Case Name: California Spine and Neurosurgery Institute v. Aetna, Inc., et al.
Case No.: 18-CV-336774

Currently before the Court is the demurrer by defendants Aenta, Inc., Aetna Life Insurance Company, and SAP America, Inc. (“SAP America”) (collectively, “Defendants”) to the complaint of plaintiff California Spine and Neurosurgery Institute (“Plaintiff”).

Factual and Procedural Background

This is an action for breach of contract and common count. “SAP America sponsors a self-funded health benefit plan, providing health care benefits to its employees and their dependents.” (Complaint, ¶ 3.) SAP America “entered into a contractual relationship with [Aetna, Inc. and Aetna Life Insurance Company (collectively, ‘Aetna’)] for Aetna to provide administrative services with respect to paying for and/or arranging for medical care to be rendered by providers like [Plaintiff] to Aetna’s participants.” (Id. at ¶¶ 2 & 10.) As part of its contractual duties, Aetna is required “to confirm a beneficiary’s eligibility and benefits to medical providers such as [Plaintiff] … .” (Id. at ¶ 10.)

Patients R.C. and J.P. (collectively, “Patients”) were beneficiaries of a health plan sponsored, administered, and/or paid for by Defendants. (Complaint, ¶¶ 2, 3, 5, & 11.) Aetna issued identification cards to Patients at SAP America’s direction. (Id. at ¶¶ 11 & 14.)

Patients sought medical services from Plaintiff to alleviate back pain caused by herniated discs. (Complaint, ¶¶ 12-13.) Plaintiff provides minimally invasive spine surgery to patients suffering from spinal injuries or conditions, and “did not have any preexisting agreement, partnership, and/or contract with any managed health care plan, health insurance agency, or employer group.” (Id. at ¶¶ 1 & 8-9.)

Prior to Patients’ appointments, Plaintiff telephoned Aetna to verify the Patients’ medical eligibility benefits. (Complaint, ¶ 14.) “Aetna client services representatives—acting on behalf of Defendants—verified both [Patients’] healthcare coverage under a health benefit plan sponsored, paid for and/or administered by Defendants.” (Ibid.) “The representatives either expressly or impliedly assured [Plaintiff] that Defendants carried the financial responsibility to pay for [Patients’] anticipated medical care at 80% of reasonable and customary value for such care (and not at certain set discounted rates because [Plaintiff] had no pre-existing contractual relationship with Aetna).” (Ibid.)

Specifically, in April 2017, Plaintiff was informed by Aetna client services representatives about the Patients’ benefits “regarding outpatient procedures such as spine surgery and using a provider who is non-contracted with Aetna/SAP America.” (Complaint, ¶¶ 15 & 20.) Aetna’s agent “represented that reimbursement would be ‘80% of the uniform and customary rate.’ ” (Ibid.) Aetna’s client services representatives also represented to Plaintiff that under the terms of Patients’ health plan, no pre-authorization was required for an outpatient procedure such as surgery. (Id. at ¶¶ 16 & 21.)

Thereafter, in May and August 2017, “based upon the existence of an identification card issued by Aetna and SAP America, the telephone call with Aetna, and the express and/or implied resultant assurances that [Plaintiff] would be paid at least 80% [of] the reasonable and customary value of its medical services anticipated to be rendered” to Patients, “[Plaintiff] provided medically necessary and minimally invasive spine surgery” to Patients. (Complaint, ¶¶ 17 & 22.)

Plaintiff submitted bills to Aetna for medically necessary services, supplies, and/or equipment it rendered to Patients in the amounts of $87,500 and $121,000. (Complaint, ¶¶ 18 & 23.) Plaintiff expected to be paid “at least 80% of the reasonable and customary value for such care, or $70,000” and “$96,800.” (Ibid.) However, Defendants only paid a small portion of those amounts. (Id. at ¶¶ 19 & 24.) The remaining balance for care rendered to Patient R.C. is $59,239.50. (Id. at ¶ 19.) The remaining balance for care rendered to Patient J.P. is $56,850. (Id. at ¶ 24.)

