Opinion
A148912
12-22-2017
JOSEPH CAUDLE, Plaintiff and Appellant, v. NORTHBAY HEALTHCARE GROUP, Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Solano County Super. Ct. No. FCS044784)
In a putative class action against defendant NorthBay Healthcare Group (NorthBay), plaintiff Joseph Caudle (Caudle) moved for certification of a class of uninsured patients who received medical treatment at a hospital owned by defendant NorthBay, were billed NorthBay's "chargemaster" rates for their treatment, and did not receive any reductions to their bill or have payments made by a third party. The trial court denied certification, finding Caudle had not demonstrated that the class was ascertainable and that common issues predominated over individual issues. Caudle appeals, contending the trial court erred in requiring ascertainability and predominance because his putative class was a Federal Rules of Civil Procedure, rule 23(b)(1) and/or (b)(2) (Rule 23) "equivalent" class, neither of which requires ascertainability or predominance. Alternatively, he argues he established both ascertainability and predominance. We conclude the trial court properly required ascertainability and predominance, and substantial evidence supports the court's findings that Caudle failed to establish these two requirements.
We also reject Caudle's argument that the trial court should have at least certified an "issue" class under California Rules of Court, rule 3.765(b), and we deny his request that we remand the case with instructions that he be permitted to file a renewed motion for class certification based on a claim of unconscionability.
We thus affirm.
FACTUAL BACKGROUND
A. Caudle's Emergency Room Visit
NorthBay is a nonprofit healthcare organization with hospitals in Fairfield and Vacaville. The hospitals offer 24-hour emergency care to approximately 60,000 patients annually.
On October 16, 2013, Caudle received treatment at one of NorthBay's emergency rooms for injuries he suffered in an automobile accident. He did not have health insurance, nor was he covered by a governmental health program. He was given a copy of NorthBay's "Hospital and Outpatient Service Agreement," on which his wife signed his name. The agreement provided that he would pay NorthBay its "regular rates and terms" for the services provided. He did not read the agreement, nor did he ask what the services would cost.
NorthBay billed Caudle $39,534.34 for his emergency room visit. No portion of the bill was ever paid. Caudle believed the reasonable cost for the services he received was $800.
B. NorthBay's Billing Procedures
In support of its opposition to Caudle's motion for class certification, NorthBay submitted a declaration of Lori Eichenberger, senior director of its revenue cycle management. Eichenberger testified at length to the complex processes by which NorthBay bills patients for emergency services. Because the details are dispositive of the issues before us, we quote Eichenberger's declaration at length:
"3. NorthBay typically tries to receive consent from its emergency room patients prior to providing medical treatment. How that consent is obtained can differ depending on how the patient presents in the emergency room (i.e., obtaining consent from a conscious patient is different than the considerations involved in obtaining consent to treat an unconscious patient). Consent is usually obtained by having patients sign copies of NorthBay's Hospital and Outpatient Service Agreement. From February, 2009 to October, 2013, the Hospital and Outpatient Service Agreement included a consent agreement and separate financial agreement, each with separate signature blocks. The consent agreement authorizes medical treatment while the patient acknowledges and agrees in the financial agreement to pay Defendant's 'regular rates and terms' and to be 'financially responsible for charges not paid by' insurance or a health care plan. This agreement also provides that patients can request a list of health care service plans with which the hospital has a contract. . . .
"4. NorthBay implemented a new version of the Hospital and Outpatient Service Agreement in October, 2013. This new agreement incorporated the consent and financial language into one agreement, although separate signature blocks for each provision remained. Also added was language about collection efforts, complaint and grievance procedures, and several rights and responsibilities, including the right to 'examine and receive an explanation of the hospital's bill' and the duty to 'provide necessary financial information to ensure prompt collection' of medical charges. . . .
"5. Emergency room patients receive medical treatment irrespective of whether a fully executed Hospital and Outpatient Service Agreement is obtained or not. A variety of reasons can lead to a signed agreement not being obtained, such as when a patient is unconscious upon admission. Other times, patients refuse to sign the financial agreement. These individuals are encouraged to sign the consent section, but they receive care regardless.
"6. The 'regular rates' referenced in the financial agreement are contained in NorthBay's 'chargemaster'. The chargemaster is a detailed price list of the procedures, services, supplies, and medications NorthBay provides to its patients. The current chargemaster is 1,170 pages and lists approximately 16,850 items. The chargemaster frequently changes on sometimes a daily basis when, for instance, a new procedure or technology must be added to the list or outdated procedures contained in the list require deletion. The chargemaster prices are also annually reviewed by NorthBay for changes. This annual review is generally done item-by-item so that it can be determined which items need to have their prices adjusted.
"7. NorthBay provides its chargemaster to the California Office of Statewide Health Planning and Development, which posts the chargemaster on its publicly-accessible website. The current chargemaster is also available, upon request, to NorthBay patients.
"8. All patients receiving care in NorthBay's emergency rooms are billed full chargemaster rates, but not all patients ultimately pay those rates because charges can be reduced, written-off, or adjusted because of a variety of factors like insurance, government benefits, 'charity care', discretionary reductions, and bankruptcy.
"9. NorthBay accepts all private medical insurance plans, but only those plans which have previously negotiated an agreement with NorthBay will have discounts provided to their members. [¶] . . . [¶]
"13. NorthBay provides legally-required discounted rates for Medicare or Medi-Cal patients. These are non-negotiable rates, unilaterally set by the government on an annual basis.
"14. NorthBay also provides legally-required 'charity care' discounts to qualifying, uncovered, low-income patients. The amount of the charity care discount varies depending upon the patient's income, with discounts ranging from a complete write-off of the entire medical bill to a percentage discount depending on the bill amount.
"15. NorthBay also retains the discretion to offer a discount to any patient, at any time, in any amount. These discretionary discounts have been given at all points during the collection process. They have even been given when an otherwise delinquent medical bill is sent to collections, but returned after collection efforts are unsuccessful.
"16. Annually, NorthBay receives notice that hundreds of outstanding medical bills have been discharged through bankruptcy proceedings.
"17. It can range from a few days to several years to determine whether an emergency room patient's bill should be reduced, discounted, or written-off. This is because the time required to make this assessment is unique to each patient and can be influenced by factors such as patient cooperation, bureaucratic efficiency, and clarity of coverage.
"18. Simply determining medical coverage can be time consuming. As required by the law, NorthBay does not ask about potential coverage until an emergency room patient is admitted and stabilized. Once stabilized, some patients have their plan information readily available, meaning their bills can be promptly processed with the appropriate discounts provided. Other patients either do not know if they have medical coverage or initially believe they are uncovered, but after an investigation learn their charges are covered by private insurance or a government plan. Other patients—often indigent patients—leave the hospital after receiving treatment, but before they can be questioned about coverage.
"19. NorthBay sends bills to uncovered patients once an initial determination about medical coverage is made. This bill states that NorthBay's 'records indicate you do not have health insurance' and the patient is encouraged to promptly apply for Medi-Cal, which can have retroactive application up to three months. Some patients apply for Medi-Cal themselves while others ask NorthBay for assistance, which can range from answering general questions to completing the necessary Medi-Cal paperwork and submitting it on the patient's behalf to the appropriate government agency. . . .
