Doctors Hospital of Manteca v. Kaiser Foundation Hospitals CA2/1 ( 2022 )

Filed 7/1/22 Doctors Hospital of Manteca v. Kaiser Foundation Hospitals CA2/1
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
DOCTORS HOSPITAL OF B313077
MANTECA et al.,
(Los Angeles County
Plaintiffs and Appellants, Super. Ct. No. 20STCP03110)
v.
KAISER FOUNDATION
HOSPITALS et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of
Los Angeles County, John P. Doyle, Judge. Affirmed.
Jones Day, Erica L. Reilley and James L. Poth for Plaintiffs
and Appellants.
Sheppard, Mullin, Richter & Hampton, Moe Keshavarzi,
John T. Brooks and Matthew G. Halgren for Defendants and
Respondents.
____________________________
OPINION REDACTED TO EXCLUDE
CONFIDENTIAL INFORMATION.
(Cal. Code Regs., tit. 15, § 3321, subd. (a);
see People v. Landry (2016) 2 Cal.5th 52, 73.)
Between December 2013 and February 2017, appellants
Doctors Hospital of Manteca, Doctors Medical Center of Modesto,
Los Alamitos Medical Center, Sierra Vista Regional Medical
Center, Emanuel Medical Center, and Twin Cities Community
Hospital (collectively, Tenet) provided emergency medical
services to members of respondents Kaiser Foundation Hospitals
and Kaiser Foundation Health Plan, Inc. (collectively, Kaiser).
The parties dispute the adequacy of the reimbursement Kaiser
made to Tenet for these emergency medical services. Tenet and
Kaiser agreed to arbitrate Tenet’s quantum meruit claim for the
reasonable and customary value of its services, Kaiser’s
counterclaim seeking restitution of alleged overpayments made to
Tenet, and Tenet’s unfair competition law claim arising out of
Kaiser’s payment methodology.
At the conclusion of the arbitration, a panel of arbitrators
denied Tenet and Kaiser relief on their respective claims. The
panel concluded that neither side had discharged its burden of
showing the reasonable and customary value of the emergency
medical services in question. The panel also announced three
independent reasons for rejecting Tenet’s unfair competition law
claim: (1) Tenet’s challenge to Kaiser’s methodology was not
cognizable under the unfair competition law, (2) Tenet failed to
show that the methodology violated a regulation that governs
Kaiser’s reimbursement obligations, and (3) the arbitrators
should abstain from assessing whether Kaiser’s reimbursement
2
formula complies with that regulation. Tenet filed a petition to
vacate the final arbitral award, invoking a provision in the
parties’ arbitration agreement that empowered the trial court to
conduct a de novo review for mistakes of law or legal reasoning.
The trial court denied Tenet’s petition and confirmed the award.
On appeal, Tenet fails to demonstrate that the panel made
a prejudicial error of law or legal reasoning. First, the panel
applied the correct legal standard in disposing of Tenet’s
quantum meruit claim. The record reveals that Tenet simply
failed to persuade the arbitrators that primary leased network
and non-par rates approximate the reasonable and customary
value of Tenet’s emergency medical services to Kaiser’s members.
Second, in contesting the award’s resolution of the unfair
competition law claim, Tenet erroneously describes the panel’s
rulings and raises factual challenges thereto. Lastly, any error
made by the panel in adjudicating the unfair competition law
claim was harmless because Tenet is not entitled to
restitutionary or injunctive relief on that cause of action. We
thus affirm the trial court’s judgment.
FACTUAL AND PROCEDURAL BACKGROUND1
We summarize only those facts that are relevant to our
disposition of this appeal.
1 Our factual and procedural background is based on the
undisputed facts, the positions taken by the parties in their
filings, and the final arbitral award. (See Artal v. Allen (2003)
111 Cal.App.4th 273, 275, fn. 2 (Artal) [“ ‘[B]riefs and
argument . . . are reliable indications of a party’s position on the
facts as well as the law, and a reviewing court may make use of
statements therein as admissions against the party.’ ”];
Standards of Review, post [noting that an arbitrator’s award is
3
“Under the federal Emergency Medical Treatment and
Active Labor Act [citation] and the Knox-Keene [Health Care
Service Plan Act of 1975 (the Knox-Keene Act)], hospitals and
other medical providers have a statutory duty to provide
‘emergency [medical] services and care’ to persons who are in
‘danger of loss of life, or serious injury or illness.’ [Citations.]
Under the Knox-Keene Act, the health care service plan . . . must,
within 30 or 45 days, reimburse the hospital or other medical
providers for the ‘emergency services and care provided to its
enrollees’ as to (1) all care necessary for ‘stabilization’ of the
enrollee, and (2) for all poststabilization care the plan authorizes
the hospital to provide. [Citations.] When the hospital or other
medical providers have a contract with the plan, the plan must
reimburse them for the services at the ‘agreed upon contract
rate.’ [Citation.]” (Long Beach Memorial Medical Center v.
Kaiser Foundation Health Plan, Inc. (2021) 71 Cal.App.5th 323,
329, 334 (Long Beach Memorial Medical Center).)
“However, when the hospital or other medical providers
do not have a contract with the plan, the plan is statutorily
obligated to reimburse the hospital or providers for the
‘reasonable and customary value [of] the [emergency] health care
services rendered.’ [Citation.] . . . [¶] If a hospital or other
medical provider believes that the amount of reimbursement it
has received from a health plan is below the ‘reasonable and
customary value’ of the emergency services it has provided, the
hospital or provider may assert a quantum meruit claim against
presumed to be correct]; cf. Baxter v. State Teachers’ Retirement
System (2017) 18 Cal.App.5th 340, 349, fn. 2 [utilizing the
summary of facts provided in the trial court’s ruling].)
