State’s high court to weigh in on lawsuit over IU Health billing

Indiana's hospital boards and trial lawyers are closely monitoring a lawsuit that accuses the state's largest hospital group of charging uninsured patients more for treatment than insured patients.

The case, set for May 10 arguments before the Indiana Supreme Court, involves a 2010 lawsuit by two uninsured patients who accuse IU Health of overbilling them. Although their breach-of-contract claims in the case amount to just a few thousand dollars, the legal stakes are high.

Indianapolis trial lawyer Scott Weathers tells The Indianapolis Star that a favorable ruling for his two clients could allow patients to sue over billings as far back as 10 years.

"If we win, I'm afraid the other hospitals are going to hear from us. We have clients in the wings," he said, who are ready to sue.

Weathers wants to turn his clients' lawsuit into a class action, open to hundreds of uninsured patients who might have been overbilled by the health system over the past decade. He also hopes to target other Indiana hospitals with similar lawsuits seeking damage claims in the millions of dollars.

The Indiana Hospital Association, which has filed a friend-of-the-court brief with the Supreme Court in support of IU Health's legal position, views the case as "a pretty concerning situation" for hospitals, considering the trial lawyers' intentions, said the group's president, Doug Leonard.

It's the first time the Indiana Supreme Court will wrestle with the legalities of a hospital charging uninsured patients more than insured ones, according to attorneys involved. And the court's consideration of the issue comes even after a new federal law requires hospitals to give discounts to uninsured patients similar to those given to insured ones.

That law led IU Health to offer uninsured patients a 40 percent discount off its full-price "chargemaster" rates in January of last year, said Lauren Cislak, an IU Health spokeswoman. She said IU Health's discount applies to uninsured patients regardless of income and is based on the best rates it charges its commercial insured customers or Medicare.

But the new federal guidelines don't bar patients from suing over past billing practices.

At the heart of the IU Health case are 120 years of state common law holding that, if a contract for a service doesn't specifically set a price or fee, the bill must be "reasonable," one definition of which is the price charged most other customers.

Plaintiffs Abby Allen and Walter Moore feel that's where they were wronged by IU Health North Hospital in Carmel.

Allen, a college student from Avon, says she was billed $15,641.64 to treat an infection in 2008. The lawsuit alleges that an insured patient would have been charged $7,308.78 for the same procedure, given the discounts IU Health had negotiated with insurance companies.

Meanwhile, Moore, a Carmel police trainee, says he was charged $1,138 in 2009 for treatment of injuries after an auto accident. He was uninsured and claims the hospital would have accepted "significantly less" if he'd been insured.

Both patients claim their bills were submitted to a collection agency, which damaged their credit ratings.

Their lawsuit was filed in Marion County Superior Court, which sided with IU Health and dismissed it. But the state Court of Appeals last fall said the complaint has merit and should be tried in the county court. Then, IU Health appealed to the Supreme Court.

IU Health's attorneys have argued to the appeals court that hospital billing disputes don't belong in the courts, saying "the anomalies which exist in the American system of providing health care" mean that a court "could not possibly determine what a 'reasonable charge' for hospital services would be."

Weathers said the new federal regulations don't negate a hospital's responsibility "to right what was wrong" with past billing methods.

Please enable JavaScript to view this content.

Story Continues Below

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.