Hoveida v. Scripps Health
Filed 12/21/05 Hoveida v. Scripps Health CA4/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for
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ordered published for purposes of rule 977.
COURT OF APPEAL, FOURTH APPELLATE DISTRICT
DIVISION ONE
STATE OF CALIFORNIA
D046313
(Super. Ct. No. GIC800304)
Plaintiff and Appellant,
v.
KEVIN H. HOVEIDA,
SCRIPPS HEALTH et al.,
Defendants and Respondents.
APPEAL from a judgment of the Superior Court of San Diego County, S. Charles
Wickersham, Judge. Affirmed.
Beginning in 1991, Kevin H. Hoveida, M.D. (Hoveida) provided internal medicine
services to patients in the Behavioral Health Unit (BHU) of Scripps Mercy Hospital (the
Hospital) who were not already assigned to an internist (unassigned BHU patients).
From July 2001 to October 2002, Hoveida provided those services through a contract
with Emergency and Acute Care Medical Corporation (EACMC), which had an
agreement with Scripps Health (the owner of the Hospital) to provide internal medicine
services to unassigned BHU patients. In October 2002, Scripps Health gave an entity
other than EACMC the exclusive right to provide internal medicine services to
unassigned BHU patients. Accordingly, EACMC, at the direction of Scripps Health,
terminated its contract with Hoveida, and Scripps Health terminated a contract between it
and Hoveida under which he provided services to unassigned BHU patients covered by
Medicare. Hoveida did, however, retain his staff privileges at the Hospital.
Hoveida filed suit against Scripps Health, EACMC, and Davis Cracroft, M.D.
(Cracroft), alleging: (1) intentional interference with economic relations; (2) breach of
contract; (3) violation of Business and Professions Code section 2056; (4) violation of the
right to common law fair procedure; (5) intentional interference with his right to practice
his profession; (6) violation of the Cartwright Act, Business and Professions Code
section 16700 et seq.; and (7) unfair competition in violation of Business and Professions
Code section 17200 et seq.
The trial court entered judgment against Hoveida following two summary
adjudication motions. We conclude that there is no triable issue of material fact and the
trial court properly interpreted the contract at issue in the breach of contract cause of
action. Accordingly, we affirm.
I.
FACTUAL AND PROCEDURAL BACKGROUND
A.
The BHU
The BHU is an in-patient psychiatric hospital that serves patients who are
transferred from the Hospital’s emergency department. Although the BHU exists to
provide psychiatric services, BHU patients also commonly require the attention of
2
internal medicine specialists. Unassigned BHU patients are referred to internists by their
treating psychiatrists. Hoveida has provided internal medicine services to BHU patients
since 1991 through these referrals. Hoveida estimates that by 1999 he was providing the
majority of the internal medicine services for unassigned BHU patients, and that work
made up approximately 95 percent of his practice.
B.
Hoveida’s Participation in the EA Program
In mid-2001, Scripps Health contracted with EACMC to provide on-call internal
medicine services to unassigned BHU patients. EACMC’s provision of services to the
BHU was controlled by a March 2001 agreement between EACMC and Scripps Health
under which EACMC agreed to provide on-call, specialty physician services at all of
Scripps Health’s hospital emergency departments (the EACMC-Scripps Health
Agreement) through what is commonly referred to as the “EA Program.”1
EACMC provides services under the EA Program by contracting with a panel of
physicians. Under the EA Program, EACMC compensates the physicians at the rate of
130 percent of the prevailing Medicare rate and it bills payors (such as insurance carriers
and patients) for the cost of the physicians’ services. The EA Program is not a fixed-cost
contract for Scripps Health because Scripps Health is obligated by the EACMC-Scripps
1
The EACMC-Scripps Health Agreement states that the parties entered into the
agreement because “[i]n recent months appropriate specialty physician coverage at
[Scripps Health] hospitals has become seriously threatened by the inadequate
compensation received by specialty physician payors. In order to address this issue,
[Scripps Health] is implementing a physician on-call program . . . whereby [Scripps
Health] will authorize EACMC to contract with physicians to provide necessary
professional services at its [h]ospitals.”
3
Agreement to make up any shortfall in collections between what EACMC collects from
payors and what EACMC pays to the physicians. As of April 2004, there were
approximately 617 physicians in the EA Program throughout all of Scripps Health’s
hospitals, with 187 physicians at the Hospital.
To fulfill its obligation to provide internal medicine services to BHU patients
under the EA Program, EACMC contracted with Hoveida and four other internists in July
2001, and Hoveida continued to provide the majority of internal medicine services to
unassigned BHU patients. Two agreements established Hoveida’s role in the EA
Program: (1) a “Professional Services Agreement (Medicare Patients)” between Hoveida
and Scripps Health (Hoveida-Scripps Contract) and (2) a “Professional Services
Agreement” between Hoveida and EACMC (Hoveida-EACMC Contract) (collectively
the Service Contracts).
Under the Hoveida-EACMC Contract, Hoveida agreed to provide care for
unassigned BHU patients except Medicare beneficiaries. Hoveida’s care for unassigned
Medicare beneficiaries in the BHU was covered by the Hoveida-Scripps Contract.2 The
Service Contracts both provided: “Either party shall have the right to terminate this
2
The Hoveida-Scripps Contract was necessary because the EACMC-Scripps Health
Agreement provided that the provision of services to Medicare patients would not be
covered by the agreements that EACMC entered into with physicians in the EA Program.
Instead, Scripps Health would enter into an agreement with each physician participating
in the EA Program for the provision of services to Medicare patients.
4
Agreement, without cause, by giving no less than thirty (30) days written notice to the
other party.”3
C.
Hoveida’s Coding Disputes Under the EA Program
EACMC and Scripps Health determined the amount that the payors were billed
and the amount that the physicians were paid based on standard codes that certified
independent coders assigned to the physician services after the patients were discharged
from the BHU. The codes were assigned according to information recorded by the
physicians in the patients’ charts. The coders’ selection of codes to describe a service
performed by the physician determined the amount the physician would be paid for that
service. A higher code meant greater compensation.4
The EA Program included a process through which physicians could review and
dispute the codes assigned to their services. Hoveida disagreed about the assigned codes,
as did many other physicians in the EA Program.5 When disagreements arose with
Hoveida, the coders reviewed the patients’ charts and occasionally made adjustments, but
in most cases the adjustments were not made because Hoveida had provided insufficient
3
The EACMC-Scripps Health Agreement provides that EACMC “shall terminate”
an agreement with a physician providing services in the EA Program “at the direction of
[Scripps Health] and the [EA] Steering Committee.”
4
The practice of assigning a code that results in a lower payment to the physician is
known as “downcoding.”
5
Hoveida also complained about occasions when he was mistakenly not paid for
treatment of certain patients that were misidentified as outside of the EA Program, and
for the delay in payment caused by coding disputes and the volume of patients’ charts that
the coders had to review.
5
documentation in the patients’ charts to support the requested code.6 Hoveida stated that
although he disagreed with the coding practices, the Hospital never prevented him from
providing medically appropriate health care, and neither the Hospital nor EACMC ever
refused to pay for any test, drug, or medical procedure that Hoveida deemed appropriate
for his patients. The issue was simply how those procedures should be coded, and
correspondingly how much he should be paid for the services he had already performed.
In November 2001, Thomas Gammiere, who is the administrator of the Hospital,
and Cracroft, who is EA Program Physician Advisor at the Hospital and head of the
steering committee overseeing the EA Program (EA Steering Committee), sent a letter to
Hoveida about his coding disputes. The letter explained that an outside expert had
reviewed Hoveida’s patients’ charts and had confirmed the validity of the Hospital’s
coding practices. The letter noted that there were “considerable discrepancies” in
Hoveida’s documentation of his services on the patients’ charts, and that Hoveida had
been invited to, but did not, attend meetings of the advisory committee overseeing coding
issues or a coding education session for all physicians at the Hospital. The letter put
Hoveida on notice that that “continued problems with similar disputes of Scripps Mercy
coding practices may result in the discontinuation of your participation in the [EA]
Program.”