"20. The bills NorthBay sends to uncovered patients also request that those denied for Medi-Cal coverage contact NorthBay about qualifying for financial assistance or a discount. Uncovered patients involved in an accident are also referred to Health Advocates, which is an outside service retained by NorthBay. Health Advocates performs many services for NorthBay. One of these services is to assist patients injured in an accident in determining whether a third-party insurance policy provides coverage for the medical care they received. For instance, Mr. Caudle's case was referred to Health Advocates.
"21. Patients who ultimately have no coverage are asked to complete and submit the charity care applications to NorthBay so qualifying patients can receive the appropriate discount. As mentioned above, NorthBay also retains the discretion to provide discounts to any of its patients. Many reasons can prompt NorthBay to provide a discretionary discount. Oftentimes, NorthBay determines if a discretionary discount is appropriate after a patient reaches out to NorthBay with a concern.
"22. NorthBay follows-up with patients throughout the collection process when they do not pay their bill. Sometimes, NorthBay decides to send delinquent accounts to outside collection agencies. Should these collection efforts prove unsuccessful however, the matter can be sent back to NorthBay, which sometimes applies a discretionary discount to write-off the bad debt.
"23. NorthBay tracks its gross patient revenue, which is the amount billed to patients, and net patient revenue, which is the amount collected from patients, insurance, the government, or other third parties. These numbers primarily differ because of the contractual and legally-required discounts given to covered patients. Other reasons for the disparity between the gross and net amounts include destitute patients being unable to pay, bills being discharged through bankruptcy, and unsuccessful collection efforts such as when a patient cannot be located, has passed away, or when the cost to continue collection efforts exceeds the amount of the debt. Other times, discretionary discounts are given to ensure that at least some amount from an otherwise unpaid bill is collected. Importantly, NorthBay's annual net profit numbers do not reflect ultimately successful collection efforts continuing beyond the year in which the bill was generated. Conversely, annual net profit numbers may reflect payments made to accounts from prior years.
"24. NorthBay retains clinical and financial records for all of its patients. Depending on how long an individual has been a patient, those records can be in both written and electronic format, with the written file possibly being stored at an off-site location. The clinical record typically contains medical documentation pertaining to a patient (i.e., consent agreements, charts and medical histories) while the financial record contains documents relating to items like insurance or government coverage, bills, and payments. Much of that information is now electronically scanned into the clinical or financial file, but that does not mean that it can be collectively searched, isolated, or retrieved for all patients at the same time with just a 'click of a button.' For instance, patients often have relatives make payments to their medical bill on their behalf. The financial record indicates whether the source of a bill payment was insurance, the government, or the patient, but it is not so specific to show if a payment was made by a third party like a relative. Because there is no source data entry point for these third parties, such payments are included in the patient source payment data, although the patient did not actually make the payment. While that information is contained within the financial record, there is no electronic search function I can perform to collectively determine who, of all NorthBay emergency room patients, has had a payment made to their bill by anyone other than insurance, the government, or the patient. For instance, as I note above, NorthBay's emergency rooms typically serve approximately 60,000 patients annually. If I wanted to know which of the 60,000 emergency room patients in 2015 had a payment made to their account by a person or entity other than insurance, the government, or the patient, I would need to individually search each patient's financial record for that information. I conservatively estimate that search would take several months, and the efforts of several employees, to complete. Similar time commitments would be needed if such payment data from other years was needed to generate a class list.
"25. Patients who sign the Hospital and Outpatient Service Agreement will have that document scanned into their clinical files. But once again, there is no electronic search function I can perform to filter out in mass which patients have, and have not, signed that agreement. To use the example provided above, if I wanted to determine which of the approximately 60,000 emergency room patients treated in 2015 signed an agreement, I would need to individually search each's [sic] patient's clinical record for that information. Once again, I conservatively estimate that search would take several months, and the efforts of several employees, to complete. Similar time commitments would be needed if such information from other years was needed to generate a class list.
"26. I am aware that Joseph Caudle is attempting to certify a class of all individuals between March 1, 2011 to the certification date who were billed at NorthBay's full chargemaster rate, received no permanent write-off, discount, or adjustment to this rate, and no payments for the hospital visit were made by anyone else other than the patient. I have recently tried to determine if NorthBay's electronic system can generate a list of these individuals. It cannot for several reasons. First, as noted above, patients' financial records do not allow me to search electronically, in mass, whether anyone other than insurance, the government, or the patient made a payment to the patient's account. Thus, I cannot determine with a 'click of a button' which potential class members have had a third party like a relative make a payment to their account.
"27. My understanding is that Mr. Caudle's lawsuit primarily focuses on the language in the financial agreement portion of the Hospital and Outpatient Service Agreement. Determining which potential class members signed the financial agreement is also data I cannot retrieve electronically, in mass, from the clinical files. The only way I could determine whether a patient signed the financial agreement would be to review each patient's clinical record individually. This individual review would be more detailed then [sic] just seeing if the Hospital and Outpatient Service Agreement were in the clinical file. This is because some patients only sign the consent portion of the contract and leave the financial agreement unexecuted. So each contract in the file will need to be reviewed to determine if the financial agreement was actually signed.
"28. Moreover, I am unable to generate a definitive list of patients who meet the class definition because determining whether a self-pay patient qualifies for a write-off, discount, or adjustment to the billed chargemaster amounts—all disqualifiers under the class definition—is a lengthy, convoluted, and fluid process which could result in someone being in the class one day, but not the next. For example, consider a patient who is billed the full chargemaster rate without reduction the day before the motion for class certification is heard on July 6, 2016. The person likely would qualify as a class member on July 6, 2016. However, at any point in the next few years, the events described above—which can lead to a reduction of the bill (i.e. application of medical coverage, charity care, discretionary discount)—could occur and take that person out of the class. While this person may be a class member as of July 6, 2016, that patient may not be a member on July 6, 2018. Mr. Caudle is a perfect example of how lengthy and fluid this process is. His declaration states he received medical care from NorthBay in October, 2013, and he is in the collection process. If that matter is sent back to NorthBay from the collection agency, NorthBay could use its discretionary authority to provide a discount, thereby taking Mr. Caudle out of the class. In sum, there is no way, at any particular time, to identify each and every self-pay patient who will never receive a discount, adjustment, or write-off of the full chargemaster amount, and thus a definitive list can never be generated.
"29. This recent effort was the first time I, or any person at NorthBay of whom I am aware, tried to determine whether a class list could be generated based on all the factors in the class definition. I am aware that Mr. Caudle states in his brief that NorthBay has admitted it has 2,260 class members for 2013 alone. I believe this number reflects a search I did last year for self-pay emergency room patients in 2013 who had not yet received a reduction to their bill. But, this demonstrates my point on the fluidity of the reduction process—when I recently conducted the same search for 2013 self-pay emergency room patients, I found that this number had dropped by several hundred patients because those patients received a discount within the last year. It is entirely possible that this number will continue to decease [sic] as patients receive a discount, reduction, or write-off, applied to their account."
PROCEDURAL BACKGROUND
A. The Complaint
On January 23, 2015, Caudle filed a putative class action against NorthBay, challenging its "unreasonable, unfair and unlawful" practice of billing emergency room patients its chargemaster rates. He alleged that NorthBay's financial agreement was "vague and ambiguous as to pricing and payment terms, in that it fails to describe, specify, explain, or identify any price or pricing schedule for [NorthBay's] services and treatment rendered or to be rendered to an emergency care patient." As such, he contended, the agreement contains an " 'open' " pricing term, prohibiting NorthBay from charging self-pay patients its "grossly excessive" chargemaster rates and obligating self-pay patients to pay no more than the reasonable value for emergency care provided in NorthBay's hospitals.
