Hospital's Suit For Reimbursement Is Not Preempted by ERISA

Court of Appeal Reverses a Judgment Sustaining a Demurrer by Blue Cross
Coast Plaza Doctors Hospital v. Blue Cross of California (2009) 173 Cal.App.4th 1179
11 p.

According to the allegations in the complaint, a patient checked into an out-of-network hospital for previously scheduled surgery. Because the Hospital was out-of-network the patient made an advance cash payment for the surgery. The surgery went smoothly and is not at dispute in this litigation. However, a few days after the surgery the patient suffered a life threatening respiratory distress which required her to be put on a ventilator and moved to the Hospital's ICU. (This was emergency treatment.)

Once the patient was stabilized the Hospital contacted the Independent Practice Association (IPA) that Blue Cross had contracted with to provide medical care for the patient, in order to arrange for the transfer of the patient to an in-network provider. The IPA refused to approve the transfer or to be involved in any decisions regarding the patient's medical care. The patient spent two months in the Hospital's ICU before being transferred.

The Hospital sued Blue Cross for slightly under $600,000 for the emergency care that it provided to the patient.

Blue Cross successfully demurred on the ground that because the patient's health insurance was an employee benefit, the Hospital's action against it was preempted by ERISA. The Hospital elected not to amend its complaint and appealed from the judgment that followed.

The Court of Appeal held that the Hospital's action was based on Health and Safety Code section 1371.4, and that section 1371.4 falls within ERISA's saving clause (ERISA section 514(b)(2)(A)) as state law regulating insurance. It reversed the judgment and remanded for further proceedings.