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For a Few Dollars More: Hospital Liens and Other Dirty Tricks Part 2

October 12, 2017

 

Current “Dirty Tricks”

 

A. Trying to apply Allen to the Hospital Lien Statute: Parkview v. Frost

 

Every ITLA member should be aware of Allen v. Clarian Health Partners, Inc., 980

N.E.2d 306 (Ind. 2012).  This case holds, in essence, that if a hospital has an uninsured patient sign agreements to pay “the account” upon admission the patient may be charged the full chargemaster rates.  Hospitals love this decision, and wish to extend it to cases where they have also chosen to file a hospital lien under the Statute.

 

1.  Allen v. Clarian: what you need to know

In Allen, ITLA member Jerry Garau (and others) filed a class action Complaint on behalf of many uninsured patients who signed adhesive fine-print agreements to pay for services at Clarian upon admission.  The agreement called for the patients to pay for all charges associated with the treatment, but contained no prices, or references to any “chargemaster.”  The hospital moved for a T.R.12(B)(6) dismissal, which was granted by the trial judge.  The Court of Appeals (Najam) reversed this, holding in a lengthy (and well-reasoned) opinion that the complaint was supported by 120 years of Indiana common law.  Allen v. Clarian Health Partners, Inc., 955 N.E.2d 804 (Ind.Ct.App. 2011).  Because the “contract” did not specify a price, the patient was only obligated to pay the “reasonable value” for the services.  Id. at 809.  Judge Najam drew heavily from Stanley v. Walker, 906 N.E.2d 852 (Ind. 2009) in this regard.  

 

Unfortunately, the Indiana Supreme Court (Rucker) reversed the Court of Appeals decision and reinstated the dismissal.  In so doing, the Court found that the “contract” provision stating that the patient “agreed to pay for all charges associated with her treatment” was specific enough.  The contract between the patient and Clarian specified no price for the services to be provided, but Justice Rucker noted that "[a]n offer which appears to be indefinite may be given precision by usage of trade or by course of dealing between the parties." Id., and that “absolute certainty in all terms is not required." Allen v. Clarian Health Partners, Inc., 980 N.E.2d 306, 309-310 (Ind. 2012).  He cited that “A contract need not declare a specific dollar amount for goods or services in order to be enforceable,” and that “In the context of a contract for the provision of and payment for medical services, a hospital's chargemaster rates serve as the basis for its pricing.”  Id. at 310.  

 

The Allen opinion goes on to note that each hospital sets its own chargemaster rates, thus each hospital's chargemaster is unique.  Id.  It is from these chargemaster prices that insurance companies negotiate with hospitals for discounts for their policyholders. Id.  Other reimbursement schemes are based in part on hospital chargemaster rates. See, e.g., I.C. § 11-10-3-6(d)(1) (reimbursing hospitals 65% of their chargemaster rates for medical care provided to Indiana inmates).  It seemed significant to Justice Rucker that “Even the 2010 Federal Patient Protection and Affordable Care Act (ACA) recognized the centrality of chargemasters to hospital billing practices.”  He noted that the ACA “requires hospitals to publish their chargemasters annually.”  (Although where these can be found remains a mystery to this author).  

 

2.  Parkview v. Frost: a discovery issue turns into a statutory end-run

Allen is now at the forefront in Parkview v. Frost, an Allen County case where an uninsured patient filed a statutory motion to quash a Parkview Hospital lien of about $600,000.  Frost sought discovery from Parkview regarding discounts it gives other entities for the same services.  Parkview refused, and instead filed a motion for summary judgment that such information is irrelevant because its lien, at chargemaster rates, is “reasonable per se.”  The trial judge denied the motion, and ruled that the discount information is discoverable, and admissible, at the Section 4(e) hearing to determine what Parkview is to be paid.

 

Parkview sought and obtained an interlocutory appeal of the order.  On March 14, 2016, the Indiana Court of Appeals affirmed the trial court’s decision 2-1.  Parkview v. Frost, Court of Appeals Case No. 02A03-1507-PL-959.  The majority agreed that the patient should be allowed to conduct discovery to contradict Parkview’s prima facie evidence that the chargemaster rates are reasonable, and that evidence of these discounts should be considered, although not binding, on the ultimate issue of “reasonableness.”  The majority found that Allen has no applicability to the Hospital Lien Statute, which explicitly allows the patient to question the reasonableness of charges contained in the lien.  

 

Both the trial court and the majority of the Court of Appeals agreed that Stanley v. Walker, 906 N.E.2d 852 (Ind. 2009), is relevant to this discussion.  Although Stanley did not concern the Hospital Lien Statute or uninsured patients, it contains an extensive discussion of chargemaster rates, and why they are seen to have no relationship to the “reasonableness” of medical charges.  Although not universally popular among ITLA members, the Stanley decision has been quite helpful in debunking the assertion by hospitals that chargemaster rates are anything other than a fantasy.

