Healthcare Financial Management Association CPE Seminar December 12, 2018

Transcription

1 Healthcare Financial Management Association CPE Seminar December 12, 2018 Recent Legal Developments Affecting Hospitals Kevin A. Crass William M. Griffin, III Topics: 1. Northwest Arkansas hospital settles class action; 2. Recent Arkansas court rulings regarding the Doctrine of Charitable Immunity; and 3. Issues concerning litigation hold letters and document retention policies. 1

2 NWA Hospital Class Action Settlement Mounce, et al v. CHSPSC, LLC, et al In 2013, Plaintiff was treated in the ED for injuries she attributed to a car accident. She reported that she was not at fault. Plaintiff had medical insurance through an ERISA-based employer benefit plan contracted with AR BCBS. Signed Conditions of Admission and Consent to Medical Treatment form Granted the hospital rights to proceeds of all claims resulting from the liability of a third party, and Included a statement that the patient was responsible for any charges not covered by insurance. 2

3 Mounce Plaintiff s ED bill was not submitted to insurance within the 180-day claim period, and a lien was filed for the full amount of charges billed ($6,104.96). The hospital had a provider agreement with BCBS that included, among other things, negotiated charges, that claims must be made within 180 days, and that the hospital could not attempt to recover money in excess of negotiated prices, which would be a violation of the provider agreement. Plaintiff settled the lawsuit from the car wreck for $16,000. Her attorney negotiated the lien amount to $3,052.48, which Plaintiff paid from the settlement proceeds. Allegations in the lawsuit: Hospital s billing practices violated the Arkansas Deceptive Trade Practices Act ( ADTPA, A.C.A , et seq.) Tortious interference with business expectancy/contract (interfered with her right to receive the benefits of PPO membership with BCBS) Unjust enrichment (filed lien against her settlement proceeds in an amount more than she would have been charged when she owed no underlying debt [i.e., it would have been paid by her insurance company and she would have owed nothing to the hospital]) 3

4 ADTPA, Effective 8/1/17 Prohibited individual from bringing class-action claim under this statute unless the claim is being asserted for a violation of the Arkansas Constitution (A.C.A (f)(1)(B)) Court said that while this provision is procedural in nature, and therefore should be applied retrospectively to Mounce, it conflicted with F.R.C.P. 23, which trumps any state law also procedural in nature and allows class-actions to be filed in all civil actions in U.S. district courts. (Relying on Shady Grove Orthopedic Assoc., P.A. v. Allstate Ins. Co., 559 U.S. 393 (2010)). Court granted class certification (gave substantial weight to the fact that the hospital s billing and lien policy as to car-accident victims was applied uniformly to all approx. 850 potential class members) This protection would not extend to actions filed in state court. Hospital s Defenses: Voluntary Payment Defense Court found there was an issue of fact as to whether exceptions to the voluntary payment rule applied, including duress, mistake of fact, fraud, coercion, and extortion, on the representations that: Her health insurance would be hilled for her treatment; She owed the hospital a debt for the full amount of her bill; The lien for the full amount of the bill was valid; and She owed the hospital money after the BCBS 180-day deadline. Court also found that the voluntary payment defense did not apply to statutory claims, including those made under the ADTPA. 4

5 Hospital s Defenses: Arkansas Medical, Nursing, Hospital, and Ambulance Service Lien Act (A.C.A , et seq.) Court made the following findings: The hospital has statutory lien rights under these circumstances Statute, as well as the admission form, does not require the hospital to file a claim with the patient s insurance before filing a lien or to collect against any insurer in any particular order Contract with BCBS did not require that claims be filed with them and specifically grants a lien to providers for Third Party Liability However... Hospital s Defenses: Arkansas Medical, Nursing, Hospital, and Ambulance Service Lien Act (continued) The Court found that the statute did not authorize the hospital to bypass: 1. The contractually negotiated rates; 2. The provision that the hospital could not attempt to receive excess payment from the patient over the negotiated rates; and 3. The 180-day claim requirement. 5

6 Hospital s Defenses: Plaintiff could not prove actual damage or injury as a result of an offense of violation of the ADTPA because the Admission Form provided the appropriate disclosures The Court found there were material disputes of fact as to whether: The Admission Form was deceptive or misleading (Plaintiff claimed it implied the hospital would bill her insurance company first and only after that would it seek payment from her on remaining balances); The billing practice was deceptive for patient s with proof of insurance; The defendants acted deceptively when they did not inform Plaintiff that they did not charge her the rates negotiated with BCBS and did not submit the medical bill to the insurance company for payment. Thoughts and Questions 6

7 Charitable Immunity in Arkansas Brief History The doctrine is premised on the idea that the assets of organizations that exist for charitable purposes should be protected because the organization exists to benefit the public and taking assets would deplete the resource. In 1906, the Arkansas Supreme Court published a decision stating, Whatever privileges or exceptions may be granted to such charities by the state are not gratuities; for without schools, hospitals, churches and libraries we should soon relapse into a state of semi-barbarism, which would not be for the public good. Fordyce v. Women s Christian Library Ass n, 79 Ark. 550, 96 S.W. 155, 159 (1906). 7

