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A California appeals court reinstated a class action against a medical center that allegedly violated unfair competition laws and consumer protections by charging emergency room patients an undisclosed “Evaluation and Management Services Fee.”

Joshua Naranjo filed a class action lawsuit against the Doctors Medical Center of Modesto Inc., seeking declaratory and injunctive relief, and alleging violations of the unfair competition law (UCL) and the Consumer Legal Remedies Act (CLRA) in connection with Medical Center’s emergency room billing practices.

Briefly summarized, Naranjo alleged Medical Center’s practice of charging him (and other similarly situated patients) an undisclosed “Evaluation and Management Services Fee” (EMS Fee) was an “unfair, deceptive, and unlawful practice.”

Naranjo alleged, “[Medical Center’s] summary billing statements are not itemized and do not list items separately.” As a result, “most emergency room patients never even realize they have been charged a separate EMS Fee, even after their visit.” “[E]ven for those patients who do request and receive an itemized billing statement, EMS Fees are listed only as ER ROOM LEVEL [I-V], which does not inform a patient that this is a separate charge simply for receiving treatment in the emergency room.”

Medical Center’s EMS Fee is “set at one of five levels, determined after discharge, based on an internally developed formula known exclusively to [Medical Center].” The “algorithm used to determine the level of the EMS Fee (1, 2, 3, 4, or 5) is not disclosed to patients, making it virtually impossible for patients to know or seek to control the level or amount of the EMS Fee they will be charged for their emergency room visit.”

Medical Center charged Naranjo a total of $12,889.93 before any discounts or adjustments were applied. The gross charge included a “Level 4” EMS Fee in the amount of $8,833.35.

Medical Center demurred to each cause of action alleged in the first amended complaints on grounds each failed to state facts sufficient to state a cause of action. It was granted, and judgment was entered against Naranjo and in favor of Medical Center. The Court of Appeal reversed in the published case of Naranjo v Doctors Medical Center of Modesto Inc. -F083197 (April 2023).

On appeal, Naranjo contends he adequately alleged claims for declaratory and injunctive relief, violation of the UCL, and violation of the CLRA. Alternatively, he contends he should have been granted leave to amend to add a claim for breach of contract.

Naranjo has adequately alleged a claim under the Consumer Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.). Naranjo has alleged Medical Center’s EMS Fee billing practices were known exclusively to Medical Center and that information in that regard was not reasonably accessible to Naranjo. And Naranjo sufficiently alleged the materiality of the nondisclosure. Naranjo also sufficiently alleged reliance, causation and damages.

The Court of Appeal also concluded that his CLRA claim is independently actionable under the unfair competition law (UCL) and is tethered to the legislative policies underlying the CLRA.