6
The Hospital retained a coding expert to review a sample of Hoveida’s patients’
charts. The coding expert found no evidence of downcoding for Hoveida’s services.
6
D.
Termination of the EA Program for Internal Medicine Services in the BHU
Effective October 2002, the Hospital discontinued the use of the EA Program to
provide internal medicine services to unassigned BHU patients in favor of an exclusive
arrangement with Hospital Based Physicians Group (HBPG). The exclusive arrangement
with HBPG left Hoveida without the ability to provide care for unassigned BHU patients
because he was not one of the doctors employed by HPBG.
Declarations and deposition testimony by Gammiere and Cracroft explained the
reasons for the change. They explained that after operating the EA Program in the BHU
for several months, the Hospital discovered that it was incurring more costs for internal
medicine services than it had anticipated and the costs were proving to be a considerable
drain on the Hospital’s financial resources. Several factors appeared to contribute to this
unanticipated expense, including the high rate at which the contracting internists were
paid, overutilization of services by Hoveida, and the administrative costs incurred in
coding and billing for the services performed.
In approximately January 2002, in an attempt to find a way to save costs, Cracroft
asked Arthur Gruen, M.D. (Gruen), who worked for EACMC, to compare the current
cost of internal medicine services for the BHU under the EA Program with what those
services would hypothetically cost under a “case rate” system.7 The study concluded that
the Hospital would save money by changing to a case rate system.
7
The record does not define what Gruen meant by a case rate system.
7
Gammiere explained that in July 2002 after analyzing the situation and consulting
with legal counsel and other Hospital administrators, he decided to discontinue the EA
Program for internal medicine services in the BHU. HBPG, which was already providing
internal medicine services in the emergency department and other areas of the Hospital,
agreed to provide internal medicine services in the BHU for a flat, fixed rate. Gammiere
determined that the Hospital would obtain quality internal medicine services for the BHU
at a considerably lower, fixed cost under an exclusive contract with HBPG and would
attain added stability in the Hospital’s relationship with HPBG — which had an important
role in teaching the hospital’s physician residents. Further, because HBPG had agreed to
code for the physicians’ services and to bill the payors directly, the Hospital would
eliminate administrative costs associated with coding and billing.
Because HPBG was to be the exclusive provider of internal medicine services to
unassigned BHU patients, Scripps Health terminated the Hoveida-Scripps Contract and
its contracts of the other four internists who provided services to unassigned BHU
patients under the EA Program. Scripps Health also directed EACMC to terminate its
contracts with Hoveida and the other four internists. Hoveida and the other physicians
were provided formal written notice of termination on August 1, 2002, and again on
September 1, 2002. The termination took effect on October 1, 2002.
Hoveida still enjoys staff privileges at the Hospital and still provides internal
medicine services at the BHU to patients that are referred to him from BHU psychiatrists,
as long as they are not unassigned BHU patients covered by the exclusive arrangement
with HBPG.
8
On November 19, 2002, Hoveida filed suit against Scripps Health, EACMC, and
Cracroft, alleging causes of action against each of them for: (1) intentional interference
with economic relations, (2) breach of contract, (3) violation of Business and Professions
Code section 2056, (4) violation of the right to common law fair procedure,
(5) intentional interference with his right to practice his profession, (6) violation of the
Cartwright Act (Bus. & Prof. Code, § 16700 et seq.), and (7) unfair competition (Bus. &
Prof. Code, § 17200 et seq.).
Defendants filed a motion for summary adjudication on all of the causes of action
except breach of contract. The trial court granted the motion.8 Hoveida then amended
the breach of contract cause of action to allege that defendants breached a duty to
terminate the EACMC-Scripps Health Agreement before terminating the Service
Contracts. The trial court granted summary adjudication on the issue of duty
encompassed in this aspect of the breach of contract cause of action, ruling that
defendants did not owe Hoveida a duty to first terminate the EACMC-Scripps Health
Agreement.
Applying the one-final-judgment rule, we rejected Hoveida’s initial attempt to
appeal the summary adjudication rulings because the remaining aspects of the breach of
contract cause of action had been dismissed by Hoveida without prejudice in a stipulation
8
Hoveida stated in his opposition to the summary adjudication motion that he had
chosen not to pursue the Cartwright Act and unfair competition causes of action. On that
basis, the trial court granted summary adjudication as to those causes of action. The
summary adjudication of those two causes of action is not at issue on appeal.
9
that tolled the statute of limitations. (Hoveida v. Scripps Health (2005) 125 Cal.App.4th
1466.) Hoveida then dismissed all of the remaining aspects of the breach of contract
cause of action with prejudice. The trial court entered final judgment, and Hoveida filed
the appeal that is currently before us.
Hoveida challenges the two summary adjudication rulings, arguing that (1) a
triable issue of material fact exists on the causes of action at issue in the first summary
adjudication motion, and (2) the second summary adjudication motion should not have
been granted because defendants owed him a contractual duty to refrain from terminating
the Service Contracts before terminating the EACMC-Scripps Health Agreement.
II.
DISCUSSION
A.
Standard of Review
We review a summary adjudication ruling de novo to determine whether there is a
triable issue as to any material fact and whether the moving party is entitled to judgment
as a matter of law. (Certain Underwriters at Lloyd’s of London v. Superior Court (2001)
24 Cal.4th 945, 972.) “In practical effect, we assume the role of a trial court and apply
the same rules and standards which govern a trial court’s determination of a motion for
summary [adjudication].” (Lenane v. Continental Maritime of San Diego, Inc. (1998) 61
Cal.App.4th 1073, 1079.)
A defendant “moving for summary [adjudication] bears an initial burden of
production to make a prima facie showing of the nonexistence of any triable issue of
material fact.” (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).)
A defendant may meet this burden either by showing that one or more elements of a
10
cause of action cannot be established or by showing that there is a complete defense.
“[A]ll that the defendant need do is to show that the plaintiff cannot establish at least one
element of the cause of action[;] the defendant need not himself conclusively negate any
such element . . . .” (Id. at pp. 853-854.) If the defendant’s prima facie case is met, the
burden shifts to the plaintiff to show the existence of a triable issue of fact with respect to
that cause of action or defense. (Code Civ. Proc., § 437c, subd. (o)(2); Silva v. Lucky
Stores, Inc. (1998) 65 Cal.App.4th 256, 261.) On appeal, we apply the same three-step
analysis used by the trial court. “We identify the issues framed by the pleadings,
determine whether the moving party has negated the opponent’s claims, and determine
whether the opposition has demonstrated the existence of a triable, material factual
issue.” (Silva, at p. 261.)
B.
1.
The Trial Court Properly Granted the First Summary Adjudication Motion
The Fourth and Fifth Causes of Action
We first consider Hoveida’s fourth and fifth causes of action, which allege that
defendants violated his right to common law fair procedure and intentionally interfered
with his right to practice. As we will explain, although the two causes of action have
distinct elements, whether they survive summary adjudication depends on a common
issue: Is there a material factual dispute about defendants’ legitimate, non-retaliatory
reasons for terminating the Service Contracts? We will conclude that no triable issue of
material fact exists, and accordingly summary adjudication is proper for the fourth and
fifth causes of action.
11
a.
Right to Common Law Fair Procedure
(Fourth Cause of Action)
We first discuss the legal basis for Hoveida’s claim that he was denied his common
law right to fair procedure. A cause of action for violation of a physician’s right to
common law fair procedure is based on the principle that, generally, “a physician may
neither be refused admission to, nor expelled from, the staff of a hospital, whether public
or private, in the absence of a procedure comporting with the minimum common law
requirements of procedural due process.” (Anton v. San Antonio Community Hosp.
