Filed
3/29/00

CERTIFIED FOR PUBLICATION

 IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND
APPELLATE DISTRICT

DIVISION
ONE

CALIFORNIA MEDICAL ASSOCIATION et al., ??????????? Plaintiffs and Respondents, ??????????? v. THE REGENTS OF THE UNIVERSITY OF CALIFORNIA et al., ??????????? Defendants and Appellants.

????? B135863   ????? (Super. Ct. No. BC202127)

 

 

 

??????????? APPEAL from
an order of the Superior Court of Los Angeles County, Judith C. Chirlin,
Judge.? Reversed.

??????????? Howard,
Rice, Nemerovski, Canady, Falk & Rabkin, Jerome B. Falk, Jr., Ethan P.
Schulman; University of California, James E. Holst, John F. Lundberg, Jeffrey
A. Blair, Christopher M. Patti and Michael R. Goldstein for Defendants and
Appellants.

??????????? Catherine
I. Hanson and Astrid G. Meghrigian for Plaintiff and Respondent California
Medical Association.

??????????? Stephan,
Oringher, Richman & Theodora, Arthur R. Chenen, and Robert M. Dato for
Plaintiffs and Respondents Santa Monica Anesthesiology Medical Group, Inc.,
Thomas D. Bohlman, Evan M. Krantz and Ronald J. Wahlig.

 

 

??????????? The University
of California at Los Angeles Medical Center purchased the Santa Monica Hospital
Medical Center.? When physician
participation in the anesthesia service at the Santa Monica facility was later
restricted to UCLA’s faculty members, a group of anesthesiologists who had
previously practiced at the Santa Monica facility sued UCLA for damages and
injunctive relief.? The trial court
viewed the doctors’ unlawful practice and unfair competition claims as
meritorious and issued a preliminary injunction to prevent UCLA from using its
faculty members to run the Santa Monica anesthesia service.? We reverse.

 

FACTS

 

??????????? The UCLA School of Medicine.? The UCLA School of Medicine (one of five
publicly funded medical schools within the University of California system)
operates teaching hospitals in which it offers patient care, conducts clinical
research, and provides clinical training to physicians.[1]? Every patient admitted to a UCLA healthcare
facility is a potential teaching case and, as such, is required to sign a form
acknowledging "that residents, interns, medical students, students of
ancillary health care professions . . . and post-graduate fellows may
participate" in the patient’s care.?
Since the decision to use a particular case for teaching purposes
depends on the patient’s diagnosis and the educational needs of individual
students, the decision to include an intern or resident or other student in a
particular patient’s care can be made at any time.? To ensure the students’ exposure to a full range of medical problems
and procedures, UCLA must have a large and diverse patient population.

 

??????????? The Acquisition of UCLA-Santa Monica.? In July 1995, UCLA purchased the Santa
Monica Hospital Medical Center (UCLA-Santa Monica) in order to increase the
University’s population of teaching patients.?
UCLA’s plan was to use UCLA-Santa Monica for "lower acuity"
patients from the Santa Monica and West Los Angeles areas, and to limit the use
of UCLA’s existing Westwood facility to "higher acuity" patients.[2]? In addition, the University planned to use
UCLA-Santa Monica to serve the influx of primary care patients and trainees
from UCLA’s "Primary Care Network," a research and patient care
program developed in response to a legislative mandate to increase the number
of primary care physicians trained by the medical school.? (Educ. Code, ?? 92720-92726.)

 

??????????? The Integration of UCLA-Santa Monica into
the UCLA Medical School.? It was
understood from the outset that the integration of UCLA-Santa Monica into the
overall UCLA Medical School program would be gradual, and full integration has
yet to be completed.? At this time,
UCLA-Santa Monica provides comprehensive healthcare services, including
emergency services for the community in which it is located and residency
programs in family practice, maternal and child health, surgery, cardiology,
neuro-epilepsy and oncology.? At its
Westwood campus, the University is now engaged in a major reconstruction
project which will result in a sizeable reduction in the number of available
beds in Westwood and a shift of additional patients to UCLA-Santa Monica.? Ultimately, 40 percent of the Medical
School’s beds will be at UCLA-Santa Monica.