4
the plan to recover the shortfall.” (Long Beach Memorial Medical
Center, supra, 71 Cal.App.5th at pp. 334–335.)
Tenet Healthcare Corporation owns the six for-profit
California hospitals that are appellants to the instant
proceedings.2 Kaiser is a nonprofit health care services plan that
is regulated under the Knox-Keene Act. The arbitral panel
explained that “the heart of this dispute is the parties’
disagreement about the fair market value of the emergency . . .
services rendered to Kaiser members at [the] six . . . hospitals . . .
during the period between December 2013 and February 2017.”
During that timeframe, “the parties were not in a contractual
relationship, and no negotiated rates had been established.”
“Tenet claimed that Kaiser should reimburse the hospitals at
approximately of its billed charges,” and there is evidence in the
record that Kaiser paid between and of Tenet’s billed charges.
The parties agreed to arbitrate their dispute. Pursuant to
this agreement, the arbitral panel was charged with adjudicating
Tenet’s quantum meruit claim, Tenet’s claim under the unfair
competition law (Bus. & Prof. Code, § 17200 et seq.), and Kaiser’s
counterclaim for restitution, whereby it sought the return of
alleged overpayments. The agreement provides in pertinent part:
“The Final Award(s) shall be conclusive and binding and may be
confirmed thereafter as a judgment by the Superior Court of the
2 Tenet does not contest, and thus impliedly agrees with,
Kaiser’s assertions that Tenet Healthcare Corporation is the full
name of the entity that owns the six hospitals, and that these
hospitals are for-profit institutions. (See Rudick v. State Bd. of
Optometry (2019) 41 Cal.App.5th 77, 89–90 [concluding that the
appellants made an implicit concession by “failing to respond in
their reply brief to the [respondent’s] argument on th[at] point”].)
5
State of California, subject only to challenge on the grounds set
forth in . . . Code of Civil Procedure Section 1285 et seq., or on the
grounds that the Arbitrator(s) exceeded his/her/their powers by
making a mistake of law or legal reasoning. The Parties agree
that the court shall have jurisdiction to review, and shall review,
all challenged findings of law and legal reasoning based on a
de novo review.”
A panel of three arbitrators heard the matter and issued a
unanimous final award. In the award, the panel denied relief to
Tenet and Kaiser on their respective quantum meruit and
restitution claims on the ground that “neither party ha[d] carried
its burden of proof,” and thus the panel had “no basis[ ] on this
record[ ] to find the specific fair market value of the services
rendered at each hospital on the Disputed Claims.” The panel
also rejected Tenet’s unfair competition law cause of action for
several reasons that are addressed in greater detail in
Discussion, part B, post.
Tenet initiated the trial court proceedings by filing a
petition to vacate the final arbitral award. Kaiser filed a cross-
petition to confirm the award. The trial court denied Tenet’s
petition and granted Kaiser’s cross-petition. The trial court
reasoned that “Tenet’s objections [to the award] actually relate to
factual errors, which the Court cannot review under either the
subject arbitration agreement or Code Civ. Proc. § 1286.2.” The
trial court thereafter issued a judgment confirming the award,
and Tenet timely appealed the judgment.
STANDARDS OF REVIEW
Under the California Arbitration Act (CAA; Code Civ. Proc.,
§ 1280 et seq.), the trial court must undertake one of the
following courses of action if a petition to confirm an arbitral
6
award is filed: “confirm the award, . . . correct and confirm it, . . .
vacate it, or . . . dismiss the petition.”3 (See Cooper v. Lavely &
Singer Professional Corp. (2014) 230 Cal.App.4th 1, 10–11.) “The
trial court is empowered to correct or vacate the award, or
dismiss the petition, upon the grounds set out in the pertinent
statutes; ‘[o]therwise courts may not interfere with arbitration
awards.’ [Citations.]” (Id. at p. 11.)
“The grounds for vacating an award are set forth in [Code
of Civil Procedure] section 1286.2; they are narrow. [Citation.]
Among the listed grounds is that the arbitrators ‘ “exceeded their
powers.” ’ [Citation.] The parties to an arbitration agreement
may, as [Tenet] and Kaiser did, specify that arbitrators exceed
their powers if they ‘make [a] mistake[ ] of law or legal
reasoning,’ and that arbitrators’ legal rulings are subject to
de novo judicial review. [Citation.] ‘If the parties constrain the
arbitrators’ authority by requiring a dispute to be decided
according to the rule of law and make plain their intention that
the award is reviewable for legal error, the general rule of limited
review [of arbitration awards] has been displaced by the parties’
agreement.’ [Citation.]” (See Kaiser Foundation Health Plan,
Inc. v. Superior Court (2017) 13 Cal.App.5th 1125, 1137, fn. 8;
Factual and Procedural Background, ante [noting that the
parties’ agreement authorizes de novo review of challenged
findings of law and legal reasoning].) Notwithstanding this
modification of the general rule that arbitral awards are subject
3 The parties impliedly agree that the CAA governs
our review of the instant arbitral award. (See Artal, supra,
111 Cal.App.4th at p. 275, fn. 2 [holding that statements made in
a litigant’s brief may be construed as admissions against that
party].)
7
to limited judicial review, we still must “defer to the factual . . .
findings made by the arbitrator.” (See Cotchett, Pitre &
McCarthy v. Universal Paragon Corp. (2010) 187 Cal.App.4th
1405, 1416 (Cotchett, Pitre & McCarthy).)
