A strategy for dealing with medical providers who refuse to submit their bills to health insurance

Attorneys who represent plaintiffs in personal injury cases are all too familiar with the trend of hospitals, clinics, and other medical providers refusing to submit their bills and charges to their clients’ health insurance carriers, preferring, instead, to pursue liens against the clients’ recoveries under the Health Care Services Lien Act. In cases where they believe a tort recovery by the patient is likely, the medical providers are trying to avoid the often substantial discounts that are typically applied to their bills when they are submitted to health insurance carriers. But, there are a number of situations where the personal injury client may benefit more by having his or her medical expenses paid by health insurance rather than out of the tort recovery.

When faced with this situation, the following letter, or some variation of it, may be used in an attempt to induce the recalcitrant provider to comply with the demand to submit the client’s bills to his or her health insurance. While the legal theories expressed in the letter may have not been court tested, nearly all of the medical providers to whom it has been sent have complied with the demand within a short time.

Sample Letter

“ABC Hospital”

Gentlemen:

This firm represents John Doe in connection with his personal injury claims arising from a vehicle collision on [date], in which he sustained serious injuries. He received treatment and was hospitalized at your facility for those injuries as a result of which you are claiming an amount due from Mr. Doe of $73,083.74.

At the time of the collision and Mr. Doe’s treatment at your facility, he was covered by a health or medical insurance policy issued by XYZ Insurance. Mr. Doe’s insurance coverage information was provided to you at the time of his admission and treatment. Your facility is, and at all relevant times has been, a preferred provider in the XYZ network. Mr. Doe had obtained this health insurance coverage precisely so that in the event he required medical care and treatment, the cost of such care and treatment would be paid or largely defrayed by his insurance.

In spite of the foregoing, ABC Hospital has thus far steadfastly refused to submit my client’s bills related to the vehicle collision to XYZ for payment, instead taking the position that the liability insurance policy covering the driver of the vehicle that collided with Mr. Doe is “primary” coverage, and that Mr. Doe’s health or medical insurance coverage is secondary. You have obviously taken this position to maximize your income by attempting to avoid the discounts (voluntarily negotiated and agreed to by your management in order to become a member of the XYZ Insurance provider network) that would be applied to your bills and charges if they are submitted to XYZ as one of its network providers. Apparently in the hope of collecting the entire amount of your charges at your full “rack rates”, ABC Hospital has instead claimed a lien upon my client’s claim for damages against the at fault driver that collided with him and his liability insurance carrier by serving a lien notice pursuant to the Illinois Health Care Services Lien Act.

In prior phone calls to you, I demanded that you submit my client’s charges to his health insurance carrier for payment. You have thus far refused to do so, citing your “policy” to regard the liability insurance as “primary” coverage. Some of the reasons you may want to change your position and comply with this demand include the following.

1. THE MAXIMUM AMOUNT YOU MAY COLLECT BASED ON YOUR LIEN CLAIM IS FAR LESS THAN WHAT YOU WILL COLLECT BY SUBMITTING YOUR BILLS TO MY CLIENT’S HEALTH INSURANCE CARRIER. The per person liability limit on the liability policy covering my client’s injury claim is $100,000.00. In addition to your lien claim of $73,083.74, DNR Hospital has asserted a lien claim for $26,924.15, and ABC Clinic has asserted a lien claim for $9,886.60, making the total liens asserted against my client’s recovery thus far $109,894.49.

Under the Illinois lien statute, the total of all liens may not exceed 40% of the settlement, and no individual category of health care provider may receive more than one-third of the total settlement (770 ILCS 23/10). Thus, the two hospitals claiming liens cannot receive more than a combined total of $33,333.33 from the proposed settlement in satisfaction of their liens. According to my calculations, the maximum amount ABC Hospital can receive on its lien claim is therefore $24,359.33.

I am confident that you will recoup substantially more than that amount by submitting your charges to XYZ Insurance as we have demanded, even though the amounts paid will presumably be discounted in accord with your agreement or contract with them.

2. MY CLIENT IS A THIRD-PARTY BENEFICIARY OF THE AGREEMENTS BETWEEN ABC HOSPITAL AND XYZ INSURANCE PROVIDING FOR DISCOUNTED PAYMENTS IN SATISFACTION OF THE PATIENT’S ACCOUNTS. The law is clear that a third-party beneficiary of such a contract is entitled to enforce the contract and sue for damages for its breach. By refusing to submit his medical bills to my client’s health insurance carrier, you are depriving him of the benefits of the discounts and other provisions of the negotiated agreement between the hospital and XYZ whereby ABC Hospital became a member of the provider network. My client’s damages for this breach are, at a minimum, the amounts you would have been paid if the charges had been submitted to health insurance as we have demanded, and the satisfaction of my client’s remaining liability for any additional charges other than deductibles and co-pays that may apply. Additional damages may be applicable.

My client is prepared to initiate legal action for breach of contract should you not promptly comply with our demand.

3. THE INTENTIONAL REFUSAL TO SUBMIT MY CLIENT’S CHARGES TO HIS HEALTH INSURANCE FOR PAYMENT CONSTITUTES AN ACTIONABLE TORTIOUS INTERFERENCE WITH HIS CONTRACT WITH HIS HEALTH INSURANCE PROVIDER. As mentioned earlier, Mr. Doe had the foresight to purchase health insurance coverage to protect him in the event he was injured or became ill with the expectation that covered medical expenses would be paid by that insurance. He has paid premiums to obtain that insurance coverage.

By willfully and intentionally refusing to submit my client’s medical bills arising from this occurrence to his health insurance carrier, ABC Hospital is depriving him of the benefits of his contract with his health insurance carrier. Compensatory damages recoverable for this tort include the amounts that the hospital would have been paid, plus the fact that my client’s liability for the medical expenses would be satisfied by the discounted payments, other than deductibles or co-pays that might apply. Consequential damages, including my client’s attorney fees and expenses, and punitive or exemplary damages are also recoverable in a tortious interference with contract cause of action.

Again, my client and I are fully prepared to initiate this litigation if ABC Hospital persists in its refusal to promptly comply with our demand.

Sincerely,

___________________________

***

If there is or may be questionable liability, even with adequate liability insurance coverage, the substantial risks and delays associated with continuing to pursue their lien rights instead of being paid by the client’s health insurance need to be brought to the provider’s attention as well. So far at least, just the threat of the litigation set forth in the letter has provided sufficient leverage to induce the health provider involved to comply with the demand. Perhaps soon, some court will rule on the theories outlined in the foregoing letter. ■