(Hospital's Conditions of Admission and Assignment of Benefits were Unenforceable and Could Not be Used to Bypass Medi-Cal Reimbursement Procedures and Compel Payment from Insurer)
(September 2025) - In Dameron Hospital Association v. Progressive Casualty Insurance Co., 111 Cal. App. 5th 530 (2025), the California Third District Court of Appeal held that a hospital cannot bypass Medi-Cal reimbursement procedures by seeking full payment directly from a patient's uninsured/underinsured motorist ("UM") insurance benefits based on an assignment of benefits ("AOB") clause in its Conditions of Admission ("COA").
This case arose after Dameron Hospital ("Dameron") treated a Medi-Cal beneficiary, M.G., following an automobile accident. Instead of billing Medi-Cal, Dameron sought to recover its full charges from Progressive Casualty Insurance Company ("Progressive"), M.G.'s UM insurer, based on an AOB that M.G. signed during admission. Pursuant to the AOB, M.G. assigned to Dameron direct payment of UM benefits that would otherwise be payable under her automobile policy. Progressive declined to pay Dameron and entered into a lump-sum settlement with M.G. Thereafter, Dameron sued Progressive seeking damages, an injunction that enjoins Progressive from ignoring the AOB, and declaratory relief holding that the AOB is enforceable.
The Court of Appeal affirmed the trial court's dismissal of the case, holding that the AOB was unenforceable. In reaching its decision, the Court of Appeal followed its holding in Dameron Hospital Association v. AAA Northern California, Nevada & Utah Ins. Exchange, 77 Cal. App. 5th 971 (2022). In that case, the Court of Appeal held that COAs are contracts of adhesion and the AOBs are unenforceable because "it is not within the reasonable possible expectations of patients that a hospital would collect payments for emergency care directly out of their UM benefits." Id. at 978. Dameron argued that because M.G. had Medi-Cal insurance, a fact-pattern not considered in Dameron v. AAA, the holding in that case did not apply. The Court of Appeal, however, disagreed.
The Court of Appeal emphasized that under California law, once a provider is presented with proof of Medi-Cal eligibility, it must submit a claim to Medi-Cal for reimbursement and may not seek payment from other sources unless those sources provide a contractual or legal entitlement to healthcare services. UM insurers, the Court of Appeal clarified, do not fall into that category. Rather, they are not healthcare providers but potential third-party payors, and any recovery from them must be pursued by the state, not individual providers. In other words, "[t]o the extent UM insurance may be required to cover expenses, it is not for the provider to make that determination."
As a result, the Court of Appeal rejected Dameron's arguments that federal and state statutes regarding Medi-Cal justified their actions, noting that providers "do not have the authority to ignore a patient's Medi-Cal coverage and instead seek full payment – i.e., payment above Medi-Cal rates – from UM insurance." The Court of Appeal further held:
It is not within the reasonable expectation of the UM insureds who receive medical care through a Medi-Cal plan that a standard hospital admissions form will cause them to (1) assign their UM benefits to pay a hospital bill at above Medi-Cal rates; (2) without Medi-Cal ever being notified of a potential claim; and (3) before the extent of the UM insurer's obligation to cover the patient's damages (if the obligation exists at all) has been determined.
Additionally, the Court of Appeal held that the UM policy itself did not create a reasonable expectation of payment of the medical bills.
It may be true that M.G. would have expected UM coverage to pay for some of her medical bills, particularly any copays she might have made or any amount assigned to Medi-Cal for the amount Medi-Cal paid. However, this language did not create a reasonable expectation that Dameron would use an AOB in its COA to collect its full hospital bill from M.G.'s capped first party UM coverage – which was also to serve to cover her lost wages, pain and suffering, and other damages – without ever submitting a claim to Medi-Cal, as it was required to do when M.G. presented evidence of Medi-Cal coverage.
Accordingly, the Court of Appeal affirmed the trial court's order sustaining the demurrer and the judgment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
