Legal challenges to hospital charges are increasing in both number and intensity with plaintiffs’ counsel continuing to file suits against hospitals around the country challenging the very existence and use of chargemasters in patient billing. In many of these cases, the plaintiffs are seeking class action status. In an effort to upend chargemaster billing altogether, plaintiffs argue either that (1) hospital financial contracts, which generally require patients to pay for non-covered services at the hospital’s regular chargemaster rates, do not permit hospitals to charge those rates because patients with government-sponsored or commercial insurance may pay a different amount, or (2) hospital chargemaster rates are inherently unconscionable because the charges are higher than the hospital’s reported costs.
The Emergency Medical Treatment and Active Labor Act (EMTALA) requires hospitals to treat patients who present to the emergency room by first stabilizing the patient’s medical emergency before confirming the patient’s possession of health insurance or ability to pay for the services. Federal and state regulations also require transparency in hospital pricing, including annual submission and/or publication of hospital chargemasters. See, e.g., 42 U.S.C. § 300gg-18.
By signing the conditions of admission form requiring the plaintiff to pay “in accordance with the regular rates and terms of the Hospital,” patients have “consented to pay the facility fee to defendant.” Nolte v. Cedars Sinai Medical Center 236 Cal. App. 4th 1401, 1404-09 (May 21, 2015). The remedy the class action plaintiffs are seeking is to have courts put aside the financial agreements signed by patients and instead decide on a claim-by-claim basis what is reasonable for a hospital to charge for services provided to emergency room patients. As one court put it, plaintiffs seek “judicial intervention in a commercial transaction (for which the legislature has already established a policy favoring price comparison by the patient), whereby judges and juries would be called on to set appropriate prices for hospitals to charge their patients.” Cox v. Athens Regional Medical Center, Inc., 279 Ga. App. 586, 588 (2006).
The theory behind the cases is generally that uninsured patients should reasonably expect to pay what someone with Medicare, Medicaid or commercial insurance would pay. A key gap in that theory is that uninsured patients are not meeting the burdens of coverage such as monthly premiums or qualifying age or disability. The theory also ignores that plaintiffs have access to publicly available charge data to help them make informed decisions about where to seek care.
Plaintiffs also ignore the overlay of federal and state laws that require hospitals to provide charity care to low-income patients making less than 350% of the federal poverty level, ensuring that financially vulnerable patients are protected from charges that they cannot afford. With such safeguards in place, these lawsuits only stand to benefit patients with higher incomes who elected not to secure healthcare coverage, thereby placing the well-off uninsured in a better position than those who obtain insurance without any of the burdens.
In late 2018, an Idaho trial court granted summary judgment to Saint Alphonsus Medical Center, holding that plaintiffs failed to allege a justiciable controversy for declaratory relief because even if plaintiffs successfully obtained a declaration that the hospital may bill only a “reasonable value” of the hospital services provided, the suit would not determine what that “reasonable value” is or what plaintiffs should have been billed. Valencia and Williams v. Saint Alphonsus Medical Center – Nampa, Inc., Case No. CV-2017-6387-C. The Valencia court further held that hospital use of chargemasters is not inherently unconscionable because it is reasonable for a person to agree to pay a hospital’s charges for treatment he or she has received. Likewise, it is fair for a hospital to accept an agreement to pay Chargemaster rates regardless of whether the patient has insurance or may ultimately be eligible for other payment adjustments.
In a similar lawsuit in California that went all the way to trial, Kendall v. Scripps, Case No. 37-2013-00073680-CU-BT-CTL, a jury returned a verdict for the hospital, confirming that the hospital’s standard condition of admission agreement was sufficient to alert patients to its charges, which are publicly available.
Although they have been largely unsuccessful, lawsuits challenging hospital chargemasters continue. Were plaintiffs to be successful, it could cause serious disruption to hospital finance structures and contracting since reimbursement rates are often tied directly or indirectly to chargemaster rates, requiring that hospitals continue to meet chargemaster challenges head-on.
