MOORE, J. —
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 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 et seq.), 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.
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.
In November 2013, plaintiff filed this putative class action against defendants. The initial complaint stated causes of action for breach of contract, breach of 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
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 description master[
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.
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 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 [216 Cal.Rptr. 718, 703 P.2d 58].)
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 [178 Cal.Rptr.3d 897].) 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 [93 Cal.Rptr.2d 413].)
Plaintiff's first cause of action seeks restitutionary and injunctive relief under the UCL.
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 [29 Cal.Rptr.3d 437]; see Cel-Tech, supra, 20 Cal.4th at p. 187.)
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.
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 describes as "artificial and grossly excessive rates." Defendants claim the Hospital Fair Pricing Act (Health & Saf. Code, § 127400 et seq.) defeats this latter allegation.
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.)
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.
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" (see 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" (see 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" (see Civ. Code, § 1770, subd. (a)(14)); and (4) "Defendants insert[ed] an unconscionable provision into their Contracts" (see Civ. Code, § 1770, subd. (a)(19)).
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 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, supra, 232 Cal.App.4th at p. 1167; see Kwikset Corp. 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].)
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.
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.
Plaintiff relies on the related opinion issued by the same appellate court in Hale, supra, 183 Cal.App.4th 1373, to support his argument, plus Sarun, 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, 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
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.
First, in Hale the language of the hospital's admissions contract at issue in Hale referred to payment at "`regular rates.'" (Hale, 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."
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 be "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 charges to 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."
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 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 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.
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."
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."
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
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, 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 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.
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 section 1770 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 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."
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.
The TAC's third count sought declaratory relief under Code of Civil Procedure section 1060. It requested the trial court decree: (1) "Defendants'
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.
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.
Bedsworth, Acting P. J., and Ikola, J., concurred.