The complaint asserted one cause of action for declaratory judgment, seeking a determination as to whether NorthBay's financial agreement allows it to bill self-pay patients its full chargemaster rates or contains an open term that limits it to the reasonable value of services rendered. It also sought the following specific declarations: (1) "that [NorthBay's] billing practices as they relate to Class members are unfair, unreasonable, and illegal"; (2) "that [NorthBay's] Contract contains an 'open price' term, and does not permit [NorthBay] to bill and demand payment from self-pay emergency care patients at its Chargemaster rates"; (3) "that [members of the class] are liable to [NorthBay], under its Contract, for no more than the reasonable value of the treatment/services provided"; and (4) "that neither the provisions of the Contract nor any law or statute establishes a duty on the part of a self-pay patient to seek out and apply for charity or financial aid as a prerequisite to legally challenging the amount of a Hospital bill that the patient deems to be unfair, unreasonable, or unlawful."
In addition to declaratory relief, Caudle alleged that he "and members of the Class are further entitled to injunctive relief and to restitution, in an amount to be proven at trial." The prayer for relief additionally sought attorney fees, expert fees, and costs.
B. Caudle's Motion for Class Certification
On March 10, 2016, Caudle filed a motion for class certification "pursuant to Code of Civil Procedure section 382, California Rules of Court, Rules 3.764 and 3.765(b), and the equivalents of Rules 23(b)(1) and/or 23(b)(2) of the Federal Rules of Civil Procedure." He sought certification of the following class:
This was his second such motion. A number of months earlier, he had sought class certification pursuant to subdivisions (b)(2) and (b)(3). It appears the parties stipulated to take the motion off calendar pending a mediation.
"All individuals who, between March 1, 2011 and the date of class certification, had one or more 'eligible patient hospital visits' to a Defendant Hospital's Emergency Department (the 'Class').
"For purposes of this Class definition, an 'eligible patient hospital visit' is defined as a hospital visit to a Defendant's emergency department for which (1) the patient was billed at the hospital's full chargemaster rates; (2) there have been no permanent writeoffs, discounts or adjustments to the full chargemaster billing; and (3) no payments for the hospital visit have been made by other than the patient." (Fn. omitted.)
Excluded from the proposed class were "any officers or directors of [NorthBay], together with the legal representatives, heirs, successors, or assigns of [NorthBay], and any judicial officer assigned to this matter and his or her immediate family."
Caudle submitted that all of the requirements for maintaining a class action were satisfied, identifying the requirements as follows: "(1) Defendant has acted or refused to act on grounds that apply generally to the Class; (2) prosecuting separate actions by or against individual Class members would create a risk of inconsistent or varying adjudications with respect to individual Class members that would establish incompatible standards of conduct for Defendant; (3) the Class is numerous and ascertainable; (4) the Class representative's claims are typical of the claims of all other Class members; and (5) the Class representative is an adequate representative of the Class." Caudle acknowledged that courts have construed Code of Civil Procedure section 382 (California's class action statute) as requiring a well-defined community of interest among the members of the class, but he submitted it was not required here "where certification is sought under the equivalent to Rule 23(b)(2) and/or (b)(1)."
Caudle represented that notice was appropriate and should be given to the class because "all Class members are entitled to know their rights and obligations under Defendant's Contract, and in light of the fact that there are likely to be thousands of patients in various stages of collection proceedings (including Plaintiff) who could benefit by the ruling sought herein, this Court should exercise its discretion to order that notice be sent to Class members, so that they can be informed and obtain the benefit of this Court's interpretation of Defendant's Contract, whether favorable or unfavorable."
NorthBay opposed Caudle's class certification motion on five grounds. First, he failed to establish that common questions of law or fact predominated over individual questions because extensive individual analysis would be required to determine whether NorthBay's 16,850 chargemaster rates were reasonable.
Second, a class action was not superior because the individual issues that must be litigated rendered the class unmanageable. NorthBay reasoned that the court would not be able to grant any class member relief without a mini-trial on the reasonableness of each patient's individual bill.
Third, Caudle failed to establish an ascertainable class. As NorthBay explained it, every patient who received treatment during the applicable time period would initially be a class member because every patient was first charged chargemaster rates. The process that dictated whether they remained in the class, however, was lengthy and fluid, as the factors determining what the ultimate bill would be were unpredictable, variable, and require an individual determination. According to NorthBay, "60,000 patients visit the emergency room each year. It would take several staff members, several months, to complete this individual file-by-file review for just one year's worth of patients, thus violating the ascertainability requirement that class members 'be readily identified without unreasonable expense or time by reference to official records.' "
Fourth, Caudle's claims were not typical and he could not adequately represent the class because he received different treatment than the class and his circumstances were unique.
Fifth, Caudle had not established numerosity because there was no evidence supporting his claim that there were 11,000 members of the class.
In his reply brief, Caudle raised new arguments that contradicted his moving papers. He argued for the first time that the class did not need to be ascertainable, since that is not required of a Rule 23(b)(1) or (b)(2) class. And he argued that predominance and superiority were not required, either. And, "upon further consideration," he did not believe notice was necessary at that stage of the proceedings, "and that any decisions by the Court regarding discretionary notice should be appropriately postponed until after a classwide ruling on the merits has been issued." He also disputed NorthBay's claim that his requested relief would require the trial court to determine the reasonable value of NorthBay's services, since he merely sought "a simple interpretation of a few lines of a contract . . . ."
C. The Order Denying Class Certification
Caudle's motion came on for hearing on July 6, 2016. After taking the matter under submission, the court denied the motion, entering an order that provided as follows:
"Plaintiff Joseph Caudle's motion for class certification is denied.
"Although this Court may look to guidance from Federal authority in the absence of state authority for an appropriate procedural framework for class certification, it follows California decisional authority interpreting Section 382 of the Code of Civil Procedure requiring the showing of an ascertainable class and a well-defined community of interest in questions of law and fact among the members of a prospective class. (Reyes v. Bd. of Supervisors of San Diego County (1987) 196 Cal.App.3d 1263, 1270-1271.) The trial court must 'carefully weigh respective benefits and to allow maintenance of the class action only where substantial benefits accrue both to litigants and the courts.' (Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 385.) Plaintiff has failed to cite any California authority that permits class certification without showing that common issues predominate.
"Similar to the class definition considered in Hale v. Sharp Healthcare (2014) 232 Cal.App.4th 50, 58-59 [(Hale)], class members in the instant case cannot be readily identified without unreasonable expense or time. Defendant establishes that there is no easy electronic means to identify from its records those patients who were billed at the hospital's full chargemaster rates, who did not receive permanent write-offs, discounts or adjustments, and for whom 'no payments for the hospital visit have been made by [anyone] other than the patient' and ascertainment of the class would require an individual inquiry into the records of thousands of patients. [Citation.]
"The Court also finds that individualized questions predominate over common questions of law and fact. (Hale, 232 Cal.App.4th at 61.) Although the narrow issue of contract interpretation regarding whether the clause 'regular rates and terms of the [hospital]' can be construed as an 'open price' term subject to a reasonable value limitation might be of sufficient common interest to the class, the true gravamen of Plaintiff's declaratory relief cause of action is whether the Chargemaster rates employed by Defendant are 'unfair, unreasonable, and illegal'. [Citation.] After all, any declaration that 'regular rates' must be construed as an open price term subject to a reasonable value requirement would be meaningless absent a corresponding declaration that the Chargemaster rates are unreasonable. 'The amount patients were charged and the amount that is "reasonable" for the services they received is necessarily an individual inquiry that will depend on the specific circumstances of each class member, the time frame in which care was provided, and both [Defendant's] and other hospitals' costs at that time.' (Maldonado v. Ochsner Clinic Found. (5th Cir. 2007) 493 F.3d 521, 524.)"
