L.A. Care successfully defends Medi-Cal, averting significant financial blow to the program

L.A. Care Health Plan, the largest publicly-operated health plan in the country, is pleased to announce that the Second District Court of Appeal ruled in favor of L.A. Care in a lawsuit involving payments to out-of-network providers. This first-of-its kind case is a culmination of a five-year legal battle that could have had serious implications for all Medi-Cal managed care plans in the state.


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“L.A. Care appreciates the many hospitals that provide high quality health care services to L.A. Care’s 2.2 million members. But this was a case that could have been catastrophic for Medi-Cal managed care and the millions of Californians who rely on this program,” said John Baackes, L.A. Care CEO. “If the court had ruled against L.A. Care, out-of-network providers could have billed Medi-Cal plans across the state anything they wanted—even higher rates than plans pay for commercial members.”

The lawsuit concerned L.A. Care members who sought emergency care at Northridge Hospital and needed additional inpatient post-stabilization care. Northridge Hospital is not within L.A. Care’s network of contracted providers.  Consistent with state law, L.A. Care argued that Northridge Hospital, like other out-of-network hospitals, must accept state-set rates for post-stabilization inpatient services provided to Medi-Cal managed care members.

But Dignity Health, the parent company of Northridge Hospital, sought higher payments than the state-set rates for treating L.A. Care Medi-Cal members at its Northridge Hospital. Dignity argued that the Medi-Cal post-stabilization rates set by the California Department of Health Care Services did not apply to L.A. Care (and other Medi-Cal managed care plans) and demanded full billed rates, which are many times higher than the state-set rates.

In 2017, a Superior Court judge in Los Angeles County disagreed with Dignity’s position and ruled in favor of L.A. Care. Dignity appealed that ruling. Today’s Court of Appeal ruling affirmed L.A. Care’s position.

“The Court of Appeal ruled that L.A. Care was correct to pay out-of-network hospitals at the rates established by the state,” said Augustavia Haydel, Esq., L.A. Care General Counsel. “This ruling should put an end to similar disputes filed across the state against other Medi-Cal managed care health plans.”

L.A. Care received support in this legal battle through “friends of the court briefs” from the California Department of Health Care Services (DHCS), the California Association of Health Plans (CAHP), and the Local Health Plans of California (LHPC).

L.A. Care was represented by Michael J. Daponde and David P. McDonough of Daponde Simpson Rowe PC, with assistance from Jerome H. Friedberg and Stacey Zill of Isaacs Friedberg LLP, and in-house counsel Augustavia J. Haydel, Ellin Davtyan, and Oren Rosenthal.

Read the court opinion here.

This press release was provided by L.A. Care.