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Dignity Health loses out-of-network billing lawsuit

January 10, 2020 03:37 PM UPDATED AN HOUR AGO

A California appellate court has rejected Dignity Health’s claim that L.A. Care Health Plan, a large Medicaid plan, owes it tens of millions of dollars in out-of-network bills for inpatient care following stabilization of medical emergencies.

The Second District Court of Appeal on Thursday upheld a lower court’s summary dismissal of Dignity’s lawsuit alleging that the health plan owed Dignity’s Northridge Hospital Medical Center higher than state-set rates. Northridge is not within the plan’s network of contracted providers.

The appellate panel held that state law applies “all-patient refined diagnosis related group rates” to out-of-network inpatient post-stabilization services under Medi-Cal, California’s Medicaid program.

Dignity had argued that Northridge was entitled to its full billed rates.

The appellate court said it was not deciding whether and how federal law applied to the issue.

Michael Daponde, one of L.A. Care’s attorneys, said Dignity claimed it was owed more than $98 million for services for the 2011 to 2016 period covered by the lawsuit. In addition, he said, Dignity is claiming $6 million for services in 2016 covered by a second, similar lawsuit filed by Dignity, and $383 million for services from 2017 through 2019 for which Dignity has billed L.A. Care.

A Dignity spokesman said those figures appear to be correct.

In a written statement, John Baackes, CEO of L.A. Care, said the decision is significant because if the court had ruled otherwise, out-of-network providers could have billed Medi-Cal plans “anything they wanted – even higher rates than plans pay for commercial members.”

A Dignity spokesman said the system disagreed with the ruling and will consider whether to appeal.

In many cases, he said, patients remained at Northridge post-stabilization because L.A. Care failed to either respond or timely transfer those patients to contracted hospitals. So Northridge seeks appropriate reimbursement for providing this care.

The Dignity spokesman said this was the first appellate decision on the issue of the applicability of Medi-Cal’s APR-DRG payment rates to post-stabilization care. Other Medi-Cal plans in the state are facing similar lawsuits.

The case was closely watched by other hospital systems and health plans and by state regulators.

L.A. Care’s position was supported by friend-of-the-court briefs from the California Association of Health Plans, the California Department of Health Care Services, and the Local Health Plans of California. Dignity’s position was backed by an amicus brief from a group of hospitals.

CORRECTION: An earlier headline on this story misrepresented the dollar amount involved in the lawsuit and the type of billing involved.

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michael schoeneman
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