Doctors Medical Center v. Kaiser Foundation CA5

BACKGROUND

To pay for services provided to its members at a non-Kaiser hospital, Kaiser may access several “PPO-network lease providers.” These PPO-network lease providers negotiate discounted reimbursement rates with various hospitals and then enter into separate contracts with health plans such as Kaiser. This enables Kaiser to access the discounted “network” reimbursement rates in exchange for a fee. In 2003, Kaiser entered into a contract to “lease” a discounted “network” payment rate from Beech Street Corporation (Beech Street). In 2004, Hospital and Beech Street entered into a separate contract that set the rate that Kaiser was to pay for Hospital’s services. Kaiser’s payment rate under these Beech Street contracts was 66 percent of the billed charges for all inpatient and outpatient covered services.

2. Effective in 2009, Hospital amended its contract with Beech Street to increase its trauma services payment rate to 85 percent of covered billed charges. All other inpatient and outpatient services remained at the 66 percent rate. Kaiser was not involved in making this rate change. Thereafter, Kaiser and Hospital negotiated a direct contract to govern Kaiser’s payments for…