Health Law Standing Committee — 2022 Appellate Litigation Update

• Publication year: 2023
• Author: Written by H. Thomas Watson

HEALTH LAW STANDING COMMITTEE — 2022 APPELLATE LITIGATION UPDATE

Written by H. Thomas Watson^*

There were numerous, important appellate decisions regarding health law issues in 2022, including decisions by both the United States Supreme Court and the California Supreme Court. Following are summaries of the decisions by these high courts and the pending high court health law matters, as well as the holdings of intermediate appellate health law decisions by the Ninth Circuit and California court of appeals.

The appellate decisions are organized into the following seven categories: (1) Regulation of Healthcare; (2) Medi-Cal, Medicare, and Medicaid; (3) Peer Review and Discipline; (4) Professional Liability, Elder Abuse, FEHA, and MICRA; (5) Patient Rights, Privileges, and Privacy; (6) Arbitration; and (7) Fees, Costs, and Insurance. Within each category, federal cases precede state cases and Supreme Court decisions (which are summarized) precede intermediate appellate decisions (which include only the citation and holding), with cases then listed in reverse chronological order.

I. REGULATION OF HEALTHCARE

SmileDirectClub, LLC v. Tippins, 31 F.4th 1110 (9th Cir. 2022) [State regulatory board actions may violate the Sherman Antitrust Act]

Saldana v. Glenhaven Healthcare LLC, 27 F.4th 679 (9th Cir. 2022) [The PREP Act neither requires providers to work under federal officials nor completely preempts state law]

County of Santa Clara v. Super. Ct., 77 Cal. App. 5th 1018 (2022), review granted July 27, 2022, S274927 [Issue Presented: Are counties immune under the Government Claims Act (Gov. Code section 810 et seq.) from actions seeking reimbursement for emergency medical care provided to persons covered by county health care service plans?]

The County of Santa Clara operates a health service plan licensed under the Knox-Keene Act. Two hospitals that did not have contracts with the county provided emergency medical services to plan members. The hospitals submitted reimbursement claims to the county, which provided partial reimbursement. The hospitals sued the county for the balance, alleging breach of a contract implied-in-fact or implied-in-law (meaning implied in the Knox-Keene Act). The hospitals argued that they had provided emergency medical services to those plan members expecting the county to pay their reasonable and customary rates (about five times the county's payment). The county demurred, arguing that there is no express right of action for reimbursement under the Knox-Keene Act, that no right of action may be implied against a public entity, and that the county is immune under the Government Claims Act.¹ The trial court overruled the demurrer and the county petitioned for writ relief.

The court of appeal granted writ relief. The Knox-Keene Act does not provide an express right of action, and none could be implied here because Government Code section 815 bars a quantum meruit or other common law action against the county. The mandatory duty exception in section 815.6 did not salvage the hospitals' claim. While the Knox-Keene Act requires the

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county to pay the reasonable and customary value of the emergency health care services provided to its members, the county has discretion to determine the reasonable and customary value of the services being reimbursed. The court rejected the trial court's constitutional concerns about allowing the county to have unfettered discretion to set the reimbursements amounts, noting that the Knox-Keene Act provides enforcement alternatives to litigation, for example: providers may report allegedly unfair payment patterns to the Department of Managed Health Care, which has the authority to investigate and impose penalties on health care service plans. The hospitals' implied-in-fact contract claim likewise failed. Because the hospitals' suit was based on an alleged breach of a statutory duty rather than the breach of a promise, the nature of the action was tortious and the county is immune from tort suits under section 815. Finally, the court concluded that affording leave to amend would be futile because the hospitals failed to identify any other statutory basis for abrogating government immunity.

The California Supreme Court granted review, and limited the issue to be decided to the following: "Is Santa Clara County immune under the Government Claims Act (Gov. Code, § 810 et seq.) from an action seeking reimbursement for emergency medical care provided to persons covered by the county's health care service plan?"