(1977) 19 Cal.3d 802, 815.) A physician’s common law right to fair procedure arises
when a hospital’s decision, specific to that individual, impairs his or her ability to practice
and thus “affect[s] an important, substantial economic interest.” (Potvin v. Metropolitan
Life Ins. Co. (2000) 22 Cal.4th 1060, 1072 (Potvin) [insurance company decision to
exclude physician from preferred provider list may affect an important substantial
economic interest, giving rise to the right to fair procedure].) “[W]hen the right to fair
procedure applies, the decisionmaking ‘must be both substantively rational and
procedurally fair.’ ” (Id. at p. 1066.) Hoveida contends that the decision to terminate the
Service Contracts (1) was substantively irrational because the termination was in
retaliation for his complaints about coding determinations and (2) was procedurally
unfair because defendants did not provide him with adequate notice of their decision to
terminate the Service Contracts or give him an opportunity to respond.9
9
“Fair procedure” is a common law concept not synonymous with constitutional
due process. (Pinsker v. Pacific Coast Society of Orthodontists (1974) 12 Cal.3d 541,
12
As defendants point out and as the trial court recognized, Hoveida’s claims for
substantive and procedural due process violations are subject to the crucial limitation that
“the requirement of a proceeding with minimal due process prior to termination of a
physician’s staff privileges is not applicable if it is the result of a quasi-legislative act by
the hospital” instead of the result of an “adjudicative decision.” (Major v. Memorial
Hospitals Assn. (1999) 71 Cal.App.4th 1380, 1397-1398 (Major), italics added; see also
Mateo-Woodburn v. Fresno Community Hospital & Medical Center (1990) 221
Cal.App.3d 1169, 1183 (Mateo-Woodburn) [“In a quasi-legislative proceeding there is no
constitutional right to any hearing”].)10 “A decision is considered quasi-legislative if it is
one of general application intended to address an administrative problem as a whole and
not directed at specific individuals.” (Major, at p. 1398.)
Specifically relevant to the facts presented here, “[n]umerous cases recognize that
the governing body of a hospital, private or public, may make a rational policy decision
or adopt a rule of general application to the effect that a department under its jurisdiction
shall be operated by the hospital itself through a contractual arrangement with one or
more doctors to the exclusion of all other members of the medical staff except those who
550, fn. 7.) “The common law requirement of a fair procedure does not compel formal
proceedings with all the embellishments of a court trial . . . , nor adherence to a single
mode of process. It may be satisfied by any one of a variety of procedures which afford a
fair opportunity for an applicant to present his position.” (Id. at p. 555, citation omitted.)
10
In the context of a hospital’s decisionmaking, it may be more understandable to
refer to a quasi-legislative decision as “policy-making.” (Lewin v. St. Joseph Hospital of
Orange (1978) 82 Cal.App.3d 368, 384.)
13
may be hired by the contracting doctor or doctors.” (Mateo-Woodburn, supra, 221
Cal.App.3d at p. 1183, citing cases.) In such a case, the action is “clearly quasi-
legislative in nature.” (Id. at p. 1184.) “[W]hen terminations of staff privileges are
incidental to a hospital’s reorganization of one of its departments[,] the terminations are
the result of administrative/quasi-legislative decisions, rather than adjudicatory/quasi-
judicial decisions about a doctor, and hence do not require a due process hearing.”
(Abrams v. St. John’s Hospital & Health Center (1994) 25 Cal.App.4th 628, 636.)
“[T]here is no reason why entry into an exclusive . . . medical services contract and its
enforcement constitute a denial of due process to those doctors who are not included in
the contract.” (Centeno v. Roseville Community Hospital (1979) 107 Cal.App.3d 62, 75
(Centeno).)11
Thus, in light of the exclusion of quasi-legislative decisions from the requirements
that physicians be afforded fair procedure before losing hospital privileges, the following
dispositive factual issues arise: (1) whether the decision to terminate the Service
Contracts was an administrative decision about how to operate the hospital, making it a
quasi-legislative decision; or (2) whether, on the contrary, the decision was made to
11 A hospital’s quasi-legislative decision announcing a generally applicable rule
contrasts with the case where a hospital takes action to suspend an individual physician
from the provision of certain services as a result of specific suspected misconduct, which
is an adjudicative decision requiring that the hospital afford the physician fair procedure.
(Bergeron v. Desert Hospital Corp. (1990) 221 Cal.App.3d 146, 152 [suspension of
physician from hospital’s emergency room call roster because of misconduct in
discharging patients invokes “a fundamental property right which cannot be suspended or
revoked without notice and a hearing”].)
14
retaliate for Hoveida’s complaints about coding determinations, making it an adjudicatory
decision.12
b.
Interference with the Right to Practice
(Fifth Cause of Action)
A similar dispositive factual issue arises regarding Hoveida’s cause of action for
interference with his right to practice. That cause of action is based on the principle that
a hospital acts unlawfully, giving rise to a cause of action for damages, when “the right to
pursue a lawful business, calling, trade, or occupation is intentionally interfered with
either by unlawful means or by means otherwise unlawful when there is a lack of
sufficient justification.” (Willis v. Santa Ana etc. Hospital Assn. (1962) 58 Cal.2d 806,
810 (Willis), overruled on other grounds by Cianci v. Superior Court (1985) 40 Cal.3d
903, 925; see also O’Byrne v. Santa Monica-UCLA Medical Center (2001) 94
Cal.App.4th 797, 812 [discussing cause of action for interference with right to practice];
Centeno, supra, 107 Cal.App.3d at p. 69 [same].)
12 Hoveida argues that the reported cases deciding whether a hospital’s decision was
quasi-legislative were cases in which the court weighed evidence and found facts, such as
after a bench trial. From this observation, Hoveida infers that summary adjudication is
never appropriate on the issue of whether a hospital’s decision is quasi-legislative. We
are not persuaded by Hoveida’s reasoning. He has cited no authority that would exempt a
cause of action for violation of the common law right to fair procedure from the operation
of the summary judgment statute, which states that “[a]ny party may move for summary
judgment in any action or proceeding” (Code Civ. Proc., § 437c, subd. (a)), or from the
policy in favor of using summary judgment to “cut through the parties’ pleadings in order
to determine whether, despite their allegations, trial is in fact necessary to resolve their
dispute.” (Aguilar, supra, 25 Cal.4th at p. 843.)
15
“Whether there is justification is determined not by applying precise standards but
by balancing, in the light of all the circumstances, the respective importance to society
and the parties of protecting the activities interfered with on the one hand and permitting
the interference on the other.” (Willis, supra, 58 Cal.2d at p. 810.) Thus, for example,
“[a] cause of action [for interference with the right to practice] is stated . . . where . . . it is
alleged that a physician of the highest qualifications is denied access to necessary
hospital facilities as the result of a conspiracy designed to restrain competition and
deprive him of his practice in order to benefit competing members of the conspiracy.”
(Ibid.)
As we understand his position, Hoveida claims that defendants unlawfully
interfered with his right to practice in the BHU by terminating the Service Contracts with
insufficient justification, in that they were terminated in order to retaliate against him.
To prevail on his claim for interference with the right to practice, Hoveida would
have to show, at a minimum, that there was “lack of sufficient justification” for the
termination of the Service Contracts or some sort of illegality.13 (Willis, supra, 58
Cal.2d at p. 810.) Case law establishes that when a hospital has, for legitimate and lawful
administrative reasons, decided to close a department and award an exclusive contract to
other physicians, while not revoking the staff privileges of the excluded physicians, there
is sufficient justification for the decision to defeat a cause of action for interference with
13
The only illegality that Hoveida has alleged is based on his claim that defendants
violated Business and Professions Code section 2056. As we conclude, post, Hoveida
has identified no factual basis for that claim.
16
the right to practice. (Blank v. Palo Alto-Stanford Hospital Center (1965) 234
Cal.App.2d 377, 385-386 (Blank) [sufficient justification existed for an action that cut off
physicians with continuing staff privileges from their prior hospital-based practice when
the hospital “provide[d] by regulation, or otherwise, that certain facilities shall be
operated by the hospital itself to the exclusion of all members of the staff except those
who may be coincidently employed in such operation”]; Centeno, supra, 107 Cal.App.3d
at pp. 69-74) [hospital’s decision to enter into an exclusive contract with a physician
group did not constitute inference with physician’s right to practice because it was
justified by the difficulties with the previous arrangement and by the improvement in
hospital operations].) Hospitals have “the right . . . to make rational management
decisions, even when exercise of that right might prove adverse to the interests of specific
individual practitioners,” and this type of rational management decision will defeat a
cause of action for intentional interference with the right to practice. (Redding v. St.
