The opinion
Filed 9/14/16 Certified for publication 10/5/16 (order attached)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
GENE MORAN,
Plaintiff and Appellant, G051391
v. (Super. Ct. No. 30-2013-00689394)
PRIME HEALTHCARE OPINION
MANAGEMENT, INC., et al.,
Defendants and Respondents.
Appeal from a judgment of the Superior Court of Orange County, Kim
Garlin Dunning, Judge. Reversed.
Law Office of Barry Kramer and Barry L. Kramer; Carpenter Law and
Gretchen Carpenter for Plaintiff and Appellant.
Shulman Hodges & Bastian, Ronald S. Hodges, Gary A. Pemberton and
Heather B. Dillion for Defendants and Respondents.
A person receiving medical treatment at a hospital’s emergency room who
pays for it out of pocket can be charged substantially more for that care than one who is
covered by a either a government-sponsored program or private insurance. This case
concerns whether one can maintain an action challenging this variable pricing practice
under the Unfair Competition Law (UCL; Bus. & Prof. Code, § 17200), the Consumer
Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.), or for declaratory relief (Code
Civ. Proc., § 1060). While most of the claims asserted by plaintiff Gene Moran lack
merit, we conclude he has sufficiently alleged facts supporting a conclusion he has
standing to claim the amount of the charges defendants’ hospital bills self-pay patients is
unconscionable. Therefore, we reverse the trial court’s judgment of dismissal in this
case.
I
BACKGROUND
On three occasions in October 2013, plaintiff, “a self-pay patient,” went to
the emergency room of a hospital owned and operated by defendants Prime Healthcare
Management, Inc., Prime Healthcare Services, Inc., Prime Healthcare Foundation, Inc.,
and Prime Healthcare Huntington Beach, LLC. Each time, he signed a preprinted
Conditions of Admission agreement (Contract) and received medical treatment.
Subsequently, plaintiff received bills from the hospital for the treatment provided during
the three visits that exceeded $10,000.1
In November 2013, plaintiff filed this putative class action against
defendants. The initial complaint stated causes of action for breach of contract, breach of
1 The hospital continued to send bills to plaintiff even after he filed this
action. But in July 2014, plaintiff received a letter from the hospital stating that after
“‘administrative review’ of [his] account,” the account balance had been reduced to
“‘zero.’” The letter also informed plaintiff the hospital would send him a check to refund
his previous payment of $50. At oral argument, defendants made clear they contend
plaintiff lacks standing because he never suffered injury in fact or an imminent threat of
injury, not that their unilateral action in July 2014 eliminated his standing.
2
the implied covenant of good faith and fair dealing, violation of the UCL, restitutionary
relief under the CLRA, and declaratory relief. Plaintiff subsequently dropped the first
and second counts. His first amended complaint also expanded the scope of the CLRA
cause of action to include a request for damages by alleging that he complied with the
statutory requirement of giving defendants notice of the purportedly unlawful practice
and a demand for correction of it. Although verbose, confusing, containing contradictory
allegations, and contentions of law, each iteration of the complaint is based on allegations
the rates defendants charge self-pay patients are discriminatory, exceed the reasonable
value of the treatment, and are “artificially inflated and grossly excessive.”
Defendants demurred to the first and the second amended complaints,
arguing the counts in each pleading failed to allege facts sufficient to state a cause of
action. The trial court sustained both demurrers with leave to amend. Plaintiff filed a
third amended complaint (TAC), again stating causes of action for violations of the UCL,
CLRA, and declaratory relief.
Attached to the TAC was one of the Contracts plaintiff signed. The
Contract contains several paragraphs relevant to a patient’s financial obligation for
medical treatment and services. However, the TAC primarily focuses on only two of
these clauses. Paragraph 16 states in part: “I . . . understand that I am responsible to the
hospital and physician(s) for all reasonable charges, listed in the hospital charge
[2]
description master and if applicable the hospital’s charity care and discount payment
policies and state and federal law incurred by me and not paid by third party benefits.”
Paragraph 18 provides: “You may be eligible for the Charity Care and Discounted
Payment Program. Please contact the business office.” Copies of the hospital’s Charity
Care and Discounted Payment Policies’ Manual and forms are attached to the TAC. The
2 Throughout their appellate briefs, the parties refer to the phrase “charge
description master” as the Chargemaster rates.
3
TAC alleges “[n]othing in the Contract requires” a patient apply for financial assistance
and mentions several reasons why a person would not want to do so.
Although not mentioned in his prior pleadings, the TAC also alleges that,
“before receiving bills . . ., Plaintiff sent correspondence to [the] Hospital,” informing it
that he “was currently unemployed and uninsured and asking that the hospital ‘take into
consideration my financial status of being unemployed and not having insurance in
addressing the bill,’” and expressing his desire “‘to take care of this immediately with
what [he had] available right now, not knowing what [his] future monetary situation will
be during this recession.’” According to the TAC, the hospital never responded to
plaintiff’s correspondence.
Defendants demurred to the TAC, again arguing each of its counts failed to
state a cause of action. This time, the trial court sustained the demurrer without leave to
amend, primarily concluding plaintiff had failed to allege sufficient facts to establish his
standing to maintain the action.
II
DISCUSSION
A. Introduction
This case involves an appeal from a judgment for defendants entered after
the trial court sustained their demurrer to plaintiff’s TAC without leave to amend.
