Opposition ObjectionsCal. Super. - 6th Dist.April 24, 2019I 2 3 4 5 6 7 8 9 10 12 13 14 LAW OFFICES OF STEPHENSON, ACQUISTO & COLMAN, INC. MELANIE JOY YOUNG (STEPHENSON), ESQ. (SBN 113755) RICHARD A. LOVICH, ESQ. (SBN 113472) KARLENE J. ROGERS-ABERMAN, ESQ. (SBN 237883) 303 N. Glenoaks Blvd., Suite 700 Burbank, CA 91502 Telephone: (818) 559-4477 Facsimile; (818) 559-5484 Attorneys for Plaintiff STANFORD HEALTH CARE SUPERIOR COURT OF CALIFORNIA FOR THE COUNTY OF SANTA CLARA UNLIMITED JURISDICTION 15 16 17 19 20 21 22 23 24 25 26 27 28 STANFORD HEALTH CARE, a California non-profit public benefit corporation, Plainti ff, CALIFORNIA PHYSICIANS'ERVICE, dba BLUE SHIELD OF CALIFORNIA, a California corporation; and DOES I THROUGH 25, INCLUSIVE, De fendants. //// //// //// Case No.; 19CV346712 STANFORD HEALTH CARE'S OPPOSITIOJI/ TO DEFENDANT'S DEMURRER TO THE FIRST AMENDED COMPLAINT DATE: 26 November 2019 TIME: 9:00 a.m. DEPT.: 9 Complaint filed: 24 April 2019 copy of copy of 22003-opposition to demurrer to complaint toa2 (1).docx - I - STANFORD HEALTH CARE'S OPPOS1TfON TO DEFENDANT'S DEMURRER TO THE FIRST AMENDED COMPI.AINT Electronically Filed by Superior Court of CA, County of Santa Clara, on 11/13/2019 12:44 PM Reviewed By: K. Nguyen Case #19CV346712 Envelope: 3644167 TABLE OF CONTENTS TABLE OF CONTENTS.. ~Pa e 2,3 TABLE OF AUTHORITIES.. ..4,5 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STANFORD HEALTH CARE'S OPPOSITION TO DEFENDANT'S DEMURRER TO THE FIRST AMENDED COMPLAINT INTRODUCTION AND SUMMARY OF ARGUMENT .„.I. H. HI. STANDARD OF REVIEW. FACTUAL BACKGROUND IV. BLUE SHIELD'S DEMURRER DOES NOT WITHSTAND SCRUTINY A. The FAC Is Not Fatallv Uncertain B. Whether Plaintiff is Entitled to its Full Billed Charades is a Ouestion of Fact. C. The FAC Pled Sufficient Facts To Aliene The Existence Of An Oral Contract And An Implied-In-Fact Contract... 1. There Was An Imnlied Agreement to Pav 2. There Was A Meeting of the Minds. D. Stanford's Nealieent Misrepresentation Claim Was Properlv Pled. E. The FAC Pled Sufficient Facts To Alleee A Ouantum Meruit Cause of Action Because Blue Shield Both Reauested And Benefited From The Services Rendered bv Stanford ....... V. IF BLUE SHIELD'S DEMURRER IS SUSTAINED, STANFORD RESPECTFULLY REOUKSTS THK COURT GRANT IT LEAVE TO AMEND. 15 ....15 15 19 ...21 23 copy of copy of 22003-opposition to demurrer to complaint toa2 (1).docx - 2 - STANFORD HEALTH CARE'S OPPOSITION TO DEI'ENDANT'S DEMURRER TO THE FIRST AMENDED COMPLAINT 1 VI. CONCLUSION. 24 10 12 13 14 15 16 17 19 20 21 22 23 24 25 26 27 copy of copy of 22003-opposition to demurrer to complaint toa2 (1).docx - 3 - STANFORD HEALTH CARE'S OPPOSITTON TO DEFENDANT'S DEMURRER TO THE FIRST AMENDED COMPLAINT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Page(sl 20 20 21 12 22 14 21 16, 17 12, 13 CASES Alliance Mort@ayre Co. v. Rothwell, &1995) 10 Cal.4th 1226. fn. 4, 44 CahRptr.2d 352. 900 P.2d 601 ........................ Bilv v. Arthur Young «fc Co.. (1992) 3 Cal.4th 370. Blank v. Kirwan., 39 Cal. 3d 3I I (I985). Cedars Sinai Medical Center, v. Mid- 8'est National Life Insurance Co., 118 F. Supp. 2nd 1002 (C.D. Cal. 2000).. Citv ofAtascadero v. Merrill Lvnch, Pierce, Fenner d'c Smith Inc. 68 Cal. App. 4th 445 (1st Dist. 1998) . 11 Dohenv Park Terrace Homeowners Assoc., Inc. v. Truck Ins. Exchantre. 132 Cal.App.4th 1076 (2005) .. Donabedian v. Mercurv Insurance Co., 116 Cal. App. 4th 968 (2nd Dist. 2004). Fancher v. Bruntrer„ 94 Cal. App. 2nd 727 (2nd Dist. 1949) . Feitelbere v. Credit Suisse First Boston, LLC, 134 Cal.App.4th 997 (2005). Folev v. Interactive Data Corp., 47 Cal.3rd 654 (1988) Haeeertv v. IVarner 115 Cal. App. 2nd 468 (2nd Dist. 1953) .. Harborine Villas Homeowners Association v. Superior Court, 63 Cal.App.4th 426 (1998). 14 Hoary Memorial Hospital v. Managed Care Administrators, 820 F.Supp. 1232 (C.D.Cal 1993) .. Ion Enuipment Corporation v. Nelson, 110 Cal.App.3d 868 (1980) .. .14, 15, 18 Joslin v. H.A.S. Insurance Brokerage, 184 Cal. App. 3rd 369 (4th Dist. 1986) .. Miklosv v. Resents ofCalifornia, 44 Cal 4th 876 (2d Dist. 2008) .. ..12, 14 Ochs v. PacifICare of California, 115 Cal.App.4th 782 (2nd Dist. 2004). 21 Orthopedic Specialists ofS. California v. California Public Emplovees 'etirement ~Ss. 228 Cal.App.4th 644 (2d Dist. 2014) .. Reagents of the Universitv ofCalifornia. v. Principal Financial Group, 412 F.Supp.2nd 1037 (N.D. Cal. 2006) . 16 copy of copy of 22003-opposition to demurrer to - 4 - sTANFoRD I IEALTI I cARE's OPPoslTIolv To complaint toa2 (I).doux DEFENDANT'S DEMURRER TO TI IE FIRST AMENDED COMPLAINT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Resents ofthe Universitv ofCalifornia v. Aetna US Health ofCalifornia. 2011 WL 13227844 (C.D. Cal. 2011), Rodas v. Spic@el, 87 Cal. App. 4th 513 (2nd Dist. 2001). SKF Farms v. Superior Court, 153 Cal.App.3d 902 (1984) .. Stanford Hosp and Clinics v. Multinational Underwrr'ters inc., 2008 WL 5221071 (N.D. Cal. Dec, 12, 2008) . Stevens v. Superior Court, 75 Cal, App. 4th 594 (2nd Dist. 1999). Sunset Drive Corp, v. Citv ofRedlands, 73 Cal. App. 4th 215 (4th Dist. 1999). Tarmann v. State Farm Mut. Auto 1ns. Co., 2 Cal.App.4th 153 (1991). Te etHeattitsvste nese i Inc... Fc tisi sa ance e . inc 520 F.Supp.2nd 1184 (C.D.Cal. 2007). Wooton v. Coerber, 213 Cal. App. 2nd 142 (1st Dist. 1963) . Statutes 26 U.S.C. and 42 Cal. Civ. Code $ 3545. Cal. Civ. Proc, Code Il 452 Cal. Evid. Code Il 452(h) . Cal. Health & Safety Code Il 1339.51. California Health & Safety Code ( 1345(f). Pub.L. No. 104-191, 110. Regulations 16 13 16 19, 20 15 19 10 19 11 17 .17, 19 22, 23 10 21 22 23 California Code of Regulations, title 28, section 1300,71, subdivision (a)(3)(B). Subdivision (a)(3)(B). 13, 19 Section 1300.71(a)(3)(B). 