Page 1 

LEXSEE 45 CAL.4TH 497 

PROSPECT MEDICAL GROUP, INC., et al., Plaintiffs and Appellants, v. 

NORTHRIDGE EMERGENCY MEDICAL GROUP et al., Defendants and Respondents. PROSPECT HEALTH SOURCE MEDICAL GROUP, Plaintiff and Appellant, v. SAINT JOHN'S EMERGENCY MEDICINE SPECIALISTS, INC., et al., 

Defendants and Respondents. 

S142209 

SUPREME COURT OF CALIFORNIA 

45 Cal. 4th 497; 198 P.3d 86; 87 Cal. Rptr. 3d 299; 2009 Cal. LEXIS 3

January 8, 2009, Filed 

SUBSEQUENT HISTORY: Reported at Prospect 

Medical Group, Inc. v. Northridge Emergency Medical 

Group, 2009 Cal. LEXIS 25 (Cal., Jan. 8, 2009)

PRIOR HISTORY: 

 Court of Appeal Second Appellate District, Division 

Three, No. B172737, No. B172817. Superior Court of 

Los Angeles County, No. BC300850, No. SC076909, 

Gerald Rosenberg, Judge. 

Prospect Medical Group, Inc. v. Northridge Emergency 

Medical Group, 136 Cal. App. 4th 1155, 39 Cal. Rptr. 3d 

456, 2006 Cal. App. LEXIS 208 (Cal. App. 2d Dist., 

2006)

SUMMARY: 

CALIFORNIA OFFICIAL REPORTS SUMMARY 

In a declaratory action, the trial court ruled that 

emergency care providers were not statutorily prohibited 

from billing patients directly for the differences between 

the bills submitted and the amounts paid by health care 

service plans. Individual practice associations alleged 

that the emergency care providers routinely billed patients for the balance of their bills after having received 

reimbursement from health care service plans that contracted with the individual practice associations. The trial 

court sustained the providers' demurrers without leave to 

amend and entered judgments accordingly. (Superior 

Court of Los Angeles County, Nos. BC300850 and 

SC076909, Gerald Rosenberg, Judge.) The Court of Appeal, Second Dist., Div. Three, Nos. B172737 and 

B172817, upheld the ruling. 

The Supreme Court reversed the judgment of the 

Court of Appeal and remanded the case for further proceedings. The court held that the Knox-Keene Health 

Care Service Plan Act of 1975 (Health & Saf. Code, § 

1340 et seq.) does not permit balance billing. Although 

the court agreed with the Court of Appeal that Health & 

Saf. Code, § 1379, was inapplicable, the court found that 

other statutory provisions address balance billing. The 

language of Health & Saf. Code, § 1371.4, subd. (b), 

mandates that a health maintenance organization (HMO) 

pay the provider directly and does not involve the patient 

in the payment process at all. Health & Saf. Code, § 

1317, subd. (d), indicates that when HMO members provide insurance information, they have satisfied their obligation toward the providers. Health & Saf. Code, § 

1342, subd. (d), expresses a legislative intent to transfer 

the financial risk of health care from patients to providers. (Opinion by Chin, J, with George, C. J., Kennard, J., 

Baxter, J., Moreno, J., Corrigan, J., and McDonald, J.,*

concurring.) [*498] 

* Associate Justice of the Court of Appeal, 

Fourth Appellate District, Division One, assigned 

by the Chief Justice pursuant to article VI, section 

6 of the California Constitution. 

HEADNOTES 

CALIFORNIA OFFICIAL REPORTS HEADNOTES 
Page 2 

45 Cal. 4th 497, *; 198 P.3d 86, **; 

87 Cal. Rptr. 3d 299, ***; 2009 Cal. LEXIS 3 

(1) Healing Arts and Institutions § 2--Hospitals--

Health Maintenance Organizations--Payment for 

Emergency Services.--By statute, when emergency 

room doctors provide emergency services, health maintenance organizations are required to reimburse those 

doctors for the services rendered to their subscribers or 

enrollees. The Knox-Keene Health Care Service Plan 

Act of 1975 (Health & Saf. Code, § 1340 et seq.) compels for-profit health care service plans to reimburse 

emergency health care providers for emergency services 

to the plans' enrollees. Health & Saf. Code, § 1371.4, 

provides that a for-profit health care service plan shall 

reimburse providers for emergency services and care 

provided to its enrollees until the care results in stabilization of the enrollee, except as provided in § 1371.4, subd. 

(c). As long as federal or state law requires that emergency services and care be provided without first questioning the patient's ability to pay, a health care service 

plan shall not require a provider to obtain authorization 

prior to the provision of emergency services and care 

necessary to stabilize the enrollee's emergency medical 

condition (§ 1371.4, subd. (b)). Section 1371.4, subd. (b), 

imposes a mandatory duty upon health care plans to reimburse noncontracting providers for emergency medical 

services. 

(2) Healing Arts and Institutions § 2--Hospitals--

Health Maintenance Organizations--Payment for 

Emergency Services.--Pursuant to Cal. Code Regs., tit. 