“The party seeking to vacate an arbitration award bears
the burden of establishing that one of the six grounds listed in
[Code of Civil Procedure] section 1286.2 applies and that the
party was prejudiced by the arbitrator’s error.” (Royal Alliance
Associates, Inc. v. Liebhaber (2016) 2 Cal.App.5th 1092, 1106
(Royal Alliance Associates, Inc.); see also Rivera v. Shivers (2020)
54 Cal.App.5th 82, 94 (Rivera) [“ ‘Every reasonable intendment is
indulged to give effect to arbitration proceedings; the burden is
on the party attacking the award to affirmatively establish the
existence of error by a proper record.’ [Citation.]”].) “Absent a
showing of prejudice, even if error had been committed, the lower
court [i]s required to affirm the award.” (Cothron v.
Interinsurance Exchange (1980) 103 Cal.App.3d 853, 860–861
(Cothron).)
“ ‘[T]his court conducts a de novo review, independently of
the trial court, of the question whether the arbitrator exceeded
the authority granted him by the parties’ agreement to arbitrate.’
[Citations.]” (Safari Associates v. Superior Court (2014)
231 Cal.App.4th 1400, 1408.) Our obligation to review
independently the trial court’s judgment, however, does not
excuse an appellant of its “ ‘burden of showing reversible error,
and in the absence of such showing, the judgment or order
appealed from will be affirmed.’ [Citations.]” (See Estate of Sapp
(2019) 36 Cal.App.5th 86, 104; Los Angeles Unified School Dist. v.
Torres Construction Corp. (2020) 57 Cal.App.5th 480, 492 [noting
that this principle applies to “ ‘ “an appeal from any judgment” ’ ”
8
and on “ ‘ “[d]e novo review” ’ ”].) “ ‘[T]o demonstrate error, an
appellant must supply the reviewing court with some cogent
argument supported by legal analysis and citation[s] to the
record’ ” and “ ‘pertinent legal authority . . . .’ [Citation.]” (See
Hernandez v. First Student, Inc. (2019) 37 Cal.App.5th 270, 277
(Hernandez).) Additionally, “ ‘[i]f the decision of a lower court is
correct on any theory of law applicable to the case, the judgment
or order will be affirmed regardless of the correctness of the
grounds upon which the lower court reached its conclusion.’
[Citation.]” (Estate of Sapp, at p. 104.)
DISCUSSION
Tenet asserts the trial court erred in denying its petition to
vacate the final arbitral award because the panel of arbitrators
made mistakes of law or legal reasoning in rejecting Tenet’s
quantum meruit and unfair competition law claims. As discussed
in further detail below, Tenet fails to establish that the award
should be vacated.
A. Tenet Fails to Show the Arbitral Panel Made a
Mistake of Law or Legal Reasoning in Rejecting
Tenet’s Quantum Meruit Claim
Tenet contends that the panel of arbitrators applied an
erroneous legal standard to its quantum meruit claim. In
particular, Tenet criticizes the panel’s statement in the award
that it had “no basis, on this record, to find the specific fair
market value of the services rendered at each hospital on the
Disputed Claims.” Tenet argues that this passage indicates that,
by concluding “there was not enough evidence of value, [the
panel] must have been employing a legally erroneous higher
evidentiary burden of proof.” Tenet also maintains that the panel
9
seems to have erroneously “considered each category of evidence
individually in evaluating whether it was sufficient to ‘determine’
the fair market value of Tenet Hospitals’ services, instead of
considering the wide range of evidence together.” Additionally,
Tenet suggests the panel erred in tacitly assuming that Tenet
bore “the burden of proving an exact rate, or a precise
mathematical formula, or a specific quantification of certain
relevant factors . . . .” For the reasons discussed below, we reject
each of these contentions.
1. The panel did not employ a heightened burden of
proof
Regarding Tenet’s argument that the panel imposed an
erroneously stringent burden of proof on Tenet’s quantum meruit
claim, Tenet contends that “once the parties demonstrate the
facts and circumstances surrounding the services at issue,” the
factfinder must determine the value of the medical services,
regardless of whether “a party’s evidence of reasonable value . . .
establish[es] the specific value argued for by that party.”
Although Tenet’s argument on this point is not altogether clear,
Tenet seems to believe it discharged this burden by “ ‘fully
describ[ing]’ ” the services in question. (Quoting Spellmire v.
Buttress & McClellan, Ltd. (1935) 6 Cal.App.2d 550, 551
(Spellmire).) In support of its position, Tenet points out there are
cases in which factfinders have made value determinations that
were “between the evidentiary points offered by the parties.”
None of the decisions Tenet cites in support of its
characterization of the applicable evidentiary burden, however,
establish that a factfinder is required to determine the value of
the services at issue once a party has offered evidence describing
them. Because the factfinder in each of those cases arrived at a
10
value determination,4 these decisions had no occasion to consider
whether, and under what circumstances, a factfinder would err if
it did not make such a finding. (See Kim v. Reins International
California, Inc. (2020) 9 Cal.5th 73, 85, fn. 4 [“ ‘[C]ases are not
authority for propositions that are not considered.’ ”].)
In fact, Tenet’s assertion that it needed to merely offer
evidence describing its services in order to satisfy its evidentiary
burden is at odds with Children’s Hospital Central California, an
authority which Tenet concedes articulates the relevant legal
standard. Children’s Hospital Central California explained that
“[t]he burden is on the person making the quantum meruit claim
to show the value of the services,” and the touchstone of this
analysis is “the price that would be agreed upon by a willing
buyer and a willing seller negotiating at arm’s length.” (See
4 (See Sanjiv Goel, M.D., Inc. v. Regal Medical Group, Inc.
