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A Second Opinion

second-opinion_mainThe Supreme Court of Virgin­ia says a Henry County judge was too quick to force a hospital to accept 25 cents on the dollar for a heart patient hit with a surprise medical bill.

The justices said the judge was wrong to conclude that a contract was invalid just because the patient signed a financial responsibility form under dire circumstances as he awaited emergency room treat­ment.

The trial judge compared the situation to a “your money or your life” proposition, but the justices said the patient’s signature showed his intent to agree to the hospital charges.

The high court’s Sept. 14 rul­ing raises the curtain on a sec­ond act in the drama, with Cir­cuit Judge David V. Williams invited to rule on affirmative defenses, including the strick­en patient’s capacity to enter a contract.

The Supreme Court’s four-page unpublished order is PHC-Martinsville Inc. v. Dennis (VLW 017-6-074).

The decision highlights the practice of so-called “balance billing” in which health care providers bill patients for out­standing balances after accept­ing a portion of their charge from insurance companies. “Out of network” providers – not bound by insurance agree­ments – bill patients at the full rate, minus any insurance pay­ment.

Out-of-network surprise bills may be more common. Under the Affordable Care Act, many providers narrowed their pro­vider networks and cut out-of-network benefits to control costs and keep premiums af­fordable, according to a report in Becker’s Hospital Review.

Worried heart patient

Martinsville banker Glen Dennis was hit with chest pains and other symptoms while at work in May 2014. His symptoms recalled a heart attack he had several years earlier, according to the court’s order. Concerned co-workers persuaded him to seek medical treatment and one drove him to an urgent care center.

The medical staff decided more intensive care was needed, and a rescue crew took Dennis to the emergency department of Memorial Hospital in Martinsville. He re­mained for two nights and had five arterial stents placed, according to facts discussed by the Supreme Court in oral argument.

About 45 minutes into his visit to the hospital, Dennis agreed to sign a form titled “Consent for Services and Financial Respon­sibility.” The form obligated Dennis prompt­ly to pay in accordance with charges listed in the hospital’s “charge description master.” Dennis did not ask for a copy of the charge description master at the time. According to the court order, it contained more than 8,300 items. Dennis’ wife was at his side by the time he signed the hospital payment agreement. She testified at trial that he was too anxious and upset to read the con­tract. Dennis testified he was just concerned about getting treated and hoping he was not having a heart attack.

After hearing the evidence, Williams ruled the hospital failed to prove the parties had entered into a binding contract. In the absence of a contract price, the judge set a quantum meruit value of 25 percent of the master charge fee and entered judgment for that amount. Dennis appealed.

Patient’s state of mind considered

Supreme Court justices appeared sympa­thetic to Dennis’ plight when the case was heard in June, but they wondered if Wil­liams had applied the wrong legal standard.

Nashville attorney W. Brantley Phillips Jr., representing the hospital, urged the court to reverse the judgment and enforce the hospital’s bill.

“The trial court here awarded Mr. Dennis the benefit of a bargain that neither he nor his insurance company made with the hos­pital, and we don’t think that’s a fair way to do it,” Phillips said.

He sought to diminish the drama of the patient’s signature on the form.

The form was “standard paperwork that all patients are expected to sign,” Phillips said of Dennis’ signature on the agreement. “Neither he nor his wife ever expressed any question or concern at the time about being asked to do that,” he added.

Justice William C. Mims countered that Dennis “might have had something else on his mind” at the time. “He didn’t really have the opportunity to do a little value shopping, did he?” Mims asked, alluding to Dennis’ concerns about his medical condition.

“We would submit that the fact this dis­pute takes place in the context of health­care doesn’t change the analysis,” Phillips responded.

Dennis’s attorney, James W. Haskins of Martinsville, emphasized Dennis’ anxious state of mind when the contract was pre­sented.

“He could not read. He could not concen­trate. He was illogical. He was agitated. He was laying there thinking he was going to die. I would respectfully submit to your hon­or that someone in that condition cannot rationally under any of your court decisions mutually assent and make a valid contract,” Haskins said.

