Summary: Aggressive collection tactics by a large bariatric surgery practice exemplify widespread problems with our health insurance: complex payment arrangements, confusing and misleading financial contracts, widely variable prices, medical debt, expensive litigation, and rising private equity.
Lose Weight, Gain Huge Debt: NY Provider Has Sued More Than 300 Patients Who Had Bariatric Surgery
KFF Health News
April 20, 2023
By Fred Schulte
Seven months after Lahavah Wallace’s weight loss operation, a New York bariatric surgery practice sued her, accusing her of “intentionally” failing to pay nearly $18,000 of her bill. …
Wallace denies the allegations, which the bariatric practice has leveled against patients in hundreds of debt-collection lawsuits filed over the past four years, court records in New York state show.
In about 60 cases, the lawsuits demanded $100,000 or more from patients. Some patients were found liable for tens of thousands of dollars in interest charges or wound up shackled with debt that could take a decade or more to shake. Others are facing the likely prospect of six-figure financial penalties, court records show. …
[Wallace] said she turned over checks from her insurer to the bariatric group and was stunned when the medical practice hauled her into court citing an “out-of-network payment agreement” she had signed before her surgery.
“I really didn’t know what I was signing,” Wallace told KFF Health News. “I didn’t pay enough attention.” …
The bariatric group has cited these out-of-network payment agreements in at least 300 lawsuits filed against patients from January 2019 through 2022 demanding nearly $19 million to cover medical bills, interest charges, and attorney’s fees, a KFF Health News review of New York state court records found. …
In most cases, the medical practice had agreed to accept an insurance company’s out-of-network rate as full payment for its services — with caveats, according to court filings.
In the agreements they signed, patients promised to pay any coinsurance, meeting any deductible, and pass on to the medical practice any reimbursement checks they received from their health plans within seven days.
Patients who fail to do so “will be held responsible for the full amount charged for your surgery, plus the cost of legal fees,” the agreement states.
That “full amount” can be thousands of dollars higher than what insurers would likely pay, KFF Health News found — while legal fees and other costs can layer on thousands more.
Wallace, the Brooklyn legal assistant, was billed $60,500 for her lap sleeve gastrectomy, though how much her insurance actually paid remains to be hashed out in court.
Michael Arrigo, a California medical billing expert at No World Borders, called the prices “outrageous” and “unreasonable and, in fact, likely unconscionable.” …
Private Equity Arrives
In August 2019, the private equity firm Sentinel Capital Partners bought 65% of the MSO for $156.5 million, according to Garber’s affidavit. The management company is now known as New You Bariatric Group. The private equity firm did not respond to requests for comment.
Comment by: Jim Kahn
This exposé of one firm exposes problems that plague all of health care. The aggressive legal tactics employed by this surgery practice drew press attention because they’re so egregious and extensive. But the fundamental issues permeate our insurance system.
1) Complex payment arrangements: Scores of public insurance programs (Traditional Medicare with and without direct contracting, Medi-gap policies, Medicare Advantage and Medicaid plans in profusion) and thousands of private insurance plans from work and ACA exchanges. Out-of-network payments regulated by ambiguous laws. All of this contributes hugely to more than $600 billion per year in excess administrative costs.
2) Confusing and misleading financial contracts with patients: The patients of this bariatric surgery practice were told that it would accept out-of-network payments offered by insurers … except if … here’s the fine print … they failed to take care of all tasks within 7 days, in which case their obligation would shift to “the full amount charged for your surgery, plus the cost of legal fees”. And, it seems, the practice charged very high prices.
3) Widely variable prices: Which brings us to prices. It turns out that prices listed by different practices for these standard surgeries vary widely in nearby areas. This is generally true of medical prices: the amount “charged” (aka “billed”, aka “chargemaster”) is entirely discretionary, and varies hugely across providers. Insurers typically negotiate much lower “allowed” charges. Discerning a truly fair local price is impossible. This surgical practice aims high, which means the sued patients are on the hook for amounts far in excess of actual costs.
4) Medical debt: Which leads to medical debt. As detailed in the article, this is the result for many sued patients. And, as covered in HJM, estimates of the current prevalence of medical debt are in the range of 40-50%, with a median debt of $2,500 or more.
5) Expensive litigation: Collections lawyers are happy to line up when liabilities of tens of thousands of dollars are in the offing from poorly-represented patients who didn’t read the fine print in their contracts, and the lawyers will keep 1/3 of the yield. That adds to administrative costs. And the litigation clogs the courts and traumatizes patients.
6) Rising private equity: As the last excerpted paragraph notes, the surgery practice payment lawsuits accelerated once private equity entered the scene. Private equity is rapidly expanding its role in provider ownership, as reported in HJM. Pursuit of income and profit as their guiding light.
Single payer would solve problems 1, 2, 3, 4, and 5. And greatly mitigate 6.