VOLUME XL, ISSUE 3, FALL 2020 A Publication of the California Society for Healthcare Attorneys

EDITOR’S NOTE / ANNOUNCEMENTS 1

NEW MEMBERS / MEMBER NEWS 2

ARTICLES Powers of the Health Officer in the Era of COVID-19

Katherine Broderick...... 3

The Health Lawyer Toolkit: Time for a Bylaws Checkup?

Corinne H. Gartner...... 7

What About the Economy Case?: Continued Questions About its Applicability One Year Later.

Rebecca Hoyes...... 11

Getting to Know... David Johnson ...... 14

Appellate Case Summaries

H. Thomas Watson & Peder K. Batalden...... 16

ACKNOWLEDGEMENT OF EDITORS 25 Sara Hersh IMMEDIATE PAST-PRESIDENT Nelson Hardiman, LLP Lisa Matsubara Los Angeles Planned Parenthood Affiliates of California Sacramento David Johnson Molina Healthcare, Inc. CHIEF FINANCIAL OFFICER Long Beach Martha Ann Knutson Suzan Vida Konell County of Riverside California Health Law News (CHLN) is a quarterly Dignity Health Riverside publication of the California Society for Healthcare Pasadena Attorneys (CSHA). The mission of CHLN and the CSHA EXECUTIVE DIRECTOR/SECRETARY Publications Committee is to publish articles that are Sarvnaz (Miriam) Mackin Lois J. Richardson interesting and useful to health lawyers practicing Nelson Hardiman, LLP California Hospital Association in California. While the Publications Committee Los Angeles Sacramento strives to ensure that CHLN articles provide accurate and authoritative information regarding the subject Samuel R. Maizel DIRECTORS AT LARGE matters covered, the information is provided with Dentons US, LLP Carlo Coppo the understanding that neither CSHA nor CHLN Los Angeles Attorney at Law contributors are engaged in rendering legal services. Contributors to CHLN are not agents of CSHA and Lisa Matsubara Benjamin A. Durie the opinions and positions stated in CHLN articles Planned Parenthood Affiliates of California Hooper, Lundy & Bookman, P.C. are those of the authors and not of CSHA, its staff, the Sacramento CHLN editors or Publications Committee members. San Francisco Lois J. Richardson Brandie J. Gasper CO-EDITOR California Hospital Association Molina Healthcare Benjamin A. Durie Sacramento Hooper, Lundy & Bookman, P.C. Long Beach San Francisco Brendan O. Sanchez Scott C. Kessenick The Permanente Medical Group, Inc. CO-EDITOR Oakland Kessenick Gamma & Free, LLP Martha Ann Knutson San Francisco County of Riverside Arielle Tokorcheck Samuel R. Maizel Riverside Kaiser Permanente Oakland Dentons US LLP Los Angeles BOARD OF EDITORS Karen Weinstein Katherine Broderick MemorialCare Health System Dayna Nicholson San Mateo County Counsel Fountain Valley Davis Wright Tremaine LLP Redwood City Los Angeles Kathryn Coburn Adam Wentland Murphy Cooke Kobrick LLP Theodora Oringher PC Brendan Sanchez Santa Monica Costa Mesa The Permanente Medical Group, Inc. Oakland Andrea Frey 2020-2021 BOARD OF DIRECTORS Hooper, Lundy & Bookman, P.C. PRESIDENT Felicia Y. Sze San Francisco Melissa Borrelli Athene Law, LLP San Francisco Andrew Goodman Mazars USA LLP Novian & Novian Sacramento STAFF Los Angeles PRESIDENT-ELECT Mahsa Farahani Carla J. Hartley Brian M. Taylor Program & Operations Manager Dillingham & Murphy, LLP Boutin Jones, Inc. California Society for Healthcare Attorneys San Francisco Sacramento Sacramento EDITOR’S NOTE

good health of all. Many of us are working One thing hasn’t changed in 2020 – you and “remotely” from home based “offices” and your colleagues have continued to contribute only occasionally venturing out for in-person articles to the California Health Law News meetings and court hearings. We have and this third 2020 edition continues learned how to operate and be productive our tradition of bringing to you excellent via “Zoom,” “Skype” or “Teams;” and it will writing about issues unique to the practice be interesting to see in the future how much of healthcare law in California as well as those tools remain in use, particularly in up-to-the minute member news designed to such a large, spread out state as California. keep you abreast of who is where and doing what – despite the challenges of Covid 19. This year we also started making the News available in an electronic format – and it’s Take care, Ben Durie Martha Ann Knutson your choice if you still wish to receive the traditional “hard copy” as well. The mailed – Marty and Ben Dear Readers: version costs CSHA about $6.00 each in printing and postage – and you are welcome 2020 has been an unusual year for us all. to continue receiving it. But a number of you Although CSHA members have still had have already notified us that the electronic virtual opportunities to network and learn version meets your needs. If you are finding together our traditional Spring and Fall the hard copy version gathering dust in Conferences, both had to be cancelled for the your office “in” tray, just let us know.

ANNOUNCEMENTS

JOIN CSHA ON LINKEDIN CHECK OUT OUR ON-DEMAND WEBINAR VIRTUAL NETWORKING OPPORTUNITIES The California Society of Healthcare LIBRARY Just because people aren’t allowed to Attorneys is pleased to announce that Did you miss a CSHA live webinar? We’re group together physically doesn’t mean we are now on LinkedIn! LinkedIn is the excited to offer you the opportunity to attend we can’t connect and socialize! We are largest online network designed to connect our pre-recorded webinars at a time that is working hard to plan fun and engaging professionals across the globe. Join the most convenient for you. They are available virtual events that allow attendees to gain CSHA LinkedIn group page now to connect to watch on-demand at: csha.info/past-event- information, actionable insights, and plenty of with other CSHA members and build your downloads opportunities to engage and catch up professional networking profile. We look with one another. More information will be forward to seeing you there! INTERESTED IN BEING A WEBINAR made available in the coming weeks at www. SPEAKER? csha.info MEMBERSHIP RENEWAL CAMPAIGN Submit Your Idea The California Society for Healthcare Attorneys is looking forward to another great We are currently seeking speakers for our year full of information, events and activities webinars and virtual panels on various topics for our members. Your CSHA membership related to healthcare law. renewal information has been sent to you – Submit your contact information and topic don’t let your membership lapse! Four lucky idea and someone from our team will reach members who have already renewed their membership or do so by the Jan. 13 deadline out: csha.info/event/webinar-speaker will automatically be entered into a drawing for a $100 Amazon gift card, so be sure to renew ASAP!

1 | California Health Law News NEW MEMBERS

Anahita Anvari Kate M. Hammond Tish Pickett Villa Park, CA Manatt, Phelps & Phillips, LLP Optum360, Inc. Los Angeles, CA Carson, CA Vanessa Barrios Delta Dental Insurance Company Krista Hernandez Chalisa Sims Alpharetta, GA Doll Amir & Eley LLP Madison, WI Los Angeles, CA Kyle Brierly Stephanie Thompson U.S. Department of Health and Human Services Ji Won Kim St. Louis, MO Manatt, Phelps & Phillips, LLP Washington, D.C. Los Angeles, CA Tim Travelstead Aneliese Castro Narayan Travelstead PC Jeeyoung Kim Pleasanton, CA Playa Vista, CA CommonSpirit Health Susan Turner Tara Cowell Glendale, CA Department of Managed Health Care Cowell Law Corporation Kelsey Leingang Sacramento, CA Orange, CA Providence St. Joseph Health Irvine, CA Elizabeth (Lisa) Vega Krista DeBoer Delta Dental Insurance Company Doll Amir & Eley LLP Natalie Maas Alpharetta, GA Los Angeles, CA Davis, CA David Yates Victoria Felt Carla Minnard Los Angeles, CA DJR Health Law and Consulting The Minnard Law Firm Sacramento, CA Oakland, CA

MEMBER NEWS

Our members are in the news and JAMIE OSTROFF joined Hill Physicians years as a partner with the firm. Prior to making career changes! Medical Group as Chief Legal Officer in April his long tenure at Nossaman, during which 2020. Jamie previously served as Associate he especially focused on managed care law, ERIC D. CHAN joined Athene Law as General Counsel at Blue Shield of California. Richard served as Director of the California a partner in July 2020. Prior to joining Department of Consumer Affairs. Richard Athene, Eric spent eight years in private ELSPETH D. PAUL, a former CSHA President plans to concentrate his post-retirement time practice as a health law litigator. and past CSHA seminar presenter, has on fighting the impact of climate change. joined Cedars-Sinai Health System as PAUL R. DEMURO, PHD has been named its new Deputy General Counsel. Prior PAMELA STONE has left private Chief Legal Officer Health and Wellness, to joining Cedars-Sinai, Elspeth was the practice to serve in the public sector as Royal Palm Companies, Miami, Florida. General Counsel of Verity Health System. a Policy and Analysis Attorney with the Department of Managed Health Care. MARC GOLDSTONE, Senior Vice RAJA SÉKARAN, also a former CSHA President/California Registered In-House President, was recognized by the Daily Counsel at Prime Healthcare, has been Journal as a “Top Healthcare” lawyer for elected as a Class of 2020 Fellow of the 2020. In addition, Raja was also named American Health Law Association. by the National Law Journal (NLJ) as a “Healthcare Trailblazer” for 2020. KAREN KIM, CenCal Health General Counsel, was recently featured RICHARD SPOHN retired from the in a Vanguard Law article. Nossaman Law Firm on March 31, after 37

Volume XL, Issue 3, Fall 2020 | 2 POWERS OF THE HEALTH OFFICER IN THE ERA OF COVID-19

During the late-night hours on March 15, including quarantine and other regulations, 2020, seven health officers from the bay area prescribed by the CDPH; and (c) Statutes jurisdictions and various county counsel relating to public health.4 members met on the phone to strategize on how best to respond to the rising cases of With such duties comes burdens. Before the 2019 novel coronavirus (“COVID-19”) in their pandemic, the role of the health officer was jurisdictions.1 The lack of immediate action not well known, and most residents would be from the state and federal governments hard put to even name the person filling that shifted the burden to the local regions to act. role. Because of COVID-19, they have jumped The following day the Shelter in Place Order into the spotlight and been subject to both was issued in the seven bay area jurisdictions, positive and negative public scrutiny. On the essentially stopping life as we knew it and negative side, they have been the target of By Katherine Broderick bringing us into the age of the pandemic. Such protests and even death threats from people a decision is a powerful one that impacted angry with the orders requiring sheltering in Katherine F. Broderick is Deputy place, closing businesses or wearing masks. County Counsel for San Mateo millions of people’s lives. How was such a In the relatively short time since the start of County. She is currently assigned to power granted to the local health officer, a the pandemic, at the time this article is being San Mateo Medical Center, Public position not usually known to the general written, nine California health officers have Health and Family Health teams. public? Below I will describe how a health left their posts.5 In response to increasing Prior to her current position, she officer is appointed to his/her/their role, the reports of threats, Governor Gavin Newsom worked as in house counsel for duties of a health officer, the overarching signed an executive order on September 23, the federal government and was and specific powers of a health officer, the 2020 to protect local health officers and a litigation associate specializing limitations of those powers, supervision of the other public health officials on the front lines in healthcare reimbursement. health officers, and the current role health of the fight against the virus.6 The order She received his J.D. degree from officers have coordinating with the State of permits these individuals to participate in the St. Louis School of Law in 2014 California. Secretary of State’s address-confidentiality with a concentration in health program, currently offered to victims of law, where she was on the Journal APPOINTMENT OF THE HEALTH OFFICER domestic violence, stalking, and elder abuse, of Health Law & Policy and was among others. 7 Health Law Student of the Year. The board of supervisors of each county shall take measures as may be necessary to preserve and protect the public health POWERS OF HEALTH OFFICERS in the unincorporated territory of the county, including, if indicated, the adoption On the podcast Reveal, Dr. Scott Morrow, the of ordinances, regulations and orders not health officer for San Mateo County, stated in conflict with general laws, and provide for the payment of all expenses incurred in There are some specific laws but they’re very enforcing them.2 The board of supervisors broad and vague and basically say you can do of each county appoints a health officer anything you need to, to stop the spread of who is a county officer except when a city disease. They’re kind of brilliantly written; has made other arrangements.3 As such, the they kind of take politics out of the mix. They health officer is not an elected position and make the disease the kind of the central therefore not usually well known to the public. focusing point in science, space disease 8 Before the pandemic, health officer roles control. were centered on preparedness (i.e. potential bioterrorism or other potential disasters) It is true that there is are a number of and responding to local health issues (i.e. the overarching and very broad laws granting opioid crisis, tuberculosis infections). the county health officer authority to act in an emergency. Specifically, Cal. Health & Safety Code § 120175 provides, “[e]ach health DUTIES OF THE HEALTH OFFICER officer knowing or having reason to believe that any case of the diseases made reportable The health officer shall enforce and observe by regulation of the department, or any other in the unincorporated territory of the county, contagious, infectious or communicable all of the following: (a) Orders and ordinances disease exists, or has recently existed, within of the board of supervisors, pertaining to the the territory under his or her jurisdiction, public health and sanitary matters; (b) Orders, shall take measures as may be necessary