“That’s capacity. It’s not mutual mistake,” responded Chief Justice Donald W. Lemons.

“A very thin line, I think judge, between capacity and mutual assent,” Haskins re­plied.

Undisclosed prices

Several justices expressed concern that the prices referenced on the contract were not readily available to Dennis. “It is quite frustrating for the average consumer. And it is quite frustrating for the court,” one justice said.

Phillips said the patient learned of the charges in due time. “The evidence here is very clear that Mr. Dennis had access to the items of the charge description master that were relevant to his care when they were provided to him in the ordinary course, as part of his bill,” Phillips said.

Lemons pointed out that the price infor­mation was not available before Dennis’ signature was obtained on the bottom of the payment form. Phillips said broad concerns about hospital billing practices should not guide handling of Dennis’ bill.

“We’re sympathetic to the concerns about the way healthcare gets paid for in this country, that clearly seemed to animate the trial court’s decision. As we all know, there’s a robust debate about that going on at the state and federal level. Respectfully, though, I would submit that’s where it belongs, not here in the trial courts of Virginia,” Phillips said.

Affirmative defenses to be weighed

Justice D. Arthur Kelsey signaled the court’s ultimate approach to the case by sug­gesting Williams had misapplied the stan­dard for forming a valid contract by focusing on Dennis’ state of mind and on the secre­tive aspects of the agreement.

“Your case has strong emotive themes, but there are legal doctrines which have to be consistent across all industries, all con­tractual fields, and the first legal doctrine is that the assent to the contract is an objective standard. It’s not subjective,” Kelsey said.

“The trial judge appeared to use what I would argue to be a subjective standard on the wrong question,” Kelsey added.

Subjective factors might be more relevant on affirmative defenses, Kelsey said, sug­gesting a remand might be proper.

Succinct order

The court spoke through an unpublished order, concluding that Dennis had assented to the terms of the contract, regardless of his state of mind.

“Whatever Dennis’ unexpressed inten­tions may have been, his signature on the Contract was clearly a manifestation of his intent to agree to its terms,” the court’s order read. “The Hospital’s use of a standard-form contract and the disparity in bargaining power between the parties did not affect Dennis’ ability to assent to its terms,” the court said.

The court remanded the case for findings on Dennis’ affirmative defenses. The court said no further evidence was needed since the parties presented evidence of all claims and defenses at the trial.

After the Supreme Court decision, Haskins said one of the key defenses he will argue is Dennis’ capacity.

“He lacked the capacity to enter a valid, enforceable contract,” Haskins said.

The Supreme Court expressly noted that, because the trial judge had ruled there was no contract, he had not addressed Dennis’ affirmative defense of unconscionability.

Haskins said he would pursue that de­fense, as well. His client’s $111,000 hospital bill was “totally unconscionable,” Haskins said. He said Williams heard evidence that only one tenth of 1 percent of patients ever pays the charges listed in the hospital’s “charge description master.”

An attorney for the hospital referred inquiries to a spokesperson for LifePoint Health in Brentwood, Tennessee. The spokesperson had not responded as of press time. The Virginia Hospital and Healthcare Association said Dennis’ troubles stemmed from the administration of his health care plan.

“This case represents an unfortunate se­ries of events in which a third party admin­istrator used by Mr. Dennis’ group health plan took it upon itself to dictate prices to health care providers through an intention­al scheme that places patients like Mr. Den­nis, health care providers, and employers in the middle of costly and contentious court battles,” said VHHA vice president and gen­eral counsel R. Brent Rawlings.

These misleading practices favor litiga­tion over contracts between private parties and marketplace solutions to health care pricing. If allowed to continue, these practic­es will have deleterious effects on the health care system,” Rawlings continued.

He approved of the outcome. “For the court to decide otherwise would have re­sulted in a total breakdown of long-stand­ing billing practices commonly accepted in the industry and turned contract law on its head,” Rawlings said.

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