Opposition Prime Hospitals Opposition To Heritages Demurrer

Opposition

Cal. Super. - 2nd Dist.January 10, 2020

Electronically FILED | aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Superior Court of California, County of Los Angeles on 07/28/2020 04:25 PM Sherri R. Carter, Executive Officer/Clerk of Court, by A. Miro,Deputy Clerk DARON L. TOOCH (SBN 137269) dtooch@kslaw.com KATHRYN T. HAN (SBN 318293) khan@kslaw.com KING & SPALDING LLP 633 West Fifth Street, Suite 1600 Los Angeles, CA 90071 Telephone: (213) 443-4355 Facsimile: (213) 443-4310 Attorneys for Plaintiffs Alvarado Hospital, Prime Healthcare Centinela, et al. SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF LOS ANGELES - CENTRAL DISTRICT ALVARADO HOSPITAL, LLC DBA ALVARADO HOSPITAL MEDICAL CENTER, etal. Plaintiffs, VS. HEALTH NET OF CALIFORNIA, INC., et al., Defendants. Case No. 20STCVO01345 [Assigned to the Honorable Susan Bryant- Deason, Dept. 52] PLAINTIFFS’ OPPOSITION TO DEFENDANT HERITAGE PROVIDER NETWORK, INC.’S DEMURRER [Request for Judicial Notice, [Proposed] Order on Request for Judicial Notice, and Declaration of Kathryn Han] Hearing Information Date: August 10, 2020 Time: 11:00 a.m. Dept: 52 Complaint Filed: October 10, 2019 FAC Filed: February 4, 2020 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Plaintiffs! (“Plaintiffs” or “Prime Hospitals”) hereby opposes the Demurrer filed by Defendant Heritage Provider Network, Inc. (“Heritage”) as follows: L INTRODUCTION Plaintiffs filed this action against Health Net and various medical groups for underpayment of hospital claims for services provided to Health Net members. Health Net has delegated financial responsibility to pay the claims to the medical groups for some of the services at issue, but, since Plaintiffs do not have access to the Division of Financial Responsibility (“DOFR”) contracts between Health Net and the medical groups, Plaintiffs filed this action against all parties and has worked cooperatively with all the medical groups to address the issue of financial responsibility for the medical claims, except for Heritage. The contract between Plaintiffs and Health Net contains an arbitration provision. Plaintiffs and Health Net have agreed to arbitrate this dispute, and Plaintiffs and all the medical groups, except Heritage, have agreed to stay this case pending the completion of the arbitration. Instead, Heritage has filed a demurrer asserting arguments that have been rejected by many courts in similar cases. Heritage’s Demurrer is meritless for a number of reasons. First, the Plaintiffs have searched through its claims set and determined that there are no commercial claims against Heritage involved in this action. Furthermore, to the extent that such claims exist, the Plaintiffs agree to remove such claims from the action. The applicable rates for the claims against Heritage are based on the contracted Medi-Cal and Medicare fee schedule. Therefore, Heritage’s arguments regarding the Prime Hospitals’ inability to recover full billed charges under the Fifth Cause of Action for Implied in Law Contract against Heritage are moot as 1 Alvarado Hospital, LLC dba Alvarado Hospital Medical Center, Prime Healthcare Centinela, LLC dba Centinela Hospital Medical Center, Desert Valley Hospital, Inc. dba Desert Valley Hospital, Prime Healthcare Services Encino, LLC dba Encino Hospital Medical Center, Prime Healthcare Services Garden Grove, LLC dba Garden Grove Hospital Medical Center, Prime Healthcare Services Huntington Beach, LLC dba Huntington Beach Hospital, Prime Healthcare La Palma LLC dba La Palma Intercommunity Hospital, Prime Healthcare Services III, LLC, dba Montclair Hospital Medical Center, Prime Healthcare Paradise Valley, LLC, dba Paradise Valley Hospital, Prime Healthcare Services San Dimas, LLC, dba San Dimas Community Hospital, Prime Healthcare Services Sherman Oaks, LLC dba Sherman Oaks Hospital, Prime Healthcare Services-Shasta, LLC, dba Shasta Regional Medical Center, Prime Healthcare Anaheim, LLC dba West Anaheim Medical Center 1 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the Prime Hospitals are not seeking full billed charges or reasonable value against Heritage. Second, Heritage asks this Court to dismiss the Hospitals’ properly pled causes of action for violation of the Unfair Competition Law (“UCL”), Business and Professions Code sections 17200, et seq., and declaratory relief on the grounds that the Court should abstain from hearing these claims because to do so would require the Court to “assume the functions” of the administrative body tasked with regulating Knox-Keene plans -i.e., the Department of Managed Health Care Services (“DMHC”). This argument has been rejected by many courts and the DMHC itself. Heritage’s Demurrer intentionally fails to consider, cite, and bring to the Court’s attention a long string of cases that specifically hold in no uncertain terms that providers’ “claim[s] under the UCL do[] not infringe on the [DMHC’s] jurisdiction.” Bell v. Blue Cross of California (2005) 131 Cal.App.4th 211, 215. In fact, other California courts have