Judge: William A. Crowfoot, Case: 19STCV26289, Date: 2023-01-13 Tentative Ruling

Case Number: 19STCV26289    Hearing Date: January 13, 2023    Dept: 27

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES - CENTRAL DISTRICT

I.            INTRODUCTION

On July 26, 2019, plaintiff Julian Alexander Brito-Gonzalez (“Plaintiff”), a minor, by and through his guardian ad litem, Janahi Gonzalez-Cruz, filed this action against defendant Valley Presbyterian Hospital (“Defendant”).  Plaintiff alleges that Defendant, through its hospital staff and respiratory therapists, negligently managed his neonatal care resulting in a severe hypoxic brain injury.  (Compl., ¶ 12.)  On May 25, 2021, Plaintiff filed a notice of settlement. 

On August 30, 2021, the Court approved the settlement of Plaintiff’s claim in exchange for $5.75 million.  As part of the order approving the settlement, $339,131.96 was placed in Plaintiff’s counsel’s trust account, pending a future resolution of the lien asserted by the California Department of Health Care Services (“DHCS”) for past medical expenses paid by Medi-Cal.  The Court specifically reserved jurisdiction to determine the issue of any lien reduction in the future. 

On January 25, 2022, Plaintiff filed this motion to reduce the lien asserted by DHCS to zero or some other amount, arguing that Plaintiff did not pursue reimbursement on behalf of DHCS, his settlement does not include any compensation for medical care or expenses paid by DHCS and the federal Medicaid Act bars DHCS from assuming that the settlement includes such expenditures, and the lien asserted by DHCS is for an amount greater than its actual expenditures for medical care. 

On March 15, 2022, DHCS filed its opposition to Plaintiff’s motion, along with eight supporting declarations.

On April 1, 2022, Plaintiff filed objections to DHCS’s evidence and a reply brief.  On April 11, 2022, DHCS filed a response to Plaintiff’s evidentiary objections. 

On July 19 and October 20, 2022, the Court continued the hearing and ordered that the parties submit supplemental briefs addressing recent opinions from the United States Supreme Court in Gallardo v. Marstiller (2022) 596.U.S.___ (Jun. 6, 2022) and the California Court of Appeal, Second District in Daniel C. v. White Memorial Medical Center, et al., 83 Cal.App.5th 789. 

The parties submitted briefs on November 16, December 13, and December 30, 2022. 

II.          LEGAL STANDARD

Under California Welfare and Institutions Code 14124.76, subdivision (a):

. . . . Recovery of the director’s lien from an injured beneficiary’s action or claim is limited to that portion of a settlement . . . that represents payment for medical expenses, or medical care, provided on behalf of the beneficiary.  All reasonable efforts shall be made to obtain the director’s advance agreement to a determination as to what portion of a settlement . . . that represents payment for medical expenses, or medical care, provided of behalf on the beneficiary.  Absent the director’s advance agreement as to what portion of a settlement . . . for medical expenses, or medical care, provided on behalf of the beneficiary, the matter shall be submitted to a court for decision.  Either the director or the beneficiary may seek resolution of the dispute by filing a motion, which shall be subject to regular law and motion procedures.  In determining what portion of a settlement . . . represents payment for medical expenses, or medical care, provided on behalf of the beneficiary and as to what the appropriate reimbursement amount to the director should be, the court shall be guided by the United States Supreme Court decision in Arkansas Department of Health and Human Services v. Ahlborn (2006) 547 U.S. 268 and other relevant statutory and case law.”

“In Ahlborn, the United States Supreme Court held that in seeking reimbursement ‘the State’s assigned rights extend only to recovery of payments for medical care.’  In response to Ahlborn, our Legislature amended the California statutes governing claims for reimbursements made by the Department for funds expended on behalf of injured parties by the Medi-Cal program.  (Bolanos v. Superior Court (2008) 169 Cal.App.4th 744, 747 . . . .)  Namely, from any settlement, judgment or award obtained by an injured party, the Department is limited to recovering payments it made for medical expenses.  (Welf. & Inst. § 14124.76, subd. (a).)  ‘In determining what portion of a settlement, judgment, or award represents payment for medical expenses, or medical care, provided on behalf of the beneficiary and as to what the appropriate reimbursement amount to the director should be, the court shall be guided by . . . Ahlborn . . . and other relevant statutory and case law.’  ‘[W]hen the settlement, judgment or award does not specify what portion thereof was for past medical expenses, an allocation must be made in the settlement, judgment or award that indicates what portion is for past medical expenses as distinct from other damages.  The director’s recovery is limited to that portion of the settlement that is allocated to past medical expenses.’”  (Aguilera v. Loma Linda University Medical Center (2015) 235 Cal.App.4th 821, 827 [citations omitted].)

