Hambrick v. Healthcare Partners Med. Grp., Inc., B251643

• Citation: 238 Cal.App.4th 124,189 Cal.Rptr.3d 31
• Decision Date: 01 June 2015
• Docket Number: B251643
• Court: California Court of Appeals
• Parties: Corey HAMBRICK, Plaintiff and Appellant, v. HEALTHCARE PARTNERS MEDICAL GROUP, INC. et al., Defendants and Respondents.

238 Cal.App.4th 124

189 Cal.Rptr.3d 31

Corey HAMBRICK, Plaintiff and Appellant

v.HEALTHCARE PARTNERS MEDICAL GROUP, INC. et al., Defendants and Respondents.

B251643

Court of Appeal, Second District, Division 7, California.

Filed June 1, 2015

Rehearing Denied June 17, 2015

Review Denied September 30, 2015

McMurray Henriks, Yana G. Henriks and Randy H. McMurray, Los Angeles, for Plaintiff and Appellant.

McDermott Will & Emery, Terese A. Mosher Beluris and Gregory R. Jones, Los Angeles, for Defendants and Respondents.

OPINION

FEUER, J.^*

INTRODUCTION

Plaintiff Corey Hambrick (Hambrick) brought this class action alleging causes of action for violation of the unfair competition law (UCL; Bus. & Prof.Code, § 17200 et seq. ), common law fraudulent concealment, and violation of the false advertising law (FAL; id., § 17500) against defendants Healthcare Partners Medical Group, Inc. (MGI), Healthcare Partners, LLC (HCP-LLC), and DaVita Healthcare Partners, Inc. (DVHCP) (collectively HCP or the HCP defendants).¹ The premise underlying all of Hambrick's claims is that although HCP does not fall within the literal definition of a “health care service plan”² as defined in Health and Safety Code section 1345, subdivision (f)(1),³ due to the level of risk it assumed, HCP operated as a health care service plan without obtaining the license required by the Knox-Keene Health Care Service Plan Act of 1975⁴ (Knox-Keene Act; § 1340 et seq.), and without meeting the regulatory mandates required of health care service plans.

The trial court, relying on the doctrine of judicial abstention, sustained without leave to amend the demurrers filed by the HCP defendants and entered a judgment of dismissal. Hambrick appeals from the judgment, which includes an order awarding the HCP defendants costs.

Hambrick argues on appeal that HCP was required to have a license under the Knox-Keene Act because it accepted a level of “global risk” that transforms it from a medical “risk-bearing organization” under section 1375.4 to a “health care service plan” under section 1345. However, neither the Knox-Keene Act nor the regulations adopted by the Department of Managed Health Care (DMHC) defines the level of risk that would cause a medical entity like HCP to become a de facto health care service plan. We find that this determination of an acceptable risk level is a regulatory decision involving complex economic policy considerations that should be made by DMHC, the regulatory agency tasked with interpreting and enforcing the Knox-Keene Act.

We therefore conclude that the trial court acted within its discretion in invoking the abstention doctrine as to the statutory causes of action but not as to the common law cause of action for fraudulent concealment. However, we find that Hambrick failed to plead a claim for fraudulent concealment, and that she has failed to demonstrate how she could amend the operative complaint to cure the defect. We affirm the judgment of dismissal, including the order awarding costs.

FACTUAL AND PROCEDURAL BACKGROUND⁵

A. The First Amended Complaint

On January 25, 2013, Hambrick, on behalf of herself and others similarly situated, filed a first amended class action complaint for damages and equitable relief against the HCP defendants.⁶ Hambrick alleges that MGI is a professional medical corporation and HCP-LLC is a wholly owned subsidiary or affiliate of DVHCP, a Delaware corporation. MGI and HCP-LLC “operated in such a way as to make their individual identities indistinguishable, and are therefore the mere alter egos of one another.”

As alleged, HCP operated as a health care service plan for nearly a decade without obtaining the license required by the Knox-Keene Act. Hambrick paid her medical premiums to a health care service plan other than HCP. However, HCP assumed the financial risk and responsibility for Hambrick's “institutional care” (hospital care)⁷ and other health care services (e.g., physicians), and it paid for her care through contracts with health care service plans and other third parties. By assuming the financial risk for Hambrick's hospital care without a license, HCP purported to relieve Hambrick's health care service plan, which is legally responsible for her care, of any financial responsibility for her care.