3 | California Health Law News POWERS OF THE HEALTH OFFICER IN THE ERA OF COVID-19

to prevent the spread of the disease or wear a face mask or covering despite a health for religious purposes. So long as the occurrence of additional cases.” officer order that they do so.14 Enforcement government’s action is reasonably in that County fell to the County Counsel’s related to stopping the spread of This statutory provision alone can allow office, using a variety of civil litigation tactics, COVID-19, the government is likely to health officers to act and enforce measures including cease and desist letters, restraining prevail.21 they deem necessary to prevent the spread orders, civil contempt proceedings, etc. The of disease. Additionally, Cal. Health & Safety San Diego Sheriff put out a public statement Code §120175.5(b) provides “[i]n addition to that his officers would focus on “education” SUPERVISION OF HEALTH OFFICERS the actions required under subdivision (a), efforts and “report” businesses not in the local health officer may issue orders to compliance back to the health officer for The board of supervisors supervises the other governmental entities within the local investigations.15 And the State Department official conduct of all county officers, health officer’s jurisdiction to take any action of Corrections developed a “policy” of including health officers, and particularly the local health officer deems necessary ignoring guidance from local health officers, insofar as the functions and duties of such to control the spread of the communicable which seems to have been a factor in a large county officers and officers of all districts disease.” outbreak at San Quentin.16 Recently some and subdivisions of the county relate to counties have passed ordinances setting civil the assessing, collecting, safekeeping, Under these broad authorities, health officers fines for businesses that continue to violate management, or disbursement of public funds. 22 in various counties attempting to control the health orders.17 Other counties have gotten The board of supervisors is to ensure that spread of COVID-19 issued orders covering a creative in their approach to enforcement. public officials faithfully perform their duties, wide range of topics. For example, in addition For example, Los Angles has been shutting direct prosecutions for delinquencies, and to the Shelter in Place orders that have been off utility services for flagrant violations of when necessary, require them to renew their issued by numerous California counties, public health orders.18 Most notable, was an official bond, make reports and present their 23 health officers have also issued orders influencer house that wouldn’t stop hosting books and accounts for inspection. barring visitors from skilled nursing facilities; parties, so Mayor Eric Garcetti cut its power.19 banning mass gatherings; closing school People v. Langdon held that despite its in-person instruction; and mandating face supervisory role of county officers, the board coverings. CHALLENGES TO POWERS OF of supervisors does not have the power to THE HEALTH OFFICER perform county officers’ statutory duties for But in addition to overall authority regarding them or direct the manner in which they are communicable diseases, health officers are Because the health officer’s exercise of carried out.24 “The board of supervisors has sometimes granted specific authority. For authority may impact, curtail or impair an no inherent powers; the counties are legal example, a health officer can require isolation individual’s protected rights and liberties, subdivisions of the state, and the county or quarantine.9 As such, we have also seen constitutional considerations may arise. board of supervisors can exercise only those specific isolation and quarantine orders There have already been a number of cases powers expressly granted it by Constitution issued in various counties. filed against the State, counties, and county or statutes and those necessarily implied departments regarding the issuance and therefrom.” 25 enforcement of the health officer orders. It ENFORCEMENT appears that everyone from churches, gun An examination of the provisions of the shops, furniture stores, to the gym industry applicable statutes and of the Constitution A failure to comply with an order of the health and angry brides have initiated lawsuits reveals that the board of supervisors has officer may constitute a public offense.10 If not regarding shelter in place orders.20 It will been granted power to take measures as complied with, the demand or order may be be important to watch these cases and how necessary to preserve and protect public followed by the application of physical force their ultimate decisions will affect the scope health including the adoption of ordinances in the form of an arrest of the person who has of a health officer’s power. However, it is also not in conflict with general laws.26 However, failed to comply.11 This is known as criminal important to note the broad local and state the board of supervisors has not been given enforcement.12 Civil enforcement is the authority to act in emergencies. As the dean of the specific authority to issue ordinances to obtaining of a court order in the nature of an UC Berkley law school stated combat communicable diseases as the health injunction ordering the person or business to officer has under Health & Safety Code § comply with the health officer’s order.13 Simply put, these lawsuits are very 120175.5(b). likely to lose, as most of these challenges But most public health departments don’t around the country have failed. The In sum, although the board of supervisors has come staffed with dedicated sheriffs or government has broad powers to take the general authority to protect the public police to arrest those who violate the health emergency actions to stop the spread of health, the health officer has been delegated officer’s orders. At least one County Sheriff, in communicable diseases. This includes the specific statutory authority to issue orders Riverside County, announced at the beginning the power to order quarantine or shelter regarding communicable diseases. Because of the pandemic that his officers “would not” in place, to order closure of businesses, that specific duty has been delegated to the be ticketing or arresting those who failed to and to limit assemblies, including health officer, the board of supervisors cannot

Volume XL, Issue 3, Fall 2020 | 4 then perform such duties or direct the health applicants satisfy certain requirements which END NOTES officer on how to perform the duties, they can have been set by the State.32 only supervise. 1 Reveal Podcast, The Center for In the age of COVID-19, a local health officer’s Investigative Reporting, Divided states of power is strong and almost untethered. A the pandemic (June 13, 2020), available at STATE ACTIONS AND THE NEW local health officer can act in any way they https://www.revealnews.org/episodes/ ROLE OF THE HEALTH OFFICER deem necessary to protect the public from divided-states-of-the-pandemic/ communicable diseases. Their power is only Only a few days after the bay area shuttered by actions of the State, specifically 2 Cal. Health & Safety Code § 101025. jurisdictions issued their own shelter in the State Health Officer or California place orders, on March 19, 2020 the State Department of Public Health. In addition, 3 Cal. Health & Safety Code of California issued a state-wide public they could theoretically be fired by the local § § 101000; 101460. health officer order which set a baseline for board of supervisors, however the board of statewide restrictions on non-residential supervisors could not act in a health officers 4 Cal. Health & Safety Code 27 business activities. Later the State place for their specific role of protecting the § § 101030; 101375. introduced a “Resilience Roadmap” which public from communicable diseases – firing 5 Carolyn Said, California health officers depicted a one through four stage process one health officer would only require them to 28 facing protests, even death threats, over to recovery. On August 28, 2020, the State appoint another. released a new reopening plan replacing the coronavirus orders, San Francisco Chronicle, Resilience Roadmap with a “Blueprint for a In conclusion, as the public is now learning, (June 30, 2020 4:36 p.m.) https://www. Safer Economy.”29 The Blueprint for a Safer the powers of the health officers serving sfchronicle.com/bayarea/article/Area-health- Economy is a revised criteria for loosening California are immense and necessary during officers-confront-harassment-15375304. and tightening restrictions on activities.30 a pandemic. There have been numerous php; Colleen Shalby, Placer County rescinds It uses a color coded system to indicate how studies on the effectiveness of the shelter in COVID-19 health emergency, prompting health open or closed a county is based on new cases place orders across the county. One study officer to resign, Los Angeles Times, (Sep 10, and positive test results. More specifically, the noted that had New York implemented shelter- 2020) https://www.latimes.com/california/ State describes its system as: in-place orders a week earlier, it could have story/2020-09-10/placer-county-ends-local- avoided 80% of the 20,000-and-counting covid-19-health-emergency-prompting- Every county in California is assigned deaths in the city, more than anywhere else health-officer-to-resign. Notation: 1. Nevada to a tier based on its test positivity in the country.33 Instead, Governor Andrew County Public Health Officer Dr. Ken Cutler; and adjusted case rate. At a minimum, Cuomo waited until the night of March 22, 2. San Benito County Interim Public Health counties must remain in a tier for at least six days after the Bay Area’s order went into Officer Dr. Marty Fenstersheib; 3. Yolo County 3 weeks before moving forward. Data is effect, to issue his “New York State on PAUSE” Public Health Officer Dr. Ron Chapman; reviewed weekly and tiers are updated executive order. Imagine if areas in California 4. Butte County Public Health Officer Dr. on Tuesdays. To move forward, a county did the same, how many lives would have been Andy Miller; 5. Orange County Public Health must meet the next tier’s criteria for two lost if local health officers hadn’t acted when Director David Souleles; 6. Orange County consecutive weeks. If a county’s metrics they did? Public Health Officer Nichole Quick; 7. San worsen for two consecutive weeks, it Bernardino County Public Health Director will be assigned a more restrictive tier. Trudy Raymundo; 8. Alameda County Public Public health officials are constantly Health Officer Erica Pan; 9. Placer County monitoring data and can step in if Public Health Officer Aimee Sisson. See necessary.31 also https://www.npr.org/sections/health- shots/2020/08/30/907228233/opinion- With the State taking a more active role in public-health-leaders-deserve-more-respect managing the COVID-19 response on a county level, there is less of a need for a local health 6 Cal. Executive Order N-80-20 officer to issue orders unless the orders would be more restrictive than the state proposals. 7 Id.

Additionally, under the State control schemes, 8 Reveal Podcast, The Center for local health officers are also charged with Investigative Reporting, Divided states of new roles as their duties and responsibilities the pandemic (June 13, 2020), available at expand. For example, local health officers https://www.revealnews.org/episodes/ are currently charged with the decision divided-states-of-the-pandemic/ on whether or not to grant a waiver to elementary schools to reopen in-person 9 Cal. Health & Safety Code instruction under specified conditions if § § 120130 (c); 121365 (g).