rejected Heritage’s demurrer against the Prime Hospitals in other cases on the same basis. See the Prime Hospitals’ Request for Judicial Notice (“RIN”), Ex. A (“Ruling on Heritage Provider Network's Demurrer to the Prime Hospitals’ Consolidated First Amended Complaint” issued by the Court in HERITAGE NETWORK REIMBURSEMENT CASES, Los Angeles Superior Court, Ct. Case JCCP4849 (Dec. 7, 2017)). Third, Heritage argues that it cannot be held liable for tortious interference with Health Net contract because it is not a stranger to that contract. Not so. Heritage is a stranger to the Health Net contract because Heritage is (1) not a party, (2) not named in the contract and (3) Heritage’s performance is not necessary to the performance of either the Prime Hospitals or Health Net. Plaintiffs request that the Court overrule the Demurrer. II. LEGAL AND FACTUAL BACKGROUND This case arises out of Defendants’ underpayments for healthcare claims submitted by the Prime Hospitals for medically necessary services provided to Health Net’s members (“Members”). (See FAC, 99 1 - 3.) Health Net and the other Defendants? have entered into various Divisions of 2 Defendants AltaMed Health Services Corporation, Applecare Medical Group, Inc., Healthcare Partners Medical Group, P.C., Heritage Provider Network, Inc. Multicultural Medical Group, Inc., Omnicare Medical Group, Inc., Prospect Medical Group, Inc. 2 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Financial Responsibility (“DOFRs”) dividing up Health Net, the Defendants, and other entities’ financial responsibility on the Prime Hospitals’ claims based on the services rendered and/or the type of plan coverage. (/d.) The Prime Hospitals believe that a portion of these underpaid claims have been delegated by Health Net to Heritage and Heritage holds the financial liability on these claims for certain Members. (/d.) The Prime Hospitals are not contracted with Heritage. (/d.) The Prime Hospitals have no access into Heritage and Health Net’s DOFRs or any understanding of Heritage and Health Net’s contractual agreement. (/d.) All the Prime Hospitals can ascertain is that the Prime Hospitals have provided necessary medical services to Health Net Members and that Health Net has delegated to Heritage the financial responsibility to pay for all or part of the claim. This Court may determine that the Prime Hospitals’ claims against Heritage arise out of the Health Net contract and thus, Heritage is liable for contractual amounts. (See FAC, 437.) Regardless, whether Heritage’s conduct manifested an implied-in-law contract to pay the Prime Hospitals at the contracted rate pursuant to the agreement between Health Net and the Prime Hospitals is a matter of proof for trial, and is not an issue for demurrer. Moreover, contrary to Heritage’s representation in its Demurrer, the Prime Hospitals have already provided a spreadsheet of claims that the Prime Hospitals have identified as potentially relevant as to Heritage. (See Demurrer, p. 9, fn. 1.) The Prime Hospitals provided this spreadsheet of claims to Heritage’s counsel on March 23, 2020, well before Heritage filed its Demurrer in which Heritage falsely asserts that it “does not have enough detail regarding the individual patient claims in this case to assess the validity of Plaintiffs’ claim that Defendant is the responsible party...” (See id.; Declaration of Kathryn T. Han, 2.) By the time of this filing, Heritage has had several months to review the relevant claims set and determine whether Heritage is financially liable for certain individual patient claims. Heritage has also had months to confer with counsel and inform the Prime Hospitals as to the nature of the its relationship with Health Net and its determination on the proper reimbursement rates for those claims. The Prime Hospitals have received no substantive response to its attempts to meet and confer with Heritage’s counsel on the March 23, 2020 claims set. (Decl. of Han, 9 3.) Furthermore, due to the complicated nature of this litigation and the arbitration provision 3 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 between the Prime Hospitals and Health Net, all parties to this action except for Heritage has agreed to stay this case until the Prime Hospitals and Health Net resolve the division of financial responsibility and other issues in arbitration. (See FAC, 1 - 5; see also Joint Stipulation for Arbitration and Stay of Case.) Despite Heritage’s own refusal to provide the Prime Hospitals with further information on the division of financial responsibility between Heritage and Health Net, Heritage also refuses to stipulate to a reasonable stay of the case as to Heritage. III. LEGAL STANDARD In ruling on a demurrer, the allegations of the complaint must be liberally construed, and the Court must accept all facts properly pled in the complaint as true. (See Code Civ. Proc. § 452; Aubry v. Tri-City Hosp. Dist. (1992) 2 Cal.4th 962, 966-67; Teva Pharm. USA, Inc. v. Superior Court (2013) 217 Cal. App.4th 96, 102.) “The rules of pleading require... only general allegations of ultimate fact.” (McKell