Judge: Mary H. Strobel, Case: 22STCP00750, Date: 2022-09-08 Tentative Ruling

Case Number: 22STCP00750    Hearing Date: September 8, 2022    Dept: 82

             Respondents California Department of Health Care Services (“DHCS” or “Department”) and Michelle Baass, Director of the State Department of Health Care Services (“Director”) (collectively “Respondents”) generally demur to the first, second, third, and fourth causes of action in the petition for writ of mandate filed by Petitioner K. Andrew Johnson, M.D. (“Petitioner”).

Judicial Notice

Respondents’ Request for Judicial Notice (“RJN”) Exhibits 1-3 – Granted. 

Petitioner’s RJN Exhibits 1 and 2 – Granted. 

Background

Brief Summary of Petition

            Petitioner “is board certified by the American Board of Anesthesiology and duly licensed as a medical doctor by the State of California. He has provided, and continues to provide, anesthesia services at various locations in southern California.”  (Pet. ¶ 2.)

            In this writ action, Petitioner seeks to enforce Welfare and Institutions Code section 14079 on behalf of himself and “other physician anesthesiologists in the State of California.”  (Id. ¶¶ 2-10.)  Petitioner contends that Department failed to comply with section 14079 when setting Medi-Cal rates for physician anesthesiologists.  (Id. ¶¶ 1-2.)  The requirements of section 14079 are discussed in the Analysis section below.  Among other things, Petitioner prays for a “writ of mandate compelling the Respondents to implement payment rates for physician anesthesiology services under the California Medicaid program that are in compliance with California Welfare & Institutions Code section 14079.”  (Id. ¶ 39.)

Statutory Background – Medicaid Act and Medi-Cal

“Medicaid is a cooperative federal-state program through which the federal government reimburses states for certain medical expenses incurred on behalf of needy persons.’”  (Keffeler v. Partnership Healthplan of California (2014) 224 Cal.App.4th 322, 326-27; see 42 U.S.C. § 1396 et seq.)   "States do not have to participate in Medicaid, but those that choose to do so must comply both with statutory requirements imposed by the Medicaid Act and with regulations promulgated by the Secretary of the U.S. Department of Health and Human Services." (Keffeler, supra at 326-27.)  States administer the program and "determine eligibility, the types of services covered, payment levels for services, and other aspects of administration, within the confines of federal law." (Id. at 327.)

To qualify for federal funds, a state must submit its Medicaid plan and any amendments to the federal agency that administers the program, the Centers for Medicare & Medicaid Services (CMS). (Douglas v. Independent Living Center ofSo. Calif., Inc. (2012) 565 U.S. 606, 610.) “Participating states are required to include in their plans reimbursement methods and standards for the medical services provided.”  (California Hosp. Ass’n v. Maxwell-Jolly (2010) 188 Cal.App.4th 559, 565.) 

State plans and amendments must " provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan (including but not limited to utilization review plans as provided for in section 1396b(i)(4) of this title) as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.”  (42 U.S.C. § 1396a(a)(30)(A) [hereafter section 30(A)].) 

“Section 30(A) is commonly understood to set two standards for Medicaid provider rates: ‘efficiency, economy and quality of care’ (EEQ) and equal access to care.”  (Santa Rosa Memorial Hospital, Inc. v. Kent (2018) 25 Cal.App.5th 811, 820.)

Medi-Cal is California's state Medicaid program. (See e.g. Welf. & Inst. Code §§ 14132.)  Department administers the Medi-Cal program.  (22 C.C.R. § 50004(a).) 

“Medicaid providers and recipients may challenge CMS approval of a state plan under the Administrative Procedure Act (APA).”  (Santa Rosa, supra, 25 Cal.App.5th at  815.)  “[T]hey may obtain judicial review should the agency uphold the rates” after that administrative process.  (Id. at 818.)

Procedural History

            On March 3, 2022, Petitioner filed a verified petition for writ of ordinary mandate and complaint for declaratory relief against Respondents. 

            On June 29, 2022, Respondents filed the instant demurrer and a meet and confer declaration.  The court has received Petitioner’s opposition and Respondents’ reply. 

