PART I: What level of reimbursement are non-participating (out-of-network) providers entitled to when providing non-emergency services to plan policyholders?

On August 1, 2014, Orthopedic Specialists of California (OSSC), a provider group, urged an appellate panel to revive its putative class action alleging that California Public Employee’s Retirement System (CalPERS) health plan did not properly compensate out-of-network health care providers for non-emergency services rendered to its subscribers. Orthopedic Specialists of Southern California v. California Public Employees’ Retirement System (Cal. Ct. App. July 15, 2014) B248535, 2014 WL 3749525.

OSSC argued that a lower court wrongly denied its right to seek usual, reasonable and customary (UCR) reimbursement for out-of-network services provided to CalPERS-covered patients. Additionally, OSSC argued that CalPERS’ paid unreasonably low rates, though its plan calls for non-emergency, out-of-network care providers to be paid based on factors including the value of the services rendered, geographical region and the provider’s charge patterns. CalPERS countered with the argument that non-emergency providers are not protected or restrained in the same way emergency health providers are. Emergency care doctors are entitled to UCR payment because they are legally compelled to provide treatment regardless of insurance coverage or ability to pay.

At center stage in Orthopedic Specialists was the following question: What level of reimbursement-(1) reimbursement terms located in a Plan’s Evidence of Coverage; or (2) UCR rates as calculated by the Department of Managed Health Care’s subjective regulatory factors (described below)-are non-participating (out-of-network) providers entitled to when providing non-emergency services to plan policyholders? Typically, medical groups, independent practice associations, hospitals and emergency physician groups will contract with health care payors and negotiate fees for services rendered to payors’ policyholders. When no such contract exists between payor and provider, providers will charge fees that do not reflect any negotiation and which may be more or less reflective of the actual costs of providing such services. When payor and provider are not bound by the terms of a contract (which lays out fees for services to be rendered) patients are left caught in the middle of a payor-nonparticipating provider reimbursement dispute.

For example, imagine you suffer from chronic lower back pain. You feel numbness up and down your left arm and begin to lose significant functional mobility in your back and arm. You spend two years attempting to manage the pain and functional decline by utilizing conservative treatment methods, such as cortisone injections, inverted table therapy or other non-invasive treatment options. Finally, your neurosurgeon specialist recommends that you undergo medically necessary lumbar spinal fusion surgery. The procedure has been shown to provide high efficacy rates and provides more long-term pain relief than any option. You undergo the non-emergency procedure and begin to experience the benefits of this aggressive treatment option. Your neurosurgeon bills your insurance company $150,000 for the procedure. Months or even years later you come to find out that your neurosurgeon was reimbursed only $11,000 for the procedure, and now wants to be paid the rest. Do you have to pay him, or should your insurance company? (Never mind, you don’t really have to answer that!)

Now imagine the following scenario involving the same neurosurgeon. You experience a freak off-road biking accident and sustain a life-threatening head and neck injury. You are rushed into the emergency room at the local hospital and the same neurosurgeon performs life-saving cranial and neck surgery on you. You undergo the emergency procedure and the neurosurgeon bills your insurance company $150,000. Months or even years later you find out that the neurosurgeon was reimbursed $11,000 for the procedure that saved your life. What happens next? What are the provider and the patient’s legal rights as it relates to the outstanding fee bill?

California law provides two very different outcomes for these scenarios. Furthermore, the type of plan the policyholder has-HMO or PPO -will also determine what law will be applied to resolving a reimbursement dispute in court. Thus, this series of posts seeks to address three aspects of provider-nonparticipating provider reimbursement disputes: (1) Who can sue in a reimbursement dispute; (2) How can providers or patients sue in a reimbursement dispute; and (3) What rules will a court employ to determine a reimbursement rate for providers in resolution of such a dispute.

Stay tuned for more….

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