Dignity Health loses appeal of Medicaid out-of-network billing case

By | January 13, 2020

Dive Brief:

  • L.A. Care, the biggest public Medicaid managed care plan in the country, won an appellate court victory late last week against hospital operator Dignity Health regarding reimbursement for out-of-network patients.
  • The legal dispute centered around L.A. Care patients being admitted through the emergency room at Northridge Hospital Medical Center in Los Angeles, which is out-of-network for the health plan’s enrollees. Dignity wanted to set its own rates for providing post-stabilization care, but they are typically capped by the state regulator that oversees the Medicaid program.
  • A statement from San Francisco-based Dignity, which merged with Catholic Health Initiatives about a year ago to form CommonSpirit Health, suggested the company may appeal the ruling to the California Supreme Court.

Dive Insight:

Known as Medi-Cal, California’s Medicaid program is an enormous endeavor, covering one in three of the state’s residents — 13 million people in all. The scale of the program and the fact many providers have long chafed over the state’s reimbursement rates, which are among the lowest in the nation, means there are often high-stakes legal battles over who pays whom for care.

That was the case with Dignity, which operates hospitals in most of California’s major population centers, including the San Fernando Valley section of Los Angeles, home to 2.4 million residents. Dignity’s Northridge Hospital treats many out-of-network L.A. Care patients.

Dignity sued the health plan in 2015, claiming it was entitled to full payment for providing care to these patients after they had been medically stabilized after receiving emergency medical care. State law says that managed care plans have discretion in reimbursing out-of-network providers for such care, and can even request prior authorization. The sum Northridge claimed it was owed for such services performed on L.A. Care enrollees had topped $ 487 million as of last July.

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L.A. Care succeeded in obtaining summary judgment in Los Angeles County Superior Court, but Dignity appealed. However, in a 30-page ruling issued Thursday, the Second Appellate Court upheld the lower court’s decision, concluding that both California and federal law dictated that Dignity be paid rates mandated by the Department of Health Care Services, which manages the Medi-Cal program.

“This was a case that could have been catastrophic for Medi-Cal managed care and the millions of Californians who rely on this program,” L.A. Care CEO John Baackes said in a statement. “If the court had ruled against L.A. Care, out-of-network providers could have billed Medi-Cal plans across the state anything they wanted — even higher rates than plans pay for commercial members.”

Dignity said in a statement it “will consider whether to appeal this ruling.”

“As a managed Medi-Cal plan, L.A. Care’s responsibility is to manage the care of their patients within their contracted network of providers. However, in many instances, patients remained at Northridge post-stabilization because L.A. Care failed to either respond or timely transfer those patients to contracted hospitals. Northridge seeks appropriate reimbursement for providing this care,” the company said.

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