Filed 8/10/20
                              CERTIFIED FOR PUBLICATION




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



 OAK VALLEY HOSPITAL DISTRICT,                            C085869, C085882, &
                                                               C085883
                  Plaintiff and Respondent,
                                                         (Super. Ct. Nos. 34-2016-
          v.                                           80002320-CU-WM-GDS, 34-
                                                         2016-80002307-CU-WM-
 STATE DEPARTMENT OF HEALTH CARE                        GDS, & 34-2016-80002437-
 SERVICES,                                                    CU-WM-GDS)

                  Defendant and Appellant.


 RIDGECREST REGIONAL HOSPITAL,                                  C086335

                  Plaintiff and Respondent,              (Super. Ct. No. 34-2016-
                                                        80002471-CU-WM-GDS)
          v.

 STATE DEPARTMENT OF HEALTH CARE
 SERVICES,

                  Defendant and Appellant.


      APPEAL from a judgment of the Superior Court of Sacramento County, Michael
P. Kenny, Judge. Affirmed.



                                               1
      Xavier Becerra, Attorney General, Julie Weng-Gutierrez, Assistant Attorney
General, Ismael A. Castro and Brenda A. Ray, Deputy Attorneys General for Defendant
and Appellant.

      Douglas S. Cumming; Davis Wright Tremaine and Jordan B. Keville for Plaintiff
and Respondent.



        These four consolidated appeals present the question of whether medical providers
who provide services under California’s Medi-Cal program are entitled to reimbursement
for the costs of providing in-house medical services for their own employees through
“nonqualifying” self-insurance programs. 1 Nonqualifying self-insurance programs are
those that do not meet all the requirements of section 2162.7 in the Centers for Medicare
and Medicaid Services’ Publication 15-1 (Centers for Medicare and Medicaid Services,
The Provider Reimbursement Manual, § 2162.7, p. 21-42.7 (rev. 406, 08-98); hereafter
Provider Reimbursement Manual). 2 Even for nonqualifying self-insurance programs,
however, the Provider Reimbursement Manual allows providers to claim reimbursement
for reasonable costs on a “claim-paid” basis. (§ 2162.7, par. A, p. 21-42.7 (rev. 406, 08-
98).)
        Here, Oak Valley Hospital District (Oak Valley) and Ridgecrest Regional Hospital
(Ridgecrest) have self-insurance programs providing health benefits to their employees.



1      These consolidated appeals comprise Oak Valley Hospital District v. Department
of Health Care Services (C085869) (relating to the audit of the fiscal year ending June
30, 2008) (Oak Valley I); Oak Valley Hospital District v. Department of Health Care
Services (C085882) (relating to the audit of the fiscal year ending June 30, 2010) (Oak
Valley II); Oak Valley Hospital District v. Department of Health Care Services
(C085883) (relating to the audit of the fiscal year ending June 30, 2012) (Oak Valley III);
and Ridgecrest Regional Hospital v. Department of Health Care Services (C086335)
(Ridgecrest) (relating to the audit of fiscal periods ending on Jan. 31, 2010, & Jan. 31,
2011).
2       Undesignated section citations are to the Provider Reimbursement Manual.

                                             2
Claims for in-house medical services to their employees were included in cost reports
submitted to the State Department of Health Care Services (DHS). DHS allowed the
costs when Oak Valley and Ridgecrest employees received medical services from outside
providers but denied costs when the medical services were provided in-house. Oak
Valley and Ridgecrest sought formal hearings on the denials of their costs for these in-
house medical services. In each of the cases, DHS determined claims paid to Oak Valley
and Ridgecrest out of their self-insurance plan for in-house medical services rendered to
their employees are not allowable costs. Oak Valley and Ridgecrest then petitioned the
trial court for writs of administrative mandate. The trial court granted the writ petitions
on grounds that costs of in-house medical services are reimbursable so long as they are
“ ‘reasonable’ ” as defined by the Provider Reimbursement Manual. DHS has timely
appealed in each case.
       In Oak Valley I, DHS contends the trial court erred because (1) Oak Valley’s self-
insurance program does not meet the requirements for a qualified plan under section
2162.7, (2) the costs claimed by Oak Valley are not reasonable because they represent
charges that exceed actual costs, and (3) the claimed costs are also not reasonable
because they run afoul of related party principles. The issues and arguments in Oak
Valley II and Oak Valley III are substantively the same as in Oak Valley I, but relate to
later fiscal periods. Oak Valley II adds the contention that DHS properly denied the in-
house medical services costs on the bases of sections 332, 332.1, and 2144.4. Ridgecrest
presents substantively the same legal issues and arguments as the Oak Valley cases, but
as they relate to Ridgecrest Regional Hospital.
       We conclude Oak Valley’s and Ridgecrest’s self-insurance programs do not meet
the requirements of a qualified plan under section 2162.7. However, neither medical
provider ever claimed they operated qualified plans. We reject DHS’s contention that
Oak Valley and Ridgecrest costs relating to in-house medical services for their employees
are inherently unreasonable. Oak Valley and Ridgecrest incur actual costs in providing

                                              3
in-house medical services for their employees in the form of time expended by medical
professionals, supplies required for treatment, and facilities within which treatment can
take place. To the extent DHS argues the cost reports are not per se unreasonable, but
unreasonable under the circumstances of the actual treatments of Oak Valley and
Ridgecrest employees, we determine the evidence in the record supports the trial court’s
findings that expert testimony established Oak Valley and Ridgecrest incur actual
expenses in providing in-house medical services for their employees that are not
otherwise reimbursed.
       We reject DHS’s assertions regarding violation of related party principles for
failure to develop the argument. Moreover, DHS did not raise the related party argument
during the administrative or trial court hearings in these cases. We discern nothing in
sections 332, 332.1, and 2144.4 that supports DHS’s categorical denial of in-house
treatment costs. Sections 332 and 332.1 are inapposite because they apply to
circumstances in which the patient is billed directly, whereas this case involves the
question of reimbursement for hospital self-insurance plans that are not fully qualified
under section 2162.7. Section 2144.4 states that fringe benefits, such as unrecovered
costs for in-house treatment of employees, are allowable costs. Finally, we decline to
address DHS’s assertion it calculated costs correctly in Ridgecrest, for failure to set forth
the facts in the light most favorable to the judgment. Contrary to appellant’s burden on
appeal, DHS sets forth a statement of facts in which it ignores the majority of the
testimony introduced during the administrative hearing. Accordingly, we affirm the trial
court’s granting of the petitions for writs of administrative mandate.
                                     BACKGROUND
                  Medi-Cal Reimbursements to Health Care Providers
       In Oroville Hospital v. Department of Health Services (2006) 146 Cal.App.4th 468
(Oroville Hospital), this court explained: “Medicaid is a program through which the
federal government provides financial assistance to qualified participating states for

