Author: Andrew Williams
Editor: Ariel Gozzip
How many of you reading this have had this experience: you get a settlement demand with hundreds of thousands of dollars in claimed hospital bills, but the actual amount owed by the claimant is redacted, or you are told by the claimant’s attorney you just have to pay the full amount of the medical bills? If you manage Washington claims, this may sound familiar. Despair not; it is not true. The fight continues, and the federal hospital price transparency rules give us a powerful tool to push back.
The Reality of Medical Billing in the United States and Washington State
The reality in the United States is that medical billing rates are set by a complex web of contractual and statutory requirements between insurers and other payors for a medical provider’s services. Although reimbursement rates may vary from payor to payor for the same service, the patients receiving such services rarely pay the full stated amount of the bills because the various payors negotiate or legislate reimbursement rates. Instead, patients are only obligated to pay the amounts agreed to pursuant to contractual or statutory reimbursement rates. The remainder of the charges are either paid for by the patient’s insurer, who usually retains a right of subrogation, or are written off contractually by the medical provider.
In Washington, the State’s Office of Financial Management’s data indicates only 4.7% of Washingtonians are uninsured.[1] What this means is that more than 19 out of 20 Washington residents never pay the full gross charges reflected on a hospital’s chargemaster. Yet, despite more than 95% of Washingtonians never having to pay anything beyond the agreed reimbursement rates, the plaintiffs’ bar has been very successful in convincing courts to exclude evidence of what was actually payment in full. This often results in large windfalls to plaintiffs and their attorneys. It is no wonder the plaintiffs’ bar likes it – who does not like free money?
Washington Law on Reasonable Medical Bills
In Washington, plaintiffs are allowed to ask for the reasonable value of necessary medical care, treatment, and services received to the present time.[2] As the court in Hayes v. Wieber Enterprises indicated, “The amount actually billed or paid is not itself determinative. The question is whether the sums requested for medical services are reasonable.” [3] Generally, expert testimony will be necessary to establish the reasonableness and necessity of medical expenses.[4] In Washington State, the law has never been that the defense cannot fight the reasonable value of medical bills. Instead, the question the defense must ask is what a reasonable amount is, and more importantly, what evidence will courts allow the jury to consider in determining the amount of reasonable medical bills.
What Can a Defendant Do to Fight Unreasonable Billings?
The plaintiffs’ bar would like you to think anyone with medical training is automatically qualified as an expert to opine on the cost of medical care. Nothing is further from the truth. I can’t tell you how many physicians have testified in depositions or trial that they have absolutely nothing to do with their office’s billing practice. Object to their testimony at trial and request to voir dire the witness on the foundation for their testimony, if you think it will help. However, if the witness is allowed to testify, you will need a backup plan.
The plaintiffs’ bar is usually okay with you calling your own medical expert to testify about reasonable medical billings. This is because, unless the bills are truly outrageous, it has been my experience that my own medical expert will agree the full amount of the bills are reasonable. Even if your doctor is willing to go “behind the curtain” and talk about what the medical providers actually get paid versus what they billed, it is nearly impossible to do so in Washington. This is because of the collateral source rule and the limited evidence courts think is relevant to prove bills are unreasonable.
In Washington, the courts have applied the collateral source rule to exclude evidence of payments, the origin of which is independent of the tortfeasor.[5] The collateral source rule has been expanded over the years to include payments made by Medicare as well as other sources including workers compensation and social security benefits.[6] Further, Washington courts have barred testimony from a physician that he accepted a first party insurer’s carrier limit for his services because it did not tend to prove his charge for his services was unreasonable.[7] Even defense billing experts have been excluded from testifying on the comparison between a plaintiff’s medical expenses and Medicare reimbursement rates. This was because the court determined that evidence that, on average, a procedure costs less than the amount charged or that plaintiff’s physicians accepted a lesser payment for services from Medicare was not helpful to the jury in determining whether her medical expenses were reasonable. [8] The bottom line is that attempts at introducing evidence on the “paid versus incurred” medical billing issue or which mentions insurance, Medicare or any other payor, is likely to be excluded by the courts in Washington.
The Hospital Price Transparency Rules
Fortunately, the federal government has enacted regulations to require Hospital Price Transparency. [9] The purpose of the law was to make it easier for consumers to shop and compare prices across hospitals and estimate the cost of care before going to the hospital. Effective January 1, 2021, most institutions in the United States that are licensed as hospitals or otherwise approved as meeting applicable licensing requirements must post their standard charges prominently on a publicly available website. Hospitals are required to post a machine-readable file containing the following standard charges for all items and services provided by the hospital: gross charges, discounted cash prices, payor-specific negotiated charges, and de-identified minimum and maximum negotiated charges.[10] These terms are all defined by federal law. Significantly, the term “discounted cash price” means the charge that applies to an individual who pays cash (or cash equivalent) for a hospital item or service. [11] These cash discounts can be quite substantial. For example, the cash price at a Pierce County, Washington hospital for an MRI of the brain without contrast was $1,699.41, and the full price was $4,248.52. For more intrusive procedures the savings is even larger. For example, at the same hospital, a spinal fusion with complications cost $113,122.55 for a person who pays cash, whereas the gross charge was $282,806.37.
Because these charges apply by statutory definition to anyone who pays cash, there is no need to get into the convoluted problems of insurance, subrogation, or collateral source. This is even more applicable for a patient whose bills were written off or whose care was handled on a lien. The issue for the court would then be whether the amounts that the hospital reports to the public in compliance with federal regulations would be helpful to the trier of fact in determining the reasonable costs of medical care. It would be very hard for the plaintiffs’ bar to say it is not relevant.
The potential applicability of the data is quite broad. In its most direct application, the charges from a specific hospital’s care for a specific claimant’s treatment can be analyzed directly. In addition, the charges for future treatment recommended by a claimant’s physicians and life care planners can be estimated and compared to the cash price for the services. In the broadest applications, the care from facilities not covered by the rules can be compared to the same services when provided at one or more local hospitals that do have to publish the data. Further, because it is a federal regulation, it is national in scope, and each jurisdiction will have to review its potential applicability.
Without a doubt, the plaintiff’s bar will come up with clever ways to continue to continue to get free money from hiding the truth about medical billing from the jury, but rest assured we will continue to fight those attempts.
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