28, § 1300.71, subd. (a)(3)(B), a health maintenance organization (HMO) has a duty to pay a reasonable and 

customary amount for the services rendered. But how 

this amount is determined can create obvious difficulties. 

In a given case, a reasonable amount might be the bill the 

doctor submits, or the amount the HMO chooses to pay, 

or some amount in between. 

(3) Statutes § 49--Construction--Reference to Other 

Laws--In Pari Materia (Same Subject Matter)--

Harmonizing.--Courts do not examine statutory language in isolation, but in the context of the statutory 

framework as a whole in order to determine its scope and 

purpose and to harmonize the various parts of the enactment. 

(4) Healing Arts and Institutions § 2--Hospitals--

Health Maintenance Organizations--Payment for 

Emergency Services.--Health & Saf. Code, § 1317, 

subd. (d), which requires emergency room doctors to 

render emergency care without questioning a patient's 

ability to pay, also provides that the patient or his or her 

legally responsible relative or guardian shall execute an 

agreement to pay for the services or otherwise supply 

insurance or credit information promptly after the services are [*499] rendered. This provision implies that 

once patients who are members of a health maintenance 

organization provide insurance information, they have 

satisfied their obligation towards the doctors. 

(5) Healing Arts and Institutions § 2--Hospitals--

Health Maintenance Organizations--Payment for 

Emergency Services.--The only reasonable interpretation of a statutory scheme that (1) intends to transfer the 

financial risk of health care from patients to providers; 

(2) requires emergency care patients to agree to pay for 

the services or to supply insurance information; (3) requires health maintenance organizations (HMO's) to pay 

doctors for emergency services rendered to their subscribers; (4) prohibits balance billing when the HMO, 

and not the patient, is contractually required to pay; (5) 

requires adoption of mechanisms to resolve billing disputes between emergency room doctors and HMO's; and 

(6) permits emergency room doctors to sue HMO's directly to resolve billing disputes, is that emergency room 

doctors may not bill patients directly for amounts in dispute. Emergency room doctors must resolve their differences with HMO's and not inject patients into the dispute. 

(6) Healing Arts and Institutions § 2--Hospitals--

Health Maintenance Organizations--Payment for 

Emergency Services.--Doctors cannot bill patients for 

emergency services that the patients' health maintenance 

organizations are obligated to pay. Balance billing is not 

permitted. Thus, individual practice associations could 

maintain a declaratory action challenging providers' balance billing. 

[Cal. Insurance Law & Practice (2008) ch. 26, § 

26.01; 2 Witkin, Summary of Cal. Law (10th ed. 2005) 

Insurance, § 126 et seq.] 

(7) Statutes § 42--Construction--Aids--Purpose and 

Policy Considerations.--If statutory language permits 

more than one reasonable interpretation, courts may consider extrinsic aids, including the purpose of the statute, 

the evils to be remedied, and public policy. 

(8) Healing Arts and Institutions § 2--Hospitals--

Health Maintenance Organizations--Payment for 

Emergency Services.--Health & Saf. Code, § 1371.4, 

subd. (b), does not say that patients must pay emergency 

room doctors and then turn to their health maintenance 

organizations (HMO's) for reimbursement. Rather it 

states that the health care service plan shall reimburse 

providers for emergency services and care provided to its 

enrollees. This language does not authorize the roundabout route of the doctor's collecting from the patient, 

who must then collect from the HMO. Rather, it mandates that the HMO pay the doctor directly. It does not 

involve the patient in the payment process at all. [*500] 
Page 3 

45 Cal. 4th 497, *; 198 P.3d 86, **; 

87 Cal. Rptr. 3d 299, ***; 2009 Cal. LEXIS 3 

(9) Statutes § 44--Construction--Aids--

Contemporaneous Administrative Construction--

Regulation Adopted While Litigation Pending.--

Although courts give some deference to contemporaneous interpretations of a statute by an agency charged with 

its administration, especially when the interpretation is in 

the form of a regulation adopted in accordance with the 

Administrative Procedure Act, a regulation adopted during the pendency of the litigation is not contemporaneous 

with the statutory scheme. It is doubtful that a court owes 

such a regulation any deference. 

COUNSEL: Bird, Marella, Boxer, Wolpert, Nessim, 

Drooks & Lincenberg, Thomas R. Freeman; Miller & 

Holguin, Stephan, Oringher, Richman, Theodora & 

Miller, Theodora Oringher Miller & Richman, Harry W. 

R. Chamberlain II, Kenneth E. Johnson, Robert M. Dato 

and Stacey L. Zill for Plaintiffs and Appellants. 

Epstein Becker & Green, William A. Helvestine, Michael T. Horan and Carri L. Becker for California Association of Health Plans as Amicus Curiae on behalf of 

Plaintiffs and Appellants. 

Fulbright & Jaworski, Buchalter, Nemer, Fields & 

Younger, Buchalter Nemer and Carol K. Lucas for California Association of Physicians Groups as Amicus Curiae on behalf of Plaintiffs and Appellants. 

Amy L. Dobberteen, Debra L. Denton, Michael D. 

McClelland and Drew Brereton for Department of Managed Health Care as Amicus Curiae on behalf of Plaintiffs and Appellants. 

