HFMA VIEWS

Another eccentricity of the nation’s fragmented healthcare payment system was in the spotlight this week as the California Supreme Court unanimously ruled that “balance billing” is prohibited under state law.

The issue of balance billing arises when a patient who is an HMO member seeks emergency care from a provider (in this case, groups of emergency physicians) who does not have an advance agreement for payment with the HMO. California state law imposes an obligation on providers to give emergency care, but also states that providers are entitled to a reasonable payment for that care. This is all well and good, except when the provider and the payer differ on what is a reasonable payment for the service.

The California Supreme Court held that a dispute on reasonable payment is an issue between the physician and the HMO, not the patient who sought the emergency care. Physicians are entitled to directly sue the HMO if they believe they have received an unreasonably low payment, but they cannot bill the patient for the balance between what the physician thought was a reasonable charge for the care provided and what the HMO was willing to pay.

Filing a lawsuit for each disputed payment from an HMO is, needless to say, a rather cumbersome way to be paid. The Wall Street Journal Health Blog notes that the emergency physicians who brought the case argued that balance billing gave them some leverage against the plans, which would likely hear from unsatisfied members who had been balance billed.

The California Medical Association makes a similar argument about lost leverage, stating that in many cases physicians and hospitals will now simply “eat the cost of emergency medical care that HMOs refuse to cover” and place greater financial pressures on already stressed emergency departments.

From the patient’s perspective, the ruling makes sense. In a true emergency, patients are likely to go to the nearest emergency department without thinking too much about whether a particular provider has a payment agreement with their plan. They probably do think, however, that they have purchased some peace of mind along with their coverage.

The California Supreme Court’s decision made clear that the question of how to resolve disputes between physicians and HMOs was not before it in this case; it was simply resolving the issue of whether a patient/HMO member could be brought into the dispute. Now might be an appropriate time for state legislators or regulators to step in to make sure that providers and payers are playing on a balanced field.