v. Washington Mut., Inc. (2006) 142 Cal.App.4th 1457, 1469.) “It is not the ordinary function of a demurrer to test the truth of the plaintiff's allegations or the accuracy with which he describes the defendant's conduct.” (Committee on Children's Television, Inc. v. Gen. Foods Corp. (1983) 35 Cal.3d 197, 213.) Further, where allegations are subject to different interpretations, the court must draw inferences in favor of the plaintiff. (See Perez v. Golden Empire Transit Dist. (2012) 209 Cal.App.4th 1228,1238.) A complaint that apprises defendants of the “basis upon which plaintiff is seeking relief” will survive demurrer. (Perkins v. Superior Court (1981)117 Cal. App.3d 1, 6.) IV. THE PRIME HOSPITALS DO NOT SEEK FULL BILLED CHARGES UNDER ITS FIFTH CAUSE OF CAUSE FOR IMPLIED IN LAW CONTRACT AGAINST HERITAGE The Prime Hospitals have reviewed its claims set against Heritage and determined that no commercial claims exist. All the claims at issue involve managed Medicare or Medi-Cal claims. The Prime Hospitals are not seeking their billed charges or the reasonable value of these services; instead, the Prime Hospitals are seeking the applicable government rates for these claims. Therefore, Heritage’s argument regarding whether the Prime Hospitals are permitted to seek full billed charges under its Fifth Cause of Action is moot. Regardless, whether Heritage’s conduct 4 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 manifested an implied-in-law contract to pay the Prime Hospitals at the contracted rate pursuant to the agreement between Health Net and the Prime Hospitals is a matter of proof for trial, and is not an issue for demurrer. V. THE HOSPITALS HAVE PROPERLY ALLEGED AN UCL CLAIM AND IT IS WELL-ESTABLISHED THAT ABSTENTION IS NOT APPROPRIATE ON THE HOSPITALS’ UCL. AND DECLARATORY RELIEF CAUSES OF ACTION The Prime Hospitals have properly alleged its UCL and Declaratory Relief Causes of Action against Heritage. Heritage argues that the Prime Hospitals failed to allege unfair, unlawful, or fraudulent conduct, because (1) Prime Hospitals are not a competitor or consumer of Heritage, (2) the Court should abstain due to the Department of Managed Health Care (“DMHC”); (3) the Prime Hospitals lack a “vested ownership” in the amount owed; and (4) the Prime Hospitals’ requested relief is vague and not recoverable under the law. This is not the first time that Heritage has made these meritless arguments. In a case very similar to this case, Heritage Network Reimbursement Cases, Los Angeles Superior Court, Case No. JCCP 4849 (Dept. 308), Heritage raised some of the same arguments that it is raising in this demurrer. The court overruled the demurrer to the UCL and declaratory relief causes of action, holding that “Plaintiffs” UCL and declaratory relief claims seek relief [that] do not require the Court to assume the functions of the DMHC”).)” (The Prime Hospitals’ RJN, Ex. A). This Court should similarly reject Heritage’s arguments. A. The Prime Hospitals Are Not Required to Be Consumers or Competitors to Bring an Action Under the UCL An action for relief under the UCL shall be brought by “a person who has suffered injury in fact and has lost money or property as a result of the unfair competition.” (Cal. Bus. & Prof. Code § 17204.) It is “simply incorrect [to] assert[] that California's Unfair Competition Act prohibits only conduct that is unfair to competitors.” (People ex rel. Renne v. Servantes (2001) 86 Cal.App.4th 1081, 1095 [court held that city attorney may allege claim under UCL against a towing company for improperly towing vehicles that did not violate parking regulations].) “Actual injury to competition is not a required element of proof of a violation of Business and 3 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Professions Code section 17200.” (Herr v. Nestle U.S.A., Inc. (2003) 109 Cal. App.4th 779, 789 - 90 [court rejected limitation of UCL claim to “consumer” or “competitor” and relied on the plain language of the statute that “relief under the UCL may be brought ‘by any person...,”” which includes employees suing their employer for age discrimination]; see also In re Pomona Valley Medical Group, Inc., 476 F.3d 665, 675 (9th Cir. 2007) [“[U]nder California's unfair competition statute, competition between the parties is not a prerequisite to relief.”’]; People v. E.W.A.P. (1980) 106 Cal.App.3d 315, 318-319 [court concluded that anti-competitiveness or harm to the consumer need not be alleged in a section 17200 action where the unlawful business practice is a violation of a Penal Code section designed to protect the public.]) “Standing to sue under the UCL is expansive as well. Unfair competition actions can be brought... by any person acting for the interests of itself, its members or the general public.” (Korea Supply, 29 Cal .4th at 1143.) A “person” includes corporations, partnerships, associations, and other organizations of persons. (Cal. Bus. & Prof. Code § 17201.) The Prime Hospitals have pled that it has suffered an injury in fact and lost money as the result of Heritage's unfair and fraudulent