The opinion
Filed 7/29/14
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
THIRD APPELLATE DISTRICT
(San Joaquin)
----
DAMERON HOSPITAL ASSOCIATION,
Plaintiff and Appellant, C070475
v. (Super. Ct. No.
39201000245260CUMCSTK)
AAA NORTHERN CALIFORNIA, NEVADA AND
UTAH INSURANCE EXCHANGE et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of San Joaquin County, Carter P.
Holly, Judge. Affirmed.
Hatton, Petrie & Stackler, Gregory M. Hatton and John A. McMahon for Plaintiff
and Appellant.
Coddington, Hicks & Danforth, Richard G. Grotch, R. Wardell Loveland, Sungjee
Lee for Defendant and Respondent AAA Northern California, Nevada and Utah
Insurance Exchange; Pollak, Vida & Fisher, Michael M. Pollak and Hamed Amiri
Ghaemmaghami for Defendant and Respondent Allstate Insurance Company.
Fred J. Hiestand for The Civil Justice Association of California as Amicus Curiae
on behalf of Defendants and Respondents; Davis & Associates and Monte R. Davis, Jr.,
for Permanent General Assurance Company as Amicus Curiae on behalf of Defendants
and Respondents.
1
Under California law, hospitals must provide emergency room services without
regard for a patient’s ability to pay or who will ultimately bear responsibility for the
medical bill. (Prospect Medical Group, Inc. v. Northridge Emergency Medical Group
(2009) 45 Cal.4th 497, 501-502 (Prospect).) Depending on who pays the bill for
emergency room services, billing rates for the same treatment can vary substantially.
(Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 552, 560 (Howell).)
After patients have received their care, hospitals often face the difficult and complex task
of trying to secure payment for the emergency room services. The final cost and identity
of the responsible payer of the emergency room services can remain unresolved for years.
Sometimes a patient needs emergency room care due to negligent driving by a
third party tortfeasor with automobile liability insurance coverage. In such an instance,
the hospital with the emergency room must determine whether the medical bills are the
responsibility of the patient, the patient’s health care service plan, the tortfeasor, the
tortfeasor’s liability insurer, or some combination of these potential payers. (Prospect,
supra, 45 Cal.4th at pp. 501-502; Parnell v. Adventist Health System/West (2005) 35
Cal.4th 595, 598 (Parnell); Health & Saf. Code, § 1371.4, subd. (b).) Further
complicating a hospital’s endeavor to bill for emergency room services are varying limits
on financial responsibility for the medical services. A patient’s financial responsibility
may be limited to the copayment amounts specified by the health care service plan.
(Parnell, at p. 611, fn. 15.) The patient’s health care service plan may be limited to
paying a negotiated rate that is less than the hospital’s customary billing rate.1 (Id. at
1 We refer to the lower billing rates payable by health care service plans having
contracts with hospitals as “negotiated rates.” Although negotiated rates are lower than
the “customary rates” charged for emergency room services, they do not necessarily
constitute “discount” rates. The California Supreme Court has explained that “if it were
established a medical provider’s full bill generally represents the value of the services
2
p. 609.) Many hospitals enter into contracts with health care service plans to ensure
sufficient volume for their emergency rooms and in turn pass along the savings for
“buying in bulk” the emergency room services provided. While many health care service
plans contract for such negotiated rates, most automobile liability insurers do not.
The health care service plan in this case, Kaiser Permanente (Kaiser), covered
three patients who received care at an emergency room operated by Dameron Hospital
Association (Dameron). The patients were injured due to the negligence of third party
tortfeasors who had automobile liability insurance with California Automobile
Association Inter-insurance Bureau (AAA)2 and Allstate Insurance Company (Allstate).
Unlike Kaiser, neither AAA nor Allstate has contracts with Dameron. In the absence of
an agreement for negotiated billing rates, Dameron sought to collect from AAA and
Allstate its customary billing rates by asserting liens filed under the Hospital Lien Act
(HLA). (Civ. Code, § 3045.1 et seq.) AAA and Allstate, however, ignored Dameron’s
HLA liens when paying settlements to the three Kaiser patients.
Upon learning of the settlements, Dameron sued AAA and Allstate to recover on
its HLA liens. The trial court granted the automobile liability insurers’ motions for
summary judgment on grounds the patients’ debts had already been fully satisfied by
their health care service plans. Reasoning the HLA liens were extinguished for lack of
any underlying debt, the trial court dismissed the case. The trial court further found
dismissal was warranted because Dameron failed to timely file some of its HLA liens
against AAA.
provided, and the discounted price negotiated with the insurer is an artificially low
fraction of that true value, one could make a parallel argument that relieving the
defendant of paying the full bill would result in underdeterrence. The complexities of
contemporary pricing and reimbursement patterns for medical providers, however, do not
support such a generalization.” (Howell, supra, 52 Cal.4th at p. 560.)
2 California Automobile Association Inter-insurance Bureau is now named AAA
Northern California, Nevada and Utah Insurance Exchange.
3
The central question presented in Dameron’s appeal is this: Does a health care
service plan’s payment of a previously negotiated rate for emergency room services
insulate the tortfeasor’s automobile liability insurer from having to pay the customary
rate for medical care rendered? AAA and Allstate contend they are not responsible for
any amount after Kaiser paid in full the bill for the emergency room services provided by
Dameron. Dameron responds that it contracted with Kaiser to preserve its rights to
recover the customary billing rates from tortfeasors and their automobile liability
insurers. Dameron asserts the tortfeasors and their liability insurers are responsible for
the entire bill for medical services at the customary rate –- not just the difference between
the reimbursement received from Kaiser and the customary billing rate.
In Parnell, supra, 35 Cal.4th 595, the California Supreme Court unanimously held
hospitals may not recover their customary rates for emergency room care when they have
contractually agreed to accept negotiated rates as payment in full. (Id. at p. 609.) In so
holding, the Supreme Court acknowledged that “California hospitals face mounting
financial pressures, and that many, if not all, of these hospitals may ‘face a genuine
financial crisis that threatens their ability to continue to serve their communities.’ ” (Id.
at p. 611.) Parnell noted its holding might “result in a significant hardship for many of
these hospitals.” (Ibid.) To alleviate such hardship, the Supreme Court stated hospitals
could turn to the Legislature for changes to the HLA. (Id. at p. 611.)
