Parkview Hospital v. Thomas E. Frost by Shirley A. Riggs, his Guardian

Mar 14 2016, 6:32 am
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEES
Dennis F. Dykhuizen Laura L. Ezzell
Theodore T. Storer Edward J. Chester
Reanna L. Kuitse Chester Law Office
Rothberg Logan & Warsco LLP Elkhart, Indiana
Fort Wayne, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Parkview Hospital, March 14, 2016
Appellant-Defendant, Court of Appeals Case No.
02A03-1507-PL-959
v. Appeal from the Allen Circuit Court.
The Honorable Craig J. Bobay,
Special Judge.
Thomas E. Frost by Shirley A. Cause No. 02C01-1405-PL-221
Riggs, his Guardian,
Appellees-Plaintiffs.
Friedlander, Senior Judge
[1] In this interlocutory appeal, we are presented with the issue of whether
evidence of discounts provided to patients who either have private health
insurance or are covered by government healthcare reimbursement programs is
relevant, admissible evidence regarding the determination of reasonable charges
under the Indiana Hospital Lien Act, Indiana Code Annotated section 32-33-4-
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1, et seq. (West, Westlaw current with P.L. 1-2016 and P.L. 2-2016 of the 2016
Second Regular Session of the 119th General Assembly). We hold that it is and
affirm.
[2] On October 8, 2013, Frost was seriously injured in a collision involving a
motorcycle he was operating and a pickup truck. Frost was transported by
airbus to Parkview Hospital where he remained on an in-patient basis until
November 12, 2013. Parkview did not obtain a signature on any written
contract from Frost or his personal representative at the time of Frost’s in-
patient stay there.
[3] On November 12, 2013, Frost’s condition had improved such that he was
transferred to the skilled nursing facility at Parkview Randalia. The next day,
Frost’s mother, Shirley Riggs, who had just recently been appointed as guardian
over the person and estate of Frost, was approached by Parkview to sign an
admission agreement, which she did sign. The agreement contained the
following provision:
Agreement to Pay
The patient or person financially responsible for the patient, in
consideration of the service to be rendered to the patient, is
obligated to pay the account of the Hospital on all charges for
services rendered.
Appellant’s App. p. 44.
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[4] Frost remained in skilled nursing until January 7, 2014, when he was
transferred to in-patient rehabilitation before being discharged on January 28,
2014.
[5] Parkview filed its hospital lien with the Allen County Recorder on February 12,
2014, in the amount of $629,386.50. That amount included charges for Frost’s
in-patient and skilled nursing care at Parkview. A copy of the lien was mailed
to the law firm representing Frost in his personal injury action.
[6] Frost hired a person employed by an independent medical bill reviewing
company to review the charges. After the discovery of several billing errors,
Parkview filed a final amended hospital lien in the amount of $625,117.66.
[7] Frost did not have health insurance at the time he sustained his injuries. As the
permissive user of the motorcycle, Frost had medical payment insurance
coverage through State Farm for $5,000.00.
[8] On May 29, 2014, Frost filed a declaratory judgment action to enforce the
patient’s remedy under the Indiana Hospital Lien Act, Indiana Code Annotated
section 32-33-4-1, et seq. (West, Westlaw current with P.L. 1-2016 and P.L. 2-
2016 of the 2016 Second Regular Session of the 119th General Assembly).
Under the Act, a patient may contest the lien or the reasonableness of the
charges by filing a motion to quash or reduce the claim in the court where the
lien was perfected. Ind. Code Ann. § 32-33-4-4(e) (West, Westlaw current with
P.L. 1-2016 and P.L. 2-2016 of the 2016 Second Regular Session of the 119th
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General Assembly). Indiana Code Annotated section 32-33-4-4(e) provides as
follows:
A person desiring to contest a lien or the reasonableness of the
charges claimed by the hospital may do so by filing a motion to
quash or reduce the claim in the circuit court in which the lien
was perfected, making all other parties of interest respondents.
[9] Frost’s petition alleged in part that Parkview’s charges were unreasonable
because they were greater than the amounts Parkview accepts as payment in
full from other patients. Frost served a written discovery request on Parkview
requesting information about discounts provided to patients who either had
private health insurance or who are covered by government healthcare
reimbursement programs. Frost was dissatisfied with Parkview’s response and
sought an order to compel discovery. Parkview requested and received a stay of
discovery. Parkview then filed its motion for partial summary judgment
1
seeking an order that its chargemaster rates were reasonable as a matter of law.
