Cottage Health has filed a lawsuit alleging the Kaiser Foundation Hospitals Inc. healthcare system has not been fully reimbursing Cottage’s Santa Barbara County hospitals for care given to Kaiser insurance patients.
The civil complaint for damages, breach of implied contract, and violation of professional business codes and health and safety codes was filed in Santa Barbara County Superior Court on March 4.
In addition to hospitals in Santa Barbara, Goleta and Santa Ynez, Cottage Health operates a children’s medical center, urgent care centers and rehabilitation centers.
Kaiser Foundation Hospitals, which is also known as Kaiser Permanente, is a health insurance provider and operates hospitals and medical centers throughout California.
In its complaint for damages, Cottage Health alleges that Kaiser Permanente does not have hospitals in the Santa Barbara area, but does insure patients in the area. The nearest Kaiser Permanente medical facilities to Santa Barbara are in Ventura.
When Kaiser-insured patients in the area need medical attention, they sometimes go to Cottage Health facilities for care, and Kaiser-insured tourists and visitors also use Cottage facilities, according to the lawsuit.
“Despite Kaiser relying on Cottage Health to provide care to Kaiser patients, Kaiser often fails to properly reimburse Cottage Health. In doing so, Kaiser commonly assigns itself deductions never agreed to by Cottage Health. Kaiser’s conduct has cost Cottage Health tens of millions, while Kaiser continues to reap the full benefits of the premiums it charges patients.”
When Cottage Health provides care for a Kaiser-insured patient, it submits claims to Kaiser for reimbursement and expects to be paid for 100% of that billed charge, the lawsuit claims.
Cottage Health typically gives Kaiser Permanente a discount on some elective care (performing the services for 85% or 90% of the billed charges) but has not agreed to extend these discounts to non-elective care or care outside a specific agreement, the lawsuit claims.
“On thousands of occasions since 2018, notwithstanding Cottage Health repeatedly informing Kaiser of Cottage Health’s billed charges, both in general and in specific, Kaiser has paid substantially less in reimbursements for services provided by Cottage Health’s emergency departments.”
Cottage Health’s lawsuit claims that for each year 2018 through 2021, Kaiser Permanente gave itself discounts of 30% to 42% when reimbursing claims, and that the company intends to continue these practices.
“Cottage is informed and believes that Kaiser’s regular practice is to rely on out-of network hospitals, like Cottage Health, to provide medical care to Kaiser members, and then to substantially underpay those providers,” the lawsuit claims.
The lawsuit asks for monetary damages and attorneys’ costs.
“Kaiser Permanente is committed to keeping health care affordable and, consistent with California law, paying fair and reasonable rates for emergency services provided to our members by non-Kaiser Permanente hospitals,” a Kaiser Permanente spokesperson said in a statement to Noozhawk.
“This is the standard spelled out in California law, and we fully comply with that standard. We look forward to a court reviewing Cottage Health’s claim for high charges, and are confident we will prevail following an impartial review of the facts.”
Kaiser Foundation Hospitals had not filed a reply in Superior Court as of Friday.
The case is schedule for a case management conference in Judge Donna Geck’s courtroom in July.
— Noozhawk managing editor Giana Magnoli can be reached at gmagnoli@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.