19 Other Authorities 25 26 27 28 Restatement (Second) Contracts Il 4..... 17 copy of copy of 22003-opposition to demurrer to complaint toa2 ( I tdocx - 5 - sTANFQRD I IFALTII cARE's OPPoslrtoN To DEFENDANTS DEMVRRER TO TIIE FIRST AMFNDED COMPI,AINT STANFORD HEALTH CARE'S OPPOSITION TO DEFENDANT'S 2 DEMURRER TO THE FIRST AMENDED COMPLAINT INTRODUCTION AND SUMMARY OF ARGUMENT 10 12 13 14 15 16 17 19 20 21 22 23 By way of its First Amended Complaint ("FAC"), plaintiff STANFORD HEALTH CARE (nStanfordn) simply seeks to be paid for medical care it rendered to 239 patient/beneficiaries of a health plan sponsored and/or administered by defendant CALIFORNIA PHYSICIANS'ERVICE, dba BLUE SHIELD OF CALIFORNIA (nBlue Shield" ), Given that Blue Shield contends that no written agreement exists between the parties, Stanford is entitled to payment at its publicly posted rates and is not constrained to submit to Blue Shield'nilateral determination of what Blue Shield thinks Stanford should be paid. This is particularly true given that Blue Shield effectively pulled a "bait and switch" by directing its beneficiaries to Stanford to obtain world-class care, and then, after confirming coverage and authorizing treatment, remitted, in most instances, a mere $250 or 500 in maximum payment for each episode of care. Stanford was never advised of such limits during the verification and authorization calls. Worse, it assigned none of the balances owed to patient responsibility. Thus, Stanford was left "holding the bag," having provided medically necessary care to Blue Shield's beneficiaries and recouping only the smallest fraction of the payment due for that care. 24 25 26 28 Imagine Blue Shield's indignation should its beneficiaries venture to dictate how much Blue Shield should collect in premiums from those beneficiaries. Certainly, the same deference Blue Shield expects in regard to its premium pricing scheme should also be afforded to Stanford's pricing structure for the medical care copy of copy of 22003-opposition to demurrer to " 6 " sTANFQRD HEALTH cARE's OPPosirioNTo complaint toa2 (1).docs DEFENDANTS DEMURRER TO THE FIRST AMENDED COMPLAINT it provides. Stanford is confident that it will establish the reasonableness of its charges at trial, and avers that its FAC adequately sets forth the required elements and factual underpinnings of the causes of action pursuant to which it seeks relief. However, Blue Shield purports to have the court decide, at the demurrer stage, that Stanford's charges are somehow unreasonable, and asks the Court to "dismiss Plaintiff's FAC in its entirety," Moving Papers, p. 3:4-5. Blue Shield will certainly have the opportunity to make its case, but the demurrer stage is not the appropriate time to do so. 10 As shown below, Blue Shield'emurrer fails on a number of levels: 12 13 14 15 16 17 18 19 20 21 22 23 24 i) The FAC is not "uncertain" merely because its attached spreadsheet does not specifically identify which claims are emergency/maternity claims. As used in the California code "uncertain" means "ambiguous" or "unintelligible." However, Blue Shield never explains what it finds "ambiguous" or "unintelligible" about the claims, asserting only that its "response depends on the nature of the health care services." In fact, its response, at the pleading stages, does not require Plaintiff to specify the particularities of the treatment provided. The only issue raised in the complaint is whether Plaintiff is entitled to its full billed charges for each episode of care. Since no contract governs the claims, there is no negotiated rate for the services provided-therefore, whether the claims were maternity claims or not, or emergency claims or not, has absolutely no bearing on Stanford's expectation of payment. It expects its, full, publicly posted rates for all services rendered. 25 26 27 Additionally the "continuation of care" allegations were made in the alternative, in the event discovery reveals that certain claims were not part of Blue Shield's "Individual Family Plan" ("IFP") (Blue Shield contends they all are), and copy of copy ot 22003-opposition to demurrer to - 7 - STANFORD HEALTH CARE'S OPPOSITfOJi TO complaint toa2 (1).doux DEFliNDANT'S DEMURRER TO THF: l'IRS'I'MFNDED COMPLAlNT 10 12 thus in fact governed by the parties'rior contract (i.e., the dates of service began prior to that contract's termination date). Given that all of the alleged dates of service began during the time that the parties were purportedly non-contracted for such IFP members, and assuming that Blue Shield is correct that all of the claims are in fact IFP claims, then the continuation of care allegations are effectively moot. At this stage, however, Stanford can only assert on information and belief that some of the claims might be subject to the parties'rior written contract. However, this issue raises questions of fact, and such questions are not appropriate for adjudication at the demurrer stage. Ramsden v. II'estern Union, 71, Cal.App. 3d 873,879 (2d Dist.,1977). The true facts are as yet undiscovered, and will come to light once the case is at issue and discovery undertaken. 