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Emergency rooms around the state have been closing down. The failure of some health plans to pay hospitals for emergency care is one reason for this trend. While hospitals can sue health plans for reimbursement, the process is slow and does not solve the problem of the continuous flow of patients through the ER who need care while outstanding accounts receivable become unmanageable. Health plans are statutorily obligated to reimburse hospitals for emergency care to health plan enrollees, but some health plans have raised defenses to avoid the basic obligation to compensate hospitals even absent any dispute that emergency care was needed and provided. Unlike other services, hospitals must provide emergency care to persons who need it. Many uninsured patients cannot afford to pay, and hospitals with emergency rooms must absorb those losses. To ensure that those who have means pay for emergency care, California should institute expedited adjudication procedures. ER CRISIS AND HOSPITALS’AND HEALTH PLANS’ DUTIES The crisis in emergency care and the dearth of available facilities in California have been well documented. ER overcrowding has become a national problem. The California Medical Association has declared that, in California, emergency departments across the state are strained beyond their capacity. One study found that the number of emergency departments in California decreased by 12 percent between 1990 and 1999, while the number of emergency department visits increased 27 percent. In the last 10 years, nearly 60 emergency departments in California have shut their doors. While a number of factors have contributed to this trend, the inadequate reimbursement by managed care plans is among them. Thus, in explaining that the current financing of emergency rooms is a “disaster,” the California Medical Association has stated that many health plans simply reduce reimbursement, delegate the responsibility for payment to medical groups, or refuse reimbursement entirely, claiming no emergency. Emergency care is critical to public health. State policy should and does encourage hospitals to provide emergency care. Licensed hospitals with emergency rooms are required by law to provide emergency care to patients who arrive in the emergency department in danger of loss of life, or serious injury or illness (Calif. Health & Safety Code �1317(a); see also 42 U.S.C. �1395dd). The Legislature mandated that the provision of such emergency care cannot be limited based on the patient’s insurance status, economic status, or ability to pay for medical services. Hospitals cannot ask an emergency patient about his or her ability to pay for emergency care before rendering emergency patient care. The Legislature also found that the cost of emergency care is greater than the cost of delivering other forms of medical services because emergency services must be readily available to all on a 24-hour-a-day basis. The Knox-Keene Act, which regulates health care plans in California and charges the Department of Managed Health Care (DMHC) with enforcement power, also embodies this policy in part. The Knox-Keene Act imposes mandatory payment obligations on health plans to pay for emergency care to their enrollees. These health plans have a statutory or contractual obligation to provide or indemnify emergency services on behalf of a patient and are liable to the extent of the contractual obligation to the patient for the reasonable charges of a hospital for the emergency services provided. Health & Safety Code �1371.4 specifically provides that a health plan “shall reimburse providers for emergency services and care provided to its enrollees. …” As long as federal or state law requires that emergency services be provided without regard to the patient’s ability to pay, a health plan may not require a provider to obtain authorization before rendering emergency care necessary to stabilize the enrollee’s emergency medical condition. Under �1371.4(c), a health care plan may deny payment for emergency care only if the health plan reasonably determines that the emergency care was never performed, and may deny payment for emergency screening only if the patient did not require emergency care and reasonably should have so known. In many instances, hospitals must provide necessary medical care to patients after they have been stabilized, for example, to prevent relapse. Health plans must reimburse hospitals for post-stabilization care that is authorized or deemed authorized. Further, a plan is prohibited from engaging in an unfair payment pattern, including “failing on a repeated basis to pay the uncontested portions of a claim within the timeframes specified” by statute. Hospitals that carry out their statutory obligations in good faith might find themselves in the position of being forced to provide emergency care without any assurance of adequate reimbursement from those who have the means to pay. Some plans, or their intermediaries, might be unable to transfer the patient to a preferred contracted facility but are unwilling to pay the non-contracted hospital’s rates, leading to a fee dispute even though the emergency and follow up care was provided and necessary. AN ATTEMPT TO AVOID PAYMENT Although the Knox-Keene Act explicitly imposes an obligation on health plans to pay for emergency care and although a good argument exists that �1371.4 provides a private right of action, some trial courts have held that the Knox-Keene Act generally