Truman Medical Center will stop billing practice that refuses to accept health insurance

Truman Medical Center in Kansas City has agreed to stop a billing practice that involves refusing to accept a patient’s health insurance.

The concession is part of a proposed settlement valued at $478,000 to dispose of a lawsuit against the hospital. Truman Medical Center allegedly didn’t file health insurance claims for some patients injured in auto accidents, which allowed it to avoid the deep discounts typically required by health insurers.

It could then seek more money for its medical services, mainly from auto insurance settlements.

In court documents, the hospital said it is ready to stop the billing method and provide some financial relief to more than 180 patients who were subjected to the billing practice. The hospital said it will partly reimburse those who have already paid their bills and seek no further payments from those who haven’t.

In the agreement, the hospital states that going forward it will submit claims to a patient’s health insurer as long as it is told the patient has coverage.

“Yes, we have reached a settlement and we’re happy with it,” said Shane Kovac, a spokesman for Truman Medical Center.

The settlement has an initial cash value of about $178,000. The rest is what the hospital could lose over a specified period in the future by no longer refusing health insurance.

Ralph Phalen, one of the attorneys that filed the lawsuit seeking class action status to stop the practice, said, “We think it’s a very good settlement.”

The settlement, which still needs the approval of a Jackson County Circuit Court judge, comes more than four months after St. Luke’s Hospital settled a similar lawsuit alleging it didn’t accept health insurance from roughly 1,000 patients. It agreed to stop the practice and also offered some financial relief to affected patients. The settlement was valued at $3.5 million.

The St. Luke’s settlement was thought to be one of the first court settlements in the country to put an explicit stop to the billing method. The case covered all of St. Luke’s hospitals in Missouri.

Similar lawsuits are pending against Liberty Hospital and Research Medical Center in the Kansas City area and SSM DePaul in St. Louis.

Research Medical is owned by HCA, and its legal difficulties over the billing practice appear to be deepening. HCA is facing additional lawsuits with allegations of unfair billing practices at its Centerpoint Medical Center in Independence, Swedish Hospital in Colorado and JFK Memorial in Florida.

A spokeswoman for HCA responding to the recently filed lawsuit against Centerpoint said: “This is a very complex issue facing hospitals. At this point, there is active litigation, therefore we do not have a specific update in this matter.”

When hospitals refuse to accept health insurance from auto accident patients and instead collect car insurance settlements, they typically get paid more. That’s because health insurers have arrangements under which they can reduce the hospital’s charges. In health insurance contracts, hospitals agree in advance to the discounted charges to do business with the insurer.

Some hospitals instead seek payment of the nondiscounted bill from a car insurance settlement, usually by filing a lien against patients for any settlement they receive. In some cases, hospitals even go after payment for the full bill directly from patients.

Hospitals tapping auto insurance settlements is not new. In state laws dating back to the Great Depression, when hospitals were struggling because many patients were unable to pay, the hospitals got the right to place liens on injury judgments and settlements. The liens were seen as contributing to the public good by helping hospitals stay open.

But critics say that in recent years, hospitals looking for new sources of money as health care reforms seek to curb costs are using the liens to help maximize revenues. However, no figures are available to show how often bills aren’t submitted to health insurance.

The most public rebuke to the practice occurred in Indiana. With large bipartisan majorities, the legislature approved a bill stopping the practice, and a conservative governor signed the bill.

Critics say the practice puts patients in the middle of disputes over medical bills that they thought would be paid with health insurance.

The Missouri Court of Appeals last year dealt a blow to hospitals refusing health insurance. The appeals court ruled hospitals don’t have unfettered rights to use the liens to collect a higher bill. Instead, if a hospital was required to submit the health insurance claim, then it needed to do so and accept the discounts.

In its agreement, Truman Medical Center agreed not to file liens to collect from auto insurance settlements.

This story was originally published September 18, 2014 at 11:15 AM with the headline "Truman Medical Center will stop billing practice that refuses to accept health insurance."