Howard Rice Nemerovski Canady Falk & Rabkin, 

Jerome B. Falk, Jr., Ethan P. Schulman, Steven L. 

Mayer, Jonas M. Nahoum; Law Offices of Andrew H. 

Selesnick, Alleguez & Selesnick and Andrew H. Selesnick for Defendants and Respondents. 

Catherine I. Hanson for California Medical Association 

as Amicus Curiae on behalf of Defendants and Respondents. 

Astrid G. Meghrigian for American College of Emergency Physicians, California Chapter of the American 

College of Emergency Physicians and California Chapter, American Academy of Emergency Medicine as 

Amici Curiae on behalf of Defendants and Respondents. 

[*501] 

Physicians' Advocates and Charles Bond for American 

Medical Association as Amicus Curiae on behalf of Defendants and Respondents. 

Hooper, Lundy & Bookman, Lloyd A. Bookman, Suzanne S. Chou and Felicia Y Sze for California Hospital 

Association as Amicus Curiae on behalf of Defendants 

and Respondents. 

JUDGES: Opinion by Chin J, with George, C. J., Kennard, J., Baxter, J., Moreno, J., Corrigan, J., and McDonald, J., concurring. 

OPINION BY: Chin 

OPINION 

 [**88] [***301] CHIN, J.--A health maintenance 

organization (HMO) commonly manages medical care in 

California. In the typical model, familiar to many, doctors contract to provide medical care to enrolled HMO 

members. Members generally use the services of one of 

the contracting doctors. When they do, and except for 

copayments the members must make when services are 

rendered, the HMO (or its delegate) pays the doctor under the existing contract. In this way, the parties agree 

upon, and know in advance, what their obligations and 

rights are and who must pay, and how much, for medical 

care. 

The typical payment model sometimes breaks down, 

however, in the case of emergency care. In an emergency, an HMO member goes to the nearest hospital 

emergency room for treatment. The emergency room 

doctors at that hospital may or may not have previously 

contracted with the HMO to provide care to its members. 

In that situation, the doctors are statutorily required to 

provide emergency care without regard to the patient's 

ability to pay. Additionally, when the patient is a member of an HMO, the HMO is statutorily required to pay 

for the emergency care. 1

 For HMO members, it is always clear in advance who has to provide emergency 

services--any emergency room doctor to whom the 

member goes in an emergency--and who has to pay for 

those services--the HMO. The conflict arises when there 

is no advance agreement between the emergency room 

doctors and the HMO regarding the amount of the required payment. 

1 For ease of discussion, we will sometimes refer rather loosely to those required to provide 

emergency services without regard to the patient's 

ability to pay as emergency room doctors, while 

recognizing that the category is broader than just 

doctors (Health & Saf. Code, § 1345, subd. (i)), 

and to the entities required to reimburse those 

emergency room doctors for services rendered to 

their subscribers as HMO's, while recognizing 

that the entities are more technically described as 
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45 Cal. 4th 497, *; 198 P.3d 86, **; 

87 Cal. Rptr. 3d 299, ***; 2009 Cal. LEXIS 3 

"health care service plan[s]" and include the 

plans' delegates (Health & Saf. Code, § 1371.4, 

subd. (e)). 

Thus, the potential inherently exists for disputes between the emergency room doctors and the HMO regarding how much [***302] the HMO owes the doctors for 

emergency services. When no preexisting contract exists, 

the doctors [*502] sometimes submit a bill to the HMO 

that they consider reasonable for the services rendered 

but that the HMO considers unreasonably high; conversely, the HMO sometimes makes a payment that it 

considers reasonable for the services rendered but that 

the doctors consider unreasonably low. The resolution of 

such disputes can create difficult problems. 

But the question of how to resolve disputes between 

the doctors and the HMO over the amount due for emergency care is not before us in this case. The issue here is 

narrow, although quite important for emergency room 

doctors, HMO's, and their members: When the HMO 

submits a payment lower than the amount billed, can the 

emergency room doctors directly bill the patient for the 

difference between the bill submitted and the payment 

received--i.e., engage in the practice called "balance billing"? 

Interpreting the applicable statutory scheme as a 

whole--primarily the Knox-Keene Health Care Service 

Plan Act of 1975, Health and Safety Code section 1340 

et seq. (Knox-Keene Act) 2

--we conclude that billing 

[**89] disputes over emergency medical care must be 

resolved solely between the emergency room doctors, 

who are entitled to a reasonable payment for their services, and the HMO, which is obligated to make that 

payment. A patient who is a member of an HMO may 

not be injected into the dispute. Emergency room doctors 

may not bill the patient for the disputed amount. 

2 All further statutory references are to the 

health and safety code unless otherwise indicated. 

I. FACTUAL AND PROCEDURAL BACKGROUND 

Because neither party petitioned the Court of Appeal 

for a rehearing, we take our facts largely from that court's 

opinion. (Richmond v. Shasta Community Services Dist. 

(2004) 32 Cal.4th 409, 415 [9 Cal. Rptr. 3d 121, 83 P.3d 

518]; see Cal. Rules of Court, rule 8.500(c)(2).) 