 

??????????? The Santa Monica Anesthesia Medical Group.? Up to and including the time at which UCLA
purchased the Santa Monica Hospital Medical Center, the Santa Monica Anesthesia
Medical Group, Inc. (SMAMG) and its members provided anesthesia services, as
independent members of the medical staff, at the facility now known as
UCLA-Santa Monica.[3]? In 1998, UCLA decided that the only feasible
way to operate the UCLA-Santa Monica anesthesia service in conformance with the
University’s educational goals was as a "closed" service staffed by
members of the UCLA anesthesia faculty.[4]? UCLA offered full-time faculty positions
("Assistant Clinical Professor of Medicine") to all but one of the
SMAMG anesthesiologists but they all declined.

 

??????????? Instead,
Drs. Thomas D. Bohlman, Evan M. Krantz and Ronald J. Wahlig (individually and
as SMAMG), joined by the California Medical Association, Inc., sued the
Regents.[5]? The complaint seeks damages, injunctive
relief, specific performance and declaratory relief on a variety of unfair
competition and tort theories.?
According to SMAMG, "[t]he gravamen of [its] complaint is that UCLA
. . . has gone far beyond its praiseworthy teaching and research
activities . . . and has commenced an aggressive business plan
designed to enable the unlicensed practice of medicine by UCLA, to force
community based physicians into unlawful fee-splitting and referral schemes
which jeopardizes the quality of patient care, disrupts the continuity of
patient care in the community, and forces private physicians out of practice,
under the guise of teaching and research activities."[6]

 

??????????? At about
the same time it filed suit, SMAMG sought a preliminary injunction to prevent
UCLA "from operating the Anesthesia Service at [UCLA-Santa Monica] with
employed physicians . . . ."? SMAMG claimed the offers of teaching positions were a sham and
insisted that UCLA was unlawfully engaged in the unlicensed practice of
medicine insofar as it accepted compensation for services rendered to
non-indigent and non-teaching patients.?
The Regents opposed the motion for a preliminary injunction.[7]? After a hearing, the trial court granted
SMAMG’s motion for a preliminary injunction and restrained the University from
(1) operating the anesthesia service at UCLA-Santa Monica with physicians
employed by UCLA, (2) using physicians employed by UCLA to provide anesthesia
services "to the general public for compensation" at UCLA-Santa
Monica, and (3) interfering with the operation of the anesthesia service at
UCLA-Santa Monica "as an open staff service," but permitting UCLA to
provide anesthesia services "in any case in which an anesthesia resident
or fellow is directly providing the anesthesia to a bona fide teaching patient
[defined by the injunction as an indigent patient or a patient who the Chief of
Anesthesia at UCLA-Santa Monica and the Chair of the UCLA Department of
Anesthesia agree has a legitimate teaching value] under the direct one to one
supervision of a member of the UCLA Department of Anesthesia."

 

??????????? The Regents
filed a notice of appeal and a petition for a writ of supersedeas.? After briefing, we issued a writ of
supersedeas (to stay the preliminary injunction) and expedited the appeal. 

 

 

DISCUSSION[8]

I.

??????????? In support
of its motion for a preliminary injunction, SMAMG contended (and the trial
court agreed) that the statutory ban against the corporate practice of medicine
makes it illegal for UCLA to treat patients for compensation.? The Regents contend the statutory ban does
not apply to the University of California’s medical schools and hospitals.? We agree with the Regents.

 

A.

