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HENRY B. LaTORRACA

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Business litigation case decides acceptable hospital rates

| Jun 27, 2014 | Business Torts |

When you go to purchase a vehicle, you check the blue-book value. A quick scan of real estate listings in your area can give you a good idea about the reasonable cost of a home. Why, then, does it seem to be so difficult to nail down a price for health care services? An appeals court business litigation ruling could change all that. The decision from the Fifth District Court of Appeals will prevent hospitals from abusing their relationship with insurance companies by requiring them to request only the actual value of the services rendered to the patient.

Financial experts say that the ruling is a landmark decision that will change the way that health plans and hospitals interact in the future. California law was fuzzy on the issue until now. That situation led to hospitals grossly overcharging insurance companies instead of seeking compensation for the “reasonable value” of services.

The case was brought by insurance company Blue Cross after their contract with Children’s Hospital expired in 2007 and a new agreement was not reached. Although the hospital was still bound to provide services to Blue Cross patients by law, it decided to charge the company higher amounts because of the absence of the contract. When Blue Cross refused to pay, the hospital sued.

Although this may seem like a boon to insurance companies, which may have suffered economic loss because of the former business relationships, experts say that the decision could have a negative effect on patients in the state of California. Now, health plans can essentially receive those carefully negotiated rates without ever having to enter into a contract. That could compromise the standard, quality and cost of care for patients throughout the state. The full effects of this legal decision remain to be seen, but one thing is clear: Health care plan administrators are sure to benefit because of the ruling in this business tort case.

Source: Sacramento Business Journal, “Ruling: Hospital bills should reflect ‘reasonable value’ of services” Kathy Robertson, Jun. 13, 2014

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