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Surprise Hospital Billing Outrage Is Pushing Patients Into Court

Sept. 6, 2019, 9:36 AM

Attorneys Emily Madoff and Chet Waldman have read through more than 4,300 complaints in the last two years from people who got a big bill for a medical service or lab work they never anticipated having to pay.

The partners at Wolf Popper LLP are now fighting these surprise bills on behalf of patients in seven class actions in state and federal courts across the country, and they expect more cases to come. They’ve already seen success. One hospital provider has agreed in a preliminary settlement to refund patients for overcharges.

Patients who receive high unexpected medical bills usually have no other choice but to fight for themselves in court. Federal lawmakers haven’t passed legislation to prevent and resolve disputes over the charges, and there is a patchwork of state laws to address the problem.

Clients are coming out in droves. “We’ve never had a situation where more people have contacted us than with respect to these surprise bills,” Waldman said of the New York-based firm, which specializes in class actions and consumer fraud. “People are outraged.”

One Generic Clause

Thanks to a legal theory steeped in “implied contract law,” patients have a way to push back. The argument focuses on the fine print in hospital-patient contracts. A patient’s financial obligations to the hospital and its contractors may be embedded as a clause in a patient intake form. The language is usually farther down on the form than the average patient would read.

In most contracts, “you know what you’re bargaining for,” said Joey Kirchgessner, an attorney based in Fredericksburg, Va., who has contested bills on behalf of patients. He works with a group called Broken Healthcare that fights for price transparency in the health-care system.

“But patients come into the hospital and sign this contract, and in the middle of page two, you’re essentially writing a blank check to the hospital,” he said of the financial obligation clause. “That’s not typical in the contract world.”

There’s no specific price patients agree to pay on these forms. Attorneys argue that what the hospital charges them can’t be more than the fair market rate or reasonable value for the service. Some groups calculate that figure by averaging how much that service costs in facilities in the surrounding area.

Out-of-Network Snag

Five of Wolf Popper’s cases are against health-care service groups, including Dignity Health, Envision Healthcare Corp., and its subsidiary EmCare. Patients claim they were treated in an emergency department of a hospital that was in their health plan’s network by a doctor affiliated with the hospital who was out-of-network. They then argue the bill was for an amount that was beyond the reasonable value of the service provided, they said in court documents.

Renee MacLaughlan Bozarth, a lead plaintiff in one of the cases against Envision, alleges she was billed $2,157—more than four times the average in-network price of $468—for treatment of lower back pain in an emergency department managed and staffed by EmCare Holdings Inc., according to court documents.

EmCare “made no effort to warn patients” that EmCare’s emergency department physicians were out of her insurance plan network even though she was being treated at an in-network hospital, she said.

EmCare argued against having to post signs to alert patients, claiming it could endanger patient lives if they see the sign and choose not to receive necessary, life-saving treatment because they fear high bills.

The Centers for Medicare & Medicaid Services has a longstanding position that any action or sign that discourages a patient from completing the medical screening process in an emergency room is a violation of the Emergency Medical Treatment and Active Labor Act, which ensures public access to emergency services regardless of ability to pay, attorneys for EmCare and the other defendants said in court documents.

One Settlement

Madoff and Waldman said Envision Healthcare Corp. and EDS-I Practitioners of California have agreed to a preliminary settlement.

As part of the settlement, which still needs to be formally approved by the court, the companies have agreed to refund patients for the difference between what was charged and what their insurance would have covered, forgive that debt for those who did not pay, and asks all hospitals they contract with to disclose in bold print in patient forms the name of their physician group to give patients the ability to check whether they are in-network.

“The settlement is for what we would term almost 100% relief,” Waldman said.

Envision Healthcare Corp. said in a statement to Bloomberg Law that it’s committed to putting patients first and working with health-care systems to solve the issue of surprise medical billing.

“We publicly announced in February 2017 our strategy to be in-network with as many insurers as possible, and today, more than 90 percent of our business comes from in-network agreements,” Bob Kneeley, senior vice president of communications and government affairs, said. “Providing patients with access to quality care is a shared responsibility. Insurers must be held accountable and do their part to provide patients with adequate insurance coverage and transparency.”

Kneeley said the heath services provider is actively advocating for federal legislation that includes a comprehensive, independent dispute resolution process as a solution.

Dignity Health, a hospital provider in California, declined to discuss the specifics of the class action it’s facing, but a spokesman said he understands “how frustrating and concerning an unexpected medical bill is for patients.”

“We support efforts that protect patients from unexpected medical bills that may result from gaps in insurance coverage and will continue to work with policymakers and health plans to find solutions that protect patients and remove them from payment disputes between insurers and providers,” the spokesman said.

Helps Bottom Line

Health-care providers often rely on the “charge” price from patients in determining their bottom line, Barak Richman, a law and business administration professor at Duke University, said. The charge price is the higher, non-negotiated price for care that usually falls to the uninsured or under-insured populations to pay.

“A lot of hospitals and physicians just calculate into their revenue that some people are going to pay their charge,” Richman said.

“Because charges are being collected and being relied upon, we’re building a revenue model around it, and that’s a real problem,” Richman said. “It’s not only exacerbating price inflation, it’s exacerbating price inflation on the backs of the most vulnerable.”

Legislation Needed

Attorneys say litigation is just a Band-Aid, not a final remedy for surprise bills or high costs.

Small-scale lawsuits contesting bills for individual patients might help one hospital change its policy, and a class action could change how certain hospital groups operate, but “there’s no real blanket effect for a whole nation or state unless there’s some legislation that kind of forced it,” Kirchgessner said.

Congress is grappling with how to take patients out of the crossfire when dealing with surprise bills, but lawmakers have had trouble coming to a consensus on how it should be done. Setting a rate a doctor must accept for out-of-network services versus setting up a system of arbitration to settle disputes is key sticking point as they debate the issue in the fall.

“The best we can do is let people know what’s going on and how to watch out for yourself because there is no way we’re going to get a court, and it’s really not the role of a court, to start saying what you can charge,” Madoff said.

To contact the reporters on this story: Jacquie Lee in Washington at jlee1@bloomberglaw.com; Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editors responsible for this story: Cheryl Saenz at csaenz@bloombergtax.com; Fawn Johnson at fjohnson@bloomberglaw.com