Our scope of review is well established. “In reviewing the sufficiency of a
complaint against a general demurrer, we are guided by long-settled rules. ‘We treat the
demurrer as admitting all material facts properly pleaded, but not contentions, deductions
or conclusions of fact or law. [Citation.] We also consider matters which may be
judicially noticed.’ [Citation.] Further, we give the complaint a reasonable
interpretation, reading it as a whole and its parts in their context. [Citation.] When a
demurrer is sustained, we determine whether the complaint states facts sufficient to
4
constitute a cause of action. [Citation.] And when it is sustained without leave to amend,
we decide whether there is a reasonable possibility that the defect can be cured by
amendment: if it can be, the trial court has abused its discretion and we reverse; if not,
there has been no abuse of discretion and we affirm. [Citations.] The burden of proving
such reasonable possibility is squarely on the plaintiff.” (Blank v. Kirwan (1985) 39
Cal.3d 311, 318.)
The parties’ appellate briefs focus on the issue of whether plaintiff had
standing to maintain his causes of action alleging violations of the UCL and CLRA. On
appeal, “[w]e perform an independent review of a ruling on a demurrer and decide de
novo whether the challenged pleading states facts sufficient to constitute a cause of
action.” (Nguyen v. Western Digital Corp. (2014) 229 Cal.App.4th 1522, 1536.) Thus,
“we do not review the validity of the trial court’s reasoning,” nor are we “bound by the
trial court’s construction of the complaint, but must make [our] own independent
interpretation.” (Wilner v. Sunset Life Ins. Co. (2000) 78 Cal.App.4th 952, 958.)
B. The UCL
1. Background
Plaintiff’s first cause of action seeks restitutionary and injunctive relief
under the UCL.
The TAC alleges defendants’ Contract violates the UCL on several
grounds. It alleges the charges billed to self-pay patients seeking emergency care are
discriminatory because “self-pay emergency care patients signing” the Contract
“reasonably expected and relied on the[] reasonable belief that they would be billed at the
same rates as those applicable to other patients signing the same Contract and receiving
similar emergency treatment/services.” The TAC also asserts self-pay patients
“reasonably expected to be billed at rates which reflected no more than the reasonable
value of the treatment and services,” and were “not expecting to be billed at the artificial
5
and grossly excessive rates for which they were subsequently billed.” Another claim is
that defendants “fail to inform and/or conceal from . . . self-pay patients” the “uniform
policy” of charging them the higher rates.
Business and Professions Code section 17200 declares “unfair competition”
includes “any unlawful, unfair or fraudulent business act or practice.” Cases have
recognized “the unfair competition law’s scope is broad,” covering “‘“‘anything that can
properly be called a business practice and that at the same time is forbidden by law.’”’”
(Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20
Cal.4th 163, 180 (Cel-Tech).) In addition, “‘[b]ecause Business and Professions Code
section 17200 is written in the disjunctive, it establishes three varieties of unfair
competition—acts or practices which are unlawful, or unfair, or fraudulent.’” (Ibid.)
However, “[c]ourts may not simply impose their own notions of the day as
to what is fair or unfair. Specific legislation may limit the judiciary’s power to declare
conduct unfair. If the Legislature has permitted certain conduct or considered a situation
and concluded no action should lie, courts may not override that determination. When
specific legislation provides a ‘safe harbor,’ plaintiffs may not use the general unfair
competition law to assault that harbor.” (Cel-Tech, supra, 20 Cal.4th at p. 182.) Thus,
“[i]n any unfair competition case, Cel-Tech requires us to engage in a two-step process.
First, we determine whether the Legislature has provided a ‘safe harbor’ for the
defendant’s alleged conduct. If not, we determine whether that conduct is unfair.”
(McCann v. Lucky Money, Inc. (2005) 129 Cal.App.4th 1382, 1387; Cel-Tech, supra, 20
Cal.4th at p. 187.)
A further constraint on UCL actions limits an action by a private party to
one who “meets the standing requirements.” (Bus. & Prof. Code, § 17203.) Thus, to
maintain a private enforcement action under the UCL, a plaintiff must be “a person who
has suffered injury in fact and has lost money or property as a result of the unfair
competition.” (Bus. & Prof. Code, § 17204.)
6
2. The Safe Harbor Defense
Defendants contend plaintiff cannot maintain his UCL cause of action
because the hospital’s variable pricing regimen has been legislatively endorsed. We
conclude this argument has only partial merit.
In Cel-Tech, supra, 20 Cal.4th 163, the Supreme Court recognized the safe
harbor doctrine, “does not . . . prohibit an action under the unfair competition law merely
because some other statute on the subject does not, itself, provide for the action or
prohibit the challenged conduct. To forestall an action under the unfair competition law,
another provision must actually ‘bar’ the action or clearly permit the conduct. There is a
difference between (1) not making an activity unlawful, and (2) making that activity
lawful.” (Id. at pp. 182-183.)
As for plaintiff’s discriminatory pricing claim, we conclude the safe harbor
defense applies. Business and Professions Code section 16770, subdivision (f), states
“[t]he Legislature . . . finds and declares that the public interest in ensuring that citizens
of this state receive high-quality health care coverage in the most efficient and cost-
effective manner possible is furthered by permitting negotiations for alternative rate
contracts between purchasers or payers of health care services, and institutional and
professional providers, or through a person or entity acting for, or on behalf of, a
purchaser, payer, or provider.” Also Business and Professions Code section 17042,
subdivision (c) states, “A differential in price for any article or product as between any
customers in different functional classifications” is not prohibited by the Unfair Practices
Act. These statutes permit the use of variable pricing. Thus, to the extent plaintiff
alleges defendants violated the UCL by discriminatorily charging self-pay patients more
than patients covered by government programs or private insurance, his argument fails.
