Progress on Balance Billing!

It is ironic, on the day Health Access celebrated its founding 20 years ago, a founding that started out of a consumer victory against the California Medical Association (CMA) and other providers, we get word of a new victory in a fight that has Health Access on one side and doctors on the other.

The big news: A court sent out its preliminary decision against CMA and other providers, denying their efforts to stop new regulations on “balanced billing” at the Department of Managed Health

Insured patients can breathe easier that if they get needed care in an emergency situation, they will not be billed unnecessarily and used as a pawn in a contractual dispute between insurers and providers.

The practice of balanced billing, where insured patients are sent the bill when a provider has a billing dispute with the insurer, is a significant problem for consumers. Patients get sent to collections, and have their entire credit history ruined—when legally they owe nothing and have done nothing wrong, except get the care they need.

We are pleased the courts sided with the Department of Managed Health Care (DMHC), and against the CMA’s lawsuit. There’s more work to do on this subject, but this is good news for patients.

Two final notes on the ruling, from my colleague and legislative advocate, Beth Capell:

* First, it is evident from the court’s ruling that the case made by the California Medical Association, the California Hospital Association and other providers ignored the economic impact on consumers and focused only on the economic impact on providers. While it is reasonable for provider trade associations to represent their members, we are weary of these same organizations claiming that they care deeply for consumers when they oppose consumer measures time and again… it is plain that their pocketbooks are their primary concern.

* Second, the court’s ruling rests on the plain language of the law which states that a “unfair billing pattern” means engaging in a demonstrable and unjust pattern of nbundling of claims, upcoding of claims, or other demonstrable and unjustified billing patterns, as defined by the department.

Put simply, DMHC defined balance billing as an “unfair billing pattern”, the court found that the law permits it to do so and the providers are squawking because they thought “unfair billing pattern” only applied to provider-plan disputes with consumers as collateral damage.

Here’s excerpts from the case, below:

The following shall constitute the Court’s tentative ruling on the Petition for Writ of Mandate and Complaint for Declaratory and Injunctive Relief filed by Petitioners California Medical Association, California Hospital Association, California Chapter of the American College of Emergency Physicians, California Orthopeadic Association, California Radiological Society, and California Society of Anesthesiologists, set for hearing in Department 31 on Friday, November 21, 2008 at 9:00 a.m.

II. Background

This case challenges DMHC’s promulgation of 28 CCR § 1300.71.39 (the “Balance Billing Regulation”). The Balance Billing Regulation was enacted under the authority purportedly granted to DMHC by provisions in the Knox-Keene Act, Health and Safety Code §§ 1340 et seq., in which the Legislature delegated certain regulatory authority with regard to health care service plans (“HMOs”) to DMHC. Of particular interest here is Health and Safety Code § 1371.39, which was added to the Act as part of Assembly Bill 1455 (Scott, 2000). Among other things, § 1371.39 allows HMOs to report “instances in which the plan believes a provider is engaging in an unfair billing pattern” to DMHC.

The Balance Billing Regulation defines “unfair billing pattern” to include a practice known as “balance billing” when that practice is engaged in with respect to emergency care recipients who are enrollees in a health care service plan (an “HMO”). Balance billing occurs when a provider receives less than the total amount billed from a patient’s HMO and subsequently bills the unpaid balance directly to the patient. The Balance Billing Regulation provides:

(a) Except for services subject to the requirements of Section 1367.11 of the Act, “unfair billing pattern” includes the practice, by a provider of emergency services, including but not limited to hospitals and hospital-based physicians such as radiologists, pathologists, anesthesiologists, and on-call specialists, of billing an enrollee of a health care service plan for amounts owed to the provider by the health care service plan or its capitated provider for the provision of emergency services.

Petitioners contend that DMHC acted unlawfully in promulgating the Balance Billing Regulation and seek a writ of mandate (under CCP § 1085) ordering DMHC to repeal the Balance Billing Regulation, a declaration that the Balance Billing Regulation is invalid, and an injunction stopping DMHC from implementing and enforcing the Balance Billing Regulation.

III. Analysis

A. Standard of Review.

In reviewing the legality of a regulation adopted pursuant to a delegation of legislative authority, the Court’s inquiry is limited to three questions: (1) whether the regulation is within the agency’s delegated authority; (2) whether the regulation is reasonably necessary to effectuate and not in conflict with the purposes of the statute being implemented; and (3) whether the regulation was promulgated pursuant to proper procedure. (Moore v. Cal. State Bd. of Accountancy (1992) 2 Cal.4th 999, 1014-15; Cal. Gov’t Code §§ 11342.1, 11342.2, 11350(b).) The Court accords the regulation a strong presumption of regularity, and Petitioners bear the burden of showing its invalidity. (Moore, 2 Cal.4th at 1014-15; Credit Ins. Gen’l Agents Ass’n v. Payne (1976) 16 Cal.3d 651, 657.)

B. Discussion.

Petitioners challenge the Balance Billing Regulation under each of the three areas of Court review listed above, and additionally challenge the regulation as unconstitutionally vague. Petitioners’ many arguments can be organized into the following categories: (1) that the regulation was not within DMHC’s delegated authority to enact; (2) that DMHC did not follow proper procedures under the California Administrative Procedure Act in promulgating the regulation because its economic impact statement conflicts with substantial record evidence; (3) that the record lacks substantial evidence that the Balance Billing Regulation was reasonably necessary to effectuate the statutory purpose; (4) that the regulation conflicts with the Knox-Keene Act’s purpose that contracts between HMOs and providers be “fair and reasonable to ensure adequate networks”; and (5) that the regulation violates due process because it is overly vague. The Court will address each category of argument in turn.

* The DMHC Acted Within Its Delegated Authority in Promulgating the Balance Billing Regulation….
a. Health and Safety Code § 1371.39(b)(1) Plainly Authorizes DMHC to Define Unfair Billing Practices….
b. Health and Safety Code § 1371.39(b)(1) Authorizes DMHC to Regulate Providers With Regard to Unfair Billing Practices.
c. DMHC’s Determination that Balance Billing Can Constitute a Billing Pattern is Reasonable..
* The DMHC’s Economic Impact Statement Does Not Conflict with Substantial Record Evidence.
* The DMHC’s Conclusion that the Balance Billing Regulation Was Reasonably Necessary Is Supported by Substantial Evidence.
* The Balance Billing Regulation Does Not Conflict with the Knox-Keene Act’s Requirements for HMO-Provider Contracts.
* The Balance Billing Regulation Is Not Unconstitutionally Vague.

IV. Disposition
The petition is denied. The requests for declaratory and injunctive relief are denied. DMHC, as the prevailing party, is directed to prepare a formal order, incorporating the Court’s ruling herein verbatim or attaching it as an Exhibit, and a judgment consistent with the ruling; submit them to opposing counsel for approval as to form; and thereafter submit them to the Court for signature and entry of judgment in accordance with Rules of Court 3.1312 and 3.1590.

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