The Cost of Lawyer-Driven Medical Care

This article provides information regarding a standard methodology used in Texas Personal Injury cases to maximize settlements in lawsuits through the use of arbitrarily inflated medical costs.

It Starts with Referral to a Doctor who is part of the Lawyer’s referral network

In October 2015 Joe Cantu was involved in a car accident in Austin, Texas. A few days after the accident, he went to see a lawyer who referred him to Pain Care Physicians. Mr. Cantu had United Healthcare Insurance and Pain Care Physicians accepted United Healthcare Insurance. As is customary with the general public, Mr. Cantu used his health insurance for medical treatment prior to contacting his personal injury attorney.

The United Healthcare insurance plan, like other insurance plans, provides the dual benefit of paying for medical costs and establishing contracted rates that protect patients such as Mr. Cantu. Under the Affordable Care Act, taking advantage of these contracted rates and insurance payments does not affect future insurance rates for insureds such as Mr. Cantu.

Even with the health insurance carrier covering the costs of treatment, Mr. Cantu nonetheless has the right to seek reimbursement from the at-fault party that caused the accident. He can recover the total amount paid, including any co-pays, deductibles, and payments to the doctors or medical facilities.

Despite all of these benefits and protections, and the fact that Mr. Cantu and Pain Care Physicians ordinarily use health insurance benefits to cover healthcare costs, after contacting his attorney and being referred to this medical provider, Mr. Cantu elected not to use his available health insurance, allowing the provider to submit charges for services in amounts substantially more than what is allowed under the health insurance plan.

The Medical Provider then submits medical bills far in excess of what is allowed under the insurance plan, artificially inflating the case value.

Mr. Cantu’s lawyers sent a “letter of protection” to Pain Care Physicians, as part of the arrangements where the United Healthcare insurance benefits would not be used and the contracted rates that protect Mr. Cantu would not apply to the medical services. Instead, the medical facility could now charge amounts substantially more than what was otherwise allowed under Mr. Cantu’s health insurance plan. As a result, Pain Care Physicians charged Cantu $80,552, with no adjustment for the contracted rates that were available to Cantu under the United Healthcare insurance plan.

Pain Care Physicians billed Mr. Cantu $14,290 for a procedure for which expert testimony showed medical providers typically get paid less than $400. Likewise, Pain Care Physicians charged Cantu $3,893 for a back brace that is available on the manufacturer’s website to the general public for less than $150.

There are significant financial gains for a plaintiff and his lawyer that come from the lawyer-referred medical providers’ inflated medical bills. Namely, the bigger the bills, the bigger the settlement. The attorneys typically get 40 percent or more of the recovery. So when a medical provider generates bills that are ten times the actual market rate, the attorney stands to gain ten times the revenues for that same case and treatment.

The inflated medical bills impact the value of other portions of the case. For example, a case with six figure medical bills may result in six figure non-economic awards, such as pain and suffering and mental anguish. Conversely, a case with five figures in medical bills may only generate a comparable amount in non-economic damages. In other words, inflated medical bills have an exponential effect on the total value of the case.

Medical Providers and Lawyers typically work out a reduction after the case is resolved

After cases are settled, the lawyer and lawyer-referred doctor or medical provider typically work out a reduced payment. Because the bill submitted to the defendants or the court is several times above what the doctor is typically paid, there is a built-in amount to allow for a significant reduction in payment to the doctor, allowing the remaining amounts to be split between the lawyer and the plaintiff. Keep in mind that this is in addition to the amounts the plaintiff and the lawyer collect for loss of earning capacity, pain and suffering, mental anguish, and other non-economic damages that may be claimed.

There have been recent efforts at the Texas Supreme Court to address this scheme but….

In Mr. Cantu’s case, the defendant asked to get a copy of the United Healthcare contract that shows the maximum amount Pain Care Physicians is allowed to charge for the services at issue. Mr. Cantu and Pain Care Physicians fought disclosure of the amounts. They fought to protect the secrecy of the actual contracted rates.

The matter went all the way up to the Texas Supreme Court. The defense was asking the Texas Supreme Court to declare for the first time that a plaintiff has a duty to mitigate their damages by not allowing the health insurance contract rates to be side-stepped for unnecessarily unlimited amounts in their place. Seems like common sense? What defies common logic is what happened next.

While the Texas Supreme Court was considering lifting the veil of secrecy on this common practice, and after Mr. Cantu negated available health insurance resulting in a claim of more than $80,000 in inflated medical bills, Mr. Cantu’s attorney filed a letter with the Texas Supreme Court advising that Mr. Cantu was dropping the entire claim for medical expenses and would not seek reimbursement for any of the medical expenses.

As such, the plaintiff attorney requested the Texas Supreme Court to not render a decision on this issue. Because the medical bills were dropped from the claim, the Texas Supreme Court had to dismiss the appeal as there was no pending issue to decide any longer. Had a decision been rendered, it would have impacted all cases in Texas going forward.

Ethical considerations for our justice system and the practice of medicine

The fact that lawyers and doctors are working together to make financial arrangements that result in inflating a plaintiff’s purported debt is deeply troubling. It implicates the integrity of our justice system and patient care.

The lawyer-referred doctors oftentimes have an extensive working relationship whereby the doctor understands the ultimate objective of maximizing the amount of the claim, which means there is incentive to overtreat and overbill. These medical providers also have an arrangement whereby their payment is ultimately contingent on the outcome of the case, meaning that they will be incentivized to attribute unrelated medical findings and conditions to the claim.