                                              4
furnishing medical assistance to the poor. (42 U.S.C. § 1396 et seq.; Children’s Hospital
& Medical Center v. Bontá (2002) 97 Cal.App.4th 740, 747.) California participates in
Medicaid through the Medi-Cal program. (Welf. & Inst. Code, § 14000 et seq.;
Children’s Hospital & Medical Center v. Bontá, supra, 97 Cal.App.4th at p. 747.) DHS
administers the Medi-Cal program pursuant to the Medi-Cal Act and DHS’s regulations.
(Welf. & Inst. Code, § 14000 et seq.; Cal. Code Regs., tit. 22, § 50000 et seq.)” (Id. at
pp. 471-472.) “DHS is required to reimburse Medi-Cal providers of hospital services for
their Medi-Cal costs. ([Welf. & Inst. Code,] § 14170; Cal. Code Regs., tit. 22, § 51536.)
. . . Hospitals [providing Medi-Cal services] are to be reimbursed for their ‘[a]llowable
costs determined in accordance with applicable Medicare standards and principles of
reimbursement.’ (Cal. Code Regs., tit. 22, § 51536, subd. (a)(2), italics added;
[citation].)” (Redding Medical Center v. Bonta (2004) 115 Cal.App.4th 1031, 1035.)
       Consistent with Medicare standards, Medi-Cal providers such as Oak Valley and
Ridgecrest may seek reimbursement for self-insured programs in which they provide
medical benefit to their own employees. (§ 2144.4, p. 21-31 (rev. 375, 12-93) [including
a provider’s “unrecovered cost of medical services rendered to employees” among fringe
benefits includable in a provider’s costs].) To this end, the Provider Reimbursement
Manual informs providers: “You may believe that it is more prudent to maintain a total
self-insurance program (i.e., the assumption by you of the risk of loss) independently or
as part of a group or pool rather than to obtain protection through purchased insurance
coverage.” (§ 2162.3, p. 21-42.6 (rev. 444, 03-11).)
       If a provider’s self-insurance program qualifies under section 2162.7,
contributions into the program fund are reimbursable. (§ 2162.3, p. 21-42.6 (rev. 444,
03-11) [“If such a program meets the conditions specified in §2162.7, payments into such
funds are allowable costs”].) However, if a provider’s self-insurance program does not
qualify under section 2162.7, contributions into the program fund are not reimbursable.
The Provider Reimbursement Manual states: “If a provider enters into an agreement with

                                             5
an unrelated party that does not provide for the shifting of risk to the unrelated party,
such an agreement shall be considered self-insurance. For example, any agreement
designed to provide administrative services only shall be considered self-insurance and
must meet the requirements specified below. If administrative services agreements do
not meet these requirements [for a qualifying plan as defined in section 2162.7], any
amounts funded as part of the agreement will not be allowed. Payments from the fund,
however, will be treated on a claim-paid basis as specified in §2162.3.” (§ 2162.7,
par. A, p. 21-42.7 (rev. 406, 08-98), italics added.)
       Regardless of whether the medical provider has a qualified or nonqualified self-
insurance program, “[a]ll payments to providers of services must be based on the
reasonable cost of services covered under title XVIII of the Act and related to the care of
beneficiaries . . . . Reasonable cost includes all necessary and proper costs incurred in
rendering the services, subject to principles relating to specific items of revenue and
cost.” (§ 2100, p. 21-2.5 (rev. 454, 09-12), italics added.) Section 2102.1 elaborates on
this principle and states, in pertinent part, that “[i]t is the intent of the program that
providers are reimbursed the actual costs of providing high quality care, regardless of
how widely they may vary from provider to provider, except where a particular
institution’s costs are found to be substantially out of line with other institutions in the
same area which are similar in size, scope of services, utilization, and other relevant
factors.” (§ 2102.1, p. 21-2.5 (rev. 454, 09-12).)
             Oak Valley and Ridgecrest Nonqualifying Self-insurance Plans
       Oak Valley and Ridgecrest are acute care hospitals that provide Medi-Cal services.
Both hospitals provide health benefits to their employees through self-insurance
programs that do not qualify under section 2162.7. Employees of Oak Valley and
Ridgecrest who participated in the plans could obtain medical services in house or from
third party providers. Claims for employee treatments were submitted to the self-
insurance plans’ third party administrators. The third party administrators reviewed the

                                                6
claims, determined whether they were payable, and if payable would draw the money
from a bank account funded by the medical providers to pay approved claims.
       Consistent with Medi-Cal rules, Oak Valley and Ridgecrest submitted cost reports
to DHS. As noted above, Oak Valley I relates to the fiscal year ending June 30, 2008,
Oak Valley II relates to the fiscal year ending June 30, 2010, Oak Valley III relates to the
fiscal year ending June 30, 2012, and Ridgecrest relates to those ending on January 31,
2010, and January 31, 2011. These cost reports submitted to DHS included as allowable
costs claims paid for the medical services rendered to Oak Valley’s and Ridgecrest’s
employees under the nonqualifying self-insurance programs.
       DHS audited the cost reports and, as relevant to these appeals, eliminated all
claims paid under the self-insurance program for in-house medical services for Oak
Valley and Ridgecrest employees. Oak Valley and Ridgecrest pursued informal hearings
regarding the outcome of DHS’s audits. When DHS confirmed its denial of in-house
medical treatment expenses under the self-insurance plans, Oak Valley and Ridgecrest
requested formal hearings.
                             Formal Administrative Hearings
       On July 21, 2015, a formal administrative hearing was conducted in Oak Valley I.
We recount in some detail the proceedings of the formal administrative hearing in Oak
Valley I because it established the evidence and contentions of the parties at the
administrative level in a manner consistent with the approach in these consolidated
cases. 3




3      The record in Oak Valley II contains additional evidence and argument regarding
whether Provider Reimbursement Manual sections 332, 332.1, and 2144.4 apply to Oak
Valley’s in-house medical treatment costs as unrecovered costs. We recount the record
relating to these sections of the Provider Reimbursement Manual in parts IV and V,
below. In part VI, below, we address the administrative record as it relates to Ridgecrest.