business practices. (See FAC, 4942 - 44.) Moreover, the Prime Hospitals have pled that Heritage’s actions have “hindered patient access to necessary medical care while negatively impacting the quality, safety and efficiency of the Prime Hospitals’ health care services.” (See FAC, 990.) The Knox-Keene Act “does not bar the provider from seeking direct compensation... under the Unfair Competition Law,” (Coast Plaza Doctors Hospital v. UHP Healthcare (2002) 105 Cal.App.4th 693, 698), and courts have held that health care providers can bring UCL claims against non-contracted health plans and medical groups to enforce the provisions of the Knox- Keene Act. (See, e.g., Bell, 131 Cal.App.4th 211 [finding emergency room doctor could bring UCL claim to enforce violations of the Knox-Keene Act for underpayment on amounts due]; Prospect, supra, 45 Cal.4th 497, 507 [California Supreme Court allowing payor to proceed on UCL claim that sought to enforce Knox-Keene Act against provider]; Blue Cross of California v. Superior Court (2009) 180 Cal. App.4th 1237, 1250-51 [held city attorney could proceed in UCL action against managed care health plan for violating Knox-Keene Act statute prohibiting post- 6 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 claims underwriting]; In re Wellpoint, Inc. Out-of-Network UCR Rates Litigation (C.D. Cal. 2012) 903 F. Supp.2d 880; Bell v. Blue Cross of California (2005) 131 Cal.App.4th 211.) Heritage ignores such cases concerning claims similar to the ones made by the Prime Hospitals here. For example, in Wellpoint, health care providers brought a claim alleging that health insurers failed to provide proper reimbursement for out-of-network services (Id. at 892-95.) The court stated that healthcare providers may pursue UCL claims against insurers for their own independent and direct injuries as a result of the unfair competition. (/d.) The UCL can, and has repeatedly been used by a health care provider against a health plan in payment disputes. Heritage cites Linear Technology Corp. v. Applied Materials, Inc. (2007) 152 Cal. App.4th 115, which is a case involving alleged patent infringement, and is demonstrably different than the case at hand. The Linear court even acknowledges that to state a claim under the UCL, “one need only show that members of the public are likely to be deceived.” (/d. at 133.) But the Linear court specified that the patent infringement case at issue involved a UCL claim “not involving either the public in general or individual consumers who are parties to the contract.” (/d.) This is simply not the case here, where the Prime Hospitals” UCL claim is based on proper payment owed for services rendered to members of the general public. 1 This Court May Properly Decide the Prime Hospitals’ Causes of Action and the DMHC’s Role Will Not Be Usurped Hospitals may properly bring a UCL claim against a health plan and a provider’s ULC claim does not infringe upon the DMHC’s jurisdiction over the Knox-Keene Act. The California Court of Appeal has expressly rejected the argument raised in Heritage’s motion. In Bell v. Blue Cross, supra, 131 Cal. App. 4th 211, Blue Cross raised the same issue that Heritage is raising in this case - i.e., that allowing the healthcare provider to bring a UCL would usurp the jurisdiction of the DMHC. The trial court dismissed plaintiff's UCL claim under the equitable abstention doctrine on grounds that the DMHC “has the exclusive power to enforce the Knox- Keene Act.” (Id. at 214.) However, the Court of Appeal reversed, holding: Although the Department of Managed Health Care has jurisdiction over the subject matter of section 1371.4 (as well as the rest of the Knox-Keene Act), its jurisdiction is not exclusive and there is nothing in section 1371.4 or in the Act 7 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 generally to preclude a private action under the UCL or at common law on a quantum meruit theory. skskosk Any doubt about Dr. Bell’s standing dissolves in light of the Department of Managed Health Care's support of private enforcement. An uncontroverted record establishes (1) that the Department “has consistently taken the position that a provider is free to seek redress in a court of law if he disputes a health plan's determination of the reasonable and customary value of covered services as required by section 1371.4,” (2) that “providers are free to pursue alternate theories of recovery to secure the reasonable value of their services based on common law theories of breach of contract and quantum meruit,” and (3) that a “provider's private action for reimbursement under the ... UCL does not infringe upon the Department's jurisdiction over the Knox-Keene Act.” (Id. at 217-18 (emphasis added).) In Blue Cross of California, Inc. v. Superior Court (2009) 180 Cal.App.4th 1237, the Los Angeles city attorney filed suit against Blue Cross under the UCL on the grounds that the plan's post-claims underwriting practices were unlawful under the Knox-Keene Act. (/d. at pp. 1242- 1243.) Blue Cross argued that the trial court should abstain from adjudicating the action