13 14 15 16 17 18 19 20 21 23 24 25 27 28 ii) The FAC did plead sufficient facts to allege causes of action for breach of oral contract and breach of implied-in-fact contract based on the totality of the circumstances surrounding the creation of such contracts. These included the implied agreement to pay Stanford's published, publicly available rates as well as Blue Shield's verification of benefits and/or authorization of treatment. Whether Stanford's published charges represented the usual reasonable and customary charge for its services is, again, a factual dispute not capable of resolution at the demurrer stage. See Ramsden, supra. iii) Stanford's claims of negligent misrepresentation were adequately and particularly alleged. Stanford agrees that fraud-based claims must be be alleged with particularity, and it has done just that. Blue Shield, however, insists that the minutiae of the misrepresentations ought be alleged in the FAC. For example, it seeks to know "the who" - i.e., the names of the employees who participated in the verification and authorization calls on which the cause of action is based. This goes beyond the meaning and scope of "particularity" in pleading. ~ copy of copy of 22003-opposition to demurrer to STANI'ORD HEALTI I CARE'S OPPOSITIO/V TO complaint toa2 (I l.docx DEFENDAN'!"S DEMDRRER TO TkIF, FIRST AMENDED COMPLAINT It is enough that Stanford has alleged that it contacted Blue Shield's employees who verified and authorized the treatment, and made (mis)representations as to what would be paid. There are over 200 individual claims which would render the FAC unduly voluminous if the names of each employee were to be set forth in the pleading. Moreover, the names of all employees involved are not known at this stage, as they are within the possession of the Blue Shield, and are expected to be obtained in discovery. 10 12 13 14 15 16 17 19 20 iv) The FAC did plead sufficient facts to allege a quantum meruit cause of action. As set forth in the pleading, Blue Shield both requested and benefited from the services rendered by Stanford. California law supports that a treatment authorization is tantamount to a request, and Blue Shield benefited by fulfilling its statutory obligation to provide healthcare services in exchange for the premium payments it collected from its members, and in doing so, maintained its members'oodwill. Should the Court choose to sustain Blue Shield'emurrer in any aspect, Stanford respectfully requests the Court grant it leave to file an amended complaint to correct any perceived deficiencies. 21 22 FACTUALBACKGROUND 23 24 26 27 This is an action for payment of amounts due and owing to Stanford in connection with medically necessary treatment provided to 239 patients on various dates between January 2016 and January 2018, whose health insurance copy of copy of 22003-opposition to demurrer to ~ STANFORD HEALTH CARL" S OPPOSITION TO complaint toa2 ( l).docs DEFFNDANT'S DEMDRRER To THE FIRST AMENDED COMPLAINT benefits were sponsored, administered and/or financed by Blue Shield,'AC $ 10, Exhibit l. 10 12 13 14 15 16 17 19 20 21 22 23 24 At all relevant times, Stanford and Blue Shield had no written contract providing Blue Shield with the right to pay discounted rates for healthcare services rendered to members of Blue Shield's health plans. FAC $ 9, As such, Stanford duly billed its usual and customary charges for the services provided to the Patients. FAC $ 17. Blue Shield unilaterally determined how much it would pay, and thus failed to pay the amount due to Stanford, despite Stanford's repeated demands for payment. FAC $ 18. Worse, Blue Shield did not hold any of the patients responsible for the balances owed. Blue Shield now contends that the patients belonged to its Individual Family Plan ("IFP"), which is believed to be a low cost health care product it offered pursuant to the Patient Protection and Affordable Care Act ("PPACA"), and provides extremely limited benefits. FAC $ 29. However, when Stanford properly contacted Blue Shield to verify that there were benefits available and to obtain authorization to treat the patients, Blue Shield did not disclose that these were IFP members and that there was a cap on the amount Blue Shield would pay for that product. Id. $$ 27-29. That cap is believed to be $500.00, often with a member copay of $250.00. Thus, despite verifying the patients had coverage and authorizing treatment, Blue Shield ultimately underpaid Stanford in excess of $8 Million Dollars. In 25 26 27 28 The patients are not identified by name pursuant to the privacy provisions of the Health Insurance Portability & Accountability Act (nHIPAAn), Pub.L. No. 104-191, 110 Stat.1936 (codified as amended in scattered sections of 26 U.S.C. and 42 U.S.C.). copy of copy of 22003-opposition to demurrer to complaint toa2 (I tdocx - 10 - sTANFQRD HEALTH cARE's oPP0$1Tlolv'To DEFENDAN'I'S DEMURRER TO THE FIRST AMENDED COMPLAINT order to recover the outstanding balance on the claims, Stanford filed this lawsuit. HI. STANDARD OF REVIEW 10 11 12 13 14 15 16 17 18 19 20 21 22 In determining whether a demurrer has merit, a complaint must be construed "liberally... with a view to substantial justice between the parties." Cal. Civ. Proc. Code $ 452; Stevens v. Sunerior Court, 75 Cal. App. 4'" 594, 601 (2nd Dist. 1999). uA complaint is sufficient if it alleges facts which state a cause of action under any possible legal theory." Sunset Drive Corp. v. Citv of Redlands, 73 Cal. App. 4'" 215, 219 (4~ Dist. 1999) (emphasis added). "In determining the merits of a demurrer, ail materialfacts pleaded in the complaint and those that arise by reasonable implication, but not conclusions of fact or law, are deemed admitted by the demurringparty." Rodas v. Spiegel, 87 Cal. App, 4'" 513, 517 (2n Dist. 2001) (emphasis added), uA demurrer is simply not the appropriate procedure for determining the truth of disputed facts." Ioslin v. H.A.S. Insurance Brokerage, 184 Cal. App. 3'69, 374 (4'" Dist. 1986) (emphasis added). oA demurrer tests the pleading alone..." Citv of Atascadero v. Merrill Lvnch, Pierce, Fenner k Smith, Inc., 68 Cal. App. 4+ 445, 459 (1" Dist. 1998). 