8 Basic Principles - Historically, it is an issue of law for the judge, not an issue of fact for the jury. - Under this doctrine, charitable entities are immune from suit as well as liability. - As a result, plaintiffs must pursue an action against a charitable entity under the Arkansas direct action statute against the entity s insurance carrier, if applicable. - For this reason, insurance carriers must be named-defendants in the complaint before the statute of limitations expires. Eight Masterson Factors, Whether the organization s charter limits it to charitable or eleemosynary purposes 2. Whether the organization s charter contains a not-for-profit limitation 3. Whether the organization s goal is to break even 4. Whether the organization earned a profit 5. Whether any of the profit or surplus must be used for charitable or eleemosynary purpose 8

9 Eight Masterson Factors, Whether the organization depends on contributions and donations for its existence 7. Whether the organization provides its services free of charge for those unable to pay 8. Whether the directors and officers receive compensation 9. Whether the charitable form for has been abused (Additional factor added in Watkins v. Arkansas Elder Outreach of Little Rock, 2012 Ark. App. 301.) Neal v. Davis Nursing Ass n (2015) Arkansas Court of Appeals Findings on the factors weighing against immunity: - Followed charitable business approach, but could not state Davis s goal was to break even; (Factor 3) - Company operated at a loss, but reasonable minds could question whether the records were manipulated; (Factor 4) - Statement that any surplus gained would be reinvested was not enough; (Factor 5) - Forgiving uncollectable debt was not equivalent to providing services free of charge to those unable to pay (Factor 7) - Davis received only $100 in 2012 and 2013 as donations (Factor 6) - Reasonable people could disagree as to whether Davis abused the charitable-entity form because Davis Life Care Services (non-profit) was operating as a holding company for various for-profit companies providing services to the nursing home (Factor 9) 9

10 Neal v. Davis Nursing Ass n Issue of whether Davis Life Care Services was entitled to charitable immunity was tried to a jury. Trial was bifurcated and lasted three days. Jury ruled it was not entitled to immunity. Davis appealed arguing: A jury trial was improperly held on this issue; The jury was improperly instructed; and Substantial evidence did not support the jury s verdict. Davis Nursing Ass n v. Neal (2018) Arkansas Court of Appeals findings: Charitable immunity often involves facts on which reasonable persons could reach different conclusions and, therefore, the decision to hold a jury trial on Davis s entitlement to charitable immunity was affirmed. Arkansas does not have model jury instructions on charitable immunity, but declining to include the defendant s proffered instructions that included references to case law was not an abuse of discretion by the trial court judge. The additional instructions emphasized certain factors over the others, which the court found was improper. Providing the Masterson factors was sufficient. 10

11 Davis Nursing Ass n v. Neal (2018) Arkansas Court of Appeals findings: Jury s verdict was supported by substantial evidence. Court explicitly states that it was persuaded by these facts Davis s gross revenue ranked in the middle of other nursing homes in Arkansas in terms of profitability. It receives minimal cash donations. Davis received $1,645 of total donations in 5 years vs. $40 million in gross revenues. Most compelling based on free-care factor. Davis failed to establish that forgiving uncollectable debt is equivalent to providing free services. Amount of debt forgiven ( only unreimbursed care ) by those who do not or cannot pay was miniscule in comparison to Davis s overall revenue. Ample evidence that Davis admits patients with the presumption that they will pay. Davis Nursing Ass n v. Neal (2018) Arkansas Court of Appeals Dissent by Judge Harrison: Jury was confused by the charitable immunity decision during deliberations. Ex: I have a question about Charitable Immunity? ; Are payments from Medicaid and Medicare retroactive after admission? ; What is the definition of Charitable Immunity? No information was provided to the jury in response to these questions. Including case law in proffered jury instructions was not improper. Immunity will be another lingering point of disagreement and costly litigation for all parties in this area of the law. Increasingly persuaded that courts, not juries, should decide the immunity question while using a fair, clearly defined, and more efficient process. 11

12 Thoughts and Questions Litigation Holds & Retention Policies 12

13 Litigation Holds & Retention Policies - Which retention policies are involved based on the documents, materials, or other information requested? - What are the relevant documents? - Who should be informed of the hold? - Where is the information stored? - How is it stored? What is the native format? - Does the hold need to be renewed? WILLIAM MELL GRIFFIN III Partner I Litigation Phone: griffin@fridayfirm.com Website: /attorney/griffin KEVIN A. CRASS Partner I Litigation Phone: crass@fridayfirm.com Website: /attorney/crass 400 West Capitol Ave. Suite 2000 I Little Rock, AR North Futrall Dr. Suite 103 I Fayetteville, AR South Pinnacle Hills Pkwy. Suite 301 I Rogers, AR