County of Santa Clara v. Superior Court (July 10, 2023) __ Cal.5th __ [2023 WL 4414084]

Public health care service plans are not immune from provider reimbursement actions under the Knox-Keene Act.

As required by state and federal law, Doctors Medical Center of Modesto, Inc., and Doctors Hospital of Manteca, Inc., provided emergency medical care to three individuals enrolled in a health care service plan operated by the County of Santa Clara. The hospitals had no contract with the County governing rates payable for emergency services rendered to plan members. The hospitals billed the County for the emergency services rendered, but the County paid only a portion of the billed amounts. The hospitals then sued the County for the balance under a provision of the Knox-Keene Act (and implementing regulations) requiring a health care service plan to reimburse medical providers for the “reasonable and customary value” of the emergency care. (Health & Saf. Code, § 1371.4, subd. (b); Cal. Code Regs., tit. 28, § 1300.71, subd. (a)(3)(B).) After the trial court overruled the County’s demurrer, the County petitioned for a writ of mandate, The Court of Appeal granted writ relief, holding that the County was immune from suit under the Government Claims Act’s general immunity provision (Gov. Code, § 815). The Hospitals sought and obtained review in the California Supreme Court.

The Supreme Court reversed, holding that the Claims Act does not immunize a public health care service plan from an emergency medical provider’s implied-in-law quantum meruit claim seeking reimbursement under the Knox-Keene Act. Noting that the Claims Act does not preclude contract liability, or the right to obtain relief “other than money or damages” (Gov. Code, § 814), the Supreme Court explained that the Claims Act immunizes public entities only from tort claims seeking money damages. The Court rejected the County’s characterization of the hospitals’ quantum meruit claim as a tort claim seeking money damages, and instead viewed the hospitals’ claim as seeking County compliance with the statutory duty of reimbursement. The Court further reasoned that the Knox-Keene Act should apply equally to private and public health care service plans, and that treating public plans differently would risk systemic underpayment of emergency services, which the Legislature had sought to avoid by enacting the Knox-Keene Act’s reimbursement provision. The Court also distinguished its decisions predating the Claims Act that barred quasi-contractual recovery against public entities; those cases involved express contracts with public entities that proved to be void for violating applicable statutes or charters. Here, by contrast, the hospitals had no express contract with the County and the hospitals’ quasi-contractual claims sought payment required by statute. 

The bulletin describing this appellate decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson, Peder K. Batalden, and Lacey Estudillo at the appellate firm 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.