Northbay Healthcare Grp. - Hosp. Div. v. Blue Shield of Cal. Life & Health Ins., Case No. 17-cv-02929-WHO

• Decision Date: 26 October 2018
• Docket Number: Case No. 17-cv-02929-WHO
• Citation: Northbay Healthcare Grp. - Hosp. Div. v. Blue Shield of Cal. Life & Health Ins., 342 F.Supp.3d 980 (N.D. Cal. 2018)
• Court: U.S. District Court — Northern District of California
• Parties: NORTHBAY HEALTHCARE GROUP - HOSPITAL DIVISION, Plaintiff, v. BLUE SHIELD OF CALIFORNIA LIFE & HEALTH INSURANCE, et al., Defendants.

342 F.Supp.3d 980

NORTHBAY HEALTHCARE GROUP - HOSPITAL DIVISION, Plaintiff,

v.BLUE SHIELD OF CALIFORNIA LIFE & HEALTH INSURANCE, et al., Defendants.

Case No. 17-cv-02929-WHO

United States District Court, N.D. California.

Signed October 26, 2018

David Joseph Tassa, Daron Lael Tooch, Hooper, Lundy and Bookman, P.C., Los Angeles, CA, for Plaintiff.

Amy B. Briggs, Manatt Phelps & Phillips, LLP, San Francisco, CA, Gregory Neil Pimstone, Manatt Phelps & Phillips, LLP, Los Angels, CA, for Defendants.

ORDER GRANTING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENT AND RESOLVING DISCOVERY DISPUTES

Re: Dkt. Nos. 47, 57

William H. Orrick United States District Judge

INTRODUCTION

PlaintiffNorthBay Healthcare Group Hospital Division d/b/a NorthBay Medical Center and VacaValley Hospital ("NorthBay") filed a suit over reimbursements that it believes were not for the reasonable and customary value of the services given to members of defendantBlue Shield of California Life & Health Insurance Company and California Physicians' Service d/b/a Blue Shield of California ("Blue Shield").Count Eight of NorthBay's complaint alleges that Blue Shield's reimbursement methodology constituted an unfair business practice under California's Unfair Competition Law ("UCL"), California Business and Professions Code Section 17200 et seq. , and Count Nine seeks related declaratory relief.NorthBay asserts that Blue Shield uses a flawed methodology or manipulates data, did not properly apply criteria for setting reimbursement rates, and engaged in an unfair payment pattern.

Blue Shield moves for partial summary judgment on those counts, contending that there is no private right of action to challenge the methodology used to determine reasonable reimbursements and urging that even if there were the court should abstain from functioning like an administrative body on issues of complex economic policy.Given the regulations and oversight of the Department of Manage Health Care("DMHC") concerning these payments, NorthBay's UCL claim must be predicated on an incorrect reimbursement amount that causes it injury rather than the methodology that led to it.Accordingly, I GRANT Blue Shield's motion for partial summary judgment.

BACKGROUND

I.FACTUAL AND LEGAL BACKGROUND

NorthBay is a nonprofit healthcare organization that owns and operates two hospitals in Solano County, California.SeeFirst Amended Compl.¶ 3.The hospitals provide comprehensive care, including emergency care.Id.Blue Shield is a health care service plan in which members receive care from in-network hospitals for more favorable reimbursement terms than if they were out-of-network.See Crawford Decl. ¶¶ 3–5(Dkt.No. 47-3).The health plan implements a two-tiered benefit structure to control costs and offer lower monthly dues to its members.Id.¶ 6.

When health plan members visit hospitals that are outside the network, such as Blue Shield members who receive emergency care from NorthBay, hospitals are required to provide treatment.SeeCal. Health & Safety Code § 1317;42 U.S.C. § 1395dd(a).In California, health plans must promptly pay a reasonable amount for the emergency services, called the "reasonable and customary value."Cal. Code Regs. tit. 28, § 1300.71(a)(3)(B),Cal. Health & Saf. Code § 1371.4(b).These "prompt-pay" laws, embodied in the Knox-Keene Health Care Service Plan Act of 1975, ("Knox-Keene Act" or the "Act") require health plans to reimburse hospitals within thirty working days after it receives a complete claim.Seeid.§ 1371.35(a).

California's "prompt-pay" laws also task the Department of Managed Health Care("DMHC") with regulating the state's health care policy.Seeid.§ 1371.38.In turn, DMHC directs health plans like Blue Shield to adopt their own reasonable and customary value methodology ("R & C methodology") for reimbursing non-contracted hospitals according to its guidance and regulations.SeeCal. Code Regs. tit. 28, § 1300.71(a)(3)(B).Health plans then submit their R & C methodologies to the DMHC consistent with this regulatory scheme.