because the case would require the court to assume regulatory powers over the health care industry, which was a task better accomplished by the DMHC. (Id. at p. 1246.) The trial court declined to abstain and the Court of Appeal affirmed. (/d. at pp. 1257-1259) In rejecting Blue Cross' abstention arguments, the Court noted that the city attorney was not asking the trial court to assume or interfere with the functions of the DMHC, but rather “to perform an ordinary judicial function, namely, to grant relief under the UCL ... for business practices that are made unlawful by statute.” (Id. at p. 1258.) The Court further reasoned that the trial court would not be required to determine complex economic policy because the Legislature had “already made the relevant policy determinations” and the court was “merely being called upon to enforce those statutory prohibitions.” (Id. at p. 1259.) In addition, the city attorney was not seeking a form of equitable relief that “would be unnecessarily burdensome for the court to monitor or enforce.” (/bid.) Based on these factors, the UCL action was appropriate for adjudication by the trial court. (See also, Arce v. Kaiser Foundation Health Plan (2010) 181 Cal. App.4™ 471, 499; Coast Plaza, supra, 105 Cal.App.4th at 706-707 [“We conclude that the Department does not have exclusive jurisdiction, and that common law and other statutory causes of action may be brought by 8 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Coast”); California Pacific Regional Medical Center v. Global Excel Management, Inc., Not Reportend in F. Supp.2d, 2013 WL 2436602, (N.D.Cal. 2013), at *4 .) Not only does Heritage's motion not cite or address the controlling authority which directly contradicts its position, Heritage cherry picks inapposite cases under extensively different circumstances which, at best, stand only for the general proposition that the Court should abstain 6 from assuming and usurping an administrative body's “general regulatory powers” or to make regulatory determinations in administering equitable remedies specifically tasked to such administrative bodies. For example, Heritage relies heavily on Hambrick v. Healthcare Partners Medical Group, Inc. (2015) 238 Cal. App.4th 124. Yet, Hambrick involved the issue of whether a medical group defendant, which did not receive premiums so as to fall under the express definition of “health care service plan” under the Knox-Keene Act, so assumed the “global risk of institutional or hospital care” by accepting capitated payments from the actual plan and arranging for health care services that it should be deemed a health care service plan required to be licensed by the DMHC. (/d. at 141, 149.) Plaintiffs brought an action under the UCL contending that defendant should be considered such a health care service plan, but was unlawfully operating without such a license. The Hambrick Court held that judicial abstention was appropriate because the UCL claim sought “equitable remedies,” and would “require a trial court to assume the functions of an administrative agency” because the Knox-Keene Act on its face did not have any “definition of what level of risk assumed by a medical group under a capitation agreement would cause it to be characterized as a health care service plan.” (/d. at 149.) Thus, the DMHC had provided no “guidance in its regulations” as to what an appropriate “level of financial risk under a capitation agreement” would be to cause a risk-bearing organization to become a health care service plan under the Knox-Keene Act. Because such a “regulatory determination” would “involv[e] complex economic policy that should be made by the DMHC in the first instance,” the Hambrick Court held that abstention were appropriate. This is wholly inapplicable to the lawsuit between the Prime Hospitals and Heritage. Contrary to Heritage’s misleading citation, the Prime Hospitals have never requested that this 9 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Court “assume the regulatory jurisdiction” of the DMHC. (See Demurrer at p. 15, line 28.) In order for the Court to decide the Prime Hospitals” UCL and Declaratory Relief Causes of Action, the Court need only determine “issues of statutory interpretation” and apply the facts to statute, a role that is “well suited for adjudication by the courts.” (Hambrick, 238 Cal.App.4th at 148.) This distinction is not crafted by the Prime Hospitals here. It is one expressly provided for by the Court in Hambrick, the very opinion relied upon by Heritage. The Hambrick Court uses this very rationale in distinguishing its own facts from Acre, supra, 181 Cal.App.4th 471. In Acre, the court held that the trial court abused its discretion in abstaining from adjudicating a UCL claim that the health plan violated the Knox-Keene Act by categorically denying coverage to plan members. The question before the Acre court was “whether the [treatments] at issue are ‘health care services’ within the meaning of the... Knox-Keene Act.” (Id. at 501.) The Acre court held that judicial abstention was not appropriate, because the Knox- Keene