Mississippi hospital agrees to lower charges for uninsured patients

Patients without insurance will pay rates based on Medicare charges and on their income.

By Tanya Albert amednews correspondent — Posted Aug. 23, 2004

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Lawyers who sued hundreds of nonprofit hospitals this summer for the way they bill uninsured patients painted their first settlement as a model for ensuring affordable care for people without coverage. But the hospital industry criticized the deal.

The agreement restructures billing practices at North Mississippi Health Services so that uninsured patients get a break in prices.

"People who are uninsured up to 400% of the federal poverty level would greatly benefit from this," said Richard Scruggs, the lead attorney who hashed out the settlement. "I'm not saying it's an absolute solution [to the uninsured patient issue], but it goes a long, long way."

Hospitals across the country have come under legal fire for the prices they charge uninsured patients and for aggressive bill-collection tactics, such as garnishing wages, against people unable to pay for their care. The proposed class-action lawsuits allege that nonprofit hospitals receiving tax breaks have a requirement to serve uninsured patients.

North Mississippi Health Services, which has 650 beds and more than $1 billion in annual billings, was not among the facilities sued. The hospital system agreed to the settlement to avoid the distraction and cost of a potential suit, said its CEO, John Heer.

Under the deal, uninsured patients who were being charged higher rates than those with private insurance or Medicare will now pay rates based on the hospital's Medicare charges. The lower an uninsured person's income, the less he or she would be charged.

Scruggs said he sees the agreement as an example other hospitals could follow to resolve the lawsuits he's brought against them.

"We view this as a win-win for everyone," he said. "If these guys can do it, it's going to be difficult for the [American Hospital Assn.] to say it's not good for the whole system."

But the AHA did not endorse the settlement. Its president, Dick Davidson, said the agreement had no bearing on the lawsuits brought against the association or hospitals.

"We, as well as the hospitals, intend to fight his baseless charges vigorously because they will divert resources hospitals need to care for their communities," Davidson said in a statement. "It is not clear why a hospital that had not been sued has reached a settlement. What is clear is that the people of America's hospitals will continue to provide care to all who come to them in need, regardless of ability to pay."

Free care and discounts offered

The settlement has been filed in the U.S. District Court for the Northern District of Mississippi and awaits a judge's approval. Under it, North Mississippi Health Care Services will give free care to patients making up to 200% of the federal poverty level. It also agreed to discounted prices, which range from 50% of the Medicare rate for people earning between 201% and 250% of the federal poverty level to 85% of the Medicare rate for those making between 301% and 350% of the poverty level.

In addition, the hospital agreed that it would not try to collect more than 10% of someone's income in a given year to recoup medical bills.

"After reviewing the proposed settlement, there seemed to be little reason to pursue lengthy litigation of the issue, since the proposed discounts were very reasonable," Heer said.

The agreement is expected to save patients more than $150 million. That number includes debt relief to uninsured patients the hospital billed over the past three years and future savings to patients over the next seven years. Uninsured patients who paid bills over the past three years that were higher than what they would be charged now under the settlement are eligible to apply for rebates.

"While [the money] means little to the hospital, it means an enormous amount to the patient to not be hounded for billing," Scruggs said. If the discounted fees ultimately hurt the hospital's financial stability, it could go back to the court and ask to restructure the discounts, he said.

Lawyers' fees will be determined by a judge. Scruggs said that hospital executives could turn down the settlement if they believe that those fees are excessive.

For-profit hospitals targeted

Nonprofit hospitals, which faced the first suits in June, now aren't the only targets. Lawyers earlier this month filed charges in a Florida district court and in a Nevada court against for-profit hospitals.

Archie Lamb, the Alabama lawyer who helped physicians bring lawsuits against managed care companies for their billing practices, is among the lawyers suing the for-profit facilities.

The lawsuit in Florida alleges that Health Management Associates, a Naples-based hospital chain, billed uninsured patients for amounts far greater than what Medicare and insurance companies would have been charged for the same services. The lawsuit alleges that these higher charges violate Florida's Deceptive and Unfair Trade Practices Act.

Lamb called the court system the only place where patients can turn to stop "unprecedented price gouging."

"Our goal is to achieve a degree of elemental fairness for working Americans that seek needed health care," he said. "Charging a disenfranchised element of our society outrageous prices that result in economic and emotional ruin is not the answer to our national health care funding conundrum."

John Merriwether, HMA's vice president of financial relations, said the company would strongly defend itself against the lawsuit. He said company records showed that the named patient in the lawsuit settled his bill and received deep discounts.

"We believe our hospital billing and collection practices are reasonable," Merriwether said. "As a result, we've provided hundreds of millions of dollars of free care over the years."

Lamb and other attorneys filed similar lawsuits in Nevada against Universal Health Services and HCA Inc. Those lawsuits allege that the hospital systems violated state anti-racketeering laws.

HCA spokesman Jeff Prescott said the lawsuit misses the point. Even if billing practices are changed so that uninsured patients pay nothing, there are still 44 million uninsured patients in the nation, he said.

"If you don't fix that, it is just a Band-Aid on the situation," Prescott said.

HCA provided more than $3 billion in charity care in 2003 and plans more changes for the fall that will provide greater discounts to patients in need.

Universal Health Services officials did not return phone calls for comment before press time.

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