??????????? Business
and Professions Code section 2400 provides that "[c]orporations and other artificial
legal entities shall have no professional rights, privileges, or powers.? However, the Division of Licensing may in
its discretion, after such investigation and review of such documentary
evidence as it may require, and under regulations adopted by it, grant approval
of the employment of licensees on a salary basis by licensed charitable
institutions, foundations, or clinics, if no charge for professional services
rendered patients is made by any such institution, foundation, or clinic."[9]

B.

??????????? The
University of California is excluded from the operation of a general statutory
provision if the University’s inclusion would result in an infringement upon
the powers granted to it as an instrumentality of the state.? (City
of Los Angeles v. City of San Fernando (1975) 14 Cal.3d
199, 276-277; cf. Regents of University
of California v. Superior Court (1976) 17 Cal.3d 533,
536-537.)[10]? To state the obvious, the application of
section 2400 to UCLA would infringe upon the operation of its medical center as
a teaching and research facility — its core governmental function, its raison d’?tre.? (Educ. Code, ? 66010.4, subd. (c) ["The University of
California may provide undergraduate and graduate instruction . . .
in the professions [and] shall have exclusive jurisdiction in public higher
education over . . . graduate instruction in the professions of
medicine, dentistry, and veterinary medicine. . . .? The University of California shall be the
primary state-supported academic agency for research"]; Community Memorial Hospital v. County
of Ventura (1996) 50 Cal.App.4th 199, 206 ["laws prohibiting the
corporate practice of law or medicine do not apply to counties"]; Estate of Miller (1936) 5 Cal.2d 588,
597.)[11]

C.

??????????? UCLA’s
evidence shows that every patient is potentially
a teaching case, notwithstanding that some patients may not be seen by an
intern, resident or other trainee.? It
is for this reason that, at every patient’s first admission to the hospital or
first appointment with a primary care physician, the patient must consent to
student participation in his treatment.?
The decision whether the patient will, in fact, become a teaching case
depends on the patient’s diagnosis, the educational needs of the students, the
medical school’s staffing concerns, and other factors.? UCLA’s evidence also shows that, to provide
a full range of medical problems and procedures for the training of its
interns, residents and other students, it must admit a large and diverse
patient population.? To make the point,
UCLA explains that, to qualify for board certification, residents must have the
opportunity for direct observation and participation in the clinical treatment
of certain rare or complex conditions that occur only a handful of times in a
population of 10,000 patients.? The more
limits there are on the University’s patient population, the less likely it is
that the University’s teaching goals can be met.

 

??????????? The
provision of "quality patient care" is integral to UCLA’s patients,
to its students, and to its research into new techniques and treatments.? Quality patient care is also an essential
source of financial support for the entire UCLA hospital system, which now
receives only 4 percent of its operating budget from state funds, with the remaining
96 percent generated by clinical income.?
SMAMG nevertheless contends that UCLA’s exemption from section 2400 will
be destroyed if, at trial, the evidence shows that not all of the patients at
UCLA-Santa Monica are actually teaching patients and that UCLA is, in fact,
competing with SMAMG for the same paying patient population.? SMAMG is wrong.? The fact that UCLA’s physicians may be in competition with
private physicians does not mean that UCLA is acting inconsistently with its
statutory mandate.? (Community Memorial Hospital v. County
of Ventura, supra, 50 Cal.App.4th at pp. 206-207; Beard v. City & County of San Francisco (1947)
79 Cal.App.2d 753, 755-756.)? There is
no evidence at all to suggest that UCLA is making a profit or to suggest any
basis for questioning its non-profit status.?
Its ability to generate income to cover some of its expenses does no
more than reduce the burden on the state’s taxpayers.? It follows that there simply is no evidence to suggest that SMAMG
could prevail on its section 2400 claim.[12]

 

??????????? We are
satisfied that our conclusion is consistent with the purpose of section 2400,
which was adopted to protect the professional independence of physicians and to
avoid the divided loyalty inherent in the relationship of a physician employee
to a lay employer.? (Conrad v. Medical Bd. of California (1996)
48 Cal.App.4th 1038, 1042-1043; People
v. Pacific Health Corp. (1938) 12 Cal.2d 156, 160 [the principal evils
attendant upon the corporate practice of medicine spring from the conflict
between the professional standards and obligations of the doctors and the
profit motive of the corporate employer].)?
Concerns about for-profit corporations have nothing to do with
non-profit teaching hospitals.[13]

 

II.