However, as noted above, plaintiff further argues he expected to pay either
the same amount for the medical services provided as other patients receiving the same
treatment or only the reasonable value of those services, but was billed at what he
7
describes as “artificial and grossly excessive rates.” Defendants claim the Hospital Fair
Pricing Act (Health & Saf. Code, § 127400 et seq.) defeats this latter allegation.
The Hospital Fair Pricing Act requires licensed hospitals to maintain and
administer “an understandable written policy regarding discount payments for financially
qualified patients as well as an understandable written charity care policy” and details
mandatory requirements for the policy. (Health & Saf. Code, § 127405, subd. (a)(1)(A).)
The Act further provides it shall not “be construed to prohibit a hospital from uniformly
imposing charges from its established charge schedule or published rates, nor shall this
article preclude the recognition of a hospital’s established charge schedule or published
rates for purposes of applying any payment limit.” (Health & Saf. Code, § 127444.) But
it also declares “[t]he rights, remedies, and penalties established by this article are
cumulative, and shall not supersede the rights, remedies, or penalties established under
other laws.” (Health & Saf. Code, § 127443.)
Thus, the Hospital Fair Pricing Act imposes on licensed hospitals the
requirement that they establish, give notice of, and administer financial aid and charity
care policies, and allows a hospital to bill for treatment and services based on its own
schedule of fees. However, it does not preclude claims based on what a patient allegedly
expected to pay or authorize costs that are allegedly exorbitant. Consequently, the Act
neither “‘bar[s]’ [an] action” under the UCL, nor does it “clearly permit” a hospital to
charge self-pay emergency care patients “artificial and grossly excessive rates.” (Cel-
Tech, supra, 20 Cal.4th at p. 183.)
3. Unlawful Acts or Practices
Plaintiff’s UCL cause of action sought recovery on all three grounds listed
in Business and Professions Code section 17200. The applicability of each variety of
unfair competition is governed by different legal standards. We consider each ground
separately.
8
Under the unlawful prong, “‘the UCL borrows violations of other
laws . . . and makes those unlawful practices actionable under the UCL.’ [Citation.]
Thus, a violation of another law is a predicate for stating a cause of action under the
UCL’s unlawful prong.” (Berryman v. Merit Property Management, Inc. (2007) 152
Cal.App.4th 1544, 1554.)
To support the unlawful prong plaintiff alleges, defendants’ billing and
collection practices “violate[d] the [CLRA] as set forth” in the TAC’s second cause of
action. The latter count is based on four grounds: 1) “Defendants’ acts and practices
constitute misrepresentations that the services and/or supplies in question had
characteristics uses and/or benefits which they did not have” (Civ. Code, § 1770, subd.
(a)(5)); 2) “Defendants’ acts and practices constitute misleading statements of fact
concerning reasons for, existence of, or amounts of price reductions” (Civ. Code, § 1770,
subd. (a)(13)); 3) “Defendants represent[ed] that a transaction involves obligations which
it does not have or involve, or which are prohibited by law” (Civ. Code, § 1770, subd.
(a)(14)); and 4) “Defendants insert[ed] an unconscionable provision into their Contracts”
(Civ. Code, § 1770, subd. (a)(19)).
As noted, to support a private action under the UCL, plaintiff needs to
allege standing. (Bus. & Prof. Code, § 17204.) “To satisfy the narrower standing
requirements imposed by [the enactment of Business and Professions Code
section 17204], a party must now (1) establish a loss or deprivation of money or property
sufficient to qualify as injury in fact, i.e., economic injury, and (2) show that that
economic injury was the result of, i.e., caused by, the unfair business practice or false
advertising that is the gravamen of the claim.” (Kwikset Corp. v. Superior Court (2011)
51 Cal.4th 310, 322; Sarun v. Dignity Health (2014) 232 Cal.App.4th 1159, 1166
(Sarun).)
Plaintiff argues he satisfied the standing requirement because “he received
a bill from [defendants], paid a portion of that bill, and [until defendants later unilaterally
9
returned his payment and eliminated all charges], remained liable on the balance.” This
allegation supports plaintiff’s claim that he suffered the requisite economic injury
required to maintain a private enforcement action under the UCL. “Although
[defendants] had not begun any collection activity, the existence of an enforceable
obligation, without more, ordinarily constitutes actual injury or injury in fact.” (Sarun v.
Dignity Health, supra, 232 Cal.App.4th at p. 1167; see Kwikset v. Superior Court, supra,
51 Cal.4th at p. 325 [recognizing “a monetary payment in response to an unlawful debt
collection demand” constitutes economic injury].)
But the first three grounds cited in the TAC supporting the unlawful prong
of the UCL cause of action involve allegations of misrepresentation. To satisfy the
causation element “under the ‘unlawful’ prong of the UCL, in which the predicate
unlawful conduct is based on misrepresentations,” a plaintiff “must show actual reliance
on the alleged misrepresentation, rather than a mere factual nexus between the business’s
conduct and the consumer’s injury.” (Durell v. Sharp Healthcare (2010) 183
Cal.App.4th 1350, 1355; Hale v. Sharp Healthcare (2010) 183 Cal.App.4th 1373, 1385
(Hale).)
