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WRMC, St. Mary's sued over uninsured billing.

THE LARGEST HOSPITALS IN northwest Arkansas are fighting the same fight facing hospitals in Little Rock and other markets around the country: Uninsured patients want the same pricing as those that have insurance coverage.

Don Elliott of Odom & Elliott P.A. in Fayetteville filed separate class-action lawsuits earlier this year against Washington Regional Medical Center in Fayetteville and St. Mary's-Rogers Memorial Hospital over uninsured billing practices.

"We're not asking that they get their services for free," Elliott said. "We are just asking that they be charged reasonable rates which would be in line with what they charge Medicare, Medicaid and insurance companies."

Two other lawyers are assisting Elliott with the case: Thomas P. Thrash of Little Rock and Charles Barrett of Nashville, Tenn.

The plaintiffs in the St. Mary's suit, which was filed on Jan. 20 in Benton County Circuit Court, are Melissa Bennett, Richard Kevin Harrison and Anthony Marston. A motion to dismiss that case was denied on June 24 by Judge Xollie Duncan.

The plaintiff's in the WRMC case, which was filed on Feb. 14 in Washington County Circuit Court, are Brian McMaster, Natalie Roller, Carol Young and Ellen Moore. A motion to dismiss that case was denied on July 8 by Judge Kim Smith.

The suits, which could potentially involve hundreds of former patients, claim uninsured patients at both institutions were charged rates "significantly higher than the rates charged to its insured patients or patients covered by Medicare or Medicaid."

The suits claims fees and supplies are billed at inflated rates that do not bear a connection to the actual cost of providing the service.

WRMC and St. Mary's are in good company. The issue of uninsured billing has gained an increased spotlight in 22 states. In Little Rock, both Baptist Health and St. Vincent Health System have been hit with similar complaints.

On Aug. 11, a judge approved an agreement by Tenet Healthcare Corp. of Santa Barbara, Calif., to settle a class-action suit accusing its hospitals of overcharging uninsured or underinsured patients. That settlement was for a for-profit institution. The recent wave of lawsuits targets nonprofit hospitals.

There have been roughly 79 cases filed in federal court during the last year related to uninsured billing practices, but 40 were dismissed, said Alicia Mitchell, a spokeswoman for the American Hospital Association.

In addition to the 40 court-ordered dismissals, 22 cases were voluntarily dismissed, she said. There are 10 cases remaining in federal court.

Mitchell said about 110 cases have been filed in state courts, and there have already been five dismissals for lack of merit.

Mitchell said this kind of lawsuit is a relatively new trend that has only gained momentum in the last year or so.

Thomas Thrash, a partner with The Thrash Law Firm in Little Rock, said he's convinced the local suits have merit.

"You just can't cheat the poor people and get away with it," Thrash said.

Thrash said plaintiff's attorneys are working with a group led by Richard Scruggs of Oxford, Miss., and Charles Barrett's father, Don Barrett of Lexington, Miss. The Scruggs law firm has won billion-dollar judgments in tobacco and asbestos cases.

The Right Wronged

Scruggs and Don Barrett are involved in many of the uninsured lawsuits nationwide. The legal question in all of the recent cases remains what is "fair and reasonable" to charge uninsured patients.

"The law says (hospitals) have to charge a fair and reasonable charge," Thrash said. "They aggressively pursue these hospital bills, forcing these individuals into bankruptcy."

At this point, none of the more than 100 state cases filed has been decided, Thrash said, and none has gone to jury trial.

If the northwest Arkansas cases go to trial, Elliot said, it probably won't be until well into 2006.

Burke & Olmstead in Fayetteville and Warner Smith & Harris PLC of Fort Smith are representing WRMC. Conner & Winters LLP of Fayetteville is representing St. Mary's.

Both cases are in the discovery phase, where each hospital has to answer, or work to not answer, the plaintiff's questions.

"WRMC denies that it has engaged in any unlawful billing or collection practices," said Linda Wagner, a spokeswoman for WRMC. "With respect to the class-action lawsuit filed against WRMC and numerous other nonprofit hospitals across the country, WRMC intends to vigorously defend itself."

When asked to explain its billing practices, Wagner went into more detail.

"Washington Regional's charges are the same regardless of who pays the bill; however, we do not always get paid the same," Wagner said. "Medicare and Medicaid establish what our payment should be for services rendered to their population. We negotiate discounts with other private carriers and employers."

If a patient does not qualify for Medicaid, then WRMC offers a "prompt pay" discount of 25 percent off the estimated charges. If a patient still cannot pay, WRMC uses a sliding scale to determine what portion of the patient care it will write off and how much it will hold the patient responsible for. St. Mary's uses a similar system, offering free and discounted care based on ability to pay.

