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CA Supreme Court Rules County Health Plans Not Immune From Liability for ED Reimbursement Claims

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On July 10, the California Supreme Court issued a unanimous opinion, which found that a county health plan is not protected from liability by the Government Claims Act in a lawsuit brought by hospitals seeking reimbursement for emergency medical care provided to patients covered by the county’s health plan. By doing so, the court agreed with the position advocated by CHA in two separate amicus (friend of the court) briefs filed in connection with the Supreme Court’s consideration of this case.    

The case arose from a lawsuit by two hospitals that had provided emergency medical services to members of Santa Clara County’s health plan. When the plan reimbursed the hospitals less than 20% of their claims, the hospitals sued the county for the reasonable value of the emergency medical services they had provided on the theory that the county had breached an implied contract to reimburse the hospitals at a reasonable and customary rate under the Knox-Keene Act’s reimbursement provision (Health & Saf. Code, § 1371.4(b); 28 C.C.R. § 13007.71(a)(3)(B)).  

The county challenged the lawsuit on the ground, among others, that it was immune from liability under the Government Claims Act (Gov. Code §810 et seq.). While the trial court had rejected the plan’s arguments, the Court of Appeal, in a published decision, had reversed the trial court’s decision, holding that because the hospitals’ action was tortious rather contractual in nature, the county plan was immune from liability under the Government Claims Act. The hospitals successfully petitioned the Supreme Court to review the appellate court’s decision, with CHA filing a letter brief in support of the petition.   

In its opinion, consistent with the arguments advanced by CHA in its amicus brief on the merits of the case (which was submitted jointly with California Medical Association), the Supreme Court concluded that allowing the hospitals to proceed with their claim “violates neither the letter nor the spirit of the Government Claims Act.” To the contrary, the Supreme Court determined that allowing the hospitals’ lawsuit to proceed “further[s] a fundamental purpose of the Knox-Keene Act, protecting the continued financial viability of California’s health care delivery system, by ensuring that all emergency medical providers have an adequate remedy if there are disputes over payment, either by alleging breach of contract (if there is a contract between the provider and health care plan), or by raising a quantum meruit claim based on the Knox-Keene Act’s reimbursement obligation (if there is no contract in place).” The Supreme Court reversed the lower court’s judgment and sent the matter back to the trial court for further proceedings. 

This decision ensures that a hospital that has no contract with a county health plan has a legal remedy if the plan fails to pay the “reasonably and customary value” for the emergency care provided to a plan participant.