12 Cal. App. 5th 200
Cal. Ct. App. 5th2017Background
- Pacific Bay Recovery (out-of-network substance-abuse treatment provider) treated a Blue Shield PPO subscriber for 31 days and billed $3,500/day; Blue Shield paid for only 6 days at the billed rate and denied the rest.
- Pacific Bay sought prior authorization and alleges Blue Shield confirmed the subscriber's coverage and led it to expect payment of a portion of billed charges.
- Pacific Bay sued Blue Shield asserting six causes of action (including quantum meruit, breach of implied contract, declaratory relief, estoppel, and regulatory violations) claiming it was underpaid.
- The trial court sustained Blue Shield's demurrer to the first amended complaint (FAC) without leave to amend, concluding Pacific Bay failed to plead facts entitling it to payment.
- On appeal, the court examined whether DMHC regulation Cal. Code Regs., tit. 28, § 1300.71 governs reimbursement for out-of-network, nonemergency providers and whether Pacific Bay adequately pleaded common-law claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an out-of-network, nonemergency provider is entitled to recovery based on the usual, customary, and reasonable (UCR) standard under Cal. Code Regs., tit. 28, § 1300.71(a)(3)(B) | Pacific Bay: §1300.71(a)(3)(B) applies to noncontracted providers generally, so it is entitled to UCR reimbursement. | Blue Shield: §1300.71(a)(3)(C) controls nonemergency, noncontracted services to PPO/POS enrollees; reimbursement is set by the enrollee's Evidence of Coverage (EOC). | Held: (a)(3)(C) applies; reimbursement governed by the EOC, not (a)(3)(B). |
| Whether Pacific Bay qualified as an "emergency" provider so (a)(3)(B) could apply | Pacific Bay: some patients' addiction crises may amount to psychiatric emergencies; factual question exists. | Blue Shield: no emergency alleged; FAC contains no facts showing emergency medical condition. | Held: Pacific Bay did not and could not allege emergency services; no basis to treat it as emergency provider. |
| Validity challenge to the DMHC claims-settlement regulation (claimed conflict with §1371.37) | Pacific Bay: regulation improperly narrows statutory protections by omitting specific phrasing (e.g., "denying complete and accurate claims") and thus is invalid. | Blue Shield: regulation tracks statute, addresses unfair payment patterns, and expressly requires compliance with §1371.37. | Held: Regulation is valid and does not improperly amend or impair the Knox-Keene Act. |
| Whether quantum meruit / implied-contract claims survive despite regulatory scheme | Pacific Bay: alleged Blue Shield requested authorization and led it to expect payment, supporting quantum meruit and implied contract. | Blue Shield: Knox-Keene regulatory scheme and EOC confine remedies; FAC lacks facts showing mutual assent, specific agreed rates, or benefit retention by Blue Shield. | Held: Common-law claims fail as pleaded; enforcement would conflict with the regulatory scheme and FAC lacks requisite factual detail; demurrer properly sustained without leave to amend. |
Key Cases Cited
- City of Dinuba v. County of Tulare, 41 Cal.4th 859 (standard of review for demurrer sustaining without leave to amend)
- Children's Hospital Central California v. Blue Cross of California, 226 Cal.App.4th 1260 (DMHC regulation's factors for reasonable value and scope of permissible evidence)
- Orthopedic Specialists of Southern California v. Public Employees' Retirement System, 228 Cal.App.4th 644 (EOC governs payment terms for noncontracted, nonemergency providers)
- Gould v. Workers' Comp. Appeals Bd., 4 Cal.App.4th 1059 (origin of the six-factor test for reasonable fees in a different context)
- Prospect Medical Group, Inc. v. Northridge Emergency Medical Group, 45 Cal.4th 497 (distinguishing emergency-provider obligations and rationale for emergency care rules)