On April 29, 2013, Epstein Becker Green achieved a major victory when the Plan Review Committee of L.A. Care Health Plan ("L.A. Care") found that L.A. Care's termination of the Participating Physician Group Services Agreement ("Agreement") with Epstein Becker Green client Accountable Health Care ("AHC") was procedurally unfair.
L.A. Care terminated the Agreement under a "without cause" provision and did not contend that AHC was in breach of the Agreement. Under Potvin v. Metropolitan Life Ins. Co., 22 Cal.4th 1060 (2000), California provides a common law fair hearing right to health care providers even in the event of a "without cause" termination. Arbitrary decisions and the denial of fair procedure are prohibited by Potvin. Contractual provisions allowing termination "without cause" are unenforceable to the extent that they do not provide fair procedure. Under Potvin, the termination of a provider's agreement must be both substantively rational and procedurally fair.
Epstein Becker Green argued on behalf of AHC that L.A. Care acted contrary to its own Fair Hearing Procedure and the legal principles of Potvin by issuing a notice of termination of the Agreement prior to the fair hearing and a decision by the Plan Review Committee, even though, at the hearing, L.A. Care argued that its decision was based on a cease-and-desist order against AHC that was filed by the California Department of Managed Health Care. Although the Fair Hearing Procedure provides that the hearing process must precede any issuance of a notice of termination under a provider contract, the termination notice and related correspondence made clear that L.A. Care had already reached a decision to terminate the Agreement at the time that the notice was provided to AHC. In addition, the notice failed to include the specific reasons for the termination, a description of any policies and procedures, or any other criteria used in making the determination, as required by the Fair Hearing Procedure.
The Plan Review Committee voted unanimously in finding that the L.A. Care termination notice was procedurally unfair because it was inconsistent with the requirements of the Fair Hearing Procedure and had been issued prior to the completion of the fair hearing process.
