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California Supreme Court:
No Special Duty on Hospitals to Advise of Evaluation Fees
Opinion Says Requiring Emergency Rooms to Provide Notice of Costs, Beyond What is Statutorily Mandated, Before Caring for Patients Would Alter ‘Careful Balance of Competing Interests’ of Transparency, Treatment
By a MetNews Staff Writer
The California Supreme Court held yesterday that a hospital does not have a duty, beyond what is required by the governing statutory and regulatory scheme, to notify emergency room patients that they will be charged an evaluation and management services fee before treatment is rendered, addressing a split in authority among the courts of appeal.
Appealing the dismissal of her class action complaint was plaintiff Taylor Capito, who sued San Jose Healthcare System, also known as Regional Medical Center San Jose, after treatment at the hospital’s emergency room on two occasions in June 2019.
Before discounts, Capito was billed $41,106 for the two visits and each bill included a “Level 4” evaluation and management services (“EMS”) fee of $3,780. Even though Regional eventually reduced her total debt to $8,855.38, Capito alleges that she was “shocked and dismayed” by the EMS fees and would have sought less expensive treatment at another facility had she been aware of the cost.
According to the hospital, EMS fees are designed to cover the overhead costs of operating an emergency room and are charged at one of five levels based on a formula reflecting the intensity of resources necessary for a patient’s care. The level is determined after discharge and the fees range from $672 to $5,635.
Capito’s operative complaint asserts that the hospital’s failure to provide notice of those fees before services are provided to emergency room patients constitutes an “unlawful, unfair or fraudulent business” practice under the Unfair Competition Law (“UCL”), codified at Business and Professions Code §17200 et seq., and violated the Consumers Legal Remedies Act (“CLRA”), found at Civil Code §1750 et seq.
Statutory Compliance
The plaintiff does not dispute that Regional complied with all provisions of California’s Payers’ Bill of Rights, codified at Health and Safety Code §1339.50 et seq., which requires hospitals to publish a “chargemaster” list setting forth the uniform charges for certain services, including EMS fees.
Instead, Capito claims that Regional has a duty to not only disclose the fees in the published listings but to also provide notice of the fees before services are provided to emergency room patients.
Santa Clara Superior Court Judge Sunil Kulkarni sustained a demurrer to the complaint without leave to amend. After judgment was entered in Regional’s favor, the Sixth District Court of Appeal affirmed.
In an opinion authored by Presiding Justice Mary J. Greenwood, the court said that Capito’s demand for notice could not form the basis of a CLRA or UCL claim because it exceeded and would displace the legislative and regulatory requirements.
Justice Goodwin H. Liu wrote yesterday’s opinion for the unanimous court, saying:
“We agree with the courts below. Hospitals do not have a duty under the UCL or CLRA, beyond their obligations under the relevant statutory and regulatory scheme, to disclose EMS fees prior to treating emergency room patients. Requiring such disclosure would alter the careful balance of competing interests, including price transparency and provision of emergency care without regard to cost, reflected in the multifaceted scheme developed by state and federal authorities. Capito has not sufficiently alleged facts showing that the lack of such disclosure is ‘unlawful, unfair or fraudulent’ on any theory she presents under the UCL or CLRA. Accordingly, we affirm the Court of Appeal’s judgment.”
UCL Claim
Liu acknowledged that the scope of the UCL is “broad” and that it establishes “three varieties of unfair competition—acts or practices which are unlawful, or unfair, or fraudulent.”
Addressing “unfairness,” he noted:
“Capito alleges only that Regional’s ‘practices offend established public policies, and are immoral, unethical, oppressive, and unscrupulous.’….[W]e believe Capito has failed to show that Regional’s conduct is ‘unfair’ under these standards.”
