Court Opinion

ID: 8488713
Source: CourtListenerOpinion
Date Created: 2022-11-22 18:02:59.422706+00
Date Added: 2024-06-11T16:50:13.978257
License: Public Domain

Filed 11/22/22 Farmacia San Jose v. Dept. of Health Care Services CA3
                                           NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

                IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                      THIRD APPELLATE DISTRICT
                                                     (Sacramento)
                                                            ----

 FARMACIA SAN JOSE, LLC,                                                                       C092343

                    Plaintiff and Appellant,                                        (Super. Ct. No. 34-2019-
                                                                                   80003175-CU-WM-GDS)
           v.

 DEPARTMENT OF HEALTH CARE SERVICES,

                    Defendant and Respondent.

         Plaintiff Farmacia San Jose, LLC, doing business as Garcia Pharmacy (Garcia),
appeals from a judgment denying a petition for writ of mandate to compel defendant, the
Department of Health Care Services (Department), to set aside the denial of Garcia’s
application for enrollment as a “Medi-Cal” health care provider. The Department denied
the application on two grounds, concluding that (1) Garcia failed to submit complete and
accurate information on its enrollment application; and (2) Garcia was not in compliance
with state and local laws governing its licensing and operations. On appeal, Garcia

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argues that the judgment should be reversed because there was no rational basis for the
Department’s determination. Disagreeing, we affirm.
                                     BACKGROUND
       A.     Statutory and regulatory framework
       Medicaid is a cooperative federal-state program under which the federal
government and participating state governments share the costs of providing health care
services to qualified low-income persons. (County of Colusa v. Douglas (2014) 227
Cal.App.4th 1123, 1126.) California participates in the Medicaid program through its
California Medical Assistance Program, or “Medi-Cal,” which is administered by the
Department pursuant to the Medi-Cal Act (Welf. & Inst. Code, § 14000 et seq.) and the
Department’s Medi-Cal regulations. (Cal. Code Regs., tit. 22, § 50000 et seq.)1 (County
of Colusa, supra, at p. 1126; Oroville Hospital v. Department of Health Services (2006)
146 Cal.App.4th 468, 471-472.) To obtain reimbursement for Medi-Cal services, a
medical professional must enroll as a “provider” in the Medi-Cal program. (Marvin
Lieblein, Inc. v. Shewry (2006) 137 Cal.App.4th 700, 707; Golden Drugs Co., Inc. v.
Maxwell-Jolly (2009) 179 Cal.App.4th 1455, 1458 (Golden Drugs); Welf. & Inst. Code,
§ 14043.1, subds. (h), (o); § 51000.7.)
       An applicant seeking enrollment must follow the procedures and requirements
specified in the Medi-Cal statutes and regulations. (Marvin Lieblein, Inc. v. Shewry,
supra, 137 Cal.App.4th at pp. 707-708.) Among other requirements, the applicant must
submit an application package and disclose all the information required by the federal
Medicaid regulations and any other information required by the Department. (Ibid.;
Welf. & Inst. Code, §§ 14043.2, subd. (a), 14043.26, subd. (a)(1); §§ 51000.30, subd. (a),
51000.35, subd. (a).) The information in the enrollment application must be complete