                                             7
       During the Oak Valley I administrative proceeding, DHS introduced the testimony
of Adrian Peña. Peña testified he was the DHS auditor who reviewed the Oak Valley
cost report for the fiscal period that ended on June 30, 2008. Peña explained that he
disallowed Oak Valley’s claim for in-house medical services for its own employees under
its nonqualifying self-insurance program. In Peña’s view, “there’s no actual cost incurred
in that case [of in-house medical treatment for employees] because there’s no money out
of pocket.” However, when Oak Valley’s employees sought medical treatment from
third parties under the same self-insurance plans, the claims were allowed.
       On cross-examination, Peña acknowledged the distinction between in-house and
third party medical treatment is not supported by section 2162.7:
       “Q. Does section 2162.7 specifically make such a distinction [between claims
paid for in-house treatment and those to third parties]?
       “A. [Peña] No.”
       Peña agreed that inclusion of a claim for treatment in a cost report to DHS did not
cause the claim to be reimbursed or paid. Instead, claims for in-house medical services
for employees are required for inclusion in Oak Valley’s cost report:
       “Q. . . . When a provider prepares a cost report and they include the cost of
treating patients in the cost report, does the act of including those costs in the cost report
in and of itself cause claims to be generated, processed and paid?
       “A. [Peña] No.
       “Q. Isn’t it true that a hospital’s total costs of treating patients have to be included
in the cost report to ensure proper cost finding?
       “A. Yes.”
       In Oak Valley I, DHS introduced no other testimony than that of Peña.
       In support of its contentions, Oak Valley called Rodney Phillips as a witness.
Phillips served as a reimbursement consultant for Oak Valley during the relevant audit
period and is a certified public accountant. Phillips testified about the components of the

                                               8
costs associated with in-house medical services for Oak Valley employees. He noted that
contractual adjustments were made to the in-house medical treatment claims to ensure
there would be no request for profit through a markup but only the amount approved as
reasonable by the third party administrator.
       “Q. [Oak Valley’s counsel] [I]s Oak Valley seeking to include a markup in the
cost which it is asking here for the Administrative Law Judge to recognize as allowable?
       “A. No.
       “Q. And what’s the basis for your opinion in that regard?
       “A. The previous exhibits that we discussed regarding the contractual
adjustments.
       “The fact that the contractual adjustments were not included tells us that what the
Provider did claim was the amount of claims that were paid and processed by its third-
party administrator and nothing more.”
       Phillips also provided testimony touching on whether in fact Oak Valley had been
doubly compensated for claims relating to in-house medical services for its employees.
Phillips testified that “in this case [Oak Valley] ha[s] not attempted to recover more than
the claims that were paid and processed. They were claimed only once. And that once
was in their health plan expenditures, and it was based upon paid claims processed by the
third-party administrator. [¶] I know of no other place where they attempted to claim
those expenses.” In support, Oak Valley introduced evidence in the form of Worksheet
A. Regarding this document, Phillips explained this evidence “established that the
allowances are not included in Worksheet A. They never were claimed in the cost
report.”
       On this point, Phillips testified, “The cost of providing a health plan benefit to the
employee is separate and distinct from the operating expenses of operating the equipment
and the employee and the personnel.” “The additional information is the exhibits we’ve
provided where we established that the contractual adjustments are not included on

                                               9
Worksheet A and have not been included in the cost report as an allowable cost.” For
this reason, the hospital was not reimbursed twice for providing in-house medical care to
its employees. In short, Oak Valley established that it did not, in fact, double claim in-
house medical treatment as an allowable cost. Instead, Phillips’s testimony showed Oak
Valley ensured that its claim of in-house medical treatment was properly claimed only
once.
        Responding to Peña’s disallowance of the costs of providing in-house medical
treatment, Phillips stated that the disallowance “essentially says by zeroing that out, it
says the cost of care to those patients is zero; that the cost is zero. That’s simply false.”
        The administrative law judge issued a proposed decision that rejected Oak
Valley’s position. The proposed decision affirmed DHS’s categorical elimination of the
cost of medical services provided in-house to Oak Valley employees even while allowing
payment of costs for medical services for employees by outside providers of health care
services. The administrative law judge reasoned that because payment for in-house
medical services was paid “using monies drawn from a bank account funded by Oak
Valley . . . that payment of the In-House Service claims did not represent a real cost
because Oak Valley was simply reimbursing itself.” (Fn. omitted.)
        The administrative law judge concluded payment of the self-insurance program’s
bank account necessarily meant service claims did not represent an actual cost but mere
reimbursement of itself. The administrative law judge reasoned: “Payment origin and
destination were one and the same, and at all times Oak Valley retained ownership of the
funds. . . . [T]he actual expenses incurred by Oak Valley in providing medical care to its
employees were already included in the cost centers of the Oak Valley cost report where
the services were rendered. To also allow the claim-paid costs for In-House Services
would constitute an impermissible double expensing (referred to by witnesses as double
reimbursement) of the costs.”



                                              10
                     Petitions for Writs of Administrative Mandamus
       Oak Valley and Ridgecrest petitioned for administrative mandate. The trial
court’s decision in Oak Valley I is representative in its reasoning and result on the
common issues. In Oak Valley I, the trial court issued a writ of administrative mandate
commanding DHS to set aside its decision. In issuing the writ, the trial court relied on
the testimony of Phillips. The trial court explained, “Oak Valley is not reimbursed for
the cost of providing a self-insured health plan by virtue of the fact that the total costs of
treating all patients (including employees) are included in the cost centers.” Phillips
provided evidence that DHS’s adjustment erred because Oak Valley was entitled to
recover its in-house medical service costs under section 2162.7 because “it’s the only
manner in which [Oak Valley] can claim [its] employee expenses related to their health
insurance.”
       The trial court also determined DHS erred in applying different standards of
“reasonableness” to costs depending on whether the costs related to qualified or
nonqualified plans. Thus, the trial court noted: “Both sections 2162.3 and 2162.7
provide a method by which a Medi-Cal provider can seek reimbursement for the costs
incurred in providing medical coverage to its employees via a self-insurance plan. If the
plan is qualified, section 2162.3 states that ‘payments into such funds are allowable
costs.’ When the plan is unqualified, section 2162.7, subdivision (A) states: ‘Payments
from the fund . . . will be treated on a claim-paid basis as specified in § 2162.3.’ The
Court finds it is unreasonable to interpret only one of these provisions as creating a
‘predetermination of reasonableness’ and not the other. Further, both sections are subject
to section 2102.[1]’s general reasonableness requirement.”
       The trial court made substantively the same decision in Oak Valley II and Oak
Valley III as in Oak Valley I, as the same legal issues relate to later fiscal periods. The
exception is that in Oak Valley II, the trial court additionally addressed DHS’s argument
that in-house medical services are not allowable costs under sections 332, 332.1, and