5 | California Health Law News 10 Cal. Health & Safety Code § § 120275; (July22, 2020) https://calmatters.org/health/ 32 California Department of Public 120280; 120285; 120295; 120300; 131082; coronavirus/2020/05/california-shutdown- Health, COVID-19 and Reopening In-Person Cal. Penal Code § § 69; 148(a)(1). lawsuits-newsom-dhillon-coronavirus- Learning Framework for K-12 Schools in shelter-in-place-executive-orders/; Mairead California, 2020-2021 School Year (July 17, 11 Id. Mcardle, California Churches Sue Gov. Newsom 2020), https://www.cdph.ca.gov/Programs/ over COVID Lockdowns (July, 16, 2020 at CID/DCDC/CDPH%20Document%20 12 Id. 1:31 p.m.) https://www.nationalreview. Library/COVID-19/Schools%20 com/news/california-churches-sue- Reopening%20Recommendations.pdf 13 Id. gov-newsom-over-covid-lockdowns/ 33 Sen Pei, Sasikiran Kandula, Jeffery 14 Sam Metz, Sheriff Chad Bianco won’t 21 Ben Christopher, Churches, Shaman, Differential Effects of Intervention ticket violators of Riverside County’s order gunshops, irked parents and irate brides: Timing on COVID-19 Spread in the United to cover faces, Desert Sun, (April 6, 2020) All the shutdown lawsuits against States, Department of Environmental https://www.desertsun.com/story/news/ Newsom, explained, CalMatters (July22, Health Sciences, Mailman School of Public politics/2020/04/06/coronavirus-sheriff- 2020) https://calmatters.org/health/ Health, Columbia University (May 20, chad-bianco-wont-ticket-violators-riverside- coronavirus/2020/05/california-shutdown- 2020) https://www.medrxiv.org/content/ countys-face-covering-order/2959487001/ lawsuits-newsom-dhillon-coronavirus- 10.1101/2020.05.15.20103655v1.full.pdf shelter-in-place-executive-orders/ 15 William D. Gore, San Diego County Sheriff’s Department, Statement on 22 Cal. Gov’t Code § 25303. Enforcement of COVID-19 Public Health Orders, available at https://sdsheriff.net/newsroom/ 23 Id. links/coronavirus-enforcement-statement.pdf 24 54 Cal. App. 3d 384, 390, 126 16 Megan Cassidy, San Quentin officials Cal. Rptr. 575, 578 (Ct. App. 1976); see ignored coronavirus guidance from top Marin also Connolly v. County of Orange, County health officer, letter says, San Francisco 1 Cal.4th 1105, 1113 n. 9 (1992). Chronicle, (Aug. 11, 2020), https://www. sfchronicle.com/crime/article/San-Quentin- 25 Hicks v. Bd. of Supervisors, 69 Cal. App. 3d officials-ignored-coronavirus-15476647.php 228, 242, 138 Cal. Rptr. 101, 109 (Ct. App. 1977); see also Cal. Const., art. XI, s 1; Williams v. San 17 https://www.mercurynews. Diego Cty. Bd. of Supervisors, No. CIV. 05CV1955 com/2020/08/17/santa-clara-county-starts- J(JMA), 2007 WL 925821, at *3 (S.D. Cal. enforcing-coronavirus-health-orders/ Mar. 16, 2007); Byers v. Board of Supervisors, 262 Cal.App.2d 148, 155, 68 Cal.Rptr. 549 18 Taylor Lorenz, An Influencer House Wouldn’t Stop Partying, so L.A. Cut Its Power, 26 Cal. Health & Safety Code § 101025 New York Times (Aug. 19, 2020) https://www. nytimes.com/2020/08/19/style/la-party- 27 N-33-20; N-60-20 power-cut-tiktok.html?auth=linked-google 28 California State, Update on California’s 19 Id. Pandemic Roadmap (Sept. 15, 2020 at 3:53 p.m.) https://www.gov.ca.gov/wp- 20 Robert Salonga, Local gun dealers, content/uploads/2020/04/Update-on- NRA sue Bay Area officials over ‘non- California-Pandemic-Roadmap.pdf essential ‘designation after Trump Administration Weights in, The Mercury 29 California State, Stay home Q&A, News (April 1, 2020 at 6:00 a.m.) https:// (last updated September 14, 2020 at www.mercurynews.com/2020/04/01/ 10:31 a.m.) https://covid19.ca.gov/stay- coronavirus-local-gun-dealers-nra-sue- home-except-for-essential-needs/ bay-area-officials-over-non-essential- designation/#:~:text=A%20group%20 30 California State, Blueprint of%20firearms%20dealers,spread%20 for a Safer Economy, (last updated of%20COVID%2D19%20%E2%80%94%20 September 15, 2020 at 11:11 a.m.) https:// be; Ben Christopher, Churches, gunshops, covid19.ca.gov/safer-economy/ irked parents and irate brides: All the shutdown lawsuits against Newsom, explained, CalMatters 31 Id.

Volume XL, Issue 3, Fall 2020 | 6 THE HEALTH LAWYER TOOLKIT: TIME FOR A BYLAWS CHECKUP?

Many healthcare providers in California 1. PURPOSE CLAUSE (including hospitals and clinics) are organized under, or are otherwise subject Normally, the purposes of a California to, the California Nonprofit Public Benefit nonprofit public benefit corporation (both Corporation Law.1 As with any corporation, general and specific) are stated in the 5 the articles of incorporation, as amended articles. The purposes may be – and often or restated from time to time (collectively, are – restated in the bylaws as a reminder to the corporation’s directors and other the “articles”), are the primary governing constituents. As a general matter, any change document of a California nonprofit public to a corporation’s purpose clause should be benefit corporation.2 The articles must include carefully considered. Among other reasons, certain mandatory provisions and basic this is because a corporation’s federal and/ information about the corporation, including By Corinne H. Gartner or state tax-exempt status is often dependent the corporation’s name and address.3 on the purposes for which the corporation Corinne Gartner is a is organized and operated. But corporations partner at Delfino Madden All nonprofit public benefit corporations should be especially cautious when including O’Malley Coyle & Koewler must also adopt bylaws to establish or revising a purpose statement in the bylaws LLP in Sacramento, where procedures for the management and – since a purpose clause in the bylaws is only she specializes in the conduct of the corporation’s activities effective to the extent it is consistent with representation of nonprofit 4 and affairs. Most California corporate the purposes set forth in the articles. 6 and tax-exempt organizations lawyers would likely agree that bylaws on corporate/transactional serve three general purposes: To avoid inconsistency between the matters and compliance two governing documents, consider the with federal and state rules 1. To alter specific statutory model bylaws provision set forth below. regarding obtaining and default rules that would control This simple clause refers the reader to maintaining tax-exempt absent a contrary bylaw; the articles, reinforcing the primacy and status. Her experience controlling authority of the articles and includes counseling nonprofit 2. To address matters that are serving as an implicit reminder that any healthcare systems and not covered by statute; and changes to the purpose clause would medical foundations on need to be made via the articles. corporate governance issues 3. To provide a “ready reference” to and business transactional certain key provisions of statutory Purposes. The purposes of this matters. Before becoming an governing law for the benefit and corporation shall be as set forth in the attorney, Corinne had a career awareness of the corporation’s directors corporation’s articles of incorporation. in the nonprofit sector, which and officers (by restating – or at least inspired her to focus her legal referring to – specific provisions of practice on advising nonprofit the California Corporations Code). 2. MEMBERS and tax-exempt entities. Despite their importance from a nonprofit Nonprofit corporations in California can, but are not required to, have statutory members.7 corporate governance perspective, all In the healthcare context, it is not uncommon too often bylaws are consigned to a file or for a parent corporation in a nonprofit health shelf and left to languish, without being system to be the sole statutory member of one reviewed or updated as the corporation or more subsidiary nonprofit corporations. (and the laws that apply to it) continues to evolve and change. Or, bylaws get reviewed It is important for the corporation’s legal and revised without due consideration for advisers to know whether the corporation other relevant factors or documents. has statutory members. This is because members have certain rights with respect to The purpose of this Health Lawyer Toolkit the corporation, including the right to vote article is to highlight some issues/problem on the election of the corporation’s directors, areas commonly encountered when as well as the right to vote on significant reviewing bylaws of healthcare organizations corporate changes (such as mergers, formed or treated as California nonprofit dissolutions, dispositions of substantially all of public benefit corporations, and to offer the corporate assets, and amendments to the model bylaws provisions for consideration articles).8 Certain bylaws changes also require by legal advisers to those organizations. membership approval, and the articles or

7 | California Health Law News THE HEALTH LAWYER TOOLKIT: TIME FOR A BYLAWS CHECKUP?

bylaws may require member approval of other, flexibility in the size of the board over time; avoid confusion – since by virtue of such or any, amendment to the bylaws.9 In addition, in such case, consider the model bylaws limitation, the individual is not a director.16 members have certain inspection and other provision set forth below (which also requires rights with regard to corporate records.10 that the authorized number of directors be an odd number to avoid deadlock). 5. PROXY VOTING BY DIRECTORS Unless its articles or bylaws provide for members, a California nonprofit public Number of Directors. The number of Another persistent area of confusion for benefit corporation is deemed to have none.11 directors of this corporation shall be leaders of California nonprofit public If the corporation has no members, actions an odd number that is not less than benefit corporations is proxy voting. It is not that would otherwise require membership [minimum] nor more than [maximum]. The uncommon for the bylaws of a California approval require only board approval, and exact authorized number of directors nonprofit public benefit corporation to rights that would otherwise vest in the shall be [exact number within foregoing expressly allow directors to vote by proxy members are vested in the directors.12 range] until changed, within the limits – that is, to permit a director to authorize specified, by resolution of the board. another individual to vote on the director’s If the corporation is a non-member behalf. In corporations with statutory corporation, consider the following Legal advisers to corporations whose bylaws members,17 it is the case that members may bylaws provision, which makes clear that set forth a variable (rather than a fixed) vote by proxy unless proxy voting rights the corporation does not have statutory number of directors should be mindful are limited or withdrawn by the articles members – even if (as permitted by of the need for board (or member) action or bylaws.18 Proxy voting by directors, California Corporations Code §5332) whenever the corporation desires to change however, is not permitted.19 Accordingly, the corporation refers to persons the exact authorized number of directors.14 as a reminder to and to reinforce this associated with it as “members.” prohibition for the corporation’s constituents, it is recommended to include a provision No Statutory Members. This corporation 4. EX OFFICIO DIRECTORS such as the following in the bylaws: shall not have voting members within the meaning of Section 5056 of the One enduring area of confusion for Director Voting. Each director shall have California Corporations Code, and California nonprofit corporations is the one vote on each matter presented nothing in these bylaws shall be status of directors who hold office by virtue to the board of directors for action. construed or interpreted to constitute of occupying a specified position within (or A director shall not vote by proxy. anyone a member of this corporation outside) the corporation – so-called ex officio for purposes of the California directors. The California legislature has made Nonprofit Public Benefit Corporation several updates to the law in recent years that 6. MANNER IN WHICH Law. This corporation may refer to have helped clarify that, unless the articles THE BOARD MAY ACT persons or entities associated with it or bylaws limit the voting rights of a person as “members,” but no such reference designated as an ex officio director, that person The board of a California nonprofit public shall constitute anyone as a member is a director for all purposes and has the benefit corporation may act in one of within the meaning of Section 5056 same rights and obligations, including voting two ways: at a meeting, or by unanimous 20 of the California Corporations Code. rights, as the corporation’s other directors.15 written consent without a meeting. Board meetings may be held in the traditional The following model bylaws provision fashion, with the directors physically 3. NUMBER OF DIRECTORS can be considered for nonprofit gathering at a designated time and place, public benefit corporations whose but directors may also (and increasingly Unless a provision addressing the number boards include ex officio directors: do) participate in meetings through use of directors of the corporation is set forth of conference telephone, electronic video in the articles (in which case it may only be Ex Officio Directors. The individual screen communication, or electronic changed by an amendment of the articles), serving as the [insert specific description transmission by and to the corporation.21 the bylaws of a California nonprofit public of position within or outside the corporation, benefit corporation must set forth the number e.g., president of ABC Hospital] from time As noted, to take action outside of a meeting, of directors of the corporation, or the method to time shall serve ex officio as a director all directors must consent in writing to of determining the number of directors of the (with the right to vote) for so long as the action.22 The written consent may corporation, or that the number of directors he or she remains in such office. be in the form of one or more documents shall be not less than a stated minimum nor signed by the directors, facsimiles of more than a stated maximum with the exact Corporations that choose to limit the those documents, or telegraphic or number of directors to be fixed, within the voting rights of an ex officio position other electronic communications.23 limits specified, by approval of the board or should consider referring to the individual the members.13 Corporations often opt for who occupies the position as something Given all of this, the question often arises, the bylaws to set forth a range to allow for other than an “ex officio director” to can directors hold a meeting, or submit

