California Files Lawsuit Against Hospital Chain Seeking End To 'Balance Billing' Practices

The California Department of Managed Health Care on Friday filed a lawsuit in Orange County Superior Court seeking to stop the hospital chain Prime Healthcare Services from billing patients for the cost of services above what their HMOs are willing to pay, the Los Angeles Times reports. The practice is known as "balance billing."

In 2006, Gov. Arnold Schwarzenegger (R) ordered state regulators to ban the practice. DMHC officials worked for two years trying to negotiate a compromise between insurers and health providers, and the agency this spring drafted regulations that will bar hospitals and physicians from charging patients for emergency services that insurers have not paid. The regulations are not expected to be adopted until the fall, which led the state to take action against Prime in court, a DMHC spokesperson said.

DMHC Director Cindy Ehnes said, "Prime Healthcare's ongoing practice of putting consumers in the middle of billing disputes between providers and health plans is the largest example of this egregious practice we've seen to date, and it must be stopped."

Prime Healthcare acknowledged it was using balance billing and said it believed it was legally allowed to send the bills to patients. Mike Sarrao, Prime's general counsel, criticized DMHC's action and said Prime believes that the agency lacks "the requisite legal or equitable standing to bring the suit forward."

According to the Times, Prime is "one of the fastest growing hospital chains" in California. When the company acquires a hospital, it often cancels most private insurance contracts, making it possible to charge insurers higher out-of-network fees for treating their members, the Times reports. In a lawsuit filed this spring, Kaiser Permanente brought similar charges against Prime and won an injunction barring the chain from seeking payment from more than 5,000 Kaiser members for bills the HMO had not paid (Costello, Los Angeles Times, 7/2).


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