                                              11
2144.4. The trial court’s decision in Ridgecrest is substantively the same as in the Oak
Valley cases, except that it pertains to Ridgecrest Regional Hospital. No additional legal
issues are presented in Ridgecrest that are not resolved by our conclusions in the Oak
Valley cases.
                                       DISCUSSION
                                              I
                                    Standard of Review
       Under Code of Civil Procedure section 1094.5, subdivision (a), a writ of
administrative mandate may issue for purposes of reviewing the validity of any final
administrative order or decision for which a hearing was required. To this end,
subdivision (b) of Code of Civil Procedure section 1094.5 provides that courts shall
consider whether the administrative agency “has proceeded without, or in excess of,
jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of
discretion.” That subdivision defines abuse of discretion as an action when an
administrative agency “has not proceeded in the manner required by law, the order or
decision is not supported by the findings, or the findings are not supported by the
evidence.”
       In reviewing claims of insufficient evidence in support of an agency’s decision,
“the trial court, as here, is authorized by law to exercise its independent judgment on the
evidence, ‘abuse of discretion is established if the court determines that the findings are
not supported by the weight of the evidence.’ (Code Civ. Proc., § 1094.5, subd. (c).) In
such a case our review on appeal is limited. We will sustain the trial court’s findings if
they are supported by substantial evidence. (Kazensky v. City of Merced (1998) 65
Cal.App.4th 44, 52; see Moran v. Board of Medical Examiners (1948) 32 Cal.2d 301,
308-309.) In reviewing the evidence, we ‘resolve all conflicts in favor of the party
prevailing in the superior court and must give that party the benefit of every reasonable



                                             12
inference in support of the judgment.’ (Kazensky, supra, at p. 52.)” (Kifle-Thompson v.
State Bd. of Chiropractic Examiners (2012) 208 Cal.App.4th 518, 523 (Kifle).)
       In the argument sections of its briefs, DHS contends it is entitled to reversal on
grounds it is entitled to deference for its interpretation of Provider Reimbursement
Manual sections. Although an agency may be entitled to deference in interpreting its own
regulations and policies, DHS is not the agency that promulgated the Provider
Reimbursement Manual. Instead, the Provider Reimbursement Manual was issued by the
Centers for Medicare and Medicaid Services. Thus, deference is owed only to the
Secretary of the (federal) Department of Health and Human Services. (Community Care
Foundation v. Thompson (D.D.C. 2006) 412 F.Supp.2d 18, 22 (Community Care) [“The
high degree of deference due to the Secretary’s interpretation of Medicare regulations
extends to the [Provider Reimbursement Manual] provisions, which are themselves
interpretation of regulations”].) Neither party has presented us with the Secretary’s
interpretation of the Provider Reimbursement Manual sections pertinent to these cases.
And our research has not revealed any guidance by the Secretary on the sections in the
Provider Reimbursement Manual relevant to these cases. Accordingly, we reject DHS’s
claim that it is entitled to any deference to its reading of the Provider Reimbursement
Manual.
                        APPEAL BY DHS IN OAK VALLEY I
                                             II

   Whether Oak Valley Self-insurance Meets the Requirements for a Qualified Plan
       DHS argues that Oak Valley’s payments from its unqualified self-insurance funds
are only allowable costs on a claims paid basis. DHS then elaborates that “payments into
the self-insurance fund are not allowable costs, while payments funded by Oak Valley
and paid from the fund by its third party vendor . . . may be allowable costs only on a
claim-paid basis.”



                                             13
       Oak Valley has never disputed that it has a nonqualifying self-insurance plan or
that the allowable costs are limited to claims paid. Moreover, there is no dispute that
section 2162.7, paragraph A, of the Provider Reimbursement Manual allows “[p]ayments
from the [self-insurance] fund” to be considered “on a claim-paid basis . . . .” (§ 2162.7,
par. A, p. 21-42.7 (rev. 406, 08-98.)
                                             A.
          Whether In-house Treatment Costs are Categorically Nonallowable
       The gravamen of DHS’s argument is not clearly articulated either in its heading or
in the opening brief’s discussion. As we can best discern, it appears that DHS contends,
as a matter of law, Oak Valley’s payments to itself necessarily represent charges that
exceed the actual cost of providing services. This position would appear consistent with
the testimony of Peña, DHS’s only witness at the administrative hearing. Peña testified
he categorically disallowed Oak Valley claims for in-house medical services for its own
employees under its nonqualifying self-insurance program. To the extent that this
represents DHS’s position, we reject it.
       The flaw in this position is illustrated by Peña’s assertion that in-house medical
treatment by Oak Valley was a nonallowable cost, but third party medical treatment was
an allowable cost. Peña himself acknowledged Provider Reimbursement Manual section
2162.7 does not distinguish between claims paid for in-house medical treatment and
those paid to third parties. On appeal, DHS also acknowledges that costs of third party
commercial insurance are allowed.
       We decline Oak Valley’s invitation to extend the holding of our decision in
Oroville Hospital, supra, 146 Cal.App.4th 468, to the circumstances of this case. The
question presented in Oroville Hospital was whether DHS erred in determining the
hospital could not claim reimbursement in the absence of a recognized independent
fiduciary. (Id. at pp. 473, 475.) This court held that section 2162.7 requires an
independent fiduciary before claims may be paid. (Oroville Hospital, at pp. 475-476.)

                                             14
This court also rejected the hospital’s alternate argument that payment should be allowed
nonetheless to avoid inconsistent treatment of payments for health care services. (Id. at
p. 477.) This court noted the hospital’s “remedy is to ask the branch of government
responsible for the rules to change them.” (Ibid.) Neither holding – that an independent
fiduciary is required for a self-administered plan or that a policy of disparate treatment of
different kinds of costs should be changed by the policy makers – requires extension to
help us conclude section 2162.7 allows payment of in-house medical treatments of
employees on a claim-paid basis.
       Therefore, we agree with the trial court that Provider Reimbursement Manual
section 2162.7 does not provide for the categorical denial of costs for in-house treatment
under a nonqualifying self-insurance plan. Section 2162.7, paragraph A, states only that
payments “will be treated on a claim-paid basis” without distinguishing between in-house
and third party treatment. (§ 2162.7, par. A, p. 21-42.7 (rev. 406, 08-98.) The only
categorical prohibition on costs is section 2102.1’s requirement that any allowable costs
meet the standard of reasonableness. The trial court correctly determined the Provider
Reimbursement Manual does not categorically bar reimbursement for costs of Oak
Valley’s in-house medical services for its employees.
                                             B.
     Whether Oak Valley’s Paid Claims for In-house Treatment are Unreasonable
       Again, the exact point of DHS’s argument is difficult to discern. DHS’s argument
heading asserts that “Oak Valley’s paid claims for services rendered in-house to its
employees are not reasonable costs.” This argument might either be legal in nature (in
that costs are unreasonable as a matter of law) or factual in nature (in that the in-house
treatment costs claimed by Oak Valley were unreasonable as a matter of fact). To the
extent the argument is one of law, we have already concluded in part II A. that section
2162.7 of the Provider Reimbursement Manual does not categorically disallow in-house
treatment costs so long as they meet the standard of reasonableness. To the extent DHS

