Apache Medical Billing frequently gets questions about California medical billing rules and regulations, and in particular about the potential impact on facility based physician groups like for anesthesiologist billing, radiologist billing, and hospitalist billing of the new Balance Billing Law California AB 72.  In part 2 of the California medical billing rules and regulations regarding patient balance billing, we discuss specifically California AB 72.


California AB 72

In 2016, bill AB 72 was passed into law in California.  It introduces new restrictions on balance billing by non-contracted physicians.


Basically applies to non-contracted physician at a contracted facility.  Facilities include laboratories, sleep centers, imaging centers, ambulatory surgery centers, and of course hospitals.


If all conditions of the bill apply:

  • a patient who has a contracted insurance plan
  • a facility that is contracted under that plan
  • an out-of-network physician
  • a service that is covered under the plan

then the patient would not be liable for any more than the “in-network cost sharing amount”.  The rate payable to the physician under this way for patient care that meets all of the criteria would be either the rate normally paid in that area to contracted physicians for the same service or 125% of the Medicare rate, whichever is higher.



This law does not apply to ERISA self-funded plans, which makes medical billing in California much more complicated.  Again.  Since many ERISA plans are managed by large payers like Blue Cross or Aetna and the insurance card for the patient may only state the managing insurer like Anthem Blue Cross.  This means that your practice may lose money without a good California medical billing company to help you identify where there may be additional revenue opportunities.


This law does not cover emergency services.  Many believe that the current balance billing laws preclude balance billing any patients for emergency services, and therefore current law already covers these group of patients.  However, as noted in a prior article, the California Supreme Court Ruling in 2009 narrowly ruled that non-contracted emergency doctors cannot balance bill HMO patients.  Therefore, it is possible that there is still no law (statutory or case) covering balance billing for emergency services to PPOs and other types of insurance plans.


Non-covered services under the patient’s plan are also not governed by this law.  That means for example in anesthesia billing that if a patient receives a colonoscopy under anesthesia and anesthesia was not covered for colonoscopies under the patient’s plan, then the anesthesiologist is not governed by this law and may balance bill the patient in full for that case.


Special provision where for PPOs where patient has out-of-network benefits, physicians can get added reimbursement if get signature from a patient more than 24 hours prior to care.  The physician must provide a written estimate of costs as part of the process of getting consent.  This is unlikely to present much benefit for anesthesiology billing for example since anesthesiologists typically do not have access to the patient prior to care.


Let’s try that again with the exclusions:

  • a patient who has a contracted insurance plan
  • a facility that is contracted under that plan
  • an out-of-network physician
  • a service that is covered under the plan
  • where the plan is not an ERISA plan
  • non-emergency services
  • the patient did not have a PPO and give consent more than 24 hour prior to care


Effective Date

Goes into effect starting July 1, 2017.  There is some phase in period since the renewal date of the patient’s plan determines the effective date and therefore could be in force as late as 2018 for some plans.  Additionally, the law will have to be clarified in regulations yet to be issued.



Since the law effectively requires the physician to accept whatever reimbursement and EOB information to determine the patient portion to bill that is given to them by the payer, there will likely be a lot of dissatisfied physicians as a result of this law.


California AB 72 sets up an independent dispute resolution process for claims where the provider does not feel as though they have been reimbursed sufficiently by the insurer.  The law requires establishment by the DMHC by Sep 1 2017 an independent resolution process that is binding arbitration.  The physician must complete the payer’s internal appeals process prior to appealing to the independent binding arbitration.



The American Association of Physicians and Surgeons filed suit in federal court in Oct 2016 to block AB 72.  The case certainly seems to have merit since the state has enacted a law that effectively takes away the right of physicians to negotiate contracts and set rates for their services on their own.  This make take several years to work through the legal system including appeals, so stay tuned.


About Apache Health

Apache Health is a revenue cycle management (RCM) analytics, benchmarking, and auditing company. The founders of Apache formerly ran a large RCM company that was acquired by a private equity group in a rollup. Apache’s predictive analytics will benchmark billing performance and project exactly how much more revenue you should earn from your existing volume of patients.  Using many factors and a blend of artificial intelligence and specialty specific benchmarks, the model projects whether changing the billing process would improve collections for your particular mix of procedures and payers. Apache Health can help you evaluate whether to outsource the billing, determine which billing company to select to maximize performance, or track inhouse billing performance improvement over time.


Sean McSweeney

Apache Health




Legal disclaimer: Apache Health is engaged in the business of healthcare revenue cycle management analytics.  We offer information about regulations, rules, and industry practices relating to compliance.  Apache has researched that subject and has set forth the results of that research herein.  Apache Health is not a law firm and we do not offer legal advice.  Apache does not guarantee the completeness nor the accuracy of its research.  You should consult with your qualified healthcare attorney.