(2017) 11 Cal.App.5th 1054, 1057; Moore v. Mercer (2016)
4 Cal.App.5th 424, 427–428, 436; Children’s Hospital Central
California v. Blue Cross of California (2014) 226 Cal.App.4th
1260, 1264–1265 (Children’s Hospital Central California); Culver
Adjustment Bureau v. Hawkins Constr. Co. (1963) 217 Cal.App.2d
143, 144; Williams v. Dougan (1959) 175 Cal.App.2d 414, 418–
419; Geisenhoff v. Mabrey (1943) 58 Cal.App.2d 481, 482;
Spellmire, supra, 6 Cal.App.2d at p. 551; Kimes v. Davidson Inv.
Co. (1929) 101 Cal.App. 382, 383, 388; Nylund v. Madsen (1928)
94 Cal.App. 441, 442–443; Galaxy Networks, Inc. v. Kenan
Systems Corp. (9th Cir. June 2, 2000) 225 F.3d 662 [2000 WL
714554, at pp. *1, *7]; NorthBay Healthcare Group - Hospital
Division v. Blue Shield of California Life & Health Insurance
(N.D. Cal. Apr. 2, 2019) 2019 WL 7938444, at p. *1 (NorthBay II);
Regents of the University of California v. Global Excel
Management, Inc. (C.D. Cal. Jan. 10, 2018) 2018 WL 5794508, at
pp. *1, *23 (Regents).)
11
Children’s Hospital Central California, supra, 226 Cal.App.4th at
pp. 1274–1275.) The Court of Appeal further observed that “the
facts and circumstances of the particular case dictate what
evidence is relevant to show the reasonable market value of the
services at issue . . . .” (Id. at p. 1275.) Examples of evidence
relevant to the “reasonable and customary value of the
services . . . . include the full range of fees that [the provider] both
charges and accepts as payment for similar services,” and “[t]he
scope of the rates accepted by or paid to [the provider] by other
payors . . . .” (See ibid.)
Given that “[s]pecific criteria might or might not be
appropriate for a given set of facts” in a quantum meruit
case (see Children’s Hospital Central California, supra,
226 Cal.App.4th at p. 1275), evidence merely detailing the
services in question (e.g., the type and duration of the emergency
medical services) could—in a particular case—fall short of
providing the factfinder with sufficient information to ascertain
the price that a willing buyer would pay a willing seller in an
arm’s length transaction for the services. This conclusion is
reinforced by our high court’s observations that “pricing of
medical services is highly complex,” and that “the price of
services depend[s] on the category of payer and sometimes on the
particular government or business entity paying for the services.”
(See Howell v. Hamilton Meats & Provisions, Inc. (2011)
52 Cal.4th 541, 562.)
Moreover, the final award demonstrates the panel
employed the legal standard articulated in Children’s Hospital
Central California. According to the final arbitral award, Tenet
argued that “ ” The panel agreed with Tenet that the contracted
rates from commercial payors “do not represent the fair market
12
value of Tenet’s services for Kaiser’s members” because these
commercial rates typically contain some form of “steerage,[5 ]
exclusivity[,] and . . . other contracted-for benefits” that “are
missing from the Kaiser/Tenet relationship.” The panel reasoned
that, under Kaiser’s “integrated healthcare structure[,] . . . Kaiser
seeks to repatriate its members after stabilization” and “offers no
opportunity . . . to participate in any . . . means of providing a
myriad of services to Kaiser members.”
The panel observed that Tenet had not “quantified the
value” of the contractual benefits that are “absent from Tenet’s
relationship with Kaiser,” and that Tenet had instead
“compar[ed] [Tenet’s] relationship with Kaiser” to payors “who
access the primary leased networks, or the non-par rates
embedded in various commercial contracts.” The panel noted
that under Tenet’s theory, entities paying primary leased
network or non-par rates are analogous to Kaiser because such
payors “ ‘are unwilling or unable to include the hospital in-
network and allow the hospital to compete for the plan’s business
on the merits of the care they provide.’ ”6 The panel rejected
5 Although the panel did not explicitly define “steerage” in
the award, the panel appears to have used the term as a
shorthand to refer to “a health plan’s ability to steer [patient]
volume to a hospital.”
6 The panel did not further describe the “primary leased
networks” and “the non-par rates” discussed in the final award.
In its opening brief, Tenet claims that leased networks “reflect
the rates that third-party companies . . . are able to negotiate
with hospitals and ‘rent’ to health plans for a fee,” and it appears
Tenet is claiming that non-par rates are prices that “major health
plans negotiate with hospitals that are excluded from a
network . . . .” Tenet does not support properly these assertions,
13
Tenet’s reliance on the primary leased network rates because the
evidence suggested that Tenet’s payors utilized these rates
infrequently, and “Tenet has not accounted for reasons those
payors would have accessed these high rates that were unrelated
to lack of steerage or other factors in other commercial contracts.”
Similarly, the panel found that “Tenet’s alternative reliance on
non-par rates is . . . misplaced” because “there is no evidence of
any buyer paying those rates to Tenet,” meaning that “[t]he non-
par rates, by themselves, cannot determine the fair market value
of actual transactions that occurred with regularity between
Tenet and Kaiser.” Consequently, the arbitrators concluded that
“the primary leased network and non-par rates do not reflect the
fair market value of Tenet’s services absent steerage, exclusivity
or other benefits,” and “Tenet . . . failed to discharge its burden of
proving the reasonable or fair market value of its services
rendered to Kaiser members on the Disputed Claims.”
The award thus demonstrates that the arbitral panel found
Tenet had failed to offer sufficient evidence to enable the panel to
however. One of Tenet’s record citations is to an excerpt from the
final award that does not substantiate Tenet’s description of
primary leased networks or non-par rates, and Tenet’s other two
citations correspond to briefing that it and Kaiser had submitted
during the arbitration. (See Fierro v. Landry’s Restaurant Inc.