23 IV. BLUE SHIELD'S DEMURRER DOES NOT WITHSTAND SCRUTINY 25 26 A. The FAC Is Not Fatallv Uncertain 27 copy of copy of 22003-opposition to demurrer to complaint toa2 (1).docx Blue Shield contends that Stanford's complaint is "fatally uncertain" - I 1 " STANFORD HEALTH CARE'S OPPOSITlON TO DEI'ENDANT'S DEMURRER TO THE FIRST AMENDED COMPLAINT because the spreadsheet attached to the FAC does not identify which of the 239 claims are emergency claims, and as such the complaint is "deliberately vague." Moving Papers, p.5:3. 10 12 13 14 15 16 17 19 20 21 The FAC is not "uncertain" merely because its attached spreadsheet does not specifically identify which claims are emergency claims. As used in the California code "uncertain" means "ambiguous" or "unintelligible." However, Blue Shield never explains what it finds "ambiguous" or "unintelligible" about the claims, asserting only that its "response depends on the nature of the health care services." In fact, its response, at the pleading stages, does not require Plaintiff to specify the particularities of the treatment provided-as the only issue here is whether Plaintiff is entitled to its full billed charges for such treatment. For purposes of a demurrer, all facts alleged in the complaint, as well as reasonable inferences arising therefrom, are taken as true. Miklosy v. Regents ofCalifornia, 44 Cal,4fn 876,883 (2d Dist. 2008). A plaintiff need only allege ultimate facts to survive demurrer. Doheny Park Terrace Homeowners Assoc., 1nc. v. Truck Ins. Exchange, 132 Cal.App.4fn 1076, 1085 (2005). Whether the treatment was rendered on an emergency basis or not does not change Stanford's expectation of payment. Since no contract governs the claims, there is no discounted rate available for the services provided. Stanford therefore expects its posted rates for all services billed, regardless of type. 23 24 25 26 Blue Shield improperly relies on Orthopedic Specialists ofS. California v. California Public Employees 'etirement Sys., 228 Cal.App.4~ 644 (2d Dist. 2014), which involved a dismissal at the demurrer stage, of a Plaintiff s quantum meruit claim based on a determination that payment was governed by the plan member's Evidence of Coverage ("EOC"). What Blue Shield fails to mention in its moving papers is that in Orthopedic Specialists, the plan member's EOC was copy of copy of 22003-opposition to demurrer to " 12 - sTANFDRD HEALTH cARE s OPPostrloN To complaint toa2 (1).docx DEFENDANT'S DEMORRER TO THE FIRST AMFNDFD COMPLAINT attached to the FAC and provided express language regarding how the plaintiff s claims were to be paid. Id. at 647. (Indeed, it even provided that the patients were responsible for any balance owed, unlike the situation here). As such, the trial court was constrained to sustain the demurrer and find that each cause of action failed because it conflicted with the document that was attached to the complaint. Id. Here, Stanford has not provided as part of its FAC any evidence as to what Blue Shield's IFP plan document (i.e., its EOC) does or does not provide. 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Indeed, Stanford's position is that Blue Shield's EOC has no bearing on the claims at issue. There are two reasons why. First, it cannot be disputed that Blue Shield of California is subject to the requirements of California's Knox Keene Act, pursuant to which it is required to reimburse Stanford the "reasonable value" of its services, which is defined in California Code of Regulations, title 28, section 1300.71, subdivision (a)(3)(B). Subdivision (a)(3)(B) specifically governs "contracted providers without a written contract and non-contracted providers, except those providing services described in paragraph (C)." Although it never comes right out and says so, Blue Shield appears to be suggesting that it is not governed by subdivision (a)(3)(B), but rather, is subject to paragraph "C" as referenced in (a)(3)(B). However, on its face, subdivision (a)(3)(C) is in fact only applicable to "non-emergency services provided by non- contracted providers to PPO and POS enrollees." For such plans, the provider is entitled to "the amounts set forth in the enrollee's Evidence of Coverage." Id. There is absolutely no allegation or evidence that any of the claims at issue fall into either a PPO or POS plan category, much less any allegation or evidence as to what is set forth in the enrollee's EOC. It is hornbook law that a demurrer cannot be based on evidence which is beyond the four comers of the complaint. See SKF Farms v, Superior Court 153 Cal.App.3d 902, 905 (1984). ("The only issue copy of copy of 22003-opposition to demurrer to - 13 - sTANFDRD Hl'AI.TH cARE's OPPoslrtolv To complaint toa2 (1).docx DEFENDANT'S DEMURRER TO THE I'IRST AMI'NDED COMPLAINT involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.") 10 12 Thus, to the extent that Blue Shield is disputing the allegations as contrary to what its EOC provides, it must do so as part of a motion to dismiss, or for summary judgment, as there is nothing within the four corners of the FAC that provides the Court any basis on which to find that Blue Shield's plan documents control. A demurrer tests the sufficiency of the pleadings, not the evidence or facts alleged therein. Feitelberg v. Credit Suisse First Boston, LLC, 134 Cal.App.4 997,1007 (2005). Moreover, it is well settled that questions of fact cannot be decided on demurrer. Ramsden v. 8'estern Union, supra, at 879. 