                                             15
argues the actual costs claimed by Oak Valley were unreasonable under the factual
circumstances, we reject the argument as unsupported by the record.
       DHS asserts that “the claims paid to Oak Valley for services rendered to its
employees in-house were for payment of billed charges, not actual costs to Oak Valley, in
that the actual costs were already included in the cost report in the various cost centers
where the employees were treated.” We note DHS also states that “[t]he parties agree
that Oak Valley may have incurred costs in treating its employees in-house.” Thus, it
appears DHS understands that Oak Valley incurred some costs in providing in-house
treatment, but asserts those costs did not meet the test of reasonableness.
       More importantly for purposes of this appeal, DHS did not present testimony or
evidence to support this newly-raised factual theory that the actual costs were already
included in the cost reports. At the administrative hearing, Peña testified only that in-
house costs were inherently unreasonable. To the contrary, Oak Valley did present
evidence that Oak Valley incurs actual costs when it provides in-house medical treatment
to its employees and that these costs are not otherwise reimbursed. In considering the
evidence, we resolve all conflicts in favor of Oak Valley because it prevailed in the
superior court and give Oak Valley the benefit of every reasonable inference in support of
the judgment. (Kifle, supra, 208 Cal.App.4th at p. 523.) We conclude the record
supports the trial court’s finding it was “persuaded by Phillips’[s] testimony that Oak
Valley incurs an actual expense in providing self-insured medical coverage to its
employees as a fringe benefit that is not reimbursed by Oak Valley including the cost of
treating all of its patients in the cost center sections of the Cost Report.” 4




4      During the administrative hearings in the other cases in these consolidated cases,
Phillips’s testimony provides substantial evidence in support of the trial court’s findings
that Oak Valley and Ridgecrest have actual expenses they may claim for in-house
medical services provided to their employees.

                                               16
       DHS next asserts that “health coverage plans offered to employees is a fringe
benefit and employee fringe benefits are allowable cost. . . . However no such
documentation was provided.” In support of this assertion, DHS does not provide a
record citation. This does not meet the appellant’s burden and the assertion is deemed
forfeited. (Nwosu v. Uba (2004) 122 Cal.App.4th 1229, 1246.)
       DHS asserts that if it “were to allow the claims paid by [the third party
administrator] to Oak Valley for treating its employees in-house, Oak Valley would
receive reimbursement from the Medi-Cal program for those services in excess of its
actual costs.” We reject this assertion on the same grounds. Again, the lack of record
citation in support of this factual assertion forfeits the claim. (Nwosu v. Uba, supra, 122
Cal.App.4th at p. 1246.) DHS did not introduce evidence at the administrative hearing on
this point. Further, the trial court found, on the basis of testimony by Phillips, that Oak
Valley was not receiving reimbursement in excess of the actual costs of its in-house
medical services for Oak Valley’s employees.
       Finally, we note the evidence in the record supports the trial court’s finding DHS
did not prove Oak Valley received double compensation for its in-house medical services
for employees. During the administrative hearing, Phillips explained that contractual
adjustments included on a worksheet have not been included in the cost report as an
allowable cost. Thus, Oak Valley was not reimbursed twice for the same costs. As this
court has previously observed, “A single witness’[s] testimony may be sufficient to
satisfy the substantial evidence test” for review of evidence presented at an administrative
hearing. (Mickelson Concrete Co. v. Contractors’ State License Bd. (1979) 95
Cal.App.3d 631, 634.) Under the standard of review applying to this case, we conclude
the evidence in the record supported the trial court’s finding that DHS did not prove that
Oak Valley claimed or received double compensation for in-house medical treatment of
its employees.



                                             17
                                              III
        Whether Oak Valley’s Payment Conflicted with Related Party Principles
       DHS asserts that “Oak Valley’s payments to itself contradict related party
principles which prohibit providers from claiming profit and artificially inflating costs
which may be generated from a less than arm’s-length transaction.” (Fn. omitted, italics
added.) DHS’s opening brief does not discuss the standard for independence of a third
party administrator or what facts might support the argument that Oak Valley’s third
party administrator was not independent. For lack of development, this argument is
forfeited. (Allen v. City of Sacramento (2015) 234 Cal.App.4th 41, 52 (Allen) [“We are
not required to examine undeveloped claims or to supply arguments for the litigants”].)
       Moreover, DHS did not raise the issue of whether the Stanislaus Foundation for
Medical Care was an independent third party administrator of Oak Valley’s self-
insurance plan during the administrative hearing. The issue also was not tendered during
the trial court’s hearing on Oak Valley’s writ petition. However, “[t]he general rule is
that contentions not raised in the trial court may not be raised for the first time on
appeal.” (Wilson v. State Personnel Bd. (1976) 58 Cal.App.3d 865, 883.) DHS has not
developed the record to allow our review of the assertion that the Stanislaus Foundation
for Medical Care is not sufficiently independent of Oak Valley to serve as a third party
administrator for the self-insurance program.
       Accordingly, we affirm the trial court’s issuance of the writ of administrative
mandate in Oak Valley I.
         APPEALS BY DHS IN OAK VALLEY II AND OAK VALLEY III
       As we noted in footnote 1, the appeals in Oak Valley I, Oak Valley II, and Oak
Valley III differ in the fiscal periods upon which they focus. Comparing DHS’s briefing
in Oak Valley I to the briefing in Oak Valley II and Oak Valley III, the briefs are nearly
identical in the substance of the arguments presented in Oak Valley I, with two additional
arguments discussed below. First, DHS argues the trial court erred in rejecting DHS’s