(2019) 32 Cal.App.5th 276, 281, fn. 5 [holding that “ ‘unsworn
averments in a memorandum of law prepared by counsel do not
constitute evidence’ ”]; cf. Alki Partners, LP v. DB Fund Services,
LLC (2016) 4 Cal.App.5th 574, 590 (Alki Partners, LP) [“Citing
points and authorities filed in the trial court is not appropriate
support for factual assertions in a brief.”].) In any event, Tenet’s
claim of error would fail even if it had substantiated these
descriptions of primary leased networks and non-par rates.
14
determine “the price that ‘ “a willing buyer would pay to a willing
seller, neither being under compulsion to buy or sell, and both
having full knowledge of all pertinent facts.” ’ [Citation.]” (See
Children’s Hospital Central California, supra, 226 Cal.App.4th at
p. 1274.) In particular, the panel found Tenet failed to account
adequately for the value of steerage and other contractual
benefits that are absent from its relationship with Kaiser.
Although Tenet disagrees with that conclusion, the panel’s
analysis reveals that it identified and applied the correct legal
standard.
Additionally, Tenet claims to have offered other evidence on
reasonable value—i.e., “the contracted rates paid by other
commercial payors, the amounts Kaiser paid , [and] Kaiser’s own
formula for determining the reasonable and customary value of
services prior to October 2015 . . . .”7 Tenet seems to contend the
panel’s refusal to arrive at a reasonable and customary value
determination based on this evidence also demonstrates the
7 In the argument section of Tenet’s opening brief, Tenet
cites part of its factual summary for the proposition that Tenet
also introduced evidence of “the amounts Kaiser agreed to pay
other hospitals in negotiated contracts for comparable
services . . . .” (Italics added.) This assertion fails, however,
because the portion of Tenet’s factual summary Tenet references
does not discuss—let alone cite evidence concerning—the
amounts Kaiser agreed to pay other hospitals. (See Alki
Partners, LP, supra, 4 Cal.App.5th at p. 590, fn. 8 [noting that
the procedural requirements governing appellate briefing are
“intended to enable the reviewing court to locate relevant
portions of the record ‘without thumbing through and rereading
earlier portions of the brief’ ”].)
15
arbitrators employed an erroneously heightened evidentiary
standard. We disagree.
Regarding the contracted rates paid by other commercial
payors, Tenet intimates the panel made an error of law or legal
reasoning by declining to award any relief on the quantum
meruit claim despite the panel’s supposed “acknowledge[ment]
that [Tenet’s] evidence showed that the reasonable value of its
services was, at a minimum, higher than the highest commercial
contracted rates.” The portion of the final award that Tenet cites
for this proposition, however, does not support their contention.
Moreover, the panel rejected Tenet’s reliance on the fact
that “” prior to late 2015.8 The arbitrators reasoned that “Kaiser
was initially reluctant to involve its members in balance billing, [9 ]
and even after 2009, it took some time to realize that the
consistent and unilaterally determined increase in Tenet’s . . .
8 This appears to be the evidence Tenet is referencing
when it claims to have offered “the amounts Kaiser paid ” and
“Kaiser’s own formula for determining the reasonable and
customary value of services prior to October 2015 . . . .” Insofar
as Tenet intended to identify some other evidence it had
submitted to the panel, Tenet has waived any argument relating
thereto. (See Cahill v. San Diego Gas & Electric Co. (2011) 194
Cal.App.4th 939, 956 (Cahill) [“ ‘The absence of cogent legal
argument . . . allows this court to treat the contention as
waived[,]’ ” italics added].)
9 The panel explained that “balance billing” is a practice in
which a hospital “pursue[s] patients . . . for the balance of any
charges not paid by their plan,” and that, “in 2009, the California
Supreme Court prohibited this practice, . . . at least with respect
to California patients who are members of HMOs like Kaiser.”
(Citing Prospect Medical Group v. Northridge Emergency Medical
Group, Inc. (2009) 45 Cal.4th 497, 507.)
16
rates required an updated methodology . . . .” To the extent
Tenet argues the panel should have found the reasonable and
customary value of Tenet’s services based on the Kaiser
previously paid to Tenet, that argument fails because Tenet
makes no effort to show the panel’s rejection of this evidence
constitutes an error of law or legal reasoning. (See Rivera, supra,
54 Cal.App.5th at p. 94 [“ ‘[T]he burden is on the party attacking
the award to affirmatively establish the existence of error . . . .’
”].)
2. The panel did not consider each category of evidence
in isolation
Furthermore, Tenet’s contention that the panel ran afoul of
“Children’s Hospital’s directive that it ‘must consider the full
range of relevant factors’ ” because the panel “considered each
category of evidence in isolation” is without merit. Tenet points
out the arbitrators found that the primary leased network and
non-par rates were “ ‘not determinative of’ ” and “cannot
determine’ ” the fair market value of Tenet’s services. When
these excerpts of the final award are read in context, however, it
becomes apparent the panel utilized this language to explain its
finding that Tenet had not shown the primary leased network
and non-par rates arose from transactions resembling the
disputed claims.
And, although Tenet correctly notes the panel used similar
language in disposing of Kaiser’s counterclaim for restitution
(i.e., the panel indicated that the fair market value is not
necessarily “ ‘determined by’ ” average contracted rates, volume
is not the “ ‘ultimate indicator’ ” of the reasonable value, and
profit is “ ‘not determinative’ ” of fair market price), these
passages do not show the arbitrators failed to assess the evidence
17
as a whole. Rather, the panel was simply stating that Kaiser had
not shown that its “average of contracted rates” approach to
calculating reasonable and customary value 10 “adequately
account[ed] for . . . relevant factors such as varying degrees of
steerage, network participation and other features that are
present in other contracted relationships but absent from Tenet’s
relationship with Kaiser.” Accordingly, the record belies Tenet’s
characterization of the award.
