A lawsuit that accuses the state’s largest hospital group of charging uninsured patients more for treatment than insured patients is receiving lots of attention. The case, argued before the Indiana Supreme Court last month, involves a 2010 lawsuit filed by two uninsured patients who accuse IU Health of overbilling them. Although their breach-of-contract claims in the case amount to just a few thousand dollars, the legal stakes in this case are very high.
A favorable ruling for the two Plaintiff’s could allow other patients to sue over billings as far back as ten years. If the Plaintiffs win on appeal, the case could be converted to a class action. This would open the suit to hundreds of uninsured patients who might have been over-billed by the health system over the past decade. Other Indiana hospitals could also be faced with similar lawsuits seeking damage claims in the millions of dollars.
The Indiana Hospital Association, which filed a friend-of-the-court brief with the Supreme Court in support of IU Health’s legal position, calls the case “a pretty concerning situation” for hospitals. It’s the first time the Indiana Supreme Court will deal with the legalities of a hospital charging uninsured patients more than patients who are insured. The Court’s consideration of the issue comes after a new federal law took effect which requires hospitals to give discounts to uninsured patients similar to those given to insured ones.
That new law led IU Health to offer uninsured patients a 40% discount off its full-price “chargemaster” rates in January of last year, according to Lauren Cislak, an IU Health spokeswoman. Ms. Cislak said IU Health’s discount applies to uninsured patients regardless of income and is based on the best rates it charges its commercially insured customers or Medicare. It should be noted that the new federal guidelines do not prohibit patients from suing over past billing practices.
At the heart of the IU Health case are 120 years of state common law holding that if a contract for a service doesn’t specifically set a price or fee, the bill must be “reasonable.” One definition of “reasonable” is the price charged most other customers. Plaintiffs Abby Allen and Walter Moore believe that’s where they were wronged by IU Health North Hospital, located in Carmel.
According to Ms. Allen, a college student, she was billed $15,641.64 to treat an infection in 2008. The lawsuit alleges that an insured patient would have been charged $7,308.78 for the same procedure, taking the discounts IU Health had negotiated with insurance companies into account. Mr. Moore, a Carmel police trainee, says he was charged $1,138 in 2009 for treatment of injuries after an auto accident. He was uninsured and claims the hospital would have accepted “significantly less” had he been insured.
Both patients claim their bills were submitted to a collection agency, which damaged their credit ratings. The lawsuit was filed in Marion County Superior Court. A judge sided with IU Health and dismissed the case. But the state Court of Appeals said last fall the complaint had merit and that the case should be tried in the county court. IU Health appealed the decision by that Appeals Court to the Supreme Court.
IU Health’s lawyers argued to the Appeals Court that hospital billing disputes don’t belong in the courts, saying “the anomalies which exist in the American system of providing health care” mean that a court “could not possibly determine what a `reasonable charge’ for hospital services would be.” The new federal regulations don’t negate a hospital’s responsibility “to right what was wrong” with past billing methods. It will be most interesting to see how the Supreme Court rules in this case.
Source: Insurance Journal
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