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Prospect Medical Group, Inc. v. Northridge Emergency Medical Group

January 8, 2009

PROSPECT MEDICAL GROUP, INC., ET AL., PLAINTIFFS AND APPELLANTS,
v.
NORTHRIDGE EMERGENCY MEDICAL GROUP ET AL., DEFENDANTS AND RESPONDENTS.
PROSPECT HEALTH SOURCE MEDICAL GROUP, PLAINTIFF AND APPELLANT,
v.
SAINT JOHN'S EMERGENCY MEDICINE SPECIALISTS, INC., ET AL., DEFENDANTS AND RESPONDENTS.



Ct.App. 2/3 B172737 & Ct.App. 2/3 B172817. Los Angeles County Super. Ct. Nos. BC300850 & SC076909. Judge Gerald Rosenberg.

The opinion of the court was delivered by: Chin, J.

A health maintenance organization (HMO) commonly manages medical care in California. 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. In this way, the parties agree upon, and know in advance, what their obligations and rights are and who must pay, and how much, for medical care.

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.*fn1 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, the potential inherently exists for disputes between the emergency room doctors and the HMO regarding how much the HMO owes the doctors for emergency services. When no pre-existing contract exists, the doctors sometimes submit a bill to the HMO that they consider reasonable for the services rendered but that the HMO considers unreasonably high; conversely, the HMO sometimes makes a payment that it considers reasonable for the services rendered but that the doctors consider unreasonably low. The resolution of such disputes can create difficult problems.

But the question of how to resolve disputes between the doctors and the HMO over the amount due for emergency care is not before us in this case. The issue here is narrow, although quite important for emergency room doctors, HMO's, and their members: When the HMO submits a payment lower than the amount billed, can the emergency room doctors directly bill the patient for the difference between the bill submitted and the payment received - i.e., engage in the practice called "balance billing"?

Interpreting the applicable statutory scheme as a whole - primarily the Knox-Keene Health Care Service Plan Act of 1975, Health and Safety Code section 1340 et seq. (Knox-Keene Act)*fn2 - we conclude that billing disputes over emergency medical care must be resolved solely between the emergency room doctors, who are entitled to a reasonable payment for their services, and the HMO, which is obligated to make that payment. A patient who is a member of an HMO may not be injected into the dispute. Emergency room doctors may not bill the patient for the disputed amount.

I. FACTUAL AND PROCEDURAL BACKGROUND

Because neither party petitioned the Court of Appeal for a rehearing, we take our facts largely from that court's opinion. (Richmond v. Shasta Community Services Dist. (2004) 32 Cal.4th 409, 415; see Cal. Rules of Court, rule 8.500(c)(2).)

Plaintiffs and appellants, Prospect Medical Group, Inc., et alia (collectively Prospect), are individual practice associations.*fn3 Prospect manages patient care by executing written contracts with health care service plans.*fn4 It provides for medical care to persons who are members of a health care service plan and who select a Prospect physician. Prospect also provides billing services to the health care service plans contracted with Prospect. As such, it is a "delegate" of those health care service plans and is statutorily obligated to pay for emergency services provided to patients who have subscribed to those health care service plans. (§ 1371.4, subds. (b) & (e).)

Defendants and respondents, Northridge Emergency Medical Group and Saint John's Emergency Medicine Specialists, Inc. (collectively Emergency Physicians), have exclusive licenses at two California hospitals to provide emergency room physician care. Emergency Physicians are health care providers and are statutorily required to provide emergency care without regard to an individual's insurance or ability to pay. (§ 1317, subd. (d); see also 42 U.S.C. § 1395dd.)

When patients who are members of a health care service plan schedule medical services in advance, they generally go to physicians with whom the health care service plan or its delegate, like Prospect, has an express pre-existing contract. On occasion, when these same patients need emergency medical care, they may be taken to a hospital where the doctors staffing the emergency room do not have a pre-existing contract with the health care plan or its delegate. In this case, after Emergency Physicians provided emergency medical services to patients who were members of health care service plans that contracted with Prospect, they submitted reimbursement claims to Prospect. Sometimes Prospect paid Emergency Physicians less than the amount billed. In those cases, Prospect paid what it alleged was reasonable for the services rendered. Emergency Physicians then billed the patients directly for the differences between the bills they submitted and what Prospect paid. The parties refer to this practice as "balance billing."

After billing disputes arose between Prospect and Emergency Physicians, Prospect filed two related actions against Emergency Physicians seeking, among other things, a judicial determination that (1) Emergency Physicians were entitled only to "reasonable" compensation for emergency medical care, which Prospect claimed was equivalent to the Medicare rate; and (2) the practice of balance billing is unlawful. In one of the actions, Prospect alleged that Saint John's Emergency Medicine Specialists, Inc., "routinely bills Prospect's patients, threatens to turn over Prospect's patients to an outside collection agency, and threatens to take legal measures against Prospect's patients." The trial court sustained Emergency Physicians' demurrers without leave to amend and entered judgments accordingly. Prospect appealed both judgments, and the Court of Appeal consolidated the appeals.

The Court of Appeal concluded that balance billing is not statutorily prohibited. Second, it concluded that Prospect is not entitled to a judicial declaration imposing the Medicare rate as the reasonable rate. Third, it concluded the trial court abused its discretion by denying leave to amend the complaint to permit Prospect to allege that Emergency Physicians charged more than a reasonable rate for a specific medical procedure. We granted ...


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