More importantly for purposes of this case, the Parnell court held that “the
solution lies in the hands of the hospitals. By precluding the Community Hospital from
asserting a lien under the HLA in this case, we ‘simply give[] effect to’ its contracts.
(Lopez v. Morley [(2004)] 817 N.E.2d [592,] 599.) If hospitals wish to preserve their
right to recover the difference between usual and customary charges and the negotiated
rate through a lien under the HLA, they are free to contract for this right. Our decision
today does not preclude hospitals from doing so. (See, e.g., Andrews [v. Samaritan
Health System (Ct. App. 2001)] 36 P.3d [57,] 61.)” (Parnell, supra, 35 Cal.4th at p. 611.)
4
Although Dameron claims it should benefit from the California Supreme Court’s
holding that it may avoid extinguishment of its HLA liens upon receiving payments from
health insurers, the contract in this case preceded Parnell by 10 years. The
Dameron/Kaiser contract did not seek to avail itself of the Parnell court’s guidance.
Instead, the Dameron/Kaiser contract is silent as to whether Dameron may collect from
tortfeasors and their automobile insurers after receiving negotiated rate payments from
the patients’ health care service plans. Dameron attempts to supply the contract term by
relying on a history of “uniform conduct” in which Dameron and Kaiser have cooperated
in seeking payment from third party tortfeasors and their liability insurers.
We conclude the Dameron/Kaiser contract does not contain the term described by
the Parnell court as sufficient to preserve the right to recover the customary billing rate
for emergency room services from third party tortfeasors. To paraphrase Parnell, if
Dameron wishes to preserve its right to recover its customary billing rates through an
HLA lien, it is free to contract for this right. (Parnell, supra, 35 Cal.4th at p. 611.) But
Dameron must actually contract for this right. (Ibid.) A history of voluntary cooperation
with Kaiser does not suffice to avail Dameron of the Parnell court’s guidance on
reservation of contractual rights under the HLA. Consequently, the trial court properly
granted summary judgment in favor of AAA and Allstate. Because we affirm the
granting of summary judgment for lack of contractual reservation of billing rights against
third party tortfeasors, we do not reach the question of whether all of the HLA liens in
this case were timely filed by Dameron.
BACKGROUND
Dameron’s Claims Against AAA and Allstate
In July 2010, Dameron sued AAA and Allstate for damages as well as injunctive
and declaratory relief. Dameron’s complaint alleges it gives emergency room care to
patients regardless of their ability to pay, as required by Health and Safety Code section
5
1317. Thus, Dameron provided emergency room services to Denise H.3 and Don P. The
bill for Denise H. amounted to $1,724 and Don P.’s bill was $3,445. After these patients
were discharged from the emergency room, Dameron learned each was injured by the
negligence of a driver insured by Allstate.
Dameron also provided emergency room services to Rita H., Sara M., and D.S.
Rita H.’s emergency room bill totaled $33,831.74, Sara M.’s was $1,976, and D.S.’s was
$2,029.76. After these patients were discharged, Dameron learned they were all injured
by drivers insured by AAA.
The record indicates Kaiser provided health insurance for each of these patients
except Rita H. and D.S. For each of these patient’s emergency room services bills
Dameron served HLA liens on all entities known to Dameron and who might be liable for
causing each patient’s injuries. And, for each of these patients, Dameron learned AAA or
Allstate paid a settlement to the patient without satisfying any part of Dameron’s HLA
liens. Dameron filed the present action within a year of learning of the settlements and
judgments.
Dameron further alleges each of the contracts with health care service plans for the
patients in this case contains an “applicable rate agreement” that “preserves Dameron’s
HLA rights, as contemplated by the California Supreme Court in Parnell[, supra, 35
Cal.4th at p. 611].” Dameron asserts it follows the same procedure in collecting on its
HLA liens whenever a third party has caused injury to an emergency room patient who
has coverage with a health insurer having a rate agreement contract with Dameron.
Specifically, Dameron bills the full amount of the emergency room costs to the injured
patient’s health plan per Dameron’s contract with the health plan. Dameron also bills the
3 The names of the patients at issue in this case are redacted to protect their privacy.
6
full amount of emergency room costs to the third party tortfeasor and/or tortfeasor’s
liability insurer by serving an HLA notice under Civil Code section 3045.3.4
If the tortfeasor, tortfeasor’s liability insurer, or any responsible party pays
Dameron’s HLA claim before the patient’s health care service plan pays Dameron the
negotiated rate, Dameron cancels its bill to the patient’s health care service plan.
However, if the patient’s health plan pays the negotiated rate under the applicable rate
agreement before any other responsible party pays under the HLA lien, Dameron “holds
the health plan’s payment in abeyance (as well as any co-payment received from the
injured patient), pending resolution of Dameron’s HLA claim.” If Dameron recovers
money on its HLA claim following payment from the patient’s health care service plan,
Dameron refunds the patient’s copayment and then refunds the health care service plan
from the proceeds of the HLA lien recovery. If there are any proceeds remaining after
reimbursements to the patient and patient’s health plans, Dameron keeps the remainder.
In any event, Dameron does not “attempt to collect or retain more than its reasonable and
necessary charges in any patient’s account.”
Dameron’s complaint also alleges payments of settlements and judgments to
patients while ignoring HLA liens “are not isolated or random events. Rather the HLA
violations . . . are part of an industry-wide business strategy adopted primarily by
automobile liability insurers in California . . . and by other similarly situated responsible
parties under the HLA.” In addition to violating the HLA, Dameron claimed the
4 In other words, Dameron does not seek to “balance bill” tortfeasors or their
liability insurers for the difference between the negotiated rates paid by health care
service plans and the customary rate Dameron would ordinarily charge. Instead,
Dameron seeks to recover the entirety of its customary rates from the tortfeasors and their
liability insurers.