The decision in Durell presents an analogous situation. That case also
involved a patient lacking health insurance coverage who went to the defendants’ hospital
emergency room on several occasions, each time signing an admissions agreement that
obligated him to pay the “‘usual and customary charges for . . . services.’” (Durell v.
Sharp Healthcare, supra, 183 Cal.App.4th at p. 1356.) After being billed for the
hospital’s full standard rates, Durell sued. In part, he alleged the hospital’s disparate
billing practices that required uninsured patients to pay its full standard rate for medical
care while patients covered by government programs and private insurance paid a lesser
amount constituted an unlawful business practice. To support this claim, Durell alleged
the defendants’ pricing policy violated provisions of CLRA all of which involved making
a false or misleading representation.
10
The Court of Appeal affirmed a judgment dismissing the action after
sustaining the defendants’ demurrer to the second amended complaint. The appellate
court held, “[a] consumer’s burden of pleading causation in a UCL action should hinge
on the nature of the alleged wrongdoing rather than the specific prong of the UCL the
consumer invokes.” (Durell v. Sharp Healthcare, supra, 183 Cal.App.4th at p. 1363.) It
cited the California Supreme Court’s decision in In re Tobacco II Cases (2009) 46
Cal.4th 298, which held Business and Professions Code section 17204’s “‘as a result of’”
requirement “imposes an actual reliance requirement on plaintiffs prosecuting a private
enforcement action under the UCL’s fraud prong” (In re Tobacco II Cases, supra, 46
Cal.4th at p. 326). Relying on that decision, Durell held where “as here, the predicate
unlawfulness is misrepresentation and deception[,] . . . the ‘concept of reliance’
unequivocally applies.” (Durell v. Sharp Healthcare, supra, 183 Cal.App.4th at
p. 1363.) Since Durell “d[id] not allege [he] relied on either [the hospital’s] Web
site representations or on the language in the Agreement for Services in going to
[the hospital] or in seeking or accepting services once he was transported there,” or that
he “ever visited [the hospital’s] Web site or even . . . ever read the Agreement for
Services” (ibid.), his amended complaint failed to state a cause of action under the UCL’s
unlawful prong. (Durell v. Sharp Healthcare, supra, at p. 1364.)
In the present case, plaintiff alleged he signed defendants’ Contract each
time he visited the emergency room. While plaintiff’s TAC asserts that he “reasonably
expected to be billed and to pay at the same rates as other emergency care patients
signing the same Contract and receiving similar emergency care,” or would “not be
required to pay more than the reasonable value of the treatment/services received,”
plaintiff never alleged that he actually read or relied on the Contracts. Nor does plaintiff
allege that he relied on other oral or written representations made by defendants or any of
their employees concerning how much he would be charged for the medical treatment
provided to him.
11
Plaintiff relies on the related opinion issued by the same appellate court in
Hale v. Sharp Healthcare, supra, 183 Cal.App.4th 1373, to support his argument, plus
Sarun v. Dignity Health, supra, 232 Cal.App.4th 1159. Sarun does not help plaintiff in
this context. It did not involve allegations that defendant misrepresented the nature of its
medical charges. Rather, Sarun addressed whether an uninsured patient who had paid a
portion of his bill and remained obligated to pay the balance of it had adequately alleged
he suffered damage under the UCL and CLRA even though he failed “to seek financial
assistance,” under the hospital’s discounted billing policy. (Sarun v. Dignity Health,
supra, at p. 1168.)
However, Hale is similar to Durell and the present case. In Hale, the
plaintiff was admitted to the defendants’ hospital after signing an admission agreement
obligating her “‘to pay . . . the hospital in accordance with [its] regular rates and terms.’”
(Hale v. Sharp Healthcare, supra, 183 Cal.App.4th at pp. 1377-1378.) The appellate
court reversed a judgment dismissing the action as to Hale’s UCL and CLRA causes of
action. Citing the amended complaint’s allegation that “Hale signed the Admission
Agreement, and ‘at the time of signing the contract, she was expecting to be charged
“regular rates,”’” the appellate court concluded, “‘to the extent [she] is bringing a fraud-
based claim under the UCL, she has reasonably pled reliance.’” (Hale v. Sharp
Healthcare, supra, at p. 1385.) In reaching this conclusion, Hale rejected the defendants’
assertion Hale “would not have seen the Admission Agreement until after she arrived at
the hospital” noting “[i]t is possible, however, for a person who has arrived at the hospital
to rely on the Admission Agreement in deciding whether to proceed with treatment.” (Id.
at p. 1386.)
Plaintiff’s TAC also alleges his expectations concerning payment for the
emergency medical services provided to him. But we conclude Hale is distinguishable
from this case and, in any event, plaintiff’s allegations concerning what he expected to
pay for defendants’ medical treatment are contradicted by the agreements he signed.
12
First, in Hale the language of the hospital’s admissions contract at issue in
Hale referred to payment at “regular rates.” (Hale v. Sharp Healthcare, supra, 183
Cal.App.4th at p. 1378.) The plaintiff challenged the hospital’s billing on the ground that
rather than the “‘“regular rates”’” she was expecting to pay, the hospital sent a bill for
“‘grossly excessive rates.’” (Id. at p. 1385.) Plaintiff signed admission agreements
obligating him to pay “all reasonable charges, listed in the hospital charge
description master and if applicable” defendants’ “charity care and discount payment
policies” or “state and federal law incurred by me and not paid by third party benefits.”