                                              18
calculations of Oak Valley’s unrecovered costs in the Oak Valley II and Oak Valley III.
Second, DHS contends Oak Valley’s payments violate related party principles by Oak
Valley “paying itself” for its in-house medical treatments of its employees.
                                             IV
          Whether DHS Properly Calculated Oak Valley’s Unrecovered Costs
       In Oak Valley II and Oak Valley III, DHS additionally asserts that it “properly
calculated Oak Valley’s unrecovered costs in rendering medical services to its employees
in-house and adjusted Oak Valley’s per diem rate and cost-to-charge ratio.” DHS asserts
that sections 332.1 and 2144.4 govern the method by which Oak Valley may seek
unrecovered costs. The resolution of DHS’s contentions turns on the correct
interpretation of sections 332.1 and 2144.4. As we explain below, we conclude section
332.1 is inapposite because it applies to circumstances in which the patient is billed
directly, whereas this case involves the question of reimbursement for hospital self-
insurance plans that are not fully qualified under section 2162.7. Section 2144.4 states
that fringe benefits are allowable costs, and includes a provider’s unrecovered cost of
medical services rendered to employees as one of the examples of a fringe benefit.
(§ 2144.4, par. 6, p. 21-31 (rev. 375, 12-93).) This section is not applicable because there
is no unrecovered cost.
                                             A.
                            Provider Reimbursement Manual
       As pertinent to the resolution of this issue, we recount the provisions of three
sections in the Provider Reimbursement Manual.
       Section 2144.4 provides: “Fringe Benefits Includable as Provider’s Cost. —
Following are examples of fringe benefits: [¶] Provider contributions to certain deferred
compensation plans (see §2140ff); [¶] Provider contributions to certain pension plans
(see §2142ff); [¶] Paid vacation . . . . [¶] Provider-paid educational courses benefiting
the employee’s interest; [¶] Provider’s unrecovered cost of meals (see §2145) and room

                                             19
and board furnished employees for the employees’ convenience; [¶] Provider’s
unrecovered cost of medical services rendered to employees (see §332.1); and [¶] Cost
of health and life insurance premiums paid or incurred by the provider if the benefits of
the policy inure to the employee or his/her beneficiary.” (§ 2144.4, p. 21-31 (rev. 375,
12-93), underscoring omitted, italics added.)
         Due to its centrality to this issue, we quote the entirety of section 332.1:
         “Method for Including Unrecovered Cost.--The unrecovered cost of services
furnished to employees as fringe benefits may be included in allowable costs by treating
the amount actually charged to the employees as a recovery of costs. Where the cost of
the service exceeds the amount charged to the employee, the amount charged to the
employee would be applied as a reduction in the costs of the particular department(s)
rendering the services. If costs should be apportioned by the RCCAC Method, all
charges related to employees’ services would be subtracted from the total charges used to
apportion such costs, so that unrecovered costs relating to employees’ allowances would
be apportioned between Medicare patients and other patients. Likewise, where an
average cost per diem is used to apportion costs, the days applicable to the employees
who received the allowances should be removed from the total days used to apportion
costs.
         “Where the amount charged to an employee exceeds the costs of the services
provided, there is no unrecovered cost and, therefore, no cost of fringe benefit. In this
case, the amount charged to the employee is not offset against the department costs and
the charges for the services given to the employee are not deleted from the total charges.
The services furnished to employees are treated the same as services furnished to any
other patients.” (§ 332.1, p. 3-10 (rev. 280, 01-83), underscoring omitted.)




                                               20
         The following two examples are then provided in paragraphs A and B of section
332.1:

         A. Example (Where Departmental Costs are Equivalent to 90% of
            Charges).-

                                                  Gross Charges                 Costs

         Other than Employees
            Medicare---------------------------- $ 900
            Non-Medicare---------------------- 1,800
                                                   $2,700
         Employees                                    300
            Total--------------------------------- $3,000                   $2,700

         Computation of employee fringe
            benefit (30% discount):
         To be collected--70% of $300                                       ($210)
         Cost applicable to service
            provided (90% x $300)                                             270
         Unrecovered Cost---------------------                              $ 60

         Total charges-------------------------- $3,000 Total costs         $2,700
         Less: Employee charges--------------       300 Employee payment       210
                                                        (Amount charged)
         Adjusted charges---------------------- $2,700 Adjusted cost        $2,490

         Payment by Medicare--900/2700 x $2,490 = $830

         The unrecovered cost of $60 remains in the departmental costs and is
         apportioned among the users of the department other than employees.




                                                 21
       B. Example (Where Departmental Costs are Equivalent to 50% of
          Charges).--

                                               Gross Charges                     Costs

       Other than Employees
          Medicare----------------             $ 900
          Non-Medicare----------                1,800
                                               $2,700
       Employees--------------------              300

          Total-----------------------         $3,000                          $1 500

       Computation of employee
          fringe benefit (30%
          discount):
       To be collected--70% of $300                                            ($210)
       Cost applicable to service
          provided (50% x $300)                                                   150
       Excess of amount charged
          to employees over cost                                                 $ 60
       Unrecovered Cost-----------                                               None
       Payment by Medicare
          (900/3,000 x $1,500)--                                                 $ 450

(§ 332.1, par. A, p. 3-10 (rev. 280, 01-83) & par. B, p. 3-11 (rev. 435, 03-08), italics
added.)
       Section 332 provides: “Allowances to Employees [¶] Allowances, or reduction
in charges, granted to employees for medical services as fringe benefits related to their
employment are not considered courtesy allowances. Employee allowances are usually
given under employee hospitalization and personnel health programs. [¶] The
allowances themselves are not costs since the costs of the services rendered are already
included in the provider’s costs. However, any costs of the services not recovered by the
provider from the charge assessed the employee are allowable costs.” (§ 332, p. 3-9
(rev. 280, 01-83).)




