Here - California Medical Association

No. B238867
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT, DIVISION THREE
CENTINELA FREEMAN EMERGENCY MEDICAL ASSOCS., et al.,
Plaintiffs and Appellants,
v.
HEALTH NET OF CALIFORNIA, INC., et al.,
Defendants and Respondents,
Appeal from the Superior Court of California, County of Los Angeles
Case No. BC 415203
Honorable John Shepard Wiley
APPLICATION FOR LEAVE TO FILE AMICUS CURIAE BRIEF
AND AMICUS CURIAE BRIEF OF CALIFORNIA MEDICAL
ASSOCIATION, CALIFORNIA HOSPITAL ASSOCIATION,
CALIFORNIA ORTHOPAEDIC ASSOCIATION, CALIFORNIA
RADIOLOGICAL SOCIETY AND CALIFORNIA SOCIETY OF
PATHOLOGISTS IN SUPPORT OF APPELLANTS CENTINELA
FREEMAN EMERGENCY MEDICAL ASSOCIATES et al.
Francisco J. Silva, SBN 214773
Long X. Do, SBN 211439
Michelle Rubalcava, SBN 229947
Center for Legal Affairs
CALIFORNIA MEDICAL ASSOCIATION
1201 J Street, Suite 200
Sacramento, CA 95814
Telephone: (916) 444-5532
Facsimile: (916) 551-2885
Counsel for California Medical Association,
California Hospital Association, California
Orthopaedic Association, California
Radiological Society and California Society of
Pathologists
CERTIFICATE OF INTERESTED ENTI'I'IES OR PERSONS
Court of Appeal, Second Appellate District, Division Three
Centinela Freeman Emergency Med. Assocs. et al. v. Health Net ofCalifornia, Inc. et al.
Appeal1Vo.B238867
There are no interested entities or parties that must be listed in this certificate
under California Rules of Court, rule 8.208(d)(3).
DATED: .Jvly-27, 2013.
:Sw'-c.
t.r.N)
By:~
;r
Long X. Do
Attorneyfor California Medical
Association, California Hospital
Association, California Orthopaedic
Association. California Radiological
Society, and California Society of
Pathologists
TABLE OF CONTENTS
TABLE OF AUTHORITIES ....................................................................... iii
APPLICATION FOR LEAVE
TO FILE AMICUS CURIAE BRIEF ...................................................... A 1
I.
INTERESTS OF AMICI CURIAE ..................................................... AI
ll.
PURPOSE OF THE AMICI CURIAE BRIEF ................................... A3
AMICUS CU,RIAE BRIEF .......... ................................................................. !
I.
INTR.ODUCTION ................................................................................ 1
II.
INTERESTS OF AMICI CURIAE ........................................................ 3
III. BACKGROUND .................................................................................. 6
A. RBO FAILURES AT THE TURN OF THE CENTURY
7
B. LEGISLATIVE RESPONSE TO THE RBO FAILURES
10
C. REGULATIONOFTHERBOMARKET
13
IV. DISCUSSION ..................................................................................... 17
A. OCHS IS CONTROLLING PRECEDENT THAT
ESTABLISHES THE AVAILABILITY OF A NEGLIGENT
DELEGATION CLAIM.
17
l. Ochs Is Consistent with Other Cases in Recognizing the
Statutory Efficacy of a Delegation. ....................................... 17
2. Ochs Also Goes Further than any Other Case to Recognize
Boundaries on a Health Plan's Delegation Power................ 18
3. Ochs Is Good Law................................................................ 19
4. There Is No "Safe Harbor'' Created by Section 1371.4 to Bar
a Negligent Delegation Claim...........- .................................. 22
B. A NEGUGENT DELEGATION CLAIM STRENGTHENS THE
DELEGATION MODEL.
25
1. Health Plans Are in the Best Position to Promptly Address
Problems with their Delegated RBOs ................................... 26
i
2.
V.
A Negligent Delegation Claim Would Complement
the DMHCs Regulatory Authority over the
Delegation Model. ................................................................. 29
CONCLUSION ................................................................................... 31
ii
TABLE OF AUTHORITIES
Cases
California Emergency Physicians Medical Group
(2003) Ill Cal.App.4th 1127 ....................................................... 18, 19, 21, 23
California Medical Association v. Aetna U.S. Healthcare ofCalifornia, Inc.
(2001) 94 Cal.App.4th 151 ............................................................................. 18
Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co.
(1999) 20 Cal.4th 163 ................. -................ ,...................... ~ ....................................... 23
Chambers v. Unemployment Ins. Appeals Bd.
(1973) 33 Cal.App.3d 923 .............................................................................. 25
Coast Plaza Doctors Hospital v. UHP Healthcare
(2002) 105 Cai.App.4th 693 ........................................................................... 20
Desert Healthcare District v. PacifiCare FHP, Inc.
(2001) 94 Cal.App.4th 781 ................................................................. 18, 19,21
Gentry v. Ebay, Inc.
(2002) 99 Cal.App.4th 816 ............................................................................. 23
Harshbarger v. City of Colton
(1988) 197 Cal.App.3d 1335 .......................................................................... 24
J'Aire Corp. v. Gregory
(1979) 24 Cal.3d 799 .......................................................................... 21~ 22,29
Ochs v. PaciftCare ofCalifornia
{2004) 115 Cal.App.4th 782 .................................................................... passim
Ott v. Alfa-Laval Agri, Inc.
(1995) 31 Cal.App.4th 1439 ........................................................................... 21
Weirum v. RK.O General, Inc.
(1975) IS Cal.3d 40 ........................................................................................ 22
Williams v. State Farm Fire & Casualty Co.
