Amended Complaint Filed No FeeCal. Super. - 6th Dist.May 25, 2021LAW OFFICES OF STEPHENSON, ACQUISTO & COLMAN, INC. MELANIE JOY STEPHENSON-LAWS, ESQ. (SBN 113755) RICHARD A. LOVICH, ESQ. (SBN 113472) KARLENE J. ROGERS-ABERMAN, ESQ. (SBN 237883) kaberman@sacfirm.corn 303 N. Glenoaks Blvd., Suite 700 Burbank, CA 91502 8 9 10 12 13 Telephone: (818) 559-4477 Facsimile: (818) 559-5484 Attorneys for Plaintiff STANFORD HEALTH CARE, a California non-profit public benefit corporation SUPERIOR COURT OF CALIFORNIA FOR THE COUNTY OF SANTA CLARA UNLIMITED JURISDICTION 14 15 16 17 STANFORD HEALTH CARE, a California nonprofit public benefit corporation Plaintiff, Case No. 21CV382953 FIRSTAMENDED COMPLAINT FOR DAMAGES FOR: 18 19 20 21 22 23 24 25 26 27 28 1. BREACH OF ORAL CONTRACT; BREACH OF IMPLIED-IN- FACT CONTRACT; and QUANTUM MERUIT. Defendants vs. CALIFORNIA PHYSICIANS'ERVICE dba BLUE SHIELD OF 2. CALIFORNIA, a California corporation; and DOES 1 THROUGH 25, INCLUSIVE 3. FC 28050 FIRST AMENDED COMPLAINT Electronically Filed by Superior Court of CA, County of Santa Clara, on 12/16/2021 4:36 PM Reviewed By: R. Tien Case #21CV382953 Envelope: 7884647 PARTIES 1. Plaintiff Stanford Health Care ("Stanford") is a non-profit public benefit corporation organized and existing pursuant to the laws of the State of Californi. Stanford has its principal place of business in the City of Palo Alto, County of Santa Clara, State of California. Stanford renders medically necessary care to patients. 10 12 13 14 15 17 18 19 20 21 22 23 24 25 26 27 2. Defendant California Physicians'ervice, doing business as Blue Shield of California ("Blue Shield") is a corporation organized and existing pursuant to the laws of the State of California. Blue Shield has its principal place of business in San Francisco, County of San Francisco, State of California. Among other things, Blue Shield sponsors, funds, and/or administers health plans. 3. Stanford is unaware of the true names and capacities, whether corporate, associate, individual, partnership, or otherwise of defendants Does 1 through 25, inclusive, and therefore sues such defendants by such fictitious names. Stanford will seek leave of the Court to amend this complaint to allege their true names and capacities when ascertained. 4. Blue Shield and Does 1 through 25, inclusive, shall be collectively referred to as "Blue Shield." 5. Blue Shield, at all relevant times, has transacted business in the State of California. The violations alleged within this complaint have been and are being carried out in the State of California. 6. At all relevant times Blue Shield, including the defendants FC 28050 FIRST AMENDED COMPLAINT named "Doe," was and is the agent, employee, employer, joint venturer representative, alter ego, subsidiary, and/or partner of one or more of the other defendants, and was, in performing the acts complained of herein, acting within the scope of such agency, employment, joint venture, or partnership authority, and/or is in some other way responsible for the acts of one or more of the other defendants. COMMON FACTUAL BACKGROUND 10 12 7. Prior to January 1, 2016, Blue Shield and Stanford were parties to a Fee For Service Hospital Agreement effective May 1, 2003 (the "Contract") 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 8. The parties'ontract terminated effective January, 2016 and Stanford thus became an "out of network" provider. Although Stanford and Blue Shield are parties to other written agreements, those agreements do not include discounted reimbursement rates for claims (such as those at issue in this case) that arise from plans purchased on the Covered California marketplace. Based on the termination of the Contract and the fact that the claims in dispute are Covered California claims, Blue Shield was no longer entitled to a discount for services provided by Stanford to Blue Shield's members, and Stanford was entitled to 100 of its total billed charges. 9. Stanford is informed and believes and thereon alleges that at all relevant times the patients identified on the spreadsheet attached as Exhibit 1 to this Complaint (and which is incorporated herein by this reference as though set forth in full) ("Patients") were enrolled beneficiaries and/or members of Covered 28 FC 28050 3 FIRST AMENDFD COMPLAINT California health plans sponsored, administered and/or financed by Blue Shield.'0. Stanford is informed and believes and thereon alleges that at all relevant times, Blue Shield provided, arranged, and/or paid for healthcare services for its beneficiaries and/or members, including the Patients. 