7
practices also violated the Unfair Competition Law (Bus. & Prof. Code, § 17200 et
seq.).5
Motions for Summary Judgment
AAA and Allstate each moved for summary judgment, arguing Dameron could not
recover anything under the HLA liens because the underlying debts had been
extinguished by payments in full by the patients’ health plans. AAA also argued two of
the three claims asserted by Dameron were time-barred.
In support of its motion, Allstate introduced the Dameron/Kaiser agreement for the
provision of hospital services to Kaiser patients. The Dameron/Kaiser contract, effective
January 1, 1995, provides in pertinent part:
“3. Member Billing. [¶] (a) Hospital shall look solely to Kaiser Permanente (or
another responsible payer) for compensation for Hospital Services rendered to Members
under this Agreement, and, except as expressly provided in this Section, Hospital agrees
that in no event, including but not limited to non-payment by Kaiser Permanente,
insolvency or breach of this Agreement, shall Hospital bill, charge, collect a deposit
from, seek compensation, remuneration or reimbursement from, or have any recourse
against any Member for Hospital Services provided pursuant to this Agreement. Hospital
further agrees that this provision shall (i) survive the termination of this Agreement
regardless of the cause giving rise to termination and shall be construed to be for the
5 Dameron urges us to consider the judgment entered in an earlier class action
lawsuit titled Ruacho, et al. v. Dameron Hospital Association (Superior Court
San Joaquin County (2012) SV231473), not as “controlling authority in any manner” but
to supply “a historical perspective, because it is part and parcel of the uniform
performance of the Dameron/Kaiser contract in regard to HLA claims.” We decline to do
so. As Dameron acknowledges, the trial court’s decision in that case cannot be cited as
legal authority. (Bolanos v. Superior Court (2008) 169 Cal.App.4th 744, 761.)
Moreover, the outcome of the earlier and unrelated case does not constitute evidence in
this case. (Johnson & Johnson v. Superior Court (2011) 192 Cal.App.4th 757, 768.)
8
benefit of the Members, and (ii) supersede any oral or written contrary agreement now
existing or hereafter entered into by the parties. [¶] (b) Hospital may assert claims for
compensation other than claims against Kaiser Permanente, in the following
circumstances: [¶] (i) Copayments. . . . [¶] (ii) Services After Coverage Exhausted or
Disallowed. . . . [¶] (iii) No benefit. . . . [¶] (iv) Regular Medicare. . . . [¶] (c)
Hospital understands and agrees that surcharges against Members are prohibited and
Kaiser Permanente shall take appropriate action if surcharges are imposed. A surcharge
is an additional fee which is charged to a Member for a covered Hospital Service but
which is not approved by the Commissioner of Corporations or provided for under the
applicable Membership Agreement and disclosed in the Member’s evidence of
coverage.”
Dameron opposed summary judgment on grounds the Dameron/Kaiser contract
allowed collection of the HLA liens against AAA and Allstate. Dameron also asserted its
claims against AAA were not time-barred because the hospital filed the HLA lien notices
within a year of discovering the identity of the responsible payers.
The trial court granted summary judgment in favor of AAA and Allstate. The trial
court reasoned Kaiser’s payment of an agreed-upon rate for emergency room payments
extinguished the debt owing to Dameron and had the effect of also extinguishing the
HLA liens. As to two of the claims against AAA, the trial court found the discovery rule
did not apply to render the HLA claims timely.
Dameron timely filed notices of appeal from the judgments of dismissal.
DISCUSSION
I
Standards of Review
We apply the independent standard of review to the trial court’s order granting
summary judgment. (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) As this
court has noted, “We review the issues framed by the pleadings to determine the scope of
9
the issues tendered and to determine whether the moving party has established facts
negating the opponent’s claim and justifying a judgment in the moving party’s favor.
(AARTS Productions, Inc. v. Crocker National Bank (1986) 179 Cal.App.3d 1061, 1064–
1065.) In so doing we determine whether the opposition to the motion demonstrates the
existence of a triable issue of material fact. (Ibid.) We review the evidence in the light
most favorable to the opposition to the motion, and liberally construe the opposition’s
evidence, while strictly scrutinizing the successful party’s evidence and resolving any
evidentiary ambiguities in the opposition’s favor. (Saelzler v. Advanced Group 400
(2001) 25 Cal.4th 763, 768.)” (Avidity Partners, LLC v. State of California (2013) 221
Cal.App.4th 1180, 1192.) We also independently review contractual agreements,
including the question of whether the language used in a contract is ambiguous.
(American Alternative Ins. Corp. v. Superior Court (2006) 135 Cal.App.4th 1239, 1245.)
Finally, “[w]e are not bound by the trial court’s reasons for granting summary judgment
because we review the trial court’s ruling, and not its rationale.” (Avidity, supra, at
p. 1192.)
II
The HLA as Interpreted in Parnell
Dameron’s right to recover its customary rates for emergency room services from
third party tortfeasors and their liability insurers depends on whether the hospital’s HLA
liens are extinguished when accepting payments by the emergency room patients’ health
care service plans. The HLA provides a hospital with a statutory lien against any
judgment, settlement, or compromise paid by a third party tortfeasor or tortfeasor’s
liability insurer to a patient who received emergency room care. (Parnell, supra, 35
Cal.4th at p. 598; Civ. Code, § 3045.2.) Civil Code section 3045.1 states a hospital that
“furnishes emergency and ongoing medical or other services to any person injured by
reason of an accident or negligent or other wrongful act . . . shall, if the person has a
claim against another for damages on account of his or her injuries, have a lien upon the
10
damages recovered, or to be recovered, by the person, or by his or her heirs or personal
representative in case of his or her death to the extent of the amount of the reasonable and
necessary charges of the hospital.”
