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United States: California Supreme Court Rules Hospitals May Not “Balance Bill” Patients for Emergency Room Charges Rejected by HMOs

(Jan. 23, 2009) On January 8, 2009, the California Supreme Court ruled that California law prohibits hospitals from directly billing patients for costs of emergency treatment that patients' health maintenance organizations (HMOs) decline to pay.

HMOs contract with medical providers to provide treatment to patients enrolled in the HMO. Under California law, patients in emergencies may go to the closest hospital to receive treatment, irrespective of whether the HMO has a contract with that hospital, and the HMO is required to pay for the treatment. When portions of the hospital's charges for emergency treatment are rejected by the HMO, hospitals commonly send a bill for the balance of the charges to the patient, a practice known as “balance billing.”

In the case at hand, when a dispute arose between an HMO and a provider of emergency room care, the HMO sued for a declaration that the provider is entitled only to “reasonable” reimbursement for its services, and that balance billing is unlawful.

The California Supreme Court agreed that balance billing is prohibited under California law. The court examined several interrelated statutory provisions, which it found:

(1) transfer the financial risk of health care from patients to providers;

(2) require emergency-care patients either to agree to pay for the services or to supply insurance information;

(3) require HMOs to pay doctors for emergency services rendered to their subscribers;

(4) prohibit balance billing when the HMO, and not the patient, is contractually required to pay;

(5) require adoption of mechanisms to resolve billing disputes between emergency room doctors and HMOs; and

(6) permit emergency-room doctors to sue HMOs directly to resolve billing disputes.

Viewing these provisions together, the court concluded that California law prohibits balance billing of HMO patients by emergency care providers. (Prospect Medical Group, Inc. v. Northridge Emergency Medical Group, No. S142209 (Cal. Jan. 8, 2009), available at http://www.courtinfo.ca.gov/opinions/documents/S142209.PDF.)