California Court Blocks Hospital Attempt to Bill Auto Insurance Directly
In a significant ruling with implications for healthcare billing and insurance practices, California’s Third District Court of Appeal has rejected a hospital’s attempt to recover payments directly from a patient’s auto insurance policy. The court’s decision in Dameron Hospital Association v. Progressive Casualty Insurance Company reinforces the state’s Medi-Cal reimbursement structure and limits hospitals’ ability to bypass it.
The case centered around Dameron Hospital Association’s treatment of a Medi-Cal patient, M.G., who was involved in an automobile accident. During her admission, the hospital had M.G. or her representative sign a Conditions of Admission (COA) form that included an assignment of benefits (AOB) clause. This clause purported to allow the hospital to claim M.G.’s uninsured motorist (UM) benefits directly from Progressive Casualty Insurance Company, her auto insurance provider.
Dameron billed Progressive $2,686.75 directly, bypassing Medi-Cal entirely. When Progressive settled with M.G. but the hospital remained unpaid, Dameron sued Progressive for unfair business practices and breach of contract. The trial court dismissed the complaint, and the Court of Appeal affirmed this decision.
The appellate court relied heavily on a previous, similar case involving the same hospital (Dameron Hospital Assn. v. AAA Northern California, Nevada & Utah Ins. Exchange, 2022). The court held that the AOB clause in the COA form was an unenforceable contract of adhesion, particularly since Medi-Cal was not billed as required by law.
The court emphasized that California law mandates billing Medi-Cal upon proof of eligibility and prohibits providers from pursuing payments from patients or third parties not legally obligated to provide healthcare. The decision noted that Medi-Cal patients like M.G. could not reasonably expect that signing a standard hospital admissions form would assign their UM benefits to pay hospital bills at rates above Medi-Cal’s established rates, especially without Medi-Cal being notified of the potential claim.
This ruling reinforces that uninsured motorist coverage is intended to compensate insured individuals directly for accident losses, not to serve as an alternative payment source for hospitals outside the state’s established reimbursement system. The decision is final, with Dameron ordered to pay Progressive’s appellate costs.
The case has significant implications for both healthcare providers and insurers operating in California. It underscores the importance of adhering to the state’s Medi-Cal billing requirements and the limitations on hospitals seeking payment through alternative means such as AOB clauses for UM coverage benefits.
