California's high court bans balance billing

Doctors say the decision will burden an already strained emergency care system.

By Amy Lynn Sorrel — Posted Jan. 26, 2009

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A recent California Supreme Court ruling may have quelled an ongoing feud over whether out-of-network emergency physicians can balance bill patients. But doctors say the decision left unresolved the root cause of the issue -- HMOs' routine underpayments to physicians.

The high court concluded unanimously that state laws clearly prohibit doctors from turning to patients for outstanding bills that health plans refuse to cover. Such reimbursement squabbles "must be resolved solely between the emergency room doctors, who are entitled to a reasonable payment for their services, and the HMO, which is obligated to make that payment," Justice Ming W. Chin wrote in a Jan. 8 opinion. Patients "may not be interjected into the dispute."

In a disappointment to doctors, however, the court declined to address the larger problem of determining what constitutes reasonable compensation for emergency care.

While state officials and health plans hailed the decision as an important protection for patients, physicians fear the court's failure to remedy reimbursement discrepancies will deal yet another blow to an already strained emergency care system.

Doctors sympathize with patients, "but you can't just give a blank check to HMOs," California Medical Assn. President Dev GnanaDev, MD, said. The CMA, along with the Litigation Center of the American Medical Association and State Medical Societies, filed a friend-of-the-court brief in the case.

Rather than forcing HMOs to appropriately pay doctors -- as required by law -- the ruling shifts the burden to physicians to recoup any reimbursements due, Dr. GnanaDev said. "There's no way a little trauma surgeon like me can go after any HMO. My resources are minimal. It's like David versus Goliath."

According to CMA data, emergency departments in the state were underpaid more than $1 billion in 2007, while financial struggles have forced the closure of more than 70 emergency departments in recent years.

Dept. of Managed Health Care Director Cindy Ehnes reassured physicians the agency "will not retreat from efforts to make sure that doctors are paid fairly." At the same time, the decision removes "a crushing economic burden" on patients "caught in the middle of billing disputes," she said in a statement.

The ruling also reaffirms recent department regulations defining balance billing for out-of-network emergency care as an unfair billing pattern, Ehnes said. A trial court in December 2008 upheld the DMHC's authority to create the regulation, instituted last October. The CMA initiated the legal challenge, but officials said they do not plan to appeal, in light of the recent Supreme Court ruling.

Gov. Arnold Schwarzenegger, who urged the new rules, said the high court's decision "will protect Californians who have done the right thing by obtaining insurance, but then later receive burdensome medical bills that they do not owe."

Health plans, meanwhile, say the decision will help keep health care affordable.

"We see a wide variety of out-of-network charges" for emergency care, California Assn. of Health Plans spokeswoman Nicole K. Evans said, and eliminating balance billing will help eliminate the threat of potentially excessive bills.

Holding HMOs accountable

Justices agreed with doctors that an HMO does not have "unfettered discretion to determine unilaterally the amount it will reimburse a noncontracting provider." But the court noted the Legislature did not intend to involve patients in the payment process.

State laws and regulations already ban balance billing for contracted care and provide other measures to protect the interests of out-of-network emergency doctors by:

  • Requiring HMOs to pay for emergency services policyholders incur.
  • Prohibiting HMOs from engaging in unfair payment practices.
  • Mandating that HMOs adopt internal dispute resolution mechanisms that can be used.
  • Allowing emergency physicians to sue HMOs over reimbursement issues they encounter.

But doctors said those avenues have done little to hold HMOs accountable, and they are pursuing other options.

The CMA continues to advocate for legislation similar to that in New Jersey and Colorado requiring insurers to first pay a bill in full before resolving disputes over the amount, whether through arbitration or court.

Meanwhile, the DMHC has touted an independent dispute resolution process to help address disagreements over reasonable and customary rates for health care services. The California Assn. of Health Plans has supported the effort.

But doctors are not too keen on the program, which costs $25 to $50 to participate. With average underpayments to doctors of $30, such alternatives -- especially more expensive court options -- give doctors little recourse, Dr. GnanaDev said.

"A lot more needs to be done."

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Case at a glance

Does California law prohibit balance billing for out-of-network emergency care?

The state Supreme Court said yes.

Impact: Physicians say the decision gives them little recourse to fight HMOs' underpayments and will overburden emergency departments that are already struggling financially. State regulators and health plans say the decision rightly takes patients out of the middle of billing disputes.

Prospect Medical Group Inc. v. Northridge Emergency Medical Group, California Supreme Court

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