Francis Medical Center (1989) 208 Cal.App.3d 98, 106, 100 [rejecting cause of action
for “interference with present and prospective contractual rights and professional
relationships” because the hospital had provided a sufficient justification in that it had
chosen, for administrative reasons, to adopt a closed staff structure for its heart surgery
program].)
Accordingly, the dispositive factual issue in the cause of action for interference
with the right to practice is whether the decision to terminate the Service Contracts was
without sufficient justification in that it was made to retaliate against Hoveida rather than
to reap the operational benefits of an exclusive arrangement with HBPG.
17
c.
Analysis of Evidence
We next analyze whether there is a triable issue of material fact on the single
factual issue dispositive of both the fourth and fifth causes of action: whether the Service
Contracts were terminated to fulfill the Hospital’s legitimate administrative goals of
saving costs and stabilizing its relationship with HBPG rather than to retaliate against
Hoveida for raising disputes about coding.
i.
Defendants Met Their Initial Burden on Summary
Adjudication on the Fourth and Fifth Causes of Action
We first consider whether defendants have met their initial burden on summary
adjudication to produce evidence sufficient for a finding in their favor. (See Aguilar,
supra, 25 Cal.4th at p. 850 [a defendant makes a prima facie showing and satisfies its
burden of production on summary judgment by showing ” ‘one or more elements of’ the
’cause of action’ in question ‘cannot be established,’ or that ‘there is a complete defense’ ”
to that cause of action].)
Defendants argue that they met their initial burden on the fourth and fifth causes of
action by producing the declarations of Gammiere and Cracroft. They argue that these
declarations establish that the Service Contracts (along with the contracts of the four
other participating physicians) were terminated because Gammiere, as administrator of
the Hospital, had determined to save costs and stabilize the relationship with HBPG.
Accordingly, the Hospital entered into an exclusive flat-rate, fixed-cost contract with
HBPG instead of continuing with the EA Program for internal medicine services in the
BHU.
18
Hoveida argues that we should not consider the Gammiere and Cracroft
declarations. Relying on Code of Civil Procedure section 437c, subdivision (e), which
gives the trial court discretion to deny summary adjudication “where a material fact is an
individual’s state of mind, or lack thereof, and that fact is sought to be established solely
by the individual’s affirmation thereof,” Hoveida argues that we should not consider the
declarations to the extent that they provide evidence of Gammiere’s and Cracroft’s intent
in terminating the Service Contracts. We reject this argument for two reasons.
First, to the extent that Code of Civil Procedure section 437c, subdivision (e)
applies to any of the statements in the declarations, our application of section 437c,
subdivision (e) on appeal is limited to reviewing whether the trial court abused its
discretion. (City of South Pasadena v. Department of Transportation (1994) 29
Cal.App.4th 1280, 1288 [“The only exception to the independent review standard [for
summary judgment] applies when we review a trial court’s exercise of discretion as
allowed by Code of Civil Procedure section 437c, subdivision (e)”]; see also 6 Witkin,
Cal. Procedure (4th ed. 1997) Proceedings Without Trial, § 235, p. 646 [citing the
provisions of Code of Civ. Proc., § 437c, subd. (e) as the only instance where a portion of
a summary judgment ruling is reviewed for abuse of discretion].) Here, Hoveida
objected to the Gammiere and Cracroft declarations, but the trial court considered them in
ruling that defendants met their burden on summary adjudication. Hoveida has identified
no reason to conclude that the trial court abused its discretion in deciding to consider the
declarations. Instead, he has erroneously argued that we have the discretion to disregard
those declarations in the first instance.
19
Second, even if we had discretion to disregard declarations describing “an
individual’s state of mind” (Code Civ. Proc., § 437c, subd. (e)), we do not believe that
defendants’ summary adjudication motion depends on state-of-mind evidence. Instead,
the Gammiere and Cracroft declarations carry defendants’ burden by describing the facts
surrounding an administrative decision. The declarations establish the high cost of using
the EA Program to provide internal medicine services for the BHU, describe the steps the
Hospital took in response (i.e., an exclusive contact with HBPG), and explain how these
steps led to the termination of the Service Contracts.
Hoveida also contends that the Gammiere and Cracroft declarations do not meet
the requirements of the summary judgment statute (Code of Civ. Proc., § 437c, subd. (d))
because they are not made by persons with personal knowledge and do not show that the
declarants are competent to testify. We reject this argument because it is not supported
by the content of the declarations. Both the Cracroft and Gammiere declarations state: “I
have personal knowledge of the facts stated herein, except for those matters stated on
information and belief, which I believe to be true.” The declarations do not identify any
material facts as based on information and belief. Moreover, the declarations explain
why Gammiere and Cracroft have personal knowledge about the decision to discontinue
the EA Program for the provision of internal medicine services in the BHU. As the
Hospital’s EA Program Physician Advisor, Cracroft had responsibility for “chairing the
EA Steering Committee, reviewing coding disputes and facilitating resolution of any
conflicts, facilitating the development of EA Steering Committee policies, and directing
review of financial and utilization matters within the EA Steering Committee.” As
20
administrator of the Hospital, Gammiere was responsible for overseeing the day-to-day
operations of the Hospital, including the BHU, and he was responsible for making the
decision to switch to an exclusive contract with HBPG for BHU internal medicine
services.14
Having rejected Hoveida’s arguments as to the lack of admissibility and probative
value of the Gammiere and Cracroft declarations, we conclude that defendants satisfied
their initial burden by submitting those declarations. Under the authorities discussed
above, which establish that a hospital’s award of an exclusive contract to another provider
constitutes a quasi-legislative decision and provides sufficient justification to defeat a
cause of action for interference with the right to practice, the Hospital’s explanation for
the termination of the Service Contracts met defendants’ burden of production on
summary adjudication. Defendants made a prima facie case showing that (1) Hoveida
cannot establish that termination of the Service Contracts was without sufficient
justification as required for his cause of action for interference with the right to practice,
14
Similarly, Hoveida challenges the Gammiere and Cracroft declarations because
they do not refer to or attach any financial analyses supporting the statement that the
Hospital was experiencing unacceptably high costs in operating the EA Program in the
BHU. We reject this argument because Hoveida has not identified any relevant authority
requiring a court to reject declaration testimony by a competent declarant on the basis
that statements in the declaration that are within the personal knowledge of the declarant
were not accompanied by supporting documentation. The summary judgment statute
requires only that “[s]upporting . . . declarations shall be made by any person on personal
knowledge, shall set forth admissible evidence, and shall show affirmatively that the
affiant is competent to testify to the matters stated . . . .” (Code Civ. Proc., § 437c,
subd. (d).) The Gammiere and Cracroft declarations met these qualifications. No more
was required.
21
and (2) Hoveida cannot show that the decision was adjudicatory rather than quasi-
legislative, as required for his cause of action for violation of the right to fair procedure.
(See, e.g., Blank, supra, 234 Cal.App.2d at pp. 385-386; Mateo-Woodburn, supra, 221
Cal.App.3d at p. 1183.)
ii.
Hoveida Did Not Identify Evidence Creating a
Triable Issue of Material Fact
Next, we analyze whether Hoveida has produced evidence showing the existence
of material factual disputes about the reason for the termination of the Service Contracts.
Hoveida argues that he has produced evidence sufficient to create an inference that
defendants terminated the Service Contracts to retaliate for his coding disputes. ” ‘When
opposition to a motion for summary judgment is based on inferences, those inferences
must be reasonably deducible from the evidence, and not such as are derived from
speculation, conjecture, imagination, or guesswork.’ ” (Waschek v. Department of Motor
Vehicles (1997) 59 Cal.App.4th 640, 647 (Waschek); see also California Shoppers, Inc. v.
Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 44-45 [an inference may not be
illogically and unreasonably drawn or be based on mere possibility or suspicion,
imagination, speculation, supposition, surmise, conjecture or guesswork].)