Act had defined “health care services,” and determination of whether a particular service fell under that definition was well-within the province of the trial court. (/d.) “[I]ssues of statutory interpretation” are within a court's role, and the relief sought “would not call upon the court to determine complex issues of economic or health policy,” and “would not require the trial court to assume or interfere with the functions of an administrative agency.” (/d.) Although the Hambrick opinion discusses and distinguishes Acre, for precisely the same reason why the present case is distinguishable from Hambrick, Heritage made no mention of Acre at all. The circumstance presented in Acre, which concerns a dispute over coverage as required under the Knox-Keene Act, is much more analogous to this action than Hambrick. Moreover, Heritage also failed to cite to a number of opinions which reference and distinguish its other supporting case, Alvarado v. Selma Convalescent Hosp. (2007) 153 Cal.App.4th 1292. For example, in Shuts v. Covenant Holdco, LLC (2012) 208 Cal.App.4th 609, the court expressly distinguished Alvarado as follows: “unlike Alvarado, where plaintiff solely sought equitable remedies under the UCL,” here, plaintiff “seeks monetary damages and attorney fees, as well as equitable relief...” (Id. at 624-25.) “Consequently, the abstention doctrine does not apply to plaintiffs’ legal claims, and the court had no discretion to apply this doctrine in 10 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 dismissing the first cause of action in its entirety.” Like in Shuts, the Prime Hospitals’ UCL Cause of Action also seeks monetary relief in the form of “restitution.” (FAC, § 195.) Therefore, this Court may properly decide the Prime Hospital’s UCL and Declaratory Relief Causes of Action and it would not usurp the DMHC’s role by doing so. 2) The Prime Hospitals Do Hold a Vested Ownership Interest Heritage also attempts to argue that Prime Hospitals’ relief sought is not recoverable under the UCL because the relief sought is not a vested ownership interest. But the Prime Hospitals have a statutory and vested interest in payment for the medical services provided. In Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 164, the California Supreme Court held that the trial court was authorized to issue an order compelling the defendant to pay unlawfully withheld wages as a restitutionary remedy in a UCL action. (/d.) In so doing, the court used the principle of equitable conversion to find that earned wages that are due and payable are “as much the property of the employee who has given his or her labor to the employer in exchange for that property as is property a person surrenders through an unfair business practice.” (Id. at 178; see also Pineda v. Bank of America, N.A. (2010) 241 P.2d 870, 878 [“The vested interest in unpaid wages, on the other hand, arises out of the employees’ action, i.e., their labor”’].) The same is true in this case. The Prime Hospitals has earned payment for the medical services it has already provided to the members delegated to Heritage, which was unlawfully withheld from the Prime Hospitals. Therefore, the Prime Hospitals have a vested interest in payment for its labor and services. Moreover, as discussed above, the California Supreme Court and many courts of appeal have held that non-contracted providers may bring actions under the UCL to recover restitution for the services they have provided to the health plan’s members. In Bell, supra, 131 Cal.App.4th at 211, non-contracted providers brought a case against Anthem seeking declaratory, injunctive and restitution under the UCL. The court held that the providers had adequately pled a cause of action under the UCL. (/d. at 221; see also Coast Plaza, supra, 105 Cal.App.4th at 698 [Knox-Keene “does not bar the provider from seeking direct compensation... under the Unfair Competition Law.”]) Similarly, the Prime Hospitals can bring a cause of action under the UCL for restitution 11 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 against Heritage. A) The Prime Hospitals’ Request Injunctive Relief Is Proper As previously articulated, in allowing the UCL action to proceed, this Court would not usurp the DMHC’s role by order Heritage to desist its improper business practices. Under the UCL, this Court can order Heritage to cease its unfair practice of underpaying the Prime Hospitals for the medically necessary services they provided to Heritage’s members, and can order that Heritage pay the contracted rates of the Prime Hospitals’ medical services under the Health Net contract. Furthermore, the Court can order that an inpatient authorization request is deemed approved whenever Heritage fails to timely responds pursuant to state laws and regulations. And lastly the Court can order Heritage to implement a clear and actual appeal process for the Prime Hospitals to submit disputed claims. An injunction requiring Heritage to halt its impermissible business practices would be definite enough to be enforceable. Once again, Heritage’s support case citation is