10 12 13 14 15 16 17 18 19 11. At or near the time of treatment Blue Shield verified that the Patients were members of its health plan. In many instances, Blue Shield also issued an authorization number to Stanford for the treatment rendered to its beneficiaries and/or members. Pursuant to California Health & Safety Code Section 1371.8, a health care service plan that authorizes a specific type of treatment by a provider shall not rescind or modify this authorization after the provider renders the health care service in good faith and pursuant to the authorization for any reason. 12. In reliance on the verification of benefits and/or the authorization provided, Stanford rendered medically necessary services, supplies, and/or equipment to the Patients on the dates of service indicated on Exhibit l. 20 21 22 23 24 25 26 13. Stanford's usual, customary and reasonable charges for the medically necessary services, supplies, and/or equipment rendered to the Patients amounted to $5,125,199.32. 14. Stanford timely and properly billed Blue Shield for the medically necessary services, supplies, and/or equipment it rendered to the 27 28 'tanford has limited disclosure of patient identification here pursuant to the privacy provisions of the Health Insurance Portability & Accountability Act ("HIPAA"), 42 U.S.C. (ti 1320 e( seq., and the California Constitution, art. I ti l. FC 28050 FIRST AMENDED COMPLAINT Patients. 15. Rather than properly paying Stanford for the medically necessary services, supplies, and/or equipment Stanford rendered to the Patients, Blue Shield underpaid the claims, leaving a balance to be proven at trial, but not less than $2,019,560.73 exclusive of interest. 10 12 16. As a result of the refusal of Blue Shield to properly pay Stanford for the medically necessary services, supplies and/or equipment Stanford rendered to the Patients, Stanford has been damaged in an amount to be proven at trial but not less than the sum of $2,019,560.73, exclusive of interest. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 FIRST CAUSE OF ACTION (Breach of Oral Contract) (Against Defendants Blue Shield, and Does 1 through 25) 17. Stanford incorporates by reference and re-alleges paragraphs 1 through 16 here as though set forth in full. 18. On or about the admission dates indicated on Exhibit 1, Stanford contacted Blue Shield and spoke with Blue Shield's representatives to verify the Patients'ligibility under Blue Shield's health plan and to confirm that Blue Shield would pay for the medical services provided. In response, Blue Shield's agents orally advised Stanford of any applicable copayment, coinsurance and deductible amounts and represented that: i) the Patients were eligible beneficiaries under Blue Shield's health plan; ii) either that no authorization was required for the services rendered, or that Stanford was authorized to render medically necessary services to the Patients (indeed, in connection with such FC 28050 FIRST AMENDED COMPLAINT medical treatment, Blue Shield provided authorization numbers for many of the claims at issue); and iii) Stanford would be reimbursed for the medically necessary services provided to the Patients. Given that no written contract existed for such care, and based on custom and practice in the industry, that reimbursement amount was to be at Stanford's usual and customary total billed charges, without any pre- established contractual discount, and subject to the copayments, coinsurance, or deductible amounts disclosed. 10 12 13 14 15 16 17 19 20 21 22 23 24 19. Stanford promised to provide, and did provide, medically necessary services to the Exhibit 1 Patients. Based upon such promises, Stanford and Blue Shield entered into oral contracts regarding the rendering ofmedical care and payment for medical care to be rendered to the Exhibit 1 Patients. 20. Stanford has performed all conditions required by it on its part to be performed in accordance with the terms and conditions of the oral contracts. 21. Blue Shield breached the oral contracts by failing to pay Stanford 100% of its usual and customary total billed charges for the medical care given to the Exhibit 1 Patients. 22. As a direct and proximate result of Blue Shield's breaches, Stanford suffered damages in the amount to be proven at trial, but no less than $2,019,560.73 exclusive of interest. 