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Must a managed care plan pay for Medi-Cal beneficiary hospital services in accordance with the providing hospital's full billed charges concerning post-stabilization services not under contract?

beneficiary.jpgIn Children's Hospital Central California v. Blue Cross of California (filed 6/10/14) F065603, Blue Cross, in providing a managed care plan, paid $4.2 million to Children's Hospital for a 10-month period of coverage without written contract rates for post-stabilization care. Payment was based on the Medi-Cal rates paid by the government. Children's Hospital sued for $6.6 million, claiming it was entitled to payment for its full billed charges totaling $10.8 million, based on California Code of Regulations title 28, section 1300.71 (a)(3)(B), which defines "Reimbursement of a Claim" as the payment of the reasonable and customary value for the health care services rendered." Children's Hospital prevailed at trial. The trial court had precluded Blue Cross from presenting evidence of: the rates accepted by or paid to Children's Hospital, Medi-Cal fee for service rates paid by the government, and expert testimony that the Medi-Cal rate was the reasonable and customary rate that Blue Cross should be paying for the services in question.

The Court of Appeal, Fifth Appellate District reversed. The court found that the Department of Managed Health Care (DMHC) adoption of 13300.71 (a) (3) (B) was not an exclusive criteria; that neither billed charges nor government rates are determinative of reasonable value; and reasonable value for the purposes here is based on quantum meruit. Accordingly, the trial court committed reversible error in not allowing discovery of these other measures of value, and further erred in excluding any documentary and expert evidence as to fees actually accepted by this and other hospitals for post-stabilization care to determine reasonable value that should be paid by Blue Cross. The billing that the hospital considered as the reasonable and customary charge was not dispositive standing alone.

This ruling does not mean that Blue Cross automatically prevails. The appellate court remanded the matter for a new trial on damages, including additional discovery. At the retrial, the jury will hear the various items of evidence going to the issue of what the reasonable value is here in the broader context of the realities in the managed care marketplace, including evidence of Medi-Cal rates.

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May an HMO be found negligent in the delegation of its statutory duty to reimburse non-contracting emergency physicians?

physicians.jpgEmergency room physicians have a legal duty to treat a patient regardless of patient's inability to pay the physician's bill. Where patient is enrolled in an HMO (Health Maintenance Organization care service plan), even where the emergency physician is not under contract to the HMO, the obligation to pay for the physician's services still rests with the HMO. But HMO's are statutorily allowed to delegate this responsibility to IPA's (independent practice associations). Where this delegation has occurred, and the emergency physician providing treatment neither contracted with the patient's HMO nor was a member of the delegated IPA, is the physician entitled to payment from the HMO when the IPA fails to pay?

The answer to this complex question is equally complex, and is found in Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc. (filed 4/2/14) B238867a. It may seem surprising that the answer is more a matter of tort law than contract law. And much like the inquires found in the venerable tort law authority in Rowland v. Christian (1968) 69 Cal.2d 108, public policy considerations play a large role. As the discussion below indicates, central to the answer is the policy that the HMO patient (the consumer) not be vulnerable to such billings in violation of their HMO contractual entitlement. In resolving a split of appellate authority, that answer found in Centinella is the HMO has a duty not to delegate its obligation to reimburse emergency physicians to an IPA it knows, or has reason to know, will be unable to pay. On the facts alleged in this case, the Court of Appeal, Second Appellate District, Division Three, found a sufficient basis for the physicians to seek payment from the HMO on the claim of negligent delegation. The trial court's sustaining of the HMO's demurrer without leave was reversed, and the matter was remanded.

In the trial court, the HMO had succeeded in arguing that no duty arose for it to protect the financial interests of the third party physician-plaintiffs under Biakanja v. Irving (1958) 49 Cal.2d 647. The trial court agreed that Biakanja barred relief in that it requires an intent to harm a plaintiff specifically, which was not alleged here. The appellate court disagreed with this interpretation of Biakanja, discussing the split of authority on the issue. The proper interpretation, ruled the court, is that the duty of the HMO is owed to the plaintiff or to a class of which plaintiff is a member.

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National Federation of Independent Business v. Sebelius

August 1, 2012

Health Care.jpgThere are approximately 50 million Americans uninsured for healthcare. The Patient Protection and Affordable Care Act ("ACA") seeks to have about 30-35 million of those covered by private and public health insurance. About half of those will be covered under the "Individual Mandate" that each individual, subject to certain exceptions, purchase health insurance or pay a "penalty". This half will also consist of persons who become insured as a result of the mandate that "large" employers provide certain coverage or pay a penalty. The other approximate half was to consist of those individuals newly covered under an expansion of Medicaid. The United States Supreme Court addressed the constitutionality of the "Individual Mandate" and the Medicaid Expansion.

Before the Court could address the merits of the challenge to the Individual Mandate, the Court had to determine whether jurisdiction was precluded by the Anti-Injunction Act, which provides that the court lacks jurisdiction of suits to restrain the assessment or collection of "any tax." Noting that ACA required the penalty to be assessed and collected "in the same manner as taxes," Chief Justice Roberts concluded that this language made little sense if the assessable penalties were themselves taxes for purposes of the Anti-injunction Act. Thus, the Court had jurisdiction.

Chief Justice Roberts then found ACA to be constitutional in part and unconstitutional in part. Joined by Justices Scalia, Kennedy, Thomas and Alito, the Chief Justice found that the Individual Mandate was unconstitutional under the Commerce Clause. To permit Congress to regulate individuals because they chose not to become active in commerce by purchasing a product would open a new and potentially vast domain of unauthorized Congressional authority. However, noting that there could be no criminal penalty and no government lien for nonpayment of the "penalty," Chief Justice Roberts determined the Individual Mandate could be upheld under the Taxing Clause because the "penalty" could reasonably be construed as a tax on those with a certain level of income who chose to go without health insurance. Justices Ginsburg, Breyer, Sotomayor, and Kagan joined this determination.

Joined by all other Justices besides Ginsburg and Sotomayor, Chief Justice Roberts found the portion of ACA that permitted the Secretary of Health and Human Services to withhold all Medicaid funding from states that refused to accept the Medicaid expansion as unconstitutional coercion. However, rather than strike down the Medicaid expansion, Chief Justice Roberts, joined by Justices Ginsburg, Breyer, Sotomayor and Kagan, ruled that this portion of ACA was not enforceable. Thus, states are free to accept or reject the Medicaid expansion.

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