Plaintiffs and appellants, Prospect Medical Group, 

Inc., et al. (collectively Prospect), are individual practice 

associations. 3

 Prospect manages patient care by executing written contracts with health care service plans. 4

 It 

provides for medical care to persons who are members of 

health care service plans and who select a Prospect physician. Prospect also provides billing services to the 

[*503] health care service plans contracted with Prospect. As such, it is a "delegate" of those health care service plans and is statutorily obligated to pay for emergency services provided to patients who have subscribed 

to those health care service plans. (§ 1371.4, subds. (b), 

(e).) 

3 Section 1373, subdivision (h)(6), defines an 

individual practice association by reference to title 42 United States Code section 300e-1(5), 

which provides as relevant: "The term 'individual 

practice association' means a ... legal entity which 

has entered into a services arrangement (or arrangements) with persons who are licensed to 

practice medicine ... ." 

4 As pertinent here, section 1345, subdivision 

(f)(1), defines a health care service plan as "[a]ny 

person who undertakes to arrange for the provision of health care services to subscribers or enrollees, or to pay for or to reimburse any part of 

the cost for those services, in return for a prepaid 

or periodic charge paid by or on behalf of the 

subscribers or enrollees." 

Defendants and respondents, Northridge Emergency 

Medical Group and Saint John's Emergency Medicine 

Specialists, Inc. (collectively Emergency Physicians), 

have exclusive licenses at two California hospitals to 

provide emergency room physician care. Emergency 

Physicians [***303] are health care providers and are 

statutorily required to provide emergency care without 

regard to an individual's insurance or ability to pay. (§ 

1317, subd. (d); see also 42 U.S.C. § 1395dd.) 

When patients who are members of health care service plans schedule medical services in advance, they 

generally go to physicians with whom the health care 

service plan or its delegate, like Prospect, has an express 

preexisting contract. On occasion, when these same patients need emergency medical care, they may be taken 

to a hospital where the doctors staffing the emergency 

room do not have a preexisting contract with the health 

care plan or its delegate. In this case, after Emergency 

Physicians provided emergency medical services to patients who were members of health care service plans 

that contracted with Prospect, they submitted reimbursement claims to Prospect. Sometimes Prospect paid 

Emergency Physicians less than the amount billed. In 

those cases, Prospect paid what it alleged was reasonable 

for the services rendered. Emergency Physicians then 

billed the patients directly for the differences between 

the bills they submitted and what Prospect paid. The parties refer to this practice as "balance billing." 

After billing disputes arose between Prospect and 

Emergency Physicians, Prospect filed two related actions 

against Emergency Physicians seeking, among other 

things, a judicial determination that (1) Emergency Phy-
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45 Cal. 4th 497, *; 198 P.3d 86, **; 

87 Cal. Rptr. 3d 299, ***; 2009 Cal. LEXIS 3 

sicians were entitled only to "reasonable" compensation 

for emergency medical care, which Prospect claimed was 

equivalent to the Medicare rate; and (2) the practice of 

balance billing is unlawful. In one of the actions, Prospect alleged that Saint John's Emergency Medicine Specialists, Inc., "routinely bills Prospect's patients, threatens 

to turn over Prospect's patients to an outside collection 

agency, and threatens to take legal measures against 

Prospect's patients." The trial court sustained Emergency 

Physicians' demurrers without leave to amend and entered judgments accordingly. Prospect appealed [**90] 

both judgments, and the Court of Appeal consolidated 

the appeals. 

The Court of Appeal concluded that balance billing 

is not statutorily prohibited. Second, it concluded that 

Prospect is not entitled to a judicial declaration imposing 

the Medicare rate as the reasonable rate. Third, it [*504] 

concluded the trial court abused its discretion by denying 

leave to amend the complaint to permit Prospect to allege 

that Emergency Physicians charged more than a reasonable rate for a specific medical procedure. We granted 

Prospect's petition for review, which raised the sole question whether Emergency Physicians may engage in balance billing. 

II. DISCUSSION 

The Knox-Keene Act governs this case. "The KnoxKeene Act is a comprehensive system of licensing and 

regulation under the jurisdiction of the Department of 

Managed Health Care." (Bell v. Blue Cross of California 

(2005) 131 Cal.App.4th 211, 215 [31 Cal. Rptr. 3d 688]

(Bell).) In addition, one statute not part of the act is pertinent here. Section 1317 requires emergency care providers to provide emergency services without first questioning the patient's ability to pay. (Bell, supra, 131 

Cal.App.4th at pp. 215-216 & fn. 4.) Federal law is similar. (42 U.S.C. § 1395dd; see Bell, supra, at p. 215, fn. 

4.) 

(1) Today, by statute, when emergency room doctors 

provide emergency services, HMO's are required to reimburse those doctors for the services rendered to their 

subscribers or enrollees. As Bell explained, the KnoxKeene Act "compels for-profit health care service plans 

to reimburse [***304] emergency health care providers 

for emergency services to the plans' enrollees. ... 

