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Lawmakers move to curb hospitals from 'capturing' patients

Monica Lam/California Watch

The emergency room practices of a major California hospital chain have prompted new legislation to reduce what critics describe as a pattern of "capturing" insured patients in order to boost bills.

Sen. Ed Hernandez, D-West Covina, chairman of the state Senate Health Committee, is carrying the bill limiting how much hospitals are paid after they admit a certain rate of out-of-network, privately insured patients. Because current state law is so vague, hospitals can charge insurers top dollar for treating patients from outside their medical networks.

Hernandez, who was co-chairman of a Feb. 24 legislative hearing in Los Angeles, said the proposed bill comes after his office heard “about a growing business practice in the hospital world where unscrupulous hospitals avoid contracts with health plans, filter patients with commercial insurance through their ER, and bill higher ‘out-of-network’ charges to maximize profits.”

“This practice goes against the very idea of managed care, which is not only bad for our health care system, it harms patients,” Hernandez said in a statement.

He said he introduced the bill to "remove the economic incentive for a hospital to operate in this manner.”

Hernandez introduced his bill after a yearlong California Watch investigation into aggressive billing by Prime Healthcare Services, a 16-hospital chain based in Ontario.

Prime spokesman Edward Barrera said the bill is part of Hernandez's "increasing bizarre and illegal attempts to target one hospital system."

"This poorly written bill unduly gives more power to HMOs and insurance companies, makes no sense to anyone who understands the economics of healthcare and the already fragile healthcare safety net, and makes it even more difficult for hospitals across the state to stay solvent," Barrera said in an e-mail.

The bill would only affect hospitals where, during the course of a year, half or more of the privately insured patients admitted through the emergency room are outside of their care network. Once a hospital reaches that point, it would be paid Medicare rates or a "good faith and reasonable" estimate of costs.

The move comes as two health care providers, Kaiser Health Plan and Heritage Provider Network, are suing Prime in Los Angeles County Superior Court. Kaiser accuses the chain of attempting to increase profits by "capturing" their patients who come into Prime emergency rooms. Heritage says the chain misdiagnoses patients to justify keeping them in Prime hospitals.

Prime has denied those claims and filed the first lawsuits in the disputes with the insurers, saying both wrongfully withheld payments for patient care. The lawsuits are ongoing.

During the February hearing, Assemblyman Bill Monning, D-Monterey, and Hernandez heard testimony from a Kaiser emergency room doctor who said hospitals bought by Prime stopped communicating with Kaiser about patients.

Sandra Taylor-Davey, granddaughter of a Medicare patient, testified about the difficulties her family faced getting her grandmother moved out of West Anaheim Medical Center, which is owned by Prime.

Hernandez’s bill is up for a hearing and vote Wednesday.

Update: This bill passed out of the committee during the hearing.

The California Hospital Association opposes the bill. In an April 9 letter to Hernandez, the hospital association said the bill conflicts with current law, which lays out what emergency room doctors and managed care plans are required to do when dealing with out-of-network patients.

Kaiser and Heritage have accused Prime of subverting the law by routinely failing to notify them when a covered patient lands in a chain hospital. However, Prime General Counsel and Vice President Michael Sarrao has said its doctors make autonomous decisions about how to handle emergency care.

The hospital association said in its letter that when disagreements over the process can't be resolved, “the appropriate forum to resolve disputes remains the courts.”

Kaiser and the California Association of Health Plans, which represents major insurers, have not taken a position on the bill, spokeswomen for the organizations said.

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