Harvey S. Frey #202595
Santa Monica, CA 90402
Attorney for Plaintiffs
California Consumer Health Care Council, Inc.,
Gerry Goldshine, Rachel Goldshine,
Jeff La Marca, Antony La Marca,
Martha K. Reitz, Carl Slawski,
Victoria Travis, and Kelley Turner
California Department of Managed Health Care,
Daniel Zingale, Director,
Barbara Reagan, Director of HMO Help Center,
Andrew George, Senior Staff Counsel of HMO Help Center and
Joan Cavanagh, Director of Enforcement,
Respondents & Defendants
Case No.: 01CS01286
Verified Petition for Writ of Mandate, and
Complaint for Declaratory Relief and
The petitioner/plaintiffs (hereinafter "plaintiffs") are 1) enrollees of various California health care service plans (HMOs), who have filed complaints against their plans with the California Department of Managed Health Care (DMHC), and 2) the California Consumer Health Care Council, Inc., an organization of which the other plaintiffs are members and which has been working on their behalf, and for the benefit of all California health care consumers.
DMHC, by and through the individual respondent/defendants (hereinafter "defendants") has breached its statutory duty to each of the plaintiffs by failing and refusing to comply with plaintiffs’ requests and the requirements of the Knox-Keene Act (KKA) (Health & Safety Code (HSC)§ 1340 et seq) in at least three ways:
1) DMHC has failed to send to plaintiffs requested copies of materials submitted to DMHC by HMOs, or to require HMOs to supply such copies, as required by HSC § 1374.30(n) and as further described in heading IV below;
2) It has refused to provide the explanations required by HSC § 1368(b) upon closing plaintiffs’ cases, as further described in heading V below; and
3) It has refused plaintiffs’ requests to investigate, correct and penalize HMO violations, such as material misstatements to enrollees, DMHC, and Independent Medical Review (IMR) organizations, as further described in heading VI below.
This petition seeks an order from this court requiring DMHC to follow these legal requirements.
California Consumer Health Care Council, Inc. (CCHCC) is a 501(c)(3) California non- profit public benefit corporation and membership organization, whose purpose is to improve the health care system. One of its primary goals is to ensure the faithful enforcement of all consumer protection laws. Acting to require DMHC to abide by and enforce the law, in the manner sought in this petition, is central to this goal. The other plaintiffs are members of CCHCC.
Information on other plaintiffs has been redacted
Plaintiffs’ individual medical histories are immaterial to the specific issues raised herein, and to avoid making them public record, we purposely omit them from the pleading. They will be made available to the court upon request if required for in camera review.
The California Department of Managed Health Care (DMHC) is the Department established by §1341 of the California Health and Safety Code (HSC) to regulate health care service plans. Daniel Zingale is its Director, Barbara Reagan is the Director of its HMO Help Center, Andrew George is Senior Staff Counsel of the HMO Help Center, and Joan Cavanagh is its Director of Enforcement. Each of the individual defendants, is in some manner responsible for the errors and omissions listed herein, because of their organizational positions, and/or their personal involvement in one or more of plaintiffs’ cases.
IV. DMHC HAS FAILED TO REQUIRE HMOs TO PROVIDE COPIES OF SUBMITTED RECORDS TO COMPLAINANTS
HMOs are required by the KKA to create, maintain, and submit complete and accurate patient records and summaries to enrollees, DMHC and to the IMR Organization when IMR is ordered. DMHC, as the agency with the statutory duty to enforce the KKA, has the duty to require HMOs to comply.
The general rights of a patient to have access to his/her medical records are expressed in HSC §§ 123100-123149.5 .
More specifically, with respect to record disclosures relating to the IMR process:
HSC § 1374.30 provides (underlining added for emphasis):
. . .
(n) Upon notice . . . that the enrollee has applied for an independent medical review, the plan or its contracting providers shall provide to the independent medical review organization . . . a copy of all of the following documents within three business days of the plan's receipt of the . . . notice of a request . . . :
(1) (A) A copy of all of the enrollee's medical records in the possession of the plan or its contracting providers relevant to each of the following:
(i) The enrollee's medical condition.
(ii) The health care services being provided . . .
(iii) The disputed health care services requested . . .
(B) . . . The plan shall concurrently provide a copy of medical records required by this subparagraph to the enrollee . . .
