Hospital Asks Calif. Supreme Court To Review Insurer Payment Ruling

On Thursday, lawyers for Children's Hospital Central California asked the California Supreme Court to review a June appellate court ruling that said insurers are not required to reimburse hospitals for amounts that are more than the actual value of services, the Sacramento Business Journal reports (Robertson, Sacramento Business Journal, 7/17).

Background on Case

The lawsuit between Children's Hospital Central California and Anthem Blue Cross involved a dispute over insurer reimbursement rates for hospital services.

In 2007, the hospital and insurer for about 10 months were unable to reach an agreement to renew a contract setting reimbursement rates for hospital services. During that time, federal and state laws required that Children's Hospital continue to provide emergency care to Anthem beneficiaries.

The hospital later billed Anthem for post-stabilization emergency medical care that took place during the 10-month contract gap. In the billing, the hospital listed the full rate of services included in its "chargemaster" document instead of the usual discounted rate based on volume. In total, the hospital charged Anthem $10.8 million for care provided to 896 beneficiaries.

Anthem paid the hospital about $4.2 million based on Medi-Cal rates. Medi-Cal is California's Medicaid program.

Children's Hospital filed a lawsuit over the difference, and a jury awarded the hospital $6.6 million. Anthem then filed an appeal.

In June, the Fifth District Court of Appeals ruled that insurers are not required to reimburse hospitals for amounts that are more than the actual value of services.

The ruling stated that the hospital "rarely received payment based on [their] published chargemaster rates." Therefore, the trial court should have allowed Anthem to present evidence of the value of post-stabilization emergency services.

The appeals court ordered a new trial between Children's Hospital and Anthem to establish damages that reflect the "reasonable value" of services, as opposed to the higher costs included on the hospital's bill to the insurer (California Healthline, 6/18).

Details of Calif. Supreme Court Filing

In the filing this week, attorneys said that the appellate court decision "will have a profound and fundamental impact on the way in which health care is delivered to patients in California."

They added that the ruling "disrupts the carefully established balance between plans and providers during contract negotiations" and "if the opinion stands, then both health plans and providers will have less incentive to enter into network contracts, members will have fewer in-network options and California's existing legal structure encouraging networks will be radically changed" (Sacramento Business Journal, 7/17).