Considering Hoveida’s arguments in turn, we conclude that Hoveida has not
identified any evidence creating a reasonable inference that defendants terminated the
Service Contracts to retaliate against him for coding disputes instead of to save costs and
stabilize the Hospital’s relationship HBPG. Thus, there is no triable issue of material fact
precluding summary adjudication on the fourth and fifth causes of action.
22
(a) Disproportionate Impact on Hoveida
Hoveida argues that because the other four internists terminated from the EA
Program rarely treated unassigned patients in the BHU — and one of them (Grant
Kingsbury, M.D.) obtained a position with HBPG treating patients in the BHU — those
internists were not harmed by Scripps Health’s decision to enter into an exclusive
arrangement with HBPG. Hoveida argues that that “[t]he evidence . . . gives rise to the
reasonable inference that Hoveida was singled out for retaliation, as his was the only
practice that suffered by the [defendants’] acts.”
We reject Hoveida’s argument because evidence that Hoveida was the physician
primarily affected by the exclusive contract with HBPG does not call into question the
legitimate and rational administrative purposes for the decision as described in the
Gammiere and Cracroft declarations and does not create an inference in his favor. (See
Major, supra, 71 Cal.App.4th at p. 1403 [rejecting as a non-sequitor plaintiff physicians’
argument that “the fact they were deprived of their staff privileges as a result of [the
hospital’s] decision . . . is evidence that eliminating them was the purpose of the action,”
when in fact the decision was a general administrative decision to enter into an exclusive
provider arrangement with a provider who decided not to offer positions to plaintiffs].)
The trial court observed, and we agree, that “[w]hile [the Hospital’s] administrative
decision disproportionately affected plaintiff’s practice, no case law has been cited
demonstrating that this is a material distinction. Five contracts were terminated, and even
plaintiff’s interpretation of the evidence shows that at least three other doctors were
accepting EA patients, though on a more limited basis. Plaintiff’s argument, taken to its
23
logical conclusion, would render all decisions adjudicatory in nature where one of several
doctors happens to treat the majority of patients. This is not the law.”
(b) Documentary Evidence
Hoveida relies on several documents in an attempt to create an inference that
defendants terminated the Service Contracts to retaliate against him rather than to address
legitimate administrative problems with the cost of the EA Program. He points to an
e-mail sent by Cracroft to colleagues on August 12, 2002, discussing whether the
Hospital was at risk from potential legal action by Hoveida by terminating the Service
Contracts. The e-mail states,
“I thought about this more and concluded that the problem that was
identified leading to this change was simply overutilization and the
significant unjustified cost overrides that were principally the fault of
one individual. We did discuss the relative advantages and
disadvantages of just terminating one contract [versus] switching the
coverage to a different reimbursement scheme. This was a decision
made to save money and have a fixed ‘cost’ to the hospital [versus] the
runaway cost we had seen. The decision was also made to augment an
existing program — HBP[G] — and encourage that group to be more
stable with added ‘business[.]’ We did not try to change any of the
individual practices as I think trying to dictate how to practice from a
utilization standpoint can be fraught with danger. So, I think we’re on
solid ground in doing what is right.”
It is undisputed that the “one individual” causing runaway costs refers to
Hoveida.15 Hoveida argues that the reference to him in the e-mail creates an inference
15
Cracroft’s deposition testimony explained what he meant by “overutilization”:
“overordering of tests, seeing patients for prolonged periods on a daily basis when
perhaps they didn’t need to be seen anymore, extensive workups for entities that may or
may not be justified.”
24
that the Service Contracts were terminated to retaliate against him for disputing coding
determinations rather than because of “broad administrative concerns.”
For several reasons, we do not agree that the e-mail creates such an inference.
First, Cracroft’s focus in the e-mail on saving costs and adding stability to the HBPG
relationship, corroborates, rather than calls into question, the claim that the Service
Contracts were terminated to reduce costs and support HBPG. Second, Cracroft’s e-mail
does not support a reasonable inference that defendants retaliated against Hoveida for
coding disputes, as the e-mail does not mention coding disputes. Instead, the e-mail
expresses Cracroft’s concern over Hoveida’s “overutilization.” Third, evidence that
Cracroft was concerned about Hoveida’s “overutilization” does not advance Hoveida’s
case, as Hoveida does not claim (either in the complaint or in his briefing) that defendants
acted impermissibly by focusing on his alleged overutilization in deciding whether to
switch to a contract with HBPG. Hoveida’s consistent theory in support of his fourth and
fifth causes of action is that he was retaliated against solely because he disputed the
Hospital’s coding determinations.16
16
Further, even if Hoveida’s alleged overutilization motivated Scripps Health to
enter into an exclusive contract with HBPG and terminate the Service Contracts, this
causal relationship would not mean that the decision was an adjudicatory decision
“directed at” Hoveida, giving rise to the right to fair procedure. (Major, supra, 71
Cal.App.4th at pp. 1402-1403 [hospital’s decision to “close” a department in favor of an
exclusive provider was quasi-legislative even though “plaintiffs’ conduct accounted for a
disproportionate share of the . . . department’s problem” and “plaintiffs’ names came up in
the course of discussing the troubles within the department” in that the hospital’s decision
generally addressed administrative concerns rather than showing “an intent to specifically
exclude plaintiffs”].)
25
The next document cited by Hoveida is a November 14, 2001 letter to Hoveida
from Gammiere and Cracroft discussing the coding disputes and putting Hoveida on
notice that he may be terminated from the EA Program if problems continue.17 This
letter does not create a reasonable inference that defendants retaliated against Hoveida
because of coding disputes. Hoveida has shown no link between this warning, made in
November 2001, and the Hospital’s decision to terminate the Service Contracts, along
with those of four other physicians, almost one year later in favor of an exclusive contract
with HPBG. Because of the letter’s remoteness in time from the termination of the
Service Contracts and the lack of any other connection between it and the eventual
termination decision, any inference from the letter that the Service Contracts were
eventually terminated because of Hoveida’s coding disputes would be based solely on
” ‘speculation, conjecture, imagination, or guesswork.’ ” (Waschek, supra, 59 Cal.App.4th
at p. 647.)
The next documents that Hoveida points to are statistical analyses and e-mail
concerning Gruen’s study of the cost of providing internal medicine services to the BHU
through the EA Program compared to through a case-rate system, which used Hoveida’s
data as the basis for the study.18 Gruen’s focus on Hoveida’s data does not support an
17
The letter was sent shortly after the EA Steering Committee approved the practice
of recommending that an individual physician who continues to have concerns with
coding be asked to withdraw from the EA Program.
18 Although his argument is not completely clear, Hoveida also refers to an analysis
that Gruen performed comparing Hoveida’s services with that of another internist
working in the BHU.
26
inference that defendants retaliated against Hoveida for coding disputes and does not call
into question defendants’ claim that the Hospital switched to an exclusive arrangement
with HBPG to save costs. On the contrary, the study supports that claim because it shows
the Hospital was focused on costs and was shown that there were less costly ways to
provide the same services. Further, Gruen’s uncontradicted deposition testimony is that
he was not asked by anyone to focus on Hoveida’s data and did so only because Hoveida
treated the most patients, negating any claim that any of the defendants singled out
Hoveida in a plan to retaliate against him.
(c) Decisionmaking Process
Hoveida argues that the process by which the Hospital decided to terminate the
Service Contracts shows that defendants intended to retaliate against him. Hoveida
points out that the decision to terminate the Service Contracts was primarily made by two
people: Gammiere and Cracroft. He argues that if the Hospital was truly making an
administrative decision rather than a decision designed to retaliate against him, more
people would have been involved, including the hospital medical director (Joseph
Shaw, M.D.) (Shaw), the BHU director (Peter Seymour, M.D.) (Seymour), and the BHU
administrator (Jerrald Gold, Ph.D.) (Gold).
