Two recent California Court of Appeal decisions, Naranjo and Dameron, are significant for hospital billing, especially for emergency care and Medi-Cal patients
In the ever-evolving world of healthcare billing, two recent reported California appellate court decisions, Naranjo v. Doctors Medical Center of Modesto and Dameron Hospital Association v. Progressive Casualty Insurance Company, alert hospitals to a range of possible liability risks arising from their communications about patient charges.
These cases may impact how hospitals word their Conditions of Admission ("COA") forms and bills—especially as they relate to emergency care—and how the hospitals bill for care provided to Medi-Cal patients.
Naranjo v. Doctors Medical Center of Modesto
May 23, 2025, 5th Dist., F093197
2025 WL 1482842
Plaintiff Joshua Naranjo filed a class action lawsuit alleging defendant Doctors Medical Center of Modesto, doing business as Emanuel Medical Center ("Medical Center"), improperly charged emergency room patients an "Evaluation and Management Services Fee" ("EMS Fee"). Medical Center demurred, and the trial court dismissed the case without leave to amend. In the first appeal, the Court of Appeal reversed, holding Naranjo could pursue his claims under California's Unfair Competition Law ("UCL") and Consumer Legal Remedies Act ("CLRA") and the trial court could decide whether to grant him leave to plead a breach of contract claim as well.
The California Supreme Court accepted review and remanded the case to the Court of Appeal based on Capito v. San Jose Healthcare Systems, LP (2024) 17 Cal. 5th 273 ("Capito"), where the Supreme Court held that prior to treatment, a hospital is not obligated to disclose an EMS Fee, except as applicable federal and state emergency care statutes require. On remand, the Court of Appeal distinguished Capito to the extent Naranjo's claims involve disclosure of the EMS Fee subsequent to treatment, and held Naranjo could seek leave to amend his complaint to state breach of contract, UCL, and CLRA claims based on Medical Center's post-treatment conduct. Naranjo slip op. at pp. 17, 29-35.
Key Holdings
- Contract-Based Declaratory Relief Cause of Action: The Court held Naranjo stated a valid contract-based declaratory relief claim because an actual controversy exists regarding whether Medical Center's COA form obligates Naranjo and other emergency patients to pay the EMS Fee, even though the COA form does not include a promise or agreement to pay the EMS Fee. The COA form obligates the patient to pay for certain "services," but the Court of Appeal concluded the EMS Fee is not clearly a fee for any "service," as Naranjo argued. Id. at pp. 1923.
- Contract-Based UCL and CLRA Claims: The Court held Naranjo can seek and should be allowed leave to amend the operative complaint to allege violations of the UCL and CLRA if he can do so based solely on the hospital's post-treatment billing practices since, as noted above, claims based on events that arose after the hospital completed its emergency care are not barred by Capito. Id. at pp. 29-31.
In particular, Naranjo could state a claim under the UCL's fraud prong because "a jury could reasonably find that a business practice that involved a hospital charging for services that a patient is not contractually obligated to pay, and hiding the nature of the fee in its original billing and in subsequently requested itemized bills ... is deceptive to a reasonable consumer of emergency room services." Id. at p. 31. Further, he could state a claim under the UCL's unlawful prong and the CLRA (id. at pp. 32-34), and under the UCL's unfair business practice prong (id. at pp. 34-35).
The Court suggested Naranjo also might seek leave to allege the EMS Fee is unconscionable. Id. at pp. 12-13 and fn.7.
Dameron Hospital Association v. Progressive Casualty Insurance Company
May 27, 2025, 3rd Dist., C099467
2025 WL 1502017
A Medi-Cal patient received emergency care and other medical services at Dameron Hospital following a car accident. Dameron directly billed Progressive Casualty Insurance Company ("Progressive"), the patient's uninsured/underinsured motorist ("UM") insurance carrier, for payment of Dameron's full charges for the patient's care—based on a broad assignment of benefits ("AOB") provision in Dameron's COA form the patient or her representative had signed. Progressive declined to pay and Dameron sued, arguing the hospital was entitled to collect the patient's UM benefits directly from Progressive for full charges in the first instance, instead of billing the Medi-Cal program, because as a government program Medi-Cal is a secondary payor. Dameron slip op. at pp. 1-3.
Both the trial court and the Court of Appeal disagreed, ruling the AOB was an unenforceable contract of adhesion with respect to the UM benefits under recently decided precedent, Dameron Hospital Association v. AAA Northern California, Nevada & Utah Insurance Exchange (2022) 77 Cal.App. 5th 971. Id. at pp. 9-14.
The trial court sustained Progressive's demurrer without leave to amend, and the Court of Appeal affirmed.
Key Holdings
- Medi-Cal Billing Requirement: Under California law, once a patient presents proof of Medi-Cal coverage, the provider must submit a claim to Medi-Cal for reimbursement (Welf. & Inst. Code, § 14019.4). If a Medi-Cal beneficiary assigns UM benefits, that assignment is made to Medi-Cal, not to the provider. Id. at pp. 14-20.
- Assignment of UM Benefits as an Unenforceable Contract of Adhesion: The Court determined it was not within the reasonable expectations of a Medi-Cal beneficiary that UM benefits payable to the patient for expenses such as lost wages, pain and suffering, etc., would be assigned to the hospital to pay for medical services covered by Medi-Cal—when the hospital never billed Medi-Cal for the covered medical services first as required. Id. at pp. 10-12.
Considerations for Hospitals
The Naranjo and Dameron decisions exemplify the continued push toward full billing transparency to protect patients—and also payors.
Naranjo highlights post-treatment billing practices in particular. Hospitals may want to consider whether their COA forms expressly obligate patients to pay all charges the hospitals may bill for, including evaluation and management charges that cover the costs of utilizing the emergency department facilities, equipment, nursing staff, and other resources necessary to provide the patients' care.
In light of Dameron, hospitals may want to ensure their Medi-Cal billing practices and their inclusion of AOBs in their COA forms comply with applicable legal standards.
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