inapposite to the circumstances here. In Re Berry, 68 Cal. 2d 137, 156 (1968) involves a proscription that is not directed at the parties of the lawsuit but rather drafted to encompass “all persons in active concert or participation with them or in concert among themselves.” (Id.) The Prime Hospitals agree with the Berry court that the request includes a “baffling element of uncertainty as to the application of the order to persons wholly unaffiliated with the Union or with other specifically named parties defendant.” (/d.) However, the Prime Hospitals’ request are clear, precise, and specifically directed towards Heritage. There is no element of uncertainty as to the application of the requested injunctive relief. It is abundantly clear that under existing California law, it would not be appropriate for the Court to abstain from the Prime Hospitals” UCL and Declaratory Relief Causes of Action. To the contrary, the Court, and not the DMHC, has exclusive authority to determine and provide specific injunctive relief, as is sought under those causes of action. Heritage’s demurrer to the Prime Hospitals’ fifth and eighth causes of action misleadingly and improperly fails to discuss controlling authority that directly contradicts its abstention argument, and should be denied 12 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 VI. HERITAGE IS A STRANGER TO THE CONTRACT AND THE PRIME HOSPITALS HAVE PROPERLY PLED A CLAIM FOR TORTIOUS INTERFERENCE The Prime Hospitals properly plead supporting facts to establish a Tortious Interference Cause of Action by alleging that (1) a valid contract existed between the Prime Hospitals and Health Net, (2) Heritage had knowledge of the contract, (3) Heritage’s intentional acts were designed to induce a breach or disruption of the contractual relationship, (4) actual breach and disruption of the contractual relationship occurred, and (5) the Prime Hospitals were damaged. (Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 55.) 1) Heritage is a Stranger to the Health Net contract In its Demurrer, Heritage argues that it cannot be held liable for tortious interference with the Health Net contract because Heritage is not a stranger to that contract. Once again, Heritage miscites the law. Heritage is a stranger to the Health Net contract because Heritage is (1) not a party, (2) not named in the contract and (3) Heritage’s performance is not necessary to the performance of either the Prime Hospitals or Health Net. As Heritage has admitted in its Demurrer, “California courts have refined the definition of “stranger” such that certain non- contracting parties can be held responsible for interfering with the contracts of others, even though they have some level of involvement in that contractual arrangement. Redfearn, 20 Cal. App. 5th at 997. This concept of the “stranger” has been interpreted such that “a noncontracting party is not a stranger interloper when that party’s performance is necessary to the plaintiff’s contract performance or prospective economic relationship.” Id. at 1001 (emphasis added). (See Demurrer at p. 20, lines 11-16.) Heritage’s performance is not necessary to the Prime Hospitals or the Health Net’s performance under the contract. With or without Heritage, the Prime Hospitals could render services to Health Net’s Members and Health Net could pay for the rendered services. Although the Health Net contract does permit Health Net to delegate certain duties to other parties, Health Net’s delegation of certain obligations to Heritage was never necessary or required for the contract to be performed between the Prime Hospitals and Health Net. 13 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 “A nonparty to a contract that contemplates the nonparty’s performance, by that fact alone, is not immune from liability for contract interference. Liability is properly imposed if each of the elements of the tort are otherwise satisfied.” (Redfearn v. Trader Joe's Co. (2018) 20 Cal.App.5th 989, 1003.) A noncontracting party who has a legitimate interest in the performance of the contract may still be liable for interference. (See Powerhouse Motorspots Group, Inc. v. Yamaha Motor Corp., U.S.A. (2013) 221 Cal. App.4th 867, 883-884 [noncontracting manufacturer could be sued for intereference with dealership’s proposed sale of dealership and franchise, even if manufacturer had right to approve successor dealer and would distribute products to new franchisee].) Moreover, any party “who is not a party to the contract or an agent of the party to the contract is a ‘stranger’ for purpose of the tort of intentional interference with contract.” (Redfearn, supra, 20 Cal. App.5th at 1003; see also Popescu v. Apple Inc. (2016) 1 Cal.App.5th 39; see also Asahi Kasei Pharma Corp. v. Actelion Ltd. (2013) 222 Cal. App.4th 945, 963 [Executives of foreign drug manufacturer's competitor, which had acquired domestic company that had entered into a licensing agreement with foreign manufacturer, may be liable for tortious interference with contract after domestic company terminated licensing agreement.]) Heritage is not a party to the Health Net agreements or alleged to be an agent of HealthNet. Therefore, contrary to Heritage’s assertion, Heritage is a “stranger” to the contract and the Prime Hospitals’ Tortious Interference Cause of Action is properly plead. 