City of Oxnard v. County of Ventura, 71 Cal. App. 5th 1010 (2021) [A city may not administer ambulance services after delegating those services to the surrounding county]

II. MEDI-CAL, MEDICARE, AND MEDICAID

BECERRA V. EMPIRE HEALTH FOUND., 142 S. CT. 2354 (2022) [MEDICARE'S LOW-INCOME PATIENT HOSPITAL REIMBURSEMENT ADJUSTMENT IS BASED ON INDIVIDUALS "ENTITLED" TO PART A BENEFITS, EVEN IF MEDICARE DOES NOT PAY FOR THEIR TREATMENT]

Medicare pays hospitals a fixed rate for treating each Medicare patient, regardless of actual costs, subject to hospital-specific rate adjustments. Hospitals that serve an unusually high percentage of low-income patients receive increased Medicare payments via a "disproportionate share hospital" (DSH) adjustment. To calculate entitlement to and the amount of a DSH adjustment, the Department of Health and Human Services (HHS) uses a "mind-numbingly complex" formula that adds two statutorily described fractions: the Medicare and Medicaid fractions. The former roughly measures the hospital's low-income senior-citizen population. The latter roughly measures the hospital's low-income non-senior population. The Medicare fraction is the number of patient days attributable to patients "entitled to benefits under Part A of Medicare," plus supplementary security income benefits (SSI), divided by the number of days attributable to all Medicare patients.² The Medicaid fraction is the number of patient days attributable to patients "eligible for Medicaid," but not entitled to benefits under Part A, divided by the total number of patient days.³

When a person turns sixty-five, or has received federal disability benefits for twenty-four months, he automatically becomes "entitled" to benefits under Medicare Part A, which includes coverage for in-patient hospital treatment. However, there are instances where Part A will not cover qualifying patients' treatment, for example, because they have private health insurance that must be exhausted first. The issue presented here is whether the numerator of the Medicare fraction includes patients "entitled" to Medicare benefits by virtue of their age or disability, even if Medicare did not actually pay for hospitalization expenses because, for example, those expenses were paid by private health insurance.

For seven years after it was enacted, HHS construed the statute as excluding from the Medicare fraction Medicare patients whose treatment was not paid by Medicare. Then, in 2004, HHS adopted a regulation requiring the Medicare fraction to include all patients who meet the criteria for Medicare Part A coverage regardless of whether Medicare paid for their treatment. Empire Health Foundation challenged the regulation as inconsistent with the statute. The Ninth Circuit agreed with Empire Health, holding that "entitled" to Part A benefits "meets the Medicaid statutory criteria" but "eligible" for Medicare assistance means an absolute right to have Medicare pay for treatment. The Supreme Court granted certiorari on the issue of whether a patient who qualifies for Medicare Part A, but who does not pay for treatment under the plan, is "entitled to [Medicare Part A] benefits" for the purpose of computing a hospital's DSH percentage?

The Supreme Court reversed, holding that, in calculating the Medicare faction, patients "entitled" to Medicare Part A benefits are those who qualify for the program, regardless whether Medicare pays for their hospital expenses. The Court held that "entitled" to benefits is a term of art that means qualifying for benefits. A limitation on payments due to a condition, such as exceeding the ninety-day hospital stay cap, does not terminate a patient's entitlement to coverage for other medical treatment. Moreover, because other Medicare beneficiary rights are conditioned on entitlement to benefits, Empire's definition would fluctuate constantly depending on whether Medicare paid for patients' hospital care each day. The Court also rejected Empire's argument that the uses of "for such days" in the statute gives "entitled" a meaning different from the rest of the Medicare statute, concluding

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that it only requires the HHS to exclude days before the beneficiary became eligible for Part A benefits. Finally, under the HHS definition, all low-income people fit neatly into either the Medicare or the Medicaid fraction, with the "sum of the two leaving no one out."

Justice Kavanaugh dissented, joined by Chief Justice Roberts and Justices Alito and Gorsuch. The dissent zeroed in on the statutory phrases "entitlement to have payment made" and "for such days" as requiring the Medicare fraction to include only patients whose treatment was paid by Medicare. They explained that a patient was not entitled to have payment made by Medicare for days spent in the hospital if the patient could not (and did not) have payment made by Medicare for those days. The dissent reasoned that "the retrospective reimbursement provision at issue focuses laser-like on whether the patient was actually entitled to have payment made by Medicare for particular days in the hospital. A patient cannot be simultaneously entitled and disentitled to have payment made by Medicare for a particular day in the hospital." Finally, the dissent faulted the HHS for changing its position over time to...