For the HLA lien to become effective, the hospital must serve written notice of
“the amount claimed as reasonable and necessary charges” on each person or entity
“known to the hospital and alleged to be liable to the injured person . . . for the injuries
sustained prior to the payment of any moneys to the injured person.” (Civ. Code,
§ 3045.3.) The HLA notice must also be served on any known liability insurers
responsible for the actions of the alleged tortfeasors. (Ibid.) However, the hospital need
not provide notice of the HLA lien to the emergency room patient. (Parnell, supra, 35
Cal.4th at p. 601.)
Tortfeasors and their liability insurers are required to satisfy the HLA lien at the
same time as they pay any money to the emergency room patients. As the Parnell court
explained, “If the tortfeasor pays the injured person ‘after the receipt of the notice as
provided by [Civil Code] Section 3045.3, without paying to the’ hospital ‘the amount of
its lien claimed in the notice, or so much thereof as can be satisfied out of 50 percent of
the moneys due under any final judgment, compromise, or settlement agreement,’ then
the tortfeasor ‘shall be liable to the’ hospital ‘for the amount of its lien claimed in the
notice which the hospital was entitled to receive as payment for the medical care and
services rendered to the injured person.’ ([Civ. Code,] § 3045.4.)” (Parnell, supra, 35
Cal.4th at pp. 601-602.) This statutory penalty payment to the hospital does not come
from recovery of funds paid to the injured patient, but must be paid separately by the
tortfeasor or tortfeasor’s liability insurer. (Mercy Hospital & Medical Center v. Farmers
Ins. Group of Companies (1997) 15 Cal.4th 213, 221.)
The HLA creates a statutory lien that “is ‘nonconsensual’ and ‘compensates a
hospital for providing medical services to an injured person by giving the hospital a direct
right to a certain percentage of specific property, i.e., a judgment, compromise, or
11
settlement, otherwise accruing to that person.’ (Ibid.)” (Parnell, supra, 35 Cal.4th at
p. 602.) Parnell further notes that, “[a]s a general rule, ‘[a] lien is a charge imposed in
some mode other than by a transfer in trust upon specific property by which it is made
security for the performance of an act.’ ([Civ. Code,] § 2872.) Because ‘[a] security
interest cannot exist without an underlying obligation’ (Alliance Mortgage Co. v.
Rothwell (1995) 10 Cal.4th 1226, 1235), a lien is typically ‘but an incident of the debt
secured’ (Lewis v. Booth (1935) 3 Cal.2d 345, 349) and ‘presupposes the existence of a
debt’ (Dorr v. Sacred Heart Hosp. (1999) 228 Wis.2d 425, 597 N.W.2d 462, 470
(Dorr)).” (Parnell, supra, 35 Cal.4th 595, 602-603.)
The typical dependence of a lien on an underlying debt led the Parnell court to
conclude payment of the underlying debt –- such as by an injured patient’s health plan –-
extinguished the hospital’s HLA lien. (Parnell, supra, 35 Cal.4th 595, 602-603.) Thus, a
hospital’s acceptance of “payment in full” from a health care service plan relieved the
third party tortfeasor and his or her liability insurer from any further payment under the
HLA. (Ibid.) However, the Parnell court noted hospitals could contractually preserve
the right to recover their usual and customary rates from tortfeasors and their liability
insurers. Parnell states that “[i]f hospitals wish to preserve their right to recover the
difference between usual and customary charges and the negotiated rate through a lien
under the HLA, they are free to contract for this right.” (Id. at p. 611.) Parnell further
noted neither the Insurance Code nor the Health and Safety Code “precludes hospitals
from contractually preserving their right to recover ‘reasonable and necessary charges’
pursuant to a lien under the HLA.” (Id. at p. 611, fn. 15.)
The Parnell court’s unanimous conclusion that hospitals can contractually reserve
the right to recover customary emergency room billing rates from third party tortfeasors
delineates the extent of its holding that a hospital’s acceptance of payment in full from a
health care services plan extinguishes any HLA lien premised on the same debt.
(Parnell, supra, 35 Cal.4th at p. 611 & fn. 16 [noting its “holding relies solely on the
12
absence of a debt underlying the lien” and does not extend to resolving issues of whether
the HLA applies in the Medicaid context, violates due process, is subject to waiver by
hospitals, or is subject to litigation immunity].) Contrary to respondents’ suggestion,
Parnell’s statements regarding the availability of contractual remedies for hospitals were
not mere dicta. The Parnell court’s guidance regarding contractual options “was
responsive to the issues raised on appeal and was intended to guide the parties” and lower
courts in addressing HLA issues in the future. (Garfield Medical Center v. Belshé (1998)
68 Cal.App.4th 798, 806.) We are bound to follow the Supreme Court’s holdings. (Auto
Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455.)
In holding California hospitals may contractually reserve the right to recover their
customary billing rates from third party tortfeasors, the Parnell court cited the example of
Andrews v. Samaritan Health System (Ct.App. 2001) 36 P.3d 57, 61 (Andrews),
disapproved on another ground in Blankenbaker v. Jonovich (2003) 205 Ariz. 383, 385-
386, 71 P.3d 910, 912-913.6 (Parnell, supra, 35 Cal.4th at p. 611.) In Andrews, the
Arizona Court of Appeals held injured patients could not prevent hospitals from balance
billing by enforcing statutory medical liens on judgments received from third-party
tortfeasors. (Andrews, supra, at p. 59.) In so holding, the Andrews court provided two
rationales. (Id. at p. 61.) One rationale was Arizona Revised Statutes, section 33–931,
automatically created a medical lien providing that “a [hospital] provider ‘is entitled to a
lien for the customary charges for care and treatment . . . of an injured person’ without
specifying further action by the hospitals.” (Andrews, supra, at p. 61.)
6 Remarkably, none of the parties nor amici curiae mentions Andrews, supra, 36
P.3d 57 in any of their extensive briefing on the meaning and continuing validity of
Parnell’s holding hospitals have the ability to contractually retain their right to seek their
customary rates for emergency room services.
