In an opinion issued on January 8, 2009, the California Supreme Court ruled that emergency service providers are prohibited from billing HMO members and must instead resolve all disputes regarding payment for emergency services directly with the HMO. In a unanimous decision, Justice Ming W. Chin wrote: “Emergency room doctors must resolve their differences with HMOs and not inject patients into the dispute. Interpreting the statutory scheme as a whole, we conclude that the doctors may not bill a patient for emergency services that the HMO is obligated to pay. Balance billing is not permitted.” Prospect Medical Group v. Northridge Emergency Medical Group, S142209 (January 8, 2009), Slip Opinion at p. 11.

The Supreme Court reversed the decision of the court of appeal that ruled that balance billing of HMO members by emergency physicians was not barred by the Knox-Keene Health Care Service Plan Act of 1975, specifically Health and Safety Code section 1379. The text of section 1379 specifically prohibits contracted providers from attempting to collect from HMO members any sums owed by the HMO, but the language does not address service providers that do not have a contract with the HMO.

The Supreme Court decision arose from a lawsuit brought by Prospect Medical Group against two emergency physicians’ groups. Prospect held contracts with HMOs that obligated Prospect to pay for emergency services required for its assigned HMO members. Prospect did not have contracts with the defendant emergency physicians’ groups. The emergency physicians’ groups had engaged in the practice of “balance billing” HMO patients when the physicians found the payments made by Prospect for emergency services the groups had rendered were inadequate. Prospect sought injunctive relief to bar the emergency physicians’ groups from balance billing its assigned HMO members. The trial court denied the injunction and Prospect appealed. The Second District Court of Appeal affirmed the decision of the trial court holding that balance billing was not barred by the Knox-Keene Act.

The California Supreme Court reversed and remanded the case for further proceedings. The Court noted that since section 1379 was enacted in 1975, the Knox-Keene Act was amended in 1994 to add section 1371.4 requiring that HMOs pay for emergency services. The Court also pointed out that emergency service providers were permitted to sue HMOs directly for the reasonable value of the services rendered to HMO members citing Bell v. Blue Cross of California (2005) 131 Cal.App.4th 211. The Court noted further that HMOs are required to have a dispute resolution mechanism accessible to noncontracting providers to resolve payment disputes, and that HMOs are prohibited from engaging in unfair payment practices. Health & Saf. Code, §§ 1367(h)(2), 1371.37, 1371.39. These factors led to the Court’s conclusion that balance billing was prohibited. At the conclusion of its opinion, the Court specifically refused to address “the larger problem of adequate compensation for emergency room doctors” stating that “this larger issue is not before us.” Slip Opinion at p. 15.

The Prospect decision reaffirms the obligation of California HMOs and their delegates to pay the reasonable value of emergency services provided to their plan members, but the decision provides no guidance for resolving disputes about the reasonable payment amount. HMOs commonly delegate the responsibility to pay for emergency physician services to their contracted physician groups as is permitted by the Knox-Keene Act. Health & Saf. Code, § 1371.4, subd. (e); California Emergency Physicians, Inc. v. PacifiCare of California (2003) 111 Cal.App.4th 1127. While the Prospect decision takes the HMO member out of the middle of payment disputes between emergency service providers and HMOs and their delegated physician groups, questions concerning the reasonable value of emergency services will persist.