(2) A copy of all information provided to the enrollee . . . concerning . . . decisions regarding the enrollee's condition and care . . . and a copy of any materials the enrollee . . . submitted . . . in support of the enrollee's request for disputed health care services. This documentation shall include the written response to the enrollee's grievance, required by paragraph (4) of subdivision (a) of Section 1368. . .
(3) A copy of any other relevant documents or information used by the plan or its contracting providers in determining whether disputed health care services should have been provided, and any statements by the plan and its contracting providers explaining the reasons for the decision to deny, modify, or delay disputed health care services on the basis of medical necessity.
The plan shall concurrently provide a copy of documents required by this paragraph, except for any information found by the director to be legally privileged information, to the enrollee and the enrollee's provider. . . .
HSC § 1374.31 (underlining added for emphasis)
. . .
(b) The department shall expeditiously review requests and immediately notify the enrollee in writing as to whether the request for an independent medical review has been approved, in whole or in part, and, if not approved, the reasons therefor. The plan shall promptly issue a notification to the enrollee, after submitting all of the required material to the independent medical review organization, that includes an annotated list of documents submitted and offer the enrollee the opportunity to request copies of those documents from the plan. . . .
Each of the plaintiffs has informed DMHC of unfair, deceptive, untrue or misleading statements and/or omissions of material fact (hereinafter "false statements") in records, reports and/or other submissions that they have obtained from the plans and/or from DMHC. These false statements, when uncorrected, skew the findings of DMHC and the IMR Organization (IMRO) against the complainant. They also lead to incorrect diagnoses and treatment when future medical providers, unwittingly or otherwise, rely upon the false statements. It is imperative that complainants are able to see these documents, to be able to: 1) identify any false statements; 2) make corrections before any additional harm is caused to the complainants by these false statements, and 3) permit DMHC to thoroughly investigate, correct and appropriately penalize the improper conduct.
Plaintiffs have requested that DMHC provide, or require the HMOs to provide, them with copies of materials submitted to DMHC and/or IMROs by the HMOs.
On October 12, 2000, in a letter to CCHCC, David Link, Chief Counsel of DMHC’s Office of Patient Advocate, committed to a policy of releasing a patient's medical records to that patient upon request.
Nevertheless DMHC has not provided the documents requested by plaintiffs. In addition, in many cases, DMHC has not required the HMOs to provide this material to complainants either.
DMHC has a statutory duty to provide complainants with final case-closing summaries, to wit:
It is important for complainants that DMHC complies with this duty, since it: (a) encourages DMHC to draw legally relevant sub-conclusions supportive of its ultimate decision; (b) facilitates orderly analysis and minimizes the likelihood that the agency will prematurely leap from evidence to conclusions; and (c) enables a complainant or a reviewing court to trace DMHC's analysis, avoiding the necessity of unguided and resource-consuming explorations of the record to determine whether some combination of credible evidence and factual and legal conclusions supported the ultimate decision. Properly documented findings enable the parties to determine whether and on what basis they should seek review. They also serve a public relations function by helping to persuade the parties and the public that administrative decision-making is careful, reasoned, and equitable.
Each of the plaintiffs has asked DMHC for the summaries described above.
DMHC, has not complied, and has explicitly refused to comply with the statute, as expressed, for example, in a letter of August 2, 2001 from DMHC’s Joan Cavanagh.
In those cases where closing letters have been supplied by DMHC, they have been almost entirely conclusory, failing to satisfy the specificity requirements of HSC § 1368(b)(5), largely ignoring plaintiffs’ allegations and uncritically accepting HMOs blanket denials, and often consisting of no more than the bald statement ". . . no formal enforcement action will be taken at this time."
The adoption of this informal policy to ignore HSC § 1368(b) also constitutes improper regulation-making, contrary to the procedures of Government Code 11340 et seq.
VI. DMHC HAS FAILED TO INVESTIGATE HMO VIOLATIONS
AND TO APPLY MANDATORY PENALTIES
DMHC has a statutory duty to investigate and penalize violations of the KKA, to wit:
HSC §1368.04(a) The director shall investigate and take enforcement action against plans regarding grievances reviewed and found by the department to involve noncompliance with the requirements of this chapter . . . Where substantial harm to an enrollee has occurred as a result of plan noncompliance, the director shall . . . assess administrative penalties . . .