“Settlements, however, are often not allocated between past medical expenses and other damages.  This was the situation in Ahlborn.  Thus, the parties in Ahlborn stipulated to the use of a formula (the Ahlborn formula) as an allocation method. . . .  The Ahlborn formula is the ratio of the settlement to the total claim, when applied to the benefits provided by the Department.  Expressed mathematically, the Ahlborn formula calculates the reimbursement due as the total settlement divided by the full value of the claim, which is then multiplied by the value of benefits provided.  (Reimbursement Due = [Total Settlement ÷ Full Value of Claim] x Value of Benefits Provided.).”  (Id. at pp. 827-828.)

“The fundamental point is that a settlement that does not distinguish between past medical expenses and other damages must be allocated between these two classes of recoveries.  Without such an allocation, the principle set forth in Ahlborn, that the state cannot recover for anything other than past medical expenses, cannot be carried into effect.”  (Bolanos, supra, 169 Cal.App.4th at p. 753.)

III.        DISCUSSION

This case arises from the allegedly negligent medical care received by Plaintiff.  Plaintiff required medical treatment resulting in medical expenses in the amount of $339,131.96, paid by DHCS pursuant to his entitlement to Medi-Cal benefits.  (Lew Decl., Ex. 7.)  Based on a detailed life care plan that was prepared by Kelly Nasser, a registered nurse, gerontological nurse practitioner, and certified nurse life care planner, and an estimation by Darryl R. Zengler, an economist, Plaintiff represents that his overall damages are valued at $26,564,216.  (Motion, 19:18-20:4.)  Because his total recovery was $5,750,000, which is approximately 21.64% of his overall damages, Plaintiff contends that DHCS’s gross lien recovery should be $27,051, which is the same percent of the $125,005, which Plaintiff contends is the only fee-for-service expense paid by DHCS to Maxim Health Care, a nursing agency.  (Motion, 20:8-14.)  After accounting for attorneys’ fees and costs, Plaintiff contends DHCS’s net recovery is $19,811.  (Motion, 20:15-21:5.) 

Plaintiff argues that in the alternative, if the Court is not inclined to extinguish the lien completely, DHCS has not produced any evidence showing that it paid the claimed $339,132 for his care and its recovery should be limited to $48,885 (after subtracting attorney’s fees and costs).  Plaintiff states that he was a member of LA Care Health Plan, which is a prepaid managed care plan, and Plaintiff has asked, but failed to receive, any indication for which items were paid on a fee-for-service basis, and which items were paid by the managed care plan.  (See W&I §§ 14204, 14301, subd. (a); 22 C.C.R. § 53800 et seq.)  Under a managed care plan DHCS pays a certain amount per month per beneficiary enrolled, i.e., a “capitation fee.”  Plaintiff argues, the “cost paid” through a managed care plan would be less compared with “fee-for-service.”  Therefore, Plaintiff argues that only the fee-for-service expenses should be included when determining the value of the actual benefits provided. 

This is unpersuasive because Medicaid allows states to enroll beneficiaries in managed care plans, and there is no reason why DHCS should not recover for the services it rendered based on whether the arrangement is based on fee-for-service or managed care.  Furthermore, California law establishes the “reasonable value of benefits” where a plan pays a provider on a capitated basis to mean “the value of the services rendered to the beneficiary calculated by the plan as the usual customary and reasonable charge made to the general public by the provider for similar services.”  (W&I, § 14124.70, subd. (c)(2).)  Citing to Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 561-562 and Hanif v. Housing Authority (1988) 200 Cal.App.3d 635, 651, Plaintiff argues that DHCS should not be able to recover more than the capitation fee and argues that the MediCaid Act only requires that a state agency be reimbursed.  However, neither case addresses the amount of reimbursement DHCS is entitled to; they concern the calculation of special damages for a plaintiff. 

