California hospitals sue Anthem over out-of-network policy

The California Hospital Association has filed a lawsuit against Anthem Blue Cross to block a policy that would financially penalize hospitals when Anthem members receive care from out-of-network physicians at in-network facilities.

Filed May 4, the complaint seeks to stop Anthem from expanding its nonparticipating provider policy into California. CHA said the policy would penalize hospitals when an Anthem enrollee chooses an out-of-network physician, even when that option is allowed under the patient’s health plan.

The policy is scheduled to take effect June 1. Under the policy, Anthem would reduce hospital reimbursement by 10% for claims involving nonparticipating physicians, according to CHA’s summary of the lawsuit.

Radiologists are among the physician groups potentially affected because they often provide hospital-based services without being directly employed by the facility. CHA argued that California law does not allow hospitals to require physicians or physician groups to participate in a specific insurer’s network.

“Anthem’s new policy is trying to force hospitals to solve a problem Anthem created,” said CHA President and CEO Carmela Coyle.

The hospital association said Anthem has the responsibility to maintain adequate provider networks and contract with physicians, rather than shifting that responsibility to hospitals. CHA also said the policy could strain hospital finances and interfere with patient choice.

The lawsuit alleges the policy violates California law, constitutes fraudulent marketing to PPO members, and amounts to an unfair business practice, according to King & Spalding, which is representing CHA in the dispute.

The complaint also argues that Anthem’s policy conflicts with California Assembly Bill 72, which addresses out-of-network physicians providing services at in-network facilities. CHA contends the policy would shift obligations to hospitals that state law places on physicians and health plans.

Anthem has defended the policy as a way to address out-of-network billing. Fierce Healthcare reported that the insurer said patients and employers should not face unexpected bills when patients use in-network hospitals, and that the policy targets situations involving planned care rather than emergency care.

The dispute reflects broader tension around payer networks, hospital-based physicians, and reimbursement after the No Surprises Act. Anthem has argued that some out-of-network providers use the law’s dispute-resolution process to seek higher payment, while hospitals say the insurer’s response improperly penalizes facilities for physician contracting issues.

CHA is asking the court to prevent the California rollout before the June 1 start date. The case was filed in Los Angeles County Superior Court, according to CHA and court-related summaries.