Phoenix, Arizona – “Today is the best day I’ve ever had being a lawyer,” said Geoffrey Trachtenberg, one of the managing partners at Levenbaum Trachtenberg, PLC.
Trachtenberg and his lawyer-colleague, Lance Entrekin, spearheaded a nearly four year long legal battle against Arizona hospitals who were failing to adhere to federal law by collecting tens of millions of dollars from sick and indigent AHCCCS patients. The hospitals were doing this by filing “healthcare provider liens” against the injury settlements of AHCCCS patients who were involved in accidents or other mishaps. In most cases, these patients were injured through no fault of their own and, because their income was at or below the federal poverty guidelines, they qualified for acute hospital treatment under AHCCCS.
In legal circles the hospital’s practice is known as “balance billing,” which refers to a healthcare provider who is paid a portion of their bill from an insurer, such as Arizona’s AHCCCS program (Medicaid), and then seeks to recover the “balance of the bill” from the patient. Under federal law and applicable regulations, hospitals who participate in the AHCCCS program agree that they will accept payment from AHCCCS as “payment in full” which means they will not attempt to “balance bill” or otherwise collect from the AHCCCS patient.
The hospitals filed these “healthcare provider liens” anyway. They claimed that a provision in Arizona’s state law permitted the practice, but typically offered to release the liens for a “discounted amount.”
When confronted with the demand to either pay the “discounted amount” or litigate against a hospital while having their injury settlements frozen in the meantime, indigent AHCCCS patients lacked the resources to fight and uniformly buckled under the financial pressure.
So several years ago, Trachtenberg and Entrekin filed a class action lawsuit to preclude the hospitals from continuing the practice and requiring them to return the proceeds that they unlawfully collected.
While the lower court concluded that the practice was illegal, the court refused to order the hospitals to return the money they had unlawfully collected under a legal theory called “accord and satisfaction.” “The trial court essentially concluded that, even though the practice violated federal law, ‘a deal is a deal,’” said Trachtenberg. The lawyers appealed that portion of the case to the Arizona Court of Appeals, arguing that you cannot enforce an unlawful contract.
Trachtenberg explained, “We used the analogy that the hospitals were like muggers. That they essentially said ‘empty your wallet’ to AHCCCS patients, but later said ‘hey, why don’t you keep 90% of what’s in your wallet and we’ll call it a deal?’” While the Court of Appeals did not call the hospitals muggers, they did analogize the hospitals’ argument to “two corporations [who] agreed to defraud a third party and split the ill-gotten gains.”
In the end, the Court of Appeals concluded that the practice was indeed unlawful and that the hospitals will not be able to retain the unlawful collections. The Court explained that, “[s]ince the liens themselves are void under federal law, the accord and satisfaction agreements are also unenforceable.”
“This means that thousands, if not tens of thousands, of AHCCCS patients will potentially be getting money back from the hospitals that they were not required to pay,” said Trachtenberg.
Attached is the Court of Appeals opinion.