Colorado Supreme Court forces hospital to deal with a consumer in a semi-reasonable way

News on one of my pet topics, the ability of hospitals to hit the unwary with bills for 5-10X what a service actually costs (i.e., what 95 percent of customers pay via insurance)… “She Was Told Surgery Would Cost About $1,300. Then the Bill Came: $229,000.” (NYT, May 21):

When Lisa Melody French needed back surgery after a car accident, she went to a hospital near her home outside Denver, which reviewed her insurance information and told her she would be personally responsible for paying about $1,337.

But after the surgery, the hospital claimed that it had “misread” her insurance card and that she was, in fact, an out-of-network patient, court papers said. As a result, Centura Health, which operated the hospital, billed her $229,112.13. When she didn’t pay, Centura sued her.

“I was scared about it,” said Ms. French, 60, a clerk at a trucking company, who eventually filed for bankruptcy. “I didn’t understand because I kind of relied on the hospital and my insurance company to work out what I needed to pay.”

This week, after a yearslong legal battle, the Colorado Supreme Court ruled that Ms. French did not have to pay nearly $230,000 for the spinal fusion surgery she underwent at St. Anthony North Hospital in Westminster, Colo., in 2014.

It took 8 years of litigation to shut down the conventional scam for this particular patient. How come?

Before her surgery, Ms. French signed two service agreements promising to pay “all charges of the hospital.”

Centura asserted that, because Ms. French was an out-of-network patient, those service agreements required her to pay the full rates, listed in a giant health system database known as a chargemaster — a catalog of the cost of every procedure and medical supply Centura provided.

In Centura’s view, the service agreements “were unambiguous and French’s agreement to pay ‘all charges’ ‘could only mean’ the predetermined rates set by Centura’s chargemaster,” the court said.

But the court found that Ms. French wasn’t responsible for paying those rates because she didn’t know the chargemaster even existed and hadn’t agreed to its terms.

Justice Gabriel pointed out that courts and commentators have noted that hospital chargemasters have become “increasingly arbitrary and, over time, have lost any direct connection to hospitals’ actual cost, reflecting, instead, inflated rates set to produce a targeted amount of profit for the hospitals after factoring in discounts negotiated with private and governmental insurers.”

“They have no basis in reality,” said Gerard F. Anderson, a professor of health policy and management and a professor of international health at Johns Hopkins University Bloomberg School of Public Health.

“The hospital cannot explain to anyone why they charge the prices they charge,” he said. “They are not based on costs. They are not based on accounting principles. They are fictitious instruments created by somebody in the hospitals.”

I still can’t figure out how the hospital’s behavior, despite being conventional nationwide, was ever considered legal in any state. It wouldn’t work for a car dealer to not tell a customer in advance how much a brake repair was going to cost and then charge that particular customer 5-10X what everyone else pays.

Some detail from the opinion:

Based on its understanding of the information that French had provided, Centura estimated that her surgeries would cost $57,601.77 and that after French’s insurance payment, she would personally be responsible for $1,336.90 of that amount.

Thereafter, and notwithstanding the fact that Centura had told French that her surgeries would cost $57,601.77 and that she would personally be responsible for $1,336.90 of that amount, Centura billed French $229,112.13, reflecting its full chargemaster rates. Centura did so because it determined that it had misread French’s insurance card and that she was, in fact, an out-of-network patient. Centura calculated the amount due after subtracting from the total charges the payment from French’s insurer of $73,597.35 and French’s payment of $1,000.00 (thus, the total amount that Centura charged was over $300,000.00, notwithstanding its pre-procedure estimate that the surgeries would cost $57,601.77)

The hospital’s victimization of this lady was far worse than the NYT article reports, in other words. Her insurance company actually paid the hospital more than the originally estimated fair cost of the services provided. But the hospital decided that it had found a clever opening to go after the patient for $229,000 extra.

12 thoughts on “Colorado Supreme Court forces hospital to deal with a consumer in a semi-reasonable way

  1. > I still can’t figure out how the hospital’s behavior, despite being conventional nationwide, was ever considered legal in any state.

    Me neither. I’ve been following these kinds of stories in a laid-back kind of way – including exorbitant out-of-network charges for ambulance trips (something that I’ve had occasion to worry about living in a small town) – for several years now. I see them and take note of them but sadly – since I no longer live in Baltimore – I haven’t ever had the opportunity for a conversation with Anderson. I do I recognize his name and have some anecdotal evidence that he is a Smart Person who was educated at a good school before the post-truth world began to take hold. I’d really enjoy having lunch with him to discuss the subject in much greater detail.

    If it’s not illegal, it should be. And some real people should to to real jail.

  2. Some of these hospital billing stories are so ridiculous that I do not how they can ever be enforced in court.

    A basic part of contract law is that a consumer has to understand his obligations. Most patients today have no idea. Therefore I do not see how the patient can have a contractual obligation.

    I once got one of those absurd bills, and I threw it in the trash because I figured that the hospital would not dare go to court with such an extreme story. I was right, although they dinged by credit rating. I hear about others being sued, and I do not see how the hospitals win.

  3. 1 rattlesnake bite in Fl*rida can cost $1 million in antidote, nowadays. The lion parents have spent at least $300,000 on dental care (not covered by medicare) since retiring, bringing their real income to $2/day. Should have moved to China.

