California court rejects Dignity Health's lawsuit against L.A. Care over out-of-network bills

Gavel court room lawsuit judge
A California court has weighed in Dignity Health's lawsuit against L.A. Care over out-of-network payments. (Pixabay)

A California appeals court has rejected a lawsuit filed by Dignity Health alleging that L.A. Care Health Plan—a large Medicaid plan in the state—owes millions in payments for out-of-network care.

In the suit, Dignity argued L.A. Care should pay a higher reimbursement rate for its members who were provided emergency services with post-stabilization inpatient care at Northridge Hospital than state-set rates, because the hospital was not in-network. In its ruling (PDF), the state's 2nd District Court of Appeals upheld a lower court ruling from 2017 dismissing the suit.

Though the appellate court did affirm the lower ruling based on state law, it did not weigh in on how federal laws could impact the dispute.

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In a statement, L.A. Care CEO John Baackes said that if the court had sided with Dignity Health the results would have been "catastrophic" for Medi-Cal, Calfornia's Medicaid program, as the results could be extrapolated to managed care plans statewide.

"If the court had ruled against L.A. Care, out-of-network providers could have billed Medi-Cal plans across the state anything they wanted—even higher rates than plans pay for commercial members," he said.

In a statement, Dignity Health said "in many instances" L.A. Care members who were stabilized in Northridge's emergency department remained there as the health plan "failed to either respond or timely transfer those patients to contracted hospitals." The health system is mulling an appeal.

"As a managed Medi-Cal plan, L.A. Care’s responsibility is to manage the care of their patients within their contracted network of providers," Dignity said.

California's Department of Health Care Services and regional health plan groups backed L.A. Care in the suit, while a group of hospitals filed a brief in support of Dignity Health.