                                             22
                                              B.
                              Administrative Hearing Record
       As in Oak Valley I, DHS introduced the testimony of Adrian Peña, who testified
about Oak Valley’s approach to claiming costs for in-house medical treatments for its
employees under its self-insurance program. During the administrative hearing in Oak
Valley II, DHS also elicited the testimony of Jose Juarez, the auditor who conducted the
audit at issue in that case. Juarez testified that he disallowed the third party
administrator’s payments to Oak Valley for in-house medical services for its employees.
After eliminating the in-house treatment costs, he compared “the total amount of the
charges related to employees treated in house to the amount in health benefit premiums
the employees paid during the subject fiscal year to determine if the employees had
received fringe benefit allowances or reductions in charges.” Juarez calculated that Oak
Valley employees received almost $2.5 million in fringe benefit allowances.
       Testifying as a witness for Oak Valley, Phillips took a different view: “Section
332.1 has no bearing whatsoever in this situation because section 332 involves discounts
against charges in which the patient is billed directly. [¶] The [provider’s self-insurance]
plan is not billed; the patient is billed directly. And the provider has given a discount to
the employee, but the employee is obligated to pay the full amount of the charges if the
discount isn’t allowed. [¶] So there’s a difference between a contract directly with an
employee and a contract through a [third party administrator] in which the [third party
administrator] pays and processes claims. There’s a stark difference. 332.1 is
inappropriate.”
       Phillips further testified that in this case, “the Department wishes to remove the
claims, the paid claims themselves, and not the discount. The discount has not been
claimed by the Provider. [¶] And 332 is clear in that a provider is not entitled to claim
the discount, the discount being the difference between billed charges and amount paid.
[¶] And the Department has assumed that . . . and I’m not sure of the reason behind it,

                                              23
but they’re reducing and eliminating the claims themselves, rather than the discount,
which is what 332 permits a provider to do if in fact there is, quote, an unrecovered cost,
which we’re not alleging there is.”
       In its final decision, DHS followed the approach taken by Juarez to the accounting
guidance of section 332.1. In determining which approach to take, DHS noted that “[a]ll
of the interpretations, and the conclusions reached therefrom, of these complex regulatory
provisions as presented by the three witnesses are found by this tribunal to be reasonable,
non-arbitrary and fair.” DHS determined that its own “interpretation of sections 332 and
332.1 . . . is entitled to . . . deference . . . .” DHS further reasoned that “other than the
testimony of . . . Phillips, there is little support for [Oak Valley’s] conclusion that
sections 332 and 332.1 apply only to discounts. The term ‘discount’ does not appear in
either of these sections nor has [Oak Valley] offered any authority for its suggestion that
sections 332 and 332.1 apply narrowly only to discounts.”
       The trial court came to the opposite result in ruling on the Oak Valley II petition
for administrative mandate. The trial court determined that the Provider Reimbursement
Manual “provides that the cost of ‘health insurance premiums’ is an allowable cost ‘if the
benefits of the policy inure to the employee.’ (. . . § 2144.4.)” The trial court concluded
that DHS’s “application of section 332.1 . . . was also an abuse of discretion. Since Oak
Valley’s in-house claims are reimbursable under section 2162.7, there is no ‘unrecovered
cost’ associated with Oak Valley’s provision of self-insured medical coverage to its
employees triggering the use of section 332.1.”
                                               C.
                                            Analysis
       At the outset of our analysis, we reiterate our conclusion that the trial court
correctly determined Provider Reimbursement Manual section 2162.7 does not allow for
the categorical denial of costs for a medical provider’s in-house treatment under a
nonqualifying self-insurance plan. (See part II, above.) Thus, the question presented by

                                               24
this issue is whether sections 332, 332.1, and 2144.4 provide a basis for categorically
denying Oak Valley’s in-house medical treatments as includable costs. Oak Valley
counters that section 332.1 is inapplicable because it applies only to instances in which
employees are billed directly by insurance companies for medical services provided. In
Oak Valley II, the trial court determined section 332.1 does not apply because there is no
unrecovered cost under that section. In Oak Valley III, the trial court did not address
section 332.1.
         Section 2144.4 states that fringe benefits are “[i]ncludable as Provider’s Cost” and
that the provider’s unrecovered cost in providing medical services for employees is such
a fringe benefit. (§ 2144, p. 21-31 (rev. 375, 12-93), underscoring omitted.) Based on our
conclusion that Oak Valley’s in-house medical claims for its employees are reimbursable
under section 2162.7, there is no “unrecovered cost” associated with Oak Valley’s
provision of self-insured medical coverage to its employees triggering the use of section
332.1.
         And even if these sections applied to Oak Valley’s nonqualifying self-insurance
plan, sections 332, 332.1, and 2144.4 do not support DHS’s categorical denial of Oak
Valley’s in-house treatment costs.
         In construing sections 332, 332.1, and 2144.4, we reject DHS’s claim that its
interpretation is entitled to deference. As we noted in part I, above, the sections at the
heart of this issue were promulgated by the federal Centers for Medicare and Medicaid
Services – not by DHS. Thus, DHS is not entitled to deference in its interpretation of
regulations it did not originate. (Community Care, supra, 412 F.Supp.2d at p. 22.)
         We also reject the reasoning in DHS’s final decision where it asserts that neither
section 332 nor 332.1 contains the word “discount.” By quoting only the beginning
portion of section 332.1, DHS’s final decision overlooked the fact that the section uses
“discount” twice in providing examples of calculations for allowable costs. (§ 332.1,
par. A, p. 3-10 (rev. 280, 01-83) & par. B, p. 3-11 (rev. 435, 03-08).) The examples of

                                              25
section 332.1 are instructive because they show the complexity of having three separate
approaches to costs for essentially the same medical treatment but that vary according to
whether the treatment was provided to (1) Medicare patients, (2) non-Medicare patients,
or (3) the medical provider’s own employees. Section 332.1 further shows the
calculation of includable costs becomes even more complex if the medical provider gives
its employees a “discount” for in-house treatments.
       Regarding discounts for in-house treatments of employees, section 332.1 clearly
provides that the amount of the discount is not an allowable cost. Section 332.1’s first
example – which posits a “30% discount” on a $300 service to an employee – lists only
the non-discount portion of $210 under the “costs” column. (§ 332.1, par. A, p. 3-10
(rev. 280, 01-83).) This $210 represents the amount charged to the employee who must
pay only 70 percent of the $300 service. Once the employee has paid $210, the provider
in the example is allowed to claim as a cost only $60 as an “allowable cost” for the
“unrecovered cost of services furnished to employees as fringe benefits.” (§ 332.1, p. 3-
10 (rev. 280, 01-83).) This allowable cost reflects the following computation: The
service that is “billed” as a $300 service costs the provider only 90 percent of that, i.e.,
$270. Of that $270 of actual cost, the employee pays $210. Subtracting the $210
employee payment from the $270 actual cost, leaves $60 of unrecovered cost that the
provider may claim as an allowable cost. As a result, the provider’s discount to the
employee is not borne by anyone as an allowable cost.
       For purposes of this case, the significance of the first example in section 332.1 is
that the provider is allowed the entirety of its actual cost of $270 as an allowable cost –
reduced only by the amount that the employee himself or herself pays. In short, section
332.1’s guidance and illustrative example show two overarching concepts: (1) the
provider may recover its actual costs of in-house medical services for employees, but not
the “billed” cost, and (2) the provider must reduce its actual costs when claiming
allowable costs to the extent that the employee paid for any part of the service.

