Court Rules that California Legislature Intended Medi-Cal Managed Care Plans to Pay
APR-DRG Rates to Out-Of-Network Hospitals for Post-Stabilization Services

A five-year battle against Dignity Health concluded on January 9, 2020 when the Second District Court of Appeal ruled in L.A. Care’s favor.  L.A. Care successfully defended the State’s All Patient Refined Diagnosis Related Groups (APR-DRG) payment methodology as the appropriate payment for out-of-network emergency and post-stabilization services provided to L.A. Care’s Medi-Cal members by Dignity’s subsidiary, Northridge Hospital.  The appellate court’s ruling establishes once and for all that the State’s APR-DRG payment methodology (which provides a single payment amount for a patient’s entire episode of care and is designed to cover all the costs of care provided by the hospital) is the payment intended for both emergency and post-stabilization inpatient services provided by an out-of-network hospital to a Medi-Cal managed care beneficiary.

Dignity did not dispute that it was required to accept the APR-DRG payment for out-of-network emergency services.  However, Dignity contended that Medi-Cal managed care plans are required to transfer patients after the emergency condition is stabilized at an out-of-network hospital or else be subject to the hospital’s full-billed charges.  The appellate court ruled that the California Legislature intended the APR-DRG payment to be used for out-of-network post-stabilization services as well.

In the lawsuit, Dignity had asserted that approximately $98 million was owed for services from 2012 to mid-2016.  For the periods from mid-2016 to mid-2019, Dignity claimed an additional $390 million under the same legal theory through a second lawsuit and various government claims.

DSR Health Law represented L.A. Care in the action.  The California Department of Health Care Services (DHCS), the California Association of Health Plans (CAHP), and the Local Health Plans of California (LHPC) all submitted amicus curiae (friend of the court) briefs supporting L.A. Care’s position.

The decision, which is certified for publication, can be considered a victory for the entire Medi-Cal managed care community.  A copy of the appellate court decision is available here.

For more information, please contact Michael Daponde or David McDonough.

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