In opposition, DHCS argues that it is entitled to its lien and that Plaintiff did not obtain its agreement to any settlement.  DHCS claims it asserted its lien by: (1) sending a preliminary lien itemization for $339,131.96 to Plaintiff’s counsel on April 12, 2021, and (2) contacting the mediator for Plaintiff’s medical malpractice case between April 15, 2021, and April 20, 2021.  DHS also states that it asserted its lien claim again on May 18, 2021.  DHCS submits declarations from representatives of Anthem Blue Cross (“Anthem”), AltaMed Health Services Corporation (“AltaMed”), and Imperial Health Holdings (“Imperial”) to analyze payment records and determine the amounts paid to providers for Plaintiff’s care.  Henderson Berberabe declares that Imperial was paid $524.16, Marisela Torres declares that Anthem was paid $118,364.87, and Darren McLachlan declares that AltaMed was paid $5,932.17; these amounts add up to $124,821.20.   (Berberabe Decl., ¶ 14; Torres Decl., ¶¶ 12-13; McLachlan Decl., ¶ 16.)  Karina Valadez declares that the remaining $214,300.32 in injury-related services were found within DHCS’s fee-for-service paid claims report.  (See Valadez Decl., Exs. H, J.)  Valadez explains that managed care plans provide services to Medi-Cal members through a network of contracted providers, and certain categories of services that are not covered by those plans are paid for through fee-for-service.  (Valadez Decl., ¶¶ 21-22.)  Based on these declarations, DHCS has sufficiently shown the amount it has paid to providers for Plaintiff’s care. 

DHCS additionally argues that, even if an Ahlborn-style calculation is made, it is entitled to exclude any payments by DHCS for future Medi-Cal expenses from Plaintiff’s “full value” of the case pursuant to Aguilera v. Loma Linda University Medical Center (2015) 235 Cal.App.4th 821.  Aguilera similarly involved a claim for reimbursement made by the DHCS for funds expended on behalf of an injured party by the state's Medi–Cal program, and the injured party’s (Ashlynn Aguilera) special motion to determine the Department's lien under Welfare and Institutions Code section 14124.76.  In arguing that the full value of her claim amounted to $14,789,658, Aguilera represented that the present value of future medical costs is $1,560,429 and that the value of future attendant costs is $11,641,244.  (Id. at 825-826.)  The Court of Appeal found that the plaintiff’s future medical expenses must be excluded from the Ahlborn formula:

“We agree in theory with the Department's contention that future health care expenses must be excluded, as a matter of law, in applying the Ahlborn formula to reduce the Department's lien, because if future health care expenses were to be included, the Department would be forced to accept a lower percentage of its total lien based on the amount of future benefits that will be paid by Medi–Cal.  However, as we shall discuss, excluding such expenses is contingent on the Department presenting sufficient evidence that it will in fact pay Ashlynn's expenses as long as she qualifies for the benefits that she is presently receiving…”  (Id. at 831-833.)

With regard to DHCS’s evidentiary showing that Medi-Cal will in fact pay plaintiff’s expenses in the future, the Court of Appeal provided that “[a]ny declarations must establish the declarant's expertise in Medi–Cal benefits, funding and eligibility determinations.  [Citation.]  The declarations must also be supported with citations to applicable statutes or regulations regarding current Medi–Cal eligibility, the type of health care currently available under Medi–Cal, past funding to pay for such health care, and estimated future funding to pay for the type of health care at issue.”  (Id. at 832-833.)  The Court of Appeal nevertheless noted that “it is impossible for either party to predict the future.  We believe it is unjust to require absolute certainty from the Department regarding how Medi–Cal eligibility will be determined in the future, whether Ashlynn will remain Medi–Cal eligible, what benefits it will provide in the future and whether funding will exist for these future benefits.”  (Id. at 832.)  Thus, based on the evidence provided, “the trial court must make a determination whether it is reasonably probable the Department will pay [plaintiff’s] future health care expenses.  If the trial court makes such a finding, it is directed to exclude these expenses from its Ahlborn calculation.”  (Id. at 833.)

