Judge: Armen Tamzarian, Case: 23STCV21211, Date: 2024-02-16 Tentative Ruling

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Case Number: 23STCV21211    Hearing Date: February 16, 2024    Dept: 52

Defendant Local Initiative Health Authority for Los Angeles County d/b/a L.A. Care Health Plan’s Demurrer to Complaint

Defendant Local Initiative Health Authority for Los Angeles County d/b/a L.A. Care Health Plan (LA Care) demurs to all four causes of action alleged in the complaint by plaintiffs Dr. Lincoln Luk, Jr., M.D. and California Society of Pathologists. 

Request for Judicial Notice

Defendant requests judicial notice of two exhibits: (A) a letter written by the Department of Health Care Services (DHCS) to the California Society of Pathologists, and (B) part of the Medi-Cal Provider Manual titled “Pathology: Billing and Modifiers.”  Both documents are “[o]fficial acts” of the State’s executive departments subject to judicial notice under Evidence Code section 452(c).

Defendant’s requests for judicial notice are granted.   

Judicial Abstention

            Defendant argues the court should abstain from resolving this dispute and instead defer to the DHCS’s determination.  “As a general matter, a trial court may abstain from adjudicating a suit that seeks equitable remedies if ‘granting the requested relief would require a trial court to assume the functions of an administrative agency, or to interfere with the functions of an administrative agency.’  [Citation.]  A court also may abstain when ‘the lawsuit involves determining complex economic policy, which is best handled by the Legislature or an administrative agency.’ ”  (Arce v. Kaiser Foundation Health Plan, Inc. (2010) 181 Cal.App.4th 471, 496.)  But courts must not abstain when resolving the claim requires only “the basic judicial functions of contractual and statutory interpretation.”  (Id. at p. 499.)

At this stage, defendant has not shown that resolving this dispute would require the court to assume the functions of DHCS or interfere with those functions rather than perform the basic judicial functions of contractual and statutory interpretation.  Plaintiffs’ complaint alleges defendant’s “new policy called ‘Source Clarification Regarding Split Billing’ (the ‘Split Billing Policy’)” (Comp., ¶ 5, Ex. 1) results in “refusing to reimburse … pathologists for medically necessary diagnostic laboratory services” (¶ 7). 

The court has taken judicial notice of a letter from DHCS  stating it is responding to plaintiff the California Society of Pathologists’ letter “regarding L.A. Care Health Plan’s (L.A. Care) ‘Source Clarification Regarding Split Billing’ announcement.”  (RJN, Gawley Decl., Ex. A.)  The letter states that the pathologists’ concerns “are governed by specific contractual arrangements between L.A. Care and hospitals and pathologists.  DHCS generally does not weigh-in on contractual disputes between Medi-Cal managed care plans (MCPs) and their subcontracted providers unless a dispute involves potential MCP contract violations; DHCS concludes that L.A. Care has not violated its contract with DHCS in this matter.”  (Ibid.)  In other words, the letter states that DHCS finds defendant’s split-billing policy does not violate its contract with defendant.  It does not clearly state that DHCS finds defendant’s policy is authorized under all applicable law.

First Cause of Action: Quantum Meruit – Emergency Services

Plaintiff Dr. Luk alleges sufficient facts for this cause of action.  “To recover on a claim for the reasonable value of services under a quantum meruit theory, a plaintiff must establish both that he or she was acting pursuant to either an express or implied request for services from the defendant and that the services rendered were intended to and did benefit the defendant.”  (Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782, 794.)  “Health care providers are entitled to reimbursement from patients’ health care service plans for the emergency services that they provide.”  (Sanjiv Goel, M.D., Inc. v. Regal Medical Group, Inc. (2017) 11 Cal.App.5th 1054, 1060.)  “State law substantially limits the authority of health care service plans to deny claims for emergency services.”  (San Jose Neurospine v. Aetna Health of California, Inc. (2020) 45 Cal.App.5th 953, 958.) 

Dr. Luk alleges he performed emergency services for defendant’s plan members, and defendant has not paid the reasonable and customary value for his services.  (Comp., ¶¶ 38-42.)  These allegations suffice to constitute a cause of action for quantum meruit. 

Defendant argues plaintiff has not alleged sufficient facts because he did not allege he submitted “complete claims” under Health and Safety Code section 1371.35.  None of the authority defendant cites states that alleging submission of a “complete claim” under the Health and Safety Code is an element of this cause of action.  Assuming it is a required element, Dr. Luk adequately alleges it.  When liberally construing the complaint (as required on demurrer), the allegations that defendant “has failed to reimburse Dr. Luk on any of his professional claims” (¶ 32) after he “provided L.A. Care with spreadsheets setting forth these claims in detail” (id., fn. 3) constitute submitting “complete claims.”

Second Cause of Action: Quantum Meruit – Inpatient Services

Plaintiff Dr. Luk alleges sufficient facts for this cause of action.  Unlike emergency services, a claim for quantum meruit for other services requires “either an explicit or implicit request for the services.”  (Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 249.)  “[W]hen the services are rendered by the plaintiff to a third person, the courts have required that there be a specific request therefor from the defendant.”  (Ibid.)

The complaint alleges defendant requested or authorized Dr. Luk’s inpatient services.  It alleges, “Prior to offering inpatient services, Centinela [Hospital Medical Center], or a provider at Centinela, will submit a request for authorization to L.A. Care.  This request for authorization will identify the enrollee, the inpatient services to be provided, and the facility at which the services will be performed.  Because diagnostic laboratory services are a medically necessary component of these inpatient services, and a service which L.A. Care is mandated to cover, L.A. Care’s approval of an authorization request also approves by implication the provision of medically necessary diagnostic laboratory services.”  (Comp., ¶ 49.) 

Each authorization request identified “the inpatient services to be provided.”  When liberally construing the complaint, that allegation means each request stated the diagnostic laboratory services to be performed.  Approving such a request constitutes making a specific request for the services identified in it—including Dr. Luk’s diagnostic laboratory services.    

Dr. Luk’s allegations are analogous to those in Allied Anesthesia Medical Group, Inc. v. Inland Empire Health Plan (2022) 80 Cal.App.5th 794.  There, the Court of Appeal held that “authorizing surgical procedures, which necessarily required anesthesia” was “insufficient for the creation of an agreement” by the plan to pay the reasonable and customary value of the anesthesiologists’ services.  (Id. at p. 808.)  The court, however, noted the plaintiffs’ “allegations amount to a claim for quantum meruit.”  (Id. at p. 810.)  The court concluded, “[H]aving failed to negotiate, and contract for, a higher rate of payment, the applicable Medicaid/Medi-Cal statutes and regulations mandate that plaintiffs accept a reduced reimbursement amount as set forth in the Medi-Cal fee schedule.”  (Id. at p. 813.)  Under this reasoning, authorizing surgery that required anesthesia did mean the health plan also authorized anesthesia, though it did not agree to pay the rate plaintiffs wanted for administering anesthesia. 

Here, Dr. Luk alleges defendant “refuses to reimburse him anything” for his inpatient services.  (Comp., ¶ 51.)  Even with no agreement by defendant to pay Dr. Luk, he alleges sufficient facts to state a cause of action under which defendant owes him something, if not reasonable and customary value, for his services.    

Third and Fourth Causes of Action: Declaratory and Injunctive Relief

Defendant demurs to these causes of action based on the same arguments it makes for abstention.  The court has already rejected those arguments.

Disposition

Defendant Local Initiative Health Authority for Los Angeles County d/b/a L.A. Care Health Plan’s demurrer is overruled.  Defendant shall answer the complaint within 20 days.