Business Law

Epstein v. Vision Service Plan (Oct. 22, 2020, A155219) __ Cal.App.5th __ [2020 WL 6165494]

Doctor network agreement may require arbitration review of an administrative dispute resolution panel’s decision.

Dr. Gordon Epstein, an optometrist, entered into a “Network Doctor Agreement” with Vision Service Plan (VSP) to be part of its provider network. After auditing Dr. Epstein’s reimbursement claims, VSP determined that he had knowingly purchased lenses from an unapproved supplier, terminated the agreement, and demanded that Dr. Epstein pay $104,333 in restitution. Dr. Epstein invoked VSP’s two-step Fair Hearing/Binding Arbitration dispute resolution procedure to appeal that decision. In the first step, counsel for both Dr. Epstein and VSP presented documentary and testimonial evidence to a three-person panel, which upheld VSP’s decision. The second step required binding arbitration pursuant to the Federal Arbitration Act and in accordance with procedures set forth in VSP’s plan and policy. Rather than invoking arbitration, Dr. Epstein sought a writ of administrative mandamus from the superior court. The court denied the petition on the ground that Dr. Epstein had failed to exhaust his administrative remedies. He appealed. 

The Court of Appeal affirmed. It rejected Dr. Epstein’s argument that VSP’s dispute resolution process violated Health and Safety Code section 1367 and its implementing regulation. The court held that this regulatory law “requiring certain network provider agreements to include a dispute resolution process that is not arbitration, pertains only to the first step of the dispute resolution process and does not foreclose the parties from agreeing to arbitration in lieu of subsequent judicial review through administrative mandamus.” The court noted that the relevant regulation did not address, much less limit, the means by which the parties were permitted to challenge a final dispute resolution decision. “[N]o statutory provision purports to make administrative mandamus the exclusive means for review of such a decision . . . and no statutory provision purports to bar the parties from agreeing to binding arbitration.” The court further held that VSP could enforce the arbitration provision because, while it was procedurally unconscionable in minor respects, it was not substantively unconscionable.

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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