In Section 1300.71(a)(3)(B), the DMHC adopted what are termed the Gould factors(named after Gould v. Workers' Comp. Appeals Bd. , 4 Cal. App. 4th 1059, 1071, 6 Cal.Rptr.2d 228(1992) ) to determine whether a given reimbursement amount is of "reasonable and customary value."The Gould factors include six non-exclusive considerations related to medical provider qualifications, the nature of the service provided, fees charged by geography, and other considerations.Id.Health plans must consider these factors when they develop their R & C methodology, but there is no regulation dictating the appropriate way to consider them or requiring a specific reimbursement value.As amicus curiae in other law suits, the DMHC has represented before that it "does not specifically approve or disapprove filings purporting to establish a methodology, pursuant to Title 28 Cal. Code Regs. § 1300.71(a)(3)(B), for reimbursement of non-contracted providers."ToochDecl. Ex. D. ¶ 7 (Dkt. No. 52-1).But the DMHC has the authority to take disciplinary actions like civil, criminal, or administrative penalties if it does find an R & C methodology is non-compliant with Section 1300.71.SeeCal. Code Regs. tit. 28, § 1300.71(s)(2).

Blue Shield submitted its R & C methodology to the DMHC around March 2015.See Vojta Decl. ¶ 5(Dkt.No. 47-1).Its R & C methodology considers reasonable and customary value of non-contracted services by what other hospitals in the region charge or receive for payment of similar services, the hospital's own reported costs of operation, and other considerations.Id.¶ 4.Consistent with the DMHC's request, Blue Shield detailed how it considered the Gould factors in compliance with Section 1300.71(a)(3)(B).SeeTooch Decl. Ex. A atBSC002648.The DMHC has not required Blue Shield to change its R & C methodology.Id.¶ 8.

II.PROCEDURAL BACKGROUND

NorthBay filed suit in May 2017, and voluntarily amended its complaint two months later in July.SeeCompl. (DktNo. 1); Amended Compl.(Dkt. No. 17).It brings nine claims against Blue Shield for violations of the Employee Retirement Income Security Act of 1974, various breaches of contract, recovery for services rendered, unfair business practices, and declaratory relief.Blue Shield answered the amended complaint and filed a counterclaim alleging unjust enrichment.See Answer and Counterclaim (Dkt. No. 18).At a June 2018 case management conference, the parties agreed to bifurcate the issues for a jury trial first addressing the reasonable value of NorthBay's services.See Joint Case Management Statement (Dkt. No. 36); Minutes Entry (Dkt. No. 37).

This motion brings two of NorthBay's nine claims to the fore.NorthBay alleges in Count Eight that Blue Shield engaged in unfair business practices under the UCL for failing to compensate NorthBay hospitals for non-contracted services, and manipulating data inputted to a flawed methodology to underpay non-contracted claims.SeeAmended Compl.¶ 128.Considering those alleged unfair practices, NorthBay seeks injunctive relief and restitution to stop Blue Shield from using a reimbursement methodology that improperly considers factors required in Section 1300.71andGould .SeeAmended Compl.¶ 130.Relatedly, Count Nine seeks declaratory relief that Blue Shield's reimbursement methodology is improper, that it manipulates data to underpay claims, and that it will not continue being used for future reimbursements.SeeAmended Compl.¶ 136.

LEGAL STANDARD

A party is entitled to summary judgment where it "shows that there is no genuine dispute as to any material fact and [it] is entitled to judgment as a matter of law."FED. R. CIV. P. 56(a).To prevail, a party moving for summary judgment must show the lack of a genuine issue of material fact with respect to an essential element of the non-moving party's claim, or to a defense on which the non-moving party will bear the burden of persuasion at trial.SeeCelotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265(1986).Once the movant has made this showing, the burden then shifts to the party opposing summary judgment to identify "specific facts showing there is a genuine issue for trial."Id.The party opposing summary judgment must then present affirmative evidence from which a jury could return a verdict in that party's favor.Anderson v. Liberty Lobby , 477 U.S. 242, 257, 106 S.Ct. 2505, 91 L.Ed.2d 202(1986).

On summary judgment, the court draws all reasonable factual inferences in favor of the non-movant.Id. at 255, 106 S.Ct. 2505.In deciding a motion for summary judgment, "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge."Id.However, conclusory and speculative testimony does not raise genuine issues of fact and is insufficient to defeat summary judgment.SeeThornhill Publ'g Co., Inc. v. GTE Corp. , 594 F.2d 730, 738(9th Cir.1979).

DISCUSSION

Blue Shield moves for partial summary judgment, arguing: (i) NorthBay has no private right of action to challenge Blue Shield's R & C methodology under the UCL, and (ii) even if it did, the court should abstain from interpreting complex economic policy and deny declaratory and injunctive relief.¹The parties also bring discovery disputes concerning Blue Shield's request for billed charge and profitability documents.For the reasons below, I do not find NorthBay can pursue a UCL claim predicated on improperly considering the Gould factors or considerations required by Section 1300.71 and I DENY declaratory and injunctive relief related to that cause of action.I also DENY Blue Shield's request for documents which are not relevant for determining reasonable value considering NorthBay disavowed its intent to introduce or rely on them.

I.UNFAIR COMPETITION LAW CLAIM

The UCL prohibits "any unlawful, unfair or fraudulent business act...