Piggybacking on the ongoing debate over hospital billing of the uninsured, one of the nation’s largest auto insurance carriers is suing Adventist Health System Sunbelt Health Care Corp. for allegedly charging grossly inflated prices to treat car-accident victims at its 17 Florida hospitals.
State Farm Mutual Automobile Insurance Co., which covers 3 million vehicles in the state, claimed that Adventist’s Florida hospital system has charged 225% to 1,000% more than average Medicare rates when treating patients injured in car crashes. It also contends that Winter Park, Fla.-based Adventist, which operates 29 not-for-profit hospitals in 10 states, refuses to tell State Farm how much it charges other private insurers for the same services.
In its lawsuit, filed last month in state Circuit Court in Orlando, State Farm has requested a judicial order to clarify its “rights and responsibilities on paying insurance benefits” and to offer a formula for determining payment rates for medical treatments. It has not requested financial damages.
State Farm spokesman Chris Neal said auto insurers, like the uninsured, aren’t in a position to negotiate the volume discounts that managed-care companies reap. “So hospitals, in many instances, have been charging several hundred times more to treat injured patients if they’re uninsured or covered under an auto insurance policy versus if they’re covered by a health plan,” he said. “We’re simply asking the court if that’s reasonable.”
While the alleged overpricing “seems to be a common industrywide practice among hospitals,” Neal added, the Bloomington, Ill.-based auto insurer plans to wait to hear how the judge rules before deciding whether to file similar lawsuits against other hospital systems.
At deadline, Adventist spokesman Kevin Edgerton said he could not comment because the hospital chain was still reviewing the lawsuit.
The lawsuit comes as Florida lawmakers are considering whether to renew or extend the state’s no-fault auto-insurance law, which is set to expire after 35 years on Oct. 1. The law, which State Farm publicly opposes, currently requires drivers to carry $10,000 in personal-injury coverage.
The action also comes as not-for-profit hospitals nationwide face a deluge of class-action lawsuits accusing them of discriminating against the uninsured by charging them artificially high retail rates while granting deep discounts to other payers.
Last month, another Florida hospital chain, 59-hospital Health Management Associates, based in Naples, settled one such lawsuit by agreeing to cut uninsured patients’ bills by 40% to 60%, among other things.
E. Kirk Wood, a Birmingham, Ala.-based attorney who filed the Health Management suit, said State Farm’s case supports plaintiffs’ contentions that hospitals are playing fast and loose with their rates by systematically fleecing some groups to compensate for the discounts given to others.
In 2004, Wood and a consortium of class-action attorneys led by Alabama lawyer Archie Lamb filed an uninsured-billing lawsuit against Florida Hospital. The case was dismissed by a federal judge late that year, but Kirk said the group is considering refiling the lawsuit in state court.
Wood said when car-accident victims arrive at a Florida hospital, typically they are asked to provide all of their insurance information, including both health and auto-liability coverage. If the hospital bills the health insurer for treating the patient, it will receive roughly 48% of its full retail rate as negotiated under its managed-care contracts. “But they know that if they can get to the person’s car insurance company first, they don’t have to give them the same discounts; they can immediately charge the full 100% of their chargemaster rate and try to suck out all the money they can,” Wood said.
Still, Wood admitted, State Farm could face an uphill battle because, while not-for-profit hospitals have a charitable obligation to aid needy individuals, they have no such obligation to private corporations. Further complicating the issue is the state’s no-fault law. “It’s a conundrum,” Wood said.
Some consumer advocacy groups argue that State Farm is simply trying to capitalize on the uninsured issue in what essentially boils down to a pricing dispute between two large corporations. “It’s disingenuous to merge the two issues,” said Bill Newton, executive director of the Florida Consumer Action Network.
Newton fears that if State Farm prevails in its lawsuit and secures lower rates, it could quickly destabilize the state’s healthcare system by stripping hospitals of a much-needed source of revenue. He pointed to Colorado, where hospitals and ambulance companies have complained of mounting losses since the state repealed its no-fault auto insurance law in July 2003.
“Granted, it’s not an ideal setup, but the fact of the matter is that hospitals are able to treat uninsured patients only because they manage to get higher rates from somewhere else,” Newton said. “We’re afraid of the crisis that will occur if all that money gets pulled out of the healthcare system.”