3. The panel did not require Tenet to establish the
reasonable and customary value of its services with
precision
Tenet’s argument that the arbitral panel improperly
charged Tenet with proving “ ‘an exact rate, . . . a precise
mathematical formula, or a specific quantification of certain
relevant factors, such as steerage, exclusivity, and other benefits”
is likewise unsubstantiated. At no point did the panel state in its
final award that Tenet was required to establish the precise
value of its services. The panel merely found that Tenet had not
shown that the primary leased network and non-par rates “reflect
the fair market value of Tenet’s services absent steerage,
exclusivity or other benefits.” Indeed, in rejecting a motion Tenet
filed during the arbitral proceedings to challenge the panel’s
findings on the quantum meruit claim, the panel stated it did not
“require Tenet to prove reasonable value with any mathematical
precision or provide evidence of specific rates that are applicable,”
but instead “required . . . sufficient evidence . . . on which [the
panel] could base an estimate of the value of Tenet’s services.”
10 This approach is discussed in greater detail in
Discussion, part B.1, post.
18
Thus, even assuming arguendo the governing burden of proof
did not require Tenet to establish with precision the reasonable
and customary value of its services, the record shows the panel
imposed no such obligation on Tenet.
Moreover, the arbitrators’ insistence that Tenet provide
“sufficient evidence” on which it could “base an estimate of the
value of Tenet’s services” was not erroneous. Although we agree
with Tenet that “the service being evaluated” in a quantum
meruit claim “has some value ([and] not zero value),” it does not
follow that the panel’s ruling on that claim, in effect, rendered
Tenet’s services worthless. There is no dispute that Kaiser paid
Tenet something for its services. Thus, by finding that Tenet did
not satisfy its burden of proof on the quantum meruit claim, the
arbitrators essentially concluded that Tenet failed to show it was
entitled to any additional compensation. (See Long Beach
Memorial Medical Center, supra, 71 Cal.App.5th at p. 335 [“As
the plaintiff in a quantum meruit lawsuit, the hospital or
provider bears the burden of establishing that the plan’s
reimbursement was less than the ‘reasonable and customary
value’ of its services,” italics added].) And the panel correctly
pointed out that it was not required to “speculate, guess, or
otherwise arbitrarily select an amount to award” in order to
comply with the applicable legal standard. (See McDonald v.
John P. Scripps Newspaper (1989) 210 Cal.App.3d 100, 104
[“ ‘It is fundamental that damages which are speculative, remote,
imaginary, contingent, or merely possible cannot serve as a legal
basis for recovery.’ ”].)11
11 Likewise, we reject Tenet’s apparent suggestion that the
panel should have arbitrarily selected a valuation falling within
the range of rates for emergency medical services reflected in the
19
In sum, Tenet does not establish that the arbitral panel
made a mistake of law or legal reasoning in denying relief on
Tenet’s quantum meruit claim.12 Moreover, Tenet’s assertion
that the award did not “include a determination of all the
questions submitted to the arbitrators the decision of which is
necessary in order to determine the controversy”13 fails because
the panel’s finding that Tenet did not satisfy its burden of proof
resolved the merits of the quantum meruit claim. (See Hauser v.
Ventura County Bd. of Supervisors (2018) 20 Cal.App.5th 572,
576 [indicating that a finding that “a party has failed to carry
[its] burden of proof” constitutes a “determination” that there is
no “evidence of sufficient weight and credibility to convince the
trier of fact”].)
B. Tenet Does Not Establish the Arbitral Panel’s
Rejection of the Unfair Competition Law Claim
Amounts to Reversible Error
The unfair competition law “outlaws as unfair competition
‘any unlawful, unfair or fraudulent business act or practice . . . .’ ”
parties’ “substantial competing evidence”—i.e., “between and of
billed charges . . . .”
12 Tenet states that “[t]he parties offered extensive,
competing evidence on all the different value points considered
sufficient in Children’s Hospital, Regents, NorthBay II and
Moore—e.g., the range of contracted rates, the highest contracted
rate, the leased network rates, and the individual hospital
evidence.” Inasmuch as Tenet purports to make an argument
that is not already addressed in Discussion, part A, that
argument fails because Tenet does not cogently raise it. (See
Cahill, supra, 194 Cal.App.4th at p. 956.)
13 (Code Civ. Proc., § 1283.4.)
20
(Morgan v. AT&T Wireless Services, Inc. (2009) 177 Cal.App.4th
1235, 1240, 1253 (Morgan), quoting Bus. & Prof. Code, § 17200.)
“Because the [unfair competition law] is framed in the
disjunctive, a business practice need only meet one of the three
criteria,” also known as “prong[s],” “to be considered unfair
competition. [Citation.]’ [Citation.]” (Morgan, at pp. 1240, 1253;
Law Offices of Mathew Higbee v. Expungement Assistance
Services (2013) 214 Cal.App.4th 544, 558.) With respect to the
unlawful activity prong, “ ‘ “ ‘ “section 17200 ‘borrows’ violations
of other laws and treats them as . . . independently actionable.”
[Citation.]’ ” [Citation.]’ [Citation.]” (Law Offices of Mathew
Higbee, at pp. 553, 558.)
