California Court Upholds Balance Billing and Reasonable Reimbursement for EPs

[CAL/AAEM News Service]

California Court Upholds Balance Billing and Reasonable Reimbursement for EPs
by Steven C. Gabaeff, MD

Source: COMMON SENSE - The Newsletter of the American Academy of Emergency Medicine
Volume 13, Issue 2
Date: March/April 2006


In the matter of Prospect Medical Group v. Northridge Emergency
Medical Group, a very important court decision directly
addressing two major issues that impact emergency medicine,
balance billing and reasonable rates of reimbursement, was filed
on February 17, 2006, in the Second Appellate District, California
Court of Appeal.
 

The decision allows balance billing of patients for all patients
without prior contractual agreements with the billing emergency
physician group and bans health plans from arbitrarily and
unilaterally setting reimbursement rates, after the fact, with noncontracted
physician groups. This published decision (giving it
more import and designed to set precedent) will have immediate
impact in California and, over time, be applied in other
jurisdictions throughout the nation.


The California Medical Association (CMA) joined forces with
the Northridge Emergency Medical Group (a southern California,
two-hospital based group) by filing an amicus curiae brief (a
supporting document) with the court, to convince the court that
in the absence of a written contract, none can be inferred and
that health plans have no authority to unilaterally set
reimbursement rates or block EPs from balance billing patients
when health plans refuse to pay. It specifically condemns the
arbitrary use of Medicaid or Medicare rates for reimbursement,
which were expressly ruled inadequate, and the use of this self
serving strategy to reduce health plan expenses at the expense of
emergency physicians.

The incongruity of a health plan’s absolute reliance on Emergency
Medical Services to provide essential services to their enrollees and
reluctance to pay reasonable rates for such services, was judged by
the court to be real and substantive. The court ruled that health
plan reimbursement is subject to fair and equitable resolution and
that either party can rely on the courts if necessary. The net effect
is that health plans must pay reasonable rates of reimbursement
for out of plan emergency medical services or be subject to
litigation.

The CMA reported their victory with a statement reproduced in
part below and the news was disseminated through CalJEM, the
California AAEM Newsletter, sent to EM physicians throughout
California. We are pleased to share this information with the
national emergency medicine community where its legal
significance can be applied from this time forward.

The court issued its opinion concluding that the Knox-Keene Act
did not prohibit non-contracted physicians providing emergency
services from “balance billing” patients for fees not paid by either
the health plan or its contracting IPA. The Court also concluded
that such physicians are not required to accept Medicare payment
rates as payment in full. As a result, the Court concluded that the
IPA in that case could not sue a group of emergency physicians for
violating the unfair practice laws for balance billing their patients
and could not require that these physicians charge no more than
100 percent of the Medicare rate. The Court did allow, however,
the IPA to contest the reasonableness of the emergency physicians
rate, just as physicians have the ability to sue plans and IPAs for the
reasonable value of their services in accordance with the Bell v Blue
Cross decision. This opinion fully sided with CMA’s amicus curiae
brief that it filed in this case supporting the emergency physicians.

Briefly stated, the Prospect Court held that Section 1379 of the
Health & Safety Code did not prohibit emergency physicians from
balance billing. That section provides that contracts between a plan
and provider shall be in writing and shall provide that where the
plan fails to pay for health care services, the enrollee shall not be
liable to the provider for sums owed by the plan. The provision goes
on to provide that where the contract has not been reduced to writing
or fails to prohibit balance billing, no provider may collect or attempt
to collect sums owed by the plan.

The Court concluded that Section 1379 refers to and includes within
its scope only freely and “voluntarily negotiated contracts” between
physicians and plans “based on traditional contractual principles such
as a meeting of the minds.” In reaching this conclusion, the court
rejected the IPA’s argument that “implied” contracts based on the
parties’ conduct or the physicians’ obligation to provide EMTALA
services could suffice to trigger the balance billing prohibition. The
Court reasoned, among other things, that because the prohibition
only applies to “sums owed by the plan,” there would need to be a
voluntarily negotiated agreement “as to how much the plan will pay
for a particular procedure in advance of the medical procedure.”

Significantly, the Court also concluded that the IPA was not entitled
to a declaration imposing the Medicare rate as the reasonable rate.
The Court explained that it had no authority to set rates and noted
that in any event, the California Department of Managed Health
Care had already opined in the record supporting the AB 1455
regulations that the Medicare rate was not appropriate, stating in
the rulemaking that, “The Department recognizes that these
government programs are not designed to reimburse the provider
for the fair and reasonable value of the services and are therefore an
inappropriate criteria.”

The Court concluded by reiterating that non-contracted physicians
providing emergency services were entitled to reasonable
compensation, and that the IPA and plans, like providers in the Bell
case should be able to contest the reasonableness of the rates
charged. Thus, the Court dismissed the IPA’s claims for
declaratory relief and unfair business practices against the
emergency physicians.

There is an expectation that the plans and IPAs will make every
effort to see that this opinion is overturned. In the interim,
however, we can use this decision as a basis for discouraging
legislators from trying to reverse this decision in other states
through legislation. It would seem that the clarity of the decision
will make it difficult to circumvent this ruling in the future.

In California, CalACEP, through their lobbying activities has
led an effort over a two year period that has been successful in
keeping proposed legislation specifically blocking balance billing
from coming before the legislature. That effort indirectly allowed
the Court the latitude to make this decision without legislative
constraints that could have precluded the court from deciding
as they did. It was ironic the victory came through the courts,
not legislative efforts, but none the less, an important victory it
was.

In this case, CalACEP apparently adopted a strategy used
successfully by AAEM in numerous cases of financially supporting
litigation in alignment with the organization's goals. Their stated
contribution of $20,000, made without any public
announcement, reflects CalACEP’s dedication to protecting
macrorevenue streams in emergency medicine which was no
doubt resonant with the thrust of this case. The victory will be a
benefit to all EM contractors and ultimately EM physicians.

The involvement of CalACEP in this issue and its financial
contribution to the litigation came to light following a series of
e-mails between the leadership of CalACEP and CalAAEM.

We, in California, and others throughout the nation, should be
grateful for CalACEP’s ongoing legislative efforts and we
commend their use of the strategy of supporting litigation
financially. We have been working here in California to identify
areas of common interest to all EM physicians and here we have
clearly found one. It seems clear that AAEM’s strategy of
supporting litigation, both financially and in published writings,
to advance the rights of emergency physicians, is a strategy that
has been validated once again. Moving forward we can continue
to seek out such opportunities to advance our policy goals within
the legal system. February 17, 2006, was a good day for
emergency medicine!

The decision is available at 
http://fsnews.findlaw.com/cases/ca/caapp4th/slip/2006/b172737.html  


Cyrus Shahpar & Brian Potts 
Managing Editors, CAL/AAEM News Service
University of California, Irvine

The CAL/AAEM Archives are available at: http://maillists.uci.edu/mailman/public/calaaem/


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