13
The other rationale in Andrews arose from the language of the contracts between
the defendant hospitals and the patients’ health care services plans. Andrews explained
that “the instant contracts each contained language stating that the hospitals accepted the
plaintiffs’ insurer’s payment as ‘payment in full,’ and all . . . expressly reserved the right
to recapture the difference between any payments made by the insurer and the providers’
customary charges. Unlike the contracts in the cases from other jurisdictions, this
reservation clearly qualifies the ‘payment in full’ language and sets forth the hospitals’
expectation to recover their customary charges when possible.” (Andrews, supra, 36 P.3d
at pp. 60-61, italics added.) As a consequence, “[t]he fact that the hospitals have no
personal recourse against plaintiffs, by virtue of their insurance coverage, does not alter
the fact that a debt remains between the hospitals’ customary charges and the amounts
paid by plaintiffs’ insurers.” (Id. at p. 61.) This contract-based rationale for preserving a
hospital’s right to recover its customary charges from third-party tortfeasors was cited
with approval by the California Supreme Court in Parnell, supra, 35 Cal.4th at p. 611.
Notably, the patients in Andrews, supra, 36 P.3d 57 did not have their recoveries
from third party tortfeasors reduced by the hospitals’ ability to recover their customary
charges when the patients’ health plans paid only a negotiated rate because “[i]n their
various personal injury suits, plaintiffs all quantified their damages by including the
hospitals’ full charges for medical services, rather than the discounted amount paid by
their insurers.” (Andrews, supra, 36 P.3d at p. 59.) In other words, plaintiffs in Andrews
were able to claim damages in the amount of customary rates based on the express
contracts between the hospitals and the health care service plans. (Ibid.) The Andrews
plaintiffs nonetheless argued the hospitals’ reservation of rights to customary rates
constituted an unfair assignment of their personal injury claims against the third party
tortfeasors. The Andrews court rejected the argument, explaining that “[t]he legislature,
in limited circumstances, may abrogate the rule against assigning tort claims. [Citation.]
The medical lien statute represents the legislature’s abrogation of that rule. The
14
abrogation effected by the medical lien statute serves to ease the financial burden on
providers and to encourage hospitals to render emergency care to patients without regard
to ability to pay. [Citation.] Here, the plaintiffs’ insurers did not assign any rights to the
hospitals. Rather, the right to the medical liens springs from [Arizona Revised Statutes]
§ 33–931. We see no reason to invalidate the medical lien statute as written by the
legislature given its obvious value and purpose.” (Andrews, supra, at p. 63.)
Taken together, Parnell, supra, 35 Cal.4th 595 and Andrews allow for statutory
medical liens to recover customary billing rates for emergency room services if the
hospital has an express contract with the health care service plan to that effect.
III
Parnell’s Continuing Validity
AAA and Allstate argue Parnell, supra, 35 Cal.4th 595 is no longer valid authority
for the proposition that hospitals can contractually reserve the right to recover their
customary rates even after being paid the negotiated rate by injured patients’ health plans.
In so arguing, AAA and Allstate rely on the Knox-Keene Health Care Service Plan Act of
1975 (Knox-Keene Act) (Health & Saf. Code, § 1340 et seq.) and the California Supreme
Court’s subsequent decisions in Prospect, supra, 45 Cal.4th 497 and Howell, supra, 52
Cal.4th 541. We conclude these authorities do not undermine Parnell’s holding that
hospitals may contractually preserve their right to recover their customary rates from
third party tortfeasors and their liability insurers.
California hospitals are required to provide emergency care without regard to the
injured patient’s ability to pay. (Health & Saf. Code, § 1317, subd. (d).) The treating
hospital may require only that “the patient or his or her legally responsible relative or
guardian . . . execute an agreement to pay therefor or otherwise supply insurance or credit
information promptly after the services are rendered.” (Ibid.) The Knox-Keene Act
requires health plans to reimburse hospitals for emergency care even if the hospital is not
15
included in the health care service plan’s network. (Health & Saf. Code, § 1371.4,
subds. (a) & (d).)
The Knox-Keene Act also includes the following patient-protection provisions:
“(a) Every contract between a plan and a provider of health care services shall be in
writing, and shall set forth that in the event the plan fails to pay for health care services as
set forth in the subscriber contract, the subscriber or enrollee shall not be liable to the
provider for any sums owed by the plan. [¶] (b) In the event that the contract has not
been reduced to writing as required by this chapter or that the contract fails to contain the
required prohibition, the contracting provider shall not collect or attempt to collect from
the subscriber or enrollee sums owed by the plan. [¶] (c) No contracting provider, or
agent, trustee or assignee thereof, may maintain any action at law against a subscriber or
enrollee to collect sums owed by the plan.” (Health & Saf. Code, § 1379 (Section 1379).)
We reject the contentions of AAA and Allstate that section 1379 insulates them
from balance billing by hospitals. Section 1379 does not mention balance billing, third
party tortfeasors, or liability insurance companies. Instead, the statute mentions only
health care service plans, providers of medical care, and patients. The clear import of
section 1379 is to protect patients with health care service plan coverage from any
collection attempts by providers of such medical care as emergency room services.
Section 1379’s patient protections were examined by the California Supreme
Court in Prospect, supra, 45 Cal.4th 497. Prospect involved billing disputes between
health care service plans and emergency room physicians with whom they did not have
preexisting contractual relationships. (45 Cal.4th at p. 503.) The health care service
plans argued the Knox-Keene Act (along with other provisions of law) prevented the
emergency room physicians from billing the patients for the difference between the bill
submitted and the amount paid by the health care service plans. (Id. at pp. 501, 505.)
Thus, the question presented for the Supreme Court was whether the lack of contract
between the health care service plans and the emergency physicians precluded section
16
1379’s prohibition on “balance billing” –- i.e., billing for the difference between the usual
and customary rate and the negotiated rate paid. (Id. at pp. 505-506.)
The Prospect court concluded the Knox-Keene Act precludes any attempt to bill
patients for the amount exceeding the negotiated rate paid by health care service plans.