Volume XL, Issue 3, Fall 2020 | 8 their votes, by email?24 In the opinion of such written consent by email or other END NOTES the author, email is not an appropriate way electronic transmission, provided that to hold a meeting. An argument could be the requirements of [insert reference 1 California nonprofit corporations made that email – which permits discussion/ to “Electronic Transmissions” section] of are governed by Division 2 of Title 1 of the deliberation to occur over an extended period these bylaws are met. Such written California Corporations Code (Cal. Corp. Code of time (and potentially via different strings/ consents shall be filed with the minutes §§5000-10841) (the “Nonprofit Corporation threads addressed to different subsets of of the proceedings of the board and Law”). Pursuant to the Nonprofit Corporation the board) – does not allow for the type of shall have the same force and effect as Law, which took effect on January 1, 1980, “real time” discussion and debate that the the unanimous vote of such directors. nonprofit corporations in California are directors are expected to engage in in the divided into three main types: public benefit, proper exercise of their fiduciary duties.25 Electronic Transmissions. Unless mutual benefit, and religious. In addition Nor, in the author’s opinion, would it be valid otherwise provided in these bylaws, to the Nonprofit Corporation Law’s general for a director to submit a vote by email, and and subject to any guidelines and provisions (Cal. Corp. Code §§5002-5080), have that vote be counted at a meeting that procedures that the board may adopt each type of California nonprofit corporation the director does not actually attend.26 On from time to time, the terms “written” is governed by a separate, self-contained the other hand, in the context of an action and “in writing” as used in these bylaws part, known respectively as the Nonprofit by unanimous written consent without a include any form of recorded message Public Benefit Corporation Law (Cal. Corp. meeting, the corporation could solicit consent in the English language capable of Code §§5110-6910), the Nonprofit Mutual from a director by email, and the director comprehension by ordinary visual Benefit Corporation Law (Cal. Corp. Code could provide such consent by email, as long means, and may include electronic §§7110-8910), and the Nonprofit Religious as certain additional requirements are met.27 transmissions, such as facsimile Corporation Law (Cal. Corp. Code §§9110- or email, provided (i) for electronic 9690). California nonprofit corporations Model bylaws provisions addressing transmissions from the corporation, formed before January 1, 1980, became subject telephone and electronic meetings, action by the corporation has obtained an to the Nonprofit Public Benefit Corporation written consent, and general requirements unrevoked written consent from the Law, the Nonprofit Mutual Benefit applicable to electronic transmissions by recipient to the use of such means Corporation Law, or the Nonprofit Religious and to the corporation, are offered below. of communication; (ii) for electronic Corporation Law on and after January 1, transmissions to the corporation, the 1980, as specified in transition provisions set Telephone and Electronic Meetings. corporation has in effect reasonable forth in Part 5 of the Nonprofit Corporation Directors may participate in a measures to verify that the sender is the Law (Cal. Corp. Code §§9910-9928). meeting through use of conference individual purporting to have sent such telephone, electronic video screen transmission; and (iii) the transmission A California nonprofit corporation’s communication, or other electronic creates a record that can be retained, classification usually relates to its purposes. transmission in compliance with [insert retrieved, reviewed, and rendered Nonprofit public benefit corporations, the reference to “Electronic Transmissions” into clearly legible tangible form. focus of this article, are formed for public or section] of these bylaws so long as charitable purposes. (See Cal. Corp. Code both of the following apply: §5130(b).) Since, in the general law of charity, CONCLUSION the promotion of health can be considered (i) each director participating in the a charitable purpose (see, e.g., Rev. Rul. 69- meeting can communicate with all of What’s the takeaway for legal advisers 545, 1969-2 C.B. 117), California healthcare the other directors concurrently; and to healthcare organizations subject to providers organized as nonprofit corporations the California Nonprofit Public Benefit are typically incorporated under – or, if (ii) each director is provided with Corporation Law? Add “review bylaws” to formed before January 1, 1980, are subject to – the means of participating in all the list of periodic compliance checkups you the Nonprofit Public Benefit Corporation Law. matters before the board, including conduct for your public benefit corporation the capacity to propose, or to interpose clients. It’s possible (and perhaps even likely) 2 Articles are filed with the California an objection to, a specific action that there are updates worth making. Secretary of State and are public documents. to be taken by the corporation. Through its Business Search portal (accessible at https://businesssearch.sos. Action Without a Meeting. Any action ca.gov/), the Secretary of State’s office makes required or permitted to be taken by the free pdf copies of imaged business entity board may be taken without a meeting documents, including articles, available; if all directors consent to such action in articles documents that are not available via writing, provided that all requirements the Business Search portal can be requested of Section 5211(b) of the California for a fee by submitting a Business Entities Nonprofit Public Benefit Corporation Records Request Form (see https://bpd.cdn. Law are met. A director may provide sos.ca.gov/pdf/be-records-requests.pdf).

9 | California Health Law News 3 See California Corporations Code 16 See California Corporations Code the other directors concurrently. §5130. In order for the corporation to §5047, stating, in pertinent part: “A person be eligible for tax-exempt status under who does not have authority to vote as (B) Each director is provided the Internal Revenue Code §501(c)(3), the a member of the governing body of the means of participating in all matters articles must also include certain additional corporation, is not a director as that term before the board, including, without provisions that limit the corporation’s is used in this division regardless of title.” limitation, the capacity to propose, or purposes, and that permanently dedicate to interpose an objection to, a specific the corporation’s assets to appropriate 17 See discussion at Section 2, above. action to be taken by the corporation. purposes. (See 26 C.F.R. §1.501(c)(3)-1(b).) 18 See California Corporations In the author’s opinion, email 4 California Corporations Code §§5150- Code §5613(a). does not meet this standard. 5153 set forth the general substantive 19 See California Corporations 26 See discussion above regarding the requirements for bylaws of California Code §5211(c), stating: “A director prohibition on proxy voting by directors. nonprofit public benefit corporations. shall not vote by proxy.” 27 Specifically, (i) in order for the 5 See California Corporations 20 See California Corporations Code §5211. corporation to use email to request Code §5130(b). consent to an action by written consent 21 See California Corporations Code from a director, the corporation must have 6 As noted earlier, as between §5211(a)(6); see also California Corporations obtained an unrevoked consent from the the articles and the bylaws, the Code §20 (for definition of “electronic director to the use of email for corporate articles (as the corporation’s primary transmission by the corporation”) communications; and (ii) in order for the governing document) control. and §21 (for definition of “electronic corporation to accept a director’s consent transmission to the corporation”). to an action by written consent sent via 7 The term “member” is defined email, the corporation must have placed in in California Corporations Code 22 See California Corporations Code effect reasonable measures to verify that §5056. Members (as defined in Cal. §5211(b). Note that consents used to approve a the sender is the director purporting to Corp. Code §5056) are sometimes transaction involving an “interested director” have sent such transmission. See California referred to as “statutory members.” (as defined in California Corporations Corporations Code §§8, 20, and 21. Code §5233(a)) or a “common director” (as 8 See California Corporations described in California Corporations Code Code §5056(a). §5234) must satisfy additional conditions.

9 See California Corporations Code §5150. 23 See California Corporations Code §5079; see also California 10 See California Corporations Corporations Code §§8, 20, and 21. Code §§6330-6338. 24 Email is one type of “electronic 11 See California Corporations transmission by and to the corporation”; see Code §5310(a). California Corporations Code §§20 and 21.

12 See California Corporations 25 California Corporations Code §5211(a) Code §5310(b). (6), the statutory default rule addressing director participation in meetings through 13 See California Corporations use of electronic transmission by and to Code §5151(a). the corporation, states, in pertinent part:

14 See California Corporations Code Participation in a meeting through §5151(a). Note also, however, that any use of electronic transmission by reduction of the authorized number of and to the corporation, other than directors does not remove any director prior conference telephone or electronic to the expiration of the director’s term of video screen communication, pursuant office unless the reduction also provides to this subdivision constitutes for the removal of one or more specified presence in person at that meeting directors. (See Cal. Corp. Code §5222(c).) if both of the following apply:

15 See California Corporations (A) Each director participating in the Code §§5047, 5220(f). meeting can communicate with all of

Volume XL, Issue 3, Fall 2020 | 10 WHAT ABOUT THE ECONOMY CASE?: CONTINUED QUESTIONS ABOUT ITS APPLICABILITY ONE YEAR LATER.

Among attorneys who advise peer review for Medical Affairs (“VPMA”), the Group’s bodies and physicians1 on fair hearing rights president removed Dr. Economy from the in California, no case has had a greater impact schedule pending further investigation.8 Upon in the past year than Economy v. Sutter East Bay learning that the physician had been referred Hospitals2 (“Economy case”). In that case, the to peer review and had been suspended First District Court of Appeal concluded that a from practice by the Group pending further physician’s notice and hearing rights apply to investigation, CDPH thereafter lifted situations where a hospital directs a medical the immediate jeopardy declaration.9 group of a “closed” department to remove a physician from the hospital schedule. In the weeks that followed, the anesthesia department peer review committees Arguably, the principles established in discussed the matter and recommended that By Rebecca Hoyes the Economy case were not new. Statutory Dr. Economy not be permitted to return to and common law have long-established practice until he had completed a Physician Rebecca Hoyes is a partner in that fair procedure rights arise when Assessment and Clinical Education “PACE” Nossaman LLP’s Health Law practice a peer review body takes an action or program at the University of California, San in the firm’s San Francisco office. makes a recommendation, based on a Diego, as well as any recommendations by that She has an extensive background in medical disciplinary cause or reason, that program and the peer review committee.10 the healthcare sector representing limits a physician’s ability to practice.3 The medical staff president informed the hospitals and their medical staffs in Moreover, Section 809.6 of the Business Group’s president about the recommendation peer review investigations, corrective and Professions code clearly states and requested that the Group implement action, hearings, and appeals. Rebecca’s language in the bylaws or a contract cannot it.11 Upon learning of this requirement, Dr. expertise in medical staff work extends Economy inquired whether he could meet to the integration of medical staffs waive a physician’s hearing rights. with the “peer review body,” but was told within a healthcare system, including However, since the First District Court of that this was his only alternative and that formal medical staff unifications Appeal filed its decision and the California the medical executive committee would not and the integration of medical staff Supreme Court subsequently denied review, look kindly on his appearing before them.12 functions, such as regional coordination it has become clear that the Economy case Dr. Economy eventually completed the of credentialing and peer review has led more attorneys and peer review PACE program and returned to practice.13 duties. Her experience in peer review bodies to wonder how future courts will includes the representation of medical extend the holdings to other fact patterns. Shortly thereafter, after being alerted by foundations, medical groups, and ASCs the pharmacy manager of problems with in related matters, such as drafting Dr. Economy’s documentation, the Hospital sharing agreements, composing Bylaws, SUMMARY OF ECONOMY CASE VPMA contacted the president and medical and B&P 809 hearings. She acts as a director of the Group and asked them to mediator in peer review matters and In the Economy case, Sutter East Bay Hospitals address the issue “immediately.”14 The Group also counsels on fraud and abuse issues and Alta Bates Summit Medical Center again took Dr. Economy off the anesthesia and in responding to investigations, (“the Hospital”) operated closed anesthesia schedule. In subsequent communications, audits, and actions by state and federal departments pursuant to a contract with the VPMA informed the Group’s president health oversight agencies. Rebecca is an East Bay Anesthesiology Medical Group (“the that they could not approve anesthesia active member of the California Society 4 Group”). The contract required, inter alia, all coverage schedules containing Dr. Economy for Healthcare Attorneys, the American anesthesiologists employed by the Group to and confirmed that the Hospital was asking Health Lawyers Association and the be members in good standing of the Hospital Group to remove him under the provision of California Association of Medical Staff 5 medical staff, and authorized the Hospital the contract allowing the Hospital to remove Services. She regularly shares her views to require the Group to immediately remove any physician that jeopardizes the quality on The Health Law Ticker, Nossaman’s from the schedule any physician providing of care provided to hospital patients. 15 blog covering noteworthy developments services under the agreement who “performs in healthcare law. Rebecca may be an act or omission that jeopardizes the quality The Group’s president informed Dr. reached at [email protected]. of care provided to hospital’s patients.”6 Economy that the Hospital did not want him on the anesthesia schedule and that When the California Department of Public he could resign his employment, but if Health (“CDPH”) conducted an unannounced he refused, the Group would proceed survey at the Hospital, it placed the Hospital with termination.16 When he refused, the in “immediate jeopardy” upon finding Group terminated his employment.17 numerous deficiencies attributed to one of the Group’s anesthesiologists, Dr. Economy.7 At Dr. Economy thereafter filed a complaint the direction of the Hospital’s Vice President alleging the hospital had violated his right

11 | California Health Law News WHAT ABOUT THE ECONOMY CASE?: CONTINUED QUESTIONS ABOUT ITS APPLICABILITY ONE YEAR LATER.