After a hearing on Parkview’s motion, the trial court entered its order denying
the motion, concluding that evidence of discounts provided to patients who
either have private health insurance or are covered by government healthcare
1
“A chargemaster is an extensive price list created and maintained by hospitals and other providers. A
hospital’s chargemaster lists a price for each good and service provided by the hospital (20,000 or more
separate items may be included). Hospitals update, that is increase, these list prices frequently.” George A.
Nation III, Determining the Fair and Reasonable Value of Medical Services: The Affordable Care Act,
Government Insurers, Private Insurers and Uninsured Patients, 65 Baylor L. Rev. 425, 427-28 (2013).
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reimbursement programs is relevant to the determination of reasonable charges
under the Act and are admissible. This interlocutory appeal ensued.
[10] In an Indiana summary judgment proceeding, “the party seeking summary
judgment must demonstrate the absence of any genuine issue of fact as to a
determinative issue, and only then is the non-movant required to come forward
with contrary evidence.” Jarboe v. Landmark Cmty. Newspapers of Ind., Inc., 644
N.E.2d 118, 123 (Ind. 1994). T.R. 56(C) provides in pertinent part:
At the time of filing [a] motion [for summary judgment] or
response, a party shall designate to the court all parts of
pleadings, depositions, answers to interrogatories, admissions,
matters of judicial notice, and any other matters on which it
relies for purposes of the motion. A party opposing the motion
shall also designate to the court each material issue of fact which
that party asserts precludes entry of summary judgment and the
evidence relevant thereto. The judgment sought shall be
rendered forthwith if the designated evidentiary matter shows
that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.
[11] Summary judgment should not be entered where material facts conflict or
where conflicting inferences are possible. Miller v. Monsanto Co., 626 N.E.2d
538 (Ind. Ct. App. 1993). When we review the grant or denial of a motion for
summary judgment our standard of review is the same as that used by the trial
court. J.C. Spence & Assocs., Inc. v. Geary, 712 N.E.2d 1099 (Ind. Ct. App. 1999).
We must determine whether there is a genuine issue of material fact and
whether the moving party is entitled to judgment as a matter of law. Id. In
resolving those inquiries, we consider only the evidence that has been
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specifically designated to the trial court. Id. The party appealing the trial
court’s ruling has the burden of persuading this court that the trial court’s
decision was erroneous. Id. A summary judgment determination shall be made
from any theory or basis found in the designated materials. Id. “We give
careful scrutiny to the pleadings and designated materials, construing them in a
light most favorable to the non-movant.” Id. at 1102 (quoting Diversified Fin.
Sys., Inc. v. Miner, 713 N.E.2d 293, 297 (Ind. Ct. App. 1999)). The fact that the
parties make cross-motions for summary judgment does not alter our standard
of review. Wank v. Saint Francis College, 740 N.E.2d 908 (Ind. Ct. App. 2000),
trans. denied.
[12] Parkview claims that Frost may not challenge the reasonableness of the fee
because the contract guaranteeing “to pay the account of the Hospital on all
charges for services rendered” referred to its chargemaster rates. See Allen v.
Clarian Health Partners, Inc., 980 N.E.2d 306 (Ind. 2012) (“In the context of a
contract for the provision of and payment for medical services, a hospital’s
chargemaster rates serve as the basis for its pricing.”).
[13] Frost is not challenging that a debt is due Parkview. Likewise, Frost is not
asking a court to impute a reasonable price into the contract where no price is
stated, or asking a court to completely disregard Parkview’s rates. Instead, he
argues that under the Act, he may challenge the reasonableness of the charges
claimed, and is entitled to discovery from Parkview in order to do so, relying on
language from Stanley v. Walker, 906 N.E.2d 852 (Ind. 2009) regarding the
evidentiary use of discounted medical expenses paid.
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[14] The Act does not define a reasonable charge, which makes sense because that is
the disputed issue. There are several cases addressing challenges involving the
reasonable value of medical services, but not exactly in the context presented in
this appeal.