25 26 27 FC 28050 FIRST AMENDED COMPLAINT SECOND CAUSE OF ACTION (Breach of Implied-in-Fact Contract) (Against Defendants Blue Shield, and Does 1 through 25) 23. Stanford incorporates by reference and re-alleges paragraphs I through 16 here as though set forth in full. 10 12 13 24. Prior to the treatment rendered by Stanford, Stanford and Blue Shield impliedly agreed and understood that Stanford would render medically necessary care to beneficiaries under Blue Shield's health plans, submit bills for such care to Blue Shield, and that Blue Shield would pay Stanford at 100% of Stanford's usual and customary total billed charges as full and final settlement for such care. 14 15 16 17 18 19 20 21 22 23 24 25 26 27 25. As is custom and practice in the health care industry, sometimes hospitals and health plans form contracts through their conduct even though they do not exchange express promises-contracts under which a hospital agrees to render medically necessary services, including emergency and/or trauma services, supplies and/or equipment to a member of a health plan; and in return, the health plan agrees to pay for such health care at the hospital's reasonable value (I'.e., hospital's charges in place at the time of service). Such implied-in-fact contracts can arise from a variety of manifested conduct which includes, among other things, (a) when a hospital calls up the health plan to ask for authorization to care for a member of that health plan and the plan indicates that no authorization is necessary, or does not deny such authorization; or does not coordinate the transfer of its enrollees to a different facility; or does not state it will pay something other than the hospital's total billed charges; (b) when the parties participate in concurrent review processes during the hospital stay and the plan does not FC 28050 FIRST AMENDED COMPLAINT coordinate the transfer of its enrollees to a different facility; and/or (c) when a hospital renders medical care to a health plan's enrollee in an emergency situation. 26. In California, Title 28 of the California Code of Regulations, Section 1300.71 entitled Claims Settlement Practices, subsection (a)(3)(B) ("28 CCR1300.71(a)(3)(B)") requires health plans, such as Blue Shield, to reimburse emergency services at the reasonable value for the health care services rendered by non-contracted providers. 10 12 13 14 15 16 17 27. Prior to the treatment rendered by Stanford to the Patients, based on both custom and practice and California law, Stanford and Blue Shield impliedly agreed and understood that when Stanford renders medically necessary services, including emergency services, supplies and/or equipment to Blue Shield's enrollees, and submits its claims for such services to Blue Shield, that Blue Shield would pay Stanford at the reasonable value of those services, which Stanford contends are its usual and customary billed charges. 18 19 20 21 22 23 24 25 26 27 28 28. Thus, on or about the time Stanford admitted the Patients, Stanford and Blue Shield entered into an implied-in-fact contract as demonstrated by the actions and conduct ofBlue Shield. Stanford alleges that Blue Shield offered to reimburse Stanford, should Stanford provide medically necessary care to beneficiaries under Blue Shield's health plans, at Stanford's usual and customary total billed charges. Stanford accepted that offer and did in fact provide medically necessary care to Blue Shield's health plan beneficiaries. Stanford properly billed Blue Shield for the medically necessary services, and Blue Shield did in fact ratify the agreement by reimbursing Stanford for a portion of some of the services rendered, in partial compliance with the implied-in-fact contract. FC 28050 8 FIRST AMENDED COMPLAINT 29. Stanford performed all conditions required on its part to be performed in accordance with the terms and conditions of that implied-in-fact contract. Stanford reasonably relied on Blue Shield'romises and conduct to pay for medical services and continued treating the Patients in reliance on those promises and upon such conduct. 10 12 13 14 30. Blue Shield breached that implied-in-fact contract by underpaying Stanford for the medically necessary services, supplies and/or equipment rendered or supplied to the Patients. 31. As a result of Blue Shield's breach of the implied contract, Stanford suffered damages in an amount to be proven at trial but not less than the sum of $2,019,560.73, exclusive of interest. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 THIRD CAUSE OF ACTION (Quantum Meruit) (Against Blue Shield Blue Shield, and Does 1 through 25) 32. Stanford incorporates by reference and re-alleges paragraphs 1 through 1 6 here as though set forth in full. 33. California Appellate courts have held that "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'hich arises from the proof of services rendered, that the person enjoying the benefit of the same is bound to pay what they are reasonably worth." Fancher v. Brunper, 94 Cal. App. 2d 727, 73 1 (1949). FC 28050 9 FIRST AMENDED COMPLAINT 34. Within the past two years, by its words and/or conduct, including (i) the issuance of authorizations to treat the Patients or its indication that no authorization was necessary, and (2) upon information and belief, issuance of health insurance cards directing their members to go to the nearest emergency room for treatment, Blue Shield specifically requested that Stanford provide the Patients with medically necessary services, supplies, and/or equipment. 10 35. Acting pursuant to the implied and/or express request of Blue Shield, Stanford provided the Patients with medically necessary services, supplies, and/or equipment during the dates set forth in Exhibit 1. 12 13 14 15 16 17 19 20 21 22 23 24 25 26 27 28 36. The very purpose ofhealth insurance is to arrange for the provision and reimbursement of appropriate medical care to plan members. California Health 8c Safety Code Section 1345(f) recognizes that plan members pay premiums to the plan (here, Blue Shield) precisely for this reason. Stanford Hospital is informed and believes and thereon alleges that at all relevant times, Patients, as enrollees of Blue Shield's health plan, paid premiums for medical coverage. In exchange for such payment ofpremiums, Patients expected Blue Shield to accept, process, arrange for, and/or pay hospitals (here, Stanford) for the value ofmedically necessary services, including emergency services, supplies and/or equipment, rendered to the Patients on Blue Shield's behalf. 37. Stanford's rendering of medically necessary services, supplies, and/or equipment to the Patients was intended to, and did, directly benefit Blue Shield. By providing care at Blue Shield's request, Stanford helped Blue Shield discharge Blue Shield's legal obligations owed to its plan members under California law and, upon information and belief, Blue Shield's contracts with the employers, if any, of those plan members. Thus, by fulfilling its coverage FC 28050 10 FIRST AMENDED COMPLAINT obligations to its plan members-i.e,, arranging for Stanford to provide medical necessary treatment to the Patients until they were stable for discharge-Blue Shield directly benefitted by avoiding several downstream consequences. For example: its plan members are not left "holding the bag" for unreimbursed medical care, which further entices them to continue paying premiums to Blue Shield; 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 any duties owed to the Patients. 10 12 13 14 38. When providing the Patients with medically necessary services, supplies, and/or equipment, Stanford reasonably believed it would be fully compensated by Blue Shield based on the verification of benefits and treatment authorizations that were provided by Blue Shield. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 39. Further, since Blue Shield is a "health care service plan" as defined in the California Health and Safety Code, at all relevant times Blue Shield was under a statutory duty to pay for emergency services provided to its enrollees until each enrollee was stabilized pursuant to California Health and Safety Code $ 137L4(b) - California's Emergency Medical Treatment and Labor Act ("EMTALA"). Stanford rendered medically necessary, emergency services, supplies and/or equipment to four ofBlue Shield's Patients (initials D.F.; R.L.; B.P.; and N.T.) from the time of the Patients'dmission, as set forth in Exhibit 1, to the time when the Patients'ondition had sufficiently stabilized to enable the Patients to be discharged or transferred. California Health & Safety Code $ 1371.4(b) provides, in pertinent part: "A health care service plan shall reimburse providers for emergency services and care provided to its enrollees." (Emphasis added). Blue Shield violated California Health & Safety Code $ 1371.4 by failing to fully reimburse Stanford for the medically necessary, emergency services, FC 28050 FIRST AMENDED COMPLAINT supplies, and/or equipment rendered to those emergency Patients. 