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Jerry Lloyd Martin et al v. Pacificare of California et al

August 31, 2011


Appeal from a judgment of the Superior Court of Orange County, Kirk H. Nakamura, Judge. (Super. Ct. No. 05CC04980)

The opinion of the court was delivered by: Aronson, Acting P. J.




Plaintiffs Jerry Jay Martin, Jerry Lloyd Martin, Tressa Brown, and Lisa Vindell (collectively the Martins) appeal from a judgment the trial court entered after granting a non-suit motion in favor of defendants PacifiCare of California doing business as Secure Horizons and PacifiCare Health Systems, LLC (collectively PacifiCare). In this insurance bad faith action, the Martins sued PacifiCare based on delays their mother or wife, Elsie Martin (Elsie),*fn1 experienced while seeking treatment for a cerebral aneurysm. Elsie died before receiving the treatment she sought.

At trial, PacifiCare moved for non-suit based on the recent decision in Watanabe v. California Physicians' Service (2008) 169 Cal.App.4th 56 (Watanabe), which held Health and Safety Code section 1371.25 (section 1371.25) barred a cause of action seeking to hold a health care service plan vicariously liable for the acts or omissions of the health care provider who agreed to deliver medical care to the plan's subscribers. (Watanabe, at pp. 63-64.) The trial court granted the motion, finding section 1371.25 barred the Martins' claims because they sought to hold PacifiCare vicariously liable for the acts or omissions of Bright Medical Group (Bright), the health care provider PacifiCare contracted with to provide Elsie medical care and to make all initial determinations regarding whether any particular care or treatment was medically necessary.

The Martins contend we must reverse the trial court's judgment because Watanabe misinterpreted section 1371.25. As the Martins interpret the statute, section 1371.25 bars health care service plans from requiring medical providers to hold the plans harmless for the plan's own acts or omissions; it does not bar common law or other liability theories against health care service plans. The Martins also argue section 1371.25 does not apply to their claims because insurance bad faith is a direct liability theory, not a vicarious liability theory.

We agree with Watanabe that section 1371.25's plain language prevents a health care service plan from being held vicariously liable for a medical provider's acts or omissions. Our examination of section 1371.25's legislative history further supports that conclusion. We also reject the Martins' contention that insurance bad faith is necessarily a direct liability theory. Regardless how they label their claim, the Martins sought to hold PacifiCare vicariously liable for Bright's acts or omissions. Accordingly, we affirm the trial court's judgment.



A. PacifiCare's Secure Horizons Plan

PacifiCare is a licensed health care service plan under California's Knox-Keene Health Care Service Plan Act of 1975 (Health & Saf. Code, § 1340 et seq.).*fn2 The Knox-Keene Act defines a "health care service plan" as "[a]ny person who undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or to reimburse any part of the cost for those services, in return for a prepaid or periodic charge paid by or on behalf of the subscribers or enrollees." (Health & Saf. Code, § 1345, subd. (f)(1).) PacifiCare is not licensed to practice medicine and it does not directly provide medical care to its subscribers. (Civ. Code, § 3428, subd. (c); Health & Saf. Code, § 1395, subd (b).) Instead, PacifiCare contracts with "providers"*fn3 to deliver medical care to subscribers who enroll in its plans. Secure Horizons is the service plan PacifiCare offers to subscribers eligible for benefits under the federal Medicare Advantage program (see generally 42 U.S.C. § 1395w-21 et seq.).

The Medicare Advantage program (previously known as Medicareਚ≱) is a federal program permitting Medicare recipients to enroll in private insurance plans, with Medicare paying all or most of the insurance premiums in lieu of paying Medicare benefits directly to health care providers. PacifiCare contracts with the federal agency that administers Medicare to receive a flat monthly payment for each person enrolled in its Secure Horizons plan. In return, PacifiCare arranges to provide its subscribers a specified range of medical services through its network of medical providers. (Yarick v. PacifiCare of California (2009) 179 Cal.App.4th 1158, 1163.)