13 14 15 16 17 19 20 21 22 23 24 25 Second, the FAC is based on communications that occurred between the parties which formed independent contractual obligations, separate and apart from whatever Blue Shield may have agreed to with its plan members. Here, Blue Shield asks the Court to consider its beyond-the-scope theories as to what its plan document provides in order to dispose of Plaintiff's claims. Again, its plan document does not govern these claims, was not alleged as part of the FAC, and California law is clear that this Court is limited to what is alleged within the four comers of the complaint. Again, a demurrer can be used only to challenge defects that appear on the face of the Complaint or upon matters that are judicially noticeable. Harboring Villas Homeowners Association v. Superior Court, 63 Cal.App.4th 426, 429 (1998). No other extrinsic evidence can be considered on demurrer. Ion Equipment Corporation v. Nelson, 110 Cal.App.3d 868, 881 (1980). 26 28 copy of copy of 22003-opposition to demurrer to complaint toa2 (1).doux 14" sTANFDRDHFALTII cARE's oPPosiTIONTo DFFENDANT'S DEMURRER TO Tl I E FIRST AMFNDFD COMPI.AINT B. Whether Plaintiff is Entitled to its Full Billed Charades is a Ouestion of Fact 10 12 13 14 15 16 17 Blue Shield next asserts that "Plaintiff is not entitled to its full billed charges under any theory." Moving Papers, p. 6:20. Again, it relies on cases that involved PPO or POS plans, which are factually different from what has been alleged in the FAC. Although Blue Shield cites to these cases, it takes great pains to avoid quoting the actual regulation at issue in those cases, because that would bring into stark relief the fact that the regulation does not apply to Blue Shield. In any event, regardless of how Blue Shield may feel about Stanford's pricing, all that needs be said here is that that is not a basis for demurrer. As explained in Section C below, whether Stanford's charges are equivalent to the reasonable value of the services provided is clearly a question of fact, which cannot be decided on demurrer. Ramsden v. II estern Union, supra, at 879. C. The FAC Pled Sufficient Facts To Alienee The Existence Of An Oral Contract And An Implied-In-Fact Contract 19 1. There Was An Imnlied Agreement To Pav 20 21 22 23 24 25 26 27 Blue Shield's next argument posits that a verification of coverage and/or an authorization of treatment by Blue Shield "does not establish an agreement to pay.u Moving Papers p.8. Blue Shield cites to a handful ofmisleading cases to support that proposition. These cases are misleading because they pertain to decisions on motions for summary judgment that were issued after presentation of evidence and facts that went beyond the four comers of the complaint. Blue Shield builds its argument around Tenet Healthsystem Desert, Inc. v. copy of copy of 22003-opposition to demurrer to complaint toa2 (1).docx 1 5 - sTANFQRD I IEALTH cARE's oPPoslrtolrf To DEFENDANT'S DEMURRER TO THE FIRST AMFNDED COMPLAINT 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Fortis Insurance Co., Inc., 520 F.Supp.2nd 1184 (C.D.Cal. 2007) and Stanford Hosp and Clinics v. Multinational Underwriters Inc., 2008 WL 5221071 (N.D. Cal. Dec. 12, 2008) and Regents of the University ofCalifornia v. Aetna US Health ofCalifornia, 2011 WL 13227844 at *3 (C.D. Cal. 2011). All three cases cited reflect holdings on for motions for summary judgment where the court had the advantage of call transcripts, declarations, depositions, responses to interrogatories, and document productions. Thus, such cases are inapposite particularly when the thrust of the FAC requires looking at the "totality of the circumstances" See Foley v. Interactive Data Corp., 47 Cal.3rd 654, 675 at 681 (1988) (the "totality of the circumstances determines the nature of the contract[; the] Agreement may be .. shown by the acts and conduct of the parties, interpreted in the light of the subject matter and of the surrounding circumstances..."). Moreover, Blue Shield'erification of benefits and/or authorization of treatment are among the circumstances that could create a contract. Other courts have found an authorization to render services quoted by an insurer, which is communicated to a hospital or health care provider has been held to constitute a promise to pay. See Regents ofthe University ofCalifornia. v. Principal Financial Group, 412 F.Supp.2nd 1037 (N.D. Cal, 2006). Further, in Hoag Memorial Hospital v. Managed Care Administrators, 820 F.Supp. 1232 (C.D.Cal 1993), the court held "[i]nsurance companies and the plan administrators must recognize the implications of their unqualified verifications of coverage[;w]hen they assure third-party health care providers that the plan will pay for the cost of the care and treatment provided, they are creating independent obligations to the plan." Id, at 1238-9. Specifically, when an insurance company verifies coverage to a health care provider, "it should realize that either it is 27 28 consenting to the payment of plan benefits or for a false representation of coverage that the copyofcopy ot22003-opposition to demurrer to - 16- complaint toa2 (1).docx it should 'accept [the] consequences provider reasonably relied upon.'" STANFORD HEALTH CARE'S OPPOSITION TO DEFENDANT'S DEMURRER TO THE FIRST AMENDED COMPLAINT Id. at 1236. Here, Stanford relied on Blue Shield's false representations of coverage, to its detriment. Based on the foregoing, Blue Shield's demurrer should be overruled. 