Taking a Greedy Hospital to Court

I have been saying for years that healthcare reform will require some far-reaching legal decisions.

Here is a relevant true story, brilliantly documented by Dan Weissman in his podcast An Arm and a Leg for April 13, 2023.

The story begins with a patient whose doctor recommended a complex back surgery, in order to keep her spine stable.

She asked the hospital – well in advance – what this was going to cost her, out of pocket.

They ran her insurance and told her: “Your end is going to be one thousand, three hundred thirty-six dollars, and ninety cents.”

She had the surgery, and it went fine. The hospital received over $74,000 from Lisa’s insurer.

The Hospital Wants More

But the hospital decided that this wasn’t enough. They decided they wanted their full sticker price: $303,000. So they billed Lisa French for the rest: $279,000.

And when they didn’t get it, they sued her.

A trial jury in a lower court first decided she owed the hospital only $766.54.

Of course the greedy hospital did not take that lying down. They appealed the outcome– and won!

But with a persistent attorney, the case finally ended up in front of the Colorado Supreme Court.

In one remarkable exchange, her attorney asked the hospital representative to confirm what the hospital charged for 13 pieces of hardware in the surgery – $197,000.

He then asked: “What did the hospital pay for these 13 pieces ?” The answer: $31,000.

The Supreme Court ruled against the hospital, unanimously.

Specifically, they ruled that the ‘chargemaster’ amount– $303,000– had not been “incorporated by reference” into the admission forms which Lisa French had signed. She did not know those chargemaster list prices even existed. How could she agree to pay them?

In a better future, patients should not need to take balance billings to their state Supreme Court.

Some legal scholars say that patients should already be protected against unconscionable markups, under long-standing conventions of contract law.

Many states require written estimates for a range of services before the work is done—whether by mechanics and plumbers or by lawyers and financial planners.

Greedy hospitals have argued that signed admission forms – which include a promise to pay – constitute mutual assent, even if there is no price disclosed.

This complexity—plus the cost of hiring an attorney—has made legal challenges to medical bills on the basis of contract law relatively scarce.

It should be much, much easier to challenge and deny medical price-gouging. In my recent article, “The War On Medical Debt,” I recommend allowing patients to challenge their medical bills in new ‘Health Courts.’

The Health Courts would be staffed by ex-physicians and active judges. All court costs including salaries will be paid by the government, and the patient will not need an attorney. We already have many kinds of specialty courts in America – drug courts, juvenile courts, probate courts, family courts, traffic courts, veterans courts, just to name a few.

If greedy hospitals and other providers are forced to go to court to justify their charges on a systematic basis, pricing sanity may eventually prevail. The grotesque markups by hospitals would be greatly reduced.