(1990) 216 Cal.App.3d 1540 .......................................................................... 24
Statutes
Health & Safety Code §1347.15 ........................................................................... 10
Health & Safety Code§ 1371.4 ...................................................................... passim
Health & Safety Code §1375.4 ................................................................. 10,13, 20
Regulations
22 C.C.R. § 1300.75.4.2.................................................-.....................'" ........................... 12
28 C.C.R. §1300.70............................................................................................... 26
28 C.C.R. §1300.74.4.4......................................................................................... 30
28 C.C.R. §1300.74.4.5 ......................................................................................... 30
28 C.C.R. §1300.75.4.1 ......................................................................................... 28
28 C.C.R. §1300.75.4.3 .......................................................... ,. .................................. 28
28 C.C.R. §1300.75.4.8................................................................................... 13, 14
Rules
Rule 8.200(c) of the California Rules of Court....................................................... 1
iii
Other Authorities
CapMetrics, California Physician Group Solvency Standards at 1 (Aug. 2002),
prepared for the California HealthCare Foundation, available online at
http://www.chct:org/-/media!MEDIA%20LIBRARY
%20Files/PDF/S/PDFo/o20SolvencyCapMetricsFullReport.pdf......... 6, 8, 9, 12
Debra L. Roth & Deborah Reidy Kelch, Making Sense ofManaged Care
Regulation in California at 20-21 (Dec. 2001), prepared for the California
HealthCare Foundation, available online at
http://www.chcf.org/-/media/MEDIA%20LffiRARY%20Files/PDFIMIPDF%
20MakingSenseManagedCareRegulation.pdf .................................................. 7
Dennis Balmer, Minimum Solvency Criteria Discussion, Presentation Slides for
the DMHC at 10 (May 9, 2013), available online at
http://www.dmhc.ca.gov/library/fssb/presentations/pdppsr.pdf...................:. 14
Gloria J. Bazzoli, et al., Managed Care An'angements ofHealth Networks and
Systems: A Review of the 1999 Experience, 26 J. AMBUL. CARE, no. 3 at 226
(2003) .........................................................................................................~...... 7
Michael D. Dalzell, California Physicians Struggling- Problems Aheadfor Other
States?, MANAGED CARE (Oct. 1999), available online at
http://www .managedcaremag.com/archives/9910/991 O.calmodel.html ........... 8
Michelle Yaman~ Provider Solvency Update, Presentation Slides for the
DMHC at 3 (May 9, 2013), available online at
http://www .dmhc.ca.gov/library/fssb/presentations/psup.pdf ........................ 13
S.B. 260, Bill Analysis at p. 2, Assem. Comm. on Approp. (Apr. 11, 2000),
available online at http://www.lcginfo.ca.gov/pub/99-00/bill/sen/sb_0251300/sb_260_ cfa_20000411_135334_ asm_ comm.html .............~ .................... 11
Senator Jackie Speier, Chilling Statistics on Patient Impact, and How
Policymaking Helps, remarks given to the California HealthCare Foundation
(Oct. 2001), available online at http://www.chcf.org/-/
media/MEDIA%20LffiRARYo/o20Files/PDF/S/PDF%20SolvencySmartRcma
rks.p(lf ..............,..............................................................•................................. 9
iv
APPLICATION FOR LEAVE TO FILE AMICUS CURIAE BRIEF
Pursuant to rule 8.200(c) of the California Rules of Court ("CRC"),
the California Medical Association, the California Hospi1al Association, the
California Orthopaedic Association, the California Radiological Society
and the California Society of Pathologists (collectively, "Healthcare
Providers") hereby request permission to file the attached amicus curiae
brief in support of Plaintiffs and Appellants Centinela Freeman Emergency
Medical Associates et al. ("Centinela physicians").
There are no disclosures to be made under CRC, rule 8.200(c)(3).
I.
INTERESTS OF AMICI CURIAE
The California Medical Association ("'CMA") is a non-profit,
incorporated professional association of approximately 3 7,000 physician
members.
CMA 's membership is comprised of California physicians
practicing medicine in all modes and specialties~ including provicting
emergency medical care.
CMA' s primary purposes are to promote the
science and art of medicine, the care and well-being of patients, the
protection of public health, and the betterment of the medical profession.
CMA and its members share the objective of promoting high-quality,
accessible and cost-effective health care for the people of California
whether through managed healthcare systems, government programs or
other direct arrangements with patients.
Al
The California Hospital Association ("CHAn) is a nonprofit
organization dedicated to representing the interests of hospitals and health
systems in California. CHA has more than 400 hospital and health system
members, including general acute care hospitals, children's hospitals, rural
hospitals, psychiatric hospitals, academic medical centers, county hospitals,
investor-owned hospitals, and multi-hospital health systems.
CHA's
primary purposes are to provide its members with state and federal
representation in an effort to improve health care quality, access and
coverage and maintain public trust in health care.
The California Orthopaedic Association ("COA") is the statewide
nonprofit incorporated professional association for orthopaedic surgeons.
There are 2,000 members of COA, which comprises approximately 70
percent of all orthopaedic surgeons practicing in California.
The
organization was founded in 1975 with the mission of ensuring that all
patients receive the highest quality musculoskeletal care in a timely
manner. Orthopaedic surgeons are routinely called to the emergency room
to render care to patients seeking emergency medical care.
California Radiological Society ("CRS") is a non-profit corporation
of approximately 2,000 board-certified diagnostic radiologists and radiation
oncologists practicing in the State of California. CRS is a chapter of the
American College of Radiology.
Its primary pmpose is to advance the
science of radiology, improving radiologic service to patients and the
A2
medical community, and studying the economics of radiology; the
encouragement of improved and continuing education for radiologists; and
the establishment and maintenance of high medical and ethical standards in
the practice of radiology.
The California Society of Pathologists ("CSP") is a nonprofit
association serving as the premiere state organization to represent
pathologists in government affairs.
CSP advocates on behalf of its
members in all areas affecting the medical practice of pathology, including
reimbursement,
clinical
lab
regulation
and
compensation and government health programs.
licensing,
workers'
Pathologists regularly
provide specialist care to patients requiring emergency medical care.
ll.
PURPOSE OF THE AMICI CURIAE BRIEF
The key question of this case is whether the Knox-Keene Act's laws
and regulations absolve a health plan from liability when it delegates
payment responsibility to a risk-bearing organization ("RBO") that fails to
pay a medical claim. The health plan defendants take the position that they
can never be held liable after a delegation is made, regardless how
irresponsible a health plan may be in entering into and maintaining a risk
sharing arrangement with a fmancially precarious RBO. The Healthcare
Providers disagree, and their amicus curiae brief explains why.
A3
Together, the Healthcare Providers represent the backbone of
California's health care delivery system. They have experience, historical
knowledge and substantive expertise with managed care systems and the
laws and regulations governing managed care and health insurance. One or
more of the Healthcare Providers sponsored, or were integral in the passage
of, many bills of legislation that have shaped the Knox-Keene Act,
including the provisions governing risk sharing arrangements between
health plans and RBOs.
By their brief the Healthcare Providers trace the history of the RBO
delegation model and the development of Knox-Keene laws and regulations
governing risk sharing arrangements, as well as the relevant case law. They
delve into practical and policy implications. Within this broader context,
the Healthcare Providers explain how a claim of negligent delegation fits
naturally within the Knox-Keene Act's delegation model. The Healthcare
Providers accordingly believe their amicus curiae brief can assist the Court
by bringing the expertise and experience of the organized community of
medical professionals and hospitals to bear on the important issues that are
raised in this case.
A4
For the foregoing reasons, the Healthcare Providers respectfully
request that the Court accept and file their attached amicus curiae brief.
DATED: June 27, 2013.
Respectfully,
Center for Legal Affairs
CALIFORNIA MEDICAL ASSOCIATION
L~ngX.Do
By:
r
Attorneys for Amici Curiae California
Medical Association, California Hospital
Association, California Orthopaedic
Association, California Radiological
Society, and California Society of
Pathologists
AS
AMICUS CURIAE BRIEF
I
INTRODUCTION
California's large and complex managed healthcare market depends
on stability and predictability. History teaches that this is especially true
when it comes to the delegation model within the Knox-Keene Act's
scheme of managed care. Wide scale failures of delegated risk-bearing
organizations ("RBOs") in the late 1990s and early 2000s affected more
than one million Californians and left thousands of physicians and other
health care providers in the lurch with millions of dollars in unpaid medical
claims.