[15] In Stanley v. Walker, 906 N.E.2d 852 (Ind. 2009), an action where liability was
admitted and the sole issue for trial was damages, the Supreme Court was
presented with the question whether the discounted amount of medical
expenses actually paid by the plaintiff in a personal injury case was admissible
and relevant to a determination of damages to an injured party. The plaintiff,
who was insured, paid a discounted amount in satisfaction of his medical
expenses after negotiations conducted by his health insurance provider. Id. At
trial, without objection, the plaintiff introduced redacted medical bills showing
the amounts medical service providers originally billed him. Id.
[16] When the defendant sought to introduce evidence of the discounted amount
actually paid, the plaintiff objected citing Indiana’s collateral source statute,
Indiana Code Annotated section 34-44-1-2 (West, Westlaw current with P.L. 1-
2016 and P.L. 2-2016 of the 2016 Second Regular Session of the 119th General
Assembly), which in pertinent part prohibits the introduction of evidence of
insurance benefits in personal injury cases. Id. The trial court did not allow
admission of the discounted amount finding that it flowed from insurance
benefits and as such was barred by the collateral source statute. Id.
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[17] On appeal, the Supreme Court held that where the reasonableness of the
medical expenses is not an issue, medical bills can be introduced under Indiana
Evidence Rule 413 as prima facie evidence of the reasonable amount of medical
expenses for purposes of a damages determination. Id.
[18] On the other hand, when there is a dispute as to the reasonable cost of medical
expenses, the opponent may introduce contradictory evidence including expert
testimony to challenge the reasonableness of the proffered medical bills. Id.
The Supreme Court granted transfer, affirmed the judgment, and ordered
remittitur, taking into consideration the discounted amount paid.
[19] Later, in Allen v. Clarian Health Partners, Inc., 980 N.E.2d 306 (Ind. 2012),
uninsured patients brought a class action against the hospital alleging breach of
contract and seeking a declaration that the rates the hospital billed were
unreasonable and unenforceable. The appeal arose from a motion to dismiss
granted to the hospital by the trial court. Id.
[20] There the patients argued that the chargemaster rates imposed by the hospital
were unreasonable such that they constituted a breach of contract. The contract
provided as follows:
In consideration of services delivered by Clarian North Medical
Center and/or the physicians, the undersigned guarantees
payment of the account, and agrees to pay the same upon
discharge if such account is not paid by a private or
governmental insurance carrier . . . . If the amounts due Clarian
North Medical Center for services rendered become delinquent
and the debt is referred to an attorney for collection it is
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understood and agreed that I shall be responsible for reasonable
attorneys’ fees, court costs, and prejudgment interest.
Id. at 309.
[21] The patients argued that the contract did not specify a price for the medical
services provided, or was silent on price, and as such a “reasonable price for the
services” term should be imputed to the contract. Id.
[22] The Court agreed generally that where a contract is silent on price, a reasonable
price should be imputed to a contract, but noted that an offer appearing to be
indefinite may be given precision by usage of trade or by course of dealing
between the parties. Id. In the context of contracts providing for health care
services, the Court noted that precision concerning price is “close to
impossible,” that a hospital’s chargemaster rates serve as the basis for its
pricing, and they are unique because they are set by each hospital. Id. The
Court noted the decision in Stanley, relied upon by the patients, and expressly
declined to extend its holding about the evidentiary use of the reasonable value
of medical expenses to actions alleging breach of contract. Id.
[23] Frost disagrees with the reasonableness of the charges claimed by the hospital,
and directly challenges them by way of the Act, which explicitly allows for
those challenges. Parkview sought to have its chargemaster rates deemed
reasonable as a matter of law. The trial court’s denial of Parkview’s motion for
partial summary judgment was premised on the language found in Stanley
regarding the evidentiary use of discounted amounts paid for medical expenses.
Although Stanley was a personal injury action where damages were the issue,
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there are enough similarities that we agree with the trial court’s reliance upon
the reasoning in Stanley.
