Cnty. of Santa Clara v. Superior Court of Santa Clara Cnty.

Decision Date26 April 2022
Docket NumberH048486
Citation77 Cal.App.5th 1018,293 Cal.Rptr.3d 158
Parties COUNTY OF SANTA CLARA, Petitioner, v. The SUPERIOR COURT OF SANTA CLARA COUNTY, Respondent, Doctors Medical Center of Modesto et al., Real Parties in Interest.
CourtCalifornia Court of Appeals Court of Appeals

James R. Williams, County Counsel, Douglas M. Press, Assistant County Counsel, Melissa R. Kiniyalocts, Lead County Counsel, Susan P. Greenberg, Deputy County Counsel, David P. McDonough, Deputy County Counsel, Office of the County Counsel, County of Santa Clara, for Petitioner COUNTY OF SANTA CLARA

Albert Edward Stumpp, Mikaela Grace Cox, Everett Casey Mitchnick, Irvine, Faatima Seedat, Helton Law Group, for Real Parties in Interest DOCTORS MEDICAL CENTER OF MODESTO, INC. and DOCTORS HOSPITAL OF MANTECA, INC.

Aurelia M. Razo, Sen. Deputy County Counsel, County of San Diego, for Amicus Curiae for CALIFORNIA STATE ASSOCIATION OF COUNTIES

Grover, Acting P. J. Petitioner County of Santa Clara operates a health care service plan, licensed under the Knox-Keene Health Care Service Plan Act. Real parties in interest Doctors Medical Center of Modesto and Doctors Hospital of Manteca, Inc. (collectively, the Hospitals) provided emergency medical services to members of the county's health plan and submitted reimbursement claims to the county. The county reimbursed the Hospitals for only part of the claimed amounts. The Hospitals sued the county for the full amounts of their claims, the operative complaint alleging a single cause of action for breach of an implied-in-fact or implied-in-law contract. The county demurred, asserting it is immune from the Hospitals' suit under the Government Claims Act ( Gov. Code, § 810 et seq. ).

Respondent court overruled the demurrer, the county petitioned for writ relief here, and we issued an order to show cause. Because the county is immune from common law claims under the Government Claims Act and the Hospitals do not state a claim for breach of an implied-in-fact contract, we will issue a writ of mandate instructing the trial court to enter a new order sustaining the demurrer without leave to amend.

I. TRIAL COURT PROCEEDINGS

According to the Hospitals' operative third amended complaint, the county operates a health care service plan called Valley Health Plan, which is licensed and regulated by the state Department of Managed Health Care (Department) under the Knox-Keene Health Care Service Plan Act of 1975 ( Health & Saf. Code, § 1340 et seq. ; "Knox-Keene Act"). The Hospitals provided emergency medical services to three patients enrolled in the county's health plan. The Hospitals submitted claims to the county for over $144,000, amounting to what they allege is the reasonable value of the emergency medical services provided to those patients. The county reimbursed the Hospitals approximately $28,500 for those services. The Hospitals submitted written administrative appeals to the county for the unpaid sums, which the county denied.

The Hospitals sued the county for reimbursement. The Hospitals initially alleged both tort and implied-in-fact contract causes of action. The trial court sustained the county's demurrer to the Hospitals' second amended complaint. The court denied leave to amend regarding the tort causes of action, concluding that as a public entity the county was immune from those common law claims. (Citing Gov. Code, § 815 ; unspecified statutory references are to the Government Code.) The trial court granted leave to amend the breach of implied contract cause of action.

The Hospitals allege in the operative third amended complaint's single cause of action that they provided emergency medical services to the county's patients with the expectation of "reasonable and customary payment" from the county; that the county did not "assert that the Patients were not [its] insured[s] or indicate in any way to the [Hospitals] that [it] would not cover the Patients['] medical expenses"; that inaction by the county "gave rise to implied-in-fact agreements between the [Hospitals] and [the county] obligating [the county] to pay for the care and treatment rendered by the [Hospitals] to the Patients at a reasonable and customary rate"; and that the county's ordinances "approved by its Board of Supervisors, as well as the statutes contained within the Knox-Keene Act and regulations of [the Department], give rise to implied-in-law agreements between the [Hospitals] and [the county] obligating [the county] to pay for the care and treatment rendered by the [Hospitals] to the Patients at a reasonable and customary rate." The county allegedly "acknowledged [its] implied contractual obligations to the [Hospitals] by issuing partial payment on such claims. However, [it] failed to fully reimburse the [Hospitals] for the services rendered to the Patients at reasonable and customary rates as required by the Knox-Keene Act."

