Two anesthesia medical groups have lost their appeal against the Medi-Cal managed health care insurance agency Inland Empire Health Plan.
Upland Anesthesia Medical Group and Allied Anesthesia Medical Group, of Orange, sued IEHP March 23, 2018, alleging the company was underpaying them by paying at the Medi-Cal rate instead of their customary rate, losing them $11.7 million from 10,000 services between 2014 and 2018.
“For years, Defendant has knowingly and willfully shirked its legal obligation to pay Plaintiffs reasonable and customary value for non-emergency anesthesia services Plaintiffs provided to Defendant’s HMO enrolled,” their 468-page complaint begins.
The published appellate ruling established that the IEHP was correct, and should, as a default required by state law, pay the Medi-Cal rate for service providers.
The plaintiffs are third-party groups of doctors who work for IEHP enrollees through agreements with hospitals. They provide anesthesia services for elective, non-emergency surgeries, according to the complaint. The plaintiffs had no direct relationship with IEHP. Their third amended complaint alleged breach of implied-in-fact contract and breach of contract.
San Bernardino Superior Court dismissed the plaintiffs’ third amended complaint Feb. 7, 2020, after IEHP argued that the plaintiffs did not prove agreement to an implied contract, and that the plaintiffs did not prove that they were intended to benefit from the state contract that gives IEHP its powers.
On appeal, the plaintiffs argued that IEHP practice of authorizing surgeries, which require anesthesia and which they knew the plaintiffs would provide services for, established an implied agreement to pay the plaintiffs at their typical rate. In their complaint, the anesthesiologists did not argue they communicated their desired rates.
“Payment at the Medi-Cal fee schedule rate shows that IEHP believed it was paying the correct amount as required by California Code of Regulations, Title 22, Section 51503. Plaintiffs’ allegation that they should have been paid the reasonable and customary value of their services shows that they believed they were entitled to a higher rate. The allegations in the TAC, therefore, do not exhibit any mutual consent as to an essential term of the alleged implied contract,” the court said.
Case information
The opinion was filed June 10, and published July 1 at the request of California Association of Health Plans, Local Health Plans of California and IEHP.
Michael Gawley, J. Maxwell Cooper and Jason Allen of Kessenick, Gamma & Free represented Upland Anesthesia Medical Group and Allied Anesthesia Medical Group.
Margaret Grignon and Anne Grignon of Grignon Law Firm, and Jack Janov, Curtis S. Leavitt and James Novello of Sacramento’s Kennaday Leavitt Owensby, represented Inland Empire Health Plan.
San Bernardino Superior Judge Keith Davis presided.
Superior Court case number CIVDS1806917.
Court of Appeal case number E074729.
Watch oral argument here.
Read the ruling here.