The impact of these failures has left indelible marks on the
healthcare community. In the. instant case, La Vida's 1 failure generated the
same widespread negative impact on patients and providers that was seen in
the wake of the RBO failures nearly 15 years ago.
The problem of earlier RBO failures was a reckless delegation of
responsibility by some health plans (usually due to inadequate capitation
rates) coupled with an inability of some RBOs to responsibly take on risk
and manage their financial affairs, without adequate oversight from their
contracting health plans and regulators like the Department of Managed
1
"La Vida" refers to La Vida Medical Group & IPA, La Vida Prairie
Medical Group and La Vida Multispecialty Medical Centers.
1
Health Care ("DMHC"). In large measure, these same problems underlie
La Vida's failure in 2010.
Plaintiffs and Appellants Centinela Freeman Emergency Medical
Associates and Centinela Radiology Medical Group
(collectively,
"Centinela physicians") provided emergency medical care to enrollees of
the Health Plans2, who had been delegated to La Vida for responsibility to
pay for their medical care. As with the RBO failures from not so long ago,
the Centinela physicians are not going to get reimbursed by La Vida. They
consequently are seeking to get just compensation for their services from
the Health Plans that delegated risk to La Vida, and only because those
Health Plans for years knew or should have known that La Vida was unable
to pay medical claims while still continuing to send more emollees through
their doors. Otherwise, fue Centinela physicians will have no remedy to
obtain reimbursement for emergency medical care that they were required
to provide under state and federal law.
By this amicus curiae brief, the California Medical Association, the
California Hospital Association, the California Orthopaedic Association,
the California Radiological Society and the California Society of
2
The "Health Plans" are Respondents and Defendants Health Net of
California, Inc., Blue Cross of California dlbla Anthem Blue Cross,
PacifiCare of California, California Physicians' Service dlbla Blue Shield
of California, Cigna HealthCare of California, Inc., Aetna Health of
California, Inc., and SCAN Health Plan.
2
Pathologists (collectively, "Healthcare Providers") urge the Court to apply
its own case precedent to afford the Centinela physicians fairness and
justice and to instill stability and strength in the RBO market. This Court in
Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782, 797,
recognized a narrow "claim of negligent delegation" when a health care
provider "suffers an economic loss because [a health plan] contracted with
[a risk-bearing organization] when it knew or should have known that [the
risk-bearing organization] was insolvent." No other state appellate court
has contradicted Ochs for this holding, which is squarely applicable to and
dispositive of the present case.
h
explained herein, not only does the principle of stare decisis
warrant application of Ochs to this case, recognizing a negligent delegation
claim here comports with wise public policy and fits within the regulatory
scheme created by the Knox-Keene Act The judgment of the trial court
should be reversed and the Centinela physicians should be permitted to
assert their negligent delegation claim.
II
INTERESTS OF AMICI CURIAE
The California Medical Association ("CMA'') is a nonprofit,
incorporated professional association of approximately 37,000 physician
members.
CMA's membership is comprised of California physicians
3
practicing medicine in all modes and specialties, including emergency room
and specialist physicians providing emergency medical care.
CMA' s
primary pwposes are to promote the science and art of medicine, the care
and well-being of patients, the protection of public health, and the
betterment of the medical profession. CMA and its members share the
objective of promoting high-quality, accessible and cost-effective health
care for the people of California whether through managed healtbcare
systems, government programs or other direct arrangements with patients.
The California Hospital Association ("CHA") is a nonprofit
organization dedicated to representing the interests of hospitals and health
systems in California. CHA has more than 400 hospital and health system
members, including general acute care hospitals, children's hospitals, rural
hospitals, psychiatric hospitals, academic medical centers, county hospitals.
investor-owned hospitals, and multi-hospital health systems.
CHA 's
primary purposes are to provide its members with state and federal
representation in an effort to improve health care quality, access and
coverage and maintain public trust in health care.
The California Orthopaedic Association ("COA'') is the statewide
nonprofit incotporated professional association for orthopaedic surgeons.
There are 2,000 members of COA, which comprises approximately 70
percent of all orthopaedic surgeons practicing in California.
The
organization was founded in 1975 with the mission of ensuring that all
4
patients receive the highest quality musculoskeletal care in a timely
manner. Orthopaedic surgeons are routinely called to the emergency room
to render care to patients seeking emergency medical care.
California Radiological Society ("CRS ") is a nonprofit corporation
of approximately 2,000 board-certified diagnostic radiologists and radiation
oncologists practicing in the State of California. CRS is a chapter of the
American College of Radiology. Its primary purpose is to advance the
science of radiology, improving radiologic service to patients and the
medical community, and studying the economics of radiology; the
encouragement of improved and continuing education for radiologists; and
the establishment and maintenance of high medical and ethical standards in
the practice of radiology.
The California Society of Pathologists ("CSP") is a nonprofit
association serving as the premiere state organization to represent
pathologists in government affairs.
CSP advocates on behalf of its
members in all areas affecting the medical practice of pathology, including
reimbursement,
clinical
lab
regulation
and
compensation and government health programs.
licensing,
workers'
Pathologists regularly
provide specialist care to patients requiring emergency medical care.
The Healthcare Providers represent the community of organized
medical professionals and hospitals forming the backbone of California's
healthcare delivery system. They have experience, historical knowledge
s
and substantive expertise with health plans and the laws and regulations
governing managed care.
One or more of the Healthcare Providers
sponsored, or were integral in the passage of, many bills of legislation that
have shaped the Knox-Keene Act, including provisions governing risk
sharing arrangements between health plans and RBOs.
m
BACKGROUND
California has been a pioneer in healthcare management and delivery
systems. It is the birthplace of the modern HMO and has led the nation in
developing the delegation model whereby a health plan transfers
responsibility to arrange and pay for medical care to an RBO, usually large
physician groups or independent practice associations ("IPA").
RBOs
started to form in California in the 1980s as a way for physicians to
compete with established HMOs, which dominated the managed care
market with effective cost-containment models in an era of ron-away
healthcare inflation. 3
3
See CapMetrics, California Physician Group Solvency Standards at
1 (Aug. 2002), prepared for the California Healtb.Care Foundation,
available online · at http://www.chcf.org/-/media/MEDIA%20LIBRARY
%20Files/PDF/S/PDF%20SolvencyCapMetricsFullReport.pdf ("Solvency
Standards Report").
6
By today's standards, there was little oversight or government
regulation of the RBO market, and by the late 1990s, many RBOs were in
trouble due to inadequate capitation rates and mismanagement or other
financial stresses.
Hundreds closed or went into bankruptcy.
The
legislative reaction to the RBO failures of this time introduced a basic
regulatory structure that has been tweaked over time.
Nevertheless, as
demonstrated by the case of La Vida, to this day RBOs still can and do fail
with devastating consequences on access to physicians, quality of medical
care and stability in the healthcare marketplace. .
A.