1     Undesignated section references are to title 22 of the California Code of
Regulations.

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and accurate. (Welf. & Inst. Code, § 14043.26, subd. (a); § 51000.30, subd. (a)(2)(A).)
Failure to disclose all required information, or disclosure of false information, is grounds
to deny the application. (Welf. & Inst. Code, § 14043.2, subd. (a).)
       Within 180 days of receipt of an application, the Department must give notice that
(1) the application either has been granted or denied; (2) the application is incomplete; or
(3) the Department will exercise its authority to conduct a more comprehensive review to
verify the accuracy of the information provided to the Department. (Welf. & Inst. Code,
§§ 14043.26, subd. (f), 14043.37, 14043.4, 14043.7; § 51000.50, subd. (e).)
       If discrepancies are found to exist during the preenrollment review period, the
Department must identify them and notify the applicant whether they can be remediated.
(Welf. & Inst. Code, § 14043.26, subd. (i); § 51000.50, subd. (i).) If the defects cannot
be cured, the applicant fails to satisfactorily correct the discrepancies, or the applicant
otherwise fails to meet the enrollment requirements, the Department shall deny the
application. (Welf. & Inst. Code, §§ 14043.2, subd. (a), 14043.26, subds. (f)(4) &
(i)(2)(A), 14043.4; § 51000.50, subds. (a)(9), (e)(4) & (i)(4).)
       A provider whose application has been denied may pursue an administrative
appeal under Welfare and Institutions Code section 14043.65. (Welf. & Inst. Code,
§§ 14043.26, subd. (l), 14043.65; § 51000.50, subd. (k).) That section allows the
provider to submit a written appeal and supporting evidence, but does not provide for live
testimony or a formal administrative hearing. (Welf. & Inst. Code, § 14043.65, subd. (a);
Mednik v. State Dept. of Health Care Services (2009) 175 Cal.App.4th 631, 643.)
       B.     Facts and Procedure
       Garcia owns and operates a licensed pharmacy in San Jose, California. In
February 2017, Garcia applied to enroll the pharmacy in the Medi-Cal program. The
application stated that the pharmacy’s business address was 25 North 14th Street, Suite
110, San Jose, California, and that the pharmacy was in compliance with all state and

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local laws. James Daniel Wong (Wong), Garcia’s sole member, signed the application
under penalty of perjury.
       In response to Garcia’s application, the Department elected to perform a
comprehensive review to verify the accuracy of the information provided. In December
2018, after completing its review, the Department denied Garcia’s application on two
grounds.
       First, the Department concluded that Garcia violated sections 51000.30 and
51000.35 of the Medi-Cal regulations by failing to disclose that Wong had a controlling
interest in another health care provider. As part of the application, Garcia was required to
disclose the name of any other “health care provider” in which Wong had an ownership
or control interest.2 (§ 51000.35, subd. (b)(3).) On the application, Wong disclosed a
controlling interest in Garcia and in an entity named “Drogueria San Jose, Inc. dba
Tropicana Drugs Long Term Care,” located at 1169 South King Road, San Jose,
California. However, a search of the California Secretary of State’s Web site revealed
that Wong also had a controlling interest in another entity named “Sangha Enterprises #9,
Inc.” (Sangha Enterprises #9), a “pharmacy” business with an address of 1167 South
King Road, San Jose, California. Because Wong’s interest in Sangha Enterprises #9 was
not reported, the Department concluded that Garcia failed to submit complete and
accurate information on its application.
       Second, the Department concluded that Garcia violated the California Pharmacy
Law (Bus. & Prof. Code, § 4000 et seq.) by expanding its pharmacy operations into an

2      In particular, an applicant is required to disclose “[t]he name and address of any
other health care provider in which a managing employee, board member, officer, or a
person(s) with an ownership or control interest in the applicant or provider also has an
ownership or control interest.” (§ 51000.35, subd. (b)(3).) A person with an ownership
or control interest is defined by regulation to include a corporate officer or director.
(§ 51000.15, subd. (a)(5).)

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adjoining lease space (Suite 120) without a license. As the Department explained,
Garcia’s application stated that its pharmacy was located at 25 North 14th Street, Suite
110. However, the Department’s investigation revealed that in or about May 2017,
Garcia expanded its pharmacy operations into an adjoining lease space (Suite 120)
without obtaining a new or modified pharmacy license. According to the Department,
this violated sections 4037 and 4105 of the California Pharmacy Law and section
51000.30 of the Medi-Cal regulations.
       Garcia appealed the decision to the Department’s Office of Administrative
Hearings and Appeals. In accordance with the written appeal procedure, Garcia and the
Department filed briefs and supporting evidence addressed to the two purported grounds
for denial: the failure to disclose Wong’s interest in Sangha Enterprises #9, and the
unlawful expansion into the adjoining lease space.
       In April 2019, the hearing officer issued her proposed decision denying the appeal.
Thereafter, the Department adopted the proposed decision as its final decision.
       Garcia filed a petition for writ of mandate seeking to compel the Department to set
aside its decision. The superior court denied the petition. Garcia timely appealed the
adverse judgment.
                                       DISCUSSION
                                               I
                                     Standard of Review
       A petition for a writ of ordinary mandate under Code of Civil Procedure section
1085 may be used to compel the performance of a ministerial duty or to correct an abuse
of discretion. (American Board of Cosmetic Surgery v. Medical Board of California
(2008) 162 Cal.App.4th 534, 539.) In reviewing an exercise of discretion, “ ‘[t]he scope
of review is limited, out of deference to the agency’s authority and presumed
expertise . . . .’ ” (Id. at p. 547, quoting Stone v. Regents of University of California
(1999) 77 Cal.App.4th 736, 745.) The court will uphold the agency’s action unless it is

