PART II: What level of reimbursement are non-participating (out-of-network) providers entitled to when providing non-emergency services to plan policyholders?

In Part I we posed the question of what rules a court will employ to determine a reimbursement rate for out-of network providers. In this installment, we examine the Initial Standing Issue: Who Can Sue in a Reimbursement Dispute – Provider or Patient?

Without a legal structure to resolve payor-provider payment disputes, non-participating providers were forced to engage in "balance billing"—a practice by which providers charged patients for the difference between the bill charged to the patient’s insurance company and the reimbursement amount provided to the provider by the insurance company. A legal structure for the resolution of reimbursement disputes began to develop. In Bell v. Blue Cross of California, (2005) 131 Cal. App. 4th 211, the Court held that emergency room physicians who did not have a written contract with a health plan nevertheless have a common law right to sue to be reimbursed for emergency services they rendered under a theory of quantum meruit (the fair value of services, or what one has earned). In early 2006, a California appellate court ruled in Prospect Med. Group, Inc. v. Northridge Emergency Med. Group, (2006) 136 Cal. App. 4th 1155, that a health plan’s contracted medical group (which acted as the plan’s agent in paying physicians for emergency services) had standing to litigate the “reasonableness” of the rates charged by non-participating physicians who provided emergency services to the plan’s members. On July 25, 2006, Governor Arnold Schwarzenegger issued an Executive Order (Cal. Exec. Order No. S-13-06) directing the Department of Managed Health Care (DMHC) to promulgate rules protecting consumers from balanced billing.

In 2008, DMHC promulgated regulations which prohibited balancing billing (28 C.C.R. § 1300.71.39). This new rule was added to other fee reasonableness rules for providers providing services to either HMO or PPO subscribers (28 C.C.R. § 1300.71(a)(3)(B) (listing six subjective fee reasonableness factors to calculate reimbursement for services provided to HMO enrollees) and 28 C.C.R. § 1300.71(a)(3)(C) (providing that the terms of an enrollee’s Evidence of Coverage with a PPO or POS plan will determine the fee reimbursement level for a non-participating provider).

In 2009, Prospect Medical Group made it up to the California Supreme Court, (2009) 45 Cal.4th 497, and successfully framed the overarching legal issue as follows:

In the typical model, familiar to many, doctors contract to provide medical care to enrolled HMO members. Members generally use the services of one of the contracting doctors. When they do, and except for copayments the members must make when services are rendered, the HMO (or its delegate) pays the doctor under the existing contract . . .

The typical payment model sometimes breaks down, however, in the case of emergency care. In an emergency, an HMO member goes to the nearest hospital emergency room for treatment. The emergency room doctors at that hospital may or may not have previously contracted with the HMO to provide care to its members. In that situation, the doctors are statutorily required to provide emergency care without regard to the patient's ability to pay. Additionally, when the patient is a member of an HMO, the HMO is statutorily required to pay for the emergency care. For HMO members, it is always clear in advance who has to provide emergency services—any emergency room doctor to whom the member goes in an emergency—and who has to pay for those services—the HMO. The conflict arises when there is no advance agreement between the emergency room doctors and the HMO regarding the amount of the required payment.

Thus, there is inherent potential for disputes between the emergency room doctors and the HMO regarding how much the HMO owes the doctors for emergency services. When no preexisting contract exists, the doctors either submit a bill to the HMO that they consider reasonable, or the HMO makes a payment that it considers reasonable; but often, the there is a wide gap between what the doctors want, and what the HMO is willing to pay. The resolution of such disputes can create difficult problems.

IN considering this payment model breakdown and reimbursement dispute, the California Supreme held that emergency room providers cannot balance bill their patients. Furthermore, out-of-network emergency department physicians had standing to assert direct claims against health care service plans, when the plans paid an amount which the physicians believed was too low.

Noticeably missing from this analysis was (1) the legal standing of non-participating physicians who render non-emergency services to plan enrollees and (2) the legal recourse of both emergency and non-emergency non-participating providers rendering services to an enrollee of a California Department of Insurance-regulated policy (non-HMO).

Non-participating providers rendering emergency services to a plan enrollee can sue directly for reimbursement. But, non-participating providers rendering non-emergency services are left to either suing their patients, or convincing patients to file a lawsuit in their name against their insurance company to try and force the insurer to pay the fair value of services rendered.

Our next post will cover the legal theories that providers and patients are legally allowed to allege in order to enforce their rights to reimbursement for services rendered. ...

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