Baystate Medical sued over billing practices

Lawyers who are taking on the nonprofit hospital industry yesterday filed their first lawsuit in Massachusetts, claiming that Baystate Medical Center overcharges uninsured patients for medical care and uses aggressive techniques to collect its money.

Attorneys filed a lawsuit in US District Court in Boston seeking class-action status against the medical center in Springfield, the latest in a series of cases against 46 nonprofit hospital systems in 21 states over their billing practices of uninsured patients. Attorney Richard Scruggs, the Mississippi lawyer who helped win a $206 million settlement from the tobacco industry for the states, is coordinating a group of plaintiff's attorneys who are bringing the lawsuits.

Lead plaintiff Diane Harrington, 49, fell down some stairs two years ago, and was rushed by ambulance to Baystate, where doctors treated the cuts and bruises on her face and kept her overnight as a precaution. But when Harrington, who doesn't have health insurance, didn't pay her medical bill, the hospital's lawyers sued Harrington for $2,983.04, tacked on 12 percent annual interest, and threatened to seize her personal property, according to court documents.

Scruggs and his fellow attorneys argue the hospitals are violating their agreements with the federal and state governments to provide charity care for the poor in return for substantial tax breaks. Specifically, Scruggs says hospitals overcharge the uninsured and then use aggressive collection techniques, such as seizing their homes, to collect money they can't afford to pay.

Jane Albert, director of public affairs for Baystate, said the hospital doesn't comment on pending litigation, and that executives had not seen the lawsuit. But she said the hospital provides more than $15 million annually in free care for uninsured patients. The class action lawsuits also name the American Hospital Association as a defendant, saying it advises its members to engage in these billing and collection practices.

"Our view is that the lawsuits are misdirected and baseless," said spokeswoman Alicia Mitchell for the Washington trade and lobbying group for hospitals. "They divert focus away from the real issue of how we as Americans are going to extend health insurance to everyone."

Hospital billing practices are coming under growing scrutiny. Last month, congressional leaders began a series of hearings about whether hospitals should disclose their prices to consumers and about how hospitals bill and collect money from patients.

Hospital billing policies generally have a much greater impact on the poor and uninsured than on anyone else. This is because hospitals often charge the uninsured the full price, a sort of "sticker price," for medical care. But they significantly discount their prices for insured patients. Health plans negotiate these discounts in return for including the hospital in its approved network.

"The poor are paying more for medical than the rest of us," said Boston attorney Thomas Greene, who is Harrington's lawyer. "The hospitals are not putting money back into the community by providing charity care, like they're supposed to."

Hospital attorneys say that's generally not true. Stephen Weiner, a lawyer with the Boston firm Mintz Levin, which represents several large hospitals, said "the Internal Revenue Service guidelines with regard to what makes a hospital a charity don't support the position the plaintiff lawyers are taking."

While free care, or charity care, is a component, he said, the IRS looks at many other factors when providing nonprofit hospitals with tax breaks, including whether they provide emergency rooms that are open to the public, if their boards are representative of the community, and whether they provide health education programs. "Free or discounted medical care is helpful, but it's not a requirement," he said.

Massachusetts healthcare executives don't have a good handle on the problem of aggressive hospital billing here, although many believe it's less severe because of the state's so-called free-care pool. The special fund helps uninsured and sometimes even insured patients pay all or part of their medical bills, based on a sliding income scale. Even middle-class patients can get some help when facing huge hospital bills. And many hospitals complain they lose thousands of dollars because the free-care pool only reimburses part of their costs.

But apparently even in Massachusetts, the free care system has holes for patients.

Greene wasn't sure why Harrington apparently didn't get "free care." It could be because she lived in New Jersey at the time and was visiting her sister in Springfield when she fell down the stairs at her apartment building. Harrington, a temporary laborer for a firm called Labor Ready, did not have the money to pay the hospital bill -- even though Baystate offered to allow her to pay $50 a month, Greene said.

"I agree that Massachusetts is a cut above any other state I'm aware of in terms of making sure people aren't being gouged," Scruggs said. "But the ingenuity of hospital administrators and the groups going around showing them how to maximize profits knows no bounds either."

Scruggs said he considers suing hospitals that: Have lots of cash and assets, use highly aggressive collection techniques, and charge uninsured patients more for medical care then they do patients with insurance or Medicare and Medicaid, the federal and state programs for the elderly and poor. He said his goal is to force a national standard dictating how much charity care hospitals must provide, and prohibiting them from charging uninsured patients more than they charge the Medicare program.

"Sadly we find systems that are really unaware of the impact their policies have had on families with inadequate coverage," said Catherine Dunham, president of the Access Project, a healthcare advocacy organization affiliated with Brandeis University. "I honestly don't think they intend to create this kind of trouble. They're caught in a bind between being corporate medical institutions and nonprofits."

Liz Kowalczyk can be reached at kowalczyk@globe.com.