Avoiding Sticker Shock: A Look Into What Are Considered “Reasonable and Customary” Charges Under 28 CCR §1300.71(a)(3)(B)

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In the case Children’s Hospital Central Cal. v. Blue Cross of Cal. (Cal. Ct. App. 2014) ___Cal.App.4th ___ (No. F065603), The Children’s Hospital Central California (“Hospital”) and Blue Cross of California (“Blue Cross”) disputed the reasonable value of medical services the Hospital provided to Medi-Cal beneficiaries enrolled in Blue Cross’s Medi-Cal managed care plan. The Court of Appeals held that the trial court incorrectly concluded that Code of Regulations, Title 28, Section 1300.71(a)(3)(B) provided the exclusive standard for determining the reasonable and customary value of medical services, because the factors enumerated in 1300.71 are not exhaustive as to what is considered when determining the “reasonable and customary” value for medical services, nor are the providers’ billed charges dispositive.    

The Hospital provided emergency services to Blue Cross Medi-Cal beneficiaries for ten months without any contract in place. During this time, Blue Cross paid the Hospital $4.2 million based on the Medi-Cal rates paid by the government. However, the Hospital demanded its full billed charges of $10.8 million for the services provided. When Blue Cross refused to pay, the Hospital sued.  The trial court made discovery and evidentiary rulings before trial, including agreeing with the Hospital that Section 1300.71 provided the exclusive standard for determining the reasonable and customary value of the medical services in this action.  Thus, the trial court refused to allow Blue Cross to introduce any evidence that the rates accepted by other payors are reasonable and customary, and refused to allow any other evidence of “reasonable and customary” that did not fit within the six factors enumerated in Section 1300.71.  The case was tried and the jury found that there was an implied-in-fact contract between the Hospital and Blue Cross.  The jury awarded the Hospital $6.6 million.  

Blue Cross appealed and argued that the trial court erred in various discovery and evidentiary rulings, including the ruling that Section 1300.71 provided the exclusive standards for violating the reasonable and customary value of medical services. The Hospital contended that its billed charges were the “reasonable and customary” value. The Court of Appeals discussed the elements of Section 1300.71, that for non-contracted providers, reimbursement of a claim means: “the payment of the reasonable and customary value for the health care services rendered based upon statistically credible information that is updated at least annually and takes into consideration: (i) the provider’s training…; (ii) the nature of the services provided; (iii) the fees usually charged by the provider; (iv) prevailing provider rates charged…; (v) other aspects of the economics of the medical provider’s practice that are relevant; and (vi) any unusual circumstances in the case.” The Court of Appeals reversed the trial court’s judgment and remanded it for a new trial. The Court found that the trial court abused its discretion and prejudiced Blue Cross when it improperly limited the evidence of “reasonable and customary value” to the factors set out by Section 1300 .71. The Court held that Section 1300.71 does not provide the exclusive standard, and reasoned that “the facts and circumstances of the particular case dictate what evidence is relevant to show the reasonable market value of the services at issue, i.e., the price that would be agreed upon by a willing buyer and a willing seller negotiating at arm’s length [and that] [s]pecific criteria might or might not be appropriate for a given set of facts.”

 

Topics:  Blue Cross, Health Insurance, Healthcare, Hospitals, Medical Expenses

Published In: Civil Procedure Updates, Health Updates, Insurance Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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