2) The Prime Hospitals Properly Pled All Elements Contrary to Heritage’s assertions, the Prime Hospitals did properly allege that Heritage’s acts were designed to disrupt the Health Net contract, Heritage’s conduct did cause a breach or disruption of that contract, and that the Health Net contract required recovery from Health Net for Heritage’s intentional acts. First, the Prime Hospitals alleged that Heritage intentionally “devised a series of practices to avoid payment” to the Prime Hospitals for services rendered to Health Net’s members and that Heritage’s policies and procedures “are designed to case the Prime Hospitals ... to forfeit their right to payment for [its] services.” (See FAC, 9 43, 46.) Second, the Prime Hospitals set forth in detail the various practices that Heritage implemented to avoid payment. (See FAC, qq 53 - 88.) Third, the Prime Hospitals alleged that Heritage’s intentional 14 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 acts did breach the contract and caused harm to the Prime Hospitals because the Prime Hospitals have “treated thousands of Health Net beneficiaries” where the Prime Hospitals have received inadequate payment pursuant to the Health Net contract. (See FAC, 35-37, 43 - 44.) And lastly, the Prime Hospitals alleged that “Health Net is directly responsible for [Heritage’s] failure to process and reimburse the Prime Hospitals’ claims.” (See FAC, q 71.) Therefore, the Prime Hospitals have properly plead its seventh cause of action for Tortious Interference. VII. CONCLUSION For the foregoing reasons, Heritage’s Demurrer should be overruled in its entirety. However, in the event that the Court sustains the demurrer in full or in part, the Prime Hospitals respectfully request leave to amend the FAC to address any deficiencies therein. DATED: July 28, 2020 KING & SPALDING LLP By: Ldn. F dsaak., DARON L. TOOCH KATHRYN T. HAN Attorneys for Plaintiffs Prime Hospitals 15 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PROOF OF SERVICE Alvarado Hospital, Prime Healthcare Centinela, et al. vs. Health Net of California, Inc., et al. Case No. 20STCV01345 I, the undersigned, declare: Iam a citizen of the United States, over 18 years of age and not a party to the within action. I am employed in the County of Los Angeles; my business address is 633 West Fifth Street, Suite 1600, Los Angeles, CA 90071. On the date specified below, I served a copy of the foregoing document described as: PLAINTIFFS’ OPPOSITION TO DEFENDANT HERITAGE PROVIDER NETWORK, INC.’S DEMURRER on the interested parties in this action: SEE ATTACHED SERVICE LIST M BY ELECTRONIC SERVICE: By electronically mailing a true and correct copy through King & Spalding LLP’s electronic mail system to the email addresses set forth below. I declare under penalty of perjury under the laws of the State of California that the above is true and correct. Executed on July 28, 2020, at Los Angeles, California. Vv Anne Kurke 16 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SERVICE LIST Brian M. Jazaeri brian.jazaeri@morganlewis.com Taylor C. Day taylor.day@morganlewis.com MORGAN, LEWIS & BOCKIUS LLP 300 South Grand Avenue, Twenty-Second FL. Los Angeles, California 90071-3132 Tel: (714) 953-2233 Fax: (714) 972-1404 Attorneys for Defendant HEATH NET OF CALIFORNIA, INC. Krista Hernandez khernandez(@dollamir.com Mary Glarum mglarum@dollamir.com DOLL AMIR & ELEY, LLP 725 South Figueroa Street, Suite 3275 Los Angeles, California 90017 Tel: (213) 542-3380 Fax: (213) 542-3381 Attorneys for Defendants HERITAGE PROVIDER NETWORK, INC. David Outwater doutwater@oplawyers.com Cathleen L. Mulligan Golden cgolden@oplawyers.com OUTWATER & PINCKES LLP 900 Roosevelt Irvine, California 92620 Tel: (949) 748-7480 Fax: (949) 748-7481 Attorney for Defendant PROSPECT MEDICAL GROUP Jonathan C. Sandler JSandler@BHFS.com BROWNSTEIN HYATT FARBER SCHRECK, LLP 2049 Century Park East, Suite 3550 Los Angeles, California 90067 Tel: (949) 564-8672 Attorney for Defendant HEALTHCARE PARTNERS MEDICAL GROUP, P.C. William Naeve wnaeve@murchisonlaw.com MURCHISON & CUMMING, LLP 18201 Von Karman Ave., Suite 950 Irvine, California 92612 Tel: (714) 953-2233 Fax: (714) 372-1404 Attorney for Defendants ALTAMED HEALTH SERVICES CORPORATION AND OMNICARE MEDICAL GROUP, INC. 17 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER aA W O N oe 0 9 S N Wn 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Bryan S. Westerfeld bwesterfeld@walravenlaw.com WALRAVEN & WESTERFELD, LLP 20 Enterprise, Suite 310 Aliso Viejo, California 92656 Tel: (949) 215-1997 Attorney for Defendant APPLECARE MEDICAL GROUP, INC. Michael D. McClelland mdm@mcclellandadvocacy.com MCCLELLAND ADVOCACY 6520 Lonetree Blvd Ste 134 Rocklin, California 95765 Tel: (916) 847-6891 Attorney for Defendant MULTICULTURAL MEDICAL GROUP, INC. 18 PLAINTIFFS’ OPPOSITION TO HERITAGE’S DEMURRER