Alborzi v. Univ. of S. Cal.

55 Cal.App.5th 155

269 Cal.Rptr.3d 295

Arash ALBORZI et al., Plaintiffs and Appellants,

v.UNIVERSITY OF SOUTHERN CALIFORNIA et al., Defendants and Respondents.

B299067

Court of Appeal, Second District, Division 4, California.

Filed September 29, 2020

Fenton Law Group, Henry R. Fenton, Dennis E. Lee and Summer Main for Plaintiffs and Appellants Arash Alborzi, M.D. and Arash Alborzi, M.D., Inc.

Nelson Hardiman, Mark S. Hardiman, John A. Mills, Los Angeles, Salvatore J. Zimmitti and Jonathan W. Radke for Defendants and Respondents University of Southern California, Keck School of Medicine of USC and USC Verdugo Hills Hospital.

Hooper, Lundy & Bookman, Devin M. Senelick, Los Angeles, Annalee M. Clubb and Bridget A. Gordon for Defendants and Respondents Concord Hospitalist Group and Elevate Health Group.

COLLINS, J.

INTRODUCTION

Plaintiffs Arash Alborzi, M.D., and Arash Alborzi, M.D., Inc. sued defendants University of Southern California, Keck School of Medicine of USC, and USC Verdugo Hills Hospital (collectively, USC); as well as Concord Hospitalist Group and Elevate Health Group. Alborzi and his corporation were part of a panel of on-call physicians at Verdugo Hills Hospital. Plaintiffs alleged that defendants entered into an illegal referral and kickback scheme in which USC paid below-market rates for hospitalist services from Concord, and Concord self-referred patients to Elevate, which shared ownership with Concord. Plaintiffs alleged that when Alborzi complained to management at Verdugo Hills Hospital about the illegal scheme, the hospital stopped referring patients to him and eventually dissolved the on-call panel in retaliation. Plaintiffs’ causes of action include violations of Health and Safety Code section 1278.5, a health care whistleblower statute; Government Code section 12653, part of the California False Claims Act; and Business and Professions Code section 17200, et seq., the Unfair Competition Law.

USC demurred to plaintiffs’ complaint, asserting that plaintiffs were required to exhaust all judicial remedies by filing a petition for writ of mandamus under Code of Civil Procedure section 1085 prior to filing an action for damages. The trial court sustained the demurrer on that basis and entered judgment for all defendants. We find that the trial court erred, because plaintiffs were not required to exhaust judicial remedies before asserting the causes of action they have alleged here.

USC asserted in the alternative that plaintiffs’ complaint failed to allege facts sufficient to state a cause of action. On appeal, plaintiffs argue that three of their six causes of action were sufficiently alleged. We find plaintiffs’ complaint alleged sufficient facts to support causes of action for violations of Health and Safety Code section 1278.5 and Business and Professions Code section 17200, et seq., and therefore the demurrer should have been overruled as to those claims. We find that plaintiffs’ cause of action for violation of Government Code section 12653 failed to allege sufficient facts to state a cause of action, but leave to amend was warranted. Finally, we find that plaintiffs have abandoned the three causes of action they did not address on appeal. We therefore reverse the judgment, and remand the action with directions to enter a new order sustaining the demurrer in part and overruling the demurrer in part.

FACTUAL AND PROCEDURAL BACKGROUND

A. Plaintiffs’ allegations

Plaintiffs filed their initial complaint on December 26, 2018. USC filed a demurrer and motion to strike. Before the scheduled hearing, plaintiffs filed a first amended complaint (FAC) alleging the same six causes of action. The FAC is the operative complaint for purposes of appeal, and we focus on the allegations in that version.

Plaintiffs alleged that Alborzi is a physician specializing in infectious disease, and he owns Arash Alborzi, M.D., Inc., which "is comprised of other duly licensed physicians who also specialize in infectious disease." Alborzi and all members of Arash Alborzi, M.D., Inc. "have medical staff privileges at Verdugo Hills Hospital [ (VHH) ], which is owned by the University of Southern California." Plaintiffs were on the infectious disease (I.D.) on-call panel at VHH. "When patients came to VHH and required immediate emergency infectious disease treatment, were admitted at VHH and required acute stabilizing infectious disease treatment, or any time a patient required an infectious disease specialist to stabilize their condition, the respective patient would be assigned to an infectious disease specialist from the I.D. call panel." The physicians on the I.D. call panel were on a rotating schedule, typically created months in advance, which "indicated which weeks the respective specialist had to be available, at any hour of the day, to see assigned patients." The same on-call panel system existed for other specialties, such as nephrology and anesthesia. Plaintiffs alleged that "[s]tructured call panels are common within hospitals and are required for all hospitals who receive payment for patient services from government sources" pursuant to state and federal law, including VHH. Plaintiffs alleged that on-call panels "assist in preventing patient-endangering self-referrals, bribes, and kickbacks because patients are assigned to physicians based solely on the call panel schedule."

