Memphis hospitals engage in illegal billing practices, suits allege

July 15--Several Memphis hospitals routinely overcharge patients by demanding payments even after they've collected enough money from private or government health insurance plans to legally satisfy the debts, according to two lawsuits seeking class-action status.

Hospitals in the Methodist Le Bonheur Healthcare system as well as AMISUB (SFH) Inc., which does business as Saint Francis Hospital, are named as defendants in the suits filed in Shelby County Chancery Court.

A parallel filing in U.S. District Court was dismissed after a judge ruled that possible administrative resolutions hadn't been exhausted. The litigation has been refiled in federal court.

In the suits, former patients say they were treated at the hospitals and received bills for the services. The hospitals then received payments -- usually steeply discounted, as allowed for in coverage plans -- from private insurance companies, TennCare and other programs.

Although those payments legally "extinguished" the debt, the hospitals continued trying to collect money, the suits allege.

That practices are called "substitute billing" or "balance billing," and courts have held them to be illegal, said Jimmy Blount, the Collierville personal injury lawyer who is representing the patients.

"A hospital is like a big octopus. When a patient comes in it reaches for as many pockets as it can," Blount said.

In a statement issued in response to the litigation, Methodist said, "It wouldn't be fair or appropriate to discuss ongoing litigation in detail, but we can tell you we believe the suit to be baseless as evidenced by its earlier dismissal in federal court."

In an email, Derek Venckus, spokesman for Saint Francis Hospital-Bartlett, said, "We don't comment on pending litigation."

The suits list examples of cases dating from 2006 through last year illustrating the billing practices. In one, Le Bonheur Children's Hospital billed $716.10 for treating a patient in its emergency room.

The hospital received a $195.16 payment from TennCare, then billed a parent of the patient for the total $716.10, which the parent paid, the suits say.

In another case, at Saint Francis Hospital-Bartlett, a patient treated in the emergency room provided the staff with information to use in billing his private health insurance carrier.

Saint Francis-Bartlett charged $4,008.93 for the treatment and, less than three weeks after the visit, filed a notice of hospital lien for that amount with Circuit Court.

The hospital received a $1,022.30 payment from the insurance company, leaving the patient responsible for a $150 copay/deductible.

St. Francis, however, did not release or amend the lien until it received another payment of $4,008.93 from the patient, according to the suits.

The lawsuits claim the hospitals' practices violate the contracts that have been negotiated with the insurance companies. Those contracts provide for discounted rates for policyholders. "The policyholder is paying for that discount" through premiums, Blount said.

Other causes of action listed in the suits include unjust enrichment, breach of contract between the hospitals and patients, and alleged violations of the Tennessee Consumer Protection Act of 1977.

Reach Tom Charlier at [email protected] or 901-529-2572 and on Twitter at @thomasrcharlier.

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