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Inova Sued Over Charging Practices

Uninsured demand equal charges for equal service.

A local man without health insurance says Inova Health System charged him five times what they would have charged a patient with insurance, billing more than $29,000 for a single day in the hospital.

The man is part of a series of lawsuits nationwide that name Inova Health System and 50 other non-profit hospital groups in 23 states. The lawsuits claim the hospital groups bill patients with and without health insurance different rates, charging those without health coverage much more.

A suit was recently filed in Alexandria Federal District Court questioning the practice of charging different fees for the same medical procedures depending on whether or not the patient has medical insurance.

In addition to Inova Health Systems, Inova Health Systems Foundation and the American Hospital Association [AHA] are also named as defendants.

"From our perspective these suits are misdirected. They will divert the focus away from how we, as a nation, can extend health coverage to all Americans," said Alicia Mitchell of the American Hospital Association.

Inova issued a statement saying, "We believe the lawsuit is without merit and we plan to vigorously defend it. Throughout our long history, Inova has cared for the people of Northern Virginia regardless of their ability to pay."

One of the lead attorneys for the locally filed suit, Bryan Vroon of Vroon & Crongeyer, Atlanta, Ga., argues just the opposite. "Non-profit hospitals should not charge inflated rates to uninsured patients. The reason they do it is to make a profit," he said.

THE NORTHERN VIRGINIA case cites Paul Shipman of Herndon as the plantiff. "Mr. Shipman was taken to Inova Fairfax Hospital for a cardiac catheterization. He spent 21 hours in the hospital and received a bill in excess of $29,000," Vroon said.

"An insured patient, one who had either private insurance or Medicare, would pay only a fraction of that. The reason is that when hospitals negotiate with insurance carriers they work from their percentage discount off the gross highest charges," Vroon said.

Inova said that in 2003, the hospital group had more than $100 million in unreimbursed costs for care provided to uninsured, underinsured and Medicaid patients.

Inova also reported that in January, 2004 the hospital group instituted a policy to provide a 35 percent discount to patients without insurance.

"My actual bill should have been about $6,000. We offered to pay $5,000 last August. They just laughed and said no way. Technically, they charged me five times the amount it should have cost," Shipman, said. "We were only offered a 15 percent discount after a series of calls."

However, his procedure was performed prior to the institution of the 35 percent discount policy.

"My income at the time was approximately $65,000 per year. That was before taxes and other expenses. My wife was going to college at the time and my employer did not offer health insurance," Shipman said.

Shipman, now 43, a former sales representative for Oak Post Furniture is presently unemployed due to the company closing the store where he worked. Prior to becoming part of the class action suit Shipman said, "We were getting calls at least four times a week trying to collect the bill."

ANOTHER ELEMENT of the suit maintains, "They (Inova) also utilize aggressive, abusive and humiliating collection practices to recover these inflated medical debts from the Plaintiff and the Class." This dunning, according to the brief, violates Inova's compact with the government for non-profit tax status.

"Such charging, collection, and patient care practices violate Inova's agreement with the United States Government, the Commonwealth of Virginia and local governments to provide mutually affordable medical care ... in return for substantial federal, state and local tax exemptions," the plaintiff's brief said.

"Inova has further conspired with their collection agents and debt collectors to collect inflated deceptive debts which are in violation of the Fair Debt Collection Practices Act. Inova has been unjustly enriched at the Plaintiff's and Class's expense, warranting the imposition of a constructive trust on their wrongfully obtained tax savings, assets, and profits," the suit states.

In addition to the alleged overcharging based on lack of insurance, the law suit challenging the tax exempt status applicability of each of the defendants.

"Inova has applied for and received a federal income tax exemption as purported 'charitable' institutions" under the Internal Revenue Code.

"Inova is required to operate 'exclusively' in furtherance of a charitable purpose, with no part of its operations attributable directly or indirectly to any noncharitable commercial purpose," according to the suit.

By accepting this tax status, plaintiff's lawyers said, "Inova explicitly and/or implicitly agreed … to provide mutually affordable medical care to all its patients" and "to charge all its uninsured patients only a reasonable cost for medical care; not to charge its uninsured patients inflated rates …; not to charge its uninsured patients a higher rate for medical care than its insured patients …; and not to pursue outstanding medical debt from its uninsured patients through humiliating collection efforts."

The suit applies the same arguments to Inova's receipt of special tax breaks from state and local governments. This applies to "local income, property and sales tax exemptions."

In juxtaposition, Inova said, "In 2003, Inova incurred costs of more than $100 million in uncompensated care to uninsured and underinsured patients. That is costs, not charges, that were not reimbursed from Medicare, Medicaid, etc."

They also said, "Our mission is to care for everyone in our

community, regardless of their ability to pay. Our financial counselors work with patients to assist them with the billing process."