                                              26
       Our conclusion is bolstered by section 2144.4 because it states that fringe benefits
are “[i]ncludable as Provider’s Cost” and that unrecovered costs for in-house medical
services for employees is such a fringe benefit. (§ 2144, p. 21-31 (rev. 375, 12-93),
underscoring omitted.) Likewise, section 332 confirms that “any costs of the services not
recovered by the provider from the charge assessed the employee are allowable costs.”
(§ 332, p. 3-9 (rev. 280, 01-83), italics added.) In other words, both of these sections
reiterate the principle that a provider may lay claim to unrecovered costs for in-house
medical treatments for employees.
       We do not perceive anything in sections 332, 332.1, or 2144.4 that disallows Oak
Valley from claiming costs incurred for in-house treatments of its employees under
section 2162.7.
                                             V
     Whether Oak Valley Impermissibly Paid Itself for In-house Treatment Costs
       In Oak Valley II and Oak Valley III, the introductions to DHS’s opening briefs
identically assert that “Oak Valley’s payments to itself contradict related party principles
which prohibit providers from claiming profit and artificially inflating costs which may
be generated from a less than arm’s-length transaction . . . .” The assertion, however,
remains undeveloped as an argument.
       In Oak Valley II, the only subsequent mention of related party principles is the
following sentence: “These claims also represent payments Oak Valley made to itself,
which are governed by the related party principles of CMS Publication 15-1, section
1000.” For lack of any explanation as to how Oak Valley’s payments violate related
party principles, the argument is deemed forfeited. (Allen, supra, 234 Cal.App.4th at
p. 52.) Oak Valley III repeats the same sentence but also adds: “Oak Valley’s payments
to itself are governed by the related party principles outlined in CMS Publication 15-1,
section 1000, which prohibits providers such as Oak Valley from claiming profit.” This



                                             27
additional sentence in Oak Valley III does not sufficiently develop the argument such that
it is cognizable on appeal. Therefore, it too is forfeited. (Allen, at p. 52.)
                          APPEAL BY DHS IN RIDGECREST
                                              VI
                          DHS’s Legal Contentions in Ridgecrest
       DHS’s briefing in Ridgecrest suffers the same ambiguities as those presented in
the Oak Valley cases, namely that it is difficult to determine whether the arguments are
presented as pure issues of law regarding the interpretation of Provider Reimbursement
Manual sections, whether the arguments challenge the sufficiency of the evidence in
support of the trial court’s findings in favor of Ridgecrest, or whether the arguments are
intended as mixed questions of law and fact.
       Insofar as the contentions are legal in nature, the arguments advanced by DHS in
Ridgecrest are substantively identical to those presented in the Oak Valley cases. DHS
argues that Ridgecrest Regional Hospital (1) has a nonqualifying self-insurance fund for
which allowable costs are only those on a claim-paid basis, (2) the costs claimed by Oak
Valley are not reasonable because they “represent charges which exceed actual costs,” (3)
the claimed costs are also not reasonable because they run afoul of “related party
principles which prohibit providers from claiming profit and artificially inflating costs
which may be generated from a less than arm’s-length transaction.”
       These contentions by DHS mesh with those advanced in the Oak Valley cases.
Because DHS does not offer any substantively different argument for reversal in
Ridgecrest than in the Oak Valley cases, the arguments all succeed or fail on the same
reasoning. On the basis of our rejection of DHS’s identical substantive legal arguments
in the Oak Valley cases, we conclude DHS has not established legal error in Ridgecrest.




                                              28
                                             VII
                   DHS Calculation of Unrecovered Costs in Ridgecrest
       In Ridgecrest, DHS additionally argues that it “properly allowed Ridgecrest’s
unrecovered costs in rendering medical services to its employees in-house by adjusting
Ridgecrest’s per diem rates and cost-to-charge ratios, removing days and charges related
to Ridgecrest’s medical services rendered to its employees in-house.” This argument
appears to be factual in nature because DHS claims that it properly adjusted Ridgecrest’s
cost claims under the circumstances of this case. Based on the briefing, we deem this
issue forfeited.
       As this court has previously noted: “In every appeal, ‘the appellant has the duty to
fairly summarize all of the facts in the light most favorable to the judgment. (Foreman &
Clark Corp. v. Fallon [(1971)] 3 Cal.3d [875,] 881.) Further, the burden to provide a fair
summary of the evidence “grows with the complexity of the record. [Citation.]” ’ ”
(Myers v. Trendwest Resorts, Inc. (2009) 178 Cal.App.4th 735, 739 (Myers), quoting
Boeken v. Philip Morris, Inc. (2005) 127 Cal.App.4th 1640, 1658.) When, as in this case,
an appellant fails to fulfill this duty the claim is forfeited. (Foreman & Clark Corp. v.
Fallon (1971) 3 Cal.3d 875, 881.)
       DHS acknowledges that the trial court “relied heavily upon Ridgecrest’s
accounting consultant, . . . Phillips, in finding Ridgecrest incurred actual costs, which
were not reimbursed through the cost centers of its cost report.” (Italics added.)
However, DHS’s statement of facts does not mention Phillips or cite to any part of his
testimony even though his testimony alone comprises more than a third of the transcript
of the administrative hearing. DHS also omits any mention of Ridgecrest’s other witness,
Danny Mower. In other words, DHS’s statement of facts ignores all of the testimony
offered by Ridgecrest and relied upon by the trial court in rendering its decision. For
failure to set forth the evidence in the light most favorable to the judgment, this argument
is forfeited.

                                             29
       We note that DHS does touch on Phillips’s testimony in its opening brief.
However, DHS does so only to argue that the trial court misplaced its reliance on
Phillips’s testimony. Thus, DHS points out considerations it believes Phillips did not
properly take into account in his testimony. And it criticizes his testimony for lack of
authority in support. This does not suffice to “ ‘fairly summarize all of the facts in the
light most favorable to the judgment.’ ” (Myers, supra, 178 Cal.App.4th at p. 739.)
       We conclude DHS has not met its burden to summarize the facts in the light most
favorable to the judgment. Therefore, this argument is forfeited.
                                      DISPOSITION
       The judgments are affirmed. Oak Valley Hospital District and Ridgecrest
Regional Hospital shall recover their costs in these consolidated appeals. (Cal. Rules of
Court, rule 8.278(a)(1) & (2).)



                                                   /s/
                                                  HOCH, J.



We concur:



 /s/
MURRAY, Acting P. J.



 /s/
DUARTE, J.




                                             30
