Judge: Mark A. Young, Case: 22SMCV01225, Date: 2023-03-17 Tentative Ruling
Case Number: 22SMCV01225 Hearing Date: March 17, 2023 Dept: M
CASE NAME: Ecure CA LLC
v. UHC of California, et al.
CASE NO.: 22SMCV01225
MOTION: Demurrer
to the First Amended Complaint
HEARING DATE: 3/15/2023
BACKGROUND
The first amended complaint (FAC)
alleges six causes of action against United Healthcare Insurance Company (UHIC)
for: 1) quantum meruit, 2) breach of implied-in-law contract (emergency
services); 3) breach of implied-in-law contract (post-stabilization services);
4) breach of implied-in-fact contract (post-stabilization services); 5) unfair
business practices; and 6) declaratory relief.
Legal
Standard
A
demurrer for sufficiency tests whether the complaint states a cause of action.
(Hahn v. Mirda (2007)
147 Cal.App.4th 740, 747.) When considering demurrers, courts read the
allegations liberally and in context. In a demurrer proceeding, the defects
must be apparent on the face of the pleading or via proper judicial notice. (Donabedian v. Mercury Ins. Co.
(2004) 116 Cal.App.4th 968, 994.) A demurrer tests the pleadings alone and not
the evidence or other extrinsic matters. Therefore, it lies only where the
defects appear on the face of the pleading or are judicially noticed. (CCP §§
430.30, 430.70.) At the pleading stage, a plaintiff need only allege ultimate
facts sufficient to apprise the defendant of the factual basis for the claim
against him. (Semole v. Sansoucie
(1972) 28 Cal. App. 3d 714, 721.) A “demurrer does not, however, admit
contentions, deductions or conclusions of fact or law alleged in the pleading,
or the construction of instruments pleaded, or facts impossible in law.” (S. Shore Land Co. v. Petersen
(1964) 226 Cal.App.2d 725, 732, internal citations omitted.)
A
special demurrer for uncertainty is disfavored and will only be sustained where
the pleading is so bad that defendant cannot reasonably respond—i.e., cannot
reasonably determine what issues must be admitted or denied, or what counts or
claims are directed against him/her. (CCP § 430.10(f); Khoury v. Maly’s
of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Moreover, even if
the pleading is somewhat vague, “ambiguities can be clarified under modern
discovery procedures.” (Ibid.)
Any party, within the time allowed
to respond to a pleading may serve and file a notice of motion to strike the
whole or any part thereof. (CCP § 435(b)(1); Cal. Rules of Court, Rule
3.1322(b).) The court may, upon a motion or at any time in its discretion and
upon terms it deems proper: (1) strike out any irrelevant, false, or improper
matter inserted in any pleading; or (2) strike out all or any part of any
pleading not drawn or filed in conformity with the laws of California, a court
rule, or an order of the court. (CCP §§ 436(a)-(b); Stafford v. Shultz (1954) 42 Cal.2d 767, 782 [“Matter in a
pleading which is not essential to the claim is surplusage; probative facts are
surplusage and may be stricken out or disregarded”].)
“Liberality in permitting amendment
is the rule, if a fair opportunity to correct any defect has not been given.” (Angie
M. v. Superior Court (1995) 37 Cal.App.4th 1217, 1227.) It is an abuse of
discretion for the court to deny leave to amend where there is any reasonable
possibility that plaintiff can state a good cause of action. (Goodman v.
Kennedy (1976) 18 Cal.3d 335, 349.) The burden is on plaintiff to
show in what manner plaintiff can amend the complaint,
and how that amendment will change the legal effect of the
pleading. (Id.)
Analysis
Plaintiff’s request for judicial notice is GRANTED.
UHIC demurs to the third, sixth and seventh causes of action.
Third Cause of
Action for Quantum Meruit/Implied-In-Law Contract for Emergency Services
A claim for quantum meruit must
allege: 1) performance of services, work or labor; 2) at defendant’s request;
and 3) circumstances inferring defendant’s promise to pay a reasonable
value. (Maglica v. Maglica (1998)
66 Cal.App.4th 442, 449-450; Palmer v. Gregg (1967) 65 Cal.2d 657, 660; see also MKB Management, Inc. v.
Melikian (2010) 184 Cal.App.4th 796, 805)
“ ‘The measure of recovery in quantum meruit is the reasonable
value of the services rendered provided they were of direct benefit to
the defendant.’ ” (Chodos v. Borman (2014) 227 Cal.App.4th 76, 96;
quoting Palmer, supra, 65 Cal.2d at 660.) “The idea that one
must be benefited by the goods and services bestowed is thus integral to
recovery in quantum meruit.” (Maglica, supra, 66 Cal.App.4th at 450.)
