Patient alleges hospital used fake collection agency to get money
The charges were as pernicious as they were surprising. Saint John’s Health Care Center stood accused of manufacturing a fake collection agency so that it could intimidate patients into paying their debts.
The class action lawsuit involving 11,000 patients at Saint John’s leveled exactly those allegations. It was settled last week when Saint John’s agreed to pay $500,000 while admitting little.
Thousands of Saint John’s patients received letters between June 20, 2001 and Dec. 11, 2002 from Excel Credit Service demanding that the debt allegedly owed to the hospital be paid.
The class action suit was originally filed by patient David Marco Weber. He claimed Saint John’s violated the law by concocting a fictitious collection agency name and falsely led patients to believe that a third party had been retained to collect the debt.
The letters also violated the federal Fair Debt Collection Practices Act by failing to advise consumers of their rights to dispute the debt, the lawsuit alleged.
Saint John’s isn’t assuming liability in the case. Neither side would say whether Excel Credit Service was actually a legitimate business. However, as part of the settlement, Saint John’s has agreed to stop using the name when collecting on patient accounts.
Attorneys for both sides refrained from commenting specifically about the case, saying the terms of the settlement bars them from giving the public details. Nonetheless, in an age when customers are becoming more aware of both excessive bills for “retail” health care, as well as games played by collection agencies, the allegations in the Saint John’s case appear astonishing.
The more than 11,000 patients said to have been affected by the fake collection outfit have been represented by the Century City law firm of Lange & Koncius. The firm also represents Weber, who formally originated the suit before class action status was sought.
Saint John’s is offering one of three choices to those eligible to share in the fund, which works out to about $40 per patient. It will make a charitable donation to a local non-profit organization, credit $40 to the patient’s outstanding balance owed to Saint John’s, or have $40 applied against future services there.
Patients must mail claim forms by June 16 to an East Coast claims administrator. The amount each patient is owed was determined based on the what the Fair Debt Collection Practices Act requires, said Jeff Koncius, the attorney handling the case.
According to the law, the payment would be either 1 percent of the net worth of the company or $500,000, whichever is less.
“From a person’s perspective, this is the fairest settlement,” Koncius said.
Both parties determined that it was in their mutual best interests to settle the lawsuit instead of going through a lengthy and costly trial. Because there is a maximum amount the court could grant according to law, $500,000 was the most Saint John’s would most likely pay, Koncius noted.
“Each side is assessing its risk of going to trial,” he said. “If you go forward, the upside is not that great.”
The terms of the settlement have been in negotiation for months. A final agreement was reached Dec. 11, 2002 and signed June 2 by United States District Court Judge Steven V. Wilson in downtown Los Angeles.
“The hospital is satisfied with the settlement,” said David Fisher, the attorney representing Saint John’s. “The settlement greatly benefits the community.”
If patients choose the first settlement option, a $35 charitable donation will be made to either the Venice Family Clinic, Westside Family Health Center, Ocean Park Community Center, the Santa Monica-Malibu Unifed School District Infant & Family Support Program, St. Joseph Center or Serra Project. Saint John’s will pick the organization based on community need, according to the settlement.
It is unclear where the additional $5 will go if patients choose to contribute their settlement money to charity.
Koncius said of the 11,000 patients, only seven have chosen to opt out of the settlement so far.
Saint John’s has agreed to pay up to $70,000 in attorney fees to Lange & Koncius, LLP and Robert Lax & Associates for expenses incurred in the lawsuit.
However, Judge Wilson has the final say on lawyer fees.
It is still unclear how Saint John’s set up its collection agency, how long it acted, how it was discovered, or the ramifications on other health care providers. The entire industry has been rocked by recent national disclosures that uninsured patients can be billed several times the amount agreed to by insurance companies for exactly the same procedures. Then, health care providers use the fear power of collection agencies to make patients pay up.
Koncius said any time a person receives a letter from a collection agency, he should deal with it immediately and make sure he is aware of his or her rights. But patients should also confirm that supposed agencies actually exist before paying, he added.
“If you don’t think it’s correct, you should call and ask questions,” Koncius advised.
Originally published in the Santa Monica Daily Press print edition on June 10, 2003. Read the original PDF.