The county demurred to the operative complaint, arguing there is no private right of action to sue for reimbursement under the Knox-Keene Act; a breach of an implied contract cause of action cannot be asserted against a public entity; and (in supplemental briefing) that the county was immune from the lawsuit by operation of section 815. The demurrer to the third amended complaint was heard by a different judge, who after the hearing issued a lengthy order overruling the demurrer. The order states that the county cannot "rely on a public policy regarding contracts as to public entities so that it can be exempted from" the Knox-Keene Act. The trial court reasoned that the "public policy to promote the delivery and the quality of health and medical care to the people of the State of California outweighs the policy to limit common law, or implied contract claims against public entities." On the issue of immunity, the order states neither the county's "supplemental brief nor its supplemental reply brief persuade the Court that [the county] is immune from the quantum meruit cause of action contemplated by statute and the [Department]. Here, whether fashioned as a cause of action for breach of an implied in fact contract or one for quantum meruit, [the Hospitals] state facts sufficient to constitute a cause of action."

The county petitioned for writ relief in this court. A different panel issued an order to show cause, invited further briefing, and granted the California State Association of Counties' request to file an amicus curiae letter.

II. DISCUSSION

We review a trial court's order overruling a demurrer de novo. ( Casterson v. Superior Court (2002) 101 Cal.App.4th 177, 182, 123 Cal.Rptr.2d 637.) We assume the truth of factual allegations in the complaint, and determine whether a valid cause of action is stated under any legal theory. ( Mayron v. Google LLC (2020) 54 Cal.App.5th 566, 571, 269 Cal.Rptr.3d 86.) "Although extraordinary relief ordinarily is not available at the pleading stage, mandamus is available when ... extraordinary relief may prevent a needless and expensive trial and reversal." ( Spielholz v. Superior Court (2001) 86 Cal.App.4th 1366, 1370, fn. 4, 104 Cal.Rptr.2d 197.)

A. THE KNOX-KEENE ACT

The county (through its Valley Health Plan) and the Hospitals are health care service plans licensed under the Knox-Keene Act, a "comprehensive system of licensing and regulation under the jurisdiction of the Department of Managed Health Care." ( Bell v. Blue Cross of California (2005) 131 Cal.App.4th 211, 215, 31 Cal.Rptr.3d 688 ( Bell ).) The county has no contract for the provision of medical services with either of the Hospitals, making them noncontracting providers. When, as here, a noncontracting health care service plan provides emergency services to another plan's enrollee, the enrollee's plan "shall reimburse providers for emergency services and care provided to its enrollees, until the care results in stabilization of the enrollee." ( Health & Saf. Code, § 1371.4, subd. (b).)

Regulations implementing the Knox-Keene Act define " ‘Reimbursement of a Claim’ " for noncontracting providers as: "the payment of the reasonable and customary value for the health care services rendered based upon statistically credible information that is updated at least annually and takes into consideration: (i) the provider's training, qualifications, and length of time in practice; (ii) the nature of the services provided; (iii) the fees usually charged by the provider; (iv) prevailing provider rates charged in the general geographic area in which the services were rendered; (v) other aspects of the economics of the medical provider's practice that are relevant; and (vi) any unusual circumstances in the case." ( Cal. Code Regs., tit. 28, § 1300.71, subd. (a)(3)(B).)

Each health care service plan must have a dispute resolution mechanism through which noncontracting providers can seek resolution of billing and claims disputes. ( Health & Saf. Code, § 1367, subd. (h)(2).) The Department has promulgated regulations governing that dispute resolution process. (See Cal. Code Regs., tit. 28, § 1300.71.38.) The Department is charged with periodically reviewing provider dispute resolution mechanisms and also may do so, "when appropriate, through the investigation of complaints of unfair provider dispute resolution mechanism(s)." ( Cal. Code Regs., tit. 28, § 1300.71.38, subd. (m)(1).)

Violations of the Knox-Keene Act and the implementing regulations are subject to enforcement actions. ( Health & Saf. Code, § 1371.39, subds. (a), (d) ; Cal. Code Regs., tit. 28, § 1300.71.38, subd. (m)(3).) Among other penalties for violating the statute and regulations, the Department's director can: issue a cease and desist order ( Health & Saf. Code, § 1391 ); suspend or revoke a health care service plan's license ( Health & Saf. Code, § 1386, subd. (a) ); impose civil penalties of up to $2,500 per violation ( Health & Saf. Code, § 1387, subd. (a) ); and seek injunctive relief in a civil action ( Health & Saf. Code, § 1392,...

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  • Health Law Standing Committee — 2022 Appellate Litigation Update
    • United States
    • California Lawyers Association Business Law Section Annual Review (CLA) No. 2023-1, 2023
    • Invalid date
    ...Act neither requires providers to work under federal officials nor completely preempts state law]County of Santa Clara v. Super. Ct., 77 Cal. App. 5th 1018 (2022), review granted July 27, 2022, S274927 [Issue Presented: Are counties immune under the Government Claims Act (Gov. Code section ......

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