The Indiana Supreme Court has disagreed with the Court of Appeals and affirmed a trial court’s dismissal of a declaratory action in the case of Allen v. Clarian Health Partners (pdf). (See my prior blog post here.)
If a price term is sufficiently vague in a contract, courts impute an agreement to pay a “reasonable” price for the goods or service. Plaintiffs argued that since the agreement they signed for hospital services did not specify a price, their agreement was to pay the reasonable price of services. When the hospital charged them more than the reasonable price, the patients argued that the hospital had breached the contract and requested a declaratory judgment to that effect. The trial court dismissed the action for failure to state a claim. The Court of Appeals disagreed, holding that because the contracts did not specifically reference the chargemaster or other extrinsic document (and noting that the chargemaster was not, in any case, a document available to a patient), the contract was open ended and, therefore, ambiguous as to price, meaning that a reasonable fee would be imputed.
The Indiana Supreme Court disagreed, deciding that, when you sign such an agreement with a hospital, you are really agreeing to pay – not the reasonable price – but, rather, whatever the hospital’s chargemaster says. The Indiana Supreme Court did not, however, address this difficulty highlighted by the Indiana Court of Appeals:
As we have already noted, Clarian contends that the chargemaster rates are “unambiguous” and “express[,] binding obligation[s]” on Allen and Moore. Appellee’s Br. at 5. But at oral argument counsel for Clarian stated that Clarian considers its chargemaster rates confidential and proprietary. Left unanswered by Clarian is how a patient and a provider can mutually agree to an “unambiguous” and “express” chargemaster fee schedule that is not available to the patient.
The decision was 5-0. Hopefully this at least undermines hospital claims that their chargemasters are confidential, proprietary, and/or trade secrets of some sort. One of the problems with our health care system is that pricing is so opaque.
In 1994 I was diagnosed with Multiple Sclerosis and hospitalized for nine days. I did not have health insurance—my bad. (btw, the bill was paid, but read on.) My hosts were aware bth of my lack of insurance and my occupation (one presumably in which I hauled down as much as Arnold Becker’s character in “L.A. Law.”) As a consequnce my hosts were concerned enough about my health to run up charges they reasonably would have known an insurance carrier would not have approvde. For example, I was put through four MRIs. MRIs are an important tool for diagnosis of MS. However, a carrier only would approve two. Also, I was put through three of those in the middle of the night and when my wife was not present to question personnel. (I was a little out of it.) I could not walk. The facility scheduled me for upper-body therapy so I could learn how to use my hands again. (My hands were fine; I did not object to matters related to therapy of my legs.) At every turn they jacked the bill. The facility wanted me to sign a promissory note—as I lay in bed half out of it from meds. I said no. On the next-to-last day I was told that, unless I signed the promissory note, I would be—their words—“shipped off to Wishard.” Upon my release I promptly sent a payment for fifty dollars ($50) with a note on the reverse side of the check that it was the first of my weekly installments, etc. By the time their legal department found out, I had made three or four payments. I said that was accord and satisfaction. Under Indiana law there are cases that hold as such. We challenged the overcharges. We had leverage because of the installment plan. They dropped a lot of the overcharges. They would not have done so had I either signed the note or not made the weekly payments. This decision of our State’s high Court is imprudent. As a lawyer, under our Rules of Professional Conduct, that is the limit to which I believe I can criticize a decision of an Indiana Court, to say that I believe it is imprudent.
Since I am an attorney writing under a nom de blog, I can call this decision and abomination.
Doug, you are correct, chargemasters are proprietary and confidential. And often not prepared by the hositals( who often have no clue what their costs are) and are purchased from medical price data companies.
There are many things that are unique about the healthcare markets, but these five men likely understand little about the “uniqueness.” This decision was probably taken nearly word for word from the Hall Render brief on behalf of the Indiana Hopital assocuation.
Just one more reason why this nation needs single payor healthcare. Give the government monopsony power, cut admin fees to about 2%, and squeeze providers until they do what they need to do. Cut costs, align inventives, and reduce unneccssary services.
Doug, your blog and your statement in this thread got a plug in the Fort Wayne Journal Gazette today. It is on the Editorial Page under the “Futhermore” caption.
Congrats…
Thanks for the heads up! The link is here. That small editorial kind of garbles what the Supreme Court said versus what the Court of Appeals had said about the same case.
I can summarize this decision, in two sentences:
Hospital adhesion contracts are legally valid. We’re Judges and
so as long as we are at least Senior Judge status with great health
care benefits, we really don’t care about the rest of you.
Indiana courts are establishment-friendly and almost always favor the party with the greatest economic power.