Hackert v. Sutter Med. Found.

• Decision Date: 06 July 2018
• Docket Number: C079903
• Court: California Court of Appeals Court of Appeals
• Parties: JOHN B. HACKERT, Plaintiff and Appellant, v. SUTTER MEDICAL FOUNDATION et al., Defendants and Respondents.

JOHN B. HACKERT, Plaintiff and Appellant, v. SUTTER MEDICAL FOUNDATION et al., Defendants and Respondents.

C079903

COURT OF APPEAL OF THE STATE OF CALIFORNIA THIRD APPELLATE DISTRICT (Sacramento)

July 6, 2018

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

(Super. Ct. No. 34-2014-00167465-CU-MC-GDS)

Plaintiff John B. Hackert, a medical doctor, sued Sutter Medical Foundation and related entities to be reimbursed for services he provided as an assistant surgeon. Sutter, however, had not authorized his services and plaintiff provided those services after he terminated his contract with Sutter and after Sutter informed him it would not pay for unauthorized services. Plaintiff alleged that state law governing managed health care, federal Medicare law, and unfair competition law (as it may apply to a breach of his prior contract with Sutter) entitled him to injunctive relief compelling Sutter to pay for the unauthorized services.

The trial court sustained defendants' demurrer without leave to amend and entered a judgment of dismissal. We reverse, but only to allow plaintiff to plead a common law cause of action for breach of his prior contract. All of his current causes of action fail to state a claim upon which relief may be granted.

We note that defendants are Sutter Medical Foundation, Sutter Medical Group, Sutter Independent Physicians, Sutter Health Sacramento Sierra Region, Sutter Health Plan dba Sutter Health Plus, and Sutter Health. For ease of reference, we refer to the defendants individually and collectively as Sutter.

FACTS AND PROCEEDINGS

The sufficiency of a complaint is a question of law we review do novo. We accept as true all properly pleaded allegations. (Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 837-838.)

In 2011, plaintiff entered into a contract with Sutter to perform surgical assistant services. He terminated the contract in 2014, believing Sutter was underpaying claims for his services. When he ended the contract, he expressed his intention to continue to bill Sutter for services he would render on a noncontracted basis.

Sutter informed plaintiff in writing that any services he provided in the future would require Sutter's authorization. Sutter also told him it would not pay for unauthorized services that he might render in the future.

Despite these warnings, plaintiff submitted claims for unauthorized services he performed at the request of other surgeons after plaintiff had terminated his contract. Sutter denied the majority of these claims.

Plaintiff filed this action. In his second amended complaint, he sought injunctive relief ordering Sutter to pay his unauthorized claims pursuant to (1) section 1300.71 of title 28 of the California Code of Regulations (section 1300.71), a regulation prescribing how provider claims against health plans are to be reimbursed under state law; (2) federal Medicare regulations directing how provider claims are to be reimbursed by health plans that provide certain Medicare coverage; and (3) the state Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) based on a breach of his prior contract. Plaintiff also sought a declaration that Sutter's refusal to pay his claims was unlawful.

The trial court sustained Sutter's demurrer without leave to amend. It held the state and federal regulations did not require Sutter to pay plaintiff for his unauthorized claims. It ruled his claim under the Unfair Competition Law was moot because he terminated his prior contract, failed to allege a fraudulent practice, and lacked standing under federal law to enforce the terms of an employer-sponsored health plan. The trial court also held plaintiff was not entitled to declaratory relief because all of his substantive claims failed as a matter of law.

Plaintiff appeals from the judgment of dismissal. He contends the trial court erred in each of its rulings. He also contends the trial court abused its discretion when it sustained the demurrer without granting him leave to allege a quantum meruit claim.

We disagree with each of plaintiff's contentions.

