March 3, 2010

Florida Court of Appeal Defines "Usual and Customary"; for Out-of-Network Emergency Medical Services Providers as "Fair Market Value" (Excluding Medicare and Medicaid Reimbursement)

Holland & Knight Alert
Eddie Williams III

On February 24, 2010, the Florida First District Court of Appeal ruled that providers of emergency services in Florida are entitled to receive fair market value for their services if they are not under contract with the health maintenance organization (HMO) whose subscriber receives treatment from that out-of-network provider. Baker County Medical Services, Inc. d/b/a Ed Fraser Memorial Hospital v. Aetna Health Management, LLC, 35 Fla. L. Weekly D438b (Fla. 1st DCA Feb. 24, 2010).

Generally, under section 641.513(5)(b), Florida Statutes, the reimbursement of providers who do not have a contract with an HMO is equal to the lesser of: (a) the provider’s charges; (b) the usual and customary provider charges for similar services in the community where the services were provided; or (c) the charge mutually agreed to by the HMO and the provider within 60 days of the submittal of the claim.

Although some hospital providers have argued that their “charge master” rate is the hospital’s “usual and customary charge” for such emergency services, the Florida court concluded that in the context of the statute, the provider is entitled only to receive the fair market value of the services provided, not whatever its “charge master” rate may be. However, the court also said that Medicare and Medicaid reimbursement rates should not be included in the determination of “fair market value.”


Baker County Medical Services, Inc. (BCMS) operates a rural, nonprofit hospital in Florida, and provides emergency medical services to patients who are brought to the emergency room. According to state and federal law, BCMS is required to provide emergency medical services to every individual in need of such care regardless of the source of payment for the services. BCMS receives payment for the services from several sources, including the patients themselves, Medicare and Medicaid, health insurance and HMOs.

The prices for emergency medical services are established in a variety of ways, including: (1) the hospital’s maximum price or “charge master” rate; (2) the negotiated rate with health insurance companies and HMOs; and (3) the reimbursement rates established by Medicare and Medicaid. Patients paying out-of-pocket for the emergency medical services are normally billed the charge master price even though a hospital may accept a lower amount as full payment in satisfaction for the debt. Although indigent patients are billed the charge master price, there is effectively no cost to the patient for the services, because the hospital usually writes off the costs.

When subscribers of HMOs with whom BCMS did not have a contract with received emergency services at BCMS, the provider billed the HMOs the charge master prices. But the HMOs discounted the charge and remitted checks for those services to BCMS marked as “payment in full.” Subsequently, BCMS sought declaratory relief seeking an interpretation of section 641.513(5)(b). BCMS asserted that under the statute, the HMOs were required to pay the amount billed or the charge master rates.

The Court’s Interpretation of Section 641.315(5)(b)

The Florida First DCA concluded that the statute contemplates providers receiving fair market value for the services provided. The court quoted United States v. Cartwright, 411 U.S. 546, 551 (1973), which said that “[f]air market value is the price that a willing buyer will pay and a willing seller will accept in an arm’s-length transaction.” In addition, the Florida court noted that, “In determining the fair market value of the services, it is appropriate to consider the amounts billed and the amounts accepted by providers with one exception.” It reasoned that the reimbursement rates for the provision of services to Medicare and Medicaid beneficiaries are established by government agencies, and therefore do not constitute “arm’s-length” transactions. The court also said that because of the Emergency Medical Treatment and Labor Active Labor Act (EMTALA) and Florida emergency access requirements, hospitals do not have the same option available to private providers to refuse to provide services to Medicare and Medicaid beneficiaries. As a result, it held that it is not appropriate to consider the amounts accepted by providers covered by Medicare and Medicaid in determining the fair market value for the emergency medical services.

Finally, the court disagreed with the BCMS argument that the term “provider,” as used in the statute, is limited only to hospitals. The court explained that Section 641.47(14) clearly defines the term “provider” to mean “any physician, hospital, or other institution, organization, or person that furnishes health care services and is licensed or otherwise authorized to practice in this state.” As a result, the guidelines for determining the usual and customary provider charges for similar services in the community where the services were provided is not limited to a specific type of provider, and would apply to physicians and other ancillary providers as well.

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