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arbitrary or capricious, entirely lacking in evidentiary support, or contrary to required
legal procedures. (Ibid.; Golden Drugs, supra, 179 Cal.App.4th at p. 1465.)
       “ ‘In each case the court must satisfy itself that the [agency’s action] was
supported by the evidence, although what constitutes reasonable evidentiary support may
vary depending upon the nature of the action.’ ” (Golden Drugs, supra, 179 Cal.App.4th
at p. 1466, quoting Shapell Industries, Inc. v. Governing Board (1991) 1 Cal.App.4th
218, 232.) Where, as here, the Legislature has given the Department the discretion to
interpret and apply the criteria for enrollment in order to protect the public, we will
uphold the Department’s decision unless it is “devoid of evidentiary support.”3 (Golden
Drugs, at pp. 1467, 1471; Welf. & Inst. Code, §§ 14043.2, subd. (a), 14043.26, subd. (f),
14043.37, 14043.4, 14043.7, 14043.65, subd. (a).) “When making that inquiry, the
‘ “ ‘court must ensure that an agency has adequately considered all relevant factors, and
has demonstrated a rational connection between those factors, the choice made, and the
purposes of the enabling statute.’ [Citation.]” ’ [Citation.]” (American Board of
Cosmetic Surgery v. Medical Board of California, supra, 162 Cal.App.4th at pp. 547-
548; accord, Golden Drugs, at p. 1471.) However, the court may not reweigh the
evidence or substitute its judgment for that of the agency. (Golden Drugs, at p. 1466.)
       In an appeal from the denial of a writ petition, we review the agency’s action, not
the trial court’s decision.4 (Martis Camp Community Assn. v. County of Placer (2020)

3      We acknowledge that when an agency’s quasi-judicial acts are reviewed by
ordinary mandate, there are (at most) only subtle differences between the “devoid of
evidentiary support” and “substantial evidence” standards. (Golden Drugs, supra, 179
Cal.App.4th at p. 1467; California Native Plant Society v. City of Rancho Cordova
(2009) 172 Cal.App.4th 603, 637; accord, McGill v. Regents of University of California
(1996) 44 Cal.App.4th 1776, 1785-1786.)
4      It thus is unnecessary for us to address all of Garcia’s arguments as to how the trial
court erred. (See Friends of the Old Trees v. Department of Forestry & Fire Protection
(1997) 52 Cal.App.4th 1383, 1393.)

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53 Cal.App.5th 569, 593.) It is the petitioner’s burden to prove that the agency’s action
was arbitrary, capricious, entirely lacking in evidentiary support, unlawful, or
procedurally unfair. (American Coatings Assn. v. South Coast Air Quality Management
Dist. (2012) 54 Cal.4th 446, 460.)
                                             II
                  Failure to Submit Complete and Accurate Information
       Garcia argues that the Department abused its discretion in denying its application
for failing to disclose that Wong held a controlling interest in Sangha Enterprises #9.
Garcia concedes that if Sangha Enterprises #9 was a health care provider, it was obligated
to disclose Sangha Enterprises #9 on its application. Garcia contends, however, that there
was no rational basis for the Department to conclude that Sangha Enterprises #9 was a
health care provider. We disagree.
       As part of its background check on Garcia, the Department obtained a “Statement
of Information” from the California Secretary of State dated February 17, 2016,
indicating that Wong had a controlling interest (as chief financial officer) in Sangha
Enterprises #9, a “pharmacy” business. This information was not reported on Garcia’s
Medi-Cal application. Thus, the Department reasonably concluded that the information
in Garcia’s application package was not complete and accurate.
       Garcia argues, as it did below, that other evidence in the record rebuts the
conclusion that Sangha Enterprises #9 was, in fact, a pharmacy business. Specifically,
Garcia relies on the following evidence: (1) information from the Secretary of State
showing that a different entity, “Sangha Enterprises, Inc.,” was incorporated as a
pharmacy at the same address (1167 South King Road); (2) a face page from a license-
discipline accusation brought by the Board of Pharmacy against “Sangha Enterprises
Incorporated, dba Tropicana Drugs,” with a listed address of 1167 South King Road;
(3) a printout from the Board of Pharmacy’s Web site indicating that a pharmacy license
(PHY 17122) was issued to “Tropicana Drugs” at 1167 South King Road; (4) a

