Business Law

Coast Hematology-Oncology Associates Medical Group, Inc. v. Long Beach Memorial Medical Center (Dec. 15, 2020, B297984) __Cal.App.5th__ [2020 WL 7351233]

Medical group’s proprietary “Relative Value Unit” assessment of physician performance and productivity may be protected as a trade secret.

Long Beach Memorial Medical attempted to buy Coast Hematology-Oncology Associates Medical Group, Inc., but the parties were unable to agree on terms. Memorial then hired two doctors and four staff members away from Coast. Coast responded by suing Memorial for misappropriation of trade secrets and related tort claims. Memorial successfully moved for summary judgment, and Coast appealed.

The Court of Appeal reversed in part, holding there was a triable issue whether Coast could assert trade secret protection regarding its historical “Relative Value Unit” (RVU) assessment of physician performance and productivity. RVU is a nationally uniform quantitative scale rating the difficulty of various medical services, and widely available information generally cannot be a protected trade secret. But the court held that historical data regarding Coast’s application of that scale to its physicians could be valuable if Coast took reasonable effort to maintain the secrecy of that physician productivity information. The court also held that firm-wide productivity data can qualify for trade secret protection, even if individual employees have the right to disclose their portion of that firm-wide data. 

However, the court affirmed summary judgment regarding Coast’s claimed trade secret regarding its use of “Current Procedural Terminology” (CPT) codes—a nationally uniform medical billing code system—since Coast failed to timely identify with reasonable particularity any CPT secrets. (See Code Civ. Proc., § 2019.210.)  The court rejected Coast’s argument that it should have been granted leave to amend its identification after Memorial filed its summary judgment motion, reasoning that a plaintiff cannot “wait until the defense has loosed its arrow at the bullseye, then move the target, and finally claim victory when the defense’s arrow misses the mark.”

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, Horvitz & Levy LLP, and is republished with permission. For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or htwatson@horvitzlevy.com.

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