It is not clear whether the phrase “all reasonable charges” refers to the fairness of the
cost of the treatment or to the scope of that treatment. But even assuming it is the
former, this paragraph is not consistent with plaintiff’s allegation that he “reasonably
expected . . . that [he] would be billed at [either] the same rates as those applicable to
other patients signing the same Contract and receiving similar emergency treatment” or
“at rates which reflected no more than the reasonable value of the treatment.”
First, even assuming plaintiff actually read the Contract, he cannot prevail
on a theory that he expected to pay the same amount as other patients covered by
government programs or private insurance. As noted, plaintiff attached a copy of one of
the Contracts to the TAC and relied on the terms of the agreement to support his
expectation theories. “While the ‘allegations [of a complaint] must be accepted as true
for purposes of demurrer,’ the ‘facts appearing in exhibits attached to the complaint will
also be accepted as true and, if contrary to the allegations in the pleading, will be given
precedence.’” (Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761, 767;
Alphonzo E. Bell Corp. v. Bell etc. Synd. (1941) 46 Cal.App.2d 684, 691 [“conclusions of
the pleader . . . contrary to the express terms of [an] instrument . . . made a part of the
complaint” are treated “as surplusage”].)
In this case, plaintiff bases his claims for relief on the terms of an express
contract. When interpreting a contract, a court must consider the “clear and explicit”
13
“language of a contract” (Civ. Code, § 1638), generally construing “[t]he words . . . in
their ordinary and popular sense . . . unless used by the parties in a technical sense” (Civ.
Code, § 1644), and taking “[t]he whole of [the] contract . . . together, so as to give effect
to every part, if reasonably practicable, each clause helping to interpret the other” (Civ.
Code, § 1641).
Plaintiff’s assertion that he expected to pay no more than patients covered
by government programs or private insurance is contradicted by the language of the
Contracts he signed. The agreements included paragraphs requiring an insured patient to
“irrevocably assign[]” his or her “insurance benefits” for the services and treatment
rendered by the hospital and hospital-based physicians, and advised an insured patient
that he or she will “personally responsible for payment of . . . charges” if the “insurance
does not cover” them. Another paragraph informed Medicare-eligible patients that some
procedures “may not be covered” and authorized the hospital to “release certain medical
information about the patient to the Social Security Administration . . . for this or a
related Medicare claim.”
Paragraph 16 itself also conflicts with plaintiff’s interpretation of the
Contract. It states a patient is obligated to pay “all reasonable charges, listed in the
hospital charge description master and if applicable the hospital’s charity care and
discount payment policies and state and federal law incurred by me and not paid by third
party benefits.” The latter clause modifies the phrase “all reasonable charges,” reflecting
patients covered by government programs, or receiving “third party benefits,” or who are
eligible for either the hospital’s charity care or discount programs would differ from the
amounts “listed in the hospital charge description master.”
Second, as for plaintiff’s reasonable value claim, in the case of an express
contract reasonable value applies only when the agreement “does not determine the
amount of consideration, nor [provide] the method by which it is to be ascertained.”
(Civ. Code, § 1611.) “[I]t is well settled that there is no equitable basis for an implied-in-
14
law promise to pay reasonable value when the parties have an actual agreement covering
compensation.” (Hedging Concepts, Inc. v. First Alliance Mortgage Co. (1996) 41
Cal.App.4th 1410, 1419.) The actual amount plaintiff would be obligated to pay for the
hospital’s medical treatment is not listed in the Contract. But the agreements provided a
means by which a patient can ascertain the amount due for the treatment and services
reasonably provided. Because this case involves an express contract containing a means
of determining what plaintiff would have to pay for his medical care, his reliance on the
reasonable value discussion in Children’s Hospital Central California v. Blue Cross of
California (2014) 226 Cal.App.4th 1260, lacks merit. That case concerned
reimbursement for services during a 10-month period when the parties did not have a
contractual relationship. Thus, plaintiff’s reliance on a reasonable value theory lacks
merit.
Finally, we note the TAC acknowledges plaintiff did not have a
reasonable expectation that he would pay no more than other patients. Paragraph 34 of
the TAC alleges “[p]atients covered by insurance, including governmental and private
insurance . . . reimburse Defendants based on governmentally regulated or privately
negotiated rate structures rather than Chargemaster rates.” The TAC further states,
“Defendants’ Chargemaster rates are not amounts which Defendants expect to be paid by
any category of patient.”
Thus, to the extent plaintiff relies on purported violations of the CLRA
premised on misrepresentation, his claim that defendants’ business practice is unlawful
fails because he does not allege facts supporting a finding he actually relied on or could
reasonably rely on any misrepresentation in seeking medical treatment at defendants’
hospital.
The remaining basis cited by plaintiff for the “unlawful” prong of his UCL
cause of action is that the Contract’s financial liability provision is unconscionable. The
TAC alleged in part, plaintiff was “not expecting to be billed at the artificial and grossly
15
excessive rates for which [he was] subsequently billed.” To support this assertion, the
TAC stated defendants’ charges for medical treatment “are not tethered to their actual
costs,” but are “four to six times” those costs “and far beyond any reasonable profit
margin.” Further, it is claimed defendants’ charges are intended “to boost hospital
reimbursement rates, as well as reflect a higher level of Charity contribution and
Financial Assistance given to the local community.” Thus, “Defendants’ pricing, billing
and collection practices have a significant detrimental impact on the large population of
self-pay emergency care patients.”
