Article - May 8, 2008 - OCRegister

Kaiser Permanente members targeted in hospital billing dispute

6,000 Southern California residents have received bills that Kaiser and the state say they do not owe.

By Courtney Perkes

David Fowlkes returned home from work last year to find his wife, Vicki, unconscious on the couch.

An ambulance rushed her to the emergency room at West Anaheim Medical Center. The couple paid their portion of the bill – a $250 deductible – and six days later, Vicki was released after treatment for respiratory distress.

But late last week, the Fowlkes were stunned to receive letters from the hospital and a collection service demanding $50,739.70. They were told Kaiser had not paid the full bill and the Fowlkes had 30 days to pay or be turned over to credit bureaus.

About 6,000 Southern California Kaiser members like the Fowlkes have received billing notices over the past week from eight Prime Healthcare Services hospitals, including West Anaheim and two others in Orange County. The massive and unprecedented collection attempt is part of an accelerating dispute between Kaiser and the controversial hospital chain founded by Dr. Prem Reddy.

"We don't have the resources, nor do we owe the money," said David Fowlkes, a 61-year-old map editor.

Stung consumers are complaining to state insurance regulators about the so-called "balance billing" practice where out-of-network doctors or hospitals try to collect the difference between their charges and what the insurer paid.

For now, sending out such bills is not illegal, although state officials say consumers are not financially responsible for treatment covered in their health plans. But because patients may wrongly pay and collection efforts can be aggressive, the state is seeking to ban the practice. A public hearing on the proposed regulations will be held next week in Irvine.

"It's always been the department's position that an enrollee should not be balance billed for the services received," said Richard Martin, a deputy director for the California Department of Managed Health Care, adding that he has never seen collection efforts "to this magnitude."

Since May 2, about 60 Kaiser health plan members have complained to the state. By comparison, since 2004, 90 consumers have complained about efforts by a hospital or doctor to collect the remainder of a bill.

Kaiser has received thousands of calls from worried members, said Dr. Ben Chu, president of Kaiser's Southern California region. Thursday afternoon, Kaiser began calling members to assure them they are not responsible for the bills. Letters will follow next week.

"We're very upset that this has happened," Chu said. "To put our members right in the middle and to scare them completely unnecessarily and threaten to trash their credit rating is just totally uncalled for."

When Reddy bought three local hospitals in 2006 – West Anaheim, Huntington Beach Hospital and La Palma Intercommunity – he made no secret of his unusual approach to dealing with reimbursement from health plans like Kaiser. About 385,000 Orange County residents have Kaiser insurance.

Reddy canceled HMO contracts that he said didn't pay a fair rate for care, allowing him to then bill health plans at a higher cost when their customers came to the emergency room. Additionally, he refused to automatically transfer patients to other hospitals, saying that would jeopardize patient safety.

Health plans that don't have a contract with a hospital are required to pay a reasonable rate, said Martin from the state.

"The question is what is that reasonable value?" Martin said.

And that's where the dispute lies.

In December, Reddy's three local hospitals sued Kaiser, alleging $10 million in unpaid bills. Reddy said the for-profit hospitals can't afford to forgo fair payment for treating Kaiser's patients.

"We really don't want the patients to pay us," Reddy said. "Patients are the only messengers to the health plans. They should call and say, 'We paid you dearly, how come you don't pay for my emergency care?'"

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