[S]ection 1371.4 provides that a for-profit 'health care 

service plan shall reimburse providers for emergency 

services and care provided to its enrollees, until the care 

results in stabilization of the enrollee, except as provided 

in subdivision (c). As long as federal or state law requires 

that emergency services and care be provided without 

first questioning the patient's ability to pay, a health care 

service plan shall not require a provider to obtain authorization prior to the provision of emergency services 

and care necessary to stabilize the enrollee's emergency 

medical condition.' (§ 1371.4, subd. (b); see § 1371.4, 

subd. (f).) 'Payment for emergency services and care may 

be denied only if the health care service plan reasonably 

determines that the emergency services and care were 

never performed ... .' (§ 1371.4, subd. (c); see § 1371.4, 

subd. (f); and see Cal. Code Regs., tit. 28, § 1300.71, 

subd. (a).)" (Bell, supra, 131 Cal.App.4th at p. 215.) 

"Subdivision (b) of section 1371.4 was enacted in 1994 to 

impose a mandatory duty upon health care plans to reimburse noncontracting providers for emergency medical 

services. [Citations.]" (Id. at p. 216.) 

The combination of circumstances that (1) in an 

emergency a patient might go to emergency room doctors who have no preexisting contractual relationship 

with the HMO, (2) the doctors are required to render 

emergency care without asking whether the patient can 

pay for it, and (3) the HMO is [*505] required to pay 

the doctors for those services, creates the problem underlying the issue before us. By the very nature of things, 

disputes may arise regarding how much the emergency 

room doctors may charge and how much the HMO must 

pay for emergency services. 

(2) Regulations of the Department of Managed 

Health Care provide that the HMO must pay "the reasonable and customary value for the health care services 

rendered based upon statistically credible information 

that is updated at least annually and takes into consideration: (i) the provider's training, qualifications, and length 

of time in practice; (ii) the nature of the services provided; (iii) the fees usually charged by the provider; (iv) 

prevailing provider rates charged in the general geographic area in which the services were rendered; (v) 

other aspects of the economics of the medical provider's 

practice that are relevant; and (vi) any unusual circumstances in the case ... ." (Cal. Code Regs., tit. 28, § 

1300.71, subd. (a)(3)(B); see Bell, supra, 131 

Cal.App.4th at p. 216.) Thus, the HMO has a "duty to 

pay a reasonable and customary amount for the services 

rendered." (Bell, supra, at p. 220.) But how this amount 

is [**91] determined can create obvious difficulties. In 

a given case, a reasonable amount might be the bill the 

doctor submits, or the amount the HMO chooses to pay, 

or some amount in between. In Bell, supra, 131 

Cal.App.4th 211, the Court of Appeal interpreted the 

Knox-Keene Act to permit, when disputes arise, emergency room doctors to sue the HMO directly for the reasonable value of their services. 

Prospect argues that section 1379, part of the KnoxKeene Act, prohibits balance billing. That section, enacted in 1975 and never amended, provides: 

"(a) Every contract between a plan and a provider of 

health care services shall be in writing, and shall set forth 
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87 Cal. Rptr. 3d 299, ***; 2009 Cal. LEXIS 3 

that in the event the plan fails to pay for health care services as set forth in the subscriber contract, the subscriber or enrollee shall not be liable to the provider for 

any sums owed by the plan. 

[***305] "(b) In the event that the contract has not 

been reduced to writing as required by this chapter or 

that the contract fails to contain the required prohibition, 

the contracting provider shall not collect or attempt to 

collect from the subscriber or enrollee sums owed by the 

plan. 

"(c) No contracting provider, or agent, trustee or assignee thereof, may maintain any action at law against a 

subscriber or enrollee to collect sums owed by the plan." 

Although no express contractual relationship exists 

between Prospect and Emergency Physicians, Prospect 

argues that the combination of statutes requiring emergency room doctors to render, and HMO's to pay for, 

emergency services creates an implied contract between 

emergency room doctors [*506] and HMO's that has 

not been reduced to writing under section 1379, subdivision (b). The Court of Appeal disagreed. Interpreting 

section 1379 as a whole (but not in the context of the 

Knox-Keene Act as a whole), it held that this section 

does not cover the situation here. It found "that the language of subdivision (b) of section 1379 refers to and 

includes within its scope only voluntarily negotiated contracts between providers of health care services, like 

Emergency Physicians, and health care service plans or 

their delegates, like Prospect, based upon traditional contractual principles such as a meeting of the minds. Subdivision (b) does not include within its scope the implied 

contract as Prospect asserts." Accordingly, it "conclude[d] that section 1379, subdivision (b), was not intended to, and does not, prohibit the balance billing practices alleged in this case." 

(3) Reading the language of section 1379 in isolation, it does not readily apply to the precise situation 

here. No doubt the Legislature did not contemplate the 

situation of this case in 1975, when it enacted section 

1379, for this situation did not exist in 1975. Section 

1371.4, which obligates HMO's to pay for emergency 

services to its subscribers, was enacted in 1994, long 

after the Legislature enacted section 1379. But we must 

not view section 1379 in isolation. "We do not examine 

[statutory] language in isolation, but in the context of the 

statutory framework as a whole in order to determine its 

scope and purpose and to harmonize the various parts of 

the enactment." (Coalition of Concerned Communities, 

Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 737 

[21 Cal. Rptr. 3d 676, 101 P.3d 563].) 