does not so provide, and one court has held that parts of the Knox-Keene Act cannot serve as a basis for an unfair competition action (Samura v. Kaiser Foundation Health Plan, Inc., 17 Cal.App.4th 1284 (1993)). Although the DMHC may act on its own to penalize a plan, the DMHC lacks administrative procedures under which hospitals may bring claims against health plans. Absent a contract, a hospital’s legal remedy to collect reimbursement for emergency care could include suing patients directly; however, hospitals generally may not proceed against Medicare+Choice patients. A non-contracted hospital’s alternative remedy is to sue the health plans under common law quantum meruit or implied-in-fact contract principles and under Business and Professions Code �17200 type claims. Although couched in different ways, some health plans have argued that the Knox-Keene Act preempts common law rights and that only the DMHC may pursue health plans for failure to pay for emergency care. However, the Knox-Keene Act nowhere limits a hospital’s common law rights to collect for emergency care, and it regulates health plans, not hospitals. California courts do not interpret statutes to alter the common law, unless expressly provided, but construe them to avoid conflict with common law rules, and the presumption is that a statute does not repeal common law by implication (California Assn. of Health Facilities v. Dept. of Health Serv., 16 Cal.4th 284 (1997)). Thus, the Knox-Keene Act does not abrogate hospitals’ common law rights. To the contrary, �1371.4 provides the contours for and supports a hospital’s quasi-contractual rights. Moreover, parts of the Knox-Keene Act may serve as a predicate violation under Business and Professions Code �17200. (Samura holds that “despite the existence of a statutory enforcement scheme, [plaintiff] may still sue to enjoin acts which are made unlawful by the Knox-Keene Act.) Section 1371.4 is one of those provisions because it imposes an affirmative duty on health plans. Health plans have also asserted their contracts with their intermediaries as shields from liability to hospitals, claiming delegation of the duty to pay to the intermediary. Some plans have argued that this relationship prohibits hospitals from pursuing the plans and requires the hospital to pursue the intermediary, even though the hospital played no part in the transaction and in no way consented to the arrangement. To support their arguments, some health plans have asserted California Med. Ass’n. v. Aetna U.S. Healthcare of California Inc., 94 Cal.App.4th 151 (2001), and Desert Healthcare Dist. v. PacifiCare FHP Inc., 94 Cal.App.4th 781 (2001), in which the courts held that the providers there could not sue the health plans directly for services to their insureds. However, both decisions were predicated upon the existence of a binding contract between the provider and the health plan’s intermediary, i.e., neither case involved non-contracted providers — providers who had not consented to look solely to the intermediary — and neither involved required emergency care, which triggers �1371.4, as opposed to voluntary admissions. If a hospital contracts with an intermediary and agrees to look solely to the intermediary for reimbursement for services to a health plan’s enrollees, holding the hospital to that agreement makes sense and conforms to accepted contract principles. In those situations, hospitals are able to weigh the benefits and make a business decision to enter into — or reject — the relationship. Typically, then, a hospital not only treats the plan’s emergency patients but also receives the economic benefit of treating the plan’s patients who need regular hospital care. However, a contract between a health plan and an intermediary to which a hospital has no connection cannot limit a hospital’s remedies. Otherwise a hospital would be forced by law to treat the plan’s patients but have no remedy against the plan and would be forced to pursue an intermediary with whom the hospital has no connection and that might be insolvent or unwilling to pay. Moreover, the California Civil Code expressly prohibits such attempts to avoid liability by “delegation” without consent. Some superior courts have accepted the plans’ arguments, while others have permitted non-contracted hospitals to pursue the health plans regardless of the health plan’s contracts with third parties (Heart Hospital of BK v. PacifiCare of California, Kern County Superior Court Case No. 244328-RDR). Conventional litigation, however, is less than a satisfactory solution. The process is slow and provides little comfort for a cash-deprived hospital that must by law continue to serve emergency patients, even when the patients’ health plans refuse to pay. Unfortunately, the only remedy short of litigation for a hospital with unmanageable accounts receivable might very well be to shut down its ER. The community pays. As a remedy, the Legislature should consider amending the Knox-Keene Act to provide explicitly a direct cause of action under �1371.4, or the DMHC could erect administrative adjudicatory procedures to adjudicate emergency claims by a hospital against a health plan on an expedited basis. The only dispute should be whether services were necessary, a medical issue, and were actually provided and the value of the services, but a non-contracted provider should not be forced to litigate over a plan’s basic obligation to reimburse for emergency care.

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