The County of Santa Clara operates a health care service plan called Valley Health Plan, which is licensed and regulated by the Department of Managed Health Care (DMHC) under the Knox-Keene Act. The Knox-Keene Act applies to private and public entities that operate health care service plans.

State and federal laws require hospitals and other medical providers to provide emergency medical services regardless of the patient’s insurance status or ability to pay. If the patient is enrolled in a health care service plan, the Knox-Keene Act requires the plan to reimburse the medical provider for providing such emergency care. If no contract exists between the plan and medical provider, the plan must pay the “reasonable and customary value” of the emergency care provided.

In 2016 and 2017, the Doctors Medical Center of Modesto, Inc., and Doctors Hospital of Manteca, Inc., provided emergency medical services to three patients enrolled in Valley Health Plan. The two Hospitals are licensed acute care hospitals in the Central Valley, but did not have a contract with the County governing the rates payable for medical services provided to Valley Health Plan enrollees.

The Hospitals submitted to the County claims for reimbursement totaling approximately $144,000 for the services provided. The County paid the Hospitals approximately $28,500. The Hospitals challenged the reimbursement decisions by submitting written administrative appeals, which the County denied.

The Hospitals then sued the County for the remaining amounts based on the Knox-Keene Act’s reimbursement provision. The trial court found that the Hospitals could state a quantum meruit claim against the County. On petition for writ of mandate, the Court of Appeal disagreed, holding that the County is immune from suit under the Government Claims Act and that no exception to immunity applies.

The California Supreme Court disagreed with the Court of Appeal and reversed in the case of County of Santa Clara v Superior Court – S274927 (July 2023)

The case called upon the California Supreme Court to determine how the Government Claims Act should be interpreted and whether a litigant may circumvent sovereign immunity with a common law claim founded on equitable principles. The Supreme Court concluded that the Government Claims Act does not bar the Hospitals’ action against the County.

Hospitals and other medical providers are required by law to provide emergency medical services without regard to the patient’s insurance status or ability to pay. (42 U.S.C. § 1395dd(b); Health & Saf. Code, § 1317, subds. (a) & (b).)

If the patient is enrolled in a health care service plan, by statute the plan must reimburse the medical provider for providing such emergency care under the Knox-Keene Health Care Service Plan Act of 1975. (Health & Saf. Code, § 1340 et seq.

If the plan does not have a contract with the medical provider addressing the reimbursement rate, the plan must pay the provider the “reasonable and customary value” of the emergency care provided. (Cal. Code Regs., tit. 28, § 1300.71, subd. (a)(3)(B).) If the plan fails to pay the reasonable and customary value of such services, the medical provider may sue the plan directly for reimbursement under a quantum meruit theory. (Prospect Medical Group, Inc. v. Northridge Emergency Medical Group (2009) 45 Cal.4th 497, 506 (Prospect Medical Group); Bell v. Blue Cross of California (2005) 131 Cal.App.4th 211, 216–217 (Bell).)

The Supreme Court concluded that “the immunity provisions of the Government Claims Act are directed toward tort claims; they do not foreclose liability based on contract or the right to obtain relief other than money or damages. (Gov. Code, § 814.)”

“The Hospitals have not alleged a conventional common law tort claim seeking money damages. Instead, they have alleged an implied-in-law contract claim based on the reimbursement provision of the Knox-Keene Act, and seek only to compel the County to comply with its statutory duty. Accordingly, the County is not immune from suit under the circumstances and the Hospitals’ claim may proceed.”