“‘The unconscionability doctrine ensures that contracts, particularly
contracts of adhesion, do not impose terms that have been variously described as
“‘“overly harsh”’” [citation], “‘unduly oppressive’” [citation], “‘so one-sided as to
“shock the conscience”’” [citations], or “unfairly one-sided.” All of these formulations
point to the central idea that unconscionability doctrine is concerned not with “a simple
old-fashioned bad bargain” [citation], but with terms that are “unreasonably favorable to
the more powerful party.”’” (Sanchez v. Valencia Holding Co., LLC (2015) 61
Cal.4th 899, 910-911.) A claim of contractual unconscionability, “‘“has both a
procedural and a substantive element, the former focusing on oppression or surprise due
to unequal bargaining power, the latter on overly harsh or one-sided results.”’” (Id. at
p. 910.) “‘“The procedural element of an unconscionable contract generally takes the
form of a contract of adhesion, ‘“which, imposed and drafted by the party of superior
bargaining strength, relegates to the subscribing party only the opportunity to adhere to
the contract or reject it.”’”’” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109,
1133.) “‘“Substantively unconscionable terms may take various forms, but may
generally be described as unfairly one-sided.”’” (Ibid.)
The Contracts plaintiff signed were preprinted documents and the TAC
alleged all emergency room patients must sign the same document before being treated.
These averments support a finding of procedural unconscionability.
16
As for substantive unconscionability, the price term of a contract can be the
basis for relief. (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 926; Morris v.
Redwood Empire Bancorp (2005) 128 Cal.App.4th 1305, 1323.) But “[a]llegations that
the price exceeds cost or fair value, standing alone, do not state a cause of action.”
(Perdue v. Crocker National Bank, supra, 38 Cal.3d at p. 926.) “The courts look to the
basis and justification for the price [citation], including ‘the price actually being paid
by . . . other similarly situated consumers in a similar transaction.’” (Id. at pp. 926-927.)
In addition, “courts consider not only the market price, but also the cost of the goods or
services to the seller [citations], the inconvenience imposed on the seller [citation], and
the true value of the product or service.” (Id. at p. 927; Morris v. Redwood Empire
Bancorp, supra, 128 Cal.App.4th at p. 1323.)
This case concerns the cost of medical care provided to uninsured patients
visiting a defendants’ hospital emergency room. Plaintiff has alleged that defendants’
charge description master rates not only far exceed the actual cost of care and provide for
a large profit margin, he further maintains the purpose of defendants’ charging excessive
costs to self-pay patients is to increase the hospital’s reimbursement for medical care by
dramatically increasing its profit margin for treatment to persons particularly vulnerable
because they are in need of emergency medical care. Generally, “[u]nconscionability is a
question of law for the court,” but “factual issues may bear on that question.” (Wayne v.
Staples, Inc. (2006) 135 Cal.App.4th 466, 480; Baker v. Osborne Development Corp.
(2008) 159 Cal.App.4th 884, 892.) Also, the Legislature has mandated that “[w]hen it is
claimed or appears to the court that the contract or any clause thereof may be
unconscionable the parties shall be afforded a reasonable opportunity to present evidence
as to its commercial setting, purpose, and effect to aid the court in making the
determination.” (Civ. Code, § 1670.5, subd. (b).)
17
To the extent plaintiff alleges the financial liability provision of defendants’
Contract is unconscionable, we conclude he has sufficiently stated a cause of action under
the unlawful prong of the UCL.
4. Fraudulent Acts or Practices
The TAC enumerates several grounds supporting the fraud prong of
plaintiff’s UCL cause of action. It alleges defendants “fail[ed] to inform and/or
conceal[ed] from . . . self-pay patients” their “uniform policy to bill and require
payment from self-pay patients at rates . . . higher than rates paid by other patients
signing the same [c]ontract.” Other claims are the Contract “misrepresent[ed] . . . the[]
‘charge description master’ rates constitute ‘reasonable charges,’” and “attending
physician(s) . . . list their charges in the Hospital’s charge description master,” and that
the Contract “contains confusing, conflicting, and unintelligible provisions.” As for the
Contract’s financial aid provision, the TAC avers it “requires an uninsured patient, as a
prerequisite to challenging the amount of a . . . bill, to first apply for Charity and
Financial Aid programs,” obligates “an uninsured patient . . . provide total strangers with
extensive personal and financial information . . . as a prerequisite for challenging a bill,”
but “nevertheless compute[s] and send[s] out bills . . . to such patients at the Hospital’s
[charge description master] rates.” Finally, the TAC maintains defendants “bill
uninsured patients at [charge description master] rates, when the[] . . . [c]ontract does not
permit billing at such rates,” and “seek to collect from uninsured patients billed charges
that are so excessive and unreasonable as to be unconscionable.”
Many of the alleged bases for plaintiff’s fraud theory do not involve
conduct that is likely to deceive a consumer or contradict the language of the Contracts
he signed. Also, as discussed above, the UCL’s fraud prong generally “‘require[s] . . . a
showing that members of the public are likely to be deceived.’” (Lueras v. BAC Home
Loans Servicing, LP (2013) 221 Cal.App.4th 49, 81.) To establish a private party’s
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standing to maintain a UCL cause of action under the fraud prong In re Tobacco II Cases,
supra, 46 Cal.4th 298, held the phrase “as a result of” appearing in Business and
Professions Code section 17204 “imposes an actual reliance requirement on plaintiffs
prosecuting a private enforcement action under the UCL’s fraud prong.” (In re Tobacco
II Cases, supra, 46 Cal.4th at p. 326.) Given our prior discussion of this issue, no basis
exists to conclude plaintiff’s complaint supports recovery under the UCL’s fraud prong.
