Case Name: Stanford Health Care v. Anthem Health Plans of Virginia, Inc.
Case No.: 2017-CV-306642

Demurrer to the Complaint by Defendant Anthem Health Plans of Virginia, Inc.

Factual and Procedural Background

This is an action for reimbursement of medical services. Plaintiff Stanford Health Care (“Stanford Hospital”) is a nonprofit corporation that renders medically necessary care to patients. (Complaint at ¶ 1.) Defendant Anthem Health Plans of Virginia, Inc. (“BCBS Virginia”) is in the business of arranging for the provision of health care services to its beneficiaries and/or enrollees; and/or paying for the provision of health care services to its beneficiaries and/or enrollees. (Id. at ¶ 2.)

According to the Complaint, Stanford Hospital entered into an agreement with Anthem Blue Cross of California, Inc. (“Anthem Blue Cross””), as a provider of medically necessary care for the benefit of all individual enrollees and/or beneficiaries of health plans that were or would be registered with Anthem Blue Cross as Payor, such as BCBS Virginia (the “Blue Cross Agreement”). (Complaint at ¶ 7.) Thus, under the Blue Cross Agreement, Stanford Hospital agreed to render medically necessary care to the individual enrollees and/or beneficiaries of the BCBS Virginia health plan. (Ibid.) In exchange, BCBS Virginia agreed to pay Stanford Hospital the negotiated rates pursuant to the terms of the Blue Cross Agreement for that care. (Ibid.) In general, the negotiated rates under the Blue Cross Agreement provide for medically necessary care to be paid at a discount off of Stanford Hospital’s usual and customary total billed charges (the “Blue Cross Rates”). (Ibid.)

Stanford Hospital alleges that Patient *693, Patient *754, and Patient *829 (collectively, “Patients”) were enrollees and/or beneficiaries of the BCBS Virginia health plan. (Complaint at ¶ 9.) Around the time of service, Stanford Hospital spoke with an agent of BCBS Virginia and verified Patients’ eligibility for benefits and obtained authorization for the medical treatment of Patients. (Id. at ¶ 10.) Stanford Hospital then proceeded to provide the medically necessary supplies and/or equipment to Patients on the dates of services which totaled $1,648,026.51. (Id. at ¶¶ 11-12.)

Thereafter, Stanford Hospital timely and properly submitted the total billed charges to BCBS Virginia through its agent, Anthem Blue Cross, for payment. (Complaint at ¶ 15.) Based on the Blue Cross Rates, the expected reimbursement from BCBS Virginia to Stanford Hospital amounted to $727,508.46 for the medically necessary supplies and/or equipment rendered to Patients. (Id. at ¶ 16.) However, BCBS Virginia underpaid the claims related to Patients. (Id. at ¶ 17.) Also, despite demands from Stanford Hospital, BCBS Virginia refused to pay the outstanding amount of $213, 396.46. (Id. at ¶ 18.)

On February 22, 2017, Stanford Hospital filed the operative Complaint against BCBS Virginia setting forth causes of action for: (1) breach-of-contract implied–in-fact; and (2) common count –quantum meruit.

Demurrer to the Complaint

Currently before the Court is the demurrer by defendant BCBS Virginia to the second cause of action on grounds that it fails to state a claim and uncertainty. (Code Civ. Proc., § 430.10, subds. (e), (f).) Stanford Hospital filed written opposition. BCBS Virginia filed reply papers.

Legal Standard

“In reviewing the sufficiency of a complaint against a general demurer, 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. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

“The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law. … [I]t is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850.)

Second Cause of Action: Quantum Meruit

General Demurrer

The second cause of action is a claim for quantum meruit. The elements of quantum meruit are: (1) that the plaintiff performed certain services for the defendant; (2) their reasonable value; (3) that they were rendered at defendant’s request; and (4) that they were unpaid. (Haggerty v. Warner (1953) 115 Cal.App.2d 468, 475 (Haggerty).)

BCBS Virginia argues that the second cause of action is subject to general demurrer as it incorporates inconsistent factual allegations. On the one hand, Stanford Hospital seeks relief in the amount of $213,396.46 based on the Blue Cross Rates which is the subject of the breach of contract claim. (See Complaint at ¶¶ 21, 24, 25, and Prayer for Relief at No. 1.) BCBS Virginia contends that this allegation is in conflict with Stanford Hospital’s request for $1,133,914.51 in the second cause of action for quantum meruit. (Id. at ¶¶ 34, 36, and Prayer for Relief at No. 3.)

This argument is not persuasive as “a party may plead in the alternative and may make inconsistent allegations.” (Adams v. Paul (1995) 11 Cal.4th 583, 593; see Haggerty, supra, 115 Cal.App.2d at p. 475 [“It is well-established that a plaintiff may, where he is seeking but one recovery, plead either upon an express contract or in quantum meruit.”]; see also Grudt v. City of Los Angeles (1970) 2 Cal.3d 575, 586 [“It has often been pointed out that there is no prohibition against pleading inconsistent causes of action stated in as many ways as plaintiff believes his evidence will show, and he is entitled to recover if one well pleaded count is supported by the evidence.”].) Furthermore, this is not a case of inconsistent facts but different facts to support different legal theories. As stated above, in the first cause of action, Stanford Hospital seeks relief on a breach of contract theory based on the Blue Cross Rates provided under the Blue Cross Agreement. (See Complaint at ¶¶ 7, 20-25.) If there is no contractual relationship, Stanford Hospital seeks relief in quantum meruit based on its usual and customary rates for the medical supplies and equipment rendered to the Patients. (Id. at ¶¶ 27, 32-33.) At the end of trial, Stanford Hospital will be entitled to only one recovery, either for breach of contract or quantum meruit. However, at the pleading stage, Stanford Hospital may allege alternative theories for relief in the Complaint. Thus, this argument is not sustainable on demurrer.

BCBS Virginia also contends that the second cause of action is deficient as Stanford Hospital fails to allege that BCBS Virginia requested the services provided to the Patients. “[I]n order to recover under a quantum meruit theory, a 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.” (Day v. Alta Bates Medical Center (2002) 98 Cal.App.4th 243, 248.) Here, the Complaint clearly alleges that, “[b]y its words and/or conduct, BCBS [of] Virginia requested that Stanford Hospital provide Patients with medically necessary, supplies and/or equipment.” (Complaint at ¶ 29.) This allegation is sufficient to state a claim for quantum meruit and must be accepted as true on demurrer.

Consequently, the general demurrer to the second cause of action on the ground that it fails to state a claim is OVERRULED.

Special Demurrer

BCBS Virginia also specially demurs to the second cause of action on the ground of uncertainty. (Code Civ. Proc., § 430.10, subd. (f).) However, the arguments for uncertainty are the same as those considered and rejected by the Court for the reasons stated above. Furthermore, demurrers for uncertainty are disfavored and will only be sustained where the pleading is so bad that the defendant cannot reasonably respond, i.e., he or she cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against him or her. (See Khoury v. Maly’s of Calif., Inc. (1993) 14 Cal.App.4th 612, 616.) Given BCBS Virginia’s arguments on general demurrer, it clearly has notice of the issues raised by Stanford Hospital in the second cause of action.

Accordingly, the special demurrer to the second cause of action on the ground of uncertainty is OVERRULED.