Here, DHCS argues that it is reasonably probable Plaintiff will continue to receive Medi-Cal benefits during his lifetime and that Medi-Cal will pay for all of the medical services and medical items listed in Plaintiff’s life care plan, with the exception of in-school caregiving and therapeutic recreation (which totals $1,257,100); additionally, in-home and community-based services are available, such as 24-hour in-home nursing care, van modifications, and architectural renovations.  (Saunders Decl., ¶¶¿9-12 [Medi-Cal benefits available to Plaintiff]; McDonald Decl.,  ¶¶ 7-8 [“reasonably probable” that Plaintiff will remain eligible for Medi-Cal based upon his condition and the likelihood of no improvement, so long as his income and/or resources remain at or below Medi-Cal eligibility benefits]; Walker Decl., ¶¶¿4-16 [DHCS’s budget]; Garbett Decl., ¶¶¿6, 13 [Plaintiff’s medical condition and availability of Medi-Cal benefits to Plaintiff].)  DHCS also points out that although Plaintiff’s life care plan includes the cost of 24-hour skilled nursing services, such care has not been needed by Plaintiff.  (Garbett Decl., ¶ 6.) 

On reply, Plaintiff argues that he is not currently receiving all of his benefits from Medi-Cal and is not currently receiving 24-hour skilled nursing care, therefore DHCS should not get a future credit for an expense that it is not paying for.  Notably, however, Plaintiff does not submit any evidence forswearing the use of Medi-Cal benefits in the future, which undercuts the argument that DHCS would be receiving a future credit it is not entitled to, nor does Plaintiff explain why Medi-Cal might be unable to meet his future needs.  (See Daniel C. v. White Memorial Medical Center (2022) 83 Cal.App.5th 789, 814 [noting that plaintiff’s mother currently provides all daily care and finds it challenging to secure a nurse to provide respite care because agencies nearby are not staffed to assist her].) 

Accordingly, in light of the foregoing and the parties’ voluminous briefing, the Court finds that the overall value of Plaintiff’s damages is $5,802,827.04, calculated as follows: $250,000 (MICRA-capped noneconomic injuries) + $3,957,358 (loss of earning capacity) + $338,369.04 (past medical care) + $1,257,100 (future care not covered by Medi-Cal, In-Home Supportive Services, or Home and Community-Based Services). 

Plaintiff’s total recovery of $5,750,000 is 99% of the total overall value of his damages.  The Court applies an Ahlborn pro-rata calculation to reach DHCS’s gross reimbursable lien as follows: $5,750,000 divided by $5,802,827.04 x $338,369.04 = $335,288.64. 

The gross lien of $335,288.64 is reduced by 25% pursuant to W&I § 14124.72(d) to account for attorney’s fees, which is $83,822.16.  The gross lien amount is further reduced by DHCS’s portion of costs which is $5,558.39 (calculated by multiplying the actual litigation expenses [$95,323] by the ratio of the amount reimbursed to the director as satisfaction of the director's lien, prior to deducting reasonable attorney's fees and litigation expenses, to the full amount of the settlement, judgment, or award [0.058).)  (W&I § 14124.72(d).)  In total, DHCS’s lien recovery is $245,908.09.

IV.         CONCLUSION

The motion to reduce the Medi-Cal lien is GRANTED in part.  DHCS’s lien is reduced to $335,288.64 for medical expenses paid, which amounts to a recovery of $245,908.09 after subtracting attorneys’ fees and costs. 

Moving party to give notice.

Parties who intend to submit on this tentative must send an email to the Court at SSCDEPT27@lacourt.org indicating intention to submit on the tentative as directed by the instructions provided on the court website at www.lacourt.org.  Please be advised that if you submit on the tentative and elect not to appear at the hearing, the opposing party may nevertheless appear at the hearing and argue the matter.  Unless you receive a submission from all other parties in the matter, you should assume that others might appear at the hearing to argue.  If the Court does not receive emails from the parties indicating submission on this tentative ruling and there are no appearances at the hearing, the Court may, at its discretion, adopt the tentative as the final order or place the motion off calendar.