10 12 40. Blue Shield's own conduct manifested an implicit request for Stanford to render medically necessary services, including emergency services, supplies and/or equipment to its enrollees: First, upon information and belief, Blue Shield instructed its enrollees to seek emergency relates medical services at the nearest emergency hospital; second, Blue Shield verified insurance eligibility information for the Patients under Blue Shield's health plans; third Blue Shield or its agents authorized the medical services for the Patients; fourth, Blue Shield failed to make arrangement to transfer the Patients to another hospital; and fifth, Blue Shield issued either no payment, or partial payment for the medical services rendered to the Patients. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 41. Stanford's usual and customary total billed charges for the medically necessary services, supplies, and/or equipment it rendered to the Patients amounted to $5,125,199.32. 42. Within the past two years, Stanford demanded that Blue Shield pay for the medically necessary services, supplies, and/or equipment it rendered to the Patients, but Blue Shield failed to fully reimburse Stanford. 43. As a direct and proximate result of the misconduct ofBlue Shield, Blue Shield damaged Stanford by not properly paying Stanford the usual, customary and reasonable value of the medically necessary services, supplies, and/or equipment it rendered to the Patients in the sum of $5,125,199.32 less any amounts previously paid, exclusive of interest, which at a minimum, leaves an underpaid balance of $2,019,560.73. FC 28050 FIRST AMENDED COMPLAINT PRAYER FOR RELIEF WHEREFORE, Stanford prays for judgment on all causes of action as follows: 8 9 10 11 12 13 14 1. for the principal sum of $5,125,199.32 less any prior payments or applicable discount, which at a minimum, leaves an underpaid balance of $2,019,560.73. 2. for interest on such principal sum at the rate of 15% per annum, pursuant to Cal. Health & Safety Code $ 1371; or, in the alternative, for interest on such principal sum at the rate of 10% per annum, pursuant to Cal. Civ. Code $ 3289; 3. for all costs of suit incurred herein; and, 15 16 proper. 4. for such other and further relief as the Court deems just and 17 18 19 20 21 22 23 24 25 26 27 28 Dated: December 1 6, 202 1 FC 28050 STEPHENSON, ACQUISTO & C0L M AN, INC . KARLENE J. 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CD M CG ID 0 fl IA 0 Ch N CO H F 4 + 0 rl (h Pl 'IF 0 CFI LA f LA Ql w N 0 ff LA A ID LA Q LA O M Qt LA M 'll (h w N 4 0 GO CG P1 Lfl F GO O ~ ID 4 Ch Pl m Ch ID O Ch N O O rU H N 0 4 N CO 4 LA Ch O ID Ifl LA IA LA LA LA LA 'll 'ff' LA ff 'll IA LA ID ID ID ID 4 ID 4 'ID 'ID 'ID 'ID ID ID ID0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 8 0 0 0 0 0 0 0 0 0 0 0 0 0 00 0 0 0 0 0 0 0 0 0 0 0 8 0 0 00 0 0 0 0 0 0 0 0 0 0 0 8 0 0 0 0 I III'll N F Ch W LA CG CQ 0 w IAN 0 W Qt IAN OO CG Ch F 'ID ~ IA LA CF CF W Ul ID ID ID 4 LD000000000000000000000000 0 IX ((IX((tjtXIX(g: NNNNNN Z Z & Z Z Z Z Z Z D, n. D.'j IX IX n.'. D.'. i c( i IX Lft Ut I-'- + & g Z Z Z Z Z Z Y Y Z I- F- CC Q 5 CI Z CC IXL w Z U c( & CC CC U U U Y 0 Z Z Z M rC i Z Z Z Z Z Z fU Pl Cf Ul ID N GG Ch 0 W IU Pl 'Il IA 4 W CO Ch 0 W N M ff LA 4 W CO Ch 0 W N M 'If III 4 h, M M M IA M m m rA cf cf cf cf w cf cf cf w IF LA LA LA LA LA LA LA LA LA LA LD 4 4 4 4 4 4 4 PROOF OF SERVICE 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 BREACH OF ORAL CONTRACT;1. 2. BREACH OF IMPLIED-IN-FACT CONTRACT; and 3. by placing a true copy thereof enclosed in a sealed envelope addressed per the attached Service List. [X] 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)] QUANTUM MER UIT 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)] 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 16 December 2021, I served the foregoing documents) entitled: FIRSTAMENDED COMPLAINT FOR DAMAGES FOR: [X] 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. [ ] 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. 9 10 ] 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. 12 13 Executed on 16 December 2021 in Burbank, California. F 14 15 ANGELA DEMERS 16 17 18 19 20 21 22 23 24 25 26 27 28 SERVICE LIST Amanda L. Morgan, Esq. Sean A. Newland, Esq. DLA Piper LLP (US) 555 Mission Street, Suite 2400 San Francisco, CA 94105 10 Charles L. Sweeris, Esq. DLA Piper 444 West Lake Street, Suite 900 Chicago, Illinois 60606 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27