2. There Was A Meetint. of the Minds 10 12 13 15 16 17 19 20 21 Blue Shield also argues that the first and third causes of action fail because there was no meeting of the minds as to the price of the medically necessary services rendered by Stanford. Moving Papers p. 9:16 ("there is no allegation that Plaintiff disclosed its billed charges...."). This is plainly incorrect because California law requires Stanford to publicly publish its Charge Description Master ("CDM"), or "menu" of prices for each item appearing on its bills. Cal. Health & Safety Code II 1339.51.'hus, Blue Shield could, at any time, find the usual and customary value of Stanford's medical services and supplies by conducting a quick search of Stanford's CDM. As pled in the FAC, the price in situations where there is no written agreement between the medical provider, such as Stanford, and the health plan, such as Blue Shield, is the usual and customary value of the services and supplies rendered. FAC $ 9. See also Restatement (Second) Contracts ( 4 (a[a] promise may be stated in words either oral or written, or may be inferred wholly or partly from cnduct."),'2 23 24 25 26 27 28 Pursuant to that edict, Stanford's CDM can be accessed by anyone with an internet connection at htto://www.oshod.ca.uov/charaemaster/. Pursuant to Cal. Evid. Code tj 452(h), Stanford requests the Court take judicial notice: i) that Stanford's CDM's for the years 2011 through 2018 are publicly available at that website; and, ii) the 2016-2018 CDM's for Stanford each contains more than 40,000 line items, including their prices per unit. In this regard, illustration 2 of the Restatement is instructive: 2. A, on passing a market, where he has an account, sees a box of apples marked "25 cts. each." A picks up an apple, holds it up so that a clerk of the establishment sees the act. The clerk nods, and A passes on. A has promised to pay twenty-five cents for the apple. copy of copy of 22003-opposition to dcmurrcr to complaint toa2 (1).docx - 17 - sTANFoRD HEALTH cARE's oPPoslT!o/v To DEF'ENDANT'S DEMURRER TO THE I'I RST AMENDED COMPLAINT 10 12 13 14 15 Blue Shield contends that Stanford's billed charges categorically cannot be the same as the usual and customary charges for the medical services rendered. Moving Papers pp,6-7. However, whether or not Stanford's billed charges are the same as the usual and customary charges is an issue of fact that must be left to the discovery process. It is well settled that questions of fact cannot be decided on demurrer. Ramsden v. 8'estern Union, supra, at 879 ("[a] demurrer is simply not the appropriate procedure for determining truth of disputed facts"); Blank v. Kirwan. 39 Cal. 31 311, 318 (1985) (a demurrer does not admit "contentions, deductions or conclusions of fact or law"). Moreover, Stanford has alleged the ultimate fact that its prices are reasonable and customary, and a plaintiff need only allege ultimate facts to survive demurrer. Daheny Park, supra. Further, the Department ofManaged Health Care provides the following guidance on how to determine the reasonable and customary value of health care services: 16 17 18 19 20 21 22 23 24 25 For contracted providers without a written contract and non- contracted providers, except those providing services described in paragraph (C) below: the payment of the reasonable and customary valuefor the health care services rendered based upon statistically credible information that is updated at least annually and takes into consideration: (i) the provider's training, qualifications, and length of time in practice; (ii) the nature of the services provided; (iii) thefees usually charged by the provider; (iv) prevailing provider rates charged in the general geographic area in which the services were rendered; (v) other aspects of the economics of the medical provider's practice that are relevant; and (vi) any unusual circumstances in the case. 26 27 28 The obvious analogy here is that Stanford, like the grocer in that illustration, has "marked" its prices beforehand by publishing its charge description master for all the public to see prior to any stay at that facility. copy of copy of 22003-opposition to demurrer to complaint toa2 (1).docx - 18 - sTANFQRD IIFALTH cARE's OPPOSITloiv To DEFENDANT'S DEMURRER TO THE I'IRST AMENDED COMPLAINT 28 Cal.Code Regs. II 1300.71(a)(3)(B) (emphasis added). 10 11 12 13 14 15 16 17 Thus, what is reasonable and customary must take into consideration a hospital's billed charges. It is important to note that Section 1300.71(a)(3)(B) provides a definition for a health plan's reimbursement by setting the minimum level at which an insurer must pay without suffering disciplinary action from the Department of Managed Health Care. Notably, that administrative rule places no duty on a health care provider to set rates at any particular value. In addition, the law presumes Stanford's price menu on file with the State of California is reasonable. Cal. Health & Safety Code $ 1339.51; Cal. Civ. Code $ 3545 ("[p]rivate transactions are fair and regular... u); Wooton v. Coerber, 213 Cal. App. 2nd 142, 145 (1" Dist. 1963) (business transactions are presumed "fair, regular and legal."). As such, at the very least it is a factual question whether Stanford is entitled to obtain the "reasonable and customary value for the health care services rendered," which as pled in the Complaint, are Stanford's total billed charges. Based on the foregoing, Stanford has pled facts sufficient to allege breach of oral and implied contract causes of action and Blue Shield'emurrer should be overruled. 19 20 21 22 23 25 26 27 28 D. Stanford's Neeiiaent Misrenresentation Claim Was Pronerlv Pled Blue Shield next posits, perplexingly, that Stanford's negligent misrepresentation cause of action must fail because it constitutes a "false promise to do something in the future." Moving Papers, p. 10. Blue Shield misapprehends the cause of action. Indeed, the case on which it relies, Tarmann v. State Farm Mut. Auto 1ns. Co,, 2 Cal.App.4'" 153 (1991) addresses "predictions as to future events, or statements as to future action by some third party." Id. at 158; Moving Papers, p. 10:15-16. No predictions or statement of future actions by a third party copy of copy of 22003-oppoattion to demurrer to - 19 sTANFDRD HEALTH cARIvs oPPoslTlolv To complaint toa2 (1).docx DL'FENDANT'S DEMURRER TO THE FIRST AMENDED COMPLAINT has been alleged in the FAC. 