(4) We have already seen that in 1975, the Legislature banned balance billing when an HMO is contractually obligated to pay the bill (§ 1379); that since 1994, 

HMO's have been obligated to pay for emergency care (§ 

1371.4); and that the Knox-Keene Act permits emergency room doctors to sue HMO's directly over billing 

disputes (Bell, supra, 131 Cal.App.4th 211). These provisions strongly suggest that doctors may not bill patients 

directly when a dispute arises between doctors and the 

HMO's. Other provisions point in the same direction. 

Section 1317, subdivision (d), which requires emergency 

room doctors to render emergency care without questioning a patient's ability to pay, also provides that "the patient or his or her legally responsible relative or guardian 

shall execute an agreement to pay [for the services] or 

otherwise supply insurance or credit information

promptly after the services are rendered." (Italics added.) 

This provision implies that once patients who are members of an HMO [**92] provide insurance information, 

they have satisfied their obligation towards the doctors. 

Section 1342, subdivision (d), expresses a legislative 

intent to "[help] to ensure the best possible health care 

for the public at the lowest possible cost by [***306] 

transferring the financial risk of health care from patients 

to providers." [*507] 

Additionally, the Legislature contemplated there 

may be disputes over the amounts owed to noncontracting providers such as emergency room doctors, and 

therefore the Knox-Keene Act requires that each HMO 

"shall ensure that a dispute resolution mechanism is accessible to noncontracting providers for the purpose of 

resolving billing and claims disputes." (§ 1367, subd. 

(h)(2); see also § 1371.38, subd. (a) [directing the Dept. 

of Managed Health Care to adopt regulations ensuring 

that each HMO adopt a dispute resolution mechanism 

that is "fair, fast, and cost-effective for contracting and 

noncontracting providers"].) Finally, the Legislature has 

acted to protect the interests of noncontracting providers 

in reimbursement disputes by prohibiting HMO's from 

engaging in unfair payment patterns involving unjust 

payment reductions, claim denials, and other unfair practices as defined, and by authorizing monetary and other 

penalties against HMO's that engage in these patterns. (§ 

1371.37; see also § 1371.39 [authorizing providers to 

report HMO's that engage in unfair payment patterns to 

the Dept. of Managed Health Care].) 

(5) The only reasonable interpretation of a statutory 

scheme that (1) intends to transfer the financial risk of 

health care from patients to providers; (2) requires emergency care patients to agree to pay for the services or to 

supply insurance information; (3) requires HMO's to pay 

doctors for emergency services rendered to their subscribers; (4) prohibits balance billing when the HMO, 

and not the patient, is contractually required to pay; (5) 

requires adoption of mechanisms to resolve billing disputes between emergency room doctors and HMO's; and 

(6) permits emergency room doctors to sue HMO's di-
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87 Cal. Rptr. 3d 299, ***; 2009 Cal. LEXIS 3 

rectly to resolve billing disputes, is that emergency room 

doctors may not bill patients directly for amounts in dispute. Emergency room doctors must resolve their differences with HMO's and not inject patients into the dispute. (6) Interpreting the statutory scheme as a whole, we 

conclude that the doctors may not bill a patient for emergency services that the HMO is obligated to pay. Balance 

billing is not permitted. 5

 

5 Our holding is limited to the precise situation 

before us--billing the patient for emergency services when the doctors have recourse against the 

patient's HMO. We express no opinion regarding 

the situation when no such recourse is available; 

for example, if the HMO is unable to pay or disputes coverage. 

(7) Any doubt about the meaning of the Knox-Keene 

Act in this regard is easily resolved when legislative policy is considered. If statutory language permits more than 

one reasonable interpretation, courts may consider extrinsic aids, including the purpose of the statute, the evils 

to be remedied, and public policy. (Torres v. Parkhouse 

Tire Service, Inc. (2001) 26 Cal.4th 995, 1003 [111 Cal. 

Rptr. 2d 564, 30 P.3d 57].) We perceive a clear legislative policy not to place patients in the middle of billing 

disputes between doctors and HMO's. Indeed, the Department of Managed Health Care argued in Bell, and the 

Court of Appeal concluded, that doctors may directly sue 

HMO's to [*508] resolve billing disputes in order to 

avoid the necessity of balance billing. The Bell court 

quoted the department's argument: " 'If providers are 

precluded from bringing private causes of action to challenge health plans' reimbursement determinations, health 

plans may receive an unjust windfall and patients may 

suffer an economic hardship when providers resort to 

balance billing activities to collect the difference between [***307] the health plan's payment and the provider's billed charges. If collection actions are pursued, 

unsuspecting enrollees can be forced to reimburse the 

full amount of a provider's billed charges even though 

those charges are in excess of the reasonable and customary value of the services rendered. [¶] The prompt 

and appropriate reimbursement of emergency providers 

ensures the continued financial viability of California's 

health care delivery system. ... [D]enying emergency 

providers judicial recourse to challenge the fairness of a 

[**93] health plan's reimbursement determination ... 

allows a health plan to systematically underpay California's safety-net providers and unnecessarily involve[s] 

the patient[s] in billing disputes between the provider 

and their health plan[s].' " (Bell, supra, 131 Cal.App.4th 

at p. 218, italics added.) 