Legal Standard – Demurrer

A demurrer tests the sufficiency of a pleading, and the grounds for demurrer must appear on the face of the pleading or from judicially noticeable matters.  (Blank v. Kirwan (1985) 39 Cal.3d 311, 318; Saltarelli & Steponovich v. Douglas (1995) 40 Cal.App.4^th 1, 5.)  “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.”  (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) 

The allegations in the petition must be liberally construed in favor of Petitioner on demurrer.  (Mobil Oil Corp. v Exxon Corp. (1986) 177 Cal.App.3d 942, 947.)  A demurrer accepts as true “all material facts properly pleaded and matters subject to judicial notice, but not deductions, contentions, or conclusions of law or fact.” (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal. App. 4th 531, 538.)  “A demurrer must dispose of an entire cause of action to be sustained.”  (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)

Analysis

The first, second, and third causes of action are for writ of ordinary mandate.  Respondents demur to these causes of action on the grounds that “Petitioner: (1) does not have an enforceable ‘beneficial right’ to the annual revision of any particular Medi-Cal reimbursement rate; and (2) cannot establish a clear, present and ministerial duty upon the Department to annually review and revise reimbursement rates for physician anesthesiologists.”  (Dem. 15.)

There are two essential requirements to the issuance of an ordinary writ of mandate under Code of Civil Procedure section 1085: (1) a clear, present, and ministerial duty on the part of the respondent, and (2) a clear, present, and beneficial right on the part of the petitioner to the performance of that duty. (California Ass’n for Health Services at Home v. Department of Health Services (2007) 148 Cal.App.4th 696, 704.) “An action in ordinary mandamus is proper where … the claim is that an agency has failed to act as required by law.” (Id. at 705.)

“Generally, mandamus is available to compel a public agency's performance or to correct an agency's abuse of discretion when the action being compelled or corrected is ministerial.”  (AIDS Healthcare Foundation v. Los Angeles County Dept. of Public Health (2011) 197 Cal.App.4th 693, 700.)  “A ministerial act is an act that a public officer is required to perform in a prescribed manner in obedience to the mandate of legal authority and without regard to his own judgment or opinion concerning such act's propriety or impropriety, when a given state of facts exists.”  (Kavanaugh v. West Sonoma County Union High School Dist. (2003) 29 Cal.4th 911, 916.)   

“However, [mandamus] will lie to correct abuses of discretion. In determining whether a public agency has abused its discretion, the court may not substitute its judgment for that of the agency, and if reasonable minds may disagree as to the wisdom of the agency's action, its determination must be upheld. A court must ask whether the public agency's action was arbitrary, capricious, or entirely lacking in evidentiary support, or whether the agency failed to follow the procedure and give the notices the law requires.”  (County of Los Angeles v. City of Los Angeles (2013) 214 Cal.App.4th 643, 654.) 

Section 14079

            Welfare and Institutions Code, which is central to the writ petition, provides as follows:

(a)  The director shall periodically review the reimbursement levels for physician and dental services in the Medi-Cal fee-for-service delivery system, and shall periodically revise the rates of reimbursement to physicians and dentists to the extent the director deems necessary to comply with applicable federal Medicaid program requirements, including provisions on reasonable access to physician and dental services for Medi-Cal beneficiaries.

(b)  To the extent consistent with the department's federally approved access monitoring plan, or any successor methodology for monitoring reasonable access to Medi-Cal covered services, as described in Section 1396a(a)(30)(A) of Title 42 of the United States Code, this periodic review, as it relates to rates for physician services, shall take into account at least the following factors:

(1) Annual cost increases for physicians as reflected by the Consumer Price Index.

(2) Physician reimbursement levels under the Medicare Program.

(3) Prevailing customary physician charges within the state and in various geographical areas.

(4) Characteristics of the current population of Medi-Cal beneficiaries and the medical services needed.