5. Unfair Acts or Practices
To support his claim under the “unfair” prong of the UCL, plaintiff alleges
defendants “fail[ed] to charge [self-pay emergency room patients] reasonable rates as
required by the terms of the[] Contract[], and instead interpret[ed] the[] Contracts to
collect exorbitant amounts . . . expressly prohibited under the federal tax code, and in
violation of the [CLRA],” and which “offend established public policies, . . . are immoral,
unethical, oppressive, and unscrupulous.”3
Cases have employed three different criterion to determine whether a
business practice is “unfair” under the UCL. One states “‘“an ‘unfair’ business practice
occurs when that practice ‘offends an established public policy or when the practice is
immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.’”’”
(Lueras v. BAC Home Loans Servicing, LP, supra, 221 Cal.App.4th at p. 81.) A second
rule provides “‘“the public policy which is a predicate to the action must be ‘tethered’ to
specific constitutional, statutory or regulatory provisions.”’” (Ibid.) A third holds “‘[a]n
act or practice is unfair if the consumer injury is substantial, is not outweighed by any
3 The TAC’s reference to an alleged violation of the Internal Revenue Code
is confusing. The paragraph in the UCL count alleging defendants engaged in an unfair
business practice does not cite to any specific section of the Internal Revenue Code.
However, in another paragraph the TAC mentions title 26 United States Code section
501(r)(5)(A) and (B). But in a footnote the TAC states it “is not asserting any private
right of action under” this statute.
19
countervailing benefits to consumers or to competition, and is not an injury the
consumers themselves could reasonably have avoided.’” (Berryman v. Merit Property
Management, Inc., supra, 152 Cal.App.4th at p. 1555.)
The TAC appears to rely on both the first and second approaches to support
a claim under the UCL’s unfair prong. In any event, it is not necessary to resolve the
appropriate standard under the unfair prong. As discussed above, plaintiff has alleged
sufficient facts to maintain his UCL cause of action on the basis defendants’ billing the
full amount to self-pay patients is unconscionable.
Defendants respond, arguing plaintiff lacked standing under this prong
because the Contracts offered plaintiff a means to avoid paying the full cost of his care by
seeking a reduction or elimination of his financial liability through the hospital’s financial
assistance or charity care policy. As noted, the Hospital Fair Pricing Act required
defendants’ hospital to maintain and administer that policy. And, as acknowledged in the
TAC, the Contracts informed a patient of the policy.
Contrary to defendants’ argument, the availability of its financial assistance
and charity care policy did not eliminate plaintiff’s standing to maintain this action. In
Sarun v. Dignity Health, supra, 232 Cal.App.4th 1159, the court rejected a similar claim.
“[A]lthough a further discount from Dignity’s ‘full charges’—even a complete
elimination of the charges in excess of what Sarun already had paid—may have been
available, the invoice as presented to Sarun . . . stated a $23,487.90 balance was due.
Sarun was not merely ‘exposed’ to the allegedly unlawful pricing system . . . Dignity’s
invoice told him to pay the full remaining sum unless he sought relief.” (Id. at pp. 1168-
1169.) The appellate court further concluded “[t]o avoid the consequences of its
allegedly unlawful ‘full charges’ pricing structure for uninsured emergency care patients,
Dignity required Sarun to apply for financial assistance, including providing tax return
information and other personal financial data. The tangible burden of such an application
20
process is far more than the ‘identifiable trifle’ required to confer injury in fact standing.”
(Id. at p. 1169.)
Plaintiff alleged defendants sent him a bill demanding that he pay $10,000
for the medical care he received. While the Contracts advised plaintiff to contact the
hospital’s business office to see if he could qualify for a reduction or elimination of the
amount owed, as Sarun concluded this application process also constituted a tangible
burden. Thus, we conclude plaintiff had standing under the unfair prong.
Furthermore, we note the TAC contains an allegation that plaintiff sent the
hospital “correspondence” informing it of his financial condition and seeking a quick
resolution of the charge for his medical treatment, to which the hospital purportedly never
responded. Assuming there is evidence to support this allegation, notwithstanding the
TAC’s allegation that there are reasons why some self-pay patients may not want to seek
financial assistance, plaintiff has alleged a basis for finding he substantially complied
with the duty to seek financial assistance before suing defendants.
Thus, plaintiff has established a basis for maintaining his UCL cause of
action on the basis defendants’ policy of billing self-pay patients the full amount of its
charge description master rates was unfair because the amount sought was allegedly
unconscionable.
C. The CLRA
Civil Code section 1780, subdivision (a) authorizes “[a]ny consumer who
suffers any damage as a result of the use or employment by any person of a method, act,
or practice declared to be unlawful by Section 1770 may bring an action” for relief. As
noted above, plaintiff cites subdivision (a)(5), (13), (14), and (19) of the latter statute in
support of his CLRA cause of action. In addition, plaintiff repeats the allegation he
“reasonably expected and relied on the[] . . . belief that Defendants would bill [him] at
the same rates as other patients signing the same Contract and receiving similar
21
emergency treatment/services,” or that his bill would be “for no more than the reasonable
value of the treatment,” and he “was certainly not expecting to be billed at the artificial
and grossly excessive rates for which he was subsequently billed.”
