Serafini v. Blake (1985)

Annotate this Case
Appellate Department, Superior Court, Los Angeles.

[Civ. A. No. 16407. March 5, 1985.]

FULVIO SERAFINI, Plaintiff and Respondent, v. RUTH BLAKE, Defendant and Appellant.

(Opinion by Shabo, J., with Bernstein, Acting P. J., and Reese, J., concurring.)


Peter R. Navarro for Defendant and Appellant.

Herb Wiener for Plaintiff and Respondent.



We are asked to decide on this appeal whether a doctor, who has submitted a claim for payment to Medi-Cal, can thereafter seek to enforce an agreement by a member of his patient's family to pay for his services pursuant to an independent agreement between the family member and the doctor to render medical service to the patient. After studying the applicable federal and California statutes as well as the administrative regulations relating to the Medi-Cal program, we conclude that the agreement is not enforceable. [167 Cal. App. 3d Supp. 13]

Summary of the Facts

The case was tried upon a stipulation of facts.

Hazel Coburn, 89 years of age, fell and broke her right hip on July 3, 1981. Her daughter, the defendant herein, took her to the emergency room at Burbank Community Hospital. Plaintiff, an orthopedic surgeon, was called to examine Mrs. Coburn. He diagnosed her injury as a subcapital fracture of the right femur and opined that she required immediate surgery. Plaintiff examined the Burbank Hospital records which indicated that Mrs. Coburn was entitled to Medicare benefits but had no other medical insurance.

Plaintiff's wife, and office manager, Maria Serafini, at approximately 8:30 a.m. on July 4, 1981, telephoned defendant, Mrs. Blake, at her home, to discuss payment of plaintiff's fees. During this conversation Mrs. Serafini advised defendant that the doctor did not accept Medicare assignments and that the practice of his office was to prepay the surgery, the fee for which was set at $2,800 plus a $100 consultation fee for the emergency room visit. The total fee was $2,900.

According to Mrs. Serafini, defendant "understood" the arrangement but could not prepay the surgery. Instead, defendant requested that plaintiff accept a $1,250 deposit while waiting for the Medicare payment. Mrs. Serafini testified that "it was the usual and customary practice of the office to have payment in full," and that, once paid, plaintiff would bill Medicare on behalf of the patient who then would receive the Medicare payment directly. The payment arrangement with defendant was discussed with plaintiff, who approved it and authorized a $400 patient discount because he believed Medicare would not pay his full fee. According to Mrs. Serafini, on this same morning the agreement was "confirmed" with defendant by telephone.

Dr. Serafini performed the surgery upon Mrs. Coburn on July 4, 1981.

On July 10, 1981, defendant personally brought into plaintiff's office a check for $1,250, which amount was credited on Mrs. Coburn's statement. The check was drawn upon Hazel Coburn's account at Gibraltar Savings and Loan Association. Defendant "reaffirmed" the phone conversation of July 4, and stated that she personally would pay the balance owed plaintiff.

On July 15, 1981, a request for Medicare payment was sent to Medicare, which paid to Mrs. Coburn the sum of $1,357.44.

On August 14, 1981, defendant went to plaintiff's office and presented a Medi-Cal label. She had explained that the Burbank Community Hospital [167 Cal. App. 3d Supp. 14] had told her to do so as Medi-Cal might pay some of the fees in connection with the medical services rendered to Mrs. Coburn. Ms. Marcos, who was responsible for plaintiff's billing, advised defendant that the hospital "is separate and apart from the doctor's payment." Defendant replied that she would be in to pay the balance.

Mrs. Serafini also explained that "as a courtesy and favor" to Mrs. Coburn and to assist defendant in her attempt to have Medi-Cal pay the balance, the plaintiff's office did bill Medi-Cal. Medi-Cal in turn rejected the claim on the basis that it could not be processed due to "illegibility" or "incorrect format."

Mrs. Serafini denied that she did the billing for plaintiff and claimed unfamiliarity with the Medi-Cal claim forms or the operations of its program. She stated that Ms. Marcos was more knowledgeable about Medi-Cal. Mrs. Serafini denied reviewing Medi-Cal provider bulletins, but acknowledged that plaintiff had received them periodically--a fact also confirmed by Ms. Marcos.

