CMA files brief in case that could have far reaching implications on managed care contracting

July 20, 2021
Area(s) of Interest: California Physician's Legal Handbook 

The California Medical Association (CMA) recently filed an amicus brief with the California Court of Appeal for the Fourth Appellate District in an important case involving Medi-Cal managed care reimbursement for out-of-network, non-emergency anesthesia care.

CMA’s amicus brief brings decades of experience and perspective to bear upon the issue of whether a Medi-Cal managed care plan owes any obligation to pay a fair and reasonable reimbursement to non-contracted physicians who obtain authorization to perform certain scheduled, nonemergency services.

In this case, Allied Anesthesia Medical Group, Inc. et al v. Inland Empire Health Plan (AAMG v. IEHP), the health plan had given prior authorization for the care and then subsequently paid the anesthesiologists the below-market Medi-Cal fee-for-service rate, arguing that all providers in such situations are only entitled to the fee-for-service rate.

Defendant Inland Empire Health Plan (IEHP) is a managed care plan contracted with the California Department of Health Care Services (DMHC) to accept capitated payments to ensure that Medi-Cal beneficiaries receive all needed covered medical services. In that capacity, IEHP must comply with  all laws and regulations under the Knox-Keene Health Care Service Plan Act and the Medi-Cal program, including the critical requirement that IEHP establish a robust and stable network of providers. The CMA brief emphasized that a concomitant feature of an adequate network and timely access to care for patients is that all providers are entitled to fair and just compensation, especially when, as here, IEHP knowingly authorized and accepted the services of such providers.

The trial court rejected AAMG's argument that it had an implied-in-fact contract with IEHP for the provision of anesthesia services, and ruled that AAMG cannot be a third-party beneficiary of IEHP's contract with the state.

CMA vehemently disagrees and explained in its amicus brief that Medi-Cal managed care is designed to operate much like commercial managed care, where out-of-network physicians who are given prior authorization should be reimbursed a fair and reasonable payment, not the artificially low and unilaterally set Medi-Cal fee-for-service rate.

Allowing health plans to reimburse physicians for services at below-market Medi-Cal rates, even where those physicians sought and received authorization from the health plan to perform those services, will have a far-reaching impact on the delivery of health care. Left unchecked by the court, plans may be disincentivized to enter into written contracts with physicians, knowing that, absent a written contract, they could simply underpay them at Medi-Cal fee-for-service rates for authorized services. The effects of this could be tremendous, potentially degrading the health care provider networks that are the linchpin of the managed health care system.

Ultimately, an unfavorable decision in this case could significantly alter the dynamics of physician-health plan relationships and undermine the maintenance and formation of adequate and robust physician networks.

CMA’s brief details the legislative history and statutory authorities that preserve physician choice whether to participate in a Medi-Cal managed care network and to be entitled to fair and just compensation. Accepting the health plan’s position that fee-for-service rates should generally apply would defeat the very purpose of transitioning millions of Californians to managed care and ultimately harm access to quality health care for California’s most underserved communities.

For decades, CMA’s mission has been to advocate for effective managed care systems that expand access to high quality medical care for patients while also providing fair and reasonable reimbursement to physicians. CMA believes access to care and quality go hand in hand with fair reimbursement. In the context of managed care systems, this balance can be achieved most effectively when all participants in the system have meaningful choice to participate in payor networks as well as to accept, reject, or negotiate the burdens and benefits of network participation.


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