[24] In Stanley, referring to a damages determination, but discussing the reasonable
value of medical expenses, the Court stated as follows:
In sum, the proper measure of medical expenses in Indiana is the
reasonable value of such expenses. This measure of damages
cannot be read as permitting only full recovery of medical
expenses billed to a plaintiff. Id. Nor can the proper measure of
medical expenses be read as permitting only the recovery of the
amount actually paid. Id. The focus is on the reasonable value,
not the actual charge. This is especially true given the current
state of health care pricing. . . . This value is not exclusively
based on the actual amount paid or the amount originally billed,
though these figures certainly may constitute evidence as to the
reasonable value of medical services.
906 N.E.2d at 856-58.
[25] The Court cited Indiana Evidence Rule 413 as one method of proving the
reasonable value of medical expenses. Id. The Rule provides as follows:
Statements of charges for medical, hospital or other health care
expenses for diagnosis or treatment occasioned by an injury are
admissible into evidence. Such statements are prima facie
evidence that the charges are reasonable.
Evid. Rule 413.
[26] Quoting Cook v. Whitsell-Sherman, 796 N.E.2d 271, 277-78 (Ind. 2003), the
Court said:
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The purpose of Rule 413 is to provide a simpler method of
proving amount of medical expenses when there is no substantial
issue that they are reasonable and were caused by the tort. If
there is a dispute, of course the party opposing them may offer
evidence to the contrary, including expert opinion. By permitting
medical bills to serve as prima facie proof that the expenses are
reasonable, the rule eliminates the need for testimony on that
often uncontested issue. Finally, the fact that a statement was
submitted is at least some evidence that the charge is normal for
the treatment involved, and it was necessary to be performed.
906 N.E.2d at 856.
[27] The Court distinguished between the introduction of medical bills to prove the
amount of medical expenses when there is no substantial issue that the medical
expenses are reasonable and when there is.
Thus, medical bills can be introduced to prove the amount of
medical expenses when there is no substantial issue that the
medical expenses are reasonable. However, in cases where the
reasonable value of medical services is disputed, the method
outlined in Rule 413 is not the end of the story. See Cook, 796
N.E.2d at 277. The opposing party may produce contradictory
evidence to challenge the reasonableness of the proffered medical
bills, including expert testimony. See id.
Id.
[28] In Stanley, the Supreme Court determined that the defendant should have been
allowed to introduce evidence of the discounted amount that was paid on
behalf of the plaintiff in satisfaction of his account, an issue relevant to the
determination of damages, to contradict the plaintiff’s prima facie evidence. Id.
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[29] Here, Parkview sought to have the trial court determine as a matter of law that
the chargemaster rates were reasonable. That issue was disputed by Frost, who
sought to discover discounted amounts Parkview had accepted from other
patients in an effort to challenge the lien amount. By frustrating Frost’s
discovery efforts, Parkview prevented Frost from meeting Parkview’s prima
facie evidence of reasonableness with contradictory evidence. The trial court
correctly found that Frost should be allowed to discover that evidence and that
such evidence was admissible under the Act.
[30] In light of the foregoing, we affirm the trial court’s decision.
[31] Judgment affirmed.
Vaidik, C.J. concurs.
Najam, J., dissents with separate opinion.
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IN THE
COURT OF APPEALS OF INDIANA
Parkview Hospital,
Appellant-Defendant, Court of Appeals Case No.
02A03-1507-PL-959
v.
Thomas E. Frost, et al.,
Appellee-Plaintiff.
Najam, Judge, dissenting.
[32] I respectfully dissent from the majority’s conclusion that the Hospital Lien Act
allows an uninsured hospital patient to renegotiate the terms of his contract
with the hospital.
[33] This case is controlled by our supreme court’s holding in Allen v. Clarian Health
Partners, Inc. In Allen, uninsured patients executed contracts with the hospital
under which they “guarantee[d] payment of the account[s].” 980 N.E.2d 306,
308 (Ind. 2012). After providing the patients care, the hospital attempted to
collect its chargemaster rates against the patients. The patients sued the
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hospital for breach of contract on the ground that their contracts did not specify
a price for services and, as such, the patients could introduce evidence in court
to determine a reasonable price as a matter of law.
[34] Our supreme court rejected the plaintiffs’ complaint outright and held that they
had failed to state a claim upon which relief can be granted. Id. at 309-10. In
particular, the court held that the “price terms in these contracts, while
imprecise, are not sufficiently indefinite to justify imposition of a ‘reasonable’
price standard.” Id. at 310. The court then explicitly held that the patients’
“agreement[s] to pay ‘the account’ . . . refer[] to [the hospital’s] chargemaster.
