The New Playing Field for California Non-Par Provider/Payor Litigation

Two recent cases published in California are changing the landscape for litigation between non-contracted providers and health care payors. The first case, Children’s Hospital Central California v. Blue Cross of California, 226 Cal.App.4th 1260, 172 Cal.Rptr.3d 861 (Cal.App. 5 Dist., 2014) found that the six- part test in H&S Code Section 1300.71(a)- (3)(B), describing the factors to consider when reimbursing non-contracted providers for emergency services, is the minimum to comply with California law, but does not control what evidence may be introduced when a provider pursues a quantum meruit theory against a health plan. The court further found that the rates paid by all payors (including the government) are fair game and should not have been excluded from discovery. The court found that the provider’s “billed charges” were just one indicator of market value along with numerous other factors, including Medicare allowed rates. This case gives payors substantial leverage to reimburse providers for emergency services at rates well below what the provider chooses to submit.

The second case, published last Thursday, July 31, Orthopedic Specialists of Southern California v. California Public Employee Retirement System, 2014 WL 3749525 (Cal.App. 2 Dist., 2014) found that, absent some specific agreement to the contrary, non-par providers are not entitled to a usual, customary and reasonable (UCR) amount of reimbursement from a member’s plan. The terms of the member’s evidence of coverage control. If, as in this case, the plan terms state that it will pay an out-of-network provider a percentage of an “eligible amount,” as determined by the claims administrator, then any additional reimbursement should be sought from the member, not the plan. The holding only applies to non-emergent care because the court relied heavily on the choice both the member and the provider had when seeking or rendering out-of-network elective treatment. Like Children’s Hospital, this case gives payors substantial leverage to pay non-par providers in accordance with the limited fee schedule that most commercial plans allow for out-of-network services.

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