Standing

To have standing to seek a writ of mandate, a party must be “beneficially interested.”  (CCP § 1086.) “A petitioner is beneficially interested if he or she has some special interest to be served or some particular right to be preserved or protected over and above the interest held in common with the public at large.”  (Rialto Citizens for Responsible Growth v. City of Rialto (2012) 208 Cal. App. 4th 899, 913; accord Carsten v. Psychology Examining Com. (1980) 27 Cal.3d 793, 796-97.) “This standard … is equivalent to the federal ‘injury in fact’ test, which requires a party to prove by a preponderance of the evidence that it has suffered ‘an invasion of a legally protected interest that is '(a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.'’”  (Associated Builders and Contractors, Inc. v. San Francisco (1999) 21 Cal.4th 352, 361-362.)  “One who is in fact adversely affected by governmental action should have standing to challenge that action if it is judicially reviewable.”  (Save the Plastic Bag Coalition v. City of Manhattan Beach (2011) 52 Cal.4th 155, 165.) 

Respondents contend that Petitioner has no private right of action because section 14079 incorporates section 30(A) and “[t]he U.S. Supreme Court held that there is no private right of action under 30(A).”  (Dem. 16-17.)

In Armstrong v. Exceptional Child Center, Inc. (2015) 575 U.S. 320, the U.S. Supreme Court held that “[t]he sheer complexity associated with enforcing § 30(A), coupled with the express provision of an administrative remedy, § 1396c, shows that the Medicaid Act precludes private enforcement of § 30(A) in the courts.”  (Id. at 329.)  The Court noted that “[i]t is difficult to imagine a requirement broader and less specific than § 30(A)'s mandate that state plans provide for payments that are ‘consistent with efficiency, economy, and quality of care,’ all the while ‘safeguard[ing] against unnecessary utilization of ... care and services.’”  (Id. at 328.)  In Santa Rosa Memorial Hospital, Inc. v. Kent (2018) 25 Cal.App.5th 811, the California Court of Appeal applied Armstrong to a writ petition seeking to enforce section 30(A) in state court and held the petitioner lacked standing. 

Petitioner concedes that “Medi-Cal providers do not have a private right of action to enforce section 30(A) ‘in both federal and state courts.’”  (Oppo. 5.)  Petitioner also agrees that “that one of the goals of section 14079 is to ensure that California complies with section 30(A).”  (Ibid.)  However, Petitioner contends that Armstrong and Santa Rosa do not preclude a private right of action here because section 14079 is materially different than section 30(A).  Unlike section 30(A), which is broad and not specific, Petitioner contends that “section 14079 … specifically describes how physician rates for Medi-Cal services should be set in California. It does not recite general goals, but instead mandates that the respondents perform very specific actions in the rate setting process.”  (Oppo. 8.)

Neither Armstrong nor Santa Rosa, or any other case cited by Respondents, decided whether there is a private right of action under section 14079.  “An opinion is not authority for propositions not considered.’”  (People v. Knoller (2007) 41 Cal.4th 139, 154-55.)  While it is true that section 14079 incorporates “applicable federal Medicaid program requirements,” the statute also specifies in mandatory language that the director “shall periodically review the reimbursement levels for physician … services in the Medi-Cal fee-for-service delivery system.”

Respondents contend that, to prevail under section 14079, the petitioner must necessarily prove that the Department failed to comply with section 30(A).  (Dem. 17-18.)  While this seems generally correct, it may be possible that a petitioner could allege a scenario in which the Department violated section 14079 in a manner that would not require the court to consider Department’s compliance with section 30(A).  In its petition, however, Petitioner has not so alleged.

Petitioner contends that a private right of action must exist simply because “where there is a right, there must be a remedy.”  (Oppo. 6-7.)  A similar argument was rejected in Armstrong.  The Court reasoned that “relief must be sought initially through the Secretary rather than through the courts.” (Reply 6; Armstrong, supra, 575 U.S. at 331.)  That rationale could apply here as well.  

Petitioner relies on an unpublished trial court decision enforcing a prior version of section 14079 and a Court of Appeal decision enforcing section 30(A) prior to Armstrong.  (Oppo. 8, 13-14.) The citation to a trial court decision is improper and the Court of Appeal decision is not controlling because it predates Armstrong.  (Cal. Rules of Court, Rule 8.1115(a); B.F. v. Sup.Ct. (2012) 207 Cal.App.4th 621, 627, fn. 2 [“trial court decisions are not precedent”]; Santa Rosa, supra, 25 Cal.App.5th at 820 [California Hosp. Ass'n v. Maxwell-Jolly (2010) 188 Cal.App.4th 559 “not controlling” because it predates Armstrong].) 