HSC §1374.27. Enforcement; Remedies of Director.
The director may levy administrative penalties and may suspend or revoke the license or licenses issued to any health care service plan, after notice and hearing . . .
The remedies available to the director pursuant to this article are not exclusive. . .
(d) . . . the director shall review individual cases submitted for independent medical review to determine whether any enforcement actions, including penalties, may be appropriate. In particular, where substantial harm, as defined in Section 3428 of the Civil Code, to an enrollee has already occurred because of the decision of a plan, or one of its contracting providers, to delay, deny, or modify covered health care services that an independent medical review determines to be medically necessary, . . . the director shall impose penalties.
(a) The director may . . . suspend or revoke any license issued under this chapter to a health care service plan or assess administrative penalties if the director determines that the licensee has committed any of the acts or omissions constituting grounds for disciplinary action. . .(c) (1) The director may prohibit any person from serving as an officer, director, employee, associate, or provider of any plan . . .
if . . .:
(A) The prohibition is in the public interest and the person has committed, caused, participated in, or had knowledge of a violation of this chapter by a plan . . .
HSC §1387. Civil Penalty; Nonexclusive Remedy; Limitation.
(a) Any person who violates any provision of this chapter . . . shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) for each violation . . .
(b) . . . the remedies provided by . . . this chapter are not exclusive, and may be sought and employed in any combination to enforce this chapter.
HSC §1390. Violations; Penalties.
Any person who willfully violates any provision of this chapter or of any rule or order thereunder shall upon conviction be fined not more than ten thousand dollars ($10,000) or imprisoned in the state prison, or in a county jail for not more than one year, or . . . both . . .
HSC §1391.5.Order for Discontinuance of Unsafe or Injurious Practice;
(a) If, after examination or investigation, the director has reasonable grounds to believe that irreparable loss and injury to the plan's enrollee or enrollees occurred or may occur as a result of any act or practice unless the director acts immediately, the director may, . . . order the discontinuance of the unsafe or injurious act or practice. . .
HSC §1392. Injunctive or Other Equitable Relief.
(a) (1) Whenever it appears to the director that any person [is going to violate the provisions of this chapter, he/she] may bring an action in superior court . . . to enjoin these acts or practices or to enforce compliance with this chapter. . . [by other equitable means]
HSC §1394. Remedies Available to Director.
The civil, criminal, and administrative remedies available to the director pursuant to this article are not exclusive, and may be sought and employed in any combination deemed advisable by the director to enforce the provisions of this chapter.
HSC §1394.1. Involuntary Dissolution of Plan; Complaint.
. . .the director may file a verified complaint for involuntary dissolution of a health care service plan on any one or more of the grounds specified in subdivision (b) of Section 1386.
The submission of false statements by HMOs, as alleged in Paragraph IV above, are
violations of the Knox-Keene Act of the sort mandating disciplinary action, to wit:
HSC § 1396. Documents Filed Under This Chapter; Willful False Statements Prohibited.
It is unlawful for any person willfully to make any untrue statement of material fact in any application, notice, amendment, report, or other submission filed with the commissioner under this chapter or the regulations adopted thereunder, or willfully to omit to state in any application, notice, or report any material fact which is required to be stated therein.
HSC § 1396. Documents Filed Under This Chapter; Willful False Statements Prohibited.
HSC § 1386(b) The following acts or omissions constitute grounds for disciplinary action by the director:
. . .
(3) The plan does not provide basic health care services to its enrollees and subscribers as set forth in the evidence of coverage...
(This provision is implicated because the false statements have been used as a pretext for failing to provide the basic health care services to which the plaintiffs were entitled under the evidence of coverage.)
(6) The plan has violated . . . any provision of this chapter, [or] any rule or regulation . . . or any order issued by the director pursuant to this chapter.
(This provision was violated as a result of the violation of e.g.: HSC §§1396; 1386(b)(3), (7), (8), (9), (12); 1374.30; 1374.33; 1374.34.)
(7) The plan has engaged in any conduct that constitutes fraud or dishonest dealing or unfair competition, as defined by Section 17200 of the Business and Professions Code.
(8) The plan has permitted . . . any violation by an employee . . . who is a holder of . . . [a] license, which would constitute grounds for discipline against the . . . license . . .