Bright is a medical service provider PacifiCare hired to provide medical services to PacifiCare's subscribers. The contract between PacifiCare and Bright requires Bright to provide medical care to Secure Horizons subscribers who select a member of Bright's medical group as their primary care physician. The contract also requires Bright to perform utilization review on PacifiCare's behalf. Utilization review is the process physicians use to determine whether a particular service or treatment is medically necessary and therefore covered by the applicable health care service plan. Although PacifiCare delegated this function to Bright, it retained final authority to determine whether Bright's physicians should provide a particular service or treatment. All Secure Horizons subscribers have the right to appeal any utilization review decision to PacifiCare and PacifiCare may reverse any decision Bright makes. PacifiCare pays Bright a negotiated, flat monthly fee (based on a percentage of Medicare's payments to PacifiCare) for each Secure Horizons subscriber who selects a Bright physician as his or her primary care physician. Bright must cover the costs of all necessary medical care, whether a Bright physician provides the care or refers the subscriber to another health care provider.

B. Elsie's Secure Horizons Contract

By enrolling in PacifiCare's Secure Horizons plan, Elsie agreed to receive her medical care (except certain emergency and urgently needed services not applicable in this case) from PacifiCare's medical providers. Her contract with PacifiCare required her to choose a primary care physician, and emphasized the doctor Elsie selected would be responsible for providing or arranging all her medical care. The contract limited Elsie to specialists and facilities that belonged to the same medical group as the physician she selected.

The contract explained PacifiCare's contractual relationship with Medicare and the providers Elsie would look to for her medical care. It also explained the utilization review process that determined whether to approve any medically necessary service or treatment. Finally, the contract described Elsie's right to contact PacifiCare with any questions or concerns regarding her health care and to appeal any utilization review decision, including an expedited appeal in case of emergency. Through its contracting process with PacifiCare, Medicare reviewed and approved PacifiCare's contract with its Secure Horizons subscribers.

When she enrolled in Secure Horizons, Elsie selected Bright's Dr. Ronald Galbreath as her primary care physician.

C. Elsie's Medical Treatment

In late August 2003, Presbyterian Intercommunity Hospital, an in-network hospital affiliated with Bright, admitted Elsie for a neurological evaluation. An MRI (magnetic resonance imaging) and MRA (magnetic resonance angiogram) revealed Elsie had a large aneurysm in her left middle cerebral artery. An aneurysm is a weakening or ballooning of a blood vessel.

Bright's affiliated physicians and facilities lacked the expertise to treat Elsie's aneurysm. Consequently, Galbreath requested that Bright authorize treatment out-of-network at the University of Southern California Medical Center (USC). Bright approved the request and Elsie saw Dr. Steven Giannotta, a neurosurgeon, at USC.

Giannotta described three treatment options for Elsie's aneurysm: (1) surgery on the affected blood vessel to prevent blood from enlarging and rupturing the aneurysm; (2) coil embolization, a process where increasingly smaller platinum coils are threaded into the aneurysm through a catheter to block blood flow and prevent the aneurysm from rupturing; and (3) doing nothing. Giannotta recommended the coil embolization option and referred Elsie to Drs. George Teitlebaum and Donald Larsen, the neurointerventional radiologists who performed coil embolization procedures at USC.

To determine whether coil embolization is a viable treatment option for their patients, Teitlebaum and Larsen perform a cerebral angiogram, which involves threading a diagnostic catheter through an artery to the aneurysm to determine whether the aneurysm has an adequate "neck" to permit coil embolization. If the aneurysm is amenable to the procedure, Teitlebaum and Larsen place the patient under general anesthesia, replace the diagnostic catheter with a guiding catheter, and perform the coil embolization procedure during the same visit.

On September 25, 2003, Giannotta sent a letter to Galbreath seeking approval for Elsie to undergo an angiogram and coil embolization with Teitlebaum and Larsen. Galbreath forwarded the request to Bright's utilization review committee. On October 7, 2003, Dr. Eric Flanders, a family practitioner and Bright's utilization review committee chairman, denied the request. Instead, Flanders approved a cerebral angiogram to be performed at Presbyterian Intercommunity Hospital, Bright's in-network hospital. Flanders did not consult with either Giannotta or Galbreath before making his decision.

Bright sent Elsie a denial letter explaining the medical documentation her doctors submitted failed to support the request and it required further diagnostic testing before Bright would refer Elsie to an out-of-network provider. The denial letter included a lengthy explanation regarding Elsie's right to appeal Bright's ...

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