 

In Frost, Judge Najam, clearly unsatisfied that his Allen decision was upended by the Supreme Court, authored a curious dissent in Frost.  He contends that the Allen case is controlling precedent, even in the context of a hospital lien.  In doing so, he relies on a public policy argument, explaining that “if Allen does not apply, hospitals will simply stop seeking recovery of unpaid fees through hospital liens and instead seek recovery through breach of contract actions, where Allen is controlling.  This end-run would obviate the Hospital Lien Act altogether.”  He does not, however, explain how an Allen-style contract can contravene the clear language of a statute [specifically I.C.32-33-4-4(e)].

 

Judge Najam’s dissent then moves on to strongly criticize the Supreme Court’s Allen decision, noting that there was “no factual basis . . .  for the assumption that chargemaster rates represented a rational–let alone a reasonable–value of medical services.”  He notes that hospitals consider their chargemaster rates “confidential and proprietary,” leaving unanswered how a patient and hospital can “mutually agree to an ‘unambiguous’ and ‘express’ chargemaster fee schedule that is not available to the patient.”  

 

Judge Najam noted that “Health care is not an option but a necessity,” and points out that,  unlike everything else we buy, when we purchase medical treatment “we buy blind.”   His raking essay recognizes that “Chargemaster rates are not per se reasonable when they are, first, confidential and, second, incomprehensible.”  Because at least one scholarly article he cites concludes that Allen is “oblivious to patients’ vulnerability and dependency,” Judge Najam invited the Indiana Supreme Court to reconsider Allen given the opportunity.  

 

It should be noted that the ITLA does not agree that the Frost case is the right vehicle to “fix” the Allen case.  It is vital for consumers to maintain their right to question the reasonableness of charges when hospitals choose to file liens pursuant to Section 4(e).  The Statute’s rules must supercede any contracts, be they fair or not.  Parkview Hospital, and Judge Najam, have opined that if the Court of Appeals decision in Frost is upheld hospitals will quit filing liens.  The ITLA doubts that this will occur, given the obvious benefits to hospitals, and the difficulty of procuring full payment of chargemaster rates from uninsured patients who do not have liability cases.  

 

Parkview filed a Petition to Transfer in the Frost case on April 13, 2016.  In it, Parkview once again argues that the Allen case applies to Frost, that the contract (“Agreement to Pay” in the fine print of the admissions paperwork) his mother signed on his behalf now compels him to pay the full chargemaster rates for his care.  Parkview further argues that Section 4(e) of the Hospital Lien Statute is irrelevant because of this “contract.”  

 

3.  Statute trumps Contract

If transfer is accepted, the Supreme Court could (1) reverse/clarify/soften the Allen opinion, (2) leave Allen intact, distinguishing it from charges being contested under the Hospital Lien Statute, or (3) hold that Allen applies to uninsured patients who sign contracts upon admission, even if the hospital files a lien.   Because #3 is too distasteful to contemplate, the most likely result may be for the Supreme Court to go with #2, deny transfer, and leave the Frost Court of Appeals case intact.  This would seem to be the easier path.

 

Indiana courts have long recognized and respected the freedom to contract.  Trotter v. Nelson, 684 N.E.2d 1150, 1152 (Ind.1997).  However, a court may declare an otherwise valid contract unenforceable if it contravenes the public policy of Indiana. Id.  Indiana courts have noted that we first look to the Constitution, the legislature, and the judiciary for explicit declarations of public policy.  Id. [emphasis added].  In fact, when courts have refused to enforce private agreements on public policy grounds, it is usually when a contract contravenes a statute.  Id.

 

The Statute states that a “corporation maintaining a hospital in Indiana or a hospital owned, maintained, or operated by the state or a political subdivision of the state is entitled to hold a lien.  I.C. 32-33-4-1.  It is not mandatory that a hospital file a lien.  But if a hospital chooses to do so, it must be bound by the rules of the Statute.  A hospital cannot undermine the Statute by getting a patient to sign a contract.  The right of a patient to question the reasonableness of charges under Section 4(e) of the Statute would have no meaning otherwise.  

 

B. Refusing to recognize Medicaid as a “benefit” under Section 3(b)(5)

Hospitals are still trying to avoid submitting charges to Medicaid.  In a 2014 case, St. Vincent Anderson Regional Hospital (“St. Vincent”) filed a lien against the settlement of a Medicaid beneficiary, Rashauna White, for 100% of its claimed charge: $1,634.  All attempts by her lawyers (who are ITLA members) to negotiate this charge were rebuffed by the hospital.  Therefore, White’s lawyers filed a motion to quash the lien.  The trial judge ruled against the hospital.  The hospital appealed.  White’s lawyers, and ITLA amicus, filed briefs.  St. Vincent dropped the appeal after reading these briefs.

 

Since the White case did not create precedent to thwart similar future behavior by Indiana hospitals, it is important for the courts and practitioners to understand the basic rules and policy concerns surrounding this issue.  For more information, see Indiana’s Hospital Lien Statute Applies to Medicaid, ITLA Verdict Magazine, Vol. 36, No.3 (2015).