We reject this argument because the evidence does not show that any of the people
identified by Hoveida had responsibility for the administration of contracts to provide
internal medicine services in the BHU. Shaw, the Chief of Staff and Medical Director of
Cardiology, testified at his deposition that he is not involved in or responsible for
contracting for internal medicine services at the BHU, and the medical staff would not be
27
consulted about a contract for those services. Gold testified he has “no oversight of the
physicians that are responsible for internal medicine coverage” and is not involved in
contracting for those services. The record contains no evidence that Seymour, who was
medical director for the BHU, had responsibility for contracts with internists or the EA
Program. 19 The decision to enter into an exclusive contract with HPBG in place of the
EA Program for BHU internal medicine services was made at a high administrative level
by Gammiere, who is the Hospital’s administrator, with the help of Cracroft, who
oversaw the EA Program. Nothing in the evidence suggests that this decisionmaking
process was unusual or unreasonable.
Hoveida also argues that the decision to terminate the Service Contracts was not a
neutral administrative decision, because the decision was purportedly made in January
2002, although he was not put on notice until September 2002, and the EA Steering
Committee was purportedly not informed until long after the decision was made. We
reject this argument without even considering its logic because it finds no support in the
record. All of the evidence shows that in January 2002 Gammiere and Cracroft were
focusing on finding an alternative to the high cost of providing internal medicine services
to the BHU, but they did not make the decision to solve the problem by entering into an
19 We note that Hoveida submitted excerpts from transcripts of Seymour’s
deposition, but did not include the page containing Seymour’s response to the request that
he “outline . . . what your duties are as the director of the BHU.” Failure to include this
information leaves Hoveida without any support for his claim that Seymour, as medical
director for the BHU, was someone who should have been consulted about the
termination of the EA Program for internal medicine services in the BHU.
28
exclusive contract with HBPG until July 2002.20 The EA Steering Committee was
consulted and consented to the change on July 17, 2002.
Finally, Hoveida argues that defendants must have intended to retaliate against
him because the record contains no evidence that they considered other alternatives to
reduce costs, such as renegotiating the Service Contracts or reverting to an “open staff”
system where any physician with staff privileges could provide the needed care, billing
payors for the services.21 This argument fails because it is Hoveida’s burden to create a
triable issue of material fact as to defendants’ motives by showing that other viable
alternatives were not considered. He has not done so. In fact, the evidence shows the
contrary. Gammiere explained that he analyzed the situation and decided that an
exclusive contract with HBPG was the best option because it would guarantee the needed
20 Hoveida claims that “the [e]-mails between Cracroft and . . . Gruen of EACMC”
show that the decision to terminate the Service Contracts was made in January 2002, but
he does not identify any document that supports his assertion. E-mail from this period
discusses projected savings from a case rate system, with Cracroft stating that the
Hospital “will likely proceed with an RFP [request for proposals],” showing only that
solutions were being considered at that time.
21
” ‘In an “open staff” system, all “qualified” physicians with medical staff privileges
are permitted to work at the [h]ospital in their respective medical departments. Under a
“closed system,” the hospital contracts with an “exclusive provider” or particular
physician group for certain medical services, thereby “closing” the medical practice to
other physicians who are not members or employees of the contracted physician group.’ “
(Major, supra, 71 Cal.App.4th at p. 1388, fn. 2.)
29
services at a fixed cost, HBPG had demonstrated its ability to deliver quality services,
and it would provide additional stability to the Hospital’s relationship with HBPG. 22
In sum, finding no merit to Hoveida’s attempts to create a triable issue of material
fact as to defendants’ reasons for terminating the Service Contracts, we conclude that the
trial court properly granted summary adjudication on the fourth and fifth causes of action.
2.
Third Cause of Action
(Violation of Bus. & Prof. Code, § 2056)
The third cause of action is for violation of Business and Professions Code
section 2056, which provides:
“The application and rendering by any person of a decision to terminate
an employment or other contractual relationship with, or otherwise
penalize, a physician and surgeon principally for advocating for
medically appropriate health care consistent with that degree of learning
and skill ordinarily possessed by reputable physicians practicing
according to the applicable legal standard of care violates the public
policy of this state. No person shall terminate, retaliate against, or
otherwise penalize a physician and surgeon for that advocacy, nor shall
any person prohibit, restrict, or in any way discourage a physician and
surgeon from communicating to a patient information in furtherance of
medically appropriate health care.” (Id., subd. (c).)
The purpose of Business and Professions Code section 2056 “is to provide
protection against retaliation for physicians who advocate for medically appropriate
health care for their patients.” (Id., subd. (a).) “[S]ince [Business and Professions Code]
22 Hoveida also argues that the defendants must have retaliated against him because
they terminated the Service Contracts without first terminating the EACMC-Scripps
Health Agreement, which Hoveida argues is a contractually required condition precedent.
We discuss and reject this argument, post, in connection with the breach of contract cause
of action.
30
section 2056 expresses a public policy to protect physicians and surgeons from retaliation
for advocating medically appropriate health care, a wrongful discharge action can be
premised on a termination in violation of that public policy.” (Khajavi v. Feather River
Anesthesia Medical Group (2000) 84 Cal.App.4th 32, 51 (Khajavi).)23
For purposes of Business and Professions Code section 2056, the term ” ‘to
advocate for medically appropriate health care’ ” means “to appeal a payor’s decision to
deny payment for a service pursuant to the reasonable grievance or appeal procedure . . .
or to protest a decision, policy, or practice that the physician, consistent with that degree
of learning and skill ordinarily possessed by reputable physicians practicing according to
the applicable legal standard of care, reasonably believes impairs the physician’s ability to
provide medically appropriate health care to his or her patients.” (Id., subd. (b).)
Applying this definition, Hoveida argues “a triable issue of material fact exists as to
whether or not the [defendants] retaliated against Hoveida for his complaints and a triable
issue of fact exists as to whether those complaints concerned the ability of the EA
Program to provide appropriate health care to patients.” (Italics added.)
23 Because we reject Hoveida’s Business and Professions Code section 2056 cause of
action on other grounds, we need not and do not decide whether a plaintiff may assert a
cause of action titled “violation of section 2056” as Hoveida has done, or whether
Business and Professions Code section 2056 may only be cited as the basis for another
claim such as wrongful discharge in violation of public policy. We leave open this issue,
as did Khajavi. (Khajavi, supra, 84 Cal.App.4th at p. 52, fn. 11 [not deciding whether the
language in Bus. & Prof. Code, § 2056, providing that “[n]o person shall terminate,
retaliate against, or otherwise penalize a physician and surgeon for that advocacy” creates
a statutory claim for violation of [Bus. & Prof. Code,] § 2056, as that provision was
added after the alleged wrongful acts alleged in Khajavi].)
31
Hoveida’s claim lacks merit because, by his own description, he did not protest a
decision, policy or practice that he reasonably believed to impair his ability to provide
medically appropriate health care to his patients. According to Hoveida’s uncontradicted
deposition testimony, his problems with the Hospital’s coding practices did not concern
or affect the type of care that he provided to his patients, and he was never denied
payment for a procedure that he performed in the BHU. Instead, his dispute with the
Hospital centered on his belief that different codes should be assigned to the procedures
he chose to perform. In short, he wanted to be compensated at a higher level for the work
that the Hospital gave him free rein to perform. That sort of dispute is not covered by
Business and Professions Code section 2056.
Hoveida argues that his complaints about coding determinations were attempts to
advocate for medically appropriate health care because he was trying to fix a problem
that discouraged well-qualified physicians from continuing to participate in the EA
Program. This argument fails because it stretches the term “advocate for medically
appropriate health care” beyond any rational interpretation. Nothing in Business and
Professions Code section 2056 suggests that it covers a physician’s disputes with a
hospital’s policies that, for reasons completely unrelated to decisions about appropriate
and compensable treatment, make the hospital a less desirable place to practice and may
drive away other qualified physicians.24
24 Hoveida claims to cite evidence showing that coding problems in the EA Program
caused the program to suffer from a lack of qualified physicians. Hoveida’s evidence
does not support this claim. He cites a recital in the EACMC-Scripps Health Agreement
32
3.