to notice and a hearing under Section 809 could not establish that it had delegated What remains to be seen is how this case of the Business and Professions Code and its peer review duties to the Group even will be relied upon in other situations. For his common-law right to fair procedure. though the contract required the Group example, when a hospital directs a group He also filed suit against the Group. 18 to develop and maintain separate peer to take action pursuant to a call coverage review processes. The contract did not contract or a non-exclusive contractual The Hospital argued that Dr. Economy’s clearly state that the Group’s peer review arrangement, a physician would not statutory notice and hearing rights were committee would be responsible for the necessarily be “effectively [prevented] … never triggered because they had not taken full fair procedure rights guaranteed from exercising clinical privileges at the action against his privileges. Rather, they under the law; the bylaws did not permit or hospital and engaging in the practice of 29 argued, the Group had suspended and authorize a closed department to conduct medicine.” However, given the court’s 19 terminated him. Thus, the Hospital asserted, peer review in lieu of what was required in attention to the expansiveness of the any grievance related to the discipline and the medical staff’s bylaws; and there is no definition of “staff privileges” under Section dismissal imposed must be directed to the evidence that the group had any policies or 805, which means “any arrangement under Group since they were the entity responsible procedures to conduct peer review which which a licentiate is allowed to practice in or for the employment actions.20 The Hospital would have been essential if the Hospital had provide care for patients in a health facility,” further argued that the suspension and in fact delegated these responsibilities.25 consideration must be given to whether a termination did not trigger a duty to file physician is entitled to a hearing whenever an 805 report with the Medical Board of With respect to a provision in the contract any action or recommendation is taken for California since the Group is not a “peer stating that the continuation of the contract a medical disciplinary cause or reason that review body” as defined by the statute.21 was not a condition of medical staff restricts a physician’s ability to practice. membership and that the contract could be The trial court rejected the Hospital’s What about the situation where there terminated without the necessity of a hearing, arguments, finding that under this approach is no contract provision similar to the the court concluded that this only applied to “a hospital could effectively avoid complying one at issue in the Economy case, but the quasi-legislative decision of the Hospital.26 with the notice and hearing requirements group takes action based on information They also pointed to the statutory prohibition of sections 805 and 809 simply by relying from the hospital administration or the on contractual waivers of peer review on its contracts with third-party employers medical staff, or upon receiving pressure 27 as a way to terminate the services of a proceedings as justification for their ruling. from these entities to “handle” the group physician whenever a hospital administrator members rather than following their own In addition to affirming the trial court’s determines there is a medical disciplinary peer review procedures? Depending on the determination that the Hospital had violated reason.” The Court of Appeal agreed, noting facts and the communications amongst the Dr. Economy’s due process rights, the Court of that if they were to accept the Hospital’s parties, a court could impute the actions of Appeal also affirmed the award of damages, position, Dr. Economy’s “right to practice the group to the medical staff or hospital. medicine would be substantially restricted rejecting the hospital’s argument that Dr. Rather than relying on the group to act, the without due process and, despite the hospital’s Economy was not entitled to lost wages since medical staff should follow its own peer concern that plaintiff was endangering he had not presented any evidence that he review processes and procedures to ensure patient safety, the state licensing board would have prevailed at a hearing. Relying they are investigating complaints or event would never be notified.”22 The request by on a civil service employment case (Skelly v. reports and address them appropriately. the Hospital to remove Dr. Economy from State Personnel Board 15 Cal.3d. 194 (1975)), the the anesthesia schedule, temporarily at first court determined that Dr. Economy did not Another uncertain situation arises when a and then permanently, “necessarily resulted need to show he would have prevailed at the Chief of Staff who also serves as a medical in a substantial reduction of plaintiff’s hearing in order to be entitled to lost income group leader suspends a fellow group member staff privileges” and “was the functional and awarded more than $3.8 million dollars. 28 from practicing for a medical disciplinary equivalent of a decision to suspend and later cause or reason acting on information from, revoke plaintiff’s clinical privileges.”23 but not the direction of, the hospital’s Chief HOW WILL THE ECONOMY CASE Medical Officer. What about the Economy The trial court also rejected the Hospital’s APPLY IN OTHER SCENARIOS? case in this scenario? Here, it will be critical argument that his privileges were not for the Chief of Staff to clarify in what role affected because he still had privileges Following the Economy case, it is now he or she was acting when imposing the at the hospital, finding that this narrow clear that at least under these narrow summary suspension in order to determine interpretation was an unjustified view of the factual circumstances a hospital cannot who is obligated to offer a hearing. meaning of privileges, which Section 805(a) direct a group with an exclusive contract (4) defines as “any arrangement under which to take a physician off of the schedule What about the Economy case when a medical a licentiate is allowed to practice or provide without serious risk that such action staff and large medical group both take care for patients in a health facility.”24 will be construed as an action against corrective action against a physician based the physician’s clinical privileges and on the same facts? Would the member be The court also concluded that the Hospital membership that triggers hearing rights. entitled to two hearings – one regarding

Volume XL, Issue 3, Fall 2020 | 12 their employment and one regarding their END NOTES 19 Id., at 1158. medical staff membership? Depending on the relationship between the group and 1 Although this article references 20 Id. the hospital/medical staff, it is possible “physicians,” fair hearing rights also apply to these hearings could be combined or that other licentiates defined under Business and 21 Id. The court did not comment in the hearing procedure can be delegated Professions Code Section 809(b) including this decision on whether the group was to one of the peer review bodies. However, podiatrists, clinical psychologists, marriage a peer review body under Business and entities interested in resolving issues and family therapists, clinical social workers, Professions Code Section 805(a)(1)(B)(iv). via a joint hearing or delegated hearing professional clinical counselors, or dentists. process should establish these procedures 22 Id. in governing documents and/or contracts 2 31 Cal.App 5th 1147. 23 Id. beforehand. Legal counsel should also be 3 “Medical disciplinary cause or consulted to ensure such language still reason” means that aspect of a licentiate’s 24 Id. Business and Professions complies with legal requirements and is competence or professional conduct that is Code Section 809(a)(4) defines “staff not considered a forbidden “waiver.” reasonably likely to be detrimental to patient privileges” as any arrangement under which a licentiate is allowed to practice Hospitals and medical groups should no safety or to the delivery of patient care. in or provide care for patients in a health longer view the termination or suspension of Cal. Bus. & Prof. Code Section 805(a)(6). facility. Those arrangements shall a group employed physician at the direction 4 Id., at 1152. include, but are not limited to, full staff of the hospital as a contractual matter. Given privileges, active staff privileges, limited the significant risk of damages, particularly 5 Id., at 1153. staff privileges, auxiliary staff privileges, in light of the court’s holding that a physician provisional staff privileges, temporary staff does not need to show that they would have 6 Id. privileges, courtesy staff privileges, locum prevailed at a hearing, peer review bodies tenens arrangements, and contractual must take the question of how the Economy 7 Id. arrangements to provide professional case applies seriously. There is a legitimate services, including, but not limited to, risk of liability for hospitals and medical staffs 8 Id arrangements to provide outpatient services. who continue to rely on contract provisions allowing administrators to remove a physician 9 Id., at 1154. 25 Id., at 1159-1160. from a service schedule when that physician 10 Id. will no longer be able to exercise his or her 26 Id., at 1160, citing Mateo-Woodburn privileges at the hospital due to this limitation. v. Fresno Community Hospital & Medical 11 Id. Center, 221 Cal.App.3d 1169 (1990). 12 Id. 27 Id., citing Business and Professions 13 Id Code Section 809.6(c): “The provisions of Sections 809.1 to 809.4, inclusive, may 14 Id., at 1154-1155. not be waived in any instrument…for a final proposed action for which a report is 15 Id., at 1155 required to be filed under Section 805.”

16 Id. 28 Id., at 1161-1162.

17 Id. 29 Id., at 1159.

18 Per the complaint, the causes of action against the group included: Violation of right to notice and hearing under Business and Professions Code Sections 805 and 809, violation of common law right to fair procedure, intentional interference with prospective economic advantage, intentional interference with right to practice profession, breach of employment agreement, and age discrimination. (2013 WL 322824).

13 | California Health Law News GETTING TO KNOW... DAVID JOHNSON

1. Where are you currently employed and specialty is health care civil rights law. I what is your position? became interested in this area while still in law school, when I represented patients in Molina Healthcare. Assistant General involuntary commitment proceedings. As a Counsel. lawyer, I have continued to represent patients, providers and health plans in mental health- 2. How long have you held that position? related matters. When the ACA was passed, Two years. I began working on the application of ACA Section 1557, which broadly applied many classic civil rights laws for the first time to 3. When did you become a member of health care. Since then, I have consulted with CSHA? and represented many health plans, patients I first became a member around 2007. and providers in health care civil rights matters. I have also written and contributed 4. Why are you a member of CSHA? to a number of books and articles and had the chance to speak at many conferences on these It’s important for health care attorneys to areas. know and have a friendly relationship with the folks that represent all participants in the 9. What is the biggest challenge in your health care system. The better we understand job? the concerns of people on the other side of transactions, regulatory matters and disputes, Balancing the many different roles that a the more easily we can achieve workable lawyer at a large health plan takes on. solutions. 10. Describe an excellent day at the office 5. When did you become a health lawyer? for you. I began working on health care matters when I I am most satisfied when I am able to bring a became an attorney in 1999, and have worked significant transaction, dispute or regulatory on health care matters since then. matter to a successful completion.

6. Why did you become a health lawyer? 11. What is/was your worst moment as a lawyer? Health care plays a central role in the lives of individuals and in society as a whole. Health The practice of law does bring some very care lawyers have the opportunity to make difficult days. Happily, a tough day in court the health care management system work for a lawyer can still result in a victory for the better so that patients get the help they need, client. providers are appropriately compensated, and the system as a whole remains sustainable and 12. What do you consider your greatest subject to ethical principles. achievement in your career? I’m of course very proud of my trial victories ... 7. Did you practice in any other area of law and can’t remember just now if I’ve ever had a before you became a health lawyer, and if so, loss. But regulatory work, even though it may what area? be less dramatic, has actually produced the While health care law is my primary largest benefits by far for my clients. substantive specialty, I have also worked in finance and insolvency law and in complex 13. What has been the biggest change you litigation. have seen in the health care system during your career? 8. What is your health law sub-specialty The biggest change over my lifetime has been and why did you choose it? the continued deinstitutionalization of the My day-to-day practice as a health plan mentally ill. The greatest change over the lawyer focuses on managed care contracting, course of my career has been the enactment of litigation and regulatory matters. My sub- the Affordable Care Act.

Volume XL, Issue 3, Fall 2020 | 14 14. What has been the oddest 21. What words of wisdom – about anything change you have seen in the health – would you want to pass on? OR: What’s one care system during your career? piece of advice you remember most clearly? The oddest changes have been the massive If you only learn by experience, wisdom will swings in health care policy over the past always come too late to be of any use. dozen years, as successive Administrations have proposed radically different programs and rules, which the courts have been increasingly willing to stymie.

15. What do you think is the biggest challenge the health care system faces today? Cost.

16. If you could change one California law affecting healthcare, what would it be and why? I would make it easier to provide institutional housing and care for the mentally ill. Our current system of housing them on our city streets is reprehensible.

17. If you could change one federal law affecting healthcare, what would it be and why? I would eliminate or greatly modify the IMD exception to permit Medicaid funding for institutional care for the mentally ill. Our current system is simply a disgrace.

18. What goals do you have for the future, both career and personal? Among my professional goals is to continue to publish in the area of civil rights law. I’m currently working on a book on healthcare and religious liberty law. My primary personal goal is to see my teenagers grow into successful adults.

19. What hobbies do you pursue? As a native Californian, I love to go to our many beautiful beaches and forests with my kids. I also like to get away as often as I can to golf.

