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Historic California appeals decision regarding hospital bills

In what some are referring to a historic court decision, an appellate court overturned a previous trial court's decision in a case called Children's Hospital Central California v. Blue Cross of California. The business litigation case could lead to major changes in litigation between health care providers and payers, say some experts.

The original case involved a contract between the hospital and the plan. The payer had a negotiated fee schedule with the hospital, which means it never paid out on claims as much as the hospital billed. That's standard practice in health care billing.

However, in 2007, the two entities could not reach an agreement on an updated contract. During the course of 10 months, the hospital was not a contracted provider with the plan. Still, as a hospital, it was required to provide emergency treatment to patients insured under the plan.

Some of the procedures that fell under emergency treatment were those previously covered under the contract's fee schedule. After 10 months, the hospital and payer reached a new agreement, but it didn't retroactively cover those months. Subsequently, the hospital billed the payer full price on all procedures and expected to receive full payment, which was much above previous discounts.

The litigation occurred when Blue Cross failed to make payment as demanded. The appeals court sided with the insurance plan, stating that the plan would not have to pay the total amount billed given the environment of discounts and over-the-top billing. The court said that for most hospitals, fees charged rarely lined up with payments accepted.

The decision is likely to have far-reaching consequences for the health care industry in California. When bringing such matters to court, businesses must consider both their own immediate interests as well as how litigation decisions could impact the future of organizations and the industry.

Source: Sacramento Business Journal, "Ruling: Hospital bills should reflect 'reasonable value' of services" Kathy Robertson, Jun. 13, 2014

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