This timely appeal followed.
DISCUSSION
A. Preliminary Observation
We begin our discussion with an observation about what this case is and is not about. It is not, as Caudle claims, a simple declaratory relief action seeking nothing but the interpretation of a single sentence in NorthBay's financial agreement. If that were the case, the complaint would seek only a declaration that the "regular rates and terms" clause in NorthBay's financial agreement is an "open" term that limits NorthBay to billing reasonable rates for its services. Period. End of story. But a straightforward reading of the complaint confirms that is not the case. (See Capitol People First v. State Dept. of Developmental Services (2007) 155 Cal.App.4th 676, 692 ["we consistently look to the allegations in the complaint" when reviewing a trial court's certification order].) Rather, the complaint seeks declarations, among others, that NorthBay's billing practices are "unfair, unreasonable, and illegal" and that NorthBay cannot bill self-pay patients its chargemaster rates. It contends that Caudle and members of the class are "entitled to injunctive relief and to restitution, in an amount to be proven at trial." It was accompanied by a civil case cover sheet acknowledging that it sought both monetary and nonmonetary relief. And Caudle's class certification motion argued that "an injunction prohibiting the Hospital from continuing to bill self-pay patients based on Chargemaster rates and/or prohibiting the Hospital from maintaining its current collection efforts against patients who were billed at Chargemaster rates would be appropriate and extremely valuable to Class members." Quite evidently, the complaint seeks much more than an interpretation of the phrase "regular rates and terms." As the trial court rightly observed, the gravamen of Caudle's claims is the reasonableness of NorthBay's chargemaster rates. In order to declare that NorthBay's practice of billing chargemaster rates is "unfair, unreasonable, and illegal," as Caudle requests, the court would be required to make individualized determinations as to whether each chargemaster rate billed to each class member was reasonable given the unique circumstances of each patient.
Caudle vigorously disputes this fact, labeling it a mischaracterization of his claims and repeatedly insisting he only seeks a determination that NorthBay's practice of billing from its chargemaster rate schedule violates the financial agreement, a determination that does not require an evaluation of the reasonableness of the chargemaster rates themselves. As he explains his theory in his reply brief: "What the trial court failed to realize is that the practice of billing Chargemaster rates to Class members would be improper and unauthorized by Hospital's Contract, regardless of whether the amounts billed were reasonable or unreasonable. It is the propriety of billing in accordance with a rate schedule that was never agreed to which is in dispute, and the propriety of such billing practice is not dependent on whether the actual amount billed to each individual under such practice was reasonable or unreasonable." This is, quite simply, wrong: if NorthBay's chargemaster rates are in fact reasonable, a declaration that its billing practices are "unfair, unreasonable, and illegal" merely because the rates are derived from a schedule would be unwarranted. In other words, there would be no basis for enjoining NorthBay from billing its chargemaster rates if those rates were reasonable. Caudle's refusal to recognize this fact is at the heart of his disagreement with the trial court's order. And, for the reasons explained below, this fact is fatal to his appeal.
B. Standard of Review
"On review of a class certification order, an appellate court's inquiry is narrowly circumscribed. 'The decision to certify a class rests squarely within the discretion of the trial court, and we afford that decision great deference on appeal, reversing only for a manifest abuse of discretion: "Because trial courts are ideally situated to evaluate the efficiencies and practicalities of permitting group action, they are afforded great discretion in granting or denying certification." [Citation.] A certification order generally will not be disturbed unless (1) it is unsupported by substantial evidence, (2) it rests on improper criteria, or (3) it rests on erroneous legal assumptions. [Citations.]' [Citation.]" (Brinker Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1022 (Brinker).)
C. General Class Action Principles
The certification of a class action in California is governed by Code of Civil Procedure section 382, which authorizes a class action "when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court." This has been interpreted to "[require] proof (1) of a sufficiently numerous, ascertainable class, (2) of a well-defined community of interest, and (3) that certification will provide substantial benefits to litigants and the courts, i.e., that proceeding as a class is superior to other methods." (Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1089.) Community of interest, in turn, is comprised of three elements: " '(1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class.' " (Ibid.)
Because Code of Civil Procedure section 382 does not provide a procedural framework for class actions, California Rules of Court, rules 3.760 through 3.771, were adopted in 2002 to govern the management of class actions in California. (Los Angeles Gay & Lesbian Center v. Superior Court (2011) 194 Cal.App.4th 288, 302.)
Originally numbered 1850 to 1861.
Where California class action law lacks precedent, courts may seek guidance from Federal Rules of Civil Procedure, rule 23, which provides standards for class certification in federal court. (Los Angeles Gay & Lesbian Center v. Superior Court, supra, 194 Cal.App.4th at p. 301, fn.7; Frazier v. City of Richmond (1986) 184 Cal.App.3d 1491, 1499.) Subdivision (a) of Rule 23 sets forth four prerequisites for all federal class actions: (1) numerosity (the class is so numerous as to make joinder impractical); (2) commonality (questions of law or fact are common to the class); (3) typicality (the class representative's claims are typical of the class); and (4) adequacy of representation (the representative parties are able to fairly and adequately protect the interests of the class).
If these threshold requirements are satisfied, subdivision (b) of Rule 23 authorizes class certification in three circumstances: (b)(1)—where "prosecuting separate actions by or against individual class members would create a risk of: [¶] . . . inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class . . . ."; (b)(2)—where "the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole"; and (b)(3)—where "the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy."
D. The Trial Court Did Not Err in Requiring Caudle to Establish Ascertainability and Predominance
1. The Putative Class Is Not a Rule 23(b)(1) or (b)(2) Class
The thrust of Caudle's appeal is that the trial court erred in requiring him to demonstrate ascertainability and predominance because the putative class satisfied the requirements of Rule 23(b)(1) and/or (b)(2), neither of which requires those two elements. He reasons as follows: Code of Civil Procedure section 382 does not address when a court should certify a class in an action for declaratory relief, so the trial court should have sought guidance from Rule 23. Rule 23 identifies three different types of classes: (b)(1), (b)(2), and (b)(3). A (b)(3) class must be ascertainable and share a community of interest, which includes common issues predominating over individual issues. A class certified under (b)(1) or (b)(2), however, does not need to meet those requirements. Because he sought certification under (b)(1) and (b)(2) (or, as he puts it, the California "equivalents" of (b)(1) and (b)(2)), ascertainablity and predominance were not required. Caudle's argument fails because its fundamental premise—that the putative class is a Rule 23(b)(1) or (b)(2) class—is incorrect.
Caudle and NorthBay both argue at length whether Rule 23(b)(1) and (b)(2) classes do in fact require ascertainability and predominance. This is irrelevant given our conclusion that the putative class is neither a (b)(1) or (b)(2) class.
The parties also address the merits of Caudle's declaratory relief claim. We decline to weigh in on this issue since it is, as both parties acknowledge, irrelevant to the issue of class certification. (Brinker, supra, 53 Cal.4th at p. 1023; Reyes, supra, 196 Cal.App.3d at pp. 1271-1272.)