20. What is your motto? Make your life meaningful. Leave a legacy.

15 | California Health Law News APPELLATE CASE SUMMARIES

CASE NOTES in the ER and could have conveyed any important medical information to the Prepared by H. Thomas Watson ER doctors when they took his history, and Peder K. Batalden and understand the admission forms he Horvitz & Levy, LLP executed and initialed. Finally, the ER doctors were not ostensible agents of the Medical malpractice plaintiff’s ostensible hospital because the hospital admissions agency theory rebutted by hospital’s forms provided clear notice that the ER independent contractor notice physicians were independent contractors. Wicks v. Antelope Valley Healthcare District (June 1, 2020, No. B297171) __ Cal. Supreme Court clarifies equitable By H. Thomas Watson App.5th __ [2020 WL 2832563] tolling principles applicable to challenges to DPH rulings Horvitz & Levy, LLP Matthew Wicks went to Antelope Valley Saint Francis Memorial Hospital v. State Hospital’s emergency room for stomach, Department of Public Health_(June 29, 2020, chest, and neck pain. Hospital nurses and S249132) __ Cal.5th __ [2020 WL 3526741] two independent contractor ER doctors evaluated him. He was then discharged with After a surgical sponge was inadvertently instructions to see a cardiologist the next day, left inside a patient, the State Department but he died eight hours later from an acute of Public Health fined Saint Francis aortic dissection. His family sued the hospital, Memorial Hospital for failing to develop and alleging its nurses provided negligent care, it implement a sponge count procedure and a negligently credentialed the ER doctors, and policy for properly training its staff. Saint the ER doctors were its ostensible agents. Francis sought administrative review. The administrative law judge issued a proposed The hospital moved for summary judgment. decision reversing the fine on the ground In opposition, plaintiffs offered expert that Saint Francis had adequate surgical testimony that if the nurses had gathered safety policies in place and the governing By Peder K. Batalden Wicks’s complete medical history, they regulations did not impose strict liability likely would have alerted the ER doctors, for deviations from those policies. On Horvitz & Levy, LLP who probably would have consulted with administrative appeal, the Department a cardiologist, who probably would have reversed, ruling that the fine was appropriate ordered a CT scan with IV contrast that because Saint Francis necessarily failed probably would have revealed the aortic to “implement” its sponge count policy. dissection, leading to a cardiothoracic surgery consult that probably would have Because the Department’s appellate decision resulted in Wicks receiving a timely diagnosis was “effective immediately,” it triggered and treatment. Plaintiffs also argued the the 30-day deadline to file a petition for hospital’s expert declarations of adequate writ of administrative mandate. But Saint treatment and supervision were conclusory Francis sought reconsideration, which and hearsay, and whether a hospital is the Department denied on the ground responsible for negligent ER physicians is reconsideration was unavailable because always a triable issue of fact. The trial court its decision was final immediately. Saint granted summary judgment for the hospital. Francis then filed a petition for a writ of administrative mandamus. The writ petition The Court of Appeals affirmed. The hospital was filed within 30 days of the denial of properly relied on authenticated business reconsideration, but more than 30 days after records and an expert’s review of those the Department’s initial appellate decision. records. In contrast, plaintiffs’ theory of The Department demurred to Saint Francis’s causation was too speculative to create writ petition, arguing it was untimely. The a triable issue of causation. In addition, trial court sustained the demurrer, agreeing the hospital granted the ER doctors staff with the Department and rejecting Saint privileges using appropriate procedures Francis’s mistake of law argument. (See Gov. for the appointment and evaluation of Code, § 11523.) The Court of Appeal affirmed, independent contractor physicians. Further, holding that, because Saint Francis’s request the hospital proved that Wicks was alert for reconsideration was not a “timely pursuit

Volume XL, Issue 3, Fall 2020 | 16 of an available remedy,” equitable tolling Worldwide LLC obtained FDA approval for Ben-E-Lect, a third-party insurance claim of the writ deadline was unavailable. several clinical studies of its non-approved administrator, developed a “wrapping” MemoryGel breast implants. A few years into strategy for reducing employer health The Supreme Court granted review, reversed the trials, the FDA sued Mentor for failing to insurance costs by bundling low-premium, the Court of Appeal, and remanded for further meet manufacturing quality standards, high high-deductible health insurance with self- proceedings on whether the limitations implant rupture rates, and other violations. funded accounts to pay employee healthcare period was equitably tolled. In doing so, the The FDA and Mentor resolved that lawsuit expenses within the annual deductible and Supreme Court clarified equitable tolling with a consent decree. Two years later, any co-pay requirements. Ben-E-Lect sold law. Initially, the Court explained that plaintiff Rexina Mize received MemoryGel its wrapping services through insurance equitable tolling is presumptively available implants through one of the clinical studies. brokers and agents to the small-employer unless the Legislature clearly forbids it. It She allegedly did not meet the study criteria market. Between 2006 and 2014, Anthem then held that equitable tolling may apply to and never consented to participating in the restricted and eventually prohibited petitions filed under section 11523 because study or to the use of non-approved implants. wrapping of all Anthem insurance policies, nothing in the text or legislative history Mize sued Mentor in state court, alleging threatening to withhold commissions and of that statute expressly forbids tolling. that defects in the MemoryGel implants terminate its relationship with any broker caused her to suffer health injuries and or agent that wrapped an Anthem policy. Next, the Court explained that, regardless lost business opportunities. The trial court Ben-E-Lect sued Anthem under several legal whether a litigant had pursued a viable sustained Mentor’s demurrer, ruling that theories for prohibiting the wrapping of its alternative remedy, equitable tolling may Mize’s product defects claims were preempted insurance policies. Following a bench trial, apply if three elements are satisfied: (1) timely by federal law and that she insufficiently the trial court found that Anthem’s wrapping notice to the defendant of the plaintiff’s pleaded causation. Mize appealed. prohibition violated the Cartwright Act claim, (2) a lack of prejudice to the defendant’s and tortiously interfered with Ben-E-Lect’s ability to address the merits of the claim, and The Court of Appeal reversed. The court business relations, awarded treble damages of (3) the reasonable and good faith conduct explained that the MDA expressly preempts $7.33 million under the Cartwright Act, and of the plaintiff. Here, Saint Francis could state requirements that are “different from, enjoined Anthem from prohibiting wrapping potentially satisfy all three elements. or in addition to” any federal requirement of insurance products offered to the California and relate to the “safety or effectiveness First, Saint Francis’s request for small-employer market. Anthem appealed. of the device” or other matters included in reconsideration, although defective, gave the a federal requirement. Another provision The Court of Appeal affirmed. The court Department adequate and timely notice of provides that all proceedings to enforce, or held that substantial evidence supported its claim. Second, the Department’s ability to restrain violations, of the MDA “shall be the trial court’s determination that, to contest the merits of Saint Francis’s by and in the name of the United States.” analyzed under antitrust law’s rule of claim would be unimpaired by tolling. reason, Anthem’s wrapping prohibition Third, whether Saint Francis’s actions Together, these preemption and enforcement amounted to a vertical boycott that had a were reasonable and in good faith depends provisions create a “narrow gap” through substantial adverse effect on competition. on its ability to establish both that its late which a state-law claim must fit to survive The court rejected Anthem’s argument that filing was objectively reasonable under preemption: the claim must be premised it could not be liable for conspiring with its the circumstances and that it acted with on conduct that both violates the MDA and own agents because the agents could act subjective good faith (i.e., the result of an would give rise to a state-law recovery in independently on behalf of their clients, honest mistake). Because the record was the absence of the MDA. Here, Mize’s claims could sell non-Anthem insurance products, undeveloped, the Court remanded the survived preemption because Mentor had a case for a determination whether Saint state-law tort duty to manufacture implants and had separate economic interests. Francis satisfied the third element. in compliance with FDA requirements that “would exist regardless of whether the The court also rejected Anthem’s argument FDA or some other federal or state agency that Ben-E-Lect failed to prove that Anthem Federal law regulating medical devices does imposed the obligations.” The Court of Appeal had sufficient market power in the relevant not preempt all state products liability claims also held plaintiff pleaded the requisite geographical market to charge prices Mize v. Mentor Worldwide LLC (July 2, 2020, causal connection between her injuries and higher than the competitive level. The court B295829) __Cal.App.5th __ [2020 WL 3602482] Mentor’s tortious act to survive demurrer. explained that, in a vertical boycott case, the inquiry is whether the defendant plays enough Under the Medical Device Amendments of a role in the relevant market to significantly Health Insurer violates the Cartwright (MDA) to the federal Food, Drug, and impair competition, not whether it could Act by prohibiting wrapping of insurance Cosmetic Act, breast implants are Class III raise prices above the competitive level. Here, plans by brokers and agents medical devices, which require a rigorous there was substantial evidence that Anthem and lengthy premarket approval process. Ben-E-Lect v. Anthem Blue Cross Life and could significantly influence the market for During that period, manufacturers can apply Health Ins. Co. (July 2, 2020, A152080) __ small-employer health plans; it controlled to use the device in clinical tests. Mentor Cal.App.5th __ [2020 WL 3603928] 25% of the California market and was the

17 | California Health Law News dominant provider to the small-employer judgment based on the gastroenterologist’s religious non-profit employers, allowing market in numerous large geographic areas. opinion that was “unsupported by factual them to “self-certify” their eligibility and detail or reasoned explanation.” The court provide that certification to their health Substantial evidence also supported explained that the expert had failed to address insurer, who would exclude contraceptive the trial court’s determinations that the whether Dr. Norman had negligently failed coverage from the employer’s group anticompetitive aspects of Anthem’s conduct to detect the colon perforation, the standard health plan while providing payments to outweighed its procompetitive aspects, for determining whether a perforation had beneficiaries for contraceptive services and that Anthem’s wrapping prohibition occurred, and the type of conduct required separate from the health plan. After Burwell unreasonably relied on projected utilization to meet that standard. Although the expert v. Hobby Lobby Stores, Inc., 573 U.S. 682, rates based on generalized statistical opined that Dr. Norman “at all times” met the 696-697 (2014), and Zubik v. Burwell, 578 guidelines rather than an analysis of Anthem’s standard of care, that conclusory statement U.S. __, __, 136 S. Ct. 1557, 1560 (2016), the actual experience that conflicted with the was insufficient to negate malpractice HRSA issued interim rules expanding the general statistical guidelines. Ben-E-Lect at the summary judgment stage. definition of exempt religious employers and also presented evidence that wrapping only creating a “moral exemption” for employers minimally increased utilization, and that it The Court of Appeal affirmed the denial of holding a sincere moral objection to the experienced a pattern of reduced sales over McAlpine’s request to amend her complaint. contraception mandate. After completing the years Anthem’s wrapping prohibition First, McAlpine long knew about the the Administrative Procedure Act’s (APA) was in place. Finally, Anthem’s own expert physician who lacerated her liver and spleen rule-making procedure, HRSA issued final evidence supported the damage award. during emergency surgery and had no rules that closely tracked its interim rules. adequate excuse for not suing him when she Medical expert’s conclusory sued Dr. Norman. McAlpine similarly had Pennsylvania and New Jersey sued in federal standard of care declaration does no excuse for waiting until the eve of trial court, contending that the new rules violated not support summary judgment to raise the informed consent issue. Finally, both the ACA and the APA. The Little while alleging additional factual support Sisters of the Poor, a Catholic organization, McAlpine v. Norman (June 22, 2020, C088327) for her malpractice claim “might have been intervened to defend the exemption rules. The __ Cal.App.5th __ [2020 WL 3833019] helpful to better frame the issues in the district court issued a nationwide injunction pleadings, it was not strictly necessary.” Christi McAlpine filed a medical malpractice blocking enforcement of the rules. The Little Therefore, the trial court did not abuse its Sisters and the Government appealed. The action against Dr. Daniel Norman for injuries discretion by denying leave to amend. stemming from colonoscopies that he Third Circuit affirmed, holding that (1) the performed. Dr. Norman moved for summary ACA authorized the HRSA to define what judgment based on a declaration from a The ACA authorizes regulators to create preventive care and screening services gastroenterology expert who reviewed religious and moral exemptions to mandated are required, but did not authorize the the medical records and opined that Dr. contraceptive health insurance coverage HRSA to carve out exemptions from those Norman’s actions were “at all times” within Little Sisters of the Poor Saints Peter & Paul requirements, (2) the Religious Freedom the standard of care. The expert noted that Home v. Pennsylvania, __ U.S. __, Nos. 19-431 Restoration Act (RFRA) did not compel or McAlpine’s colon perforation was a known and 19-454, 2020 WL 3808424 (July 8, 2020) permit the exemption, (3) the self-certification risk of a colonoscopy and that she gave accommodation did not substantially informed consent for the procedure after The Patient Protection and Affordable Care burden religion, and (4) the final rules were being advised of that risk. McAlpine opposed Act (ACA) requires employers to provide procedurally defective under the APA because the motion, but failed to submit any expert women with “preventive care and screenings” agencies failed to exhibit open-mindedness declarations. McAlpine also sought leave to without cost sharing, and requires the Heath during the notice-and-comment process. amend her complaint to add (1) the physician Resources and Services Administration who lacerated her liver and spleen during a (HRSA) to issue comprehensive guidelines The Supreme Court reversed (7-2), holding follow-up emergency surgery, (2) a new cause defining such services. These requirements that federal agencies had statutory authority of action against Dr. Norman for improperly have been the subject of continuous litigation. to enact the religious and moral exemptions, delegating to his staff the duty to obtain her The HRSA initially issued guidelines and that the rules promulgating these informed consent, and (3) additional factual defining “preventative care” as including exemptions were free from procedural allegations supporting her malpractice claim a “contraceptive mandate.” In response to defects. First, the Court held the ACA itself against Dr. Norman based on his failure to complaints by religious employers, federal grants “sweeping authority to the HRSA” to properly examine her colon for perforations agencies administering the ACA directed craft “comprehensive guidelines” and this before terminating the procedure. The trial the HRSA to exempt churches and a narrow “virtually unbridled discretion to decide what court denied leave to amend and granted category of religious nonprofit entities from counts as preventative care and screening” summary judgment. McAlpine appealed. the contraceptive mandate (the “church includes the power to create religious and exemption”). Then, in response to continued moral exemptions. The Court did not decide The Court of Appeal reversed, holding that objections, agencies issued a new regulation whether RFRA independently compelled the trial court improperly granted summary that created an “accommodation” for certain or authorized the religious exemption, but

