A potential legislative fix is in the works to keep Missouri hospitals from refusing a patient’s health insurance in hopes of collecting a bigger check from an injury settlement.
By STEVE EVERLY
The Kansas City Star
Rob Schaaf, a Republican state senator who represents Buchanan and Platte counties, has filed a bill in the Missouri Senate that would ban the practice, which targets victims of auto accidents.
Some hospitals in the state, including some in Kansas City, have used the practice, and it has been the subject of lawsuits. It has also been used elsewhere around the country, and one state, Indiana, has prohibited it.
By refusing an auto accident victim’s health insurance, hospitals avoid the discounted payments for care they have agreed to with health insurers.
Instead of accepting the reduced payments, the hospitals go after money a person injured in a vehicle accident might get from an auto insurance settlement. Hospitals get the money by attaching a lien on the settlement.
Sometimes, hospitals have demanded payment directly from patients before a car insurance settlement is in hand.
“It’s outrageous, that’s what it is,” Schaaf said of the practice.
Schaaf, a physician and chairman of a company that provides malpractice insurance to Missouri doctors, said he decided to file the legislation after The Kansas City Star reported last year that some Missouri hospitals acknowledged they did not accept health insurance for some auto accident victims. They said the practice was legal under state law.
The article noted that lawsuits seeking class-action status had been filed against St. Luke’s Hospital and Research Medical Center in Kansas City and SSM DePaul Health Center in St. Louis. Those suits contend the contracts the hospitals have with health insurers require them to file for the insurance payments. In legal filings, the hospitals have said they can refuse the health insurance.
Schaaf’s bill, if enacted, would explicitly ban the practice of not accepting health insurance as long as the patient submitted proof of coverage within 30 days of being discharged. The only expenses that could be recovered from any future financial settlement would be for services not covered by health insurance or money owed by the patient, such as the deductible.
Schaaf didn’t offer an opinion of the prospects for the legislation (SB611) being approved.
“We’ll wait and see. I do think it would be a good thing,” Schaaf said.
The legislation comes as Liberty Hospital and Truman Medical Centers find themselves also facing lawsuits over the practice. The cases involve patients injured in auto accidents and liens that were filed to collect from liability settlements from auto insurers.
Bill Colby, Truman Medical Centers’ general counsel, said in a statement that the hospital provided $130 million in uncompensated care in 2013 and “accordingly we work hard to maximize all avenues of revenue, including at times proceeding against third-party recovery after an automobile accident.”
“We directly follow Missouri law whenever we take that approach,” he said.
Dan Williams, vice president of finance at Liberty Hospital, said the hospital bills the health insurer and files a lien against any settlement to ensure it will be paid. An outside firm decides if the health or auto insurance is the primary payer. If the auto insurance is the primary, the hospital doesn’t discount the bill if it doesn’t have an agreement with the insurer to do so.
“In the business world, that’s not how it’s done,” he said.
The suit filed against Liberty Hospital claims the health insurance was not submitted.
The hospital, which was formed in 1970 as the New Liberty Hospital District as a political subdivision of Missouri, is seeking to have the case dismissed claiming “sovereign immunity,” which restricts lawsuits that can be filed against government entities.
Auto insurance settlements can indeed help pay the hospital bill in many instances, but critics say the cost without the health insurer discount can take an outsize chunk from a pot of money that is also used to cover other expenses, such as lost wages, attorney fees and replacement vehicles.
Auto insurance policies also have limits on how much they will pay in a settlement. In some cases in other states, hospitals have submitted bills worth more than the settlement.
No figures are available to show how often hospitals bills aren’t submitted to health insurance. But the practice is thought to be growing as hospitals look for new sources of revenue.
In state laws dating back to the Great Depression, hospitals got the right to place liens on injury judgments and settlements. The liens were seen as contributing to the public good by helping the hospitals stay open and treat patients.
But critics say in recent years that the liens have morphed into a tool to help maximize revenues.
In the Missouri lawsuit filed last year against St. Luke’s, the hospital argued in Jackson County Circuit Court that the state’s liens law gave it wide authority to collect the bill from a financial settlement instead of accepting the patient’s health insurance. It rejected arguments that it was unjustly enriching itself by seeking to recover the medical bill without the discounts.
The judge agreed, handing St. Luke’s a victory.
The patient appealed her case to the Missouri Court of Appeals. It ruled the hospital didn’t have unfettered rights to use the liens to collect a higher bill. Instead, the case hinged solely on whether the hospital was required to submit the health insurance and accept the discounts that satisfied the debt.
The case was sent back to Jackson County Circuit Court to determine if the hospital’s contract with the health insurer did require a claim to be filed. It is still pending.
St. Luke’s had earlier gotten a Kansas case dismissed, and no other lawsuits are known to have been filed in the state. The Kansas Legislature has also not taken up the issue.
In some other states, the practice has suffered legal setbacks dating to the late 1990s. The most public rebuke to the practice occurred in Indiana. Hospitals there were either not filing insurance or filing it and then using liens against auto insurance settlements to recover the part of the bill lost to the discounts. A new law went into effect last year banning the practice.
To reach Steve Everly, call 816-234-4455 or send email to email@example.com