The absolutely wrong way to squeeze patients

One of the unluckiest individuals I have met in recent years regarding his patient care experience is a Southern California cabinetmaker.

His travails began just about four years ago, when he sheared off the top half of his left pinkie in a mechanical joining device and badly lacerated his palm.

The plastic surgeon who treated him at a nearby hospital emergency room was an outlier on healthcare finance issues to say the least. She rejected his insurance coverage and sued him and his wife in court, demanding more than six times what she was legally entitled to under California law. This led to liens against him and his wife's property, and a legal nightmare that took years to resolve--only to devolve into yet another tangle with that doctor almost as soon as the first case was closed.

That individual provider sued dozens of her patients for full-charge sums whether or not they had insurance. One of California's two state insurance regulators eventually sued the physician and obtained a huge legal judgment against her. The California Medical Board also placed her license on probation.

That doctor was a rogue, and has more or less faced appropriate penalties for her conduct. But what happens when a hospital or hospital system behaves in a similar fashion?

That apparently was the case for St. Luke's Health, a Missouri-based hospital system, and HCA, a for-profit operator which also owns hospitals in the region.

St. Luke's finance staff kept an eye out for patients who were injured in automobile accidents and engaged in a practice known as subrogation to obtain payments for medical care from their car insurers, according to the Kansas City Star. It makes financial sense to do that--many automobile policies offer tens to hundreds of thousands of dollars in coverage for medical care connected to an accident, meaning a hospital could in theory recoup much or all of its full charge costs from such payers.

However, St. Luke's apparently took subrogation to a level not all that different from that physician I previously mentioned. If it found a patient had car insurance with medical coverage, the hospital wouldn't submit claims to the health insurer and focused instead on obtaining payment solely from the car insurer. It apparently did this with more than 900 patients in recent years.

The problem is, most consumers usually don't have much experience dealing with car insurers. They normally only communicate with their automobile carriers if they have an accident, an event that may occur once every decade, or even less. Insurers may pay patients directly for their care, but not notify them that they may have to share payments with their caregivers. If the accident left claimants incapacitated and short on cash, it makes it difficult for them to prioritize whether to pay the money to the hospital, leaving them with a huge deficit.  

Moreover, some auto insurers can stall payments for months or longer, or find technical reasons not to pay at all. That often forecloses the possibility of the provider trying to obtain payment from the medical insurer, which often places time limits on filing claims. Meanwhile, patients are left to not only recover from their injuries, but deal with a hospital collections department, even though they were indemnified from such a scenario in the first place.

That was apparently the case with Donnice Jackson, who had health insurance but is still being sued by the HCA-owned Research Medical Center in Kansas City for $2,153 --a reduced rate because Research declared in an act of kindness that Jackson is "indigent." Nevertheless, the hospital continues to also seek legal fees and interest from its former patient. Jackson's automobile insurer also refused to pay because the at-fault driver left the scene of the accident. Jackson recently scraped up money from family members to hire an attorney and file a counterclaim against the hospital.

HCA's revenue topped $34 billion last year and it should have acknowledged its ham-handed subrogation efforts and swallowed this one without a second thought. The only thing it accomplished by suing an insured patient was to hurt its reputation. Not surprisingly, Jackson decided to cough up an extra $60 a month to her insurer to get a wider option of hospitals so she won't ever have to patronize Research again. That sum represents about 2 percent of her annual income. Quite frankly, HCA should cough up that money that as well.

The danger of brand damage apparently resonated with the C-suite set at St. Luke's. It recently settled lawsuits filed by some of the hundreds of insured patients it needlessly squeezed in order to get a few dollars more. It also agreed to stop seeking payments from patients who were injured in auto accidents and had car insurance settlements. It also set up a relief fund for those it already put through the legal wringer.

Curiously, St. Luke's only agreed to do this for its hospitals in Missouri. Its hospitals just across the border in Kansas do not have to comply.

One of the attorneys that sued St. Luke's recently told the Kansas City Star that this practice of rejecting health coverage over automobile payouts and coming after the patient when that plan goes south is occurring at other hospitals in other states.

Such patients probably have two choice words for those hospitals. I have two of my own: Stay tuned.- Ron(@FierceHealth)