He opined:
“To be sure, price transparency in healthcare is a significant concern under state and federal law. The Legislature has imposed extensive chargemaster and price list obligations on hospitals ‘to increase the transparency in hospital pricing to enable consumers to comparison shop for medical services,’ and federal regulators have done the same….But price transparency is not the only concern….[S]tate and federal laws also seek to ensure that emergency medical care is promptly provided to those who need it….
“Indeed, the Legislature specifically exempted emergency rooms from mandatory, specific disclosures of costs to uninsured patients—individuals who would arguably benefit the most from additional disclosures of EMS fees…”
Unpersuaded by Capito’s argument that there is no evidence that the Legislature engaged in any careful balancing of these concerns, he wrote:
“At a minimum, it is plausible that a duty to provide such disclosures would risk discouraging patients from seeking emergency care or would put patients in the position of evaluating for themselves whether emergency services, at a particular cost, are warranted in a given circumstance. Capito’s emphasis on patient choice….contemplates that patients will weigh cost against the necessity or value of emergency care, which the regulatory scheme seeks to discourage.”
Exclusive Knowledge
The plaintiff claims that Regional violated the CLRA because it has “exclusive knowledge” of the material fact that an EMS fee would be charged. This violation, Capito argues, creates an “unlawful” UCL claim, citing jurisprudence finding failures to disclose can form the basis for CLRA liability.
Liu remarked:
“Assuming that a failure to disclose can trigger CLRA liability (an issue we do not decide), we conclude that Capito’s allegations do not establish that Regional’s conduct was unlawful. Regional disclosed the EMS fees in the chargemaster and in its list of 25 common procedures….Regional also made its chargemaster available, either electronically or physically, at the emergency room and had the requisite ‘conspicuous’ signs saying so.”
Rejecting Capito’s contention that the publication does not inform “an objectively reasonable person” of the “circumstances in which the EMS Fee is charged,” the jurist wrote:
“To be sure, the average patient would not know of the term ‘evaluation and management services.’ But that does not mean Regional had exclusive knowledge of the fact that it charges a fee for the evaluation and management of emergency room patients. A reasonable person would likely know that getting evaluated in a hospital emergency room is not free.”
He added:
“In sum, even if a failure to disclose can give rise to CLRA liability…, Capito has not alleged facts showing that Regional’s conduct was ‘unlawful’ by virtue of Regional having exclusive knowledge of the EMS fee or Capito lacking reasonable access to the information. We hold that Capito has not sufficiently alleged a violation of the CLRA and thus her UCL ‘unlawful’ claim fails.”
Fraudulent Practice
Turning to Capito’s assertion that the hospital’s purportedly insufficient disclosures amount to fraudulent or deceptive business practices, Liu said:
“This court has not defined the standard for deception by omission or failure to disclose under the UCL’s fraudulent prong, and we express no view here. It suffices to say that Regional’s conduct…is unlikely to deceive the public. Its compliance with the regulatory scheme promotes price transparency for consumers to the extent contemplated by state and federal authorities, who sought to balance that concern against the risk of dissuading patients from seeking emergency care.”
He continued:
“At bottom, Capito desires notification of the EMS fee as if emergency care were a shoppable service. She does not believe Regional’s notices about its intent to charge the EMS fee—provided in legally mandated pricelists and in a similar fashion that Capito apparently finds suitable for other services—adequately promotes price transparency and informed decision making. But Regional need not provide [model notice] to avoid liability under the UCL….This is especially so when state and federal lawmakers…have already made a reasoned determination of what constitutes sufficient notice in the emergency room context in light of competing concerns. We see no basis to conclude that the public will likely be deceived by the form and extent of Regional’s disclosures in accordance with relevant state and federal regulations.”
He added that “[w]e disapprove” the Fifth District decisions in Torres v. Adventist Health Systems, 2022, and Naranjo v. Doctors Medical Center of Modesto, 2023, “to the extent they are inconsistent with this opinion.”
The case is Capito v. San Jose Healthcare System LP, 2024 S.O.S. 3788.
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