As a result, we cannot impute a ‘reasonable’ price term into th[ese] contract[s].”
Id. at 311.
[35] Likewise here, it is undisputed that Frost, an uninsured patient of Parkview’s,
executed through his guardian a contract for medical services that obliged him
“to pay the account.” Appellant’s App. at 44. Thus, under Allen, Frost agreed
to pay Parkview’s chargemaster rates, no matter how reasonable those rates
may or may not have been and regardless of how those rates were determined.
Allen, 980 N.E.2d at 310-11. It is also undisputed here that that same amount is
the amount of Parkview’s lien against Frost.
[36] The majority asserts that Allen is irrelevant here because “Frost is not
challenging that a debt is due Parkview” and “Frost is not asking a court to
impute a reasonable price into the contract where no price is stated . . . .” Slip
op. at 6. I cannot agree. By challenging the reasonableness of Parkview’s
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chargemaster rates—the basis for Parkview’s lien—Frost is challenging the
amount of debt that, according to Allen, he has already agreed to pay, and he is
asking a court to impute a new, “reasonable” contract price in place of his
agreement to pay Parkview’s chargemaster rates.
[37] The confusion here is understandable. Indiana Code Section 32-33-4-4(e)
provides that “[a] person desiring to contest . . . the reasonableness of the
charges claimed by a hospital [in its lien] may do so by filing a motion to quash
or reduce the claim . . . .” In a vacuum, that language appears to permit
patients against whom hospitals file liens to wholesale challenge the amount
underlying the lien. But reading that language in that manner ignores our
supreme court’s holding in Allen.
[38] And, while Allen was not a hospital lien case, it is nonetheless binding here for a
simple, pragmatic reason: if Allen does not apply, hospitals will simply stop
seeking recovery of unpaid fees through hospital liens and instead seek recovery
through breach of contract actions, where Allen is controlling. This end-run
would obviate the Hospital Lien Act altogether. See, e.g., Cmty. Hosp. v. Carlisle,
648 N.E.2d 363, 365 (Ind. Ct. App. 1995) (noting that, “[b]y allowing health
care providers direct interests in funds collected by personal injury patients, the
statute furthers the important policy of reducing the amount of litigation that
would otherwise be necessary to secure repayment of the health care debts,”
and that, “by expressly allowing attorneys to collect their fees before satisfaction
of all other liens,” the statute enables “personal injury patients who are unable
to pay for medical services” to hire a lawyer of their choice).
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[39] Moreover, Indiana Code Section 32-33-4-4(e) can be interpreted in a manner
consistent with Allen. In particular, the Hospital Lien Act provides that the
amount underlying a lien:
[b](5) must:
(A) first be reduced by the amount of any benefits to which the
patient is entitled under the terms of any contract, health plan,
or medical insurance; and
(B) reflect credits for all payments, contractual adjustments,
write-offs, and any other benefit in favor of the patient;
after the hospital has made all reasonable efforts to pursue the
insurance claims in cooperation with the patient.
(c) If a settlement or compromise that is subject to subsection (b)(1) is
for an amount that would permit the patient to receive less than twenty
percent (20%) of the full amount of the settlement or compromise if all
the liens created under this chapter were paid in full, the liens must be
reduced on a pro rata basis to the extent that will permit the patient to
receive twenty percent (20%) of the full amount.
I.C. § 32-33-4-3. In other words, if a hospital files a lien that fails to properly
account for the benefits in favor of the patient, or to account for the patient’s
right to receive at least twenty percent of a settlement or compromise, or is
similarly unreasonable, the patient can challenge the reasonableness of the
amount of the lien pursuant to Indiana Code Section 32-33-4-4(e). 2 But what
Indiana Code Section 32-33-4-4(e) does not authorize is a renegotiation of the
original contract terms.
2
In his brief, Frost asserts that the subparts of Indiana Code Section 32-33-4-3 are “prerequisites to filing a
lien in the first place.” Appellee’s Br. at 11 (emphasis removed). Frost’s argument here is hard to follow;
surely he does not suggest that Section 32-33-4-4(e) prohibits review of the hospital’s accounting.
