Hospitals sue Anthem over policy prohibiting use of out-of-network radiologists

California hospitals are suing health insurer Anthem over its policy that punishes facilities for using out-of-network physicians. 

The state hospital association officially filed the complaint on Monday in a Los Angeles County Superior Court, hoping to prevent the changes from going into effect. This comes after Anthem (also known as Elevance) announced in March that it was expanding the controversial “nonparticipating care providers” policy into California, the 12th state impacted. 

Beginning June 1, Anthem will charge hospitals a 10% administrative penalty of the allowed amount for hospital claims involving radiologists and other physicians outside of the insurer’s networks. California hospitals claim the policy change is unlawful and are now asking a judge to agree.

“Anthem’s new policy is trying to force hospitals to solve a problem Anthem created,” California Hospital Association President and CEO Carmela Coyle said in a statement May 4. “It’s illegal, ignores the agreements Anthem has with its enrollees, and will lead to further financial stress for California hospitals and the communities they care for during an extremely unstable period in healthcare.”

The insurer first announced the new out-of-network penalty last October, drawing widespread criticism from radiologists and others in the industry. It initially targeted 11 states including Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, Ohio and Wisconsin. Indiana passed legislation this year stopping Anthem from implementing the policy there, while the insurer also subsequently expanded it into New York in April.

The American College of Radiology blasted the policy late last year, calling it “deeply flawed and operationally unworkable.” However, Anthem has stood its ground, contending the No Surprises Act has incentivized some physicians to remain out of network to score higher reimbursement through the law’s independent dispute-resolution process. 

California hospitals contend the policy “unfairly penalizes” the industry, with violating state law the only remedy to avoid these pay cuts. Local statutes make it clear hospitals are prohibited from requiring radiologists and physician groups to be part of an insurer network. California hospitals believe it is Anthem’s obligation to make sure certain physicians are contracted with insurance companies, rather than trying to “foist that responsibility onto hospitals.” 

“We are confident the courts will recognize Anthem’s move as a flagrant attempt to increase their profits at a time when millions of Californians are projected to lose their healthcare coverage,” Daron Tooch, the California Hospital Association’s legal counsel, said in a statement. “The policy is unethical and unlawful, and we look forward to a decision from the court that protects not just hospitals, but also Anthem enrollees who trust that their insurance company will respect their right to choose their own doctor.”

In the lawsuit, Tooch and colleagues contend the out-of-network policy will force hospitals to “police” which physicians can provide care to anthem members—a task they don’t typically perform. They gave the example of a radiologist required to provide care to a patient inside of a hospital. Attorneys believe it’s unreasonable to expect hospitals to check if each individual is an Anthem member, verify what type of policy they hold, and determine whether a radiologist has contracted with the payer.

They note that the new policy is contrary to California Assembly Bill 72 (AB 72), which expressly allows out-of-network docs to provide care at in-network hospitals. 

“AB 72 puts the obligations of informing the patient that the physician is out-of-network, and of obtaining the patient’s written consent, on the physician, not the hospital,” the lawsuit charges. “The out-of-network policy shifts that burden to the hospital without additional compensation.”

Anthem, meanwhile, defended the policy in response to the lawsuit. It contends patients and their employers shouldn’t have to worry about surprise medical bills when visiting in-network hospitals. 

“These cases aren’t surprise situations; they’re planned surgeries, such as plastic surgery, in markets where we already have robust in-network options,” a representative said in a statement. “Unfortunately, some out-of-network providers undermine the protections and goals of the No Surprises Act and charge working families and their employers tens of thousands of dollars more than what Medicare and in-network providers are paid for the same in-hospital medical care. That out-of-network billing is not fair, and our policy creates an incentive for hospitals to stop it.”