Based on the foregoing allegations, Plaintiff filed a complaint against Defendants, alleging causes of action for: (1) breach of implied in fact contract; (2) breach of express contract; and (3) quantum meruit.

On December 12, 2018, Defendants filed the instant demurrer to the complaint. Plaintiff filed papers in opposition to the demurrer on April 16, 2019.

Discussion

Defendants demur to each and every cause of action of the complaint on the ground of failure to allege facts sufficient to constitute a cause of action. (See Code Civ. Proc., § 430.10, subd. (e).) Defendants also demur to the first and second causes of action of the complaint on the ground of uncertainty. (See Code Civ. Proc., § 430.10, subd. (f).)

I. Request for Judicial Notice

Pursuant to Evidence Code section 452, subdivisions (a), (b), (c), and (d), Defendants ask the Court to take judicial notice of Plaintiff’s complaint and the “2015 SAP America Summary Plan Description, which allegedly serves as the basis of the contract between Plaintiff and Defendants … .” (RJN, pp. 1-2.)

As an initial matter, the Court declines to take judicial notice of the complaint. A court may generally take judicial notice of a pleading because it is a court record. (Evid. Code, § 452, subd. (d).) With that said, it is unnecessary to take judicial notice of the complaint because it is the pleading under review and, as such, must necessarily be considered by the Court. (See Paul v. Patton (2015) 235 Cal.App.4th 1088, 1091, fn. 1 [denying a request for judicial notice of the operative pleading as unnecessary].)

Next, the 2015 SAP America Summary Plan Description is not a proper subject of judicial notice.

First, Defendants do not establish that the 2015 SAP America Summary Plan Description is relevant to a material issue. (See Silverado Modjeska Recreation & Park Dist. v. County of Orange (2011) 197 Cal.App.4th 282, 307, fn. 18 [“ ‘There is … a precondition to the taking of judicial notice in either its mandatory or permissive form—any matter to be judicially noticed must be relevant to a material issue.’ [Citations.]”].) The 2015 SAP America Summary Plan Description is not referenced in the complaint. Furthermore, contrary to Defendants’ assertion otherwise, there is no indication, in the complaint or in the document itself, that the 2015 SAP America Summary Plan Description constitutes a contract between Plaintiff and Defendants. Lastly, the document states that it was effective January 1, 2015. There is nothing in the record suggesting that the document was in effect at the time the alleged medical services were provided in this case (i.e., May and August 2017). Thus, Defendants have not shown that the document is relevant to a material issue before the Court.

Second, Defendants fail to demonstrate, and it does not otherwise appear to the Court, that the 2015 SAP America Summary Plan Description falls within any of the categories of judicially noticeable documents set forth in Evidence Code section 452, subdivisions (a), (b), (c), and (d).

Accordingly, Defendants’ request for judicial notice is DENIED.

II. Legal Standard

The function of a demurrer is to test the legal sufficiency of a pleading. (Trs. Of Capital Wholesale Elec. Etc. Fund v. Shearson Lehman Bros. (1990) 221 Cal.App.3d 617, 621.) Consequently, “ ‘[a] demurrer reaches only to the contents of the pleading and such matters as may be considered under the doctrine of judicial notice’ [citation].” (Hilltop Properties, Inc. v. State (1965) 233 Cal.App.2d 349, 353; see also Code Civ. Proc., § 430.30, subd. (a).) “ ‘It is not the ordinary function of a demurrer to test the truth of the … allegations [in the challenged pleading] or the accuracy with which [the plaintiff] describes the defendant’s conduct. … .’ [Citation.] Thus, … ‘the facts alleged in the pleading are deemed to be true, however improbable they may be. [Citation.]’ [Citations.]” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 958.)

III. Uncertainty

Defendants demur to the first and second causes of action on the ground of uncertainty. Defendants contend that those claims are uncertain because Plaintiff does not “attach copies of or quote verbatim from the alleged contract.” (Ds’ Mem. Ps. & As., pp. 7:24-26 & 9:18-20.)