(9) The plan has aided or abetted or permitted the commission of any illegal act.
(The false statements alleged above are illegal acts under Business and Professions Code §§ 17200 & 17500 et seq., Civil Code §§ 1770(5), (7), (14) & (16), and Penal Code § 550(b)(1)-(3), as well as the HSC §§ noted herein.)
(12) The plan . . . or other person occupying a principal management or supervisory position in the plan, . . . has ... committed any act involving dishonesty, fraud, or deceit, which ... act is substantially related to the qualifications, functions, or duties of a person engaged in business in accordance with this chapter.
(The false statements alleged above are dishonest, fraudulent and deceitful.)
§ 1374.34(b) A plan shall not engage in any conduct that has the effect of prolonging the independent review process…
(Any false statements provided by the plan will prolong the independent review process by necessitating review and corrections. The process can only be completed based on accurate and complete information.)
It is also a Felony for the HMO to make misleading statements or omissions in connection with a claim for payment or other benefit pursuant to an insurance policy:
. . .
(b) It is unlawful to . . . :
(1) Present . . . any . . . statement . . . in . . . opposition to a claim for payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact.
(2) . . . make any . . . statement that is intended to be presented to any insurer or any insurance claimant in connection with . . . or opposition to, any claim or payment or other benefit pursuant to an insurance policy, knowing that the statement contains any false or misleading information concerning any material fact.
(3) Conceal, or knowingly fail to disclose the occurrence of, an event that affects any person's initial or continued right or entitlement to any insurance benefit or payment, or the amount of any benefit or payment to which the person is entitled.
(c) (3) Every person who violates paragraph (1), (2), (3), or (4) of subdivision (b) shall be punished by imprisonment in the state prison for two, three, or five years, or by a fine not exceeding fifty thousand dollars ($50,000), unless the value of the fraud exceeds fifty thousand dollars ($50,000), in which event the fine may not exceed double the value of the fraud, or by both that imprisonment and fine; or by imprisonment in a county jail not to exceed one year, or by a fine of not more than one thousand five hundred dollars ($1,500), or by both that imprisonment and fine.
Plaintiffs have presented explicit allegations of false statements by HMOs to DMHC, asking them to enforce these provisions of the KKA. DMHC has not done so, and has refused to do so, in clear derogation of its duty to protect health care consumers from just such illegal conduct. On March 2, 2001, CCHCC requested that DMHC issue a regulation requiring that documents relating to enrollee grievances submitted by HMOs be verified. DMHC refused to do so, by a letter of April 2, 2001.
VII. FIRST CAUSE OF ACTION
Declarative Relief under CCP §1060
Code of Civil Procedure(CCP) § 1060.
Any person . . . who desires a declaration of his or her rights or duties with respect to another . . . may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an . . . action . . . in the superior court . . . for a declaration of his or her rights and duties . . . either alone or with other relief; and the court may make a binding declaration of these rights or duties, whether or not further relief is or could be claimed at the time. . . .
The actual controversy here is clear. Plaintiffs say that DMHC must adhere to statutes requiring it to assure that complainants receive copies of adversarial filings, provide legally adequate summaries of closed complaints, thoroughly investigate alleged false statements and apply mandatory sanctions against HMOs that make false statements. DMHC has established a policy that it doesn’t have to do these things, and it has acted on that policy to deny plaintiffs the protections and benefits intended for them by the Legislature.
In addition, these improper policies have been implemented by DMHC without satisfying the rules for regulatory rule-making laid out in Government Code § 11340 et seq. This is precisely the sort of "overarching, quasi-legislative policy set by an administrative agency" which was held suitable for declaratory relief in Californians for Native Salmon & Steelhead Assn. v. Department of Forestry (1990) 221 Cal. App. 3d 1419. In the absence of such declaratory relief, every complainant who goes to DMHC for help in his/her dispute with his/her HMO, will be denied the benefits available under KKA and be compelled to sue DMHC or give up these benefits. These issues will have to be litigated over and over, resulting in a multiplicity of suits. As DMHC fails to adequately implement the non-judicial remedies provided by the Knox-Keene Act, complainants will be forced more often to resort to lawsuits against their HMOs, further adding to the burden on the courts. Judicial efficiency therefore also requires that this court declare once for all what DMHC’s legal responsibilities are with regard to these issues.
