Prospect Medical Group v. Northridge Emergency Medical Group

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In Prospect Medical Group, Inc. v. Northridge Emergency Medical Group, 45 Cal. 4th 497, 87 Cal. Rptr. 3d 299, 198 P.3d 86 (2009), the California Supreme Court affirmed the right of out-of-network physicians who provide emergency services to recover directly from a health plan, insurance company, or HMO under quantum meruit for a reasonable value of their services. But such physicians are prohibited in California from balance billing patients for unpaid invoices:

Because emergency room doctors prevailed in Bell, supra, 131 Cal.App.4th 211, and won the right to resolve their disputes directly with HMO's, no reason exists to permit balance billing. Thus, the Department of Managed Health Care, which supported doctors' rights to sue the HMO's directly in Bell, has appeared in this case as amicus curiae supporting patients' rights to be free of balance billing.
When a dispute exists between doctors and an HMO, the bill the doctors submit may or may not be the reasonable payment to which they are entitled. The Bell court made clear that an HMO does not have “unfettered discretion to determine unilaterally the amount it will reimburse a noncontracting provider … .” (Bell, supra, 131 Cal.App.4th at p. 220.) But the converse is also true; emergency room doctors do not have unfettered discretion to charge whatever they choose for emergency services. Emergency room doctors and HMO's must resolve their disputes among themselves. Interjecting patients into the dispute by charging them for the amount in dispute has only an in terrorem effect. As Prospect notes, although emergency room doctors “are entitled to ‘reasonable’ compensation for the services rendered, they cannot lawfully seek unreasonable payment from anyone.” But a patient will have little basis by which to determine whether a bill is reasonable and, because the HMO is obligated to pay the bill, no legitimate reason exists for the patient to have to do so. Billing the patient, and potentially attempting to collect from the patient, will put unjustifiable pressure on the patient, who will often complain to the HMO, which complaints will in turn pressure the HMO to make the payment even if it is unreasonable. Such a billing practice is not a legitimate way to resolve disputes with an HMO.

Prospect Med. Grp., Inc. v. Northridge Emergency Med. Grp., 45 Cal. 4th 497, 508, 87 Cal. Rptr. 3d 299, 307, 198 P.3d 86, 93 (2009).