RBO FAILURES AT THE TURN OF THE CENTURY
By 1999 nearly 73 percent of Knox-Keene health plans utilized the
delegation model to shift responsibility to RBOs to provide primary care
coverage, and forty percent of health plans utilized capitation contracts for
4
specialist care. With 52 percent of Californians enrolled in a Knox-Keene
health plan during this time amounting to 17 million people, and a majority
of health plans delegating primary and specialty care to RBOs, s the RBO
market became quite hot
RBOs, however, increased their scope of
4
See Debra L. Roth & Deborah Reidy Kelch, Maldng Sense of
Managed Care Regulation in California at 20-21 (Dec. 2001), prepared for
the California HealthCare
Foundation,
available online at
http://www.chcf.org/-/media/MEDIA%20LffiRARY%20Files/PDFIM/PD
fO/o20MakingSenseManagedCareRegulation.pdf.
5
Gloria J. Bazzoli, et al., Managed Care Arrangements of Health
Networks and Systems: A Review of the 1999 Experience, 26 J. AMBUL.
CARE, no. 3 at 226 (2003).
7
financial risk without developing necessary capacity in information
technology, actuarial risk, utilization management, administration and
management leadership to accommodate such growth. 6
Health plans also played a role in Wldermining the RBO market.
Although average health plan premiums increased in the 1990s (as they
continue to do so now)J the average RBO capitation rates paid ·by health
plans plummeted in the 1990s. The average capitation rate per patient in
1993 was $45 and by 1999 it decreased to $23. 7 These numbers can
translate to RBOs having a negative working capital position. 8 Working
capital measures an RBO's ability to meet its short-term liabilities and can
be seen as a measure of fmancial solvency. It is total current assets minus
total current liabilities.
Two major RBOs went out of business in 1998, MedPartners and
FPA Medical Management, leaving thousands of physicians with a total of
more than $100 million in unpaid bills. 9 A study of RBO failures found
that, from 1997 to 2000, 53 medical groups or IPAs closed, went into
6
Solvency Standards Report, supra, at I.
7
Michael D. Dalzell, California Physicians Struggling - Problems
Ahead for Other States?, MANAGED CARE (Oct. 1999), available online at
http://www.managedcaremag.com/archives/991 0/991 O.calmodel.html.
8
See Solvency Standards Report, supra, at 13-14.
9/d.
8
bankruptcy or were merged into other groups. 10 The following chart, taken
from the Solvency Standards Report (infra at page 40), shows the impact of
these closures on covered lives.
Memben .Uf«ted by Group Closam
Year
Groups
Members Averages
97
3
16,500
5,500
98
5
26,700
5,340
99
23
213,580
9,286
OD
22
806,600
36,664
TolaJs
53
1,063,380
The loss of an RBO can have far reaching consequences. Not only
can it affect physician income and cash floW to support their own practices,
RBO failures can affect the financial health of health plans, patient access
to care and quality of care. RBO failures also can disrupt continuity of care
because patient-physician relationships can be terminated as a consequence,
leaving treatment and diagnostic regimes incomplete. For instance, the
failure of K.PC Medical Management displaced 240,000 members and
caused 2,000 pap smears and 200 biopsies to go unread. 11
10
/d. at 39.
11
Senator Jackie Speier, Chilling Statistics on Patient Impact, and
How Policymaking Helps, remarks given to the California HealthCare
Foundation (Oct 2001), available online at http://www.chcf.org/-/
media/MEDIA%20LIBRARY%20Files/PDF/S/PDfOA.20SolvencySmartR.e
marks.pdf.
9
B.
LEGISLATIVE RESPONSE TO THE RBO FAILURES
In response to the RBO failures, the 1999-2000 California
Legislature passed, and the Governor signed, Senate Bill no. 260, Stats.
1999, ch. 529 ("S.B. 260"). The bill required RBOs to register with the
DMHC and submit quarterly fmancial statements.
It also created the
Financial Solvency Standards Board ("FSSB") within the DMHC to
oversee the reporting standards and RBO market. See Health & Safety
Code §1347.15. Through S.B. 260, the DMHC for the first time rated the
financial health of RBOs using four reporting standards that remain in place
today:
• Whether the RBO pays claims in a timely manner in accordance
with section 1371 12 ;
•
Whether the RBO estimates its liabilities for incurred but not
reported claims based on an methodology acceptable to the
DMHC;
• Whether the RBO has a positive tangible net equity ("TNE,) for
the reporting period; and
•
Whether the RBO has a positive working capital position.
See Health & Safety Code §1375.4(b)(l)(A)(i)-(iv).
12
Unless otherwise noted, all statutory references are to the Health
and Safety Code.
10
The financial solvency measures set forth in S.B. 260 were intended
to "enhance consumer protection for patients served by risk-bearing health
care provider organizations ... [and] to assure the actuarial soundness of all
groups that assume responsibility for providing health care to consumers."13
The California Association of Health Plans - of which all of the Health
Plans are members- opposed S.B. 260 and its efforts to impose regulatory
structure on the RBO market. The health plans fundamentally objected to
the DMHC serving as a "regulator of all licensees that assume financial risk
for providing health care." 14 In other words, the health plans wanted no
oversight of their risk sharing arrangements with RBOs.
Notwithstanding the health plans' objections, the financial reporting
standards still may not have been able to adequately measure an RBO' s
financial solvency because they failed to account for the nature of the
prepaid cash flow cycle for claims un,der which RBOs operate. By way of
illustration, FPA Medical Management (one of the two major RBO failures
in 1999) reported a positive working capital position of $4.9 million and a
positive TNE of $12.8 million in financial disclosures made as of March
13
See S.B. 260, Bill Analysis at p. 2, Assem. Comm. on Approp.
(Apr. 11, 2000), available online at http://www.leginfo.ca.gov/pub/99-
00/billlsen!sb_0251-300/sb_260_cfa_20000411_135334_asm_comm.html.
14Id.
11
31, 1998.u This RBO would have passed the solvency standards of S.B.
260, yet it filed for bankruptcy within four months of this reporting date.
Health plans typically pay RBOs a capitation fee in the month for
which the RBO has responsibility to manage care for an enrollee.
It
generally takes 60-90 days for the RBO to receive a claim from a treating
physician after a patient receives care and to pay that claim. The lag in
time between when an RBO receives a capitation payment and when it
must use part or all of the capitation payment to pay out claims can cause
cash flow problems, especially when the RBO must also pay outstanding
bills for salary, benefits, and vendors.
The key to RBO solvency may be a measure of the RBO's available
cash compared to its current liabilities, or the cash-to-claims ratio, which
can fluctuate wildly over any given period. Given the inadequacy of the
original financial solvency standards, the DMHC adopted a regulation that
requires quarterly reporting by RBOs of the cash-to-claims ratio in addition
to the original requirements ofSB 260. See 22 C.C.R. §1300.75.4.2(b). As
experience with the DMHC's regulation of RBOs instructs, this still may
not be adequate to protect against RBO failure because an RBO's financial
condition is susceptible to numerous factors that can change quickly within
quarterly or annual reporting periods. By the time the DMHC finds out
See Solvency S~dards Report, supra, at 3, table 1-1.
15
12
about a drastic change in an RBO's financial condition, it may be too late
for regulatory action to save the RBO.
C.
