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The legality of pricing disparity between insured and uninsured patients is decided on a state-by-state basis. Be aware that differential billing policies can violate state consumer protection statutes.
David J. Goldberg, M.D., J.D.Dr. Cost has a large dermatology practice in an urban Midwestern community that over the last two years, despite the Affordable Care Act, has seen an increased number of people without health insurance. Thankfully for Dr. Cost, this situation has had no impact on his busy predominantly medical dermatology practice. What he has noted is that uninsured patients may wait longer to come to the physician, but they eventually do show up.
In fact, these uninsured patients have presented him with a unique economic opportunity: Dr. Cost charges his uninsured patients double what he bills to contracted managed-care insured patients. The local economic deterioration has created a boom for the bottom line of his practice. Not only does he charge these patients more, but he also aggressively pursues them with collection agencies if they fail to pay.
Dr. Cost thinks of himself as a quality physician and a smart business man. Much to Dr. Cost’s surprise, such an uninsured patient sues him over this dual pricing scheme. Can Dr. Cost charge higher fees for the uninsured as compared to the insured?
In recent years, the United States has seen countless stories like Dr. Cost’s, in regard to charges by physicians as well as charges at hospitals.
Uninsured patients make up an ever increasing number of lower and middle income classes of Americans. Although patients with private or governmental insurance receive huge discounts for medical care, uninsured patients pay higher prices for the same medical care.
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Apparently this pricing disparity has gone on for years, but only recently has been brought to the attention of the American public. In a report from 2004, it was estimated that uninsured patients were charged 2.5 times more than a patient covered by one or more of the major insurance companies. The disparity is further accentuated by the fact that these inflated charges are not a voluntarily assumed debt, but rather, one that often cannot be avoided by the patient.
It is common knowledge that both not-for-profit and for-profit hospitals across the U.S. have policies of charging uninsured patients more than insured ones. Some physicians like Dr. Cost, aware of this fact, have done the same. However, over the last several years uninsured patients have increasingly sued hospitals for such policies. The claims have been based on several theories, one of them being that such differential billing policies violate state consumer protection statutes. Such lawsuits are based on the theory that uninsured patients have been subject to discrimination. The success of these claims depends on the state statutes where the litigation has been filed.
In Morrell v. Wellstar Health System, a patient argued that the hospital violated the Georgia Uniform Deceptive Trade Practices Act because it charged unreasonable rates and charged the uninsured higher rates than insured patients. The Georgia statute at issue prohibited fraudulent misrepresentation, false advertising, or false and misleading statements. The court found nothing illegal about the hospital’s policies because the hospital made patients aware of its fees. Despite this, and other similar decisions, some uninsured patients have been successful in their consumer protection claims.
In Servedio v. Our Lady of the Resurrection Medical Center, a lawsuit was brought by several uninsured patients who owed the hospital more than $60,000. None of the patients were able to pay for their medical services and the hospital vigorously tried to collect the debt, even bringing a lawsuit against one of the patients. The patients claimed they were charged inflated rates-double and triple what an insured patient would pay. They were not considered for charity care, and excessive collection methods were used in collecting their debt. In fact, Resurrection Medical Center had the highest charge-to-cost ratio of any Chicago hospital. The Illinois court ruled that medical services sold by a hospital were a form of trade or commerce, and that the hospital’s conduct was immoral, unethical, oppressive, and clearly against public policy.
Litigation entitled In re. Sutter Health Uninsured Pricing Cases involved a group of uninsured patients at a California hospital who alleged that they were charged unreasonable rates compared to the rates charged to insured patients. The California Supreme Court noted that under the California Unfair Competition Law, any “unlawful, unfair, or fraudulent business act or practice” was a violation. Ultimately Sutter agreed to a policy that provided discounts to uninsured patients.
Whether Dr. Cost loses his lawsuit will be determined by his state statutes on unfair practices. He will likely need advice from a health law attorney.