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 The elements of negligent misrepresentation are similar to intentional fraud except for the requirement of scienter; in a claim for negligent misrepresentation, the plaintiff need not allege the defendant made an intentionally false statement, but simply one as to which he or she lacked any reasonable ground for believing the statement to be true. (Bilv v. Arthur Younf. Ck Co. (1992) 3 Cal.4th 370. 407-408, 11; see also *185 Alliance Morteaee Co. v. Rothwell l'1995) 10 Cal.4th 1226, 1239. fn. 4. 44 CakRptr.2d 352, 900 P.2d 601 [negligent misrepresentation is a species of the tort of deceit and like fraud, requires a misrepresentation, justifiable reliance and damage].) Stanford alleged each of the required elements with specificity, to wit: Blue Shield's agents orally represented that: i) the Patients were eligible beneficiaries under Blue Shield's health plan; ii) Stanford was authorized to render medically necessary services to the Patients (indeed, in connection with such medical treatment, Blue Shield provided authorization numbers for least 160 of the 239 claims at issue); and iii) Stanford would be reimbursed for the medically necessary services provided to the Patients at Stanford's usual and customary total billed charges, subject to the copayments, coinsurance, or deductible amounts disclosed. FAC tt 27. The FAC further alleges, again with specificity, that Blue Shield led Stanford to believe that the patients at issue were "in network" with Blue Shield pursuant to the parties 'ritten Contract, and that it was only after the Patients duly received medical treatmentPom Stanford that Stanford was advised that the Patients were in fact members ofan "Individual Family Plan" which provided extremely limited benefits for medical services rendered. FAC tt 29 (emphasis added). The FAC then goes on to allege reliance and damages. ltd 31, 33. copy of copy of 22003-opposition to demurrer to complaint toa2 (1).docs - 20 - sTANFoRD HEALTH cARE's OPPostrlofv To DEFENDANT'S DEMURRER TO THE FIRST AMENDED COMPLAINT Nowhere was it alleged that Blue Shield's misrepresentations were based on some future prediction, or statement by a third party. Rather, the misrepresentation lies in the fact that Blue Shield stated during the verification and authorization calls that its plan members were covered for care, were authorized to receive such care, and thus the treatment being provided was reimbursable at Stanford's current, established, and publicly available rates (and not the outlandishly low rate supposedly contained in Blue Shield's plan documents). 10 This Court should overrule Blue Shield's demurrer. 12 13 14 15 16 17 K. The FAC Pled Sufficient Facts to Allet.e A Ouantum MeruitCause Of Action Because Blue Shield Both Retiuested And Benefited From The Services Rendered Bv Stanford Blue Shield's final argument posits that Blue Shield did not request or benefit from the medical services rendered by Stanford and therefore, Stanford's quantuIFI meruit cause of action must fail. Moving Papers p.12. 19 20 21 23 24 25 26 27 28 The traditional elements of a claim based on quantum meruit are: n(1) that the plaintiff performed certain services for the defendant; (2) the reasonable value of the services; (3) that they were rendered at defendant's request; and (4) that they are unpaid." Cedars Sinai Medical Center. v. Mid-West National Life insurance Co., 118 F. Supp. 2" 1002, 1013 (C.D. Cal. 2000) (citing Hamertv v. Warner, 115 Cal. App. 2" 468, 475 (2n'ist. 1953)). The request for services can be express orimplied. Ochs v. PacifiCare of California, 115 Cal.App.4'" 782, 794 (2nd Dist. 2004) (emphasis added). Although the Cedars Sinai and Hat.uertv cases recite the traditional formulation of the elements of a quantum meruit cause of action (including the aforementioned third element that the services are to be at the copy of copy of 22003-opposition to demurrer to - 21 - STANFORD HEALTH CARE'S OPPOSITIO/V TO complaint toa2 (1).docx DEFENDANT'S DIIMURRER TO THE I'IRST AMENDED COMPLAINT udefendant's request"), that is not the only formulation California courts have recognized: When services are rendered by one person, from which another derives a benefit, although there is no express contract or agreement to pay for the services, there is a 'presumption of law which arises from the proof of services rendered, that the person enjoying the benefit of the same is bound to pay what they are reasonablyworth.'0 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Fancher v. Brunaer, 94 Cal. App. 2" 727, 731 (2n Dist. 1949) (emphasis added). Thus, as long as Blue Shield benefits - even though it sometimes did not expressly "request" medical care be rendered to its patient/beneficiaries - then Blue Shield can be held financially responsible under a quantum meruit theory of recovery. ln any event, on the majority of the claims, Blue Shield and/or its agent pre-verified the Patients'overage and eligibility, and (on 161 of 239 claims) authorized the care provided by Stanford. FAC $ 12. Indeed, the fact that the treatment was authorized is necessarily an implied request for the services. Furthermore, Blue Shield cannot argue that it obtained no benefit by virtue of Stanford treating Blue Shield's beneficiaries. The very purpose of health insurance is to arrange for the provision and reimbursement of appropriate medical care to plan members. California Health & Safety Code $ 1345(f) defines "health care service plan" as "[a]ny person who undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees.n). Thus, Blue Shield benefited by Stanford's actions because Stanford helped Blue Shield discharge Blue Shield's legal obligation owed to its patient/beneficiaries under California law and Blue copy of copy of 22003-opposition to dcmurrcr to - 22 - sTANFQRD HEALTH cARE's oPPoslrtoftr To complaint toa2 (I).docs DEFENDAN'I"S DEMURRER 'I 0 THE FIRST AMENDED COMPLAINT Shield's contracts with the employers, if any, of those patient/beneficiaries. 