Volume XL, Issue 3, Fall 2020 | 18 it held that it was appropriate for HRSA to provides in a non-discriminatory manner, Diane and James Holley became Elizabeth’s consider RFRA when establishing exemption and Schmitt’s allegations failed to raise a temporary conservators. When admitting rules. Finally, the Court held that the plausible discrimination claim because Elizabeth to Silverado, Diane and James exemptions were not procedurally defective Kaiser afforded the same benefits to disabled signed a “Resident-Community Arbitration under the APA because promulgating a and nondisabled plan participants. Agreement” on her behalf. Six days later, document entitled “Interim Final Rules with the probate court granted Diane and Request for Comment” provided sufficient The Ninth Circuit affirmed the dismissal of James’s petition, as Elizabeth’s temporary notice, even though it was not labelled Schmitt’s complaint, but reversed to allow conservators, to place Elizabeth at “General Notice of Proposed Rulemaking.” her to amend the complaint. The court Silverado and ordered them to assume the Moreover, there is no “open-mindedness” explained that an insurer does not provide role of Elizabeth’s conservators with the test under the APA and courts are not essential health benefits under the ACA authority to place her in a locked facility. permitted to impose judge-made procedural if its plan design discriminates based on requirements exceeding APA mandates, disability status. Kaiser had defended its A few months later, Elizabeth died after which the final exemption rules met. plan because it complied with the state’s suffering a humeral fracture, an injury to benchmark plan, but the court held that was her arm, a fractured hip, and numerous Justice Alito filed a concurring opinion, not the same as compliance with section bruises. Diane and James sued Silverado for which Justice Gorsuch joined, stating that 1557. Compliance with the ACA presents a elder abuse, negligence, breach of contract, RFRA compels HRSA to create the religious federal question that a state cannot control and wrongful death. Silverado moved to exemption to the contraceptive mandate through benchmarks. The court also rejected compel arbitration, which the trial court because neither the ACA nor any other law Kaiser’s contention that, if the ACA required denied after finding that Diane and James makes RFRA inapplicable. He would have nondiscriminatory plan benefit design, then had no authority to bind Elizabeth to an held that the contraceptive mandate (1) is insurers will be forced to cover all treatments; arbitration agreement. Silverado appealed, a substantial burden on an employer’s free the court explained that, if insurers have arguing “the agreement to arbitrate was a exercise of religion, as Hobby Lobby held, (2) reasonable, nondiscriminatory reasons to ‘health care decision’ to which a conservator does not further a compelling government exclude certain coverage, they may do so. had the authority to bind a conservatee.” interest, as reflected by the fact that Congress did not treat it as a compelling interest The court then held that Schmitt’s complaint The Court of Appeal affirmed. The court when enacting the ACA; and (3) was not the failed to state a plausible discrimination explained that, as temporary conservators, least restrictive means of providing cost- claim because it defined “people with Diane and James “lacked the power to free contraception, since Congress could hearing loss” as a proxy for “hearing bind Elizabeth to an agreement giving create a stand-alone program to do that. disability” when many non-disabled people up substantial rights [such as ‘the right to experience some loss of hearing. Moreover, use the courts for redress of grievances’] without her consent or a prior adjudication ACA’s nondiscrimination mandate while “‘overdiscrimination is prohibited,’” of her lack of capacity.” Prior cases have held prohibits discriminatory design the complaint alleged no factual basis for that the decision to execute an arbitration of health insurance benefits inferring that the proxy’s “ ‘fit’ is ‘sufficiently close’ to make a discriminatory inference agreement upon admission to a senior living Schmitt v. Kaiser Foundation Health plausible.” Further, Kaiser’s coverage of facility is a healthcare decision. However, Plan, __ F.3d __, No. 18-35846, 2020 WL cochlear implants and related services could the power of a temporary conservator to 3969281 (9th Cir. July 14, 2020) meet the needs of some or most disabled plan make medical decisions on behalf of a members, undermining a discrimination conservatee is limited. If a conservatee’s Section 1557 of the Patient Protection claim. However, the court determined that lack of capacity has not been adjudicated, and Affordable Care Act (ACA) prohibits Schmitt might be able to cure the deficiencies then the conservatee must consent to discrimination in the healthcare system in her complaint and remanded with medical treatment (including arbitration). by incorporating four nondiscrimination instructions to allow such an amendment. Here, there was no evidence of Elizabeth’s statutes—including the Rehabilitation Act, consent, and a court first ruled that she lacked which prohibits certain types of disability capacity six days after Diane and James Temporary conservators cannot bind discrimination. Andrea Schmitt, who has a executed the arbitration agreement on her conservatee to arbitration agreement severe hearing loss disability, filed a class behalf. Diane and James therefore lacked absent consent or lack-of-capacity ruling action against Kaiser Foundation Health Plan, the power to bind Elizabeth to arbitration alleging that it unlawfully discriminated Holley v. Silverado Senior Living Management, at the time they executed the agreement. against her and other hearing-disabled Inc. (August 7, 2020, G058576) __Cal. plan members by excluding all hearing App.5th__[2020 WL 4558940] DHS must reimburse Medi-Cal providers loss treatments except cochlear implants. for employees’ in-house treatments The district court dismissed the complaint Elizabeth Holley became a patient at the with prejudice for failure to state a claim, Silverado Senior Living facility when Oak Valley Hospital District v. State Dept. of ruling that Kaiser has discretion under she was 77 years old and suffering from Health Care Services (Aug. 8, 2020, C085869) the ACA regarding the scope of benefits it dementia and other medical problems. _ Cal.App.5th _ [2020 WL 4581286]

19 | California Health Law News The Department of Health Services (DHS) self-insurance plans. Moreover, there were there was difficulty distinguishing a series of administers the California’s Medi-Cal no “unrecovered costs” triggering section violations from a single continuing violation, program and reimburses Medi-Cal hospital 2144.4 because the hospitals were entitled the Court thought it improbable that the service providers for allowable costs. The to reimbursement under section 2162.7. Legislature intended the penalty to be applied Center for Medicare and Medicaid Services in a sliding-scale fashion based on the severity issues the Medicare Provider Reimbursement “Patients Bill of Rights” statutory penalty of the infraction. Furthermore, the statutory Manual, which governs what payments are applies per action, not per violation penalty in private enforcement actions applies owed. Section 2144.4 of the Manual allows to all infractions regardless of severity, reimbursement for the cost of providing Jarman v. HCR Manorcare, Inc. (Aug 17, 2020, while citations issued by the Department S241431) __ Cal.5th __ [2020 WL 4744241] in-house services to hospital employees of Public Health are classified based on through self-insurance programs. Under severity. Allowing private penalties to be John Jarman stayed three months at an HCR section 2162.7 of the Manual, hospitals with assessed per violation would anomalously ManorCare skilled nursing facility while non-qualifying self-insurance programs are allow penalties for minor infractions to be recovering from hip surgery. About two years entitled to reimbursement only for payments worth twice the monetary redress that the later, Jarman sued HCR, alleging violations from their fund, which must be based on the of the “Patients Bill of Rights” (Health & Saf. Department could impose for more severe reasonable cost of the services provided. Code, § 1430, subd. (b) (section 1430(b)), elder violations. In addition, the Legislative abuse, neglect, and negligence. The jury history of section 1430(b) indicated that Oak Hospital District and Ridgecrest found that HCR was liable for 382 regulatory the Legislature originally and consistently Regional Hospital provided health benefits violations, and awarded Jarman $250 per thereafter intended the penalty to apply per to their employees through non-qualifying violation, plus $100,000 in damages. The lawsuit. Finally, the Court rejected the claim self-insurance programs that allowed the trial court struck Jarman’s punitive damages that limiting the section 1430(b) penalty employees to obtain medical services in-house claim even though the jury found that HCR to $500 per lawsuit rendered the statute or from third-party providers. Third-party engaged in oppression, malice, or fraud, due “toothless” since injunctive relief, damages, claims administrators reviewed all claims, to concerns regarding the sufficiency of and attorney fees were available in addition then paid approved claims from accounts the evidence. The court entered judgment to the penalty, and doctrines of claim and funded by the hospitals. The hospitals for $195,500 plus attorney fees. Both sides issue preclusion would prevent plaintiffs from included the cost of these in-house and appealed. The Court of Appeal held that evading the cap by filing multiple lawsuits. third-party-approved claims in their cost the trial court had erred by striking the reports to DHS. The DHS reimbursed them punitive damages claim, and rejected HCR’s Justice Cuellar filed a dissenting opinion, for third-party provider costs, but not for claim that Jarman was limited to $500 in joined by Justice Liu, arguing that a per in-house services. The DHS’s decisions were statutory damages under section 1430, violation approach did not present significant upheld in formal administrative proceedings, subdivision (b). The court instead held that practical difficulties and would further but the hospitals successfully petitioned for a statutory penalty of up to $500 could be the Patients Bill of Rights’ fundamental writs of administrative mandate reversing recovered on each of cause of action. purpose of deterring violations. He urged the the administrative decisions. DHS appealed. Legislature to modify the statutory scheme The Supreme Court granted review to address to achieve a more robust deterrent effect. The Court of Appeal affirmed, holding Medi- two questions: (1) Does the Patients Bill of Cal providers are entitled to reimbursement Rights authorize a maximum penalty of $500 for the costs of providing in-house medical MICRA damages cap does not apply per “cause of action” against a skilled nursing to certain medical battery claims services for their own employees through facility or only $500 per lawsuit? (2) Does self-insurance programs. The court the Patients Bill of Rights authorize an award Burchell v. Faculty Physicians & Surgeons of rejected DHS’s argument that in-house of punitive damages? (The Court ultimately Loma Linda School of Medicine (Sept. 10, 2020, costs were categorically nonallowable. declined to review the second issue.) E071146) __Cal.App.5th__ [2020 WL 5422950] The court found nothing in Manual section 2162.7 distinguishing claims paid for in- The Supreme Court held that the section Keith Burchell consented to undergo a house services from those paid to third 1430(b) penalty applied per action (meaning surgical procedure to remove a mass in his parties. Additionally, the costs for in-house per lawsuit), rejecting a dissenting opinion scrotum for testing. During the surgery, Dr. services were not inherently unreasonable. that it should be applied per violation. The Gary Barker discovered the mass was much The hospitals incurred actual costs by Court observed that section 1430(b) “is far larger than expected. Believing the mass providing services that were not otherwise from clear” regarding how the statutory was malignant, Dr. Barker decided to remove reimbursed. The court also rejected DHS’s penalty is applied. However, the Court it entirely. Dr. Barker did not first consult argument that Manual sections 332, 332.1, observed that, in related contexts, the Burchell (who was under general anesthesia) and 2144.4 support categorical denial. Legislature had clearly specified when other or Burchell’s medical proxy (who was present Sections 332 and 332.1 apply only when penalties were to be assessed per violation. but unknown to Dr. Barker) before performing the patient is billed directly; they do not Moreover, because many of the rights the more extensive surgery. Burchell suffered apply to the reimbursement of hospital protected by section 1430(b) overlap, and serious side effects from this surgery.

