Filed 8/8/18 Quest Diagnostics, Inc. v. Kent CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

—-

QUEST DIAGNOSTICS, INC., et al.,

Plaintiffs and Appellants,

v.

JENNIFER KENT, as Director, etc.,

Defendant and Respondent.

C083565

(Super. Ct. No.

34-2016-80002380-CU-WM-GDS)

This appeal confronts the typical legislative silence behind a statutory enactment. The plaintiffs are Quest Diagnostics, Inc.; its subsidiary, Unilab Corporation; and a trade association to which the two plaintiffs and other providers of laboratory services belong, California Clinical Laboratory Association (collectively, plaintiffs). They sought a writ of mandate to compel defendant Jennifer Kent, Director of the Department of Health Care Services (the Department) to stop applying a reimbursement discount for Medicaid services (Medi-Cal) that they provide. The trial court denied the petition.

This case centers on the interpretation of Welfare and Institutions Code section 14105.22, a 2012 enactment. This is a fairly open-and-shut case, as the trial court found. The statute does not reasonably contain the ambiguity that plaintiffs perceive, which is the beginning and the end of the judicial branch’s function in reviewing the acts of our coordinate branch. The attempt of plaintiffs to derive an overarching legislative policy supporting their interpretation of the statutory language is unavailing. We shall affirm.

FACTUAL AND PROCEDURAL BACKGROUND

The background to this case is simple and undisputed. We confine ourselves to the pertinent circumstances. As the parties do not dispute the factual summary in the trial court’s ruling, we draw these from that source.

In March 2011, during the budget crisis occasioned as a result of the recession earlier in this decade, the Legislature enacted section 14105.192, which imposed a 10 percent reduction in reimbursement to providers for most Medi-Cal services, including laboratory services. (Id., subds. (a)(2) [findings, noting a desire not to exceed what is mandated under federal law], (d)(1) [10 percent reduction], & (h) [exceptions].)

In 2012, the Legislature amended section 14105.22, which was intended to change the methodology for the reimbursement of laboratory services. (Stats. 2012, ch. 28, § 9.) The prior methodology resulted in Medi-Cal reimbursements that were significantly higher than what private insurers were paying. As the Legislature noted, it wanted the Department to “develop reimbursement rates . . . comparable to the payment amounts . . . from other payers” (§ 14105.22, subd. (b)(1)) and it suspended the regulation setting the prior methodology (id., subd. (b)(2)). The object was to find a system that would result in reimbursement rates that were at the low end of the private market. (The details of the new formula are not of concern in this appeal.)

Until the new rate methodology became effective, providers of laboratory services were subject to the general 10 percent reduction in reimbursement under the 2011 legislation and an additional 10 percent reduction in the 2012 legislation. “There . . . is no dispute that once the new . . . rates were approved and implemented, the ‘additional’ 10% payment cut mandated [in section 14105.22] would be discontinued. The dispute in this proceeding is whether the Legislature intended that the existing 10% payment cut mandated [in section 14105.192] also be discontinued . . . .” The Department interprets the statutes as requiring the continuation of the general 10 percent reduction even after the new rate methodology became effective in July 2015. The Department began to impose the 10 percent reduction on the new rates in February 2016.

Plaintiffs filed their petition in June 2016. The trial court, adopting its tentative decision, issued its judgment denying the petition in November 2016. Relying strictly on the language of section 14105.22 (finding irrelevant the Department’s extrinsic evidence), it agreed that the statute unambiguously did not exempt plaintiffs from the general 10 percent reduction in the 2011 legislation. Plaintiffs filed their notice of appeal shortly after, and completed their briefing on appeal in December 2017.

DISCUSSION

The construction of a statute is a question of law; while we accord what is termed “weak” deference to an agency’s interpretation of its governing statutes, this is an issue we decide de novo. (County of Sonoma v. Cohen (2015) 235 Cal.App.4th 42, 47.)