Therefore, a plaintiff must
establish both that he was acting pursuant to either an express or implied
request for such services from the defendant and that the services rendered
were intended to and did benefit the defendant; further, the defendant must
have retained the benefit with full appreciation of the facts. (Pacific Bay
Recovery, Inc. v. California Physicians' Services, Inc. (2017) 12
Cal.App.5th 200; Ochs v. PacifiCare of California (2004) 115
Cal.App.4th 782.)
The FAC alleges that “Physicians
provided emergency and post-stabilization emergency medical services to United
Healthcare members. During this period, Physicians did not have contracts with
United Healthcare and were “out-of-network” providers.” (FAC ¶ 14.) “Physicians
subsequently billed United Healthcare for their emergency and poststabilization
emergency medical services. Physicians sought the full-billed amount for their
services. United Healthcare failed to pay Physicians their full-billed amount
or the reasonable and customary value of the services provided, and instead
significantly underpaid Physicians for their services (if at all). These
underpaid claims are referred to as the ‘Reimbursement Claims.’” (FAC ¶ 15.) Plaintiff
purchased the Reimbursement Claims at issue. (¶ 16.) Plaintiff’s claims are
valued at $1,853,056.03, plus interest. (Id.)
“[E]mergency services are provided
in the emergency department of a hospital, as described in Health and Safety
Code section 1317(a). Post-stabilization emergency medical services are
provided at the hospital after the patient’s original emergency medical
condition has stabilized, often after the patient has been admitted as an
inpatient.” (FAC ¶ 17, emphasis added.) Such
claims include:
a. Claims
submitted by several physicians specializing in internal medicine who provided
dozens of patients with emergency and/or emergency poststabilization services,
including surgical procedures and evaluation and management services.
b. Claims
submitted by a physician specializing in wound and podiatric surgery who
provided approximately 49 patients with emergency and/or emergency
post-stabilization services, including wound debridement and skin substitute
grafts.
c. Claims
submitted by a physician specializing in general surgery who provided
approximately seven patients with emergency and/or emergency post-stabilization
services, including emergency surgeries such as appendectomies and
cholecystectomies[; and,]
d. Claims
submitted by a physician specializing in gastroenterology who provided
approximately six patients with emergency post-stabilization services.”
(FAC ¶19.) The hospitals at which the Physicians treated
UHC’s and UHCBPC’s members contacted UHC and UHCBPC to authorize
post-stabilization services. (FAC ¶ 23.) In each instance, UHC and UHCBPC
either explicitly approved the post-stabilization service or failed to respond
within 30 minutes. (Id.)
The FAC contends that UHIC has a
legal obligation to pay the Physicians for the provision of emergency and
post-stabilization emergency medical services. (FAC ¶ 47.) The FAC cites state
and federal statutory law, and common law in support of this position. (FAC ¶¶
45-48.)
The FAC further alleges that the physicians
provided a direct benefit to UHIC by rendering emergency and emergency
post-stabilization services, which UHIC was obligated to provide to its members
under the terms of UHIC’s insurance contracts with those members. (FAC ¶ 49.) The
FAC claims that the “mutual obligations between the Physicians and UHIC gave
rise to an implied-in-law contract” and, as such, UHIC was required to pay
either the reasonable value or the full billed charges for the emergency and
post-stabilization emergency services provided by the Physician. (¶53.) Notably, Plaintiff alleges that the services
were rendered pursuant to Health & Safety Code section 1317. Health &
Safety Code § 1317.2a(d) states in relevant part that the liability of a
third-party payor that is licensed by the Insurance Commissioner . . . and has
a contractual obligation to provide or indemnify emergency medical services
under a contract which covers a subscriber or an enrollee shall be determined
in accordance with the terms of that contract . . ..” Thus, Plaintiff’s quantum
meruit claim improperly attempts to circumvent the applicable statute “to
recover something to which it is not entitled.” (Pac. Bay Recovery, Inc. v.
Cal. Physicians’ Servs., Inc., (2017) 12 Cal. App. 5th 200, 215.)
In general, courts require a
plaintiff to offer more detailed allegations that defendant authorized a
certain amount of treatment or agreed to pay a specific rate to take it out of
the regulatory scheme. (Pacific Bay, supra. at 215; See Casa Bella
Recovery International, Inc. v. Humana Inc. (C.D. Cal., Nov. 27, 2017,
No. SACV1701801AGJDEX) 2017 WL 6030260, at *4.) It is possible that an
out-of-network medical provider may be entitled to payment beyond the EOC if
the insurer specifically agreed to pay the provider more. However, there
is no factual allegation supporting such a claim here.