??????????? In support
of its motion for a preliminary injunction, SMAMG also claimed that UCLA has
violated section 17200 by its "demand" that SMAMG’s anesthesiologists
enter employment contracts with the University in order to maintain their staff
privileges at UCLA-Santa Monica.? UCLA
contends it is not subject to suit under section 17200.? We agree with UCLA.

 

??????????? Section
17200 (part of the Unfair Practices Act) defines "unfair competition"
to include "any unlawful, unfair or fraudulent business act or practice
and unfair, deceptive, untrue or misleading advertising."? (See also ? 17000 et seq.)? Although "persons" who engage in
unfair competition may be sued for damages and injunctive relief
(?? 17203-17205), the University of California is a "public
entity" (Gov. Code, ? 811.2) and, therefore, not a "person"
within the meaning of the Unfair Practices Act.? (? 17201; Janis v. California State Lottery Com. (1998)
68 Cal.App.4th 824, 831; Trinkle v.
California State Lottery (1999) 71 Cal.App.4th 1198, 1202-1204; Community Memorial Hospital v. County of
Ventura, supra, 50 Cal.App.4th at p. 209; see also Santa Monica Rent Control Bd. v. Bluvshtein (1991)
230 Cal.App.3d 308, 318.)? It follows
that, as a matter of law, SMAMG cannot prevail on its claims of unfair
competition or unfair practices.[14]

 

III.

??????????? SMAMG does
not suggest that any of its remaining causes of action could support the
issuance of a preliminary injunction.[15]? Since UCLA’s decision to close the
anesthesia service at UCLA-Santa Monica appears to have been a necessary and
reasonable step in the administration of the University’s teaching responsibilities,
the anesthesiologists’ abstract right to continue to practice at the hospital
must give way to the greater needs of the community at large.? (Major
v. Memorial Hospitals Assn. (1999) 71 Cal.App.4th 1380, 1407; Mateo-Woodburn v. Fresno Community Hospital
& Medical Center (1990) 221 Cal.App.3d 1169, 1182-1185; Redding v. St. Francis Medical Center (1989)
208 Cal.App.3d 98, 103-108; Centeno v.
Roseville Community Hospital (1979) 107 Cal.App.3d 62, 70-74; Lewin v. St. Joseph Hospital of Orange (1978)
82 Cal.App.3d 368, 382-385; Blank v. Palo
Alto-Stanford Hospital Center (1965) 234 Cal.App.2d 377, 385-386.)

 

In sum, we find it unlikely that
SMAMG will prevail on the merits of any of its claims at trial and therefore do
not consider the other issues discussed by the parties.? (Garamendi
v. Executive Life Ins. Co., supra, 17 Cal.App.4th at p. 512; Shoemaker v. County of Los Angeles (1995)
37 Cal.App.4th 618, 624-625 [in granting a preliminary injunction, the trial
court must (1) evaluate the likelihood that the plaintiff will prevail on the
merits at trial; if it is likely that the plaintiff will prevail, the court
must then (2) balance the interim harm that the plaintiff is likely to suffer
without pendente lite relief against
the harm the defendant is likely to suffer by the issuance of a preliminary
injunction].)[16]

DISPOSITION

??????????? The
preliminary injunction and the order granting it are reversed.? The Regents and UCLA-Santa Monica are
awarded their costs of appeal.

??????????? CERTIFIED
FOR PUBLICATION.

???????????????????????
??????????????????????? ??????????? ??????????? VOGEL
(Miriam A.), J.

We concur:

??????????? SPENCER, P.J.

??????????? MASTERSON, J.