How a Colorado Supreme Court Opinion on Hospital Pricing Empowers Employers and Working Americans
A hospital's price should be "reasonable" if it is not provided up front, the Court said. That's not the way American hospitals have been operating.
I’m proud to be from Colorado – a state known for its big sky, majestic mountains and now a Supreme Court that shot down hidden and unreasonable hospital prices.
The Colorado Supreme Court’s May 16 opinion created a lot of headlines, but the coverage generally missed an important point that stood out to me.
Here’s my big takeaway. If patients don’t get a price at the time of service, the Court said, the law says the price should be “reasonable.”
That’s sensible and fair — and a rebuke to the way the health care system has been operating. Hospitals and other health care providers rarely provide the prices up front. Then, when the bills arrive, the prices are often quite unreasonable.
For anyone unfamiliar with the case – here’s an overview. Lisa Melody French, a clerk, was not given the price before her spinal fusion surgery at a Centura Health hospital. The hospital estimated before the operation she would be responsible for $1,336 after what her insurance paid. She put $1,000 down and had the operation. But then Centura said it had made a mistake. French’s insurance plan was out-of-network, so she didn’t qualify for any discount off its “chargemaster” list prices. Thus — in a move that illustrates the cruelty of the business of American medicine — it stuck her with the full chargemaster rates. The total bill was more than $300,000!
French’s insurer paid the hospital $73,597.35. That should have been plenty, but Centura had the audacity to balance bill French $229,112.13. Then, when she couldn’t afford to pay, the hospital sued her to collect!
Centura lost in the trial court, where the jury ruled that French only needed to pay an additional $766.74. The appellate court sided with Centura, which led to the Supreme Court showdown.
The Supreme Court determined that the jury in the trial court had made the right decision. The hospital hadn’t given French the price up front, the Court pointed out in its opinion. When parties have entered a contract to provide services, but there’s no price, “it is a general rule that the court is required to determine the price on the basis of the reasonable value of [the services…],” the Court wrote in its opinion (screenshot below).
My book, “Never Pay the First Bill: And Other Ways to Fight the Health Care System and Win,” includes a chapter on how consumers can defend themselves by suing predatory billers in small claims court. (It’s been delightful to see them do so and win.) I cite the Open Price Term, which is part of our country’s Uniform Commercial Code, the law that governs commercial transactions in the United States. The Open Price Term (screenshot below) says if a price isn’t set at the time of service, it will be a “reasonable” price.
The Open Price Term gives us strong legal basis to contest unreasonable bills where the prices were not provided up front.
The Colorado Supreme Court showed that the trial court jury was correct when it ruled in French’s favor. “…The price term of the parties’ agreement was left open, and the trial court properly allowed the jury to determine the reasonable value of Centura’s services here,” the Colorado Supreme Court opinion said (screenshot below).
To sum up the case: A Colorado hospital didn’t provide the price up front, and then sent a bill that wasn’t reasonable. The Colorado Supreme Court said, “Nope.”
Here’s how this empowers employers and working Americans. Their health care prices are often unreasonable. Working Americans may pay two-times more, five-times more, even 10-times more than Medicare patients. This is common knowledge and has been accepted in the industry. They also often pay more than the cash prices - which is not as well known.
Plus, those exorbitant prices are not being provided at the time of service. And that means if they are not “reasonable” they do not comply with the Open Price Term.
So that raises the big question. How do we determine a “reasonable” price? It’s often easy. Hospitals are now required to post their prices on their websites, thanks to the Hospital Price Transparency Final Rule. Where they are complying, they are exposing their unreasonable prices. I speak across the country about how to empower employers and health care consumers. This year I’ve been to Atlantic City, Cleveland, Las Vegas, Oklahoma City and more. The unreasonable prices are everywhere - in every city. Check your local hospital’s prices and you’ll almost certainly see the same.
I like to use diagnostic colonoscopies to show price variation, because they are an apt metaphor for the health care system’s exploitation of the American workforce. Here are a few examples that show unjustified price variation for colonoscopies at three hospitals. Again, the question here, related to the Colorado Supreme Court opinion, is what is a “reasonable” price for a colonoscopy?
I’m not singling out these three hospitals for doing something unusual. This same unreasonable and unjustified price variation exists for procedures at pretty much every hospital nationwide.
This may be ordinary to the industry, but let’s call this what it is. Employers and working Americans are being exploited financially by our health care system. Meanwhile, 1 in 6 Americans has medical debt in collections and medical debt is a leading cause of bankruptcy.
So what is the “reasonable” price for these colonoscopies? It’s hard to set a price, but here’s a sensible principle. I say it’s not reasonable to expect one patient to pay more than any other patient for the same service at the same hospital.
Making some patients pay more than others is price discrimination based on their health insurance coverage. We don’t accept this type of discrimination as “reasonable” in other consumer transactions, so we should not say it’s reasonable in health care. That’s a fundamental argument I make in my book, and it’s the argument my readers are using to get big discounts in their health care billing disputes.
Employers have a huge opportunity here. What if every employer sponsored health plan challenged every excessive bill in a case where the price wasn’t delivered to the patient up front? What if employers said they want to make sure people on their health plans are not paying more than anyone else pays for the same services at the same hospital? Employers have a lot of leverage. That’s particularly true in Colorado, where the Supreme Court has said prices need to be reasonable if they are not provided up front. But the same common sense and legal argument exists outside Colorado, too.
The problem isn’t that employers and working Americans can’t win these fights. The problem is that they have barely been fighting. So let’s get to it! It’s time to demand fairness in health care pricing. The Colorado Supreme Court has given us its stamp of approval and shown us a path forward.
Health care cruelty: Lisa French’s $229,112.13 hospital bill only makes sense in the twisted and absurd, upside-down world of American health care billing. It makes no sense in a world where we expect people to be treated in a way that’s fair and morally right.
I don’t know French or her annual income. But she’s identified as a clerk. So let’s say her salary is $50,000 a year, the median income for an individual in Colorado. That would put the hospital’s balance bill at more than four times her annual income.
It took some nerve for Centura – which has the tagline “Whole person care is our specialty” on its website – to send French the bill. It was even more audacious to sue her.
This case could be Exhibit A for the moral problem that’s undermining American medicine.
The Never Pay Pathway videos are complete — and getting applause! I spoke yesterday at the Demystifying Healthcare Costs 2022 event sponsored by Mitigate Partners in beautiful Boca Grande, Florida. I had the pleasure of showing the first video in The Never Pay Pathway series as a sneak preview of the curriculum. It was met with applause and enthusiasm!
The video curriculum includes 16 videos, between 3-6 minutes each. They cover the material in my book - understanding medical bills, getting itemized bills with billing codes, contesting unfair charges, avoiding unnecessary treatment, winning insurance company appeals, utilizing hospital financial assistance policies and more. Thanks to the generous donations to my crowdfunding campaign, the videos are beautifully illustrated and animated and visually interesting. And they are loaded with practical tips to protect consumers from the financial pitfalls of the system.
We are in the process of prepping a few things internally but hope to roll the videos out soon. The people who supported our crowdfunding and who pre-ordered will get the first look. Stay tuned - and let me know if you have any questions!