Eastern District of New York Joins Growing List of Federal Courts In Finding No CARES Act Private Right of Action

          The Eastern District of New York has joined a growing list of district courts and one court of appeals in holding that the Coronavirus Aid, Relief, and Economic Security (CARES) Act contains neither an express nor an implied private right of action. [1] [2] 

          On June 23, 2024, District Judge Brian Cogan of the Eastern District of New York dismissed a private medical testing laboratory’s suit against a host of health insurers for failing to state a claim upon which relief can be granted.  The laboratory had alleged that it provided thousands of COVID-19 tests during the pandemic to the defendants’ insureds and that the insurers had failed to pay for some of the tests. As part of its claims, the laboratory asserted a private right to sue for the fees under the CARES Act.   

          To assess whether a federal statute creates a private right of action, the “central inquiry” is “whether Congress intended to create [one], either expressly or by implication.”[3] Aligning the Eastern District of New York with numerous other district courts and the Ninth Circuit (the only court of appeals to rule on the issue thus far), Judge Cogan found that there was no Congressional intent to create a private right of action in the CARES Act because the CARES Act was not intended to remedy a “crisis in the laboratory testing industry;” rather, it was intended to benefit the American public by “encourage[ing those] who were symptomatic or exposed to COVID-19 to get tested by relieving them of financial concern that might deter them from obtaining such testing.”[4] [5]  

          Congress passed the CARES Act on March 27, 2020, in the early days of the rapidly spreading COVID-19 pandemic, to provide direct public health and economic support to Americans.[6]  Among its many provisions, the CARES Act aimed to dynamically increase access to COVID diagnostic testing, including by fostering price transparency and providing for coverage by insurers.  The law required commercial health insurers to cover the full price of COVID-19 testing without any patient contribution.  Additionally, it required providers to publish their COVID diagnostic testing charges on a publicly accessible website and required insurers to pay out-of-network testing providers “an amount that equals the cash price . . . listed by the provider on a public internet website.”[7]     

Abuses of the CARES Act “Name Your Price” Infrastructure 

          As the law did not place limits on prices that providers could charge for testing, some policy analysts warned the “name your price” provisions were likely to be “exploit[ed]” by “unscrupulous actors” and would “likely inflate costs for out-of-network COVID-19 testing.”[8]  To some extent, these predictions have borne out.  Throughout the pandemic, there were wide variances in COVID-19 testing prices and billing practices.  Some studies found that a hospital swab test could be priced anywhere from $20 to $850 and that while 69% of the providers surveyed charged less than $200 per test, 11% charged over $400 per test. [9] [10]  In an extreme example, a Manhattan hospital reportedly charged one patient $3,358 and another, $2,963 for COVID testing; another family was reported charged $39,314 for 12 tests. [11]  A hospital in the New York suburbs owned by the same parent company charged $2,793 for a drive-through COVID test. [12]  Connecticut patients also reported that the doctor running a publicly funded testing site was charging almost $2,000 per test. [13]   

          Price transparency goals were not entirely achieved.  One nationwide survey found that many providers did not list the prices of related services, such as COVID-19 screenings or specimen collection, often charged in association with testing. [14] When patients used insurance at the time of their tests, their insurance companies were often charged substantially higher rates for the total cost of services associated with testing. [15]  In one egregious instance, a Texas hospital charged an insured patient $6,209 more than a patient who chose not to use insurance for the identical drive-through test. [16]  Despite the insurance coverage goals of the CARES Act, patients were sometimes left with surprise bills. [17]  

Protecting Consumers Through Agency Enforcement 

          In finding that the CARES Act’s purpose was relieving the American public of financial concerns when seeking COVID-19 testing, Judge Cogan held that the statute did not imply the creation of a private right of action for testing providers against healthcare payors. Rather, the judge found that the CARES Act already contains an enforcement mechanism: federal agency action. [18]   

          While inconvenient for testing providers, the courts’ consistent refusal to find a private cause of action under the CARES Act likely produced a more effective statutory scheme.  As the Eastern District of New York found, the principal aim of the statute was not to benefit diagnostic laboratories, but to benefit individuals – i.e., to guarantee access to testing with no out-of-pocket costs. [19]  To serve this public interest, the statute gave providers more upfront price setting power, while contemplating downstream price negotiations between providers and insurers.  This allowed good-faith providers to rapidly expand testing operations and empowered them with the discretion to easily set and adjust prices.  The “name your own price” structure of the CARES Act would have posed an obvious risk for abuse.  By assigning enforcement to federal agencies, the CARES Act created some protection for these good faith providers, subject to the normal enforcement discretion of federal agencies, while not offering a glide path to those tempted to engage in price gauging or profiteering.   

