Florida hospital that says HMO paid too little can sue

A state appellate court leaves open the question how much insurers must pay out-of-network doctors and hospitals for emergency services under state law.

By Amy Lynn Sorrel — Posted Sept. 4, 2006

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Winning the first round in what doctors and hospitals hope to be a larger victory, Florida's 5th District Court of Appeal ruled that physicians and hospitals can take their payment disputes to court under a state law that requires HMOs to pay noncontracted health care professionals for emergency treatment they give patients who belong to the network.

The decision underscores doctors' long-running battle in the state to compel insurers to reimburse them promptly and fully for emergency services that federal law obligates them to provide. Doctors are praising the ruling, which they say helps them clear the first hurdle to getting reimbursement relief.

"This decision finally resolved the biggest question as to whether or not doctors have the right to sue, and it provides a redress for physicians who, in the past, had to basically accept whatever the HMO wanted to pay," said John M. Knight, general counsel to the Florida Medical Assn., which joined a friend-of-the-court brief supporting the hospital, along with the AMA/State Medical Societies Litigation Center and three other medical groups.

If the appeals court ruling stands, the case will return to a trial court to open up the larger question at the crux of the dispute -- the amount that Blue Cross Blue Shield of Florida is required to pay out-of-network Adventist Health System. The hospital, which operates seven facilities in the Orlando area that are not a part of the Blue Cross network, sued the Blues plan under the state's emergency services statute, saying the health plan did not reimburse the hospital for the full charges it billed.

A trial court initially dismissed Adventist's claims, saying the hospital did not have the right to sue because the law "neither expressly nor impliedly created a private right of action to enforce its provisions," court records state. But the appeals court reversed that decision, finding that the statute "does establish liability."

Blue Cross declined to comment on the court's decision, but spokesman Mark Wright said the health plan is "exploring options for an appeal" to the state Supreme Court. In court records, Blue Cross said doctors and hospitals do not have the right to enforce the payment statute by filing a lawsuit. Instead, the health plan argues that it is up to state insurance regulators to resolve such disputes.

In their decision, judges disagreed that the Legislature intended for state regulators to have "exclusive" authority over payment disputes. "Nor do we agree that the statutory, voluntary dispute resolution process ... must first be exhausted," Judge Vincent G. Torpy Jr. wrote.

A question of "usual and customary"

Under Florida's emergency services law, HMOs must pay the lesser of the health care professional's charges, the usual and customary charges for similar services in the community where the services are provided or a prenegotiated rate agreed upon within 60 days of the claim being filed.

Adventist and Blue Cross are at odds over the definition of what the "usual and customary" payment should be for noncontracted emergency care, which, barring an appeal, would be up to a trial court to decide.

Blue Cross argues that it is obligated to pay only 120% of what Medicare would reimburse for the services, court documents show.

"Hospitals get to charge whatever they want without regulation, so at any time they could raise their charges," said Bob Wychulis, president and CEO of the Florida Assn. of Health Plans, which filed a friend-of-the-court brief supporting Blue Cross.

To keep health care affordable, insurers traditionally have defined "usual and customary" as a combination of Medicare and Medicaid averages, plus a premium to factor in what other health plans in the area are charging, Wychulis said.

"With premiums rising, insurance companies want to reimburse at a level they think the law has specified and that was the reason the Legislature distinguished" between contracted and noncontracted services, he said.

Adventist argues that the Blue Cross formula was inappropriate because it did not reflect the usual and customary charges for comparable services in the geographical area, Leon N. Patricios, an attorney for the hospital system said.

"Usual and customary provider charges means the charges that other health care providers usually and customarily bill for their services," he said.

Doctors agree that HMOs are not free to make up their own reimbursement formula when the statute calls for higher payments.

"It should be tied to the classical definition [of usual and customary charges] and not to Medicare reimbursement," said emergency physician and lawyer David M. Siegel, MD, president of the Florida College of Emergency Physicians, which joined the FMA in the friend-of-the-court brief. Using Medicare as a yardstick is not a fair system, Dr. Siegel said, and only will further threaten patient access to emergency care if doctors can't afford to practice.

"What this case should do is give providers the certainty to know what they are going to get paid when they treat patients in an emergency situation," Patricios said.

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Case at a glance

Adventist Health System/Sunbelt Inc. v. Blue Cross and Blue Shield of Florida

Venue: Florida's 5th District Court of Appeal
At issue: Whether doctors and hospitals that have not contracted with an HMO can use a state payment statute to sue the plans for underpaying claims for emergency care the hospitals provide to HMO members.
Potential impact: Doctors say they should be able to sue under the statute to receive fair compensation for their services. HMOs say their reimbursements are reasonable under the law, and payment disputes were meant to be resolved out of court by state insurance regulators.

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