HCP directed Hambrick's hospital care, limiting her access to hospital care to only those hospitals with which HCP contracted, and prohibiting her from accessing “better” hospitals that contracted with her health care service plan. In addition, HCP directed Hambrick's specialty care “to physicians who practice at the hospitals with which HCP contracts” and “away from better physicians who practice at hospitals with which HCP does not contract in order to avoid paying for high quality care.” Hambrick alleges that she was entitled to use the better hospitals and physicians who contracted with the health care service plan to which she paid her premiums.

Hambrick further alleges that HCP purposefully limited her access to care for the purpose of maximizing profits as a result of its “assumption of institutional financial risk without the required State license.” By doing this, HCP “avoided a near decade of regulatory scrutiny of its operations, avoided paying the regulatory fees assessed by DMHC to all licensees, and avoided the numerous specific, consumer-protection mandates in the Knox-Keene Act such as the requirement to provide timely access to medically necessary care.” In addition, HCP “reaped extraordinary profits in the billions of dollars by delaying and denying access to medically necessary care to its members.”

Up until October 2012, Hambrick was an employee of MGI, and she was a patient of MGI from 2011 to 2012. While employed by MGI, Hambrick acquired personal knowledge that HCP “was paying claims for institutional/hospital care for claims for which HCP had assumed the responsibility for payment.” MGI's physicians served as Hambrick's primary care physicians (PCPs). She alleges that her “assigned PCPs failed to adequately diagnose or treat the source of [her] injury.”⁸ She was referred to at least two specialists with HCP's “network of contracted or employed staff physicians,” each of whom “failed to accurately diagnose or treat [her] injuries.”

In January, March and July 2012, Hambrick complained to MGI “that she was receiving inferior care from her assigned physicians, and protested both the quality of her care and the delays in accessing primary and specialist care.” Hambrick alleges that HCP “delayed her access to care because [HCP] had assumed risk for hospital charges, even though they did not have the required State license that would allow them to assume the risk for such institutional care.” In addition, she alleges “that the desire to avoid a hospital claim affected the decisions made by HCP which restricted HAMBRICK'S access to high quality specialists who practiced at hospitals with whom HCP did not contract.”

Hambrick alleges further that HCP's “desire to avoid paying hospital claims it had agreed to become responsible for, caused HCP to deny HAMBRICK[ ] access to qualified specialists and physicians who could accurately diagnose and treat her, because those physicians might admit HAMBRICK to HCP's non-preferred hospitals. HAMBRICK ultimately was forced to purchase her own insurance and to seek care outside of [MGI] in order to timely access care.”

Hambrick defines the purported class as “[a]ll patients for whom HCP assumed financial responsibility for the institutional care of, or directed the institutional care of” and “[a]ll HCP patients treated by HCP while HCP is or was controlled or owned by non-physician shareholders.”

In the first cause of action for violation of the UCL, Hambrick alleges that HCP violated numerous statutory provisions, including those in the Knox-Keene Act, and that HCP's actions constituted fraudulent and unfair business practices under the UCL. Hambrick alleges that HCP profited by ignoring the requirements of California law, including the requirements for financial reserves applicable to health care service plans. Hambrick also alleges that HCP profited by denying access to care and providing inferior care. Hambrick seeks disgorgement of “ill-gotten gains” and “an injunction prohibiting [HCP] from violating California law.”

The second cause of action for fraud and “concealment” alleges that “Plaintiffs and [the HCP defendants] were in a relationship of trust,” and that the HCP defendants had a duty “to disclose to their patients all material information a reasonable patient would want to know before consenting to treatment.” The HCP defendants concealed that they had illegally assumed financial responsibility for hospital care and that this would affect the physicians and hospitals to which HCP would direct plaintiffs. HCP further concealed that it was not licensed as a health care service plan or hospital, “and therefore was not lawfully permitted to accept hospital risk or direct hospital care, and that Plaintiffs would not be afforded all the protections afforded to consumers by a Knox-Keene licensed entity.”

The complaint further alleges that plaintiffs “reasonably relied upon [the HCP defendants] to seek their fully informed consent, and to treat them consistent with good professional practice and medical standards.” Hambrick alleges that she was injured because she received deficient care from the physicians and hospitals to which she was referred instead of the physicians and hospitals that contracted with the health care service plans to which she paid her premiums. She alleges as damages “physical injuries, emotional injuries, loss of income, future medical expenses, [and] co-pays or co-insurance payments to the hospitals.” Hambrick also seeks punitive damages against HCP pursuant to Civil Code section 3294.

Hambrick's third cause of action is for violation of the FAL. She alleges that the HCP defendants “advertise, including through their website...