          In contrast, there would be no apparent check on excessive charges if providers were empowered to enforce self-selected prices by directly suing health insurers.  The price negotiations contemplated by the CARES Act would be unlikely to occur if a price unilaterally set by a testing lab were as easy to enforce as a price set by negotiated agreement.  Given the current jurisprudence, most recently with the Eastern District of New York decision in BioDiagnostic, any temptations arising from the “name your own price” model should give way to more customary rate negotiations. 

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Written by Kimo S. Peluso and Sian Last.

[1] See Murphy Med. Assocs., LLC v. Cigna Health & Life Ins. Co., No. 3:20-CV-1675, 2022 WL 743088 (D. Conn. Mar. 11, 2022); GS Labs, Inc. v. Medica Ins. Co., No. 21-CV-2400, 2022 WL 4357542 (D. Minn. Sept. 20, 2022); BCBSM, Inc. v. GS Labs, LLC, No. 0:22-CV-00513, 2023 WL 2044329, at *2–4 (D. Minn. Jan. 30, 2023); Carr v. Kabbage, Inc., No. 1:22-CV-01249, 2023 WL 3150084, at *4 (N.D. Ga. Mar. 31, 2023) (collecting cases); Diagnostic Affiliates of Northeast Hou, LLC v. Aetna, Inc., 2023 WL 1772197 (S.D. Tex. 2023). 

[2] See Saloojas Inc. v. Aetna Health of Cal., Inc., 80 F.4th 1011, 1014 (9th Cir. 2023). 

[3] Biodiagnostic Labs, Inc. v. Aetna Health, Inc., No. 23-cv-9571 (BMC), 2024 WL 3106169, at *2 (E.D.N.Y. June 23, 2024) (quoting Saloojas, Inc. v. Aetna Health of California, Inc., 80 F.4th at 1014). 

[4] Id. at *3. 

[5] Id. 

[6] CARES Act, Pub. L. No. 116-136, 134 Stat. 281, 367.  

[7] Id. § 3202. 

[8] Loren Adler, How the CARES Act affects COVID-19 test pricing, The Brookings Inst. (Apr. 9, 2020), https://www.brookings.edu/articles/how-the-cares-act-affects-covid-19-test-pricing/#:~:text=The%20law%20mandates%20health%20plans,on%20a%20public%20internet%20website.%E2%80%9D.  

[9] Sarah Kliff, ‘It Felt Like Deception’: A Elite N.Y.C. Hospital Charges Huge Viral Test Fees, N.Y. Times (Mar. 30, 2021), https://www.nytimes.com/2021/03/30/upshot/covid-test-fees-lenox-hill.html [hereinafter Kliff, It Felt Like Deception]. 

[10] Peterson-KFF. Medicare reimbursed providers between $36 and $143 per diagnostic test. Id. 

[11] Kliff, It Felt Like Deception. 

[12 ]Kliff, It Felt Like Deception. 

[13] Sarah Kliff, These Towns Trusted a Doctor to Set Up Covid Testing. Sample Patient Fee: $1,944, N.Y. Times (Mar. 10, 2020), https://www.nytimes.com/2020/11/10/upshot/covid-testing-doctor-fees.html.  

[14] Nisha Kurani et al, COVID-19 test prices and payment policy, Peterson-KFF Health System Tracker (Apr. 28, 2021), https://www.healthsystemtracker.org/brief/covid-19-test-prices-and-payment-policy/#Of [hereinafter Peterson-KFF].   

[15] Sarah Kliff, Two Friends in Texas Were Tested for Coronavirus. One Bill was $199. The Other? $6,408, N.Y. Times (June 29, 2020), https://www.nytimes.com/2020/06/29/‌upshot/‌coronavirus-tests-‌unpredictable-prices.html [hereinafter Kliff, Two Friends]. 

[16] Kliff, Two Friends. 

[17] See Kliff, Two Friends. 

[18] Biodiagnostic, 2024 WL 3106169, at *3–4. 

[19] Biodiagnostic, 2024 WL 3106169, at *3 (“There was no backlog of unpaid bills that threatened to drive testing labs out of business.  The CARES Act was not a panacea for any problems facing the laboratory testing industry.”).