REGULATION OF THE RBO MARKET
RBOs continue to have a strong presence in the managed care
market today. According to the DMHC, there were 181 RBOs reporting
financial information at the end of2012. 16 As of2013, the DMHC had 233
assigned identification numbers for RBOs. Based on information provided
by the DMHC, CMA believes approximately eight million California lives
are currently covered by an RBO. This also means thousands of physicians
and other health care providers will interface with the delegation model and
be subject to RBOs. The current regulatory scheme, however, is inadequate
to protect these providers and their patients when RBOs fail or engage in
improper behavior.
In addition to the reporting requirements under the Kilox~Keene Act
and DMHC regulations, RBOs can be regulated through a corrective action
plan process when, in the discretion of the DMHC, an RBO has been
deficient on one or more financial solvency standard. See Health & Safety
Code §1375.4 (b)(4); 28 C.C.R. §1300.75.4.8. The DMHC reports that it
has issued 118 corrective action plans, and that 78 percent of these arose
1
~ichelle Yamanaka, Provider Solvency Update, Presentation
Slides for the DMHC at 3 (May 9, 2013), available online at
http://www.dmhc.ca.gov/library/fssblpresentations/psup.pdf.
13
out of RBO failure to meet financial solvency measurements. 17 Seventeen
percent of the corrective action plans were unsuccessful. 18
That is a
significant number of RBO failures that were not prevented or remedied
through the existing regulatory structure.
Developing and implementing a corrective action plan is a protracted
and slow process. It involves multiple steps with numerous deadlines and
opportunities for an RBO or a health plan to delay and object. See, e.g., 28
C.C.R. §1300.75.4.8 (allowing for self-initiated corrective action proposal,
consultation among the DMHC, RBO and health plan, objections by the
health plan or RBO and a final settlement conference). Furthermore, it can
take months or years before this protracted process is even initiated by the
DMHC.
With no other regulatory mechanism to monitor and address RBO's
in distress, the Knox-Keene Act's corrective action plan process standing
alone is inadequate. The factual allegations in this case demonstrate this
very point:
• For each quarter from the beginning of 2007 until June 2010
when La Vida ceased operations, it failed to comply with
multiple
financial
solvency requirements,
17
including the
Dennis Balmer, Minimum Solvency Criteria · Discussion,
Presentation Slides for the DMHC at 10 (May 9, 2013), available online at
http://www.dmhc.ca.gov/library/fssb/presentations/pdppsr.pdf.
18/d.
14
requirements for maintaining a positive working capital, TNE
and cash-to-claims ratios.
Appellants~
Appendix ("AA")
~8 .
La Vida also fell short with respect to timely payment of
hundreds of provider claims. Id.
•
The Health Plans were well aware of La Vida's deteriorating
financial condition because La Vida submitted financial
statements to the Health Plans on a periodic basis as required by
its delegation contracts and Knox-Keene laws and regulations.
AA,49.
•
Throughout the duration of their agreements with La Vida, the
Health Plans also knew that their capitation payments were
insufficient to cover the costs of medical claims. AA ~SO.
• La Vida also advised the Health Plans that its lender filed
bankruptcy in October 2009 and consequently withdrew $4
million from La Vida's account. AA ~S 1.
• Despite being advised of La Vida's financial troubles on an
ongoing basis both directly by La Vida and indirectly by health
care providers who were not being paid by La Vida, the Health
Plans continued delegating payment responsibility to. La Vida.
AA ~52.
•
Around May· and June 2010, years after La Vida began openly
demonstrating financial instability, the Health Plans finally
15
discontinued their capitation payments to La Vida and terminated
their risk-sharing agreements. AA 'i56. The Health Plans only
terminated their agreements with La Vida after being forced to
do so pW"Suant to DMHC de-delegation orders. AA ,57.
Whereas the statutory reporting requirements and corrective action
plan process imposed on RBOs focus on financial solvency and an RBO,s
ability to remain operational, there other are consequences on providers and
patients that can arise short of ceasing operations when an RBO
financially distressed.
Is
Of course, RBOs can fail to pay claims, but
experience teaches that they resort to other means to avoid payment,
incluWng:
•
Failing to pay claims in a timely fashion;
• Holding payment after sending out checks;
•
Refusing to pay statutory interest on late paid claims;
• Refusing to respond to claims status inquiries from providers;
• Asserting that claims were lost or not received;
• Underpaying claims by down-coding or bundling services; and
• Underpaying claims below usual and customary rates.
DMHC corrective action plans often fail to address these other problems
that arise when RBOs become financially distressed.
16
IV
DISCUSSION
The troubled history of the RBO market from its inception to date,
notwithstanding the DMHC's oversight of the market, demonstrates the
necessity of additional mechanisms to bolster the delegation model. As this
Court has already recognized, holding health plans liable when they
negligently delegate payment responsibility is a measured approach that
can provide the needed support for the delegation model while fitting
naturally within the governing Knox-Keene laws and regulatory scheme.
A.
IS
CONTROLLING
PRECEDENT
THAT
ESTABLISHES THE AVAILABILITY OF A NEGLIGENT
DELEGATION CLAIM.
OCHS
The Health Plans hyperbolize the nature of this appeal when they
claim that the plaintiffs are seeking a "court-imposed structural change to
California's managed health care system" or ask the Court ·'to re-write the
Knox-Keene Act." Joint Respondents' Brief ("JRB") at 2. In fact, the
Court is presented with a straightforward question whether to apply its own
existing case precedent to a narrow set of facts. Nothing about that would
require the sort of drastic measures forewarned by the Health Plans.
1.
Ochs Is Consistent with Other Cases in Recognizing the
Statutory Efficacy of a Deleaation.
In Ochs v. PacifiCare of California (2004) 115 Cal.App.4th 782,
787, Division Six of this Court held that "a health care service plan is not
17
statutorily obligated to pay for emergency services when it has delegated its
payment responsibilities to a contracting medical provider that becomes
insolvent and is unable to pay.'' In this respect, Ochs is the last in a group
of cases that arose from the wake of the IP A failures at the tum of the
century. The earlier decisions came out of the Fourth Appellate Disttict:
California Emergency Physicians Medical Group (2003) Ill Cal.App.4th
1127 ("Emergency Physicians.,); Desert Healthcare District v. PacifiCare
FHP. Inc. (200 1) 94 Cal.App.4th 781 ("Desert Healthcare,); and
California Medical Association v. Aetna U.S. Healthcare ofCalifornia, Inc.
(2001) 94 Cal.App.4th 151 ("CMA").
These cases broadly foreclosed
efforts by providers to hold health plans categorically liable when their
delegated RBOs failed to pay medical claims, regardless how responsibly
or irresponsibly the health plans undertook the delegation.
2.
Ochs Also Goes Further than any Other Case to
Recognize Boundaries on a Health Plan's Delegation
Power.
Unlike the Fourth Appellate District cases, however, Ochs alone
went further to recognize that a delegation of payment responsibility can
only absolve a health plan of liability if the delegation is done responsibly.