“[D]emurrers for uncertainty are disfavored and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Lickiss v. Financial Industry Reg. Authority (2012) 208 Cal.App.4th 1125, 1135; Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616 [“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.”].)

Here, it is clear from Defendants’ arguments that Defendants understand the nature of the claims that the complaint at least attempts to allege and that there is no true uncertainty. Furthermore, Defendants’ argument regarding uncertainty actually pertains to Plaintiff’s purported failure to allege sufficient facts to state a claim. It appears that Defendants misunderstand the nature of uncertainty as a ground for demurrer. The law is settled that “[a] special demurrer for uncertainty is not intended to reach the failure to incorporate sufficient facts in the pleading but is directed at the uncertainty existing in the allegations already made.” (Butler v. Sequiera (1950) 100 Cal.App.2d 143, 145-146.)

Accordingly, Defendants’ demurrer to the first and second causes of action on the ground of uncertainty is OVERRULED.

IV. Failure to Allege Facts Sufficient to State a Claim

A. General Argument Applicable to All Causes of Action

Preliminarily, Defendants argue that Plaintiff’s claims are analogous to claims alleged in Orthopedic Specialists of Southern California v. Public Employees’ Retirement System (2014) 228 Cal.App.4th 644 (Orthopedic) and Pacific Bay Recovery, Inc., v. California Physicians’ Services, Inc. (2017) 12 Cal.App.5th 200 (Pacific). Defendants contend that Orthopedic and Pacific stand for the proposition that “when health services are elected or scheduled (as in the case of [Patients]), the health insurer must pay only that amount which is stated in the patients’ health insurance policy or Evidence of Coverage [(‘EOC’)].” (Ds’ Mem. Ps. & As., p. 3:18-27.) Defendants conclude that Plaintiff’s claims fail to state a cause of action because Plaintiff does not allege “facts establishing a separate contract, or that the insurer’s payment was inconsistent with the terms of the patient’s EOC.” (Id. at pp. 3:27-4:1.)

The appellate courts in Orthopedic and Pacific determined that the plaintiffs’ claims were governed by California Code of Regulations, title 28, section 1300.71, subdivision (a)(3)(C), which states that “Reimbursement of a Claim” means “[f]or non-emergency services provided by non-contracted providers to PPO and POS enrollees: the amount set forth in the enrollee’s Evidence of Coverage.” Specifically, in Orthopedic, the plaintiff conceded that the issue of payment was governed by the patient’s EOC under California Code of Regulations, title 28, section 1300.71, subdivision (a)(3)(C). (Orthopedic, supra, 228 Cal.App.4th at p. 648.) In Pacific, the plaintiff alleged that: (1) the defendant provided a PPO health care service plan under the Knox-Keene Health Care Service Plan Act of 1975 (“Knox-Keene Act”), Health and Safety Code section 1340 et seq.; (2) the plaintiff had no contract with the defendant that would require the defendant to pay the plaintiff the amounts it sought; and (3) the Department of Managed Health Care (“DMHC”) adopted regulations defining the amount that health care service plans like the defendant were obligated to pay providers like the plaintiff. (Pacific, supra, 12 Cal.App.5th at pp. 203-204 & 208.) Based on these allegations, the appellate court concluded that the issue of payment was governed by the patient’s EOC under California Code of Regulations, title 28, section 1300.71, subdivision (a)(3)(C). (Id. at pp. 208-209.)

The instant case is distinguishable from Orthopedic and Pacific. Unlike the plaintiff in Orthopedic, Plaintiff does not concede that California Code of Regulations, title 28, section 1300.71, subdivision (a)(3)(C) governs the issue of payment in this case. Furthermore, unlike the plaintiff in Pacific, Plaintiff has not alleged that Defendants provided Patients a PPO health care service plan under the Knox-Keene Act.

