Dignity Health isn't owed millions from Medicaid insurer, appellate court rules

Upholding a lower court decision, a California appellate court rejected Dignity Health's lawsuit claiming that L.A. Care Health Plan owes it hundreds of millions of dollars in out-of-network payments for inpatient stabilization post-emergency. 

San Francisco-based Dignity Health sued the Medicaid managed care plan on behalf of its Los Angeles-based Northridge Hospital Medical Center, which is not within the plan's network of contracted providers. 

In the lawsuit, Dignity claimed that L.A. Care Health Plan shorted the reimbursement to the hospital by paying for the poststabilization services at state-set rates known as all patient-refined diagnosis-related group rates. 

Dignity's lawyers claimed that a Welfare and Institutions Code specifically exempts "managed care inpatient days" from services subject to the state-set rates and that the treatment provided to L.A. Care Health Plan's beneficiaries constituted "managed care inpatient days." 

As a result, Dignity sought to be paid its full billed amount, instead of the lower, state-set rates. 

A spokesperson for L.A. Care Health Plan told Becker's Hospital Review that Dignity claimed it was owed more than $487 million for the services it provided from 2011 through July 2019.

In defending the claims in the lawsuit, L.A. Care Health Plan argued that state and federal law mandate that out-of-network poststabilization services under Medi-Cal be paid at state-set rates. 

The 2nd District Court of Appeals sided with the defendant, saying that "Legislature intended the APR-DRG rates to apply to out-of-network inpatient poststabilization services under Medi-Cal. Consistent with the Legislature’s intent, we thus interpret the phrase 'managed care inpatient days' to refer to services provided pursuant to a managed care contract, that is, in-network services. Accordingly, we affirm the judgment [of the lower court.]"

"This is a challenging time for many community hospitals and it’s important that community hospitals receive appropriate reimbursement for providing this care so we can sustain the services our communities depend on. In this case, Northridge Hospital Medical Center (NHMC) did not have a contract with L.A. Care but provided necessary emergency care and post-stabilization treatment to many L.A. Care patients. 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. However, in many instances, patients remained at NHMC post-stabilization because L.A. Care failed to either respond or timely transfer those patients to contracted hospitals. NHMC seeks appropriate reimbursement for providing this care. We disagree with the Court's findings and will consider whether to appeal this ruling," Dignity Health told Becker's Hospital Review.

Access the full ruling here

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