Ms. French vs Hospital Chargemaster

HOSPITAL: Our chargemaster says you owe us $229,112.13!

PATIENT: But you told me I owed only $1,300! What’s a chargemaster?

HOSPITAL: We make up absurd pricing so we can “negotiate” discounts with insurance companies like Blue Cross, United and all the rest. You’re not an insurance company. Besides, what’s a few extra bucks! Pay up!

PATIENT: What’s the 13 cents for?

Story Line: Hospital sues patient for the difference between what her employer’s Reference Based Pricing plan paid (“The sums paid provided Centura with a profit margin of about 5.5 percent”) and billed charges. Patient loses, must pay hospital. Patient appeals to the Colorado Supreme Court and wins. Reference Based Pricing plans across the country rejoice as this set’s precedent.

Excerpts from the appellate court ruling:

Thereafter, and notwithstanding the fact that Centura had told French that her surgeries would cost $57,601.77 and that she would personally be responsible for $1,336.90 of that amount, Centura billed French $229,112.13, reflecting its full chargemaster rates. Centura did so because it determined that it had misread French’s insurance card and that she was, in fact, an out-of-network patient. Centura calculated the amount due after subtracting from the total charges the payment from French’s insurer of $73,597.35 and French’s payment of $1,000.00 (thus, the total amount that Centura charged was over $300,000.00, notwithstanding its pre-procedure estimate that the surgeries would cost $57,601.77).

The case proceeded, and during discovery, French requested that Centura produce the chargemaster that applied on the dates of service for the medical care provided. Centura, however, objected to producing its chargemaster, stating that the chargemaster was “voluminous, proprietary and a trade secret.”

In addition, an expert witness for French testified that he had estimated the actual cost of the medical services provided to French to be $70,500.00 and that Centura’s charges for the goods and services at issue greatly exceeded their reasonable value and were thus unreasonable. This witness further opined that the amount that French and her insurer had paid (i.e., approximately $74,000.00) was close to the reasonable value of the services that French had received and that the sums paid provided Centura with a profit margin of about 5.5 percent.

Moreover, as courts and commentators have observed, hospital chargemasters have become increasingly arbitrary and, over time, have lost any direct connection to hospitals’ actual costs, reflecting, instead, inflated rates set to produce a targeted amount of profit for the hospitals after factoring in discounts negotiated with private and governmental insurers.

Centura has conceded that she would not have been able to understand or interpret the chargemaster’s over 50,000 codes, and thus, access to the chargemaster would not have established mutual assent to any of the rates contained therein. And Centura does not explain how French’s reliance on the foregoing statutes would have altered its position throughout this litigation that its chargemaster was proprietary and a trade secret and would not have been provided to French.

CLASS READING ASSIGNMENT FOR TODAY (not intended to replace or diminish Aldeen’s Sunday Morning Bathroom Read weekly series):

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Chargemaster Maintenance Ensures Financial Viability for Hospitals

Hospitals Dismiss Significance Of Chargemaster Prices?

Study: Chargemasters still drive up revenue at US hospitals

Hospitals Dismiss Significance Of Chargemaster Prices?

Hospital Addresses Chargemaster Rates In Response To Time Magazine Story

Ms. French Wins Hospital Lawsuit

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How Nonprofit Hospitals Get Away With The Biggest Rip Off In America

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Nonprofit Hospitals Are Biggest Rip Off In America