Because emergency room doctors prevailed in Bell, 

supra, 131 Cal.App.4th 211, and won the right to resolve 

their disputes directly with HMO's, no reason exists to 

permit balance billing. Thus, the Department of Managed 

Health Care, which supported doctors' rights to sue the 

HMO's directly in Bell, has appeared in this case as 

amicus curiae supporting patients' rights to be free of 

balance billing. 

When a dispute exists between doctors and an 

HMO, the bill the doctors submit may or may not be the 

reasonable payment to which they are entitled. The Bell

court made clear that an HMO does not have "unfettered 

discretion to determine unilaterally the amount it will 

reimburse a noncontracting provider ... ." (Bell, supra, 

131 Cal.App.4th at p. 220.) But the converse is also true; 

emergency room doctors do not have unfettered discretion to charge whatever they choose for emergency services. Emergency room doctors and HMO's must resolve 

their disputes among themselves. Interjecting patients 

into the dispute by charging them for the amount in dispute has only an in terrorem effect. As Prospect notes, 

although emergency room doctors "are entitled to 'reasonable' compensation for the services rendered, they 

cannot lawfully seek unreasonable payment from anyone." But a patient will have little basis by which to determine whether a bill is reasonable and, because the 

HMO is obligated to pay the bill, no legitimate reason 

exists for the patient to have to do so. Billing the patient, 

and potentially attempting to collect from the patient, 

will put unjustifiable pressure on the patient, who will 

often complain to the HMO, which complaints will in 

turn pressure the HMO to make the payment even if it is 

unreasonable. Such a billing practice is not a legitimate 

way to resolve disputes with an HMO. [*509] 

(8) Relying in part on dicta in Ochs v. PacifiCare of 

California (2004) 115 Cal.App.4th 782 [9 Cal. Rptr. 3d 

734], Emergency Physicians argue that they may collect 

from the patient, who may then collect from the HMO. 

The Ochs court held that it did not have to decide the 

issue presented in this case, but it went on to "observe, 

however, that section 1379 appears only to limit 'balance 

billing' of insured patients by physicians who have contracted with the patients' plans. [The provider] may have 

a remedy against the individual patients, and those patients a remedy against PacifiCare." (Id. at p. 796.) But 

this is not what the statutory scheme provides. Section 

1371.4, subdivision (b), does not say that patients must 

pay the emergency room doctors and then turn to their 

HMO's for reimbursement. Rather it states that the 

"health care service plan ... shall reimburse providers for 

emergency services and care provided to its enrollees ... 

." [***308] This language does not authorize the 

roundabout route of the doctor collecting from the patient, who must then collect from the HMO. Rather, it 

mandates that the HMO pay the doctor directly. It does 

not involve the patient in the payment process at all. 
Page 8 

45 Cal. 4th 497, *; 198 P.3d 86, **; 

87 Cal. Rptr. 3d 299, ***; 2009 Cal. LEXIS 3 

Emergency Physicians and their supporting amici 

curiae argue that emergency room doctors are entitled to 

a reasonable fee for their services, and that HMO's must 

be held accountable and forced to pay a reasonable 

amount for those services. An amicus curiae brief supporting Emergency Physicians adds arguments that the 

California Constitution "requires that emergency physicians receive adequate compensation to cover their losses 

for serving the indigent," and that "California's emergency departments are already operating at capacity and 

risk jeopardizing quality of care." These arguments do 

not address the issue before us. Emergency room doctors 

are entitled to reasonable payments for emergency services rendered to HMO patients. All we are holding is 

that this entitlement does not further entitle the doctors to 

bill patients for any amount in dispute. 

Emergency Physicians argue that two recent bills 

that the Legislature passed but the Governor vetoed show 

that the Legislature [**94] believes that balance billing 

is currently permitted. (Sen. Bill No. 981 (2007-2008 

Reg. Sess.); Assem. Bill No. 2220 (2007-2008 Reg. 

Sess.).) We find no significance in these bills. They were 

legislative attempts to address broader concerns and, 

perhaps, clarify what is currently unclear. The Governor's veto messages state that he opposes balance billing 

but found the bills objectionable in other respects. This 

area of the law might benefit from comprehensive legislation. Failed attempts to provide some such legislation 

do not help us interpret the existing statutory scheme. 

In support of its conclusion that emergency room 

doctors may engage in balance billing, the Court of Appeal cited a regulation that became operative sometime 

before 1978 and requires health care service plans to 

advise their [*510] subscribers that "in the event the 

health plan fails to pay a noncontracting provider, the 

member may be liable to the noncontracting provider for 

the cost of the services." (Cal. Code Regs., tit. 28, § 

1300.63.1, subd. (c)(15).) This regulation, the Court of 

Appeal believed, shows that the Department of Managed 

Health Care "recognizes balance billing." (As noted, that 

department argues against permitting balance billing in 

this case.) In our view, the regulation does not support 

the conclusion that balance billing is permissible in the 

situation here. It was promulgated long before the statute 

obligating HMO's to pay for emergency services was 

enacted in 1994 and governs a different situation. HMO 

members are not required to go to doctors who have contracted with their HMO. In a nonemergency situation, 

members may, if they choose, seek professional services 

from anyone. If they obtain services from a noncontracting provider, the HMO might not be obligated to pay all 

or even part of that provider's bill, depending on the exact terms of the health care plan. If the HMO is not obligated to pay the noncontracting provider, obviously, the 

member would be liable to pay for the services. This 

circumstance does not change the fact that under the 

Knox-Keene Act, HMO members are not liable to pay 

for emergency care. 