We thus come to the pertinent text of the statute. “In addition to the payment reductions implemented pursuant to Section 14105.192, payments shall be reduced by up to 10 percent for clinical laboratory or laboratory services . . . for dates of service on and after July 1, 2012. The payment reductions pursuant to this paragraph shall continue until the new rate methodology under this subdivision has been approved . . . .” (§ 14105.22, subd. (b)(4)(A).)

Renewing the arguments they made in the trial court, plaintiffs contend that the phrase “payment reductions pursuant to this paragraph” (emphasis added) must include both the temporary additional 10 percent reduction contained in the 2012 legislation and the general 10 percent reduction in the 2011 legislation because the Legislature used a plural form and both reductions are referenced in the subdivision paragraph. This is an untenable reading.

As the trial court pointed out, the Legislature also used the plural form in referring to only the 2011 legislation in the first sentence. The plural form thus simply reflects that there are multiple services to which the two rate cuts apply. Moreover, “pursuant to this paragraph” (italics added) does not apply to the 2011 legislation simply because it is mentioned in the paragraph. Again, in the first sentence, the 2011 rate cut is described as being “pursuant to Section 14105.192,” which has as its ordinary meaning “as authorized by” or “under the authority” of the referenced statute. (E.g., Masonite Corp. v. Superior Court (1994) 25 Cal.App.4th 1045, 1057 [information collected “pursuant” to a provision means information “required by” the provision].) To give this the same meaning, the second use of “pursuant to” can denote only the rate cut authorized by this paragraph, not a rate cut previously authorized separately that was not enacted as a part of the 2012 statute. That “pursuant to” may have multiple meanings in contexts other than legislation does not warrant interpreting it as meaning nothing more than “as stated in” in the present legal context, where it is more of a term of art.

Plaintiffs point to the legislative declaration that it wanted reimbursement to Medi-Cal providers to be comparable to what private insurers paid. (§ 14105.22, subd. (b)(1).) But that declaration is simply with respect to the unadjusted reimbursement rate, under which the State of California was paying in excess of what private insurers paid. It does not represent a declaration that providers of laboratory services should not be subject to the general 10 percent reduction that most Medi-Cal providers must bear under the 2011 legislation. As we have frequently noted in the context of abolishing redevelopment agencies, we do not ordinarily ascribe to the Legislature an intent to achieve an end in a circuitous manner when it could do so in a more express or straightforward manner. (City of Tracy v. Cohen (2016) 3 Cal.App.5th 852, 860-861.) If the Legislature had intended to exempt providers of laboratory services because of some special considerations that are applicable to such providers, it either could have added them to the list of exemptions in the 2011 statute (§ 14105.192, subd. (h)) or expressly provided for this in the 2012 statute, rather than inviting a court to extract this intent from its recitals of its findings regarding rate setting (as opposed to the overall cost of the Medi-Cal program with which section 14105.192 was concerned).

Because we do not find any ambiguity in the language of the 2012 legislation, we do not have any occasion to resort to extrinsic evidence of intent. (City of Brentwood v. Campbell, supra, 237 Cal.App.4th at pp. 501-502.) Nor do the parties in any event point us to any extrinsic indicia contemporaneous with the enactment of the 2012 legislation that would give an indication of whether the general rate reduction should continue to apply to plaintiffs.

We note that the Legislature has not acted to overturn the Department’s interpretation since it was put in effect in February 2016, or in response to the present litigation. However, as we have often observed, legislative inaction is the proverbial weak reed on which to lean (e.g., Troy Gold Industries, Ltd. v. Occupational Safety & Health Appeals Bd. (1986) 187 Cal.App.3d 379, 391, fn. 6). In any event, as we have concluded, the statute stands on its own in clearly failing to apply the sunset provision to the 2011 rate cut as well as the 2012 rate cut.

DISPOSITION

The judgment is affirmed.

BUTZ , Acting P. J.

We concur:

MAURO , J.

RENNER , J.