For purposes of this demurrer, the court will assume, without deciding, that a private right of action may exist to enforce section 14079, depending on the facts alleged.  As discussed next, Petitioner has not alleged sufficient facts to support a claim under section 1085 even if he does have standing. 

Has Petitioner Alleged a Clear, Present, and Ministerial Duty or an Abuse of Discretion? 

            Respondents contend that Petitioner has not alleged a clear, present, or ministerial duty enforceable by mandate because: (1) section 14079 requires periodic and not annual reviews; and (2) “Petitioner fails to provide any factual or legal support to establish that the Department abused its discretion in reviewing and revising Medi-Cal reimbursement rates for physician anesthesiologists.”  (Dem. 18-19.)

            The petition, filed in March 2022, alleges that section 14079 requires Department to conduct an “annual review” of Medi-Cal rates.  (Pet. ¶ 19.)  Petitioner seeks a writ “compelling the Respondents to update and timely implement on an annual basis new Medi-Cal payment rates for physician anesthesiologists based on the CPI.”  (Id. ¶ 40.)  Section 14079, as amended in 2020, requires Director to “periodically review the reimbursement levels for physician and dental services in the Medi-Cal fee-for-service delivery system.”  (§ 14079(a).)  Section 14079(b) also refers expressly to “this periodic review.”  The statute does not require an “annual” review.  Thus, the petition does not allege a basis to compel Respondents to conduct “annual” review of reimbursement levels. 

            Respondents also contend: “[N]o allegations in the petition suggest that the Department’s reimbursement rates for physician anesthesiologists have negatively impacted access to care and services. In fact, by petitioner’s own admission, there are currently ‘6,174 active physician anesthesiologists in the State of California’ as of 2021. (Pet., ¶ 2.) Petitioner does not allege that the current reimbursement rates fail to conform to federal Medicaid program requirements.”  (Dem. 19-20.) 

The court agrees that the petition does not presently allege a ministerial duty or abuse of discretion that can be enforced by mandate.  In the petition, Petitioner alleges three separate causes of action for mandate based on the Department’s alleged failure to consider the factors set forth in section 14079(b)(1)-(3).  Petitioner contends that the Department violated Section 14079 by allegedly failing to account for: (1) the annual cost increases for physicians as reflected by the Consumer Price Index; (2) physician reimbursement levels under the Medicare program; and (3) prevailing customary physician charges within the state and in various geographical areas. (Pet., ¶¶ 13, 21, 29.)  

However, the factors set forth in section 14079(b) cannot be read in isolation and must be harmonized with the entire statute.  When interpreting a statute, the court must construe the statute, if possible to achieve harmony among its parts.  (People v. Hull (1991) 1 Cal. 4th 266, 272.)   “When interpreting statutory language, we may neither insert language which has been omitted nor ignore language which has been inserted.”  (See People v. National Auto. and Cas. Ins. Co. (2002) 98 Cal.App.4th 277, 282.)  “[I]nterpretations which render any part of a statute superfluous are to be avoided.”  (Young v. McCoy (2007) 147 Cal.App.4th 1078, 1083.) 

Section 14079(a) states that “[t]he director shall periodically review the reimbursement levels for physician … services in the Medi-Cal fee-for-service delivery system, and shall periodically revise the rates of reimbursement to physicians … to the extent the director deems necessary to comply with applicable federal Medicaid program requirements, including provisions on reasonable access to physician and dental services for Medi-Cal beneficiaries.”  (bold italics added.)  Section 14079(b) also states that “[t]o the extent consistent with the department's federally approved access monitoring plan, or any successor methodology for monitoring reasonable access to Medi-Cal covered services, as described in Section 1396a(a)(30)(A) of Title 42 of the United States Code, this periodic review, as it relates to rates for physician services, shall take into account at least the following factors: ….” (bold italics added.)

