A recent Indiana Court of Appeals decision has again put a hospital’s chargemaster rates in the crosshairs, and it may lead to an overarching ruling from the Indiana Supreme Court on patients’ rights to see and negotiate hospital bills in the future.
The decision, Parkview Hospital v. Thomas E. Frost by Shirley A. Riggs, his guardian, 02A03-1507-PL-959, was an appeal from Allen Circuit Court. In the decision, Senior Judge Ezra Friedlander and Chief Judge Nancy Vaidik ruled Thomas Frost was entitled under the Indiana Hospital Lien Act to discover what insured patients were being charged for similar expenses after he was charged more than $600,000 for a three-month stay at the hospital in Fort Wayne. Parkview argued Frost was bound by the contract he signed and asked the court to determine its chargemaster rates were reasonable, but the COA upheld the decision of the trial court.
Judge Edward Najam’s dissent in the case has added fuel to the debate. The COA majority based its decision on Stanley v. Walker, 906 N.E.2d 852 (Ind. 2009), but Najam thought Allen v. Clarian Health Partners Inc., 980 N.E.2d 306 (Ind. 2012) should have controlled. In Allen, the Supreme Court said patients did not state a claim upon which relief could be granted and they had to pay what the hospital charged them. Najam said he didn’t like Allen because the case puts patients “at a permanent take it or leave it disadvantage.”
Norm Tabler, counsel at Faegre Baker Daniels LLP who focuses on health care, said he agreed with Najam that Allen should have ruled, but he thinks hospitals’ chargemaster rates are reasonable.
“There’s a superficial appeal to the patient here. ‘Hey it’s not fair to charge someone more than an insured patient,’ but that ignores two key factors,” he said.
The first, he said, is that an insured patient is already paying more than their hospital bills because they are paying insurance premiums each month. Second, hospitals give insurance companies discounts because they have to. It’s the price of doing business.
“They say, ‘Unless you give us a discount we won’t sign a contract with you.’ It’s not whimsy that causes them to give a discount from the chargemaster rates. They have to give Blue Cross, for instance, a discount.”
Tabler said it was like buying a Chevy. The deal you receive on a Chevy may be higher than the one made with car-rental company Hertz, which gets volume discounts. The insurance companies give hospitals a volume of patients, which is why they provide discounts.
“I think the hospital’s chargemaster rates are presumptively reasonable,” Tabler said. “They are available to the public, on file with Medicare and anyone can look at them. People can see what they are going to be charged.”
Thomas Manges, an attorney with Roby & Manges Law Firm in Fort Wayne who wrote an amicus curiae brief for the Indiana Trial Lawyers Association, disagrees. He said patients have rights, especially under the Indiana Hospital Lien Act, and the court simply upheld Frost’s rights in the case.
“Everyone knows the chargemaster rates are unreasonable,” Manges said. “They have no relationship to anything. Not the cost of care, anything. That’s beating a dead horse.”
He said Parkview fought the case so hard because the hospital didn’t want to make public the markup it has for treatment.
“If we charge you $1,000 for a Band Aid, that’s OK, take that bill on faith,” Manges said. “I’m not OK with that.”
The Hospital Lien Act clearly allows a patient to negotiate bills and to do that, a patient needs to bring evidence, Manges said. That’s why the court ruled the way it did.
The hospital said Frost entered a contract, and his contract is covered under Allen, but it’s a contract of adhesion at best, Manges said. The hospital says “a contract trumps a statute but it doesn’t; that’s black letter law.”
Thomas Ruge, a director at Lewis and Kappes, said the Parkview case is unique on its own, and he’s not sure either Stanley or Allen related wholly to Frost’s request for discovery when disputing his medical bills.
“They’re all fairly different situations and it’s pretty inconsistent,” Ruge said. “Different contracts seem to look different.”
However, he said in this case, which was under the Hospital Lien Act, he didn’t understand how the trial court could not allow discovery, especially since the defense is allowed discovery.
Ruge said he wouldn’t be surprised to see the case go the Indiana Supreme Court, and for the court to rule that Stanley, Allen and Frost were three different situations and different rules apply.
“I don’t see a big, wide ranging decision, but I could be wrong,” he said.
Ruge said there does seem to be a social fairness issue at stake here, but for real change, the answer doesn’t lie in the courts.
“I think we’ll need a legislative change to hospital liens, and possibly to billing in general,” Ruge said.
There are other issues at stake as well. Najam said in his dissent that if Allen is allowed to stand along with Frost, it could render the Indiana Hospital Lien Act meaningless as hospitals seek to recover their bills through breach of contract instead. Tabler agreed.
“Hospitals could go through the end run where they can prevail,” Tabler said. “But remember in the Allen case, the Supreme Court granted transfer and they reversed the Court of Appeals. That could happen again in this case.”
Manges said while hospitals may file fewer liens, they’ll never get away from it.
“That would be killing their golden goose,” Manges said. “Plus a lot of patients don’t have that kind of money to pay and hospitals are looking for any piece of the liability pie. It’s almost like pick your poison.”
Manges said if Parkview filed for transfer in the case, it would be a “roll of the dice” because the Supreme Court could uphold the Court of Appeals decision. He said the Supreme Court may also want to uphold stare decisis and may not find new ground to rule on after Stanley and Allen.
However, Manges encouraged the Supreme Court to take a close look at Allen.
“Allen v. Clarian needs to be fixed,” Manges said. “We were deeply troubled by it. It’s unfair to not question a bill.”
Manges said while the Hospital Lien Act clearly allows a patient to question a bill, it doesn’t apply in all cases, and it should.
“I think the question here is not why Allen v. Clarian does not apply to the hospital lien statute, but why the hospital lien statute doesn’t apply to Allen v. Clarian.”•