Providence hospitals in California have joined other hospital chains challenging Kaiser Foundation Health Plan Inc. in court over millions of dollars allegedly owed them for emergency treatment of Kaiser members.
Depending on how the legal fight ends, coupled with expected Medicaid losses from the “Big Beautiful Bill” recently passed by Congress, Providence could be forced to shutter or reduce its emergency departments, company officials say.
“It will affect our ability to even keep our emergency departments open if we can’t get paid for our services,” said Melissa Tizon, vice president of national communication for Providence. “It’s just a very difficult predicament we are in.”
The federal spending bill is expected to cut Medicaid by $1 trillion over the next decade, with an estimated 15 million people expected to lose their health insurance. Providence expects to lose $500 million in Medicaid funding.
Greg Hoffman, chief financial officer for Providence, said the drop in Medicaid funds would exacerbate operating losses during the last five years caused by inflation. Providence lost a half-billion dollars in 2024, he said. Hoffman added that by Providence’s calculations, Kaiser owes the company more than $100 million.
“What’s at stake (with the Kaiser litigation) is the long-run stability. We can’t continue to have long running losses,” Hoffman said.
Charges unreasonable
Kaiser argues that Providence is simply overcharging.
“The plaintiffs are seeking payments above fair and reasonable levels,” said a company statement. “When a hospital or provider delivers services to one of our members, and we don’t have a price agreement already in place, we reimburse them at fair and reasonable rates, based on what is typically paid by others in the community.”
In a court motion filed in April in Los Angeles Superior Court, Kaiser added: “It is well established that full billed charges are ‘inflated’ and are ‘insincere,’ in the sense that they would yield truly enormous profits if those prices were actually paid.”
The debate over emergency room reimbursements is playing out throughout California, involving at least seven other hospital chains that have sued Kaiser. Among the plaintiffs is MemorialCare, which owns Long Beach Memorial Medical Center, Saddleback Memorial Medical Center and Orange Coast Memorial Medical Center. Other hospitals that have sued Kaiser in recent years are Pomona Valley Hospital as well as Physicians for Healthy Hospitals, which owns Hemet Valley and Menifee Valley medical centers.
In the most recent filing, Providence — which includes St. Jude Medical Center in Fullerton, Tarzana Medical Center and Little Company of Mary in Torrance — contends Kaiser paid them too little, if at all, for out-of-network, emergency room care as well as for treatment after the members were stabilized.
Federal resolution urged
Kaiser has contended in legal papers that the state court is not the proper forum for such disputes, which Kaiser says should be handled through a federal resolution program established by the “No Surprises Act” in 2021.
Under state and federal law, hospital emergency rooms must treat anyone who comes through the doors, regardless of their ability to pay. If the person is insured, the hospital can seek reimbursement through the health insurance company. Under the “No Surprises Act,” the patient is charged the same amount as they would have paid in-network.
In many cases, the hospital and the insurance company will have a written contract establishing discounted rates for service. Kaiser and the Providence hospitals do not have such a contract, so Kaiser must pay “reasonable” and “customary” rates, according to legal papers filed by Providence. But the two companies differ on what is “reasonable” and “customary.”
Some patients admitted
Hospitals are required to stabilize patients in the emergency room. If the out-of-network patient needs further treatment, the hospital must contact the insurer, which has 30 minutes to approve the treatment or arrange to transport the patient to a hospital that is in-network, Providence says. According to Providence, if the insurer fails to respond, the hospital can continue to treat the patient and charge the insurer.
Kaiser, according to Providence, is shorting them for both emergency room services and post-stabilization treatment.
In court documents, Kaiser argued that Providence can’t lump together claims from 10 hospitals. Providence is seeking payment on 12,528 individual claims, including trauma cases covering the most serious of injuries. More than 1,000 Kaiser patients ended up being admitted to Providence hospitals.
Providence’s suit is based on “different medical claims for different services provided by 10 different hospitals in different geographic areas with different economic factors,” Kaiser argued.
Joining these claims together would lead to “jury confusion” and create a “logistical headache,” according to Kaiser. A judge on overruled Kaiser’s argument on Friday, Aug. 8.
Fee schedule needed
Alan Sager, a professor of health law, policy and management at Boston University, said one of the problems with federal law is that it doesn’t establish a uniform fee schedule.
“The ‘No Surprises Act’ protects the patient, but it leaves the hospital and the payer to duke it out,” Sager said. “That’s part of American health care insanity. In other countries there would be a fee schedule. They spend less time in court and more time in the OR.”
Added Julie Siemers, a nationally recognized patient safety consultant: “You’ve got a lot of potential patients who would not get the care if the hospital does not get the funding.”