Plaintiffs alleged on information and belief that in July 2017, "Defendant[ ] Concord entered into an exclusive contract with Defendant VHH to provide hospitalist services to every patient who presented to VHH without an assigned primary care provider." They alleged that the contract was "below market value for comparable hospitalist services." Plaintiffs alleged that Concord was owned by three physicians: Dr. Narbeh Tovmassian, Dr. Garen Derhartunian, and Dr. Devinder Ghandi. Tovmassian and Derhartunian also owned defendant Elevate, which "provides medical services including, but not limited to, primary care and nursing home services." Plaintiffs alleged that Concord referred VHH patients to Elevate, and that "Defendant Concord benefits financially from self-referring Defendant VHH patients to Defendant Elevate because the same physicians own Defendant entities Concord and Elevate." Plaintiffs alleged that this constituted an improper kickback arrangement in violation of the federal anti-kickback statute ( 42 U.S.C. § 1320a-7b(b) ), and it was a self-referral arrangement that violated state and federal law. ( 42 U.S.C. § 1395nn(a)(1), Bus. & Prof. Code, §§ 650.01, 650.02, Health & Saf. Code, § 445, et seq. )

According to plaintiffs, beginning in August 2017 the number of patients assigned to them via the I.D. call panel "slowed significantly," and "an unusual number of patient consultations began to be referred to two specific infectious disease specialists, Dr. Hun and Dr. Maslow." Plaintiffs alleged on information and belief that "Dr. Maslow entered into a financial arrangement with Dr. Hun wherein Dr. Maslow receives a percentage of Dr. Hun's reimbursements for medical services. This is a kickback arrangement in violation of the Anti-Kickback Statute." Plaintiffs also alleged that Dr. Hun was "employed either directly or as a contractor" by Elevate, and "Defendant Concord benefits financially from self-referring Defendant VHH patients to Dr. Hun for infectious disease consultations" because Elevate employed Hun.

Plaintiffs alleged that beginning in December 2017, Alborzi became concerned about the "increasingly slowing patient assignments" from the I.D. call panel, since "December is the beginning of flu season, and yet patient assignments from the I.D. call panel were suspiciously low. This is when Dr. Alborzi first became aware" of the defendants’ financial arrangements. Between December 2017 and June 2018, Alborzi "expressed concerns ... regarding patient safety, the presence of illegally incentivized decisions about patient care by and among defendants, and the inability to practice medicine" resulting from defendants’ "financial arrangements" and "the non-use, or misuse, of the on-call panel system." Alborzi reported his concerns to Keith Hobbs, Chief Executive Officer of VHH, in February and April 2018. He also reported his concerns to Dr. Armand Dorian, Chief Medical Officer of VHH, in May 2018. In July 2018, plaintiffs received notice that the I.D. call panel had been terminated entirely. Plaintiffs alleged that termination of the on-call panel "was a retaliatory act" by defendants because Alborzi had reported his concerns about the "illegal financial arrangements" among defendants.

Plaintiffs alleged six causes of action in the FAC. In their first cause of action against USC, plaintiffs alleged violations of Health and Safety Code section 1278.5 ( section 1278.5 ), which bars retaliation against whistleblowers in healthcare professions. Plaintiffs alleged USC stopped providing plaintiffs with panel consultations and eventually terminated the I.D. call panel in retaliation against Alborzi for reporting his concerns about the financial arrangements among defendants. Plaintiffs asserted that Alborzi's reports concerned patient safety and constituted protected activity under section 1278.5. They alleged that defendants dissolved the I.D. call panel "in an attempt to injure Plaintiff[s] financially," and requested punitive damages.

In their second cause of action against USC, plaintiffs alleged violations of Government Code section 12653, part of the California False Claims Act (CFCA, §§ 12650, et seq.), which provides whistleblower protections for employees. Plaintiffs contended they "were, and continue to be, discriminated against ... by receiving diminished patient referrals," and they were "singled out because they were not involved in the illegal financial arrangements described, but infectious disease specialists who were, such as Dr. Hun, received increased patient referrals." Plaintiffs further alleged that USC's "discriminatory...