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declaration from Wong that, to his knowledge, “there was no health care provider
licensed to, owned or operated by Sangha Enterprises #9”; and (5) a declaration from a
paralegal that a search of the National Provider Identifier (NPI) registry found no NPI
number associated with Sangha Enterprises #9. Garcia contends that this evidence shows
“Sangha Enterprises, Inc., dba Tropicana Drugs” was the only pharmacy licensed to
operate at 1167 South King Road, and that Wong had no interest in that pharmacy.
       This is one possible interpretation of the evidence, but we disagree that it is the
only reasonable one. An equally plausible interpretation is that both Sangha Enterprises
#9 and Sangha Enterprises, Inc., were involved in the delivery or furnishing of pharmacy
services at 1167 South King Road. This is a reasonable inference based on the
undisputed evidence showing that (1) Sangha Enterprises, Inc., was operating a licensed
pharmacy (Tropicana Drugs) at 1167 South King Road; (2) Sangha Enterprises #9 was
engaged in the same business (pharmacy) and shared the same address (1167 South King
Road) and chief executive officer (Daniel Wong) as Sangha Enterprises, Inc.; (3) a box
labeled “Tropicana” was discovered in the Garcia pharmacy; and (4) Wong admitted to
having an ownership or control interest in another, similarly named pharmacy (Tropicana
Drugs Long Term Care) at an adjacent address (1169 South King Road).
       We also cannot ignore that Wong failed to present any evidence explaining the
nature of Sangha Enterprises #9’s business, its relationship to Tropicana, or the reason
why a document had been filed with the Secretary of State identifying Sangha Enterprises
#9 as a “pharmacy” with Wong as its chief financial officer. Section 14043.65 required
Garcia to submit “all pertinent documents and . . . other relevant evidence” as part of its
appeal. (Welf. & Inst. Code, § 14043.65, subd. (a); Golden Drugs, supra, 179
Cal.App.4th at p. 1469.) Presumably, if Wong had a reasonable explanation for the
Secretary of State filing listing Sangha Enterprises #9 as a pharmacy, he would have
provided it. Instead, he filed nothing more than an equivocal denial stating, “To my
knowledge, there is no health care provider licensed to, owned or operated by Sangha

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Enterprises #9, Inc.” Wong’s failure to provide an explanation, when it was within his
power to do so, supports an inference that the evidence was adverse. (Temple Community
Hospital v. Superior Court (1999) 20 Cal.4th 464, 474; Evid. Code, § 412.)
       On this record, we conclude that it was not an abuse of discretion for the
Department to infer that Sangha Enterprises #9 was a health care provider within the
meaning of section 51000.35, subdivision (b)(3). Even if Sangha Enterprises #9 was not
itself a licensed pharmacy, the evidence shows that it held itself out as a “pharmacy” and
had a clear connection to a licensed pharmacy at the same address, a connection which
Garcia failed to explain. Although Garcia presented evidence to demonstrate that Sangha
Enterprises #9 was not a pharmacy, the Department did not find that evidence persuasive.
The arguments on appeal amount to little more than an improper request for us to
reweigh the evidence, which we will not do. (Golden Drugs, supra, 179 Cal.App.4th at
p. 1466.) Because there is a rational connection between the evidence and the
Department’s determination that Garcia failed to submit a complete and accurate
application, Garcia has failed to show an abuse of discretion.
       Having concluded the Department did not abuse its discretion in denying Garcia’s
application based on its failure to submit a complete and accurate application, it is not
necessary for us to reach the other issue raised in this appeal, i.e., whether the
Department abused its discretion in finding that Garcia unlawfully expanded its
operations to Suite 120 without a license.

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                                      DISPOSITION
       The judgment is affirmed. The Department shall recover its costs on appeal. (Cal.
Rules of Court, rule 8.278(a)(1), (2).)

                                                     KRAUSE               , J.

We concur:

      HULL                  , Acting P. J.

      DUARTE                , J.

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