Billions of dollars flowing from settlements in mass tort litigation have recently spurred a new twist on a familiar business—medical lending.
Here's how it works: Medical funders buy unpaid medical bills at a discount. They pay for surgeries on patients who are involved in mass tort litigation, such as those over pelvic mesh implants. The funders guarantee doctors quick cash, paying them discounted rates similar to what insurers might pay. The funders then wait for the patients' cases to settle and place liens against those settlements for the full, nondiscounted costs of the surgeries.
Medical lending has been around for years, but funding for patients involved in mass tort litigation has begun to proliferate only recently, some experts say.
“There are a lot more mass tort cases, and the amount of money being paid out to plaintiffs is a lot higher than it was,” said Mark Fischer, chairman of the law firm Rawlings and Associates, which represents insurers with liens in personal injury cases. “If there's $30 billion being paid to anybody, there's a lot of people on the periphery figuring out how to get part of it.”
Companies making pelvic mesh implants are currently the targets of tens of thousands of lawsuits over the products, which have allegedly caused severe pain and even death. In April, Boston Scientific Corp. agreed to pay $119 million to settle nearly 3,000 cases and claims over its transvaginal surgical mesh products though the company did not admit to wrongdoing. In 2014, Endo International paid an $830 million settlement but also did not admit liability or fault.
Between those mesh cases and others, there's a pool of money for medical funders to dip into, Fischer said. Medical lenders have asked patients to pay as much as $62,000 to remove pelvic mesh implants, according to a Reuters investigation published this week. The standard insurance reimbursement rate for mesh removal surgery is between $2,000 and $7,000, according to Reuters.
But Mark Bello, CEO and general counsel of Lawsuit Financial Corp. based in Farmington Hills, Mich., which does medical funding, said in many cases the transactions are fair.
Bello has fielded inquiries from plaintiffs in pelvic mesh cases, though he has not yet funded surgery for one. He said it's necessary for companies like his to take the full cost of surgeries out of settlements even when the companies paid discounted rates for surgeries. That's because there's a risk that some patients involved in litigation might not get large enough settlements to fully reimburse his company or might not get settlement cash at all.
“What you're hoping for is that wins offset losses,” Bello said. “It isn't as profitable as some of the outside people looking in think it is.”
Bello said his company doesn't continue to pursue money from plaintiffs for surgeries if no settlement is reached. His company might also compromise if the settlement is lower than predicted. But he said not all his competitors do that.
David Rosenberg, a Harvard Law School professor who focuses on mass injury litigation, said it's certainly possible some patients are paying too high a price to surgery funders. One way to judge that might be to compare costs against what Medicare or Medicaid would pay.
Medicare and Medicaid also place liens on patients' settlements when paying for surgeries, Rosenberg said, although those lien amounts are for what the programs actually paid. Those programs, however, often face less financial risk than medical funders because they're federally funded.
“We have to know the economics better to know just how much is being charged to a person who, of course, is in pretty desperate straits,” Rosenberg said. “It's not impossible to think they're being overcharged by any means, but the mere fact you're paying double or triple doesn't necessarily tell us very much.”
Opponents of the medical funding industry, including some devicemakers, believe funders promote unnecessary surgery and cheat desperate and unsophisticated patients, according to the Reuters investigation. Ethicon, which makes pelvic mesh, said in a statement that medical treatment decisions should be made by a woman and her providers. “It can be a cause for concern when other parties or factors potentially interfere with that important relationship,” the company said.
But Bello said criticism of funders is merely devicemakers trying to deflect blame.
“Who's the bad guy here? The funding company that made the surgery possible?” Bello asked. “No, it's the people who made the bad product and refused to remove it for free.”