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[40] I am not persuaded that, in light of Allen, the holding in Stanley v. Walker has
any application to this matter. Stanley involved the evidence a tortfeasor could
introduce to attempt to reduce the injured party’s claim of damages. 906
N.E.2d 852, 858 (Ind. 2009). That simply is not this case. See Allen, 980
N.E.2d at 311 (“We decline to extend Stanley to actions for breach of
contract.”).
[41] Finally, I respectfully disagree with the Indiana Supreme Court’s premise and
holding in Allen. See Allen v. Clarian Health Partners, Inc., 955 N.E.2d 804, 809
(Ind. Ct. App. 2011) (Najam, J.), vacated. There was, simply, no factual basis in
Allen for the assumption that chargemaster rates represented a rational—let
alone a reasonable—value of medical services in the health care marketplace.
See id. at 812 n.5 (“[the hospital] considers its chargemaster rates confidential
and proprietary. Left unanswered by [the hospital] is how a patient and a
provider can mutually agree to an ‘unambiguous’ and ‘express’ chargemaster
fee schedule that is not available to the patient.”). As our supreme court has
recognized in other contexts, “the relationship between [a hospital’s] charges
and costs is tenuous at best.” Stanley, 906 N.E.2d at 857 (internal quotation
marks omitted).
[42] Health care is not an option but a necessity. Yet health care prices are an
enigma:
Unlike everything else we buy, when we purchase a medical treatment,
surgery[,] or diagnostic test, we buy blind. We do not know the cost of
health procedures before we buy. When we do get the bill, we have no
idea what the charges are based on and have no way to evaluate them.
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Tina Rosenberg, Revealing the Health Care Secret: The Price, N.Y. Times:
Opinionator, July 31, 2013, http://opinionator.blogs.nytimes.com/2013/07/
31/a-new-health-care-approach-dont-hide-the-price/. Indiana media have also
recognized that “hospitals, doctors[,] and health insurers have been playing a
game of hide-and-seek with the public on health care prices . . . .” J.K. Wall,
Hospitals, Insurers Should End Hide-and-Seek with Prices, Indianapolis Bus. J., June
14, 2013, http://www.ibj.com/blogs/12-the-dose/post/41959-hospitals-
insurers-should-end-hide-and-seek-with-prices. Indeed, few people on the
planet understand how health care prices are determined. Id.
[43] Thus, in its operation and effect, Allen places health care consumers, including
emergency-room patients, at a permanent, take-it-or-leave-it disadvantage.
Allen immunizes a hospital’s unilateral pricing scheme from an evaluation or
comparison by individual consumers or the marketplace at the front-end and
then leaves those same consumers without recourse from a trier of fact at the
back-end. Given that there is no price transparency, to insinuate chargemaster
rates into an agreement “to pay the account” cannot possibly represent a
meeting of the minds between the contracting parties. Chargemaster rates are
not per se reasonable when they are, first, confidential and, second,
incomprehensible. In sum, there is no discernable or reliable correlation
between chargemaster rates and the reasonable value of the health care services
provided.
[44] Further, under the holding in Allen, the uninsured disproportionately bear the
costs for health care. The Washington Post recently recognized that “hospitals
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in the United States are charging uninsured consumers more than 10 times the
actual cost of patient care . . . .” Lena H. Sun, 50 Hospitals Charge Uninsured
More Than 10 Times Cost of Care, Study Finds, Wash. Post, June 8, 2015,
https://www.washingtonpost.com/national/health-science/why-some-
hospitals-can-get-away-with-price-gouging-patients-study-
finds/2015/06/08/b7f5118c-0aeb-11e5-9e39-0db921c47b93_story.html. As
one academic authority has plainly stated, Allen is “oblivious to patients’
vulnerability and dependency.” Mark A. Hall, Toward Relationship-Centered
Health Law, 50 Wake Forest L. Rev. 233, 248 (2015).
[45] I believe the majority’s statutory analysis would be correct, and I would concur,
were it not for Allen, which is controlling authority. We are bound by Indiana
Supreme Court precedent, but I encourage the Indiana Supreme Court to
reconsider Allen given the opportunity. As such, I would reverse the trial
court’s judgment for Frost and remand with instructions for the court to enter
judgment for Parkview.
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