Writ of Mandate under CCP §1085
CCP § 1085. (a) A writ of mandate may be issued by any court . . . to any . . . board, or person, to compel the performance of an act which the law specially enjoins, as a duty resulting from an office, trust, or station . . .
CCP § 1086. The writ must be issued in all cases where there is not a plain, speedy, and adequate remedy, in the ordinary course of law. It must be issued upon the verified petition of the party beneficially interested.
The plaintiffs in this case are members of the class for whose benefit the Knox-Keene Act was passed, and they have verified this petition. DMHC is the agency created by that act for the express purpose of carrying out its mandates. By 1) accepting false, misleading, and/or materially incomplete statements from HMOs, as a basis for its determinations in complaints filed by health care consumers; 2) failing to provide complainants with copies of the materials supplied by each plan, upon which DMHC and/or the IMRO relies in making its determinations; 3) failing to give full, reasoned explanations for their refusal to help complainants; and 4) refusing to fully and faithfully enforce the laws enacted to protect consumers from the wrongful conduct noted herein, DMHC flouts the rule of law and deprives complainants of the ability to obtain needed medical benefits, subjecting them to pain, ill health, and shortened life expectancy, as well as significant financial loss. There is no remedy at law for this denial of their rights by a state agency. The derelictions outlined in sections IV, V, and VI above are of the clear, present, ministerial, non-discretionary duties required of DMHC by law.
If this court should find any of DMHC’s actions invested with discretion, plaintiffs allege that, in failing to obey the clear instructions of the law, DMHC acted arbitrarily, capriciously, fraudulently, and without due regard for plaintiffs’ clear, present, and beneficial rights and that the actions prejudiced them. ( Huntington Park Redevelopment Agency v. Duncan (1983) 142 Cal.App.3d 17, 25.) "While mandamus will not lie to compel governmental officials to exercise their discretionary powers in a particular manner, it will lie to compel them to exercise them in some manner." (Los Angeles County Employees Assn., Local 660 v. County of Los Angeles (1973) 33 Cal.App.3d 1, 8;
IX. THIRD CAUSE OF ACTION
DMHC’s failure and refusal to implement the above-mentioned portions of the Knox-Keene Act has deprived and continues to deprive plaintiffs of the protections and benefits the legislature intended for those in their situation. A suit at law for damages is incapable of remedying their injury. If a writ of mandate is not approved by this court, the only remedy available is an injunction directing DMHC to remedy the derelictions noted in sections IV, V, and VI above.
WHEREFORE Plaintiffs pray for judgment as follows:
1. On the First Cause of Action, that this court declare that DMHC is required to
a) provide, and/or require HMOs to provide, all complainants with copies of material submitted by HMOs to DMHC or to an IMRO within a time frame permitting correction before any decision is made by DMHC or an IMRO;
b) provide all complainants with the summary as required by HSC § 1368(b) within thirty days after closing a case or any portion of a case;
c) thoroughly investigate HMO violations reported by complainants, order violations to be corrected and apply the penalties required by the Health & Safety Code where violations are found.
2. On the Second Cause of Action, that a peremptory writ of mandate issue under seal of this court, commanding that DMHC fully and faithfully perform their mandatory duties, to wit, to enforce HSC §§ 1374.30(n)(1)(B), 1374.30(n)(3), 1374.34(b), 1386(b)(3,6,7,8,9, and 12), 1387(a), 1390, 1391.5(a), 1392, 1394.1, and to comply with HSC §§ 1346(a), 1368(b)(5,6, and 8), 1368.04(a), 1374.34(d), and 1386(a).
3. On the Third Cause of Action, that this court enjoin DMHC to fully and faithfully perform their mandatory duties as detailed in the previous paragraph.
4. Appoint CCHCC or another appropriate individual or entity, as a Special Master to monitor DMHC’s compliance with the Court’s injunction and report its findings to the Court at an interval set by the court for a reasonable period of time as set by the court..
5. Costs of suit, and reasonable attorney fees pursuant to Code of Civil Procedure §1021.5 or as otherwise allowable by law, and
6. Further relief the court deems proper.
Dated this 10th day of September, 2001
Harvey S. Frey #202595
Attorney for Petitioner/Plaintiffs