Class Action Lawsuits for inappropriate billing of Liability Insurance represent a growing threat to hospitals across the nation. For nearly 15 years, Medical Reimbursements of America, a Revecore company, has helped hospitals avoid the hidden dangers of incorrectly billing Liability insurance for accident claims. MRA’s legal team has tracked several suits that have arisen due to incorrect interpretations of contracts related to Liability insurance billing for accident claims. In each of these lawsuits, the provider has incorrectly pursued Liability insurance primary to the patient’s Commercial Health insurance. A summary of these lawsuits is presented below in order to help hospital billing offices avoid compliance-related Class Action Lawsuits in the future.
Case #:1 Dorr v. Sacred Heart Hospital
Generally, the “hold harmless” provision of a patient’s health insurance contract protects the patient from overzealous provider billing practices. In the seminal case on this issue, the Wisconsin Court of Appeals held that a provider agreement’s “hold harmless” clause prohibits the pursuit of Liability insurance primary to the patient’s Commercial Health insurance. Beverly Dorr was injured in an automobile accident and Sacred Heart had an existing contract with her health insurance carrier that contained a “hold harmless” clause whereby they agreed not to bill or hold any subscriber liable for any service covered by the insurance plan. However, Sacred Heart filed a hospital lien for its total billed charges in lieu of billing the health insurer, and subsequently received 100% reimbursement. Mrs. Dorr filed a lawsuit against Sacred Heart. The Court held the decision that the hospital’s only recourse for payment was with the HMO. To avoid a similar situation, when a provider agreement contains a “hold harmless” provision, the hospitals should only seek payment for services rendered from the health insurer in accordance with the terms of the provider agreement. By filing a lien against the insurance settlement proceeds, Sacred Heart violated the “hold harmless” provision because it already agreed not to seek recourse against the subscriber.
Case #2: Parnell et al. v. Adventist Health system West et al.
Mr. Parnell was injured as a passenger in a taxi/cab automobile accident and treated at a hospital owned by the defendant. His health insurance (Community Care Network (“CCN”)) provider agreement required “Preferred providers” to accept payment from CCN as “Payment in full” for medical treatment provided to CCN enrollees by CCN providers. Adventist was a preferred provider in CCN’s network and submitted a claim for payment and CCN paid the contracted rate. Instead of writing off the adjustment, Adventist filed a statutory hospital lien for the difference. The California Supreme Court held that a hospital seeking to assert a lien under the state’s Hospital Lien Act (“HLA”) can only do so if the patient owes an underlying debt to the hospital. The Court acknowledged that its decision would cause hardship to hospitals that have discounted rate agreements with payers, but noted that the hospitals could always contract to preserve their right to assert liens to recover the difference between negotiated rates and the actual cost of treatment.
Case #3: Desselle v. Acadian Ambulance Service
In a recently settled class action lawsuit filed in Louisiana, a provider was sued for allegedly breaching the terms of its contracts with Commercial Health insurers; and violating LSA R.S. The plaintiffs’ complaint alleged that the provider breached its contracts with Commercial Health insurers “by attempting to collect and/or collecting from [insured patients] more than [insured patients] were legally liable” to pay. The complaint also alleged violation of Louisiana’s “hold harmless” statute which prohibits “contracted health care providers” from “discount billing, dual billing, attempting to collect from, or collecting from an enrollee any amount in excess of the contracted reimbursement rate for covered health care services.” In December 2012, the trial court ruled in favor of the plaintiffs and ordered a judgment in the amount of $17 million be paid by the provider. It is important to note that this $17 million final judgment was for a small hospital, one with only 100 beds, and it calculated the financial harm to patients based on only one of the Commercial Health contracts of the hospital.
Case #4 Oklahoma:
In 2009, a provider health system was named in a class action alleging that providers within the health system were filing liens against the patients’ liability claims rather than billing the patients’ Commercial Health insurance for the medical care provided to the patients. The parties ultimately settled the litigation. However, pursuant to the settlement, the defendant health system agreed to cease pursuing liens against liability claims for patients with Commercial Health insurance – unless expressly allowed by the terms of the Commercial Health insurance provider agreement – and to pay undisclosed damages and attorneys’ fees.
One of the key arguments made by providers supporting their pursuit of Liability insurance primary to Commercial Health is that by filing a lien against the liability action, the provider is not billing the patient in breach of the “hold harmless” language. The hospitals in each of the previously mentioned cases advanced this (or similar) argument. Unfortunately, in each of these cases the court disagreed, and held that pursuing the Liability insurance proceeds when Commercial Health is available is an attempt to seek recourse against the patient because the claim to the proceeds belongs to the patient. The lesson learned is that accident claim billing is extremely complex, particularly when there is a liable party. Providers must make sure that their billing processes for these claims are 100% compliant with all rules and contract language in order to avoid potential lawsuits in the future. In the event historical billing practices for liability claims have been in error, the best approach to minimize exposure to potential Class Action Lawsuits is the immediate and intentional correction of errant billing practices.