Moran v. Prime Healthcare Mgmt., Inc. — Sept. 2016 (Summary)

PATIENT BILLING

Moran v. Prime Healthcare Mgmt., Inc.
Case No. G051391 (Cal. Ct. App. Sept. 14, 2016)

The Court of Appeal of California reversed the trial court’s decision to dismiss a patient’s claims against a hospital for, among other things, wrongfully charging self-pay patients more than insured patients in violation of the Unfair Competition Law (“UCL”), and restitutionary relief under the Consumer Legal Remedies Act (“CLRA”).

A patient visited the emergency room on three different occasions as a self-pay patient, signed a financial liability contract, and was charged over $10,000 in medical bills. Prior to receiving the bill, the patient contacted the hospital to inform it that he was unemployed and uninsured, and asked the hospital to take his financial status into consideration when addressing his bill. The patient never received a response from the hospital. The patient then filed a complaint against the hospital alleging that self-pay patients are discriminated against when they are charged higher rates than insured patients; that self-pay patients reasonably relied on the belief that they would be charged the same amount as patients who received the same services; that self-pay patients reasonably expected to be billed no more than the reasonable value of the services they received, all in violation of the UCL; and that the hospital failed to inform the patients that they would be billed at an excessively higher amount than insured patients, in violation of the CLRA.

The patient’s first argument that self-pay patients are discriminated against when they are charged higher rates than insured patients failed because the hospital’s variable pricing is legislatively endorsed by the Business and Professions Code, which permits the use of variable pricing. Therefore, the patient cannot have a viable claim of violating the UCL based on variable pricing. The patient’s arguments of reasonably believing he would either be charged the same as other patients receiving the same services, or charged a reasonable value for those services failed for two reasons. First, the court determined that even if the patient read the contract he signed stating that he was financially liable, he could not have reasonably believed that he would pay the same as all other patients because the contract includes provisions for discounted payment policies such as charity care, and federal and state assistance. Second, the court determined that reliance on charges of reasonable value applies only when the agreement does not determine the charge, or include the method by which it is to be ascertained. The patient signed an express financial liability contract that did not include prices, but included means of determining the price. The patient also failed to show that he reasonably relied on a misrepresentation by the hospital that led him to believe that he would be charged the same as all other patients, which defeated his CLRA claim.

The patient’s UCL claim survives on his argument that the financial liability contract is unconscionable. The patient alleged that the hospital’s “pricing, billing and collection practices have a significant detrimental impact on the large population of self-pay emergency care patients.” Because the patients need the medical care, they are placed at a disadvantage, ultimately sign a contract that favors a more powerful party, the hospital, and become responsible for payments that far exceed the cost of actual care. The court determined that the patient stated a sufficient claim for the unconscionability of the financial liability contract. The hospital argued that the patient’s claim should fail because he was offered alternatives to pay a lower rate. The court determined both that the alternatives offered constituted a tangible burden, and that the patient showed sufficient proof of seeking a lower rate by contacting the hospital and informing it of his financial status.