Moreover, Defendants do not otherwise establish that California Code of Regulations, title 28, section 1300.71, subdivision (a)(3)(C) applies in this case. That regulation only applies to “non-emergency services provided by non-contracted providers to PPO and POS enrollees … .” (Cal. Code Regs., tit. 28, § 1300.71, subd. (a)(3)(C).) Although it can reasonably be inferred from the allegations of the complaint that the services provided by Plaintiff were non-emergency services, there are no allegations in the complaint stating that the health care plan provided to Patients constituted a preferred provider organization plan or a point of service plan. (See Cal. Code Regs., tit. 28, § 1300.71, subd. (a)(3)(A) [defining POS as point-of-service and PPO as preferred provider organizations].) Thus, it cannot be said, at this point in time, that California Code of Regulations, title 28, section 1300.71, subdivision (a)(3)(C) applies in this case.

For these reasons, Defendants’ preliminary argument is not well-taken.

B. First and Second Causes of Action

The first cause of action alleges breach of an implied in fact contract by failing to pay at least 80 percent of the reasonable and customary rate for the spine surgeries performed on Patients. The second cause of action is essentially the same as the first, but is based on an express contract.

“A complaint for the breach of contract must include the following: (1) the existence of a contract, (2) plaintiff’s performance or excuse for non-performance, (3) defendant’s breach, and (4) damages to plaintiff therefrom.” (Acoustics, Inc. v. Trepte Construction Co. (1971) 14 Cal.App.3d 887, 913.)

Defendants first argue Plaintiff’s claims do not allege a meeting of the minds or mutual consent and, thus, fail to establish the existence of a contract. Specifically, Defendants contend that there was no meeting of the minds because there are no allegations in the complaint providing that Aetna agreed to pay a specific payment rate or a specific payment amount.

Defendants rely on Pacific for the proposition that a promise to pay an undefined usual and customary rate fails to demonstrate a meeting of the minds regarding the terms of an agreement. In Pacific, a medical provider alleged it contacted the defendant insurer to obtain authorization for treatment of an insured, was advised of the insured’s eligibility for medical coverage, and “‘was led to believe that it would be paid a portion or percentage of its total billed charges, which charges correlated with usual, reasonable and customary charges.’ ” (Pacific, supra, 12 Cal.App.5th at p. 216.) The defendant paid the medical provider pursuant to the terms of the insured’s health plan, which the medical provider claimed was not enough. (Id. at pp. 204-205.) The court held the allegations lacked specific facts showing what type of treatment or the extent of treatment was to be performed and that there was no indication in the complaint what exactly the defendant agreed to pay. (Id. at p. 216.) The court concluded the medical provider did not adequately plead a meeting of the minds regarding the material terms of the contract. (Ibid.)

Here, in contrast, Plaintiff’s allegations are more specific. Plaintiff does not merely plead Defendants agreed they would pay something for some unidentified treatment of Patients. Instead, Plaintiff alleges spine surgeries were the specific treatment to be performed and it received Defendants’ assurance that it would be paid at least 80 percent of the reasonable and customary value of its services. Defendants do not present any legal authority providing that such allegations are insufficient to show a meeting of the minds on a material term.

Next, Defendants argue, in a conclusory manner, that there was no consideration for the parties’ alleged agreement. (See Speirs v. BlueFire Ethanol Fuels, Inc. (2015) 243 Cal.App.4th 969, 987 [“ ‘Consideration consists of either a benefit to the promisor or a detriment to the promisee. It is enough that something is promised, done, forborne, or suffered by the party to whom the promise is made as consideration for the promise made to him.’ [Citation.]”].) But Defendants fail to explain why there was a lack of consideration in this case. (See Badie v. Bank of America (1998) 67 Cal.App.4th 779, 784-785 (Badie) [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.”]; see also Schaeffer Land Trust v. San Jose City Council (1989) 215 Cal.App.3d 612, 619, fn. 2 (Schaeffer) [“[A] point which is merely suggested by a party’s counsel, with no supporting argument or authority, is deemed to be without foundation and requires no discussion.”].) Consequently, Defendants’ argument lacks merit.

