Health Insurers Cannot Delegate Duty to Pay Emergency Room Doctors to Failing Medical Groups

By Scott Glovsky on February 20th, 2014 in Insurance and Healthcare Denials

Today the California Court of Appeal issued an opinion in the case Centinela Freeman Emergency Medical Associates et al., v. Health Net of California, Inc., et al. (Case No. B238867) in which it held that health maintenance organizations (“HMOs”) have a duty to not delegate their obligations to reimburse emergency physicians to an organization that the HMOs know or have reason to know are or will be unable to pay for the emergency services.  California’s statutory law requires that HMOs reimburse emergency room doctors at a reasonable rate for all emergency treatment that the doctors provide to the HMO members.  The law imposes such a duty on HMOs because the law requires the doctors perform the services regardless of whether they have contracted with the HMO or not and whether the patient is able to pay for the services or not.  While the law requires that HMOs reimburse the emergency doctors, it does allow the HMOs to delegate the reimbursement obligation to an outside company called an “independent practice association” (“IPA”).

The Centinela Freeman case arose out of circumstances in which HMOs delegated their duty to reimburse emergency room doctors to an IPA that began to experience financial problems.  The doctors continued to incur the costs of providing emergency services to the HMO members but the IPA was not reimbursing the doctors and the HMOs refused to pay the doctors on the ground that they had delegated the duty to the failing IPA.  The emergency room doctors brought suit against the HMOs for reimbursement of the costs.  In its decision, the Court held that HMOs have a continuing duty to reimburse the emergency room doctors and this duty is breached by HMOs when they learn that their delegatee is no longer able to fulfill their obligation to reimburse emergency room doctors for providing emergency services to the HMOs’ members.

Congratulations to Andy Selesnick for the great lawyering.

See the opinion here.