Thus, the Court additionally held that a health plan ''may be liable for
emergency services when it has acted negligently in delegating its payment
responsibilities." Ochs, 115 Cal.App.4th at 787 (emphasis added). The
Court recognized this as a "claim of negligent delegation," and that it can
18
arise when a provider "suffered an economic loss because [the health plan]
contracted with [an RBO] when it knew or should have known that [the
RBO] was insolvent." /d. at 797.
3.
Ochs Is Good Law.
No appellate opinion contradicts, disagrees with or criticizes either
of this Court's holdings in Ochs.
Ochs's recognition of a negligent
delegation claim stands to this day. The Health Plans cannot dispute this
and instead ·argue cryptically that Ochs represents a "departure from the
weight of California precedent," presumably represented by Emergency
Physicians, Desert Healthcare and CMA. See JRB at 31. The Health
Plans, however, are wrong.
Ochs is wholly consistent with the Fourth Appellate District cases in
giving full effect to
a delegation made under section 1371.4(e). The point
of "departure," if there is one, is not a point of conflict. Ochs departs from
the Fourth Appellate District cases only by going beyond their holdings to
recognize a negligent delegation claim. None of the Fourth Appellate
District cases addressed this separate and independent issue, much less
disapproved of a negligent delegation claim.
The question in this case is neither to re-question or reshape the
delegation· authority of section 1371.4(e) nor to construe the meaning of a
delegation. No one is asking the Court to revisit or to depart from the
holdings of Ochs, Emergency Physicians, Desert Healthcare and CMA as
19
to the effect of a delegation made under section 1371.4(e). And certainly
this case does not threaten to undermine the delegation model itself. See
infra Part B. Health plans can continue to delegate payment responsibility
and risk to an RBO. If they act negligently in making or maintaining the
delegation, Ochs will apply in those specific circumstances to hold the
health plans accountable to providers who do not get reimbursed because
the health plans• delegated·RBO fails to pay.
To be sure, the Knox-Keene Act contemplates that a health plan
may be held liable under theories based on common law or other law.
Section 1371.25 provides, "nothing in this section shall preclude a finding
of liability on the part of a plan . . . based on the doctrines of equitable
indemnity, comparative negligence, contribution, or other statutory or
common law bases for liability." See also Coast Plaza Doctors Hospital v.
UHP Healthcare (2002) 105 Cal.App.4th 693, 706. More to the point,
although the Knox-Keene Act recognizes that an RBO "is responsible for
the processing and payment of claims by providers," it also explicitly states
that "[n]othing in this subparagraph in any way limits, alters, or abrogates
any responsibility of a health care service plan under existing law." Health
& Safety Code §1375.4(g)(l)(C).
Ochs's negligent delegation claim is based on recognition of a
common law duty as a matter of public policy ''to manage one's business
affairs to protect against the economic loss of a third party." Ochs, 115
20
Cal.App.4th at 797.
Furthermore, the claim reflects well established
common law "that liability for negligent conduct may be imposed when a
duty is owed to the plaintiff or to a class of which the plaintiff is a
member." I d. In reaching this latter conclusion, Ochs squarely rejected an
argument that the Health Plans have repeated in this case, see JRB at 40,
that they owed no duty of care to the Centinela physicians because "their
conduct was not intended to affect plaintiffs" in particular:
We reject Pacifi.Care's argument that a claim of negligent delegation
is precluded because it would require a showing that the allegedly
negligent conduct was intended to affect Ochs specifically, rather
than simply the class of emergency physicians who treat
PacifiCare/FHN enrollees. This argument is based on language in
Emergency Physicians and Desert Healthcare to the effect that when
economic damages are sought, the conduct must have been intended
to affect the specific plaintiff rather than persons of the class to
which the plaintiff belongs. [Citations omitted.] But it is well
established that liability for negligent conduct may be imposed when
a duty is owed to the plaintiff or to a class ofwhich the plaintiff is a
member.
Ochs, 115 Cal.App.4th at 797 (citing Ott v. Alfa-Laval Agri, Inc. (1995) 31
Cal.App.4th 1439, 1449, and J'Aire Corp. v. Gregory (1979) 24 Cal.3d
799, 803).
By insisting on the existence of a duty owed to the Centinela
physicians in particular, not only do the Health Plans stand contrary to this
Courfs reasoning in Ochs but they also fail to account for the California
Supreme Court's note that courts have "repeatedly eschewed overly rigid
common law formulations of duty in favor of allowing compensation for
21
foreseeable injuries caused by a defendant's want of ordinary care." J'Aire,
·24 Cal.3d at 805. Thus, "[w]hile the question whether one owes a duty to
another must be decided on a case-by-case basis, every case is governed by
the rule of general application that all persons are required to use ordinary
care to prevent others from being injured as a result of their conduct. ...
[F]oreseeability of the risk is a primary consideration in establishing the
element of duty." Id. at 806 (quoting Weirum v. RKO General, Inc. (1975)
15 Ca1.3d 40, 46).19
4.
There Is No "Safe Harbor" Created by Section 1371.4 to
Bar a Negligent Delegation Claim.
Equally wtpersuasive is the Health Plans' reliance on what they call
a "safe harbor" created out of section 1371.4(e)'s delegation authority. The
Health Plans' grossly oversimplify in arguing that "[w]hen a statute permits
certain conduct, no liability for that conduct can attach under any legal
theory." JRB at 22. None of the cases cited by the Health Plans supports
any such broad principle.
1
~e Health Plans' insistence on a strict application of the Biakanja
factors as the only means to recognizing a duty of care cannot be reconciled
with their admission that the factors are used to find a duty of care "when
only injury to prospective economic advantage is claimed." JRB at 43.
Here, of course, the plaintiffs seek more than "only injury to prospective
economic advantage.'' They have provided valuable emergency medical
services and have been left uncompensated. There is nothing prospective
about their injuries due to the Health Plans' negligence. In any case,
application of the Biakanja factors would still permit recognition of a
negligent delegation in this case, as the Centinela physicians have
explained in their briefs. See Appellants' Reply Brief at 29-39.
22
Emergency Physicians discussed the safe harbor principle arising out
of the unfair competition law, Business and Professions Code section
17200. The law prohibits business acts or practices that are "unlawful."
"By proscribing 'any unlawful' business practice, section 17200 borrows
violations of other laws and threats them as unlawful practices that the
unfair competition law makes independently actionable.''
Cei-Tech
Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20
Ca1.4th 163, 180. Within this context of the unfair competition law, courts
have held that when a specific legislation authorizes certain conduct. i.e.
provides a "safe harbor," a plaintiff may not use the general unfair
competition law to assault that harbor. /d. at 182. Emergency Physicians's
reliance on the safe harbor principle was addressed to an unfair competition
law claim in that case. It certainly does not extend the principle to all torts
and common law claims as the Health Plans claim.
Unlike an unfair
competition claim, a claim of negligent delegation does not borrow or rely
upon violation of some other statute (certainly not section 1371.4). The
"safe harbor" principle derived from the unfair competition law has no
application.
The Health Plans also cite Gentry v. Ebay, Inc. (2002) 99
Cal.App.4th 816.