We begin with Rule 23(b)(1), which Caudle addresses only in passing, his clear focus on a (b)(2) class. Rule 23(b)(1) authorizes a class action where separate lawsuits by each class member would create a risk of "inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class . . . ." (Rule 23(b)(1)(A).) Caudle claimed below that the putative class here falls within this definition because "if the proposed Class is not certified, Defendant could be limited to enforcing collection for no more than the reasonable value of its services in one case, while being authorized to enforce collection of its full Chargemaster rates in another case." Exposure to inconsistent liability does not satisfy the Rule 23(b)(1) requirements, however, as a leading practical treatise explains:
"[10:388] Test: The risk must be that defendant would be unable to act in response to both judgments. . . .
"[10:389] Application: 'Rule 23(b)(1)(A) takes in cases where the party is obliged by law to treat the members of the class alike (a utility acting toward customers; a government imposing a tax), or where the party must treat all alike as a matter of practical necessity (a riparian owner using water as against downriver owners).' . . . . [¶] . . . [¶]
"[10:390] Compare—inconsistent liability not enough: It is not enough that defendant might be found liable in one case and not in others. (That may simply show a common question of fact or law.)" (Schwarzer, et al., Cal. Practice Guide: Federal Civil Procedure Before Trial, (The Rutter Group 2017) ¶¶ 10:387-10:390, p. 10-119.)
We next turn to Rule 23(b)(2), the primary type of class Caudle sought to certify. As noted, that subdivision authorizes a class where "the party opposing the class has acted or refused to act on grounds that apply generally to the class so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole . . . ." In Wal-Mart Stores, Inc. v. Dukes (2011) 564 U.S. 338, 360-362 (Dukes), the United States Supreme Court confirmed that the central concept of a (b)(2) class is the appropriateness of a single injunction or declaration: "The key to the (b)(2) class is 'the indivisible nature of the injunctive or declaratory remedy warranted—the notion that the conduct is such that it can be enjoined or declared unlawful only as to all of the class members or as to none of them.' [Citation.] In other words, Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class. It does not authorize class certification when each individual class member would be entitled to a different injunction or declaratory judgment against the defendant." This key concept defeats a Rule 23(b)(2) class here.
First, this is a contract dispute involving the "regular rates and terms" provision in NorthBay's financial agreement. As such, any relief can only apply to NorthBay patients who were actually a party to the contract. But, as Eichenberger testified in her declaration, some emergency room patients receive treatment but leave the emergency room without ever signing the financial agreement. Caudle's class definition encompasses those individuals, despite that they never entered into the written contract with NorthBay. Thus, only certain class members would be entitled to a declaration interpreting the contract, which does not satisfy the requirement of Rule 23(b)(2). While Caudle cites cases permitting an overinclusive class (see, e.g., Aguiar v. Cintas Corp. No. 2 (2006) 144 Cal.App.4th 121, 136; Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, 743), he cites no Rule 23(b)(2) case where the requested injunctive or declaratory relief would not apply to all class members. The mere concept is antithetical to the very purpose of a Rule 23(b)(2) class.
Second, in contravention of Dukes and Rule 23(b)(2), each class member here "would be entitled to a different injunction or declaratory judgment against the defendant." (Dukes, supra, 564 U.S. at p. 360.) This goes back to the fact that in order to declare NorthBay's practice of using its chargemaster rate schedule to be "unfair, unreasonable, and illegal," the trial court would be required to undertake an individualized analysis of each class member's unique circumstances in order to determine whether the chargemaster rates billed to that class member were reasonable. Only if the patient was charged unreasonable amounts for his or her specific treatment would the patient be entitled to a declaration that NorthBay's billing practices were unreasonable. And that declaration would apply only to that particular patient.
Assuming the trial court agreed with Caudle's interpretation of the financial agreement.
Third, Rule 23(b)(2) requires that NorthBay "acted or refused to act on grounds that apply generally to the class." Here, not all class members were charged the same chargemaster item at the same rate. Members were instead charged different chargemaster items that were specific to the individual medical care they received, and the rates often differed from year to year. (See Colomar v. Mercy Hospital, Inc. (2007) 242 F.R.D. 671, 683 (Colomar) [rejecting a similar argument that lumped all chargemaster items together because "the charges [self-pay patients] were billed were for different services which necessarily derived from different underlying cost considerations."].)
Fourth, Caudle's requested relief is not the "appropriate and primary" remedy for the class, as required by Rule 23(b)(2) (Jones v. American General Life & Acc. Ins. Co. (S.D. Ga (2002) 213 F.R.D. 689, 698), because it violates the rule that "the requested injunction must leave no open questions." (Maldonado, supra, (E.D. La. 2006) 237 F.R.D. at p. 150 (Maldonado) [equitable demand that a hospital lower its " 'amount charged to uninsured patients to a reasonable rate' " lacked such specificity because "what qualifies as a reasonable rate and who will make this determination still remain unresolved"].) Caudle seeks declarations that the phrase "regular rates and terms" is an open price term, NorthBay can only charge for the reasonable value of the medical services it provides, and it cannot bill its chargemaster rates. But, assuming Caudle were to prevail on these issues, this leaves open the question that is at the heart of his lawsuit: how much of a reduction, if any, is each uninsured emergency room patient entitled to, either in the form of restitution or a reduction of an outstanding bill?
NorthBay additionally argues Caudle's putative class falls outside the scope of Rule 23(b)(2) because the monetary relief requested is not incidental to the declaratory and injunctive relief requested. (See, e.g., Dukes, supra, 564 U.S. at pp. 363-364; Carter v. City of Los Angeles (2014) 224 Cal.App.4th 808, 825.) Caudle counters that his complaint does not seek monetary relief, and he expressly "disavows" that he is seeking classwide restitution. We need not address this issue, since the class falls outside of Rule 23(b)(2) for the other reasons discussed above.
Our conclusion that the putative class here is not a class as described in Rule 23(b)(2) is consistent with multiple cases that have rejected certification of a similar class. In Maldonado, supra, 493 F.3d at pp. 522-524, three uninsured patients who received medical treatment from defendant Ochsner Clinic Foundation (Ochsner) were billed standard chargemaster rates for their care. They sued Ochsner for breach of contract (among other causes of action), alleging that Ochsner's chargemaster rates were unreasonable. They sought monetary damages as well as an injunction requiring Ochsner "to provide them with 'mutually affordable health care' and to cease and desist charging them a higher amount than that charged to insured patients." Plaintiffs sought to certify a Rule 23(b)(2) or (b)(3) class of all people who received health care treatment from Ochsner during a specified time period and who were uninsured at the time of treatment. The district court denied the motion. (Maldonado, supra, at p. 523.)
The Court of Appeals affirmed, agreeing, as pertinent here, that the class did not satisfy the Rule 23(b)(2) requirements because "individualized issues here overwhelm class cohesiveness." (Maldonado, supra, 493 F.3d at p. 524.) Specifically, plaintiffs failed "to identify any way to determine what a reasonable or 'mutually affordable' rate is for the wide variety of medical services offered by" Ochsner. Further, "[t]he amount patients were charged and the amount that is 'reasonable' for the services they received is necessarily an individual inquiry that will depend on the specific circumstances of each class member, the time frame in which care was provided, and both [defendant's] and other hospitals' costs at that time." (Id. at p. 524.)
