The California Hospital Association has filed a lawsuit against Anthem Blue Cross over a policy that would penalize hospitals when patients receive care from out-of-network physicians, even if the hospital is in network.
The lawsuit, filed May 4 in Sacramento, alleges the policy violates California law and places unfair financial pressure on hospitals already facing economic strain.
Under the policy, Anthem would impose a 10% reduction in reimbursement when an enrollee receives care from an out-of-network physician at an in-network hospital. The insurer will reduce facility claim payments by 10% of the allowed amount when an enrollee receives care from an out-of-network physician at an in-network hospital, and continued use of out-of-network providers could result in network termination.
The policy is part of a broader initiative by Anthem’s parent company Elevance Health that has been rolled out across multiple states and is set to take effect in California June 1.
CHA President and CEO Carmela Coyle said the policy shifts responsibility for network management onto hospitals.
“Anthem’s new policy is trying to force hospitals to solve a problem Anthem created,” CHA President and CEO Carmela Coyle said in a May 4 news release. “It’s illegal, ignores the agreements Anthem has with its enrollees, and will lead to further financial stress for California hospitals and the communities they care for during an extremely unstable period in healthcare.”
The lawsuit argues that California law prohibits hospitals from requiring physicians or physician groups to participate in a specific insurer’s network, leaving hospitals with limited options to avoid the reimbursement penalties.
CHA also argues that ensuring physicians are in network is the insurer’s responsibility — not hospitals’.
“We are confident the courts will recognize Anthem’s move as a flagrant attempt to increase their profits at a time when millions of Californians are projected to lose their healthcare coverage,” Daron Tooch, legal counsel for CHA, said. “The policy is unethical and unlawful, and we look forward to a decision from the court that protects not just hospitals, but also Anthem enrollees who trust that their insurance company will respect their right to choose their own physician.”
Anthem has defended the policy in previous statements to Becker’s, arguing it is designed to encourage the use of in-network providers, improve affordability and reduce administrative complexity. The insurer has said patients will not face disruptions in care and that exceptions will apply in emergency situations or when no in-network providers are available.
“Hospital patients and their employers should not have to worry about surprise bills from out-of-network healthcare providers when patients visit their in-network hospitals for planned procedures,” a spokesperson for Anthem said in a May 5 statement shared with Becker’s. “These cases aren’t surprise situations; they’re planned surgeries, such as plastic surgery, in markets where we already have robust in-network options Unfortunately, some out-of-network providers undermine the protections and goals of the No Surprises Act and charge working families and their employers tens of thousands of dollars more than what Medicare and in-network providers are paid for the same in-hospital medical care. That out-of-network billing is not fair, and our policy creates an incentive for hospitals to stop it.”
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