Thursday, October 1, 2020
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C.A. Revives Whistleblower Complaint Alleging Kickbacks at USC Hospital
By a MetNews Staff Writer
A physician whistleblower alleging an illegal patient referral and kickback scheme involving the University of Southern California’s Keck School of Medicine was not required to exhaust judicial remedies by seeking writ relief before filing a lawsuit for damages, the Court of Appeal for this district has held.
The opinion by Justice Audrey B. Collins of Div. Four reverses a judgment of dismissal by Los Angeles Superior Court Judge Yolanda Orozco which followed her sustaining USC’s demurrer, without leave to amend, a complaint by Arash Alborzi, an infectious disease specialist. He claims that he was retaliated against after voicing concerns that an on-call patient referral system at Verdugo Hills Hospital (“VHH”) operated to benefit doctors who own Concord Hospitalist Group, which has an exclusive provider contract at below-market rates with the hospital.
USC owns VHH, located in Glendale.
“We find that the trial court erred, because plaintiffs were not required to exhaust judicial remedies before asserting the causes of action they have alleged here,” Collins said in her opinion, filed Tuesday and joined by Acting Presiding Justice Thomas L. Willhite Jr. and Justice Brian S. Currey.
Alborzi filed a complaint on behalf of himself and his practice alleging USC violated Business & Professions Code §17200, the Unfair Competition Law; Health and Safety Code §1278.5, the health care whistleblower statute; and Government Code §12653, the False Claims Act’s whistleblower protection provision.
Collins’s opinion directs the trial court to enter a new order overruling the demurrer as to the health care whistleblower and Unfair Competition Law claims and sustaining the demurrer with leave to amend the False Claims Act cause of action.
Alleged Kickbacks, Referrals
According to Alborzi’s complaint, hospital on-call panels are commonly used to ensure patient safety by preventing self-referrals, bribes, and kickbacks. Admitted patients who need immediate treatment are assigned a doctor through the call panel, which is rotated regularly.
Patient referrals through the call panel dropped noticeably in August 2017 and were being directed to two doctors, whom Alborzi claims were working to redirect patient referrals to Concord. Concord had entered into its exclusive contract with VHH a month earlier.
That contract, Alborzi asserts, provides services for below-market rates. Concord is owned by three doctors: Narbeh Tovmassian, Garen Derhartunian, and Devinder Ghandi.
Between December 2017 and June 2018, Alborzi repeatedly raised concerns to various persons, including to VHH’s chief executive officer, Keith Hobbs, and the chief medical officer, Armand Dorian, about the kickbacks and referral scheme,
In July 2018, Alborzi was informed the on-call panel had been dissolved.
Quasi-Legislative Action
USC argued Alborzi was required to file a petition for writ of mandate under Code of Civil Procedure §1085 before filing an action for damages. USC characterized the termination of the on-call panel as a “run-of-the-mill” staffing decision.
Such decisions, USC argued, were deemed by courts to be “quasi-legislative” and only challenged in a proceeding for traditional mandate under §1085.
Collins said USC’s claim that its decision was quasi-legislative was “unsupported by the record,” as Alborzi’s complaint asserts as a factual matter that the decision to dissolve the on-call panel was merely pretext.
Collins also rejected USC’s argument that previous court opinions recognize hospital staffing decisions to be quasi-legislative decisions “as a matter of law.”
“Although USC is correct in that these cases hold that a hospital’s well-reasoned decision to change staffing in an entire department may be deemed quasi-legislative, none of these cases decided such issues at the pleading stage or without consideration of the manner in which the hospital reached its decision,” Collins observed.
“To the contrary, each case considered extensive evidence demonstrating the hospitals’ staffing issues, the procedures employed in changing the staffing plan or implementing the physician requirements, and the hospitals’ reasons for establishing the standards or scheduling it did.”
Collins continued:
“Here, by contrast, there is no indication that VHH’s staffing decisions were even made by a board, or that the decision involved legitimate considerations about the operation or administration of VHH. In fact, plaintiffs have alleged that the decision did not involve legitimate concerns about the need for infectious disease specialists, that is undermined patient care, and it was done to cover up an illegal kickback scheme.”
Collins further determined that Alborzi was not bound to seek mandamus relief, even if USC could demonstrate that terminating the on-call panel was a quasi-legislative decision.
A person seeking relief under the False Claims Act “is not required to exhaust judicial remedies by filing a petition for a writ of mandamus before filing a civil action,” Collins declared, quoting the 2018 opinion by the Fourth District’s Div. Three in Taswell v. Regents of University of California.
“For this reason alone, the trial court erred in sustaining the entire demurrer for plaintiffs’ failure to exhaust judicial remedies,” Collins wrote.
She also determined the state’s high court opinion in Fahlen v. Sutter Central Valley Hospitals support a finding for Alborzi.
There, then-Justice Marvin R. Baxter (now retired) noted that requiring a whistleblower to exhaust judicial remedies before filing a lawsuit could “flatly contradict…a ‘rebuttable presumption’ of retaliatory motive.” In such cases, whistleblowers “need not seek and obtain a mandamus petition to overturn the decision before filing a civil action under section 1278.5,” Baxter wrote.
Collins said:
“Thus we find no support for USC’s contention that plaintiffs were required to bring their claims in a writ of mandate under Code of Civil Procedure section 1085, or that plaintiffs’ claims were susceptible to demurrer because they were not asserted in that form.”
The case is Alborzi v. University of Southern California, 2020 S.O.S. 4564.
Counsel for Alborzi were Henry R. Fenton, Dennis E. Lee, and Summer Main of Fenton Law Group in Los Angeles. USC was represented by Mark S. Hardiman, John A. Mills, Salvatore J. Zimmitti, and Jonathan W. Radke of the Los Angeles firm of Nelson Hardiman.
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