Volume XL, Issue 3, Fall 2020 | 20 Burchell sued Dr. Barker and the Faculty Regional received payments through Murray v. Tran (Sept. 24, 2020, D076104) Physicians & Surgeons of Loma Linda School Medi-Cal’s “fee-for-service” system, __Cal.App.5th __ [2020 WL 5668741] of Medicine (FPS), alleging professional and supplemental payments through negligence and medical battery. The jury California’s Hospital Quality Assurance Dr. Ian Murray and Dr. My Tran co-owned a found for Burchell on both claims and awarded Fee (HQAF) program. HQAF is a broad- dental practice. During a financial dispute, him $4 million in past noneconomic damages based healthcare tax on most non-public Dr. Tran accused Dr. Murray of “substandard and $5.25 million in future noneconomic hospitals in the state. It is not a prohibited dental work.” He repeated that claim to his damages (the parties had stipulated to “circular-funding” practice because the attorney, their employees, a retired dentist about $22,000 in economic damages). FPS collected taxes are deposited into a separate who knew Dr. Murray, and Dr. Murray’s appealed, arguing the noneconomic damage fund to be used for enumerated purposes, new employer. Dr. Murray sued Dr. Tran, award should be reduced to the $250,000 one of which is to make supplemental alleging multiple defamation claims. The MICRA limit under Civil Code section payments to Medi-Cal participants. trial court dismissed those claims under the 3333.2, subdivision (a), which applies to anti-SLAPP statute. Dr. Murray appealed. “any action for injury against a health care Gardens Regional stopped paying its HQAF provider based on professional negligence.” assessments, filed for bankruptcy, and The Court of Appeal reversed in FPS argued, in the alternative, the award of ceased operations. The State recovered part and affirmed in part. The court noneconomic damages was excessive due to Gardens Regional’s pre- and post-petition concluded Dr. Murray had alleged five improper argument by Burchell’s counsel. HQAF debt by withholding both Medi-Cal separate defamation claims, but only service payments and HQAF supplemental one—arising from the statements to Dr. The Court of Appeal affirmed the damages payments. Gardens Regional responded Murray’s new employer—involved speech awards. The court explained that the MICRA that the State’s withholding of post-petition protected by the anti-SLAPP statute. limitation on noneconomic damages applies funds violated the Bankruptcy Code’s The anti-SLAPP statute can apply “when the to actions based on professional negligence, automatic stay, which prohibits a setoff by statements concern public interest but were but does not apply to certain types of a creditor of any debt after the debtor files not made in a public forum,” as was the case medical battery. The court distinguished a bankruptcy petition. The State argued it here. Under the two-part test from FilmOn. two types of medical battery. First, a battery had properly claimed recoupments, which com v. DoubleVerify, Inc. (2019) 7 Cal.5th 133, is an intentional tort outside the scope of are exempt from the automatic stay. The 149-150, a court first considers “ ‘ what “public MICRA “‘when a physician obtains the bankruptcy court and the Ninth Circuit issue or [ ] issue of public interest” the speech patient’s consent to perform one type of Bankruptcy Appellate Panel agreed with in question implicates,’ ” and second, “ ‘what treatment, but performs a substantially the State, and Gardens Regional appealed. different treatment for which the plaintiff functional relationship exists between gave no consent.’” Second, a battery is rooted The Ninth Circuit affirmed in part and the speech and the public conversation in negligence within the scope of MICRA reversed in part, holding that some of the about some matter of public interest.’ ” “‘when a physician performs the treatment State’s deductions were proper recoupments, The Court of Appeal held that all statements for which consent was obtained and an while others were improper setoffs. To Dr. Tran made about the quality of Dr. infrequent complication occurs that the qualify as a recoupment, “the rights being Murray’s care were matters of vital public physician failed to disclose when obtaining asserted against the debtor” must be interest (step one). However (at step two), Dr. the patient’s consent.’” Here, the court held closely and logically related to “the debtor’s Tran’s private statements to employees and that Dr. Barker committed the first type of countervailing obligations[,] such that other acquaintances lacked the requisite medical battery. Accordingly, the MICRA they may be fairly said to constitute part “functional relationship” with the public limitation did not apply. (The court separately of the same transaction.” Thus, the State’s conversation, while Dr. Tran’s statement to rejected an excessive damages argument, but recovery of unpaid HQAF assessments by Dr. Murray’s new employer possessed that agreed that the trial court had improperly withholding supplemental HQAF-funded relationship—it was “directly tethered to the awarded costs under an invalid Code of Civil supplemental payments was proper—there issue of public interest (a dentist’s competence Procedure section 998 settlement offer. was an obvious connection between the to perform dental work) and promoted the two. However, no logical connection existed public conversation on that issue because California may recoup overdue tax between unpaid HQAF assessments and the they were made to a person who had direct by reducing supplemental Medi-Cal Medi-Cal fee-for-service payments that the connection to and authority over [the accused payments owed to bankrupt hospital State separately owed Gardens Regional, so doctor’s] patient population.” At that point, that are funded by that tax the Sate’s deductions of those assessments the burden shifted to Dr. Murray to prove a were setoffs violating the bankruptcy stay. In re Gardens Regional Hosp. & Med. Ctr., Inc., __ probability of prevailing. He could not do so F.3d __, 2020 WL 5541387 (9th Cir., Sept. 16, 2020) because he had failed to present evidence Statements questioning doctor’s that Dr. Tran actually made a statement to Dr. Gardens Regional Hospital and Medical quality of care receive anti-SLAPP Murray’s new employer. Accordingly, the trial Center was a private, nonprofit hospital protection if connected to the “public court had properly dismissed Dr. Murray’s participating in Medi-Cal. Gardens conversation” about that care defamation claim based on that allegation.

21 | California Health Law News Physician may pursue whistleblower claims, the court first held that Dr. Alborzi comply with the channeling requirement); suit—alleging hospital’s exclusive had adequately pleaded his section 1278.5 that enforcing the requirement did not result staffing agreement was retaliatory— claim. He had complained about patient safety in “no review at all”; and that no exception without first seeking writ relief being jeopardized by illegally incentivized obviated Sensory’s requirement to exhaust patient care decisions and VHH’s retaliation, administrative remedies. Sensory appealed. Alborzi v. University of Southern causing his loss of income. The court held California (Sept. 29, 2020, B299067) __ that Dr. Alborzi had not adequately pleaded The Ninth Circuit affirmed. Sensory’s claim Cal.App.5th __ [2020 WL 5792911] his false claims act claim because he failed to “arose under” the Medicare statute because, if successful, it might lead to Medicare paying Dr. Arash Alborzi, who had been on the allege that any false claims were filed with for Relaxis devices. In addition, applying the infectious disease call panel at Verdugo Medicare, but the trial court should have given him leave to amend. Finally, the court channeling requirement did not foreclose all Hills Hospital, sued the hospital and related rejected VHH’s argument that the UCL was review. Sensory simply needed to recruit a USC entities (collectively VHH) for violating pleaded imprecisely, since particularized fact proxy—a Medicare beneficiary with standing (among others) a healthcare whistleblower pleading is not required to assert a UCL claim. to seek a final administrative NCD decision statute (Health & Saf. Code, § 1278.5), the false subject to judicial review, which would give claims act (Gov. Code, § 12653), and the unfair the agency an opportunity to “correct its competition law (Bus. & Prof. Code, § 17200 Manufacturer must find a proxy (Medicare own errors” and produce an administrative et seq.). Dr. Alborzi’s complaint alleged that, beneficiary) to exhaust administrative record that would aid judicial review. after experiencing a significant reduction channels before seeking judicial review in patient assignments, he complained to of Medicare product coverage decision Doctor network agreement may require VHH’s chief executive and medical officers Sensory NueroStimulation v. Azar, __ F.3d __, arbitration review of an administrative that patient safety was being compromised 2020 WL 6110132 (9th Cir. Oct. 16, 2020) by an illegal referral and kickback scheme dispute resolution panel’s decision engineered by other infectious disease The Centers for Medicare and Medicaid Epstein v. Vision Service Plan (Oct. 22, 2020, physicians and their affiliated medical Services (CMS) may make a “national coverage A155219) __ Cal.App.5th __ [2020 WL 6165494] groups. He further alleged that, after lodging determination” (NCD) regarding whether that complaint, VHH retaliated by no longer Medicare will pay for “durable medical Dr. Gordon Epstein, an optometrist, entered referring patients to him and dissolving equipment.” Either the manufacturer or into a “Network Doctor Agreement” with the on-call infectious disease panel. The a Medicare beneficiary may seek an NCD Vision Service Plan (VSP) to be part of its trial court sustained VHH’s demurer with determination. But only a beneficiary has the provider network. After auditing Dr. Epstein’s prejudice on the ground Dr. Alborzi had failed right to appeal CMS’s ruling to an Appeals reimbursement claims, VSP determined that to exhaust judicial remedies. Specifically, Board of the Department of Health and he had knowingly purchased lenses from he had not first sought a writ of mandate Human Services (the agency that houses an unapproved supplier, terminated the challenging VHH’s quasi-legislative decision CMS), whose decision is administratively final agreement, and demanded that Dr. Epstein to dissolve the call panel. Dr. Alborzi appealed. and subject to judicial review. At the same pay $104,333 in restitution. Dr. Epstein time, the Medicare statute, 42 U.S.C. § 405(h), invoked VSP’s two-step Fair Hearing/ The Court of Appeal reversed, directing the eliminates federal question jurisdiction over Binding Arbitration dispute resolution trial court to sustain the demurrer in part lawsuits seeking to “recover on any claim procedure to appeal that decision. In the first and overrule it in part. The court agreed arising under” Medicare. This is known step, counsel for both Dr. Epstein and VSP that quasi-legislative hospital decisions as the “channeling requirement,” since presented documentary and testimonial must be challenged by writ of mandate, beneficiaries must first exhaust available evidence to a three-person panel, which but here the complaint alleged that VHH’s administrative channels before seeking upheld VSP’s decision. The second step dissolution of the call panel was not a quasi- judicial review. However, this requirement is required binding arbitration pursuant to the legislative decision, but instead an act of not enforced if it would foreclose all review. Federal Arbitration Act and in accordance retaliation to cover up an illegal kick-back with procedures set forth in VSP’s plan and scheme. Accordingly, the trial court erred Sensory Neurostimulation, Inc., sought policy. Rather than invoking arbitration, by sustaining a demurrer on that ground. an NCD for Relaxis, a prescription leg Dr. Epstein sought a writ of administrative Moreover, even if VHH’s decision was massage. CMS determined that it was a mandamus from the superior court. The quasi-legislative, the doctrine of exhaustion “personal comfort item” that did not qualify court denied the petition on the ground of judicial remedies did not apply under for NCD status. Sensory sued, and the that Dr. Epstein had failed to exhaust his either party’s theory of the case. There Government moved to dismiss the claim, administrative remedies. He appealed. was no “administrative decision making arguing the district court lacked subject process” to complete, nor did exhaustion matter jurisdiction because Sensory failed The Court of Appeal affirmed. It rejected doctrine apply to the false claims act and to comply with section 405(h)’s channeling Dr. Epstein’s argument that VSP’s dispute whistleblower causes of action in any event. requirement. The district court dismissed resolution process violated Health and Safety the lawsuit, ruling that Sensory’s claim “arose Code section 1367 and its implementing Addressing the merits of the individual under” the Medicare statute (so it had to regulation. The court held that this

Volume XL, Issue 3, Fall 2020 | 22 regulatory law “requiring certain network provider agreements to include a dispute resolution process that is not arbitration, pertains only to the first step of the dispute resolution process and does not foreclose the parties from agreeing to arbitration in lieu of subsequent judicial review through administrative mandamus.” The court noted that the relevant regulation did not address, much less limit, the means by which the parties were permitted to challenge a final dispute resolution decision. “[N]o statutory provision purports to make administrative mandamus the exclusive means for review of such a decision . . . and no statutory provision purports to bar the parties from agreeing to binding arbitration.” The court further held that VSP could enforce the arbitration provision because, while it was procedurally unconscionable in minor respects, it was not substantively unconscionable.

23 | California Health Law News ACKNOWLEDGEMENTS

California Health Law News wishes to thank the following Publications Committee members for their editorial work on the articles included in this issue:

Powers of the Health Officer in the Era of Covid -19 Katherine Broderick

Edited by: Martha Ann Knutson

The Health Lawyer Toolkit: Time for a Bylaws Checkup? Corinne Gartner

Edited by: Karen Weinstein

What About the Economy Case?: Continued Questions About its Applicability One Year Later. Rebecca Hoyes

Edited by: Brendan Sanchez