BALANCE-BILLING AFTER OLSZEWSKI

A. The Law Surrounding Balance-billing Law is Rapidly Evolving

Personal injury counsel are increasingly looked to as collection agents for medical care providers, insurance companies and the like. The preferred mechanism for this undertaking is the lien claim. As a practitioner, you know that lien issues can be among the most difficult and frustrating aspects of representing your clients.

Balance-billing is an area of lien practice that is both confusing and unsettling to a practitioner trying to sort out the amount due on liens from various providers. It seems that the appellate courts may be injecting some sense into this area, though the process is slow.

Even so, in June of this year, our Supreme Court declared that balance-billing (really substitute billing, see below) is not allowed in Medi-Cal situations. Olszewski v. Scripps Health, 30 Cal. 4^th 798, 135 Cal. Rptr. 2d 1. As for private insurance and hospitals attempting to balance bill under the Hospital Lien Act, it seems a high court decision is likely in the near future. See, McMeans v. Scripps Health, Inc., 123 Cal. Rptr. 2d 143 (2002) rev. granted, Nov. 26, 2002.

In any event, it is clear that the law surrounding balance-billing is in an evolutionary phase.

B. Balance-billing Principles

Balance-billing is a hot button issue for both consumer attorneys as well as hospitals, physicians and health insurers.

Consumer attorneys frequently complain that medical providers already fully compensated under their insurance provider agreements have no right to assert further recovery from an injured plaintiff’s personal injury recovery.

Medical care providers, on the other hand, view themselves as caught in a cash-squeeze caused by diminishing benefit schedules versus the real cost of providing care.

The issue has become heated enough that, at their annual convention in January 2003, the American Medical Association passed a balance-billing resolution advocating that physicians be allowed to bill Medicare recipients the difference between reimbursement rates and actual cost of services.

“It is imperative that we get back to a system where the economic arrangement is between the doctor and the patient,” said Bohn Allen, M.D., a Texas delegate. “This gives us the ability to not charge those who can’t pay and to make the transaction a reasonable business transaction just like every other business person in this world does.”

California Medical Association Resolution 408-03 specifically dictates “That CMA continue to advocate that the Centers for Medicare and Medicaid Services eliminate all caps on balance-billing.”

The issue is high priority in the medical field as Medicare and Medicaid continue to reduce benefits payable for medical care. Doctors, hospitals and other recipients of public funds are motivated to make up the difference from the beneficiaries.

Personal injury settlements represent a target for balance-billing interests because of this financial reality.

C. Balance-billing Basics

While balance-billing has been described as “the practice of billing patients for the balance remaining on a medical bill after deducting the amount paid by Medi-Cal,” (Olszewski, supra, 30 Cal. 4^th at 805, n.2), in reality balance-billing is better defined as the practice of billing for any balance over that paid by an insurer or benefit provider of any kind.

In the personal injury context, balance-billing is generally seen where a health provider n asserts a lien against a tort recovery for the difference between payment made by an insurer and its “usual and customary charge.”

However, just because a health provider’s usual and customary charge exceeds the amount already paid by the insurer does not mean that it is entitled to balance bill.

In the realm of private insurance, the decision in Nishihama v. City & County of S.F., 93 Cal. App. 4^th 298, 112 Cal. Rptr. 2d 861 (2001) is instructive. In Nishihama, a jury awarded $20,295 in medical costs to the plaintiff following a slip-and-fall accident, including $17,168 for care received from California Pacific Medical Center (“CPMC”). The later amount was based on CPMC’s normal rates.

However, CPMC treated the plaintiff under a contract with Blue Cross, under which CPMC agreed to treat the plaintiff at a reduced rate and accept the Blue Cross payment as payment in full. Under terms of that agreement, CPMC had already accepted $3,600 as payment in full for services rendered. Even so, CPMC filed a balance-billing lien under the Hospital Lien Act (“HLA”) at Civil Code sections 3045.1-3045.6.

The Court of Appeal modified the judgment to reduce the amount awarded as costs for CPMC medical care from $17,168 to $3,600. As for the CPMC lien, the Court of Appeal held that because CPMC’s rights were derivative of the plaintiff’s claim, it’s lien rights were limited by the Blue Cross contract to the amount it had agreed to accept as payment in full.

Even if the HLA contemplated an independent right in the hospital, the extent of that right would be defined by any contract between the injured party or her insurer and the health care provider. Civil Code section 3045.4 accordingly provides that the third party “shall be liable to the [health care provider] for the amount of its lien claimed in the notice which the hospital was entitled to receive as payment for the medical care and services rendered to the injured person.” The amount that a hospital is entitled to receive as payment necessarily turns on any agreement it has with the injured person or the injured person’s insurer. Here, for example, because of its contract with Blue Cross, CPMC was entitled to receive only $3,600 as payment for the medical services rendered to plaintiff.”

McMeans v. Scripps Health, Inc., 123 Cal. Rptr. 2d 143 (2002) rev. granted, Nov. 26, 2002, follows the Nishihama analysis, in reaching different results on whether a health provider asserting an HLA lien may recover, based upon differing contracts with various insurers.

Though the California Supreme Court has yet to weigh in on the subject as of this writing, its pronouncement seems imminent. In granting review on McMeans, our Supreme Court stated: “Further action in this matter is deferred pending consideration and disposition of a related issue in Olszewski v. Scripps Health, Inc. . . . or pending further order of the court.”

On June 2, 2003, the Supreme Court decided Olszewski v. Scripps Health, 30 Cal. 4^th 798, 135 Cal. Rptr. 2d 1, without deciding the HLA lien issue. Rather, Olszewski is notable in that it holds federal Medicaid law preempts California state provider lien statutes, the upshot being that Medi-Cal providers may no longer assert a lien for the full amount of their usual and customary charges, but must instead accept Medi-Cal reimbursement as payment in full.

Actually, in the Medi-Cal area, providers have not practiced balance-billing, but rather engaged in its close cousin, substitute billing, as authorized by Welfare & Institutions Code section 14124.791. Substitute billing, the practice of a provider billing for the entire “usual and customary” amount after refunding the previously paid Medi-Cal payment, was authorized by statute in 1992 after the Legislature recognized that balance-billing is prohibited by federal Medicaid law. See, Olszewski, supra, 30 Cal. 4^th at 805.

The Supreme Court considered the liens authorized by Welfare & Institutions Code sections 14124.791 and 14124.74 in light of federal Medicaid statutes and decided that, to the extent they authorize a provider to assert a lien for an amount above that paid by Medi-Cal, they are preempted by federal law.