Moreover, the Knox-Keene Act “shall
not apply to: A person organized and operating pursuant to a certificate issued
by the Insurance Commissioner unless the entity is directly providing the
health care service through those entity-owned or contracting health facilities
and providers....” (Health & Safety Code § 1343(e)(1).) Conversely, under
the Insurance Code, a health care service plan that is regulated by the
Knox-Keene Act is not subject to CDI regulations. (Ins. Code § 740(g); see Smith
v. PacifiCare Behavioral Health of California, Inc. (2001) 93
Cal.App.4th 139, 150, fn. 14 [health care service plans under the Knox-Keene
Act are generally subject to the jurisdiction of the Commissioner of
Corporations (§ 1341), not the Insurance Commissioner].) Under
this Act, a “Health care service plan” or “specialized health care service
plan” means either of the following: “(1) Any 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; [or] (2) Any person, whether located within or outside of this
state, who solicits or contracts with a subscriber or enrollee in this state to
pay for or reimburse any part of the cost of, or who undertakes to arrange or
arranges for, the provision of health care services that are to be provided
wholly or in part in a foreign country in return for a prepaid or periodic
charge paid by or on behalf of the subscriber or enrollee.” (Health &
Safety Code § 1345.)
The allegations demonstrate that
Defendants are subject to the CDI/Insurance Code. Thus, Plaintiff’s Knox-Keene
statutory claims, or common law claims based thereon, would fail as a matter of
law. In an attempt to save these claims,
Plaintiff asserts that there are fact issues as to what the terms of the
insurance policies “actually” say. Plaintiff could have alleged such terms, but
instead chose to allege a legal theory that such terms do not control. As such,
the stated cause of action fails.
Moreover, Plaintiff’s FAC contains
no allegation supporting payment under the federal “Greatest of Three (GOT)”
rule. The FAC merely alleges the conclusion that UHIC violated the GOT rule.
(FAC ¶¶ 58, 89.) The GOT rule sets the amount insurers are required to pay for
out-of-network emergency medical services at the greatest of the three listed
amounts:
(1) The amount
negotiated with in-network providers for the emergency service furnished;
(2) The amount
for the emergency service calculated using the same method the plan generally
uses to determine payments for out-of-network services (such as the
usual, customary, and reasonable charges) but substituting the in-network cost
sharing provisions for the out-of-network cost-sharing provisions; or
(3) The amount that would be paid
under Medicare for the emergency service.
(Am. Coll. of Emergency Physicians v. Price, (DDC
2017) 264 F. Supp. 3d 89, 92, emphasis added, citing 29 CFR §
2590.715-2719A(b)(iii).)
As alleged in the FAC, Plaintiff
seeks to recover either fully billed charges or a “reasonable” rate of
reimbursement from UHIC, a standard not found in the federal regulation. This
is not the same standard cited by Plaintiff. Therefore, Plaintiff fails to
state a claim under the GOT rule.
Sixth Cause of Action – UCL
The UCL alleges illegal and unfair
business practices in Defendants’ billing. This includes failing to: pay reasonable
and customary value as required under the Knox-Keene Act, and instead basing
payment on other inappropriate criteria. (¶90(a)); pay a reasonable amount as
required by the federal “Greatest of Three” rule set forth at 29 C.F.R. §
2590.715-2719A(b)(3) and common law principles of quantum meruit (90b); respond
within 30 minutes to requests for authorization to provide post-stabilization
services to United Healthcare patients then denying payment of Physicians’
charges despite authorization under Health & Safety Code § 1262.8(d)(1) (90(c));
arrange for the prompt transfer of stabilized patients after initially refusing
to authorize post-stabilization services, and electing instead for transfer,
yet failing to pay charges in violation of Health & Safety Code §
1262.8(d)(3) (90d); pay reasonable charges for care associated with the
transfer of a patient, including medically necessary care rendered to the
patient prior to the transfer in violation of Health & Safety Code §
1262.8(e) (90e); consider the minimum criteria for determining the usual,
customary, and reasonable level of payment for hospital services in the absence
of a contract, in violation of CCR 28, § 1300.71(a)(3)(B) (90(f));
and, pay the full the amount/denying complete and accurate
claims in violation of Health & Safety Code § 1371.37 (90(g)).
The FAC fails to allege sufficient
facts as to these violations. Instead, these are mere conclusions of law.
Moreover, each of the above acts pre-suppose that Defendants had to pay
reasonable amounts, or the amounts as charged. As discussed above, this is not
the law.
Declaratory Relief
Plaintiff seeks declaratory
relief to clarify the parties’ rights and obligations going forward. The allegations, however, are in effect a
restatement of the prior causes of action.
(Compl., ¶ 70(a)-(f).) Therefore,
the declaratory relief cause also fails for these same reasons.
Accordingly, Defendant’s demurrer
is SUSTAINED. The Court is not inclined to grant leave to amend, absent a
proffer of reasonable amendment.