Ms. Marcos, who had worked for plaintiff for nine or ten years, had taken Medi-Cal labels for Medi-Cal patients whom plaintiff had treated in the past, and subsequently billed the program for services rendered to them. She acknowledged receiving the Medi-Cal denial correspondence for Mrs. Coburn's claim but did not make any efforts to interpret the denial code. Without offering any explanation, she acknowledged that she had not contacted Medi-Cal for instructions on resubmitting Mrs. Coburn's claim nor made any efforts to determine the reason for its denial.

On November 17, 1982, the attorney for defendant, Peter Navarro, wrote to plaintiff's attorney, Herbert Wiener, and enclosed an American Express money order made payable to Dr. Serafini in the sum of $107.44 on the account of Mrs. Coburn. The accompanying letter explained that the enclosed check reflected the difference between what Medicare was to have paid Dr. Serafini and the amount paid by Mrs. Coburn. In the letter Mr. Navarro also explained that had plaintiff's office properly billed Medi-Cal, it would have paid the remaining 20 percent.

Mr. Wiener, plaintiff's lawyer, in a reply letter acknowledged acceptance of the American Express money order in the sum of $107.44 but indicated that the acceptance was not to be deemed or construed to be in agreement with the content of Mr. Navarro's letter.

Defendant, by stipulation, denied that she ever made a direct promise to pay for Mrs. Coburn's medical expenses. At trial she contended that the [167 Cal. App. 3d Supp. 15] plaintiff's acceptance of Mrs. Coburn's Medi-Cal label extinguished any legal duty by defendant or her mother, Mrs. Coburn, to pay the medical bills. Further, defendant's lawyer argued that enforcement of any alleged oral contract would be barred by the statute of frauds because the alleged promise was not reduced to writing.

The trial court rendered judgment for plaintiff. This appeal followed.

Contentions on Appeal

Defendant argues that the judgment must be reversed because the Medi-Cal law expressly prohibits a provider from seeking payment for covered services from the beneficiary or the other person once the provider has obtained a Medi-Cal label, that plaintiff's remedies in seeking payment were exclusively limited to those delineated in the Medi-Cal statutes and the implementing regulations, and that appellant was under no legal duty to pay Mrs. Coburn's medical bills, in any event, because of the failure of the parties to comply with the statute of frauds. Because we agree with defendant's first two contentions and conclude that the agreement is unenforceable, we do not discuss her last contention.


1. [1a] Because enforcement of the agreement to pay for medical services covered by Medi-Cal would violate public policy, the agreement is unenforceable.

Section 1396a of 42 United States Code requires "[a] state plan, in order to qualify for federal funding, to provide such methods of administration ... as are found by the Secretary [of Health and Human Services] to be necessary for the proper and efficient operation of the plan ..." One of the methods of administration found necessary and proper is contained in section 447.15 of 42 Code of Federal Regulations (1982) which provides: "A state plan must provide that the Medicaid Agency must limit participation in the Medicaid Program to providers who accept, as payment in full, the amounts paid by the agency ...." (Italics added.)

Complying with this regulation, California adopted sections 14019.3 and 14019.4, subdivision (a) of the Welfare and Institutions Code. Section 14019.3 provides in relevant part that "payment received from the state in accordance with Medi-Cal fee structures shall constitute payment in full." Section 14019.4, subdivision (a), of the Welfare and Institutions Code, further declares: "Any provider of health care services who obtains a label or copy from the Medi-Cal Card or other proof of eligibility pursuant to this [167 Cal. App. 3d Supp. 16] chapter shall not seek reimbursement nor attempt to obtain payment for the cost of such covered health care services from the eligible applicant or recipient, or any person other than the department or third party payer who provides a contractual or legal entitlement to health care services." In order to effectuate the foregoing statutory provisions, title 22, California Administrative Code, section 51002, subdivision (a) similarly states: "A provider of service under the Medi-Cal program shall not submit claims to or demand or otherwise collect reimbursement from a Medi-Cal beneficiary, or from other persons on behalf of the beneficiary, for any service included in the Medi-Cal program's scope of benefits in addition to a claim submitted to the Medi-Cal program for that service, except to:

"(1) Collect payments due under a contractual or legal entitlement pursuant to section 14000(b) of the Welfare and Institutions Code.

"(2) Bill a long-term patient for the amount of his liability.

"(3) Collect co-payment pursuant to Welfare and Institutions Code section 14134."