WRMC has seven full-time employees dedicated to financial assistance counseling. St. Mary's has two.

"St. Mary's does not deny care because a patient cannot pay, as is evidenced by the millions of dollars in charity and uncompensated care we provide each year," said Jake Matig, a public relations coordinator for Mercy Health System of Northwest Arkansas Inc.

In its filed response to the suit, WRMC said "negotiated discounts are applied to the standard prices based on a third party payer's contract with WRMC. The fact that the plaintiffs did not negotiate discounts with WRMC does not mean WRMC standard charges are, as plaintiffs allege, 'grossly inflated.'"

WRMC's attorney Robert Frazier of Warner Smith & Harris referred to a dismissed case partially based on state law from the U.S. District Court for the Eastern District of Michigan. Frazier said in reply to the plaintiff's memo that the claims in the Michigan case mirror part of his client's case.

"Plaintiffs participation in the nationwide attack on charity care at the not-for-profit hospitals with two-tiered rate structure is an attempt to correct a perceived social shortfall," the Michigan dismissal concluded.

Frazier said the case seeks to "shoehorn a public policy problem into a laundry list of state law legal theories."

WRMC wrote off $10.4 million in charity care in 2004, which was a 22.4 percent increase from $8.5 million in 2003. St. Mary's charity care billing has increased by 31 percent from $10.6 million in 2003 to $13.9 million in 2004.

Washington Regional uses Diversified Credit Services Inc. as a collection agency on unpaid bills. When asked about this practice, WRMC said "as is the case with virtually every other hospital in the country, account collection services are a necessity." St. Mary's also uses a bill collection service.

Thrash said that the uninsured make up only 3-4 percent of a hospital's total billings.

"It is what we are seeing across the board," Thrash said.

"Hospitals have a strong commitment to the uninsured," Mitchell said.

U.S. hospitals provided more than $25 billion in uncompensated care in 2003, and the ranks of the uninsured have grown by 10 million people in the last 10 years, she said.

Mitchell said the Census Bureau was expected to release new estimates for the uninsured in late August.

Just a Bill

The National Coalition on Health Care estimated that 45 million, or 15.6 percent, of Americans didn't have health insurance in 2003. Arkansas falls slightly above that average at 17 percent, the Arkansas Hospital Association reported.

Of that percentage, 74 percent of the uninsured in the state have full time jobs and 60 percent are minorities. Statewide, the number of uninsured patients admitted to community hospitals jumped 69 percent from 17,815 in 2000 to 30,063 in 2003. Uninsured patients accrued hospital charges of $151 million in 2000. That figure leapt 134 percent to $354 million in 2003.

Nationwide, Arkansas also has the second-lowest number of employers offering health insurance coverage as a health benefit, the AHA reported.

The Arkansas Center for Health Statistics estimates there are more than 52,000 uninsured people in Benton and Washington counties alone.

"I would say at least 70 percent of the bankruptcies I do per year are related to an abundance of medical bills (clients) are unable to pay," said Robert Teague, a lawyer with Boyer Schrantz Rhoades & Teague in Rogers.

Teague said the scenario he sees most is an unpaid medical bill due to a catastrophic event, such as a heart attack.

And in those cases, he said, medical bills can exceed $50,000 to $100,000.

And it's a snowball effect.

"Sometimes I have folks who have high credit card debt," Teague said. "A lot of times it's because they've taken out credit cards to pay the collection agency to hold off the lawsuits."

Teague said he sees inconsistencies with the collection agencies themselves.

"The primary concern I have is that they allow people to make payments for a period of time and then (the debtor) will just get a notice that the payment schedule is being terminated and the balance is due."

Attorney John Blair said he has been doing bankruptcy law work in Fayetteville for 23 years, and things have changed.

"Twenty-three years ago, there were very few bankruptcies in northwest Arkansas," Blair said. "I don't think we had 300 per year. Now we are at 2,000 per year."

Blair said almost every bankruptcy he saw back then was a Chapter 7 filing, which usually leads to total liquidation. Now, he said, the filings have been split evenly between Chapter 7 and Chapter 13, in which the bankrupt person promises to repay as many debtors as possible.

"There are very few business-related bankruptcies," Blair said.

Blair thinks two factors have caused the boom: credit card companies and increased medical expenses.

"A lot of folks are overextended," Blair said. "They are not looking at their total debt. They are living paycheck to paycheck."

Blair also said personal income isn't increasing at the same rate as medical costs.

"For a person who went through childbirth 10 years ago, insurance picked up $2,500 of a $3,000 bill. Now the cost is two or three times as much. It's been a ripple effect."

Laura Bruegge

lbruegge@nwabj.com
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Author:Bruegge, Laura
Publication:Arkansas Business
Date:Aug 29, 2005
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