Defendants further argue that the claims fail because there is no allegation in the complaint providing that Defendants authorized the medical care provided by Plaintiff. However, Defendants do not present reasoned argument or legal authority showing that such an allegation is necessary to state a claim for breach of contract. (See Badie, supra, 67 Cal.App.4th at pp. 784-785 [“When [a party] fails to raise a point, or asserts it but fails to support it with reasoned argument and citations to authority, we treat the point as waived.”]; see also Schaeffer, supra, 215 Cal.App.3d at p. 619, fn. 2 [“[A] point which is merely suggested by a party’s counsel, with no supporting argument or authority, is deemed to be without foundation and requires no discussion.”].) Additionally, Defendants do not address the allegations in the complaint that Aetna’s client services representatives told Plaintiff that pre-authorization was not required for the surgeries. (Complaint, ¶¶ 16 & 21.) Thus, Defendants’ argument is not well-taken.

Finally, Defendants contend that the first and second causes of action fail to state a claim because Plaintiff does not “attach copies of or quote verbatim from the alleged contract.” (Ds’ Mem. Ps. & As., pp. 7:24-26 & 9:18-20.) Defendants’ argument is premised on the assertion that the claims are based on the Patients’ EOC, a written contract. However, the first and second causes of make no mention of the EOC or any other written contract. Rather, the claims, as alleged, are based on a contract that is oral and/or implied by conduct. Moreover, Plaintiff is not required to attach a copy of the alleged contract to its pleading or quote verbatim from the alleged contract; rather, Plaintiff may plead the contract by its legal effect. (See Khoury v. Maly’s of Calif. (1993) 14 Cal.App.4th 612, 616 [a contract may be pleaded generally as to its legal effect rather than its precise language]; Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 199 [same].) Notably, Defendants do not assert that Plaintiff failed to plead the alleged contract by its legal effect. Consequently, Defendants’ argument lacks merit.

Accordingly, Defendants’ demurrer to the first and second causes of action on the ground of failure to allege facts sufficient to constitute a cause of action is OVERRULED.

C. Third Cause of Action

The third cause of action for quantum meruit alleges that Atena, on behalf of itself and SAP America provided assurances to Plaintiff that Patients “had eligibility for medical benefits, specifically for an outpatient procedure such as surgery, and that any medical procedures or treatment rendered to [Patients] would be paid by [Defendants] in an amount of at least 80% of that care’s reasonable and customary rate.” (Complaint, ¶ 42.) Based on these assurances, Plaintiff provided medically necessary care to Patients, which “was intended to, and did benefit [Patients], each patient who was a member of Defendants’ health plan, and therefore benefitted Defendants by helping Defendants’ fulfill their contractual and/or statutory duties to provide for and/or arrange for delivery of medical care to … their beneficiaries.” (Id. at ¶¶ 43-44.) Plaintiff alleges that it has not been paid in accordance with Defendants’ assurances and “Defendants have been unjustly enriched because they have collected monthly premiums from [Patients] for the express purpose of providing for and/or arranging for medical care for its beneficiaries and yet, have not fully and properly paid [Plaintiff].” (Id. at ¶¶ 45-50.)

“Quantum meruit permits the recovery of the reasonable value of services rendered. [Citation] To recover in quantum meruit, the ‘plaintiff must establish both that he or she was acting pursuant to either an express or implied request for such services from the defendant and that the services rendered were intended to and did benefit the defendant’; further, the defendant must have ‘ “retained [the] benefit with full appreciation of the facts … .” ’ [Citation.]” (Pacific, supra, 12 Cal.App.5th at pp. 214-215.)

As Defendants persuasively argue, there are no allegations in the complaint providing that the services were intended to benefit Defendants. Instead, Plaintiff alleges that the medical services were “intended to, and did benefit [Patients]” and “therefore [the services] benefitted Defendants … .” (Id. at ¶¶ 43-44.) Thus, Plaintiff has not alleged sufficient facts to state a claim for quantum meruit.

Accordingly, Defendants’ demurrer to the third cause of action on the ground of failure to allege facts sufficient to constitute a cause of action is SUSTAINED, with 10 days’ leave to amend.