reno; Gillock & Killebrew and Gerald I. Gillock and Nia C. Killebrew, Las Vegas; Edward M. Bernstein & Associates and Patti S. Wise and Gary W. Call, Las Vegas; Friedman Rubin and Richard H. Friedman and William S. Cummings, Bremerton, Washington, for Amici Curiae Dolores J. Cappetto, Carole Grueskin, James London, Rodolfo Meana, and Dorothy Rogers.

Fennemore Craig Jones Vargas and James L. Wadhams and Alexis L. Brown, Las Vegas, for Amicus Curiae Nevada Association of Health Plans.

Hardesty, J. We concur: Pickering, J., Douglas, J., Saitta, J. CHERRY, J., with whom GIBBONS, C.J., agrees, dissenting.


Page 1166



In this appeal, we are asked to determine whether a Medicare beneficiary's state common law negligence claim against his private health insurance company, through which he is receiving his Medicare benefits, is preempted by the federal Medicare Act. Because we conclude that state common law negligence claims regarding the retention and investigation of contracted Medicare providers are expressly preempted by the Medicare Act, we affirm the district court's order.


Respondents Health Plan of Nevada, Inc.; Sierra Health Services, Inc.; Sierra Health and Life Insurance Company, Inc.; Sierra Health-Care Options, Inc.; United Healthcare Insurance Company; and United Healthcare Services, Inc. (collectively, HPN) are health insurance businesses that specialize in health maintenance and/or managed care. They are engaged in the joint venture of providing insurance, including providing medical services to Medicare beneficiaries through the administration of Medicare Advantage (MA) Plans. Appellant Louis Morrison is a Medicare beneficiary who received his Medicare benefits through an MA Plan offered by HPN. Under HPN's insurance contract, Morrison was required to seek medical care from providers chosen by HPN. Since at least 2004, HPN had contracted with the Endoscopy Center of Southern Nevada, the Gastroenterology Center of Nevada, and the doctors employed or associated with the Gastroenterology Center of Nevada (collectively, the Clinic).[2] In 2006, Morrison was treated by the Clinic based on its status as a contracted provider for HPN; as a result of his treatment there, he became infected with hepatitis C.

Morrison's second amended complaint alleged that HPN breached its duty to " use reasonable care to select its health care providers" and " to inquire into the medical practices at the clinic" and was negligent in directing him to seek treatment at the Clinic.[3]

Page 1167

The complaint alleged that HPN failed to properly investigate the Clinic and knew or should have known that since at least 2004 the Clinic engaged in unsafe medical practices causing a high risk of transmission of blood borne pathogens, such as hepatitis C, to patients at the Clinic. The district court ultimately dismissed Morrison's second amended complaint with prejudice, finding that Morrison's claim was preempted by the federal Medicare Act pursuant to this court's decision in Pacificare of Nevada, Inc. v. Rogers, 127 Nev. __, 266 P.3d 596 (2011). Morrison argues on appeal that the district court erred in applying Rogers to dismiss his claim because the Medicare Act's preemption statute does not apply to his state common law negligence claim.


To resolve this appeal, we must determine whether state common law negligence claims against Medicare plan providers are preempted by the federal Medicare Act.[4] The Medicare Act, enacted as Title XVIII of the Social Security Act and codified at 42 U.S.C. § § 1395-1395kkk (2012), " creates a federally subsidized nationwide health insurance program for elderly and disabled individuals." Rogers, 127 Nev. at __, 266 P.3d at 598. Pursuant to Part C of the Act, beneficiaries may receive Medicare benefits through MA plans provided by private entities called MA organizations. Id. (citing 42 C.F.R. § 422.2 (2010)).

" MA Organizations and their plans contract with, and are subject to extensive regulation by, the Centers for Medicare and Medicaid Services (CMS)." Id.; see, e.g., 42 U.S.C. § 1395w-26(b)(1) (2012). Importantly, each MA organization that maintains one or more MA plans is required to adhere to a federally regulated quality improvement program. 42 C.F.R. § 422.152(a) (2013). The regulations specifically require that the MA organization " [m]ake available to CMS information on quality and outcomes measures that will enable beneficiaries to compare health coverage options and select among them." Id. § 422.152(b)(3)(iii). The quality improvement program also requires that each MA organization " have written policies and procedures for the selection and evaluation of providers." Id. § 422.204(a). An MA organization must also ensure that each physician or other health care professional be initially credentialed by review of verified " licensure or certification from primary sources, disciplinary status, eligibility for payment under Medicare, and site visits as appropriate." Id. § 422.204(b)(2)(i).

Although CMS does not directly select the physicians or facilities that are included in an MA plan's network, federal regulations require an MA organization to select and retain only those providers that meet the qualifications specified in the Medicare Act. See id. § 422.204(b). Furthermore, CMS has specified " requirements for relationships between . . . MA organizations[ ] and the physicians and other health care professionals and providers with whom they contract to provide services to Medicare beneficiaries enrolled in an MA plan." Centers for Medicare & Medicaid Services, Medicare Managed Care Manual, Ch. 6, § 10 (Rev. 24, June 6, 2003).

Morrison's common law negligence claim is expressly preempted by the Medicare Act

The Medicare Act contains an express preemption clause which states that

[t]he standards established under this part shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to MA plans which are offered by MA organizations under this part.

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42 U.S.C. § 1395w-26(b)(3) (2012). The scope of this preemption statute is very broad, and the " MA standards set forth in 42 CFR 422 supersede any State laws, regulations, contract requirements, or other standards that would otherwise apply to MA plans," with the exception of laws relating to licensing and plan solvency. Medicare Managed Care Manual, Ch. 6, ยง 30.1 (Rev. 101, August 18, 2011). " In other words, unless they pertain to licensure and/or solvency, State laws ...

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