The California Supreme Court Tells Emergency Room Doctors and HMOs to Leave the Patient Out of Billing Disputes

by: Jonathan Corr and David Melton

When a patient goes to a hospital seeking emergency medical care, emergency room doctors are statutorily required to provide emergency care without regard to the patient’s ability to pay. Cal. Health & Saf. Code Section 1317 (2008). Additionally, if the patient is a member of an HMO, the HMO is statutorily required to reimburse the emergency care providers for the services rendered to the HMO member. Cal. Health & Saf. Code Section 1371.4 (2008). Disputes arise when the HMO member receives emergency care from providers with whom the HMO does NOT have a prior service contract. Because there is no preexisting contract, the HMO and the emergency care providers often disagree on the “reasonable value” of the emergency services.

In the recently consolidated cases of Prospect Medical Group, Inc., et al. v. Northridge Emergency Medical Group et al., and Prospect Health Source Medical Group, v. Saint John’s Emergency Medicine Specialists, Inc., et al., Prospect, a HMO billing service, paid less than what the emergency care doctors claimed was the “reasonable price” of the emergency services rendered. The emergency care doctors subsequently billed the patient directly for the difference between the amount they asked for and the amount Prospect paid. This practice is called “balance billing.” Prospect argued that “balance billing” is unlawful. The trial court agreed but the Court of Appeal reversed, striking down Prospect’s argument on the reasoning that “balance billing” is not prohibited by statute.

The California Supreme Court criticized the Court of Appeals for not looking at the statutory scheme as a whole. Emergency care patients must either provide insurance information or agree to personally pay for the services rendered. Cal. Health & Saf. Code Section 1317(d) (2008). Where the patient has provided insurance information regulated by the Knox-Keene Act, HMOs have a “duty to pay a reasonable and customary amount for the services rendered.” Bell v. Blue Cross of California, 131 Cal.App.4th 211 (2005); Cal. Health & Saf. Code Section 1371.4 (2008). HMOs also have an obligation to “ensure that a dispute resolution mechanism is accessible to non-contracting providers for the purpose of resolving billing and claim disputes” Cal. Health & Saf. Code Section 1367(h)(2) (2008). Additionally, emergency care providers have a right to sue HMOs directly over billing disputes. Bell v. Blue Cross of California, 131 Cal.App.4th 211 (2005). The California Supreme Court held that “interpreting the statutory scheme as a whole… doctors may not bill a patient for emergency services that the HMO is obligated to pay. Emergency room doctors must resolved their differences with HMOs and not inject patients into the dispute. Balance Billing is not permitted.”

As a result of the California Supreme Court’s ban on “balance billing,” patients can not incur greater liability for emergency services than is paid by their insurer. In terms of economic damages this is a win for defendants. California courts have already prohibited Plaintiffs from recovering economic damages in an amount greater than that “paid or incurred by the Plaintiff or an independent source” where the Plaintiff’s insurance company has a service contract with the healthcare provider. See Hanif v. Housing Authority of Yolo County, (1988) 200 Cal. App. 3d 635 (finding that where a certain sum was paid or incurred for past medical care and services, that amount was the most plaintiff could recover despite the fact it may have been less than the prevailing market rate unless evidence was produced that showed plaintiff would have incurred liability for the unpaid amount). See also Nishihama v. City and County of San Francisco, (2001) 93 Cal. App. 4th 298. Prospect logically extends this line of reasoning to situations were the Plaintiff received emergency care services from non-contracting providers. Because patients can no longer incur greater liability, defendants now have a stronger argument that the “reasonable value” of the services rendered is that which was already paid and therefore the maximum amount a Plaintiff can recover. It should be noted however, that the California Supreme Court refused to expressly rule on the issue of what is “reasonable and fair” payment for doctors and hospitals. HMOs and healthcare providers must battle that issue in subsequent litigation or legislative process.

For more information on this case or other legal matters contact your legal counsel.