(Prospect, supra, 45 Cal.4th at p. 502.) Instead, the health care service plans and
emergency room physicians are required to resolve their billing disputes without injecting
their patients into the process. (Ibid.) On this point, the Prospect court noted that “the
Legislature contemplated there may be disputes over the amounts owed to noncontracting
providers such as emergency room doctors, and therefore the Knox–Keene Act requires
that each [health maintenance organization] ‘shall ensure that a dispute resolution
mechanism is accessible to noncontracting providers for the purpose of resolving billing
and claims disputes.’ (§ 1367, subd. (h)(2); see also § 1371.38, subd. (a) [directing the
Dept. of Managed Health Care to adopt regulations ensuring that each HMO adopt a
dispute resolution mechanism that is ‘fair, fast, and cost-effective for contracting and
noncontracting providers’].)” (Prospect, supra, at p. 507.) Ultimately, however, “[a]
patient who is a member of an HMO may not be injected into the dispute.” (Id. at
p. 502.)
The California Supreme Court’s decision in Prospect does not mention its earlier
case of Parnell, supra, 35 Cal.4th 595. (See Prospect, supra, 45 Cal.4th at pp. 497-511.)
This omission is explained by the fact Prospect did not involve any claim of recovery
against third party tortfeasors or their liability insurers. (Ibid.) “An opinion is not
authority for a point not raised, considered, or resolved therein.” (Styne v. Stevens (2001)
26 Cal.4th 42, 57.) Nothing in Prospect abrogates Parnell’s holding that hospitals may
contract with health care service plans to preserve rights to recover customary billing
rates via HLA liens against third party tortfeasors.
We reject AAA’s argument that the California Supreme Court’s decision in
Howell, supra, 52 Cal.4th 541 overruled its earlier statement in Parnell that hospitals
17
may contract with health care service plans to preserve the right to balance bill third party
tortfeasors. Howell involved the question of whether an injured patient could sue a
tortfeasor for damages that included the customary charges for emergency room care
billed by the hospital. (Id. at p. 548.) The Howell court concluded that when the hospital
has accepted a lesser amount as full payment under the terms of a prior agreement with
the health care service plan, the injured patient could only recover this negotiated rate.
(Ibid.)
Howell explains that “[t]he collateral source rule, which precludes deduction of
compensation the plaintiff has received from sources independent of the tortfeasor from
damages the plaintiff ‘would otherwise collect from the tortfeasor’ [citation], ensures that
plaintiff . . . may recover in damages the amounts her [or his] insurer paid for her [or his]
medical care. The rule, however, has no bearing on amounts that were included in a
provider’s bill but for which the plaintiff never incurred liability because the provider, by
prior agreement, accepted a lesser amount as full payment. Such sums are not damages
the plaintiff would otherwise have collected from the defendant. They are neither paid to
the providers on the plaintiff’s behalf nor paid to the plaintiff in indemnity of his or her
expenses. Because they do not represent an economic loss for the plaintiff, they are not
recoverable in the first instance.” (Howell, supra, 52 Cal.4th at pp. 548-549.)
Howell addressed whether a patient could recover the customary billing rate from
a tortfeasor, whereas this case involves a claim by the hospital against tortfeasors and
their liability insurers. (Howell, supra, 52 Cal.4th at p. 548.) In every instance in which
Howell articulated its holding, the Supreme Court noted the hospital in that case agreed
the negotiated rate constituted payment in full. (Id. at pp. 548 [collateral source did not
apply because hospital agreed to accept negotiated rate as full payment], 554 [hospital
accepted negotiated rate of “$3,600 in full payment for its services to the plaintiff”].)
Rather than overruling Parnell, the Supreme Court in Howell repeatedly cited its
earlier decision with approval. In each of the four instances in which Howell cited
18
Parnell, the California Supreme Court expressly noted Parnell involved a situation in
which the hospital accepted a negotiated rate as payment in full. (Howell, supra, 52
Cal.4th at pp. 554, 557, 558, 563.) For example, the Howell court noted it “reached the
same conclusion in Parnell . . . , holding the hospital could not assert a lien against a
patient’s tort recovery for its full bill when it had agreed to accept an insurer’s lesser
reimbursement as full payment.” (Howell, supra, 52 Cal.4th at p. 554, italics added.)
Similarly, Howell reiterated its holding that, “[h]aving agreed to accept the negotiated
amount as full payment, a provider may not recover any difference between that and the
billed amount through a lien on the tort recovery. (Parnell . . . , supra, 35 Cal.4th at
p. 598.)” (Howell, supra, 52 Cal.4th at p. 558.) Based on the hospital’s acceptance of a
negotiated rate as payment in full, Howell concluded that “[p]laintiff cannot meaningfully
be said ever to have incurred the full charges. (See Parnell . . . , supra, 35 Cal.4th at
p. 609 [where hospital had agreed with plaintiff’s health plan to accept discounted
amounts as payment in full, plaintiff owed hospital nothing beyond those discounted
payments] . . . .)” (Howell, supra, at p. 557.) In short, Howell does not overrule the
Parnell court’s statement that hospitals have the ability to enter into agreements with
health care service plans that preserve the right to recover customary rates from
tortfeasors for emergency room care provided.
We are also not persuaded by AAA that its interpretation of Howell, supra, 52
Cal.4th 541 was confirmed in Corenbaum v. Lampkin (2013) 215 Cal.App.4th 1308
(Corenbaum). AAA argues Corenbaum stands for the proposition that “the tortfeasor,
and by extension his [or her] insurer, is not liable for the delta between what the hospital
‘charged’ and what it accepted from the health insurer.” AAA overstates the scope of
decision in Corenbaum. The Corenbaum court expressly noted that: “As in Howell, the
medical providers who treated plaintiffs . . . accepted, pursuant to prior agreements, less
than the full amount of their medical billings as payment in full for their services.”
(Corenbaum, supra, at p. 1318.) Based on the similarity in the hospitals’ acceptance of
19
the negotiated rate as payment in full, Corenbaum holds evidence of the customary rate
for emergency room services may not be introduced at trial to prove medical expenses or
noneconomic damages when the hospital accepted full payment in a lesser amount. (Id.
at p. 1318.)
