A judge in Henry County Circuit Court has ruled that PHC-Martinsville Inc. (trading as Memorial Hospital of Martinsville & Henry County) is entitled to only one-fourth of the $111,115.37 the hospital billed Glenn Michael Dennis for services rendered when he was treated when he thought he was having a severe heart attack and feared he was going to die in May 2014.

Judge David V. Williams ruled that the hospital was entitled only to the amount the hospital would have received had Dennis pre-paid his bill as an uninsured patient.

An article by Peter Vieth in the April 25 edition of the newspaper Virginia Lawyers Weekly says: "For what may be the first time in Virginia, a judge has ordered a hospital to slash its ‘balance billing’ charges by 75 percent to reflect the hospital’s usual write-off for uninsured patients.

"The decision is rare judicial rebuke to the common hospital practice of billing full rate for patients whose insurance plans do not have reimbursement agreements with the hospital."

Williams wrote in his decision: "The practice of billing the patient for the difference between the amount charged and the amount that the hospital is reimbursed, which is what hospital has done in this case, is known as ‘balance billing.’"

The hospital charged Dennis $111,115.37 for services he received during a brief stay there (he was discharged after two nights). Dennis had health insurance, and he and his health carrier have paid the hospital $27,254.95, according to Williams’ ruling.

It added: "The hospital has contracts with a number of health insurance carriers under which the hospital has agreed to sharply discount the bills of patients covered by those carriers. Those contracts permit the hospital to collect only the amount established by the contract plus any co-payment that the patient is required to pay.

"The hospital is also limited in the amount that can be collected from patients covered by Medicare and Medicaid. Dennis’s health insurance carrier did not have a contractual relationship with the hospital; he was not covered by Medicare or Medicaid."

The hospital sued for the remaining balance of $83,860.42 – the difference between the $111,115.37 the hospital charged and the $27,254.95 Dennis and his health insurance carrier paid – on two counts:

--Claiming that by not paying all the hospital bill, Dennis breached a binding contract (called a consent for services and financial responsibility form) that he signed in order to be treated at the hospital after he had undergone a preliminary assessment by medical staff.

--If the court does not find that Dennis violated an express contract, that the court order Dennis to pay the hospital for the fair and reasonable value of its services under an implied contract.

Dennis denied that a contract existed, because he signed the consent for services and financial responsibility form while he was lying upon a gurney in the hospital’s emergency room suffering from what he thought was a heart attack; that it was forced upon him by the hospital; that he was in extreme distress and unable to know or legally comprehend the meaning of the documents he signed; and he had no choice but to accept the terms.

Dennis also contended, among other things, that the hospital repeatedly refused to allow him to see the hospital’s charge description master (or charge master), upon which the charges allegedly were based. (Williams’ ruling says that the court ultimately ordered production of the documents.)

Williams ruled that the hospital had the burden of proving by the greater weight of the evidence that the hospital and Dennis mutually had entered into a binding contract, and that the hospital failed to meet that burden.

"So far as Dennis knew, his life was on the line," Williams wrote. "His hope of receiving medical treatment lay in signing the papers he was presented. As Chief Justice Roberts has written, ‘(y)our money or your life’ is a coercive proposition, whether you have a single dollar in your pocket or $500)." (Williams was referring to U.S. Supreme Court Chief Justice John Roberts.)

As for the second count (the hospital seeking fair and reasonable value for services rendered under an implied contract), Williams wrote the following:

"The hospital acknowledges that it charges all uninsured patients and insurance providers the same amount for medical procedures and supplies used; however, the hospital accepts payment at different rates from these parties based on pre-negotiated terms.

"For example, an uninsured patient who had arranged pre-payment of services would receive a 75% discount from the hospital. Thus, had Dennis arranged pre-payment, he would still have been charged $111,115.37, but the hospital would have accepted $27,778.84 to satisfy the bill. If Dennis received Medicare subsidies, Medicare would be charged $111,115.37, but due to pre-determined federal rates, the hospital would only receive approximately $20,000. If Dennis were insured by Anthem, Anthem would also be charged $111,115.37, but due to pre-negotiated contract rates, the hospital would only receive $23,389.

"I find that the reasonable value for the services Dennis received is $27,778.84, the amount the hospital would have received had Dennis pre-paid his bill as an uninsured patient. The amount Medicare would pay the hospital is a federally-set rate that remains an outlier in determining reasonable value. The amount Anthem would pay represents a company-negotiated rate on behalf of a large volume of clients.

"Dennis’s situation more closely resembles that of an uninsured patient, as Dennis’s insurance was not recognized by the hospital. A similarly situated person could have negotiated for services to be performed at a cost of $27,778.84, and the hospital would have agreed to that amount. Dennis owes the Hospital $523.89, the difference between the reasonable value for the services provided and what he has already paid the hospital."

One of the lawyers who represented the hospital did not provide the Bulletin a comment Tuesday when asked for reaction to Williams’ ruling and whether the ruling has been or will be appealed.

In a phone interview Tuesday, Timothy S. Jost, professor emeritus at Washington and Lee University School of Law, described Williams’ ruling as "a thoughtful decision by an intelligent judge" that may persuade other judges to look at the issue this way. However, it’s not a precedent-setting decision, he added.

Jost said a number of states have prohibited "balance billing" or are adopting regulations to address the issue as provider networks get tighter.

Jost is a consumer liaison representative for the National Association of Insurance Commissioners (NAIC).

The NAIC has developed a model act "because of controversy over the growing use of narrow provider networks by issuers on the Affordable Care Act’s insurance exchanges…, along with concern over enrollee’s receipt of unexpected charges from out-of network practitioners when receiving treatment at in-network facilities (often referred to as ‘surprise bills)," according to a December 2015 NAIC update. The model act will serve as a template to assist federal and state lawmakers and regulators in drafting insurance laws and regulations.

Jost also was critical of charge masters. "Charge masters are just notorious," he said. He added that they often have nothing to do with cost, competitive prices, or what hospitals collect from anybody, but are "just fantasies."

A recent Kaiser Family Foundation survey "finds that among insured, non-elderly adults struggling with medical bill problems, charges from out-of-network providers were a contributing factor about one-third of the time," according to an online news release. "Further, nearly 7 in 10 of individuals with unaffordable out-of-network medical bills did not know the health care provider was not in their plan’s network at the time they received care.

The release added: "‘Surprise medical bill’ is a term commonly used to describe charges arising when an insured individual inadvertently receives care from out-of-network provider. This situation could arise in an emergency when the patient has no ability to select the emergency room, treating physicians, or ambulance providers. Surprise medical bills might also arise when a patient receives planned care from an in-network provider (often, a hospital or ambulatory care facility), but other treating providers brought in to participate in the patient’s care are not in the same network. These can include anesthesiologists, radiologists, pathologists, surgical assistants and others…."

Dennis, of Collinsville, is an assistant vice president at Carter Bank & Trust.

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