In Colomar, supra, 242 F.R.D. 671, a plaintiff who lacked health insurance sought medical treatment at Mercy Hospital, signing an authorization in which she agreed to pay for Mercy's services. After she received a bill for over $12,000, she filed a class action against the hospital for breach of contract, alleging that uninsured patients were charged unfairly and unreasonably high rates for the medical services they received. (Id. at pp. 673-674.) She sought certification of two classes: a Rule 23(b)(2) injunctive class seeking a declaration that Mercy's practice of charging unreasonable rates constituted a breach of contract and an injunction barring the hospital from overcharging plaintiff and the class, and a Rule 23(b)(3) damages class seeking monetary damages for overpayments of unreasonable charges. (Colomar, supra, at p. 674.)
As to Rule 23(b)(2), the court concluded that Mercy had not acted on grounds generally applicable to the class as a whole. (Colomar, supra, 242 F.R.D. at p. 683.) It reasoned that the rates Mercy billed its patients "were for different services which necessarily derived from different underlying cost considerations. Plaintiff has not shown that Mercy's charging conduct was the result of any systematic policy that would tie together the reasonableness of all charges. [Citation.] Other than her vague reference to Mercy's 'uniform policy applied to the Class as a whole,' Plaintiff never points to a uniform price, fee or rate applied to the whole class." The court also concluded that neither declaratory nor final injunctive relief would be an appropriate class-wide remedy, and that the monetary damages plaintiff sought were not incidental. (Id. at p. 683.)
In Eufaula Hospital Corp. v. Lawrence (Ala. 2009) 32 So.3d 30 (Eufaula Hospital Corp.), the facts were similar to those here: plaintiffs were self-pay patients who sought treatment at defendant medical centers and executed admission contracts agreeing to pay defendants their " 'regular rates and terms' "; after receiving bills based on defendants' chargemaster rates, plaintiffs filed a class action against defendants for breach of contract, injunctive relief, a declaration that the admission contract contained an open term, and a declaration of the reasonable price for the medical services rendered. (Id. at pp. 31, 35.) Plaintiffs moved for certification of a Rule 23(b)(2) or (b)(3) class, which the trial court granted. (Eufaula Hospital Corp. at p. 32.) The Alabama Supreme Court reversed, concluding that determining a reasonable charge for each class member would require individualized determinations making a class action inappropriate. (Id. at p. 46.) It discussed Maldonado and Colomar at length (id. at pp. 43-45), ultimately concluding with this summary: "The weight of the authorities and the testimony at the class-certification hearing indicate that the plaintiffs' method of calculating a reasonable charge for the medical services provided by the defendants involves heavily individualized determinations for each class member. We agree with the court in Maldonado that the individualized issues presented in determining a reasonable charge 'overwhelm class cohesiveness' and render certification of a class action under both Rule 23(b)(2) and Rule 23(b)(3), Ala. R. Civ. P., inappropriate." (Eufaula Hospital Corp. at p. 46.)
Alabama Rules of Civil Procedure, rule 23 is substantively identical to Rule 23.
Like the claims in Maldonado, Colomar, and Eufaula Hospital Corp., Caudle's requested declarations would necessitate case-specific inquiries into the individual chargemaster rates, the class members' unique circumstances, and even the rates charged by other hospitals in the community for similar services at the same time, inquiries that prevent certification of a Rule 23(b)(2) class. Caudle attempts to distinguish these cases on the ground that they sought monetary recovery and were thus not Rule 23(b)(2) declaratory relief actions, whereas he did not seek damages such that an inquiry into the reasonableness of NorthBay's rates was unnecessary. As already discussed, however, the relief he seeks does in fact mandate individual inquiries.
2. Code of Civil Procedure Section 382 Requires a Class to Be Ascertainable and Have Common Questions Predominate Over Individual Questions
California courts look to Rule 23 case law for guidance only when California class action law lacks precedent. (Los Angeles Gay & Lesbian Center v. Superior Court, supra, 194 Cal.App.4th at p. 301, fn. 7.) Because this is not a declaratory relief class action within the scope of Rule 23(b)(1) or (b)(2) such that California precedent is lacking, there was no basis for the trial court to consult Rule 23 authorities. Instead, the issue of certification here fell squarely within Code of Civil Procedure section 382, which leaves no doubt that ascertainability of the class and the predominance of common questions over individual questions are required elements. In Brinker, supra, 53 Cal.4th at p. 1021, the Supreme Court summarized California's "clear requirements" for class certification: "The party advocating class treatment must demonstrate the existence of an ascertainable and sufficiently numerous class, a well-defined community of interest, and substantial benefits from certification that render proceeding as a class superior to the alternatives. [Citations.] 'In turn, the "community of interest requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately represent the class." ' " Many cases before and after Brinker confirm that ascertainability and predominance are requirements for a California class action. (See, e.g., Ayala v. Antelope Valley Newspapers, Inc. (2014) 59 Cal.4th 522, 529-530 [quoting the standard summarized in Brinker]; Fireside Bank v. Superior Court, supra, 40 Cal.4th at p. 1089; Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 326 ["The party seeking certification has the burden to establish the existence of both an ascertainable class and a well-defined community of interest among class members."]; Nicodemus v. Saint Francis Memorial Hospital (2016) 3 Cal.App.5th 1200, 1212-1219 [discussing ascertainability and predominance at length].)
Hale, supra, 232 Cal.App.4th 50, on which the trial court relied and whose facts are similar to those here, is particularly instructive. There, plaintiff Dagmar Hale received emergency medical treatment at defendant Sharp Healthcare's hospital. She lacked health insurance and signed an admission agreement that she would pay Sharp " 'in accordance with the regular rates and terms of the hospital.' " Like NorthBay here, Sharp billed its emergency room patients from its chargemaster schedule. (Id. at pp. 53, 55.) Hale filed a class action against Sharp, alleging that Sharp charged its uninsured patients " ' unreasonable, unconscionable, and unlawful' " rates for the medical care it provides and asserting claims under the unfair competition law (Bus. & Prof. Code, § 17200) and the Consumers Legal Remedies Act (Civ. Code, § 1750 et seq.). The trial court certified a class similar to the putative class here. (Hale, at p. 54.)
Sharp later moved to decertify the class, and the trial court granted the motion, agreeing the class was not reasonably ascertainable and common issues did not predominate over individual issues because of the individual inquiries required to evaluate damages. (Hale, supra, 232 Cal.App.4th at pp. 55-56.) The Court of Appeal affirmed, finding no abuse of discretion in the trial court's order. (Id. at p. 58.)
In setting forth the applicable class certification standards, the court quoted the standard articulated by the Brinker court, which, as noted, required the existence of an ascertainable class and the predominance of common questions of law or fact over individual issues. (Hale, supra, 232 Cal.App.4th at p. 58.) And the court's lengthy analysis of those issues led to the conclusion that the trial court's findings of a lack of ascertainability and predominance were supported by substantial evidence. (Id. at pp. 58-67.)
Caudle vigorously disputes Hale's applicability here. He argues that it does not compel ascertainability and predominance in this case because it did not "involve a claim for declaratory judgment and did not discuss, or even mention, the equivalents of Rules 23(b)(2) and/or (b)(1), under which class certification was sought here." As we have already demonstrated, this is not a Rule 23(b)(1) or (b)(2) class either.
In addition to attempting to distinguish Hale, Caudle's counsel argues it was wrongfully decided. This comes as no surprise, since Caudle's counsel in this action represented the plaintiff in Hale.
In sum, we conclude that the trial court did not err in requiring Caudle to demonstrate ascertainability and predominance. We thus turn to whether the court's finding that Caudle had not established these requirements was supported by substantial evidence.
