Centinela Freeman Emergency Med. Assocs. v. Health Net of Cal., Inc.
| Citation | 209 Cal.Rptr.3d 280,1 Cal.5th 994,382 P.3d 1116 |
| Decision Date | 14 November 2016 |
| Docket Number | S218497 |
| Court | United States State Supreme Court (California) |
| Parties | CENTINELA FREEMAN EMERGENCY MEDICAL ASSOCIATES et al., Plaintiffs and Appellants, v. HEALTH NET OF CALIFORNIA, INC., et al., Defendants and Respondents. Centinela Radiology Medical Group, Plaintiff and Appellant, v. Health Net of California, Inc., et al., Defendants and Respondents. |
Michelman & Robinson, Andrew H. Selesnick, Damaris L. Medina, Los Angeles, Robin James, San Francisco, and Jason O. Cheuk for Plaintiffs and Appellants.
Francisco J. Silva, Sacramento, Long X. Do and Michelle Rubalcava for California Medical Association, California Hospital Association, California Orthopaedic Association, California Radiological Society and California Society of Pathologists as Amici Curiae on behalf of Plaintiffs and Appellants.
Law Office of Astrid G. Meghrigian and Astrid G. Meghrigian for California Chapter of the American College of Emergency Physicians as Amicus Curiae on behalf of Plaintiffs and Appellants.
Reed Smith, Kurt C. Peterson, Kenneth N. Smersfelt, Los Angeles, Zareh A. Jaltorossian ; Grignon Law Firm and Margaret M. Grignon for Defendant and Respondent Blue Cross of California doing business as Anthem Blue Cross.
Crowell & Moring, William A. Helvestine, San Francisco, Ethan P. Schulman and Damian D. Capozzola for Defendant and Respondent Health Net of California, Inc.
Crowell & Moring and Jennifer S. Romano for Defendant and Respondent Pacificare of California doing Business as Secure Horizons Health Plan of America.
Manatt, Phelps & Phillips, Gregory N. Pimstone, Joanna S. McCallum and Jeffrey J. Maurer, Los Angeles, for Defendant and Respondent California Physicians' Service doing business as Blue Shield of California.
Hernandez Schaedel & Associates, Gonzalez Saggio & Harlen, Zuber Lawler & Del Duca, Don A. Hernandez and Jamie L. Lopez for Defendant and Respondent SCAN Health Plan.
Gibson, Dunn & Crutcher, Krik A. Patrick, Richard J. Doren and Heather L. Richardson, Los Angeles, for Defendant and Respondent Aetna Health of California.
DLA Piper, Cooley, William P. Donovan, Jr., Santa Monica, and Matthew D. Caplan, San Francisco, for Defendant and Respondent Cigna HealthCare of California, Inc.
Barger & Wolen, John M. LeBlanc ; Hinshaw & Culbertson, Sandra I. Weishart and Larry M. Golub, Los Angeles, for California Association of Health Plans and CAPG as Amicus Curiae on behalf of Defendants and Respondents.
Carol L. Ventura, Drew Brereton and Sheila M. Tatayon for California Department of Managed Health Care as Amici Curiae.
Cantil–Sakauye
, C.J.
Both state and federal law require any licensed hospital that has appropriate facilities and qualified personnel to provide emergency medical services or care regardless of a patient's ability to pay. (Health & Saf. Code, § 1317, subds. (a)
, (b) ;1
42 U.S.C. § 1395dd (b)
, (h).) If the patient is an enrollee in a health care service plan,2 the plan is required by statute to reimburse the emergency service provider for necessary emergency medical services and care. (§ 1371.4, subd. (b).) Plans are permitted, however, to delegate this financial responsibility to their contracting medical providers. (§ 1371.4, subd. (e), hereafter section 1371.4(e).)
In this case, each defendant health care service plan (hereafter Health Plan) delegated its emergency services financial responsibility to its contracting medical providers, three individual practice associations (IPAs).3 Allegedly, these three IPAs failed to comply with multiple state financial solvency requirements beginning in 2007, and continuing through each quarter for the following four years, resulting in their failure to reimburse the plaintiff noncontracting service providers for the emergency care that they provided to enrollees of defendant Health Plans. The noncontracting emergency service providers allege that at the time of delegation and throughout the duration of the delegation contracts between the Health Plans and the IPAs, the Health Plans knew or should have known that these IPAs were insolvent. The providers further claim that under the circumstances, the Health Plans lacked any reasonable expectation that the IPAs would reimburse their emergency service claims. Rather than helping to resolve the growing number of their unpaid claims, the noncontracting emergency service providers allege, the Health Plans simply advised them to continue submitting their claims to the insolvent IPAs. The IPAs eventually went out of business. Plaintiff providers then brought actions seeking reimbursement from the Health Plans.