During the arbitration, Tenet asserted that Kaiser’s
methodology for determining the reasonable and customary value
of Tenet’s services violated the unlawful activity, fraudulent, and
unfair prongs of the unfair competition law. The panel identified
three independent reasons for denying relief on the unlawful
activity prong: (1) Tenet failed to show that Kaiser’s supposed
violation of California Code of Regulations, title 28,
section 1300.71, subdivision (a)(3)(B)14 is redressable under the
unfair competition law; (2) Tenet had not demonstrated that
Kaiser’s methodology fails to comply with section 1300.71,
subdivision (a)(3)(B); and (3) the panel abstained from
determining whether Kaiser’s methodology comported with the
regulation because “compliance is best left” to the agency
responsible for implementing it, to wit, the Department of
Managed Healthcare (DMHC). Tenet asserts that all three
14 Undesignated regulatory citations are to title 28 of the
California Code of Regulations.
21
conclusions “reflect legal error that require the award to be
vacated.”15
As discussed below, Tenet fails to demonstrate the arbitral
panel’s rulings on the unlawful activity prong amount to
reversible error. First, Tenet has not shown the arbitrators made
a mistake of law or legal reasoning in rejecting the merits of
Tenet’s challenge to Kaiser’s payment methodology—i.e., item (2)
above. Our conclusion in this regard renders harmless any error
that the panel allegedly made in arriving at the conclusions
identified in items (1) and (3) above, given that each of these
three grounds independently supported the panel’s rejection of
Tenet’s invocation of the unlawful activity prong. Second, Tenet
does not demonstrate that even if Kaiser should have been held
liable under the unlawful activity prong, Tenet would have been
entitled to any relief on its unfair competition law claim.
Because Tenet does not satisfy its burden of showing that any
error was prejudicial, it is not entitled to an order vacating the
final arbitral award. (Royal Alliance Associates, Inc., supra,
2 Cal.App.5th at p. 1106 [“The party seeking to vacate an
arbitration award bears the burden of establishing that one of the
six grounds listed in [Code of Civil Procedure] section 1286.2
applies and that the party was prejudiced by the arbitrator’s
15 The panel also rejected Tenet’s invocation of the unfair
and fraudulent prongs of the unfair competition law for various
reasons (e.g., Tenet failed to prove that Kaiser’s methodology
“result[ed] in entrenched market power that is inimical to
competition and competitors”). By failing to contest the panel’s
rulings on the unfair and fraudulent prongs, Tenet has waived
any challenge thereto. (See Cahill, supra, 194 Cal.App.4th at
p. 956; Rivera, supra, 54 Cal.App.5th at p. 94.)
22
error.”]; Cothron, supra, 103 Cal.App.3d at pp. 860–861 [“Absent
a showing of prejudice, even if error had been committed, the
lower court [i]s required to affirm the award.”].) For these
reasons, we do not reach Tenet’s complaints regarding items (1)
and (3) above.
1. The arbitral panel did not make a mistake of law or
legal reasoning in concluding Tenet failed to establish
that Kaiser’s methodology falls short of complying
with section 1300.71, subdivision (a)(3)(B)
The DMHC promulgated section 1300.71 to “ ‘clearly define
terms relating to claim settlement and reimbursement [under the
Knox-Keene Act], and provide procedures for plans and providers
to prevent unreasonable delays in payment of provider claims.’ ”
(See Children’s Hospital Central California, supra,
226 Cal.App.4th at p. 1271.) “[S]ection 1300.71[,
subdivision ](a)(3)(B) defines ‘ “Reimbursement of a Claim” ’ for
noncontracted providers. Such reimbursement means ‘the
payment of the reasonable and customary value for the health
care services rendered.’ [Citation.] The reasonable and
customary value is to be ‘based upon statistically credible
information that is updated at least annually’ and takes
six factors into consideration.” (Children’s Hospital Central
California, at p. 1271.)
“These factors are: ‘(i) the provider’s training,
qualifications, and length of time in practice; (ii) the nature of the
services provided; (iii) the fees usually charged by the provider;
(iv) prevailing provider rates charged in the general geographic
area in which the services were rendered; (v) other aspects of the
economics of the medical provider’s practice that are relevant;
and (vi) any unusual circumstances in the case.’ [Citation.]”
23
(Children’s Hospital Central California, supra, 226 Cal.App.4th
at p. 1271.) These six factors are sometimes referred to as “Gould
factors” because they are derived from Gould v. Workers’ Comp.
Appeals Bd. (1992) 4 Cal.App.4th 1059. (See Children’s Hospital
Central California, at pp. 1271–1273, 1276.)
The panel explained that Kaiser’s payment methodology
has
The panel further observed that Further, the data used
in Kaiser’s payment methodology is annually updated.
Tenet’s principal contention is that the panel committed
“legal error” by arriving at two “wholly inconsistent” conclusions:
(1) “Kaiser[’s] . . . evidence was ‘insufficient to show the fair
market value of Tenet’s services’ ”; and (2) Tenet had not shown
that Kaiser’s methodology violated section 1300.71,
subdivision (a)(3)(B). Specifically, Tenet claims the fact “[t]hat
the panel could not conclude that the amounts Kaiser . . . paid to
Tenet . . . were reasonable and customary . . . means that
Kaiser[’s] . . . methodology could not have complied with the
regulation[, ] as that methodology formed the foundation for
Kaiser[’s] . . . evidence.” Tenet’s argument rests on a false
premise.