E. The Trial Court Did Not Abuse Its Discretion in Denying Class Certification
1. The Trial Court's Finding that Caudle Had Not Established Predominance Was Supported by Substantial Evidence
As the court observed in Hale, supra, 232 Cal.App.4th at p. 61, "The ' "ultimate question" for predominance is whether "the issues which may be jointly tried, when compared with those requiring separate adjudication, are so numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants." [Citations.] "The answer hinges on 'whether the theory of recovery advanced by the proponents of certification is, as an analytical matter, likely to prove amenable to class treatment.' " ' " Predominance means that a class member need not " 'individually litigate numerous and substantial questions to determine his [or her] right to recover[y]' " and that jointly tried issues " 'be sufficiently numerous and substantial to make the class action advantageous.' " (Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 913-914.) Substantial evidence supports the trial court's finding that individual inquiries regarding the reasonableness of NorthBay's charges predominate over common issues such that a class action would not be advantageous.
Caudle seeks declarations that NorthBay cannot bill uninsured patients its chargemaster rates and can only bill them reasonable rates. This presupposes that each of the 16,850 chargemaster rates is unreasonable. Thus, in order to issue the declarations Caudle seeks, the trial court would be called upon to determine whether each chargemaster rate billed to each class member was in fact reasonable. This, in turn, would necessitate an analysis of such considerations as the medical treatment the class member received, the class member's unique circumstances, the provider's qualifications and experience, rates charged at other comparable medical facilities in the community, rates paid by insurers for their insureds, and expert testimony particular to each class member. Indeed, when analyzing chargemaster rates in the context of calculating personal injury damages, the California Supreme Court has noted that "pricing of medical services is highly complex." (Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 562.) It has also warned about making generalizations about medical pricing based simply on the chargemaster: "We do not suggest hospital bills always exceed the reasonable value of the services provided. Chargemaster prices for a given service can vary tremendously, sometimes by a factor of five or more, from hospital to hospital in California. [Citation.] With so much variation, making any broad generalization about the relationship between the value or cost of medical services and the amounts providers bill for them—other than that the relationship is not always a close one—would be perilous." (Id. at pp. 561-562, fn. omitted.)
Our conclusion that predominance was not shown here is consistent with prevailing authorities. The Hale court recognized that in order to be entitled to relief, each individual class member would have to litigate numerous issues specific to the rates he or she was billed. (Hale, supra, 232 Cal.App.4th at p. 63.) This would require an analysis of "over 7,000 line items for individual and bundled procedures, services, and goods derived for each individual patient." (Id. at p. 65.) This was substantial evidence supporting the trial court's finding that individual issues predominated over common issues. (Id. at pp. 63-64.)
The Maldonado court also held that predominance is not satisfied in this type of case. It reasoned: "[G]iven the state court's dictate that the reasonableness of medical fees depends on multiple factors, including the services rendered, patient's financial status, and customary fee for similar services, [citation], it is unlikely Appellants could ever demonstrate that the chargemaster rates are unreasonable. Moreover, the court cannot simply require Ochsner to refund to uninsureds the difference between what they paid, if anything, and what insured patients paid because, as Appellants admit, insured patients paid a wide variety of discounts from the chargemaster rates depending on the individual contracts and the specific procedures involved in their care. At this level, there is not one charge for insured patients and one charge for uninsured patients, but an array of charges tailored to each patient's treatment. In addition, the percentage of the chargemaster rate paid by an individual insurance company may vary from procedure to procedure. The fact-specific rather than class-oriented nature of the claims thus predominates not only at the plaintiffs' level, since two patients' care and financial circumstances are hardly ever comparable, but also in determining a 'reasonable' charge for each service from among the melange of third-party payer discounts." (Maldonado, supra, 493 F.3d at pp. 525-526, fns. omitted.)
The Colomar court likewise held that this type of class cannot satisfy the predominance requirement because the reasonableness of charges necessarily required an individualized determination of the value of the services provided. (Colomar, supra, 242 F.R.D. at pp. 680-681.) Specifically, plaintiff's claims turned "exclusively on the question of the reasonableness of Mercy's charges. Reasonableness in this context involves a per patient analysis of the cost of each particular medical service(s) in question, along with a comparison of the rates Mercy charged other patients with benefits as well as the rates charged by other area hospitals for similar services during the same time frame. [Citation.] With its focus on the particularized type of treatment, and the attendant internal costs and comparative rates for similar services, this case-specific analysis clearly predominates over any other common elements that would apply to the class as a whole." (Ibid.) The court rejected plaintiff's argument that common issues predominated because all " 'class members were subjected to Mercy's pricing practices here,' " identifying the real question as the reasonableness of the particular prices for the particular services, which could "only be resolved by reference to the particular facts surrounding that particular set of services." (Id. at p. 680.)
Similarly, Eufaula Hospital Corp., supra, 32 So.3d at p. 46 recognized that individualized issues overwhelmed class cohesiveness and rendered certification inappropriate given the patient-specific analysis required to determine the reasonable charge for medical services provided. (See also Butts v. Iowa Health System (Iowa Ct.App. 2015) 863 N.W.2d 36 [2015 WL 1046119, *5] [no common question of law or fact because "the reasonableness of the rates charged the putative class members is not only dependent upon the medical condition of the plaintiff, the types of services provided, the hospital at which the services were provided, and the point in time at which the services were provided, but also dependent upon a host of other variables, including, but not limited to, the hospital's attendant internal costs, the availability of medical care providers for the type of service rendered, the rates of substitute or similar services, and the rates of competitor's services"].) We join in this line of authorities, holding that individual issues predominate over common issues where, as here, plaintiff challenges as unreasonable a medical provider's practice of billing self-pay patients its chargemaster rates. Finally, we note that two recent California decisions have reached the same result. (See Hefczyc v. Rady Children's Hospital-San Diego (2017) 17 Cal.App.5th 518; Kendall v. Scripps Health (2017) 16 Cal.App.5th 553.)
2. The Trial Court's Finding that Caudle Had Not Established Ascertainability Was Supported by Substantial Evidence
While the substantial evidence supporting the trial court's finding that individual issues predominated over common issues is sufficient to support the court's denial of class certification, we also address the court's ascertainability finding.
" 'Whether a class is ascertainable is determined by examining (1) the class definition, (2) the size of the class, and (3) the means available for identifying class members.' [Citation.] ' " ' "Class members are 'ascertainable' where they may be readily identified without unreasonable expense or time by reference to official records." ' " ' [Citation.] 'Class certification is properly denied for lack of ascertainability when the proposed definition is overbroad and the plaintiff offers no means by which only those class members who have claims can be identified from those who should not be included in the class.' [Citation.]" (Hale, supra, 232 Cal.App.4th at pp. 58-59.) The trial court here found that the class was not ascertainable. The record supports this finding for two reasons: the class was fluid and constantly changing, and there was no means of readily identifying the class without unreasonable expense.
Caudle argues the trial court applied the wrong ascertainability standard by requiring there to be an " 'easy' electronic means to identify Class members." He also claims it erroneously applied a "heightened" ascertainability requirement by "requiring that it be 'administratively feasible' to actually identify the class members." Not so. The court expressly stated that "class members in the instant case cannot be readily identified without unreasonable expense or time." This is the proper standard. (Hale, supra, 232 Cal.App.4th at pp. 58-59.)