Likewise, section 51471, subdivision (a) of title 22, California Administrative Code, declares: "(a) No provider shall submit a claim to, or demand or otherwise collect reimbursement from, a Medi-Cal beneficiary or from other persons on behalf of the beneficiary for any service included in the Medi-Cal program's scope of benefits in addition to a claim submitted to the Medi-Cal program for that service except to:

"(1) Collect payments due under a contractual or legal entitlement pursuant to section 14000(b) of the Welfare and Institutions Code.

"(2) Bill long-term care for the amount of his share of cost.

"(3) Collect co-payments due under section 51004."

Finally, Welfare and Institutions Code section 14019.3 further provides in relevant part: "Upon presentation of the Medi-Cal card or other proof of eligibility, the provider shall submit a Medi-Cal claim for reimbursement, subject to the rules and regulations of the Medi-Cal program. Payment received from the state ... shall constitute payment in full." (Italics added.)

As the court in Palumbo v. Myers (1983) 149 Cal. App. 3d 1020 [197 Cal. Rptr. 214] explained at page 1025, the purpose of the foregoing statutory [167 Cal. App. 3d Supp. 17] and regulatory provisions is to prevent "balance billing" in conformity to section 447.15 of the Code of Federal Regulations (1982). To this end, the aforementioned Welfare and Institutions Code sections expressly prohibit collection and other forms of billing with respect to a Medi-Cal beneficiary or other persons once a provider submits a Medi-Cal claim for reimbursement and receives payment therefor. This prohibition is consistent with the intent of the Legislature in adopting the Medi-Cal program and with congressional intent in enacting the Medicaid program. Indeed, section 14000 of the Welfare and Institutions Code expressly declares the Legislature's intent "to provide, to the extent practicable, through the provisions of this chapter, for health care for those aged and other persons, including family persons who lack sufficient annual income to meet the costs of health care, and whose other assets are so limited that their application toward the costs of such care would jeopardize the person [sic] or family's future minimum self-maintenance and security ...."

[2] This court is obligated to effectuate the clearly expressed intent of the Legislature and to give effect to statutes enacted to accomplish the Legislature's objective by construing them according to the usual and ordinary import of the language employed in framing them. [3] When used in a statute words must be construed in context, keeping in mind the nature and obvious purpose of the statute where they appear. (Palos Verdes Faculty Association v. Palos Verdes Peninsula Unified Sch. Dist. (1978) 21 Cal. 3d 650, 658-659 [147 Cal. Rptr. 359, 580 P.2d 1155].) [1b] These familiar rules require us to hold that enforcement of the agreement between plaintiff and defendant is barred by the statutory provisions enacted to prevent the practice of "balance billing"; to hold otherwise would contravene the policy of this state, expressed in Welfare and Institutions Code section 14000 to safeguard the minimum self-maintenance and security of Medi-Cal beneficiaries and their families in the provision of health care under California Administrative Code, title 22, sections 51002, subdivision (a), and 51471, subdivision (a), of the Medi-Cal program. (Welf. & Inst. Code, §§ 14019.3, 14019.4, subd. (a); cf. Palumbo v. Myers, supra, 149 Cal. App. 3d 1020; see Jordan v. Talbot (1961) 55 Cal. 2d 597, 604-605 [12 Cal. Rptr. 488, 361 P.2d 20, 6 A.L.R.3d 161].)

In Palumbo v. Myers, supra, 149 Cal. App. 3d 1020, the Court of Appeal, in effectuating the Legislature's intent against "balance billing," construed the applicable provisions of the Welfare and Institutions Code and administrative regulations adopted pursuant thereto to prohibit a doctor from collecting the balance of his fees from the beneficiary of his services, who had settled a law suit against the tortfeasor on the basis of the full amount of the doctor's bill. The Court of Appeal held that the doctor was barred from [167 Cal. App. 3d Supp. 18] recovering amounts in excess of what the Medi-Cal program paid him for his services. Palumbo is dispositive of the issue before us. fn. 1