 

C.   Filing liens before discounts and payments from health and benefit plans in violation of Section 3(b)(5)

As noted above, the new I.C. 32-33-4-3(b) requires that “the lien provided for” in the Statute “must . . . first be reduced by any benefits to which the patient is entitled under the terms of any contract, health plan, or medical insurance; and . . . reflect credits for all payments, contractual adjustments, write-offs, and any other benefit in favor of the patient; after the hospital has made all reasonable efforts to pursue the insurance claims in cooperation with the patient.”  

 

This is a condition precedent to filing the lien.  A hospital is supposed to reduce its charges by submitting them to health or benefit plans for adjustment and payment.  After it knows the remainder, it may only then file the lien if it chooses.  But hospitals (see Parkview’s policy attached) are taking a “file the lien, then amend it later” approach.  In other words, the hospital will file the lien at the full chargemaster rate immediately, and only later file an “amended lien” for the lower amount.  Parkview Hospital takes the position that this is necessary to beat the 90 day filing rule in Section 4 of the Statute.  Parkview asserts that many health and benefit plans will not provide discount or payment information within the 90 day period.  

 

Regardless of whether this is true, the policy is contrary to the Statute.  Nothing in the Statute allows a hospital to file a lien for an unreasonable charge.  The Statute also clearly requires the hospital to file a lien only after discounts and payments from health and benefit plans are known.  The Statute says nothing about any hospital having the right to ever file an “amended lien.”  Regardless of logistical problems alleged by hospitals, the clear language of the Statute must be followed.  Hospitals that cannot follow these rules are free to refrain from filing liens under the Statute, or to lobby the Legislature for further amendments.

 

D. Filing liens for full chargemaster rates

Hospitals maintain a master price list, which sets forth a price for every good and service provided (the “Chargemaster”). George A. Nation, III, Determining the Fair & Reasonable Value of Medical Services: The Affordable Care Act, Government Insurers, Private Insurers & Uninsured Patients, 65 Baylor L. Rev. 425, 427 (2013).  Chargemaster rates “are grossly inflated because they are set to be discounted rather than paid.”  Nation, supra at 429.  See also Steven Brill, Bitter Pill: Why Medical Bills Are Killing Us, Time (February 20, 2013).

 

The Indiana Supreme Court has already held that Chargemaster rates do not represent the reasonable value of healthcare services, noting the “relationship between charges and costs is ‘tenuous at best.’” Stanley v. Walker, 906 N.E.2d 852, 857 (Ind. 2009) (quotation omitted). The Supreme Court went further to explain, “hospital executives reportedly admit that most charges ‘have no relation to anything, and certainly not to cost.’” Id.

 

ITLA members Joe Williams, Will Riley and James Piatt currently have a class action certification pending (Souders v. Eskenazi, Marion Superior Court Cause: 49D01-1309-PL-035034).  In this claim, they assert, among other things, that it is perjury for a hospital representative to file a lien at chargemaster rates since the uncontroverted literature is that these rates have nothing to do with what is “reasonable.”  Section 4(a) of the Statute requires the filing of a “verified statement” of the “amount claimed to be due.”  But the Statute also says in four (4) places that a lien may only be claimed for “the reasonable value of services.”

 

Conclusion

Although much has been done to rein in the billing practices of hospitals, the fight continues.  The Statute was enacted in 1933 during the Great Depression to make sure that hospitals are reasonably compensated for their services.  But the Statute was never meant to be a profit generator for hospitals.  With the evolution of managed care (health insurance) and government-mandated payments (Medicare/Medicaid), hospitals started using the Statute to make up for lost profits.  It is wrong, though, for this to be done on the backs of uninsured patients who needed care only due to the negligence of others.  

 

This is unjustified.  St. Vincent’s reported profits from operations totaling $167 million for the fiscal year ending June 1, 2013.  J.K. Wall, New St. Vincent CEO will inherit financially solid system, Indianapolis Business Journal (January 6, 2014).  Parkview benefits from the favorable tax status of being a “not-for-profit” entity.  “Not-for-profit” hospitals are required to file a Form 990 with the federal government each year. The reports are available online at: http://foundationcenter.org/findfunders/990finder.  In its 2013 Form 990 filing, Parkview reported hundreds of thousands of dollars in charitable gifts to causes which have nothing to do with its core not-for-profit mission of providing medical care.

 

 

____________________________________

 

5Rashauna White v. St. Vincent Anderson Regional Hospital, Madison Circuit Court 3, Cause #: 48C03-1407-CT-105.

6St. Vincent Anderson Regional Hospital v. Rashauna White, Indiana Court of Appeals Cause number: 48A05-1412-CT-546.

7For instance, a $500,000 cash grant to the Embassy Theatre capital campaign.

8"Our mission is to improve the health of the communities we serve.” See http://www.parkview.com/en/about-us/Pages/default.aspx.

 

 

 

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