(9) The Court of Appeal also relied on the fact that 

the Department of Managed Health Care had, in the past, 

proposed but never adopted a regulation that would prohibit balance billing. While this matter was pending before this court, the Department [***309] of Managed 

Health Care did adopt a regulation that defines balance 

billing as an unfair billing pattern. (Cal. Code Regs., tit. 

28, § 1300.71.39.) The parties dispute the meaning and 

validity of this regulation and whether we should give it 

deference. We need not get into such matters. Although 

we have given some deference to contemporaneous interpretations of a statute by an administrative agency 

charged with its administration, especially when the interpretation is in the form of a regulation adopted in accordance with the Administrative Procedure Act (e.g., 

Sara M. v. Superior Court (2005) 36 Cal.4th 998, 1011-

1014 [32 Cal. Rptr. 3d 89, 116 P.3d 550]), here the regulation--adopted during the pendency of this litigation--is 

not contemporaneous with the statutory scheme. It is 

doubtful that we owe the regulation any deference. (See 

Dyna-Med, Inc. v. Fair Employment & Housing Com. 

(1987) 43 Cal.3d 1379, 1389 [241 Cal. Rptr. 67, 743 

P.2d 1323] [not deferring to a noncontemporaneous interpretation]; Jones v. Tracy School Dist. (1980) 27 

Cal.3d 99, 107 [165 Cal. Rptr. 100, 611 P.2d 441] [not 

deferring to an interpretation by an agency after the 

agency had become an amicus curiae in the case].) We 

base our holding on our interpretation of the relevant 

statutory scheme and not on the previous absence or current presence of any regulation. 

The parties discuss the larger problem of adequate 

compensation for emergency room doctors. But this larger issue is not before us. Like the Bell court, "we reject 

the parties' suggestion that we can solve the societal and 

[*511] economic problems defined by their rhetoric, and 

emphasize that our decision is limited to the precise issue 

before us ... ." (Bell, supra, 131 Cal.App.4th at p. 222.) 

III. CONCLUSION 

We reverse the judgment of the Court of Appeal and 

remand the matter for further proceedings consistent with 

this opinion. 

George, C. J., Kennard, J., Baxter, J., Moreno, J., 

Corrigan, J., and McDonald, J., *

 concurred. 

* Associate Justice of the Court of Appeal, 

Fourth Appellate District, Division One, assigned 

by the Chief Justice pursuant to article VI, section 

6 of the California Constitution. 

Page 1 

LEXSTAT CAL CODE OF REGULATIONS, TITLE 28, 1300.71.39 

BARCLAYS OFFICIAL CALIFORNIA CODE OF REGULATIONS 

Copyright © 2010 by Barclays Law Publishers 

All rights reserved 

* THIS DOCUMENT IS CURRENT THROUGH REGISTER 2010, NO. 32, AUGUST 6, 2010 * 

TITLE 28. MANAGED HEALTH CARE 

DIVISION 1. THE DEPARTMENT OF MANAGED HEALTH CARE 

CHAPTER 2. HEALTH CARE SERVICE PLANS 

ARTICLE 8. SELF-POLICING PROCEDURES 

28 CCR 1300.71.39 (2010) 

§ 1300.71.39. Unfair Billing Patterns 

 (a) Except for services subject to the requirements of Section 1367.11 of the Act, "unfair billing pattern" includes the 

practice, by a provider of emergency services, including but not limited to hospitals and hospital-based physicians such 

as radiologists, pathologists, anesthesiologists, and on-call specialists, of billing an enrollee of a health care service plan

for amounts owed to the provider by the health care service plan or its capitated provider for the provision of emergency 

services. 

(b) For purposes of this section: 

(1) "Emergency services" means those services required to be covered by a health plan pursuant to Health & Safety 

Code sections 1345(b)(6), 1367(i), 1371.4, 1371.5 and Title 28, California Code of Regulations, sections 1300.67(g)

and 1300.71.4. 

(2) Co-payments, coinsurance and deductibles that are the financial responsibility of the enrollee are not amounts 

owed the provider by the health care service plan. 

(3) "The plan's capitated provider" shall have the same meaning as that provided in section 1300.71(a). 

AUTHORITY: 

 

Note: Authority cited: Sections 1344, 1371.39 and 1371.4, Health and Safety Code. Reference: Sections 1317.1, 1317.7, 

1342, 1345, 1346, 1362.8, 1367, 1371, 1371.1, 1371.35, 1371.36, 1371.38, 1371.39, 1371.4, 1371.5 and 1379, Health 

and Safety Code. 

HISTORY: 

 

1. New section filed 9-15-2008; operative 10-15-2008 (Register 2008, No. 38).