## Facts

- Aetna U.S. Healthcare of California, Inc. owned and operated a health maintenance organization (HMO) that provided Medicare coverage to enrolled members.
- Aetna’s HMO arranged member care through a contracting structure: it contracted with Greater Valley Management Services Organization, which contracted with Greater Valley Medical Group and Greater Valley Physicians Association, which then contracted with Magnolia Gardens (a nursing home) and Dr. Buttleman to provide care to Aetna members.
- Johnnie Pagarigan was an elderly Medicare beneficiary and Aetna HMO member.
- Pagarigan suffered a debilitating stroke and was placed at Magnolia Gardens.
- Dr. Buttleman was responsible for Pagarigan’s medical care while she resided at Magnolia Gardens.
- The complaint alleged Buttleman failed to timely treat an infection, a pressure sore, and other serious conditions, and that Pagarigan became malnourished and dehydrated.
- Pagarigan was eventually transferred to an acute-care hospital, but she died shortly thereafter.
- Pagarigan’s children sued Aetna’s HMO and Aetna-related corporate entities, seeking to hold Aetna liable in negligence based on Aetna’s alleged role in arranging and managing the healthcare services provided through its contracted network.
- The trial court sustained Aetna’s demurrer on the ground Aetna owed no duty of care to Pagarigan and entered a dismissal as to Aetna; the heirs appealed.

## Issues

1. Whether the complaint could support a negligence duty against an HMO or related managed-care entities based on the entities’ alleged undertaking to arrange, manage, or coordinate a member’s healthcare through contracted providers.
2. Whether the trial court erred by sustaining Aetna’s demurrer without leave to amend, rather than allowing plaintiffs an opportunity to amend at least some causes of action to state a viable claim against Aetna.

## Decision

- The Court of Appeal reversed the judgment of dismissal as to Aetna in part and remanded with instructions.
- The court directed the trial court to sustain Aetna’s demurrer with leave to amend as to certain causes of action (identified in the remand instructions as the first and eleventh causes of action).
- The court directed the trial court to sustain Aetna’s demurrer without leave to amend as to the remaining causes of action.
- The case was returned to the trial court for further proceedings consistent with the appellate court’s directions.

## Legal Principles

- A managed-care entity is not automatically liable for malpractice committed by downstream medical providers solely because the providers are in the plan’s network; duty depends on what the managed-care entity is alleged to have done and assumed responsibility to do.
- Under a negligent-undertaking theory (Restatement Second of Torts § 324A), a defendant that undertakes to render services it should recognize as necessary for the protection of another may be liable for negligent performance if the negligence increases the risk of harm, the defendant undertakes to perform a duty owed by another, or harm results from reliance on the undertaking.
- Allegations that a health plan arranged, directed, managed, or coordinated care in ways that bear on patient safety can be sufficient at the pleading stage to support a duty-based negligence theory, depending on the pleaded facts.
- On demurrer, courts test the sufficiency of pleaded facts and reasonable inferences; dismissal without leave to amend is improper where there is a reasonable possibility the plaintiff can cure defects by amendment as to at least some claims.
- Appellate courts may affirm dismissal of some causes of action while permitting amendment of others when only certain theories could potentially be pleaded against a particular defendant consistent with the governing duty and causation rules.

## Conclusion

The Court of Appeal concluded the trial court erred in disposing of the case against Aetna in a single, no-duty dismissal without permitting any amendment, and it remanded with instructions that plaintiffs be allowed to amend certain specified causes of action while leaving other claims against Aetna dismissed without leave to amend.


Pagarigan v. Aetna U.S. Healthcare of California, Inc., 2005 WL 2742807 (2005)