We granted review to consider whether a health care service plan's delegation of its financial responsibility to an IPA or other contracting medical provider group pursuant to section 1371.4(e) relieves it of any obligation to pay providers' claims for covered emergency services and care or if, as plaintiffs contend, a health care service plan has a common law tort duty to noncontracting emergency service providers to act reasonably in making an initial delegation and a continuing tort duty to protect such noncontracting providers from financial harm resulting from any subsequent insolvency of its delegate.4 We conclude that a health care service plan may be liable to noncontracting emergency service providers for negligently delegating its financial responsibility to an IPA or other contracting medical provider group that it knew or should have known would not be able to pay for emergency service and care provided to the health plan's enrollees. We further conclude that a health care service plan has a narrow continuing common law tort duty to protect noncontracting emergency service providers once it makes an initial delegation of its financial responsibility. Specifically, a health care service plan may be liable to noncontracting emergency service providers for negligently continuing or renewing a delegation contract with an IPA when it knows or should know that there can be no reasonable expectation that its delegate will be able to reimburse noncontracting emergency service providers for their covered claims.
A brief summary of the factual and procedural background of this matter and a general overview of the statutory and regulatory backdrop provides context for the parties' contentions and our conclusions.
The consolidated appeal in this matter involved two related actions. In the Centinela Freeman action, four California partnerships of emergency room physicians (hereafter Centinela Freeman), sued various health care service plans and three IPAs (known collectively as La Vida) to which the plans delegated their financial responsibilities to pay emergency service claims.5 In the Centinela Radiology action, Centinela Radiology Medical Group (hereafter Centinela Radiology), a partnership of radiologists who provided emergency and nonemergency radiology services to enrollees of various health care service plans, filed a nearly identical complaint against the three La Vida IPAs and the same plans sued in the Centinela Freeman action.6
According to both complaints, none of the plaintiff medical groups contracted with La Vida or any of the Health Plans for the provision of services, but each had provided covered emergency services and care to the Health Plans' enrollees who were assigned to La Vida. Plaintiffs alleged that they sought reimbursement for their services and care from La Vida because defendant Health Plans had delegated their responsibility to pay covered claims to La Vida, but La Vida either did not pay or did not fully pay their claims.
As relevant here, both complaints set forth a negligence cause of action alleging that the Health Plans are responsible for payment of plaintiffs' claims, despite their delegation of financial responsibility to La Vida, because at the time of the Health Plans' delegation to La Vida and throughout the duration of those delegation contracts, the Health Plans “knew or should have known” of La Vida's insolvency and yet the Health Plans negligently delegated and continued to delegate their payment obligations to La Vida.7 According to the complaints, the three La Vida IPAs failed to comply with multiple state financial solvency requirements beginning in 2007, and continuing through each quarter for the next four years, resulting in their failure to pay the plaintiff noncontracting service providers for the emergency care that they provided to enrollees of defendant Health Plans during this time.
The complaints alleged that instead of “helping to resolve” the increasing number of unpaid claims by emergency providers, the Health Plans advised plaintiffs to continue submitting claims directly to La Vida and continued their insufficient capitation payments8 to La Vida, despite the absence of any reasonable expectation that La Vida would reimburse plaintiffs. The Health Plans, it was alleged, knew La Vida was in financial trouble through their receipt of financial reports and other information, including an advisement in October 2009 that La Vida's lender had filed a petition for relief under the bankruptcy laws and had withdrawn $4 million dollars from La Vida's account, and that La Vida was unable to obtain funding from capital markets. The complaints alleged that defendant Health Plans waited until May and June 2010, years after La Vida began openly demonstrating financial instability, to finally discontinue their capitation payments to La Vida and terminate their delegation contracts. La Vida went out of business shortly thereafter.
The Health Plans demurred to the complaints. They contended that once they delegated to La Vida their statutory obligation to reimburse emergency care providers for emergency services, as permitted by section 1371.4(e), plaintiffs had no recourse against them for payments that La Vida was unable to make. As to plaintiffs' negligence cause of action, the Health Plans argued that under the seminal...
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