Thus, section 14079 directly ties the Director’s “periodic” revision of rates to a determination by the Director that the changes are “necessary to comply with applicable federal Medicaid program requirements.”  Furthermore, the four factors specified in section 14079(b) only need to be considered “to the extent consistent” with Department’s federally approved plans under section 30(A).  Any cause of action for mandate must be made within this statutory framework. 

Whether Respondents had any legal duty to give further consideration to annual cost increases for physicians as reflected in the CPI; physician reimbursement levels under Medicare; or prevailing customary physician charges within the state and various geographical areas depends on whether that consideration would be consistent with Department’s federally approved plans under section 30(A).  (§ 14079(b).)  Furthermore, the Director would only be required to make rate revisions if she determines the changes are “necessary to comply with applicable federal Medicaid program requirements.”  (§ 14079(a).) 

Petitioner does not sufficiently allege that Respondents abused their discretion, or failed to proceed as required by law, in this framework.  Petitioner provides only a cursory discussion of Department’s Access Monitoring Review Plan from 2019.  (Pet. ¶¶ 10-11.)  Petitioner alleges: “The latest AMRP makes absolutely NO mention of either the CPI or ‘prevailing customary physician charges,’ and thus is deficient on its face with respect to these two statutory requirements. Moreover, the 2019 AMRP offers NO explanation or rationale for how or why the Medi-Cal rates are 40% to 50% lower than the Medicare rates.”  (Id. ¶ 11.)  Petitioner does not provide any comprehensive discussion of the AMRP or the determination that has been made by Director, or federal agencies, with respect to compliance with section 30(A).  Petitioner does not allege that Director has failed to conduct the “periodic” review required by section 14079(a). 

In opposition, Petitioner cites to certain statements from Department’s “latest ARMP” in support of his position that a cause of action is stated.  (Oppo. 15.)  Those allegations are not made in the petition and therefore cannot support a properly pleaded cause of action.  “A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.”  (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.) 

The demurrer to the first, second, and third causes of action is SUSTAINED.

Fourth Cause of Action – Declaratory Relief

Pursuant to the local rules which designate that Department 82 is a specialized Writs and Receivers department and not a general civil department, only those special proceedings stated in the rule (including for writ of mandate) are properly assigned to this department.  (LASC Local Rules 2.8(d) and 2.9.)  Local Rules 2.8(d) and 2.9 do not include a claim for declaratory relief as special proceedings assigned to the writs departments.  To the extent the fourth cause of action seeks declaratory relief under CCP section 1060 on the question of whether fees may be awarded “from a common fund” created for the benefit of a class of beneficiaries, it is stayed pending resolution of the writ causes of action. 

The fourth cause of action also appears to seek attorney’s fees pursuant to CCP section 1021.5.  Should Petitioner seek attorney fees or other relief incidental to the writ causes of action, Department 82 may rule on such matters by noticed motion after resolution of the writ causes of action.  Respondents could raise all available defenses to a motion for fees at that time. 

If Petitioner seeks any relief not properly assignable to a writs department (including declaratory relief), and if such relief is not resolved by this court’s ruling on the writ petition, the fourth cause of action will be transferred to Department 1 for assignment to a non-writs department.

Leave to Amend

A demurrer may be sustained without leave to amend when there is no reasonable possibility that the defect can be cured by amendment.  (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.)  Courts generally allow at least one time to amend a complaint after sustaining a demurrer.  (McDonald v. Superior Court (1986) 180 Cal.App.3d 297, 303.)  In assessing whether leave to amend should be granted, the burden is on the complainant to show the court that a pleading can be amended successfully.  (Goodman v.  Kennedy (1976) 18 Cal.3d 335, 348-349.) 

            This is the court’s first ruling on demurrer, which weighs generally for granting leave to amend.  Nonetheless, Petitioner does not request leave to amend or explain what additional facts could be alleged.  Counsel should address at the hearing whether leave to amend should be granted and how Petitioner could amend to state a cause of action within the statutory framework of section 14079 discussed above.

Conclusion

The demurrer to the first, second, and third causes of action is SUSTAINED. Counsel should address at the hearing whether leave to amend should be granted.

The fourth cause of action is stayed pending resolution of the writ petition.