10 12 13 14 15 Still further, California Health & Safety Code II1345(f) recognizes that plan members pay premiums to the plan (here, Blue Shield) precisely for this reason. The allegations clearly establish that the Patients were members of Blue Shield's health plan (Complaint tt 10). In exchange for such payment of premiums, the health plan becomes obligated to accept, process, arrange for, and/or pay claims for the value of medical services rendered to the Patients, which Blue Shield did in this case. 1d. at tt 11. Thus, Stanford helped Blue Shield to avoid a number of downstream consequences, such as a plan member not being left "holding the bag" for unreimbursed medical care. In turn, such a plan member would be enticed to continue paying premiums to Blue Shield. Similarly, Blue Shield's goodwill in the eyes of its member is not diminished and Blue Shield does not have to face allegations that it breached duties owed to its plan member. Thus, Blue Shield can be held financially responsible under a quantum meruit theory of recovery and the demurrer should be overruled. 17 19 20 21 22 IF BLUE SHIELD'S DEMURRER IS SUSTAINED. STANFORD RESPECTFULLY REOUESTS THE COURT GRANT IT LEAVE TO AMEND 23 24 25 26 Stanford believes it sufficiently pled each and every cause of action found in its FAC. However, in the event the Court holds otherwise, Stanford respectfully requests the Court grant it leave to amend to correct any perceived deficiencies. 27 28 [W]hen [a demurrer] is sustained without leave to amend, we decide copy of copy of 22003-opposition to demurrer to - 23 - STANFORD HEALTH CARE'S OPPOSITIOIV TO complaint toa2 (1).docx DEI ENDAN'I'S DEMURRER To THE FIRST AMENDED COMPLAINT whether there is a reasonable possibility that the defect can be cured by amendment; if it can be, the trial court has abused its discretion and we reverse, if not, there has been no abuse of discretion and we affirm. Donabedian v. Mercurv Insurance Co., 116 Cal. App. 4~ 968, 976 (2"d Dist. 2004). VI. CONCLUSION 10 12 13 14 15 16 For all the foregoing reasons, Stanford respectfully requests Blue Shield'S demurrer be overruled. In the event the Court sustains any portion of the demurrer, Stanford respectfully requests that it be granted leave to file a Second Amended Complaint. Dated: 12 November 2019 17 19 20 22 23 24 25 26 22003-opposttion to demurrer to complaint -24- STANFORD HEAI.TH CARE'S OPPOSITION TO Df FFN DANT'S DISMLtRRER TO THE FIRST AMFNDED COMPI,AINT PROOF OF SERVICE I am employed in the county of Los Angeles, State of California. I am over the age of 18 and not a party to the within action; my business address is 303 North Glenoaks Boulevard, Suite 700, Burbank, California 91502-3226. On 13 November 2019, I served the foregoing document(s) entitled: STANFORD HEALTH CARE'S OPPOSITION TO DEFENDANT'S DEMURRER TO THE FIRST AMENDED COMPLAINT 10 12 13 14 15 16 17 18 19 20 22 23 24 25 26 27 28 [X] [ ] by placing a true copy thereof enclosed in a sealed envelope addressed per the attached Service List. BY MAIL: I am "readily familiar" with the firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the United States Postal Service on that same day with postage thereon fully prepaid at Burbank, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. [C.C.P. 1013a(3); F.R.C.P. 5(b)] BY PERSONAL SERVICE: I caused the above-stated document(s) to be served by personally delivering a true copy thereof to the individuals identified above. [C.C.P. 1011(a); F.R.C.P, 5(b)] BY TELECOPIER: Service was effected on all parties at approximately am/pm by transmitting said document(s) from this firm's facsimile machine (818/559-4477) to the facsimile machine number(s) shown above. Transmission to said numbers was successful as evidenced by a Transmission Report produced by the machine indicating the documents had been transmitted completely and without error. C.R.C. 2008(e), Cal. Civ. Proc. Code $ 1013(e). BY FEDERAL EXPRESS; I caused such envelope(s), with overnight Federal Express Delivery Charges to be paid by this firm, to be deposited with the Federal Express Corporation at a regularly maintained facility on the aforementioned date. [C.C.P. 1013(c) 1013(d)] BY ELECTRONIC SERVICE: By emailing true and correct copies to the persons at the electronic notification address(es) shown on the accompanying service list. The document(s) was/were served electronically and the transmission was reported as complete and without error. [X] BY ELECTRONIC SERVICE [BY COURT]: by causing the foregoing document(s) to be electronically filed using the Court's Electronic Filing System which constitutes service of the filed document(s) at the electronic service address of the individual(s) listed on the attached mailing list. [X] State: I declare under penalty of perjury under the laws of the State of California that the above is true and correct. Federal: I declare that I am employed in the office of a member of the bar of this court at whose direction the service was made. 9 10 Executed on 13 November 2019 in Burb , Cali fornia. 12 13 14 AN44LA DEMERS 15 16 17 19 20 21 22 23 24 25 26 27 SERVICE LIST Carol B. Lewis, Esq. VON BEHREN & HLINTER LLP 2041 Rosecrans Avenue, Suite 367 El Segundo, CA 90245 clewis@vbhlaw.corn 10 12 13 14 15 16 20 21 22 24 25 26 27 28 \OOOVONUI-bUJNI-A NNNNNNNNNv-II-AI-AI-Av-Iv-II-AI-AI-AI-A OONQUI-bWNHOCOONQUl-bWNHO SERVICE LIST Carol B. Lewis, Esq. VON BEHREN & HUNTER LLP 2041 Rosecrans Avenue, Suite 367 El Segundo, CA 90245 clewis@vbhlaw.com