The controversial practice is known as "balance billing" and is increasingly common across the state. But the size and scope of Prime's balance-billing practices appear to be among the largest thus far.
Balance billing occurs when doctors and hospitals claim they've been underpaid by insurers and ask patients to pay the balance. Some patients wrongly assume that such bills are cleared by their insurer.
For example, a doctor may charge $2,000 for a procedure, but the health plan pays $1,500. Under balance billing, the hospital would ask the patient for $500 -- even though the patient had paid his or her full share of the service.
Many of the bills involve patients who are taken -- some by ambulance -- to emergency rooms that are not in their health plan's network.
According to a 2006 survey by the California Assn. of Health Plans, more than 1.75 million Californians who visited emergency rooms in the previous two years received $578 million in bills for unpaid balances on top of their co-pays and deductibles. Nearly 60% of patients paid the bills, the survey found.
Kaiser Permanente sued Prime this spring to block the company from billing more than 5,000 of its patients for unpaid medical bills.
In May, the insurer got a temporary restraining order from Los Angeles County Superior Court barring Prime from collecting from patients or reporting the bills to national credit agencies until the case is resolved.
Kaiser is involved in a similar lawsuit with Cedars-Sinai Medical Center.
California laws on the issue are vague compared with those in some states. New Jersey and West Virginia require insurers to pay the doctors' bills in such disputes. Connecticut, Colorado and Rhode Island indemnify patients against having to pay such bills.
California has rarely acted against insurers or providers for balance-billing problems. One exception came in 2005 when regulators fined Health Net $250,000 for underpaying emergency room doctors and other physicians. The state said the Woodland Hills-based managed-care provider underpaid more than 65,000 claims.
In 2006, Gov. Arnold Schwarzenegger ordered state regulators to ban balance billing. The Department of Managed Health Care spent two years trying unsuccessfully to negotiate a compromise between insurers and providers.
This spring, the agency decided to outlaw the practice and drafted regulations to bar hospitals and their physicians from billing patients for emergency services that are the responsibility of insurers. Because the regulations aren't expected to be in effect until this fall at the earliest, the state sought recourse against Prime Healthcare in court, a department spokeswoman said.
"Patients shouldn't be brought into the middle of billing disputes. Period," said department director Ehnes.
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daniel.costello@latimes.com