IN RESPONDING to requests for information as to its defense of this suit, Inova submitted their 2003 Community Report which details their myriad programs geared to providing health services to the Northern Virginia community. The report did not address two of the three primary elements of the suit:

* The disparity of charges between insured and uninsured patients for the same medical procedures.

* The accumulation of profits both in terms of capital and assets as a tax exemption entity.

* Their responsibility to provide care to all regardless of ability to pay which is coupled to their tax status.

As to the third element, the report did provide various examples of their efforts such as, "Partnership for Healthier Kids connected 3,490 uninsured children to health care services and provided preventive services to 9,000; the OB/GYN Clinic at Inova Fairfax Hospital serves more than 2,000 expectant mothers during third trimester; Inova Pediatric Center provides primary care for children of low income families with over 13,000 visits per year; and others."

How to address costs to the uninsured, that are not charity cases, is at the heart of the case.

Plaintiffs' lawyers said, "About 786,000 Virginians do not have health insurance. … the uninsured are almost entirely under age 65."

VROON AND the other plaintiff lawyers in the IHS suit claim in the "Facts" section of their brief: "Inova is one of the largest healthcare providers in Virginia" and "Based upon the latest available information from their Form 990 and financial statements Inova has net assets exceeding 1 billion dollars." The Form 990 is the federal income tax form applicable to non-profit organizations.

They also said, "Inova and its "nonprofit" confederates across the country who employ the same business model have thereby amassed and hoarded billions of dollars in cash and marketable securities ... Moreover, enormous property and revenues have been isolated from taxation, the effect of which has bestowed upon Inova and its confederates greater liquidity than that possessed by most state and local governments."

Plaintiff attorneys also charge, "Inova provides substantial discounts for noncharitable private insurers" and "Inova realizes substantial revenues from this discriminatory charging practice." The brief states, "These discounts violate" the hospitals 501 (c)(3) tax status which prohibits "operating directly or indirectly for noncharitable commercial purposes."

Last February, AHA asked the federal government to clarify the Medicare rules and regulations pertaining to negotiated discounts.

The government gave "the green light" for hospitals to offer such discounts for the group of persons that fall into a "limbo area" of no insurance but above the level to qualify for charity care, according to AHA.

"NATIONALLY SOME of the hospitals have filed a motion to dismiss and we expect others to follow. However, there is a hearing scheduled near the end of September in Philadelphia to hear arguments on combining the suits into one," Mitchell said.

Last year Congress held hearings on the subject of hospitals charging different amounts for the same procedures based on whether the patient was insured or not. Following those hearings, AHA issued an advisory to its member hospitals entitled "Hospital Billing and Collection Practices," according to Mitchell. It stated:

"The mission of each and every hospital in America is to serve the health care needs of people in their communities 24 hours a day, seven days a week... America's hospitals are united in providing care based on the following principles:

* Treat all patients equitably, with dignity, with respect and with compassion.

* Serve the emergency health care needs of everyone, regardless of a patient's ability to pay for care.

* Assist patients who cannot pay for part or all of the care they receive.

* Balance needed financial assistance for some patients with broader fiscal responsibilities in order to keep hospitals' doors open for all who may need care in a community."

AHA's advisory also states, "While most Americans have insurance coverage ... America's hospitals treat millions of patients each year who can make only minimal payment, or no payment at all. In the absence of adequate insurance coverage for all, America's hospitals must find a way to serve both and survive."

AHA points out, "A vast and confusing array of federal laws, rules and regulations make it much more difficult than it should be for hospitals to respond to the concerns of patients of limited means ..." In response to that situation, AHA issued the following guidelines to aid hospitals to "better serve their patients."

Entitled "Helping Patients with Payment for Hospital Care" they concentrated on five categories to provide hospital administrators with guidance. They were:

* Communicating effectively. This urged hospitals to more

clearly explain charges and billing practices to their

patients.

* Helping patients qualify for coverage. This emphasized the need to make patients aware of hospital-based charity care policies.

* Ensuring hospital policies are applied accurately and consistently.

* Making care more affordable for patients with limited means. "Hospitals should have policies to offer discounts to patients who do not qualify under the charity care policy for free or reduced cost care ..."

* Ensuring fair billing and collection practices. Define the standards and practices to be used by outside collection agencies. Have written policies as to when and under what circumstances any patient debt is "advanced for collection."

AHA states, "Hospitals exist to serve. Their ability to serve well requires a relationship with their communities built on trust and compassion."

By contrast the suit alleges, "Inova has used and abused state law and procedures to enforce their discriminating charging system against their uninsured patients."

The next step will occur in Philadelphia when the court decides if the 50 suits will be combined or remain as separate entities.