342 F. Supp. 3d 980
N.D. Cal.2018Background
- NorthBay (two non-profit hospitals) sued Blue Shield claiming its reimbursement methodology under Cal. Code Regs. tit. 28 § 1300.71(a)(3)(B) (the R&C methodology using the Gould factors) led to underpayment for emergency/non-contracted services, and asserted UCL (unfair competition) and declaratory claims.
- California prompt-pay laws (Knox-Keene Act) require health plans to pay a reasonable and customary value for emergency services and direct DMHC oversight; plans must consider Gould factors but DMHC does not prescribe a single mandated formula or specific rates.
- Blue Shield submitted its R&C methodology to DMHC in 2015, described how it considered Gould factors, and DMHC did not require changes; DMHC retains enforcement authority if a methodology is noncompliant.
- NorthBay seeks injunctive relief to stop use of Blue Shield’s R&C methodology (Count Eight UCL; Count Nine declaratory relief), alleging improper application/manipulation of data in setting rates.
- Blue Shield moved for partial summary judgment arguing (1) no private right to challenge a plan’s methodology under the UCL (claims must be predicated on an unlawful underpayment amount, not on methodology alone) and (2) courts should abstain from second-guessing complex actuarial/economic methodology better handled by DMHC.
- The court denied requests for NorthBay’s internal cost/billing documents as irrelevant because reasonable value is assessed by value to the recipient (not provider cost) and NorthBay disavowed reliance on such evidence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a private UCL action may challenge a health plan's R&C methodology (i.e., how Gould factors were applied) | NorthBay: methodology can be unlawful/unfair under UCL when it improperly applies Gould factors or manipulates data to underpay providers | Blue Shield: UCL remedies only extend to unlawful results (underpayments); methodology itself is not independently actionable and DMHC regulates methodologies | Court: Granted summary judgment to Blue Shield — UCL claim cannot be predicated solely on methodology; plaintiff must attack an incorrect reimbursement amount causing injury |
| Whether the "unfair" prong of UCL supports a claim attacking methodology | NorthBay: methodology produces an unfair payment pattern harming providers (and members) | Blue Shield: unfair prong overlaps unlawful prong and must be tethered to legislatively declared policy; methodology challenge fails for same reasons as unlawful prong | Court: Unfair-prong claim fails and overlaps with unlawful prong; dismissed |
| Whether the court should abstain from ruling on methodology if claim were allowed | NorthBay: (implicit) court may adjudicate statutory compliance | Blue Shield: courts are ill-equipped for complex economic/actuarial judgments and should defer to DMHC | Court: Did not decide abstention because methodology challenge dismissed; noted that abstention might be appropriate where DMHC is better suited |
| Availability of injunctive/declaratory relief to bar use of R&C methodology | NorthBay: seeks injunction and declaration that Blue Shield's methodology is improper | Blue Shield: injunctive relief would require court to direct alternative methodology and intrude into agency role | Court: Declaratory relief denied as moot; injunctive relief dismissed insofar as it is based on methodology challenge (Count Eight dismissed) |
Key Cases Cited
- Gould v. Workers' Comp. Appeals Bd., 4 Cal. App. 4th 1059 (Cal. Ct. App.) (sets out multi-factor considerations for determining reasonable value)
- Children's Hosp. Cent. Cal. v. Blue Cross of Cal., 226 Cal. App. 4th 1260 (Cal. Ct. App.) (explains §1300.71 establishes minimum methodology criteria and does not mandate specific payment rates)
- Cel-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163 (Cal. 1999) (requires unfair-prong UCL claims against businesses to be tethered to legislatively declared policy)
- Prospect Med. Grp., Inc. v. Northridge Emergency Med. Grp., 45 Cal. 4th 497 (Cal. 2009) (recognizes providers may sue for reasonable value of emergency services under applicable law)
- Samura v. Kaiser Found. Health Plan, Inc., 17 Cal. App. 4th 1284 (Cal. Ct. App.) (limits UCL injunctive relief in the health plan context to acts made unlawful by Knox-Keene Act)