First Cause of Action
(Intentional Inference with Economic Relations)
To support his first cause of action for intentional interference with economic
relations, Hoveida alleges that defendants interfered with the BHU psychiatrists’ potential
referrals of unassigned BHU patients to him, either by (1) agreeing to enter into an
exclusive arrangement with HBPG or (2) prior to the exclusive agreement with HBPG,
asking psychiatrists not to refer patients to him. Because Hoveida alleges interference
with future referrals, we understand him to be making a claim for interference with
prospective economic relations, not a claim for interference with an existing contract.
(See Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 392) (Della
Penna).)
To prevail at trial on a claim for interference with prospective economic relations,
Hoveida would have to establish ” ‘(1) an economic relationship . . . containing the
probability of future economic benefit . . . , (2) knowledge by the defendant of the
existence of the relationship, (3) intentional acts on the part of the defendant designed to
disrupt the relationship, (4) actual disruption of the relationship, [and] (5) damages to the
plaintiff proximately caused by the acts of the defendant.’ ” (Della Penna, supra, 11
Cal.4th at p. 389, quoting Buckaloo v. Johnson (1975) 14 Cal.3d 815, 827.) A claim for
acknowledging problems with obtaining appropriate specialty physician coverage
because of inadequate compensation from payors, but this recital was made before the
EA Program was put into effect and cited a shortage of physicians as the reason for
implementing the EA Program. It does not say that coding practices under the EA
Program caused a physician shortage.
33
intentional interference with prospective economic relations also requires a showing that
defendants “engaged in conduct that was wrongful by some legal measure other than the
fact of interference itself.” (Della Penna, at p. 393.)
Hoveida’s first theory in support of his interference claim is that the violations of
law alleged in the third, fourth and fifth causes of action supply the independently
wrongful conduct that interfered with his ability to practice in the BHU. We reject this
argument because we have concluded that there is no merit to Hoveida’s third, fourth,
fifth and causes of action.
Hoveida’s second argument is that Seymour, a psychiatrist who practices in the
BHU and who became BHU medical director in February 2002, prevented referrals to
Hoveida from other psychiatrists in the BHU by making defamatory comments about
Hoveida.25 Seymour testified at his deposition that he told other BHU psychiatrists that
he believed Hoveida performed too many tests, was reluctant to listen to other physicians
and was over-aggressive in his treatment. We conclude that, for two reasons, Seymour’s
testimony does not support Hoveida’s interference claim.
25 Hoveida’s complaint alleged that defendants interfered with potential referrals
from BHU psychiatrists by approaching those psychiatrists in the Spring of 2002 “and
urging them to cease referring their EA Patients to [p]laintiff” with the false
representation “that [p]laintiff was unreliable and engaged in improper billing practices.”
During his deposition, Hoveida was not able to identify support for his claim that
defendants urged BHU psychiatrists not to make referrals to him. Hoveida has not
advocated this theory of his interference claim on appeal and instead focuses on
statements made by Seymour relating to Hoveida’s practice of medicine.
34
First, Seymour testified that he made the negative comments only from the late
1990’s until early 2001, which was while he was a psychiatrist with staff privileges at the
Hospital. He did not make any of the comments after he became medical director of the
BHU in February 2002. Thus, in light of when the comments were made, the
uncontradicted evidence supports the conclusion that they were made in Seymour’s
individual capacity as one of the staff psychiatrists. Hoveida has identified no basis for a
finding that Seymour made the comments while acting as an agent of Scripps Health,
EACMC or Cracroft. Accordingly, Seymour’s statements about Hoveida could not
support a claim against any of the defendants.26
Second, Hoveida’s attempt to rely on Seymour’s statements to other psychiatrists
to support his cause of action for interference also fails because Hoveida has not
presented any evidence to establish that Seymour’s comments caused psychiatrists to stop
referring patients to him. Accordingly Hoveida cannot establish an essential element of
his cause of action: ” ‘actual disruption.’ ” (Della Penna, supra, 11 Cal.4th at p. 389.)
C.
The Trial Court Properly Granted the
Second Summary Adjudication Motion
Defendants’ second summary adjudication motion challenged Hoveida’s claim that
defendants’ owed him a contractual duty to refrain from terminating the Service Contracts
in favor of an exclusive arrangement with HBPG while the EACMC-Scripps Health
26 We do not consider whether Seymour’s statements about Hoveida might, under
any circumstances, constitute defamatory conduct, as the record has not been fully
developed in that regard and the parties do not brief the issue.
35
Agreement was still in force. Hoveida relies on section 3 of the EACMC-Scripps Health
Agreement, and section 9 of the Hoveida-EACMC Contract. Both contain similar
language acknowledging that upon termination of the EACMC-Scripps Health
Agreement, Scripps Health may enter into exclusive agreements with other physicians or
entities, to the exclusion of EACMC and physicians working in the EA Program.
Section 3 of the EACMC-Scripps Health Agreement states in full:
“The parties acknowledge and agree that during the term of this
Agreement EACMC will not have the exclusive right to provide or
arrange for the provision of Specialty Physician Services to Covered
patients and that members of the applicable hospital medical staff who
do not have an agreement with EACMC, but who otherwise meet the
requirements of [Scripps Health] and the applicable hospital medical
staff, may provide such services to Covered Patients. The parties
acknowledge and agree that any such physicians will not receive any
payment from EACMC and will not participate in EACMC’s utilization
review activities. EACMC acknowledges and agrees that upon the
termination of this Agreement, [Scripps Health] may enter into a new
agreement(s) with one or more physicians or entities other than
EACMC for the provision of Specialty Physician Services, and that
such agreement(s) may confer an exclusive right upon such physicians
or entities to the exclusion of EACMC and Specialty Physicians.”
Section 9 of the Hoveida-EACMC Contract provides:
“9. No Exclusivity. The parties acknowledge and agree that during the
term of this Agreement, EACMC will not have the exclusive right to
provide or arrange for the provision of Specialty Physician Services to
EA Patients and that members of the [Scripps Health] medical staff who
do not have an agreement or other relationship with EACMC, but who
otherwise meet the requirements of [Scripps Health] and the [Scripps
Health] medical staff, may provide such services to EA Patients.
Specialty Physician acknowledges that upon the expiration or earlier
termination of the [EACMC-Scripps Health] Agreement, [Scripps
Health] may enter into a new agreement or agreements with one or more
physicians or entities other than EACMC for the provision of the
services covered by the [EACMC-Scripps Health] Agreement, and that
such agreement or agreements may confer an exclusive right upon such
36
physicians or entities to the exclusion of EACMC and Specialty
Physician.”
Hoveida contends that these contractual provisions obligated Scripps Health to
dismantle the EA Program (by terminating the EA-Scripps Health Agreement, which
encompasses 617 participating physicians at five hospitals) before it entered into an
exclusive arrangement with a provider other EACMC to provide the internal medicine
services to the BHU covered by the Service Contracts.
In analyzing Hoveida’s claim, we first note that Hoveida is not a party to the
EACMC-Scripps Health Agreement, and he does not claim to be an intended third party
beneficiary of it.27 As a result, the EACMC-Scripps Health Agreement does not give
rise to any contractual duty toward Hoveida on the part of EACMC or Scripps Health.
(See Burnett v. Chimney Sweep (2004) 123 Cal.App.4th 1057, 1069 [entity that was not a
party to a lease agreement could not claim the benefit of a contractual provision because
it was not a party or an intended third party beneficiary]; Jones v. Aetna Casualty &
Surety Co. (1994) 26 Cal.App.4th 1717, 1724 [nonparty to an insurance contract could
not state a cause of action for breach of an insurance carrier’s contractually based duty].)
Thus, we examine only the Hoveida-EACMC Contract, to which Hoveida is a party, to
determine whether it gives rise to the contractual duty claimed by Hoveida.
27
Even if Hoveida’s argument for a duty owing to him from the EACMC-Scripps
Agreement was interpreted as a claim to be an intended third party beneficiary of the
EACMC-Scripps Health Agreement, neither the contractual language nor any other
evidence in the record would support such a claim.