Also based on the Supreme Court’s guidance in Howell, the Corenbaum court
reasoned that “[a]n insured plaintiff incurs no liability for the negotiated rate differential
and suffers no pecuniary loss in that amount.” (Corenbaum, at p. 1325.) Thus,
“[e]vidence of the full amount billed . . . is not relevant to the amount of damages for past
medical expenses if the plaintiff never incurred liability for that amount.” (Id. at
p. 1327.) As in Howell, the decision in Corenbaum did not involve any action by the
hospital against the third party tortfeasor or tortfeasor’s liability insurer.
Based on our survey of decisional authority following the Supreme Court’s
unanimous decision in Parnell, supra, 35 Cal.4th 595, we conclude no case undermines
Parnell’s guidance to hospitals that they may preserve the right to recover from a third
party tortfeasor the differential between the negotiated rate paid by an injured patient’s
health care service plan and the customary rate billed for the emergency room services.
Moreover, neither the HLA nor applicable provisions of Knox-Keene has been amended
by the Legislature since the Supreme Court’s 2005 decision in Parnell. (Civ. Code, §§
3045.2, 3045.3, 3045.4 [pertinent HLA statutes]; § 1379 [pertinent Knox-Keene statute].)
Thus, the Legislature has not changed how the HLA statutory lien operates either in
substance or procedure since the Parnell court examined the HLA statutory scheme. In
short, Parnell remains valid insofar as it allows hospitals to contract for a reservation of
rights to recover from tortfeasors the differential between the negotiated and the usual
and customary rates for emergency room services provided.7
7 In so concluding, we are not called to determine whether or to what extent a
hospital is limited in the amount it asserts to be its “customary rates.” (Cf. Howell, supra,
20
IV
Whether the Dameron/Kaiser Contract Preserved Dameron’s Right to Recover its
Customary Emergency Room Rates from Third-party Tortfeasors
Having concluded Dameron had the prerogative under Parnell, supra, 35 Cal.4th
595 to enter into a contract to preserve its billing rights against third party tortfeasors
liable for injuries to its emergency room patients, we consider whether the
Dameron/Kaiser contract actually preserved such rights. Dameron contends its contract
with Kaiser suffices to allow it to pursue its customary billing rate from third party
tortfeasors who injure Kaiser-covered patients.
In evaluating Dameron’s claim, we apply well-established principles governing
review of contractual agreements. “The ordinary rules of contract interpretation apply
equally to contracts of insurance. (Palmer v. Truck Ins. Exchange (1999) 21 Cal.4th
1109, 1115.) The mutual intention of the contracting parties at the time the contract was
formed governs. (Civ. Code, § 1636; Palmer, supra, at p. 1115.) We ascertain that
intention solely from the written contract if possible, but also consider the circumstances
under which the contract was made and the matter to which it relates. (Civ. Code,
§§ 1639, 1647.) We consider the contract as a whole and interpret the language in
context, rather than interpret a provision in isolation. (Id., § 1641.) We interpret words
in accordance with their ordinary and popular sense, unless the words are used in a
technical sense or a special meaning is given to them by usage. (Id., § 1644.) If
contractual language is clear and explicit and does not involve an absurdity, the plain
meaning governs. (Id., § 1638.)” (American Alternative Ins. Corp. v. Superior Court
(2006) 135 Cal.App.4th 1239, 1245.)
52 Cal.4th at p. 551 [limiting economic damages to “any reasonable charges for
treatment the injured person has paid or, having incurred, still owes the medical provider
are recoverable as economic damages”], italics added.)
21
Here, the Dameron/Kaiser contract was entered into in 1995, a decade before the
California Supreme Court issued its decision in Parnell, supra, 35 Cal.4th 595. The
contract does not expressly reserve to Dameron a right to recover its customary billing
rates for emergency room services from anyone. The Dameron/Kaiser contract does not
mention HLA liens, third party tortfeasors, or liability insurers for third party tortfeasors.
Instead, the contract sets forth the reciprocal obligations of Dameron to provide
emergency medical services and Kaiser to pay negotiated rates for those services.8
Rather than reserving the right to recover the entirety of the customary charge from third
party tortfeasors, the Dameron/Kaiser contract states payment of the negotiated rates
constitutes payment in full. Exhibit A of the Dameron/Kaiser contract provides:
“[Kaiser] will pay [Dameron] for Covered Services the rates set forth in this
Exhibit A, reduced by applicable Copayments . . . . [Dameron] will accept such amounts
as payment in full for Covered Services, irrespective of the cost to [Dameron] of
providing such services, or of [Dameron]’s customary charges for such services.” (Italics
added.)
This contract provision does not reserve to Dameron any right to recover
additional payments from any other person or entity. Moreover, it imposes on Kaiser no
obligation to assist or take any other action to help Dameron recover its customary
charges from any third party tortfeasor or liability insurer. And, there is no mention of
HLA liens. To escape this express agreement to accept the negotiated rate as “payment
in full,” Dameron looks to the “Member Billing” section of the contract. Specifically,
Dameron points to language stating that “Hospital shall look solely to Kaiser Permanente
8 In the copy of the Dameron/Kaiser contract filed in the trial court, the pages
specifying the negotiated billing rates are marked “with[h]eld as proprietary trade secret
info.” Even so, the parties agree the contract supplied Kaiser with negotiated billing rates
for emergency room services that were less than Dameron’s customary rates for the same
services.
22
(or another responsible payer) for compensation for Hospital Services rendered to
Members under this Agreement.” (Italics added.)
Dameron argues the italicized language renders this contract provision sufficiently
ambiguous to allow extrinsic evidence to prove that “another responsible payer” includes
tortfeasors and their liability insurers. A contract is ambiguous when it contains language
that is reasonably susceptible to more than one meaning. (MacKinnon v. Truck Ins.
Exchange (2003) 31 Cal.4th 635, 648.) For several reasons, the contract’s reference to
“another responsible payer” cannot reasonably be construed to refer to third party
tortfeasors or their liability insurers.
