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Paul Zimmerman
pzimmerman@mrllp.com
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California Department of Managed Care Denies CAPG’s Petition for Rulemaking Amendments Regarding Reimbursements

On August 12, 2014, the California Association of Physician Groups (CAPG) petitioned the Department of Managed Care (Department). On the action requested by CAPG, it was concerned with the considerations relevant to the reasonable and customary value of services performed by non-contracted providers. CAPG requested (for the third time – its previous two times had been rejected) amendment or repeal of subdivision (a) (3) (B) of Title 28, section 1300.71, known as the “Gould factors,” contending:

  • Recent court decisions demonstrating the “reasonable value” of health care services present the only legal issues to be resolved between payers and non-contracted providers; and
  • The regulation violates the consistency standards of the Administrative Procedure Act (APA) based on the most recent court decisions.

CAPG asked that subdivision (a)(3)(B) of Title 28, section 1300.71 be repealed, or to include the average contract rates for the services of payers and providers in the respective geographic area where the services provided; and, the average amount for services paid to and accepted by non-contracted providers in the geographic area where the services were provided.  The Petition stated that in adding these factors to the Gould factors, the regulations would be consistent with prevailing law, and provide appropriate guidance to providers, payers and dispute resolvers.  The Petition further cited case law including, Bell v. Blue Cross of California (2005); Prospect Medical Group v. Northridge Emergency Medical Group (2009); and Children’s Hospital of Central California v. Anthem Blue Cross (2014).

The Department Ruling

Last month, the Department denied the Petition, deciding that the legal developments articulated by CAPG did not require it to initiate rulemaking to amend the sections, and found that the current regulations are consistent with existing statutes, court decisions and other provisions of the law.

At M&R, we believe that there is a distinction now between what the DMHC requires that payers use in determining how to reimburse providers, and what may be considered by a judge or jury in civil court when considering how to determine reasonable value of services. Merely because the payers argue that they can use Medi-Cal, Medicare, and contract rates to justify poor reimbursement does not make it so. 

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.