The decision of the federal district court in Samuel v. California Dept. of Health Services (N.D.Cal. 1983) 570 F. Supp. 566, modified 572 F. Supp. 273 also supports the foregoing conclusion. In Samuel, a declaratory relief action in which Welfare and Institutions Code section 14109.5 was challenged as not conforming to the Medicaid law and administrative regulations designed to prevent health care providers from seeking remuneration directly from a Medi-Cal beneficiary, the federal court explained at page 573: "It is apparent that the California provisions that prohibit a health care provider from collecting reimbursement from a Medi-Cal beneficiary are not triggered until the provider accepts the patient as a Medi-Cal patient and thereafter submits a reimbursement claim to the Medi-Cal program. However, when the State Medi-Cal program purchases Medicare Part B insurance for eligible beneficiaries through the buy-in agreement pursuant to 42 U.S.C. section 1395v, the State incorporates into its plan the coverage provided by Medicare Part B. Under the Medi-Cal program an individual who is applying for Medi-Cal on the basis of being aged, blind, or disabled is required by the Medi-Cal plan to apply for Medicare Part B benefits. 22 Cal.Admin.Code § 50777. For these individuals the payment of Medicare Part B premiums by the State program becomes effective thereafter, and continues for each month the individual establishes eligibility for Medi-Cal certification either because he or she is categorically eligible as a recipient of a public assistance cash grant or because he or she is less needy but has met the share of cost requirement for Medi-Cal certification. Id § 50773. As of the date State payment of Medicare Part B premiums under the buy-in agreement becomes effective, see Cal.Admin.Code § 50773(b), any Medicare Part B coverage is included in the Medi-Cal program's scope of benefits. A health care provider who accepts a crossover beneficiary therefore must accept the patient as a Medi-Cal patient for purposes of 22 California Administrative Code section 51002 regardless of whether the health care provider receives reimbursement solely from the federal Medicare Part B contribution or from a combination of the federal Medicare Part B contribution [167 Cal. App. 3d Supp. 19] of 80% of the reasonable charge and a State Medi-Cal reimbursement for some or all of the remaining 20%. Payment by the State Medi-Cal program of Medicare Part B premium costs is also sufficient to trigger the prohibition in 42 U.S.C. section 1396h(d)(1) even in the absence of further contribution by the Medi-Cal program to the Medicare Part B deductible and coinsurance costs." (Italics added.)

On the record before us, it is clear that defendant's mother upon being approved for Medi-Cal benefits became a "crossover beneficiary," whom plaintiff was required to accept as a Medi-Cal patient for purposes of section 51002 of title 22 of the Administrative Code. In thereafter submitting a Medi-Cal claim for reimbursement for services rendered her, plaintiff bound himself to the Medi-Cal law's prohibition against "balance billing," and was required to pursue his right to reimbursement through the program. Rejection of the claim by Medi-Cal did not authorize him to enforce the agreement with defendant for payment. The grievance procedure to which plaintiff bound himself constituted his "exclusive remedy." (Welf. & Inst. Code, § 14104.5.) (See fn. 1, ante.)

We therefore hold as a matter of law that plaintiff is not entitled to payment of the balance of his fee. Because of our conclusion, plaintiff's nonacceptance of the Medicare assignments, his office's policy of requiring prepayment in full, his billing Medi-Cal "as a favor or courtesy," as well as defendant's agreement to pay plaintiff's full fee personally, are simply not relevant. The critical fact is that plaintiff did submit a Medi-Cal claim and had accepted Mrs. Coburn as a Medicare patient. Pursuant to the Medi-Cal laws and administrative regulations, he was therefore barred from seeking reimbursement from defendant under the agreement for the balance of his fee. (Cf. Palumbo v. Myers, supra, 149 Cal. App. 3d 1020; Samuel v. California Dept. of Health Services, supra, (N.D.Cal. 1983) 570 F. Supp. 566, mod. 572 F. Supp. 273.)

The judgment is reversed. Appellant to recover costs on appeal.

Bernstein, Acting P. J., and Reese, J., concurred.

FN 1. That plaintiff at bench received no payment for technical reasons does not require us to ignore Palumbo's dispositive effect. The state has established grievance and complaint procedures by which rejected claims may be resubmitted in a timely manner. (Cal. Admin. Code, tit. 22, §§ 51008, 51502.) Additionally, Welfare and Institutions Code section 14104.5 sets forth a grievance procedure available to providers who are dissatisfied with the processing or payment of moneys by the program. (See Cal. Admin. Code, tit. 22, §§ 51015, 51015.1.) Section 14104.5, establishing a grievance procedure for providers, declares that "The provisions of this section shall be 'the exclusive remedyavailable to the provider of services for moneys alleged to be payable by reason of the provisions of this chapter.'" (Italics added.) That plaintiff did not avail himself of the remedies afforded under the Medi-Cal program cannot provide justification for enforcing an agreement which violates the letter and intent of the Medi-Cal law.