First, the reference to another responsible payer is qualified by the restriction that
Dameron is limited to “compensation for Hospital Services rendered to Members under
this Agreement.” (Italics added.) The purpose of the Dameron/Kaiser contract is to agree
upon negotiated billing rates and to insulate patients covered by Kaiser from charges
beyond their individual copayment responsibilities. Under this agreement, there is no
mention of customary billing rates or HLA liens.
Second, the paragraphs immediately following language cited by Dameron serve
to limit Dameron’s “claims for compensation” to copayments, services after coverage is
exhausted or disallowed by Kaiser, instances in which the patient turns out to have no
Kaiser coverage at all, and “regular Medicare.” Even if the meaning of “another
responsible payer” were ambiguous, these paragraphs preclude any interpretation of the
phrase to include third party tortfeasors or their liability insurers.
Third, any interpretation of “another responsible payer” as including third party
tortfeasors would create a conflict with the portion of the Dameron/Kaiser contract in
which Dameron has agreed to accept the negotiated rates “as payment in full for Covered
Services, irrespective of the cost to [Dameron] of providing such services.” (Italics
added.) We reject this interpretation as introducing an unnecessary internal inconsistency
into the Dameron/Kaiser contract. “It is a cardinal rule of construction that a contract is
23
to be construed as a whole, effecting harmony among and giving meaning to all the parts
thereof. (Civ. Code, § 1641.)” (People ex rel. Dept. of Parks and Recreation v. West-A-
Rama, Inc. (1973) 35 Cal.App.3d 786, 793.)
Fourth, Dameron’s assertion of the ability to collect customary rates from other
parties would have the effect of imposing new duties on Kaiser that are not otherwise
spelled out in the contract. In its briefing, Dameron contends we should accept a history
of cooperation between Dameron and Kaiser in pursuing additional payments from third
party tortfeasors. In other words, Dameron argues Kaiser has a contractual duty to assist
in recovering the customary billing rates for its patients from others. Crediting this
argument would mean Dameron could sue Kaiser for breach of contract if that health care
service plan did not help pursue Dameron’s HLA liens. The Dameron/Kaiser contract
spells out no such obligation for Kaiser.
The Dameron/Kaiser contract’s silence as to any obligation to assist in collection
from third party tortfeasors does not allow us to graft a new obligation into the
agreement. Indeed, the contract itself provides that “[a]ny other agreements, promises,
negotiations, or representations relating to the subject matter of this Agreement . . . not
expressly set forth herein are of no force and effect.” “Courts will not add a term about
which a contract is silent. (Moss Dev. Co. v. Geary (1974) 41 Cal.App.3d 1, 9.)” (Levi
Strauss & Co. v. Aetna Casualty & Surety Co. (1986) 184 Cal.App.3d 1479, 1486
dismissed, remanded and ordered published sub nom. Levi Strauss and Co. v. Aetna Cas.
and Sur. Co. (1987) [237 Cal.Rptr. 455].) Instead, “[a] contract extends only to those
things which it appears the parties intended to contract. Our function is to determine
what, in terms and substance, is contained in the contract, not to insert what has been
omitted. We do not have the power to create for the parties a contract that they did not
make and cannot insert language that one party now wishes were there.” (Vons
Companies, Inc. v. United States Fire Ins. Co. (2000) 78 Cal.App.4th 52, 58-59.)
24
Dameron correctly points out that “[n]either law nor equity requires that every
term and condition be set forth in a contract.” (Frankel v. Board of Dental Examiners
(1996) 46 Cal.App.4th 534, 545.) Thus, “usual and reasonable terms found in similar
contracts may be considered, unexpressed provisions of the contract may be inferred
from the writing, external facts may be relied upon, and custom and usage may be
resorted to in an effort to supply a deficiency if it does not alter or vary the terms of the
agreement.” (Ibid.) However, supplying implied terms to give effect to the expressed
intent of the contract does not allow us to impose new duties and obligations to which the
parties never agreed. “[C]ourts cannot make better agreements for parties than they
themselves have been satisfied to enter into or rewrite contracts because they operate
harshly or inequitably. It is not enough to say that without the proposed implied
covenant, the contract would be improvident or unwise or would operate unjustly.
Parties have the right to make such agreements. The law refuses to read into contracts
anything by way of implication except upon grounds of obvious necessity.” (Ibid.)
Although Parnell, supra, 35 Cal.4th 595 allows Dameron to contractually reserve
the right to recover its customary billing rate for emergency room services for Kaiser
patients and caused by third party tortfeasors, Dameron has not done so in this case. 9
9 We note the summary judgments in favor of AAA and Allstate included claims
pertaining to emergency room patients covered by health care service plans other than
Kaiser. In the trial court, Dameron argued summary judgment could not be granted in
favor of AAA and Allstate because their motions did not seek to dispose of all claims.
The trial court granted summary judgment in favor of AAA and Allstate concluding
claims involving Kaiser patients failed for lack of a debt underlying Dameron’s breach of
contract claims. As to the non-Kaiser patients, the trial court found Dameron had not
amended the complaint to include these claims. In this appeal, Dameron does not
contend the trial court erred in dismissing the claims based on these non-Kaiser patients.
Accordingly, we affirm also as to the trial court’s dismissal of claims premised on
patients not covered by Kaiser.
25
DISPOSITION
The judgment is affirmed. Each party shall bear its own costs. (Cal. Rules of
Court, rule 8.278(a)(1) & (2).)
HOCH , J.
We concur:
ROBIE , Acting P. J.
BUTZ , J.
Given our conclusion the judgments of dismissal were properly entered because
the Dameron/Kaiser contracts did not reserve Dameron’s rights to pursue customary
billing amounts under HLA liens, we do not reach the question of whether Dameron
timely filed its HLA liens in this case.
Finally, we do not address whether the billing scheme asserted by Dameron to be
its contractually reserved right complies with California law by reimbursing Kaiser for
the entirety of its payments if Dameron recovers the full customary billing rate from a
third party tortfeasor or tortfeasor’s liability insurer.
26