For the reasons previously discussed, we conclude the trial court properly
sustained the demurrer as to the allegations of misrepresentation. Because plaintiff failed
to allege he read and relied on the signed Contracts or other representation by defendants,
he lacks standing to maintain the CLRA cause of action on this basis. “Under Civil Code
section 1780, subdivision (a), CLRA actions may be brought ‘only by a consumer “who
suffers any damage as a result of the use or employment” of a proscribed method, act, or
practice. (Italics added.) “This language does not create an automatic award of statutory
damages upon proof of an unlawful act. Relief under the CLRA is specifically limited to
those who suffer damage, making causation a necessary element of proof.” [Citation.]
Accordingly, “plaintiffs in a CLRA action [must] show not only that a defendant’s
conduct was deceptive but that the deception caused them harm.”’ [Citation.] A
‘misrepresentation is material for a plaintiff only if there is reliance—that is, “‘“without
the misrepresentation, the plaintiff would not have acted as he did”’” . . . .’ [Citation.]”
(Durell v. Sharp Healthcare, supra, 183 Cal.App.4th at pp. 1366-1367; Hale v. Sharp
Healthcare, supra, 183 Cal.App.4th at pp. 1386-1387.) Further, even if plaintiff did read
the Contracts, as explained above, his interpretation of them is contrary to both the
language of the instruments and the applicable law.
However, as to the allegation of Civil Code section 1770, subdivision
(a)(19), declaring unlawful “[i]nserting an unconscionable provision in [a] contract,”
based on the foregoing discussion under the UCL’s unlawful prong, we conclude plaintiff
has stated a basis for maintaining the CLRA cause of action on this ground.
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D. Declaratory Relief
The TAC’s third count sought declaratory relief under Code of Civil
Procedure section 1060. It requested the trial court decree: (1) “Defendants’ billing
practices as they relate to [self-pay patients] are unfair, unreasonable, and illegal”; (2)
self-pay patients “are liable to Defendants for no more than the reasonable value of the
treatment/services provided”; and (3) “neither provision 18 of the Contract nor
any . . . law or statute establishes a duty on the part of an uninsured patient to seek out
and apply for Charity or Financial Aid as a prerequisite to legally challenging the amount
of a Hospital bill that the patient deems to be unfair, unreasonable, or unlawful.” On
appeal, plaintiff’s argument addresses only the second and third grounds.
Code of Civil Procedure section 1060 allows “[a]ny person interested under
a written instrument, . . . or under a contract, or who desires a declaration of his or her
rights or duties with respect to another . . . may, in cases of actual controversy relating to
the legal rights and duties of the respective parties, bring an original action . . . in the
superior court for a declaration of his or her rights and duties in the premises, including a
determination of any question of construction or validity arising under the instrument or
contract.” However, Code of Civil Procedure section 1061 states “[t]he court may refuse
to exercise the power granted by this chapter in any case where its declaration or
determination is not necessary or proper at the time under all the circumstances.”
As discussed above, we have rejected plaintiff’s claim the Contract can be
reasonably construed as limiting defendants’ recovery from self-pay emergency care
patients to the reasonable value of the services provided. Nor does the third ground for
declaratory relief appear to be a matter currently in dispute. While defendants assert
plaintiff is not entitled to relief because he never sought financial assistance, they do not
take the position that a patient must first seek financial aid before challenging the amount
of a hospital bill.
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That leaves only the TAC’s first ground as a basis for declaratory relief.
“‘“The purpose of a declaratory judgment is to ‘serve some practical end in quieting or
stabilizing an uncertain or disputed jural relation.”’ [Citation.] “Another purpose is to
liquidate doubts with respect to uncertainties or controversies which might otherwise
result in subsequent litigation [citation].” [Citation.]’ [Citation.] ‘“One test of the right
to institute proceedings for declaratory judgment is the necessity of present adjudication
as a guide for plaintiff’s future conduct in order to preserve his legal rights.”’” (Meyer v.
Sprint Spectrum L.P. (2009) 45 Cal.4th 634, 647.) Since plaintiff in part seeks injunctive
relief to prohibit defendants from future attempts to collect unconscionable amounts for
his medical care, we conclude this issue is ripe for declaratory relief.
III
DISPOSITION
The judgment is reversed and the matter remanded to the superior court for
further proceedings consistent with this opinion. Each party shall bear its own costs on
appeal.
MOORE, J.
WE CONCUR:
BEDSWORTH, ACTING P. J.
IKOLA, J.
24
Filed 10/5/16
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION THREE
GENE MORAN,
Plaintiff and Appellant, G051391
v. (Super. Ct. No. 30-2013-00689394)
PRIME HEALTHCARE ORDER GRANTING REQUEST
MANAGEMENT, INC., et al., FOR PUBLICATION; NO CHANGE
IN JUDGMENT
Defendants and Respondents.
Carpenter Law and Law Office of Barry L. Kramer have requested that our
opinion, filed on September 14, 2016, be certified for publication. It appears that our
opinion meets the standards set forth in California Rules of Court, rule 8.1105(c). The
request is GRANTED.
The opinion is ordered published in the Official Reports.
MOORE, J.
WE CONCUR:
BEDSWORTH, ACTING P. J.
IKOLA, J.