California Court of Appeals, Second District, First Division
Cal.Rptr.3d 423] APPEAL from a judgment of the Superior Court
of Los Angeles, Michael Johnson, Judge. Affirmed.
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Day, James Poth, Irvine, and Erica L. Reilley, Los Angeles,
for Plaintiffs and Appellants.
Simpson Rowe, Michael J. Daponde, Eunice C. Majam-Simpson,
Sacramento, and David P. McDonough. for Defendant and
Spalding, Glenn Solomon, Daron Tooch, and Vinay Kohli, Los
Angeles, for Miller Childrens & Womens Hospital of Long
Beach, Pomona Valley Hospital Medical Center, Valley
Childrens Hospital, NorthBay Medical Center, Long Beach
Medical Center, Lucille Salter Packard Childrens Hospital at
Stanford, Stanford Health Care, Orange Coast Medical Center,
El Camino Hospital, and Saddleback Medical Center as Amici
Curiae on behalf of Plaintiffs and Appellants.
Lundy & Bookman, Lloyd A. Bookman, Los Angeles, and Paul L.
Garcia for California Hospital Association as Amicus Curiae
on behalf of Plaintiffs and Appellants.
Becerra, Attorney General, Jennifer M. Kim, Gregory D. Brown,
and Sarah M. Barnes, Deputy Attorneys General for California
Department of Health Care Services as Amicus Curiae on behalf
of Defendant and Respondent.
Hiestand, Sacramento, for California Association of Health
Plans and Local Health Plans of California as Amici Curiae on
behalf of Defendant and Respondent.
Cal.Rptr.3d 424] Plaintiffs and appellants Dignity Health and
Northridge Hospital Medical Center (Northridge Hospital;
collectively, plaintiffs) appeal from a grant of summary
judgment in favor of defendant and respondent Local
Initiative Health Care Authority of Los Angeles County dba
L.A. Care Health Plan (defendant). Defendant is a managed
care health plan that provides health care coverage to
low-income individuals under Medi-Cal, the states Medicaid
program. Northridge Hospital, which Dignity Health operates,
is not within defendants network of contracted providers.
The question presented in this case is what amount defendant
must compensate plaintiffs for poststabilization
services— medically necessary inpatient care following
stabilization of an emergency— that defendant expressly
or implicitly authorized Northridge Hospital to provide to
patients enrolled with defendant.
contends, and the trial court found, state and federal law
mandate that out-of-network poststabilization services under
Medi-Cal be paid at state-set rates known as "All
Patient Refined Diagnosis Related Group" or
"APR-DRG" rates. Plaintiffs disagree, arguing that
Welfare and Institutions Code  section 14105.28,
subdivision (b)(1)(B) specifically exempts "managed care
inpatient days" from services subject to the APR-DRG
rates, and that Northridge Hospitals inpatient treatment of
defendants managed care enrollees constituted "managed
care inpatient days." Plaintiffs further contend that
federal law is silent as to any payment rate for
out-of-network poststabilization services under Medicaid.
Plaintiffs thus claim they are entitled to their full billed
conclude that the legislative history of section 14105.28,
along with the statement of legislative intent within the
statute itself, indicate that the
Legislature intended the APR-DRG rates to apply to
out-of-network inpatient poststabilization services under
Medi-Cal. Consistent with the Legislatures intent, we thus
interpret the phrase "managed care inpatient days"
to refer to services provided pursuant to a managed care
contract, that is, in-network services. Accordingly, we
affirm the judgment. We do not decide whether federal law
compels the same result.
Defendant is a publicly funded Medi-Cal managed care health
plan established by the County of Los Angeles. For the time
period at issue in this case, defendant did not have a
written contract with plaintiff Northridge Hospital for the
provision of inpatient services; thus, Northridge Hospital
was "out-of-network," i.e., not part of defendants
network of healthcare providers. Plaintiff Dignity Health
operates Northridge Hospital.
filed an action against defendant alleging that defendant had
expressly or implicitly authorized Northridge Hospital to
provide inpatient poststabilization services to Medi-Cal
beneficiaries enrolled [257 Cal.Rptr.3d 425] with
defendant. Plaintiffs alleged defendant therefore
was financially responsible for those services. Plaintiffs
alleged defendant had not paid Northridge Hospitals full
billed charges, however, instead paying the lower APR-DRG
rates set by the state.
on defendants alleged failure to pay the full billed
charges, plaintiffs asserted causes of action for breach of
implied contract, violation of Health and Safety Code section
1262.8, and declaratory relief. Plaintiffs also asserted a
cause of action under Health and Safety Code section 1371.4,
alleging defendant had failed to pay state-mandated rates for
outpatient and emergency services provided by Northridge
Hospital to patients enrolled with defendant.
discovery, plaintiffs moved for summary adjudication on their
causes of action for breach of implied contract, violation of
Health and Safety Code section 1262.8, and declaratory
relief, seeking a ruling that defendant had a
"duty" to pay plaintiffs full billed rates for
poststabilization services rather than the APR-DRG rates.
Plaintiffs argued that section 14105.28 expressly excluded
"managed care inpatient days" from the APR-DRG
rates, and that Northridge Hospitals poststabilization care
of defendants managed care enrollees fell within that
exclusion. Plaintiffs concluded that absent application of
the APR-DRG rates, defendant had to pay them their full
billed charges for these poststabilization services.
Defendant countered with its own motion for summary judgment.
Defendant argued that federal law mandates that
out-of-network hospitals accept state-set rates for
poststabilization services under Medicaid, which in
California are the APR-DRG rates. Defendant further argued
that the Department of Health Care Services (DHCS), the state
agency overseeing Medi-Cal, has interpreted section 14105.28
to apply the APR-DRG rates to out-of-network
poststabilization services provided to managed care patients,
and that the legislative history of the APR-DRG methodology
supports DHCSs interpretation. Defendant also contended that
Health and Safety Code sections 1262.8 and 1371.4 do not
create private rights of action.
trial court granted defendants motion and denied plaintiffs
motion. The trial court concluded that the interplay of three
federal regulations— 42 C.F.R. part 422.113, 42 C.F.R.
part 422.214, and 42 C.F.R. part 438.114— mandates that
Medicaid managed care plans pay state-set rates, such as the
APR-DRG rates, for out-of-network poststabilization services.
trial court rejected plaintiffs interpretation that the
exclusion for "managed care inpatient days" in
section 14105.28 applies to out-of-network services. The
trial court found that DHCSs contrary interpretation that
"managed care inpatient days" excludes only
in-network services from the APR-DRG rates was "entitled
to considerable weight." The trial court also found
DHCSs interpretation "makes sense" because
in-network services already were subject to contracted terms
and thus there was no need to regulate them through the
trial court further agreed with defendant that Health and
Safety Code sections 1262.8 and 1371.4 do not create private
rights of action.
Cal.Rptr.3d 426] The trial court entered judgment in favor of
defendant. Plaintiffs timely appealed.
OVERVIEW OF MEDI-CAL
is Californias program under the joint federal-state program
known as Medicaid." (Marquez v. State Dept. of
Health Care Services (2015) 240 Cal.App.4th ...