DISCUSSION

ISection 1300.71

Plaintiff contends the trial court erred when it determined he could not state a claim for injunctive relief under section 1300.71. He asserts the regulation required Sutter to compensate him for nonemergency services he rendered, even though Sutter did not authorize his services, because nothing in the regulation or its related statutesprohibits Sutter from paying for services it did not authorize. Simply stating the argument exposes its fallacy.

The Knox-Keene Health Care Service Plan Act of 1975 (the Act) and its related regulations govern health care service plans. (Health & Saf. Code, § 1340 et seq.)

The Act defines a " 'health care service plan' " as "[a]ny person who undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or to reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees." (Health & Saf. Code, § 1345, subd. (f)(1).) We use the terms "health care service plan," "health plan," and "plan" interchangeably.

The Act requires health plans to reimburse claims for payment made by health care providers and to provide a dispute resolution mechanism to resolve challenged claims. (Health & Saf. Code, §§ 1367, subd. (h), 1371.)

The Act does not compel a health plan to pay for provider services it does not authorize except in one instance relevant here. It requires a health plan to pay providers for emergency services they render to enrollees "until the care results in stabilization of the enrollee," even if the providers are not contracted with the health plan and the health plan does not authorize the services. (Health & Saf. Code, § 1371.4, subd. (b).) "As long as federal or state law requires that emergency services and care be provided without first questioning the patient's ability to pay, a health care service plan shall not require a provider to obtain authorization prior to the provision of emergency services and care necessary to stabilize the enrollee's emergency medical condition." (Health & Saf. Code, § 1371.4, subd. (b).)

Section 1300.71 sets forth the amount a health plan must pay providers on their claims. Subdivision (a)(3) of section 1300.71 reads in its entirety:

" 'Reimbursement of a Claim' means:

"(A) For contracted providers with a written contract, including in-network point-of-service (POS) and preferred provider organizations (PPO): the agreed upon contract rate;

"(B) For contracted providers without a written contract and non-contracted providers, except those providing services described in paragraph (C) below: 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; and

"(C) For non-emergency services provided by non-contracted providers to PPO and POS enrollees: the amount set forth in the enrollee's Evidence of Coverage." (§ 1300.7l, subd. (a)(3).

Thus, the amount a health plan must pay depends on whether the provider has a contract with the health plan and whether the provider rendered emergency services. If the provider has a contract with the health plan, the provider receives "the agreed upon contract rate." (§ 1300.71, subd. (a)(3)(A).) If the provider does not have a contract with the plan, the provider receives "the reasonable and customary value" for the services rendered, unless the noncontracted provider renders nonemergency services. (§ 1300.71, subd. (a)(3)(B).) The noncontracted provider who renders nonemergency services is entitled to "the amount set forth in the enrollee's Evidence of Coverage" established by the health plan. (§ 1300.71, subd. (a)(3)(C).)

Although he did not have a contract with Sutter and did not provide emergency services, plaintiff contends the plain language of section 1300.71, subdivision (a)(3)(B) "mandates" he be compensated the "reasonable and customary value" of his servicesregardless of Sutter's decision not to authorize his work. He argues he is entitled to this amount because section 1300.71 establishes what plans must pay noncontracted providers, and because there is nothing in section 1300.71 or the Act and its other regulations that conditions payment on the health plan authorizing the noncontracted provider's services. He asserts it is the primary surgeon who must be authorized by Sutter, and the primary surgeon can retain plaintiff to assist on a surgery without being in violation of his or her contract with Sutter.

Each of plaintiff's assertions is incorrect. If section 1300.71 applied here, its plain language would mandate plaintiff be compensated only in the amount set forth in Sutter's evidence of coverage, not the reasonable and customary value. That is because plaintiff rendered nonemergency services without having a contract with Sutter. (§ 1300.71, subd. (a)(3)(C).)

But section 1300.71 does not apply here, and it does not obligate Sutter to pay plaintiff anything. The Act expressly authorizes Sutter to condition payments to providers who render nonemergency services on obtaining Sutter's authorization. Under the Act, a health plan "may require prior...