When the Insurance Company Takes Back Payment

In a prior article I addressed the issue where an insurance company gives pre-certification and the doctor provides the medical services but payment is subsequently refused. In the present situation pre-certification is obtained. The physician provides the medical service and receives payment by the insurance company. However at a later date the insurance company advises the physician that the payment was made in error and unilaterally takes the money back from bills submitted from other patients. Does a doctor have to take this or is there a remedy?

The action by the insurance provider in the above scenario is a breach of contract. A contract comes into existence when the insurance company authorizes the operation on its insured and the physician provides the medical services. When payment is made to the doctor in accordance with the submitted bill the contract is then completed. Any mistake made by the insurance company is its problem not the medical provider's and an attempt to recover such funds from other patients constitutes a breach of contract against the services provided for the subsequent patients. These bills are unequivocally unrelated to the first services provided. 

The even more powerful