Balance billing dispute settled in California

The agreement prohibits a hospital from charging patients for emergency costs not covered by insurance.

By — Posted June 10, 2010

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A settlement between California insurance regulators and a hospital system has ended what is believed to be the last legal challenge over the state's ban on balance billing.

The California Dept. of Managed Health Care sued Prime Healthcare Services in 2008, alleging the hospital system illegally billed patients for emergency care costs not covered by their health insurance.

In a May settlement, Prime Healthcare agreed not to engage in the practice, known as balance billing, though it denied ever participating in any illegal conduct. The hospital system also agreed not to report outstanding bills to collection agencies and to refund patients' money where necessary (link).

In addition, the settlement requires Prime Healthcare to donate a total of $1.2 million to six community clinics in underserved areas around the state and to the system's foundation to help develop new clinics.

The DMHC lawsuit came amid confusion over whether state laws banning balance billing for in-network care applied to noncontracted services, including emergency care.

The department said its actions were bolstered by a 2006 executive order signed by Gov. Arnold Schwarzenegger barring emergency physicians from balance billing and ensuing regulations the DMHC promulgated in 2008.

The California Supreme Court resolved the issue in 2009 when it issued a ruling affirming the ban.

Physicians, including the California Medical Assn., had opposed the prohibition, arguing that insurers should be held accountable for underpaying doctors -- the situation that leads to balance billing, physicians said. Those views were expressed in a friend-of-the-court brief the CMA and the Litigation Center of the American Medical Association and the State Medical Societies filed in the 2009 high court case, Prospect Medical Group v. Northridge Emergency Medical Group.

Prime Healthcare echoed those sentiments, saying it "looks forward to working with the [DMHC] to ensure HMOs live up to their legal obligations."

The CMA also filed a brief in the DMHC suit against Prime Healthcare, but declined to comment on the settlement.

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