State health care laws continued to evolve in 2014

2014 was a busy year in health care law, with action at the U.S. Supreme Court level, the state Supreme Court, and significant state appellate court rulings relating to state-regulated privacy and reimbursement issues.

U.S. Supreme Court

The U.S. Supreme Court will take another crack at the Affordable Care Act in King v. Burwell, 14-114. King involves Section 36B of the Internal Revenue Code, which authorizes federal tax-credit subsidies for health insurance coverage purchased through an "exchange established by the State under section 1311" of the ACA. The question is whether the Internal Revenue Service has authority to extend subsidies to states with exchanges run by the federal government, as opposed to states (like California) that operate their own exchanges. If the regulation is found to be impermissible, millions of low-income residents in states with federally run exchanges could lose the subsidies that offset their costs of purchasing health insurance.

The Supreme Court also issued a 5-4 ruling in Harris v. Quinn, 134 S. Ct. 2618, holding that the First Amendment prohibits the collection of an agency fee from Illinois home health care providers who do not want to join, or support, a union. The linchpin of the decision was determining whether the workers were full-fledged public employees. Like many home health providers in California, the Illinois workers are supervised by private individuals on a daily basis, but are compensated by the state. By designating the workers as "partial public employees," the court exempted them from precedent allowing compulsory union contributions, as long as the contributions are not used for political activities. Harris could hinder attempts to unionize home health providers in California, preventing increases in their wages and benefits, despite providing some economic predictability for the industry.

California Supreme Court

The state Supreme Court issued its own ruling relating to in-home care providers, and clarified the interaction between civil claims brought under a key medical whistleblower statute, and concurrent disciplinary proceedings instituted against that whistleblower.

In Gregory v. Cott, 59 Cal. 4th 996, the court applied the primary assumption of risk doctrine and affirmed summary judgment against an in-home caregiver injured by an Alzheimer's patient. The court followed the reasoning of Herrle v. Estate of Marshal, a 1996 case which involved a similar claim by a nurse's aide injured by an Alzheimer's patient at a convalescent hospital. Both plaintiffs were regularly exposed to patients known to be combative and violent. The court focused on the relationship giving rise to a duty, explaining that the geographic distinction between a facility and in-home care does not change the nature of the relationship between patient and caregiver.

Both the Court of Appeal and the Supreme Court in Gregory noted that caretakers can seek reimbursement for injuries through worker's compensation and other insurance. The Court of Appeal noted that "[c]aretakers generally may look to other sources of available compensation rather than to the victim of a debilitating disease or to a spouse who has undertaken to care for the Alzheimer's patient at home and must endure the patient's misfortune." The state Supreme Court invited the Legislature to consider the nature and extent of worker's compensation and other insurance-based recovery available to in-home caretakers, noting "the importance of the services they provide."

In Fahlen v. Sutter Central Valley Hospitals, 58 Cal. 4th 655, the state Supreme Court held that physicians who claim violations of Health and Safety Code Section 1278.5 (which provides whistleblower protections for patients and hospital employees who complain of unsafe patient care and conditions) need not seek and obtain a mandamus judgment prior to pursuing a statutory claim for relief. A violation of Section 1278.5 invokes civil penalties, as well as reinstatement of the discriminated employee, reimbursement for lost wages and benefits, and costs, and other unspecified remedies at the court's discretion.

Fahlen involved a physician who complained to a hospital (where he enjoyed staff privileges) of substandard nursing care. Subsequently, the hospital engaged in a quasi-judicial peer review and terminated his at-will employment contract. Instead of seeking direct judicial review of the hospital's final decision, the physician sought relief under Section 1278.5. Key to his claim was the allegation that the hospital's quasi-judicial decision to terminate his privileges was itself a means of retaliation, made only because he had reported concerns about patient treatment. Because the proceeding itself was the means of the alleged retaliation, the physician was not required to obtain a mandamus judgment setting aside the hospital's decision before pursuing his statutory claim for relief.

California Courts of Appeal

The state Supreme Court left standing an appellate court ruling that a provider's loss of possession of medical information does not necessarily result in a breach of confidentiality of that medical information in Sutter Health v. Superior Court, 227 Cal. App. 4th 1546.

The California Medical Information Act (CMIA) prohibits the disclosure of patient medical information, and mandates that providers create, maintain and dispose of medical information in a manner that preserves its confidentiality - and providers who negligently fail to do so can be penalized. The CMIA also creates a private right of action against any provider who negligently releases confidential information regarding a patient. The patient may recover the amount of any damages sustained, or statutory damages of $1,000 (which does not require a showing that the patient suffered or was threatened with any actual damages).

Sutter involved the theft of a computer containing approximately 4 million patients' medical records. The records were stored on the computer's hard drive in a password-protected, but unencrypted, format. In a coordinated action, plaintiffs sought to proceed as a class representing all patients whose medical records were contained on the stolen computer - potentially entitling them to "nominal" statutory damages of approximately $4 billion. The plaintiffs did not allege that their confidential information had been accessed on the computer. However, they claimed that potential misuses of personal information may not manifest for several years, and that the credit monitoring services survey only a small segment of such potential misuses.

The defendants demurred, arguing that the complaint failed to state a cause of action under CMIA because there was no allegation that the stolen medical information was viewed. The trial court overruled the demurrer. The Court of Appeal issued a peremptory writ of mandate directing the trial court to sustain the provider's demurrer without leave to amend, and dismiss the action. The court held that even statutory damages are not available unless an actual injury is suffered. Since there was no allegation that the confidential information was viewed, there was no confidentiality breach, and the provider was not liable under CMIA.

This case has important implications in an era of providers who increasingly rely on computers and smart phones. The loss of an electronic device containing protected health information cannot support a claim under CMIA unless the plaintiff can demonstrate that their information was accessed on the device.

The state Supreme Court also declined to review the 5th District Court of Appeal's decision in Children's Hospital v. Blue Cross of California, 226 Cal. App. 4th 1260, which involved a hospital's claim for reimbursement for post-stabilization emergency medical services it provided to Blue Cross Medi-Cal beneficiaries at a time when the hospital was not contracted with the health plan. The hospital claimed the amount Blue Cross paid was less than "the reasonable and customary value for the health services rendered," required by Section 1300.71 (a)(3)(B) of the California Code of Regulations and sought reimbursement of its full billed charges. Blue Cross was not permitted to introduce evidence of the hospital's contracts with other payors. The Court of Appeal reversed a $6.6 million jury verdict for the hospital, because evidence regarding the range of fees accepted for post-stabilization care from other payors was relevant to determining the reasonable value of those services. It also found that neither the factors enumerated in the statute nor the hospital's billed charges, constituted the exclusive measure of value of the services the hospital provided.