Lori Eichenberger, senior director of NorthBay's revenue cycle management, described in detail the complicated process by which insured patients are billed and the difficulties in identifying the emergency room patients who met Caudle's class definition. As she described it, once an initial determination regarding medical coverage is made, NorthBay sends a bill to uncovered patients and encourages the patient to promptly apply for Medi-Cal, which some patients then do either on their own or with NorthBay's assistance. NorthBay also requests that uncovered patients contact it about qualifying for financial assistance or a discount. Uncovered patients are also referred to Health Advocates, which can assist patients in finding alternative sources for coverage for the medical care they received. Patients who after all this have no coverage are asked to submit a charity care application so NorthBay can apply a discount, if appropriate. If a bill still remains outstanding, NorthBay may send a delinquent account to an outside collection agency. If those efforts prove unsuccessful, the matter may be returned to NorthBay, who may then apply a discretionary discount to write off the debt. This process of determining whether an emergency room patient's bill should be reduced, discounted, or written off can take days to several years because the time required to make this assessment is unique to each patient and can be influenced by factors such as patient cooperation, bureaucratic efficiency, and clarity of coverage. Additionally, each year, NorthBay receives notice that hundreds of outstanding medical bills have been discharged through bankruptcy proceedings. Because of this "lengthy, convoluted, and fluid process which could result in someone being in the class one day, but not the next," Eichenberger cannot generate a definitive list of patients who meet the class definition. As she summarized it, "[T]here is no way, at any particular time, to identify each and every self-pay patient who will never receive a discount, adjustment, or write-off of the full chargemaster amount, and thus a definitive list can never be generated."
By way of example, Eichenberger described a search she conducted in 2015 for self-pay emergency room patients in 2013 who had not received a reduction to their bill. Her search retrieved 2,260 results. When she conducted the same search a year later, the number had dropped by several hundred because those patients had received a reduction in their bill in the last year. She opined the number would continue to decrease as patients continued to receive reductions on their account. The same process would apply to each year of the class (which would span over six years), such that the class would be perpetually evolving. This would not be, as Caudle suggests, a simple and harmless instance of the class being overinclusive, which would not necessarily preclude class certification. (See, e.g., Nicodemus v. Saint Francis Memorial Hospital, supra, 3 Cal.App.5th at p. 1220.) Rather, the court would find itself conducting mini-trials on the reasonableness of each class member's bills, when hundreds of those class members would likely drop out of the class at some point because they received a reduction of their bill. This fluidity would undermine the ability to definitely determine who was a member of the class. This is substantial evidence supporting the court's finding that the class was unascertainable.
Additionally, according to Eichenberger, NorthBay maintains clinical and financial records for all of its patients. While many of the records are maintained electronically, "that does not mean [the records] can be collectively searched, isolated, or retrieved for all patients at the same time with just a 'click of a button.' " For example, if a patient signed NorthBay's consent and financial agreement, the document would be scanned into his or her clinical file. But there is no electronic search function that can determine which patients signed the contract Caudle seeks to have interpreted. As Eichenberger described it, "[I]f I wanted to determine which of the approximately 60,000 emergency room patients treated in 2015 signed an agreement, I would need to individually search [each] patient's clinical record for that information," a search that in her conservative estimate would take several months and the efforts of several employees to review the files of one year alone. Given the 2011 filing of the certification motion, the class here would span at least six years. Based on Eichenberger's estimate, it would take several employees upwards of a year to determine which emergency room patients (out of an estimated 360,000) signed the contract in dispute. We disagree with Caudle that these are "vague references . . . [that] do not establish unreasonable time and expense . . . ." The case on which he relies to support his claim—Reyes, supra, 196 Cal.App.3d 1263 (Reyes)—does not persuade us otherwise. Reyes held that the class opponent had not demonstrated that the administrative cost of determining and notifying the class was disproportionate to the class's potential recovery. Here, it was not possible for NorthBay to demonstrate disproportionality since it is impossible to estimate the class's potential recovery, if any.
F. The Trial Court Did Not Abuse Its Discretion in Not Certifying an Issue Under Rule 3.765(b)
California Rules of Court, rule 3.765(b) provides that "[w]hen appropriate, an action may be maintained as a class action limited to particular issues." Caudle contends that "at the very least, the trial court should have certified the Class with respect to the issue of interpretation of Hospital's Contract . . . ." He reasons that the "single issue of contract interpretation presents a legal issue that is common to all Class members and which should be determined by a simple, summary proceeding that applies equally to all Class members." Caudle cites no authority suggesting that this rule is intended as a separate basis for class certification that bypasses the protections of Code of Civil Procedure section 382. And his request runs up against the same barriers already discussed, as the class would still be unascertainable. Thus, certification under California Rules of Court, rule 3.765 would have been improper.
G. There Is No Basis for Remanding for the Trial Court to Consider Whether a Class Should be Certified with Respect to the Issue of "Unconscionability"
Lastly, relying on Moran v. Prime Healthcare Management, Inc. (2016) 3 Cal.App.5th 1131 (Moran), Caudle urges us to remand with instructions that he be permitted to file a renewed motion for class certification based on a claim of unconscionability. In Moran, like here, a self-pay patient filed a putative class action against a hospital where the patient had received medical treatment, alleging that "the rates defendants charge self-pay patients are discriminatory, exceed the reasonable value of the treatment, and are 'artificially inflated and grossly excessive.' " (Id. at pp. 1137-1138.) After two successful demurrers by defendants, plaintiff filed a third amended complaint asserting claims for violations of the unfair competition law (UCL, Bus. & Prof. Code, § 17200), the Consumer Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.), and declaratory relief. Defendants again demurred, and the trial court again sustained it, this time without leave to amend. (Moran, supra, at p. 1138.) The Court of Appeal reversed, holding that plaintiff stated claims under the UCL and CLRA and for declaratory judgment due to his allegations that the contract's financial liability provision was unconscionable. (Moran at pp. 1151-1153.) Because the appeal was from an order sustaining a demurrer, it did not address class certification, and we see nothing suggesting that a putative class based on allegations of unconscionability would avoid the barriers to class certification present here. Moran has no relevance here.
In his reply brief, Caudle cites for the first time three additional cases in support of this request, in each of which the trial court certified the plaintiff's unconscionability claim for class action treatment: See O'Donovan v. CashCall, Inc. (N.D. Cal. 2011) 278 F.R.D. 479, 500-502; In re Checking Account Overdraft Litig. (S.D. Fla. 2015) 307 F.R.D. 656, 676; Davis v. Cash For Payday, Inc. (N.D. Ill. 2000) 193 F.R.D. 518, 522. These authorities do not avail Caudle. Unlike there, his complaint here does not assert an unconscionability claim. And he never sought leave to add such a claim. (City of San Diego v. D.R. Horton San Diego Holding Co., Inc. (2005) 126 Cal.App.4th 668, 685 [contentions or theories raised for the first time on appeal are not entitled to consideration]; Amato v. Mercury Casualty Co. (1993) 18 Cal.App.4th 1784, 1794 ["It must appear from the record that the issue argued on appeal was raised in the trial court. If not, the issue is waived."].) While Moran, supra, 3 Cal.App.5th 1131 may be new authority, the other cases cited by Caudle confirm that class certification of an unconscionability claim is not a new concept.
DISPOSITION
The order denying class certification is affirmed. NorthBay shall recover its costs on appeal.
/s/_________
Richman, J.
We concur:
/s/_________
Kline, P.J.
/s/_________
Miller, J.