Texas Court Orders Hospital to Disclose Reimbursement Rates

The Texas Supreme Court has ruled that a hospital in Cypress, Texas, must disclose its negotiated reimbursement rates with public and commercial health plans as part of the discovery process in a suit filed by an uninsured former patient………………

Article referred by Korb Matosich, Asserta Health

Chargemaster ‘Unreliable’: Top Texas Court Orders Hospital to Disclose Reimbursement

John Commins, April 30, 2018

North Cypress Medical Center’s latest appeal is rejected and the hospital must obey a trial court’s order that it provide details on its negotiated rates with payers as part of a civil suit.  

The Texas Supreme Court has ruled that a hospital in Cypress, Texas, must disclose its negotiated reimbursement rates with public and commercial health plans as part of the discovery process in a suit filed by an uninsured former patient.

In a writ of mandamus appeal, North Cypress Medical Center had asked the high court to strike down a trial court’s ruling that the hospital disclose all contracts for reduced rates with payers, including Aetna, United Healthcare, Blue Cross Blue Shield, Medicaid and Medicare.

North Cypress had argued that the negotiated rates were irrelevant in determining if the charges to an uninsured patient were reasonable, and that the trial court had abused its discretion.

“We disagree,” Justice Debra H. Lehrmann wrote for the majority in the 6-3 ruling.

“The reimbursement rates sought, taken together, reflect the amounts the hospital is willing to accept from the vast majority of its patients as payment in full for such services. While not dispositive, such amounts are at least relevant to what constitutes a reasonable charge,” Lehrmann wrote.

The background

The case centers on a lawsuit filed against North Cypress by Crystal Roberts, an uninsured woman who was injured in a car wreck in June 2015.

Roberts was taken by ambulance to North Cypress’s emergency department, where she spent three hours undergoing X-rays, a CT scan, and lab tests. She was charged $11,037.35 for the care and the hospital applied a hospital lien for the amount, based on the understanding that the other driver was at fault in the crash, and that Roberts would be compensated.

The at-fault driver’s insurance company offered to settle for $17,380, of which $9,404 was attributed for medical expense. Roberts tried to negotiate the bill to $3,500. North Cypress countered at $8,278.31. Roberts countered at $6,269.33. North Cypress rejected the offer and Roberts filed suit, claiming the charges were unreasonable and that the lien was invalid.

As part of the discovery process, the trial court granted Roberts’ attorney’s request for all contracts that North Cypress had negotiated with commercial and public payers, along with annual cost reports to Medicare, and Medicare and Medicaid reimbursement rates for the ER services that Roberts received.


The trial court and an appeals court rejected North Cypress’s argument that it would “suffer irreparable harm” from the disclosure of “confidential and proprietary” negotiated insurance contracts. North Cypress appealed the ruling to the Texas Supreme Court.

Chargemaster ‘arbitrary, unreliable’

In her ruling, Lehrmann wrote that a review of the contracts with payers was necessary because the “increasingly arbitrary nature of chargemaster prices makes it an unreliable source when determining if hospital pricing is reasonable.”

“Because of the way chargemaster pricing has evolved, the charges themselves are not dispositive of what is reasonable, irrespective of whether the patient being charged has insurance,” Lehrmann wrote.

“Yet hospitals have incentive to continue raising chargemaster prices because of the positive correlation between those prices and hospital revenue.”

While acknowledging that “government-payer reimbursement rates are not necessarily a perfect comparator in evaluating the reasonableness of a provider’s charges,” Lehrmann wrote that “the fact that explanations exist for disparate reimbursement rates does not render them wholly immaterial.”

“Considered together, reimbursements from insurers and government payers comprise the bulk of a hospital’s income for services rendered. It defies logic to conclude that those payments have nothing to do with the reasonableness of charges to the small number of patients who pay directly,” she wrote.

Lehrmann also rejected North Cypress’s concerns about confidentiality. “Nothing in the record indicates that the trial court is unwilling to issue a protective order if North Cypress requests and demonstrates entitlement,” she wrote.

In dissent

In a biting dissent, Chief Justice Nathan L. Hecht, noted that the resources of the state’s highest court were being used to weigh in on a civil dispute over $2,000 to $5,000 dollars.

Hecht said that a hospital is free to offer reduced charges to uninsured patients “but it is not required to do so.”

“There is no demonstrated relationship between reimbursement rates and prices regularly charged to uninsured patients,” Hecht wrote. “It is unreasonable to limit a hospital to charging an uninsured patient insurer-negotiated reimbursement rates. The patient cannot confer on the hospital benefits of a predictable volume of business or ease of payment as an insurer can.”

“The benefit of an insurer’s discounted rate belongs to the insurer, not the insured,” he wrote. “It certainly does not belong to an uninsured patient. Nor can reimbursement rates, which vary from insurer to insurer, be used to determine reasonable charges for uninsured patients.”

John Commins

John Commins is a senior editor at HealthLeaders Media.