37
Turning to the Hoveida-EACMC Contract, we first observe that neither Scripps
Health nor Cracroft are parties to it. Thus, the Hoveida-EACMC Contract does not
support Hoveida’s claim that Scripps Health and Cracroft owe a contractual duty to
him.28 (See Brown v. California State Lottery Com. (1991) 232 Cal.App.3d 1335, 1339,
fn. 1 [” ‘ “Mutual consent is necessary to the existence of any contract, and one cannot be
made to stand on a contract to which he never consented” ‘ “]; Civ. Code, §§ 1550, 1565
[essential elements of a parties’ contract include “[t]heir consent,” “[c]ommunicated by
each to the other”].)
Thus, the only issue left is whether the Hoveida-EACMC Contract gives rise to a
duty on the part of EACMC, as claimed by Hoveida. Because we need not resolve any
conflict in extrinsic evidence, we decide the issue as a matter of law based on the rules of
contract interpretation. (See Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861,
865-866; Winet v. Price (1992) 4 Cal.App.4th 1159, 1166.) Central to our analysis, we
rely on the principle that “[t]he whole of a contract is to be taken together, so as to give
effect to every part, if reasonably practicable, each clause helping to interpret the other.”
(Civ. Code, § 1641.) Further, we apply the rule that “[t]he words of a contract are to be
understood in their ordinary and popular sense” unless used in a technical sense by the
parties or a special meaning is given to them by usage. (Civ. Code, § 1644.)
28
The Hoveida-Scripps Contract does not contain language similar to that relied on
by Hoveida in the EACMC-Scripps Health Agreement and the Hoveida-EACMC
Contract.
38
We start our contractual analysis with the sentence in section 9 of the Hoveida-
EACMC Contract that Hoveida cites in support of his argument (the Section 9 Clause):
“Specialty Physician acknowledges that upon the expiration or earlier
termination of the [EACMC-Scripps Health] Agreement, [Scripps
Health] may enter into a new agreement or agreements with one or more
physicians or entities other than EACMC for the provision of the
services covered by the [EACMC-Scripps Health] Agreement, and that
such agreement or agreements may confer an exclusive right upon such
physicians or entities to the exclusion of EACMC and Specialty
Physician.”
Several items in the Section 9 Clause assist our analysis as to whether the
Hoveida-EACMC Contract obligates EACMC to refrain from terminating it (in favor of
Scripps Health’s exclusive contract with another provider) unless the EACMC-Scripps
Health Agreement is first terminated. First, we observe that the Section 9 Clause is
expressly identified as an acknowledgement made by Hoveida alone (“Specialty
Physician acknowledges”). It is not identified as an agreement between Hoveida and
EACMC. This word choice is especially significant because the preceding sentence
states that EACMC and Hoveida both “acknowledge and agree” to the terms set forth
(i.e., that due to the lack of exclusivity, other members of the Hospital staff may provide
internal medicine services to unassigned BHU patients).
Second, we observe that the Section 9 Clause is not phrased as an obligation on
the part of EACMC. It does not use term “shall,” which is consistently employed in the
rest of the contract to indicate the affirmative obligations of the parties. Instead, the
Section 9 Clause simply acknowledges a situation that “may” come to pass in that Scripps
Health (who is not a party to the contract) “may” decide to terminate the EACMC-
39
Scripps Health Agreement in favor of an exclusive contract with another provider.29
Both of these observations undermine Hoveida’s argument that the Section 9 Clause
creates a contractual duty on the part of EACMC.
Further, we look to the rest of the Hoveida-EACMC Contract to determine if
Hoveida’s interpretation of the Section 9 Clause is reasonable in relation to the contract as
a whole. We focus on section 6 of the Hoveida-EACMC Contract, which directly
addresses whether the parties intended any limitations on EACMC’s ability to terminate
the Hoveida-EACMC Contract. Sections 6(a) and 6(b) of the Hoveida-EACMC Contract
state that although the “term” of the Hoveida-EACMC Contract “shall continue in effect
for so long as the [EACMC-Scripps Health] Agreement remains in effect,” either party
“shall have the right to terminate [the Hoveida-EACMC Contract], without cause, by
giving no less than thirty (30) days written notice to the other party.”
Hoveida’s interpretation of the Section 9 Clause does not give effect to section 6 of
the Hoveida-EACMC Contract, which allows for termination without cause, and thus is
not a reasonable interpretation under the principle that ” ‘[l]anguage in a contract must be
construed in the context of that instrument as a whole.’ ” (Bank of the West v. Superior
Court (1992) 2 Cal.4th 1254, 1265, italics omitted.)30 Accordingly, we conclude that the
29 We agree with the trial court’s observation that “[s]ection 9 uses the term
‘acknowledges’ repeatedly, whereas the remainder of the [Hoveida-EACMC Contract]
uses terminology such as ‘shall.’ This is further evidence that the section was meant to be
advisory, but was not intended to bind EACMC to a particular course of action.”
30 Hoveida argues that the “without cause” language of section 6 in the Hoveida-
EACMC Contract could be reconciled with his interpretation of the contract if the
40
Hoveida-EACMC Contract, when read as a whole, does not create a duty on the part of
EACMC to refrain from terminating it in favor of Scripps Health’s exclusive arrangement
with another provider until the EACMC-Scripps Health Agreement is terminated.31
Hoveida argues that we should not rely on the “termination without cause”
provision in section 6 to interpret the Hoveida-EACMC Contract because that provision
is unenforceable under Potvin v. Metropolitan Life Ins. Co., supra, 22 Cal.4th 1060. We
reject this argument because Potvin is inapplicable here. Potvin held that a “termination
Section 9 Clause is read to create an obligation on the part of Scripps Health not to enter
into an exclusive arrangement with another provider while the EACMC-Scripps Health
Agreement is still in force, but not to address whether EACMC may terminate the
Hoveida-EACMC Contract. We reject this argument to the extent it attempts to create a
contractual duty on the part of Scripps Health toward Hoveida based on the Hoveida-
EACMC Contact, because Scripps Health is not a party to the Hoveida-EACMC
Contract.
31 Hoveida suggests that we look not only to the Hoveida-EACMC Contract to
interpret the Section 9 Clause, but also to the EACMC-Scripps Health Agreement and the
Hoveida-Scripps Contract. (Cf. Civ. Code, § 1642 [“Several contracts relating to the
same matters, between the same parties, and made as parts of substantially one
transaction, are to be taken together”].) Although we note that the documents share
overlapping but not identical parties and that the EACMC-Scripps Health Agreement was
entered into four months before the other two agreements, we accept Hoveida’s invitation
to consider the documents together to the extent that they may illuminate the parties’
intent. We conclude that Hoveida fails to present a convincing argument that the three
contracts, when read together, support his claim that defendants owed him a duty to
refrain from terminating the Service Contracts without first terminating the EACMC-
Scripps Health Agreement. On the contrary, the Hoveida-Scripps Contract undermines
Hoveida’s argument because that agreement lacks language similar to the Section 9
Clause in the Hoveida-EACMC Contract. The absence of such a provision in the
agreement between Scripps Health and Hoveida is conspicuous because Scripps Health,
not EACMC, is the party that controls whether and when it enters into an exclusive
arrangement with another party to the detriment of Hoveida.
41
without cause” provision in a contract between an insurance company and a physician is
unenforceable “to the extent it purports to limit an otherwise existing right to fair
procedure under the common law.” (Id. at p. 1073, italics added.) Here, as we have
concluded with respect to the fourth cause of action, Hoveida did not have a common law
right to fair procedure.32
Based on the foregoing analysis, we conclude that the trial court properly granted
summary adjudication on the issue of duty in the breach of a contract cause of action.
DISPOSITION
The judgment is affirmed.
WE CONCUR:
MCCONNELL, P. J.
BENKE, J.
IRION, J.
32 Hoveida also argues that “the implied covenant of good faith and fair dealing
required that both Scripps Health and EACMC refrain from all conduct that would
prevent Hoveida from treating EA [p]atients and the BHU,” including termination of his
contracts in favor of an exclusive arrangement with another provider. We reject
Hoveida’s argument for any such implied term because it is directly contradicted by the
express terms of the termination at will provision in section 6 of the Hoveida-EACMC
Contract and a similar termination at will provision in the Hoveida-Scripps Contract.
42