At no point did the panel find that Kaiser’s methodology
yielded reimbursements that were below the reasonable and
customary value of Tenet’s services. Recall that Kaiser had
leveled a counterclaim against Tenet for restitution, asserting
that “it ha[d] paid Tenet above what its experts say are the fair
market rates for the six Tenet hospital[s] at issue.” Specifically,
Kaiser argued that “ ‘[t]he reasonable value of hospital services is
determined by contracted or negotiated rates accepted by or paid
to a hospital[,]’ ” and Kaiser offered an “analysis [that] utilize[d]
24
an average of contracted rates” to show that it had overpaid
Tenet. The panel disapproved of Kaiser’s analytical approach
because it did not “adequately account[ ] for other relevant
factors such as varying degrees of steerage, network participation
and other features that are present in other contracted
relationships but absent from Tenet’s relationship with Kaiser.”
It was in this context that the panel remarked: “Kaiser’s showing
. . . is insufficient to show what is the fair market value of such
services on the Disputed Claims.” A review of the final award
thus reveals that the alleged “inconsistency” underlying Tenet’s
claim of error is nothing more than a mirage.
In a cursory fashion, Tenet also raises several arguments in
an effort to show the panel’s rejection of Tenet’s challenge to
Kaiser’s methodology was “wrong as a matter of law.” Tenet
claims, without any supporting analysis, that Kaiser’s imposition
of “ . . . renders the entire methodology not statistically credible,
as the law requires.” Similarly, Tenet baldly asserts that Kaiser
violated section 1300.71, subdivision (a)(3)(B) by failing to
“update its methodology ‘at least annually’ ” (italics added), even
though the regulation simply states that the “statistically
credible information” upon which the payment is based must be
“updated at least annually . . . .” (See § 1300.71, subd. (a)(3)(B),
italics added.) The panel concluded that the regulation requires
only that the underlying hospital data used in the payment
methodology—and not each and every aspect of the formula (e.g.,
)—be updated annually. Because Tenet does not explain why this
ruling is erroneous or further elaborate on why it believes these
aspects of Kaiser’s methodology contravene the regulation, its
arguments fail. (See Hernandez, supra, 37 Cal.App.5th at p. 277
25
[“ ‘We are not bound to develop appellants’ arguments for them.’
”].)
Lastly, Tenet insists that “Kaiser[’s] . . . methodology
cannot possibly incorporate the second, third or fourth Gould
factors” because the used in the formula “ regardless of their
nature (inpatient, outpatient, emergency, etc.), context
(contracted, non-contracted) or geography . . . .” The panel
acknowledged that Tenet had raised this argument during the
arbitral proceedings, but nonetheless concluded that Kaiser
presented evidence that both of its methodology “consider each
Gould factor.” It thus appears that Tenet is actually leveling a
factual challenge to the award that is beyond the scope of our
review. (See Cotchett, Pitre & McCarthy, supra, 187 Cal.App.4th
at p. 1416 [“We review the trial court’s ruling de novo, but defer
to the factual . . . findings made by the arbitrator.”].) As Tenet
does not explain why this appellate claim nonetheless concerns a
mistake of law or legal reasoning, we do not address it further.
(See Cahill, supra, 194 Cal.App.4th at p. 956.)
In conclusion, Tenet has failed to discharge its burden of
establishing that the arbitral panel made an error of law or legal
reasoning in adjudicating the merits of the unfair competition
law claim.
2. Even if the panel had erred in rejecting Tenet’s unfair
competition law claim, any such error was harmless
“The unfair competition law affords two types of relief—
namely, restitution and injunctive relief. [Citations.] . . . . [¶] As
applied to a violation of the Knox-Keene Act’s requirement for
reimbursement of emergency medical services, the restitution
available under the unfair competition law . . . . . is
indistinguishable from the award [health care providers] would
26
receive through their quantum meruit claim.” (See Long Beach
Memorial Medical Center, supra, 71 Cal.App.5th at pp. 342–343.)
In the award, the arbitral panel noted that “[a]t final argument
on liability” on the unfair competition law claim, “Tenet
confirmed that it d[id] not seek injunctive relief” or the
reasonable and customary value of its services, and that Tenet
represented it “had other theories that would be unveiled” if it
established that Kaiser was liable on this cause of action.
Kaiser maintains that even if the panel erred in rejecting
Tenet’s unfair competition law claim, that error is harmless
because “Tenet . . . failed to prove the reasonable value of its
services, which is all it would have been entitled to as
restitution.”
In its reply, Tenet does not contend that, had it shown that
Kaiser violated the unfair competition law, Tenet would have
been entitled to injunctive relief or any form of restitution other
than the reasonable and customary value of its services. Rather,
Tenet simply claims the arbitrators’ rulings on the unfair
competition law claim were not harmless because the panel made
a “legal error” in concluding Tenet fell short of meeting its burden
of establishing the reasonable and customary value of the
services at issue. For the reasons we explained in Discussion,
part A, ante, however, we have already rejected that claim of
error. Because Tenet fails to show it could have obtained any
form of relief on its unfair competition law claim, Tenet was not
prejudiced by the panel’s award denying recovery thereon. (Cf.
Long Beach Memorial Medical Center, supra, 71 Cal.App.5th at
pp. 333, 341–344 [holding that a trial court’s erroneous pretrial
dismissal of an unfair competition law claim seeking the
reasonable and customary value of emergency medical services
27
was harmless because it was entirely duplicative of a quantum
meruit claim that proceeded to trial and resulted in a defense
verdict].)
28
DISPOSITION
The judgment is affirmed. Respondents Kaiser Foundation
Hospitals and Kaiser Foundation Health Plan, Inc. are awarded
their costs on appeal.
NOT TO BE PUBLISHED.
ROTHSCHILD, P. J.
We concur:
CHANEY, J.
MORI, J.*
* Judge of the Los Angeles County Superior Court,
assigned by the Chief Justice pursuant to article VI, section 6 of
the California Constitution.
29