The court there rejected a common law claim of
negligence against an internet auction service for failing to authenticate
fraudulently signed sports memorabilia. See id. at 833-34. The court relied
23
not on the Health Plans' so-called "safe harbor" principle but on a federal
statute, 47 U.S.C. section 230(c)(l), that preempted state law and expressly
granted federal immunity to any cause of action that would make an
internet service provider liable for information originating with a third party
user of the service.
Gentry has no application here because no statute
affords the Health Plans absolute immunity from liability for delegation.
Harshbarger v. City of Colton (1988) 197 Cal.App.3d 1335, also
cited by the Health Plans (JRB at 22), is similar inapplicable. The court
rejected a claim of negligence against a city for hiring a bad home
inspector. There was no reference to anything resembling a "safe harbor''
principle but rather the court based its decision on Government Code
section 818.6, which expressly grants governments absolute immunity to
any liability for injury caused by a negligent inspection. See id. at 1346-47.
Finally, the Health Plans' reliance on Williams v. State Farm Fire &
Casualty Co. (1990) 216 Cal.App.3d 1540, is misplaced. The court there
rejected a claim of breach of the covenant of good faith and fair dealing
against an insurer for cancelling a home policy after the insurer determined
the property did not meet its underwriting requirements for earthquake
insurance coverage. The court held, "because that contention [of breach of
the covenant of good faith and fair dealing] rests on the assertion that the
cancellation was prohibited by the earthquake insurance law, our
conclusion that no statutory violation occurred is dispositive of the issue."
24
ld. at 1549. It is hard to imagine how this holding even applies here, where
the Centinela physicians do not allege that the Health Plans have violated
section 1371.4.
The Centinela physicians allege that the Health Plans negligently
delegated their payment responsibilities to La Vida because they knew or
should have known that La Vida would be unable to pay medical claims
due to its financial precariousness. That is enough to state a claim of
negligent delegation under Ochs that is independent of section 1371.4.
There is no reason why Ochs should not be applied to these factual
allegations. See Chambers v. Unemployment Ins. Appeals Bd. (1973) 33
Cal.App.3d 923, 928 (holding decision made by division of district court of
appeal should ordinarily be followed by another division of such district).
B.
A NEGLIGENT DELEGATION CLAIM STRENGTHENS
THE DELEGATION MODEL.
The Court need not do more to resolve this appeal than apply Ochs
to recognize a claim of negligent delegation against the Health Plans.
However, the Health Plans spend much time and effort trying to assail the
negligent delegation claim on policy grounds. The Health Plans primarily
argue that imposing a responsibility on health plans to eDSW'e the financial
stability of the delegation model would somehow undemrine the delegation
model. On the contrary, recognizing a negligent delegation claim would
strengthen, not weaken, the delegation model because it would place
25
responsibility on the participants in the market who are in the best position
to know and to act in rare situations when RBOs become financially
distressed. Moreover. imposing liability on health plans only when they
negligently delegate would not serve to chill delegation and capitation
arrangements. A negligent delegation claim would arise only in narrow
circumstances because the majority of risk arrangements between health
plans and RBOs are responsibly undertaken and maintained.
1.
Health Plans Are in the Best Position to Promptly Address
Problems with their Delegated RBOs.
As noted, RBO financial failures often arise due to cash flow
problems that can occur with little notice, and these solvency issues can
cause other problems for providers besides lack of reimbursement for
medical care. It is necessary that measures be in place to ensure prompt
attention and action to prevent an RBO from getting into trouble. The
Knox-Keene Act already puts the health plans in the best position to do
this.
The Health Plans would have the Court believe that they have no
responsibilities over RBOs as soon as the ink dries on a capitation contract.
Nothing could be further from the truth.
DMHC regulations expressly
require health plans that have capitation or risk-sharing arrangements with
RBOs to "[e]nsure that each contracting provider has the administrative and
financial capacity to meet its contractual obligations.,
26
28 C.C.R.
§ 1300.70(b)(2(H)( 1). The Knox-Keene Act and DMHC regulations thus
broadly require that health plans continually monitor the financial health of
their delegated RBOs and the fiscal soundness of capitation arrangements.
Health plans are also required to actively and continually assist their
RBOs to understand risk arrangements. For example,20 every capitation
contract must obligate the health plan to continually provide a large amount
of financial and other relevant information to the RBO including, among
others things:
•
Co-payment and deductible amounts;
•
The amount of capitation to be paid per enrollee per month;
• A matrix of responsibility for medical expenses (physician,
institutional, ancillary, and pharmacy) which will be allocated to the
RBO·
'
•
Expected and projected utilization rates and unit costs for each major
expense service group, the source of the data and the actuarial
methods employed in determining the utilization rates and unit costs
by benefit plan type for the type of risk arrangement; and
2
'7he Centinela physicians have enumerated in detail the many
duties and obligations imposed on health plans to monitor their delegated
RBOs, to assist their RBOs understand financial risk in order to remain
solvent, and -to take appropriate action to prevent an RBO from failing. See
Appellants Reply Brief at 11 - 15. The Healthcare Providers here focus
only on an illustrative sampling of the obligations.
27
• All factors used to adjust payments or risk-sharing targets, including
but not limited to the following: age, sex, localized geographic area,
family size, experience rated, and benefit plan design, including
co-payment/deductible levels.
See 28 C.C.R. §1300.75.4.1.
Health plans additionally are required to provide timely information
to their RBOs as circumstances changes. Plans must disclose to their
delegated RBOs information about enrollees added or terminated wtder
each benefit plan contract served by the organization and a reconciliation of
the variances between current and prior disclosures.
28 C.C.R.
§1300.75.4.1(a)(2) and (3). Health plans also are obligated to keep vigil for
any event that ''materially alters the [RBOs '] financial situation, or
threatens its solvencyu and report such events to the DMHC within five
business days ofleaming about the event. See 28 C.C.R. §1300.75.4.3(e).
Health plans are already in the best position to know when their
delegated RBOs face financial distress that can threaten insolvency and to
take appropriate action. As shown in the case of La Vida, however, health
plans cannot be relied upon on their own initiative to protect enrollees and
treating providers. They instead are relying on a slow and protracted
regulatory process that has proven to be inadequate at preventing and
redressing harm from RBO failures.
28
A negligent delegation claim would encourage health plans to take
their delegation responsibilities more seriously and engage more actively
with RBOs that the plans know or should know need attention. Such a
claim would not hold health plans responsible every time their delegated
RBO fails, but rather would only hold those health plans accountable when
they have acted negligently in delegating risk and discharging the
responsibilities that go with such a delegation. Imposing liability through
tort negligence is appropriate in these circumstances because the health
plans are in the best position to foresee when RBOs may fail and cause
harm to treating providers. See J'Aire, 24 Cal.3d at 806 ("Rather ·than
traditional notions of duty, this court has focused on foreseeability as the
key component necessary to establish liability [for negligence]").
2.
A Negligent Delegation Claim Would Complement the
DMHCs Regulatory Authority over the Delegation Model.
A negligent delegation claim would require more vigilance by the
health plans over the delegation model and serve to complement the
DMHC's regulatory oversight As already noted, health plans are in the
best position to continuously monitor the delegation model and take quick
action as necessary. But the Health Plans seem to suggest that they are
powerless to take action in the face of a faiiing RBO given the existence of
the Knox~Keene Act's corrective action plan process. See JRB at 15~16.
