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Recent California Case Holds that Emergency Room Physicians Can Sue HMOs for Negligently Delegating Reimbursement Obligations to IPAs

A California appeals court recently held that if an HMO negligently delegates its obligations to pay to an IPA, then emergency room physicians can sue the HMO for the IPA’s failure to reimburse the physicians.   In Centinela Freeman Emergency Medical Associates v. Health Net of California, Inc., an HMO delegated the obligation of physician reimbursement to an IPA, which is permitted under California’s Health & Safety Code.  Despite being delegated the duty to reimburse, the IPA experienced financial problems and failed to make payments to the emergency room physicians.  The emergency room physicians sued the HMO and the HMO argued in its defense that it owed no obligation to reimburse the physicians because the law permits them to delegate payment obligations to IPAs and that occurred in this situation.  Ruling against the HMO, the appeals court found that in situations where the HMO knows or should know that an IPA will be unable to fulfill its obligations of repayment, then the physicians can seek reimbursement from the HMO.  The case has far reaching implications for emergency room physicians because of California law imposes an obligation to treat patients in an emergency room regardless of the patient’s ability to pay.