44 Cal.App.5th 144
Cal. Ct. App.2020Background
- Plaintiffs Dignity Health and Northridge Hospital (Northridge) provided medically necessary inpatient poststabilization care to Medi‑Cal managed‑care enrollees of defendant L.A. Care, but Northridge was out‑of‑network.
- L.A. Care paid Northridge at California’s state‑set APR‑DRG inpatient rates rather than Northridge’s full billed charges.
- Plaintiffs sued for breach of implied contract and related relief, arguing Welf. & Inst. Code § 14105.28(b)(1)(B) excludes “managed care inpatient days” from APR‑DRG rates and that out‑of‑network poststabilization days are thus not subject to APR‑DRG (entitling them to full billed rates).
- The trial court granted summary judgment for L.A. Care, concluding federal regulations and DHCS practice support paying state fee‑for‑service/APR‑DRG rates for out‑of‑network poststabilization care and rejecting plaintiffs’ reading of “managed care inpatient days.”
- The Court of Appeal affirmed: it read the statutory text and legislative history to mean APR‑DRG rates apply to out‑of‑network poststabilization inpatient care and interpreted “managed care inpatient days” to refer to in‑network (contract) inpatient days; the court did not decide whether federal law independently requires the same result.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether APR‑DRG rates apply to out‑of‑network poststabilization inpatient services for Medi‑Cal managed‑care enrollees | §14105.28 excludes “managed care inpatient days,” so poststabilization days for managed‑care enrollees (even out‑of‑network) are excluded from APR‑DRG and plaintiffs are entitled to billed rates | APR‑DRG applies; legislative history, DHCS practice, and federal context support paying state‑set (fee‑for‑service/APR‑DRG) rates to out‑of‑network providers | APR‑DRG rates apply; “managed care inpatient days” means in‑network (contract) inpatient days; judgment affirmed |
| Whether federal Medicaid regulations mandate a specific payment rate (e.g., Medicare/original‑Medicare equivalent) for out‑of‑network poststabilization services | Federal law is silent on payment amount for poststabilization, so plaintiffs can recover billed charges | Federal regs (42 C.F.R. §§ 438.114, 422.113, 422.214) can be read to require payment at state fee‑for‑service rates | Court did not resolve whether federal law independently compels the result; decision rests on state law interpretation |
| Whether Health & Safety Code §§ 1262.8 and 1371.4 create private causes of action for these claims | Plaintiffs initially asserted claims under these statutes | L.A. Care argued no private right; trial court held no private right | Not directly decided on appeal (plaintiffs did not press the issue given appellate disposition) |
| Whether DHCS’s interpretation of §14105.28 is entitled to administrative deference | Plaintiffs disputed DHCS’s changing positions and challenged deference | Defendant relied on DHCS interpretation and practice | Court resolved case on statutory text and legislative history and did not decide deference question |
Key Cases Cited
- Olszewski v. Scripps Health, 30 Cal.4th 798 (2003) (framework for state administration of Medicaid/Medi‑Cal).
- Marquez v. State Dept. of Health Care Services, 240 Cal.App.4th 87 (2015) (overview of Medi‑Cal fee‑for‑service vs. managed care).
- Children’s Hospital Central California v. Blue Cross of California, 226 Cal.App.4th 1260 (2014) (pre‑2008 out‑of‑network poststabilization reimbursement via reasonable/customary value/quantum meruit).
- Hubbard v. California Coastal Com., 38 Cal.App.5th 119 (2019) (standard of review and principles for statutory interpretation).
- Fischer v. United States, 529 U.S. 667 (2000) (background reference on Medicare terminology).