Children's Hospital Central California v. Blue Cross of California
226 Cal. App. 4th 1260
| Cal. Ct. App. | 2014Background
- Hospitals and Blue Cross disputed the reasonable value for post-stabilization emergency services Blue Cross reimbursed during an off-contract period (June 2007–May 2008).
- Blue Cross paid post-stabilization claims at the CMAC rate; Hospital sought full billed charges (~$10.8 million) as the reasonable value.
- DHCS retroactively updated the CMAC rate, and Blue Cross paid additional amounts, totaling about $4.21 million for post-stabilization care.
- Hospital sued, alleging an implied-in-fact contract and seeking the reasonable value under Cal. regulations, relying on Health and Safety Code § 1300.71(a)(3)(B).
- Trial court limited evidence to Hospital’s charges and used 1300.71(a)(3)(B) as exclusive standard, excluding other market-rate evidence.
- Jury found implied-in-fact contract, breach, and awarded about $6.62 million; judgment included pre-judgment interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is 1300.71(a)(3)(B) the exclusive standard for value? | Hospital: six-factor test governs value, not exclusive. | Blue Cross: 1300.71(a)(3)(B) is exclusive standard for non-contracted providers. | No; 1300.71(a)(3)(B) is minimum standard, not exclusive. |
| Were discovery and evidentiary rulings improper? | Blue Cross evidence of other payors’ rates is relevant to value | Hospital argued such evidence is irrelevant under 1300.71(a)(3)(B) | Error to bar discovery and to limit evidence; discovery should include rates accepted by others. |
| Did trial court's instructions and expert limitations misstate value standard? | Value should reflect market value beyond full billed charges | Court correctly instructed to follow 1300.71(a)(3)(B) | Yes; instructions and expert limits were flawed; new trial on damages required. |
Key Cases Cited
- Prospect Medical Group, Inc. v. Northridge Emergency Medical Group, 45 Cal.4th 497 (Cal. 2009) (duty to reimburse under Knox-Keene for emergency/post-stabilization care)
- Bell v. Blue Cross of California, 131 Cal.App.4th 211 (Cal. App. 2005) (timeliness of reimbursement under Knox-Keene; CMAC context)
- Gould v. Workers’ Compensation Appeals Bd., 4 Cal.App.4th 1059 (Cal. App. 1992) (definition and application of reasonable value with Gould factors)
- Howell v. Hamilton Meats & Provisions, Inc., 52 Cal.4th 541 (Cal. 2011) (full billed charges not automatically equal to value; market value concepts)
- Maglica v. Maglica, 66 Cal.App.4th 442 (Cal. App. 1998) (going rate or reasonable market value standard)
- Watson v. Wood Dimension, Inc., 209 Cal.App.3d 1359 (Cal. App. 1989) (evidence of value may include price agreed upon and customary charges)