That simply is not true, especially when the
29
Knox~Kcene
Act imposes
primary responsibility on health plans to broadly ensure that their delegated
RBOs are financially capable of managing risk and paying medical claims.
Nothing in the Knox-Keene Act or DMHC regulations would
prevent a health plan from taking action to address RBO insolvency or
fmancial distress. It is one thing, as the Health Plans have pointed out, to
penalize a health plan for refusing or failing to comply with a DMHCordered corrective action plan. See 28 C.C.R. §1300.74.4.5(a)(4) and (d).
It is another thing all together to suggest that plans cannot do anything else
to protect providers and patients from an RBO failure except what is
spelled out in a corrective action plan. The Knox-Keene Act contains no
such prohibition but rather compels health plans to continually monitor
their delegated RBOs' health and take action when necessary.
Furthermore, the Knox-Keene Act expressly recognizes a health
plan's right, albeit subject to DMHC oversight, to reassign enrollees due to
a delegated RBO's financial distress even if the RBO is compliant with a
DMHC-approved corrective action plan.
See 28 C.C.R. §1300.74.4.4
(a)(6). This provision recognizes the dual responsibilities of health plans
not only to comply with a corrective action plan but also to take other
action that may be necessary when RBOs are in jeopardy of insolvency.
30
v
CONCLUSION
For the foregoing reasons, the Healthcare Providers urge the Court to
reverse the judgment of the trial court and permit the Centinela physicians
to pursue their claim of negligent delegation against the Health Plans.
DATED: June27, 2013.
Respectfully,
Center For Legal Affairs
CALIFORNIA MEDICAL ASSOCIATIOl\
4iJ
By.
I1llg£no
Attorneys for Amici Curiae California
Medical Association, California Hospital
Association, California Orthopaedic
Association, California Radiological
Society, and California Society of
Pathologists
31
CERTIFICATE OF COMPLIANCE
I HEREBY CERTIFY:
This brief is reproduced using a proportional spaced typeface of 13
points. This office uses Microsoft Word, which reports that this amicus
curiae brief contains 6,578 words.
DATED: llily27, 2013.
Jv~ (iV\AJ)
By:
L@_
{LOngx.Do
Attorney for Amici Curiae California
Medical Association, California Hospital
Association, California Orthopaedic
Association, California Radiological
Society, and California Society of
Pathologists
PROOF OF SERVICE
Centinela Freeman Emergency Medical Associates et al v. Health Net of
California. Inc. et al., Appeal No. B228867 (Second Appellate District,
Division Three)
I, Melanie Newneyer. hereby declare:
I am employed in Sacramento, California. I am over the age of
eighteen years and am not a party to the above-entitled action. My business
address is 1201 J Street, Suite 200, Sacramento, California 95814.
On June 27, 2013, I served the documents as indicated below:
APPLICATION FOR LEAVE TO FILE AMICUS CURIAE BRIEF
AND AMICUS CURIAE BRIEF OF CALIFORNIA MEDICAL
ASSOCIATION, CALIFORNIA HOSPITAL ASSOCIATION,
CALIFORNIA ORTHOPAEDIC ASSOCIATION, CALIFORNIA
RADIOLOGICAL SOCIE1Y AND CALIFORNIA SOCIETY OF
PAffiOLOGISTS IN SUPPORT OF APPELLANTS CENTINELA
FREEMAN EMERGENCY MEDICAL ASSOCIATES et al.
Electronic Service: By sending a PDF format copy to the California
Supreme Court,s electronic notification address pursuant to rule 8.212 of
the California Rules of Court.
U.S. Mail: By placing a true copy thereof in a sealed envelope with firstclass postage thereon fully prepaid, in the United States Postal Service Mail
at Sacramento, California addressed as set forth below:
Andrew H. Selesnick
Jason 0. Cheuk
MICHELMAN & ROBINSON, LLP
15760 Ventura Blvd., 5th Floor
Encino, CA 91436
Margaret M. Grignon
Kurt C. Petersen
Kenneth N. Smersfelt
Zarah A. Jaltorossian
REED SMITH LLP
355 S. Grand Ave., Suite 2900
Los Angel~ CA 90071
Attorneys for Plaintiffs and
Appellants CENTINELA
FREEMAN EMERGENCY
MEDICAL ASSOCIATES et al.
Attorneys for Defenda'ht and
Respondent BLUE CROSS OF
CALIFORNIA DBA ANTHEM
BLUE CROSS
Jennifer S. Romano
CROWELL & MORINO LLP
515 South Flower St., 40th Floor
Los Angeles, CA 90071
Attorneys for Defendant and
Respondent PACIFICA.RE OF
CAUFORNIA DBA SECURE
HORIZONS REALm PLAN OF
AMERICA
William A. Helvestine
Ethan P. Schu1man
Damian D. Capozzola
CROWELL & MORINO LLP
275 Battery St., 23Jd Floor
San Francisco, CA 94111
Attorneys for Defendants and
Respondents HEALTH NET OF
CAliFORNIA, INC.
Kirk A. Patrick
Heather L. Richardson
OffiSON, DUNN & CRUTCHER LLP
333 S. Grand Ave.
Los Angeles, CA 90071-3197
Attorneys for Defendant and
Respondent .AETNA HEALTH
OF CALIFORNIA, INC.
Gregory N. Pimstone
Joanna S. McCallum
Jeffrey J. Maurer
MANATI, PHELPS & PHILLIPS LLP
11355 W. Olympic Blvd.
Los Angeles, CA 90064
Attorneys for Defendant and
Respondent CALIFORNIA
PHYSICIANS' SERVICE, INC.
DBA BLUE SHIEW OF
CALIFORNIA
William P. Donovan
Mathew D. Caplan
DLA PIPER LLP {US)
1999 Avenue ofthe Stars, 4th Floor
Los Angeles, CA 90067
Attorneys for Defendant and
Respondent C/GNA
HEALTHCARE OF
CALIFORNIA, INC.
Don A. Hernandez
Jamie L. Lopez
HERNANDEZ, SCHAEDEL & ASSOCS.,
LLP
2 N. Lake Ave., Suite 930
Pasadena, CA 91101
Attorneys for Defendant and
Respondent SCAN HEALTH
PLAN
Ron. John S. Wiley, Jr.
Los Angeles Superior Court
Central Civil West, Dept. 311
600 S. Commonwealth Ave.
Los Angeles, CA 90005
Case No. BC449056
Consumer Law Section
Los Angeles District Attorney
210 West Temple St, Suite 1800
Los Angeles, CA 90012-3210
Appellate Coordinator
Office of the Attorney General
Consumer Law Section
300 S. Spring St.
Los Angeles, CA 90013
Service pursuant to B&P Code
§ 17209 and CRC, rule 8.29(a)
and (b)
Service pursuant to B&P Code
§17209 and CRC, rule 8.29(a)
and (b)
I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct. xecuted on June 27,
2013, at Sacramento, California.