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Wednesday, May 9, 2012

Uninsured Sue Major Indiana Hopsital System for Overcharging

As reported in the Indianapolis Star here, the Indiana Supreme Court is set to hear arguments on May 10th in a case invovling two uninsured patients who have sued Indiana's largest hospital group, IU Health, for overbilling.  This is a tip-of-the-iceberg case, since the amount in controversy is small on these particular claims but could become massive if plaintiffs succeed and other plaintiffs bring similar claims (which they undoubtedly would).

Medical FilesThe basis for the suit is that uninsured patients pay far higher prices for the same treatment, tests and services that insured patients get.  The case also provides a peek into the mindset of class action plaintiffs' attorneys, a subject related to a recent post.  Plaintiffs' attorney Scott Weathers is quoted in the Indianapolis Star as saying that he hopes to target other Indiana hospitals with similar lawsuits: "If we win, I'm afraid the other hospitals are going to hear from us. We have clients in the wings . . . ." and he expects the damages claims to get into the millions. 

The core of the case is the common law doctrine that when a contract does not specify a price, the price must be reasonable.  A good test of reasonableness is what other patients get charged for similar services.  Relying on that doctrine, Indiana's Court of Appeals reversed the trial court's dismissal of the case.  Twenty states introduced legislation requiring that uninsured be charged at the same rates as the insured, and now federal law requires that as well.  So the issue has been resolved legislatively, but that does not deprive plaintiffs of their right to sue over past overcharges. 

Given that this seems like low-hanging fruit, one might wonder why class-action plaintiffs' attorneys have not already filed class actions across the country.  As is clear from the Corut of Appeals opinion cited above, some states have sustained dismissals of similar suits based on (slightly) more specific contractual language related to the prices the hospitals would charge.  An additional sticking point seems to be the need to show commonality among the members of the purported plaintiff class.  Medical bills are individuated and hospitals claim that class litigation is impracticable.  That may be persuasive, but we understand that medical bills are now created by "coding experts," with each examination, test, procedure, etc. assigned a specific code and attendant pricing.  It seems likely that a court, provided with the coding system, could easily come up with a reasonable approximation of the extent to which the uninsured have been overcharged.  Since IU Health spokesperson affirms that the hospital system discounted charges to uninsured patients  by 40% in January 2011 in order to comply with federal law, 40% seems like a reasonable approximation of the extent of the overcharges. 

[JT]

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Comments

"[O]ne might wonder why class-action plaintiffs' attorneys have not already filed class actions across the country."

Because a ruling that someone who owes a lot of money that hasn't been paid in fact actually owes a smaller sum of money doesn't create a pool of funds from which plaintiffs' attorneys can be paid. The class of uninsured people who have actually paid more than insured rate is much smaller than those who have not, and in the case of people who have paid anything more than the sticker price, there is an accord and satisfaction argument. But, people who face collection actions from medical providers often can't afford to pay lawyers to fight the cases which are settled confidentially and without creating precedent when lawyers do defend them.

An alternate theory, by the way, was to treat the difference between the insured price and the uninsured price as an implicit finance charge and to challenge the charges as usury.

Posted by: ohwilleke | May 21, 2012 3:22:17 PM

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