  4. Good example of unfettered capitalism? Or should the central-planning committee get involved?

    • Anything related to over- regulated, hmo-ed, medicaded and Medicared us health system is an example of what unfettered, not scared of courts, government can do to you.

    • Anon: The U.S. health care system hasn’t been an example of “capitalism” since at least the mid-1960s when Medicaid and Medicare were introduced. The massive government subsidies began in World War II, though, when employer-sponsored health care insurance became tax-free. For an American health care system whose rates are set by a market, you have to look at veterinary care. Procedures can be expensive, but not expensive enough to bankrupt the customers. I think the current price for surgery on a dog is, adjusted for the inflation that the government assures us does not exist, about the same as the 1950s price of surgery on a human. Whatever the price is for canine surgery, the actual number is disclosed to the customer in advance and then the final charge is very close to that disclosed number. In other words, vets deal with customers commercially in the same way as every other non-health-care business does. There is no vet that will ask you to sign a form like the Colorado hospital gave the patient described in the NYT article. They don’t even try to get you to agree to pay prices that they have kept secret from you. And the price that they charge insurance companies is not, I think, hugely different from the quoted retail price.

    • @Anonymous @Philg:

      Over the past 18 months of my care for a rather serious medical condition – including four surgeries, one of them major, and dozens upon dozens of visits to various healthcare providers for various kinds of care – I have absolutely zero idea of what any of it has cost. I’ve never seen any kind of accounting at all.

      It already seems like a “centrally planned” system to me – because there’s a gigantic “black box” at the center of it where the costs are concerned. I would like to know, for many reasons, not the least of which is to determine if there is any way in the Universe I would still be alive today if I did not have insurance.

      The other thing that bothers me, hearing these sporadic horror stories leaves the reader with no way to establish any sense of how *PREVALENT* it is, and in which types of situations it occurs. It’s like knowing about horrible plane crashes without ever knowing that hundreds of millions of people fly all over the world in excellent safety almost all the time. There’s no way to gain any sense of proportion without being an expert.

      You read the horror stories and are supposed to think: “My God This Must Stop!” and yet you have no idea how often, when and where it occurs. It’s another example in my mind of the “What You Need to Know” media in action: tell people things that only serve to scare them and make them ANGRY.

      And to what end? I’m sure the New York Times would like nothing more than to see the government *completely* control health care from end to end. They’re certainly not interested in making it more “market based” like your veterinary example (or the car mechanic’s example, for that matter.)

      Here’s a car repair example: I like to work on my own vehicles to save money whenever possible. I’m competent enough to do repairs like brake jobs, minor engine work, electrical work, tune ups and suspension work like replacing struts and shock absorbers. My problem is that I don’t have a garage and, importantly, I don’t have a LIFT.

      Most mechanics near me charge $80-100 per hour for their work on things like brakes and suspension. As it so happens, there’s a place called the “DIY Garage” in Massachusetts where you can rent a bay with access to pressurized air to run your air tools and use their lift to work on your own car. I asked them for a quote and they want $40 an hour to rent the lift, the air and the space. For simple jobs, I could save some money, but it’s only 1/2 of what a qualified mechanic would charge and on more complicated jobs I would want an expert to handle them. But at least I *know* what I’m dealing with. It’s also very hard for repair shops to “gouge” for parts thanks to sites like – I can find the prices on almost any part I would replace myself.

      The entire medical system in this country is like a Black Box that you walk into but never really know anything about – and I get the impression that a lot of people want it that way. Either way, I know that it’s impossible for me to know the “market rate” for any of the things I’ve had done in the past 18 months. Nobody will tell me, and there’s no way to compare.

      This strikes me as being fundamentally screwy.

    • Alex: I’m not surprised that the health care system is opaque to patients. But I continue to be surprised that insurance companies don’t use the market. They will just pay out at Manhattan rates without ever encouraging a patient to travel 1-2 hours to a better-quality provider who would charge $20,000 less. You’d think that they would say “We’ll have you picked up in a limo, taken to the lower-cost provider, and drop you back off with a $5,000 gift card.” Health insurers operate as though even short-distance travel is impossible for ambulatory patients and as though highways did not exist. Maybe they’re taking their cue from the Covidcrats (let the NYC hospitals overflow with patients while hospitals 45 minutes away were laying off staff due to lack of customers).

      How often do patients get cheated by providers? I’m sure that it is happening every day in every state if we count “being charged 5X more than the normal price” to be an example of cheating. Any time someone who isn’t insured or whose insurance doesn’t line up with the provider (as the NYT’s subject’s didn’t) is an opportunity for the health care industry to cheat.

    • @philg: I agree with that completely. And there is no way for me, as the consumer, to say to my insurance provider: “Look, this surgery is two months from now. If you put me up in a cheap motel for a few days, I’ll have someone drive me up to 500 miles away to get this procedure done if it’s just as good at a lower cost. Just give me a “doctor’s note” so that I can block out the time.”

    • @philg – medical insurance in US is not insurance at all. It’s a socialist redistribition scheme which predictably evolved into massive scam. And the hospitals are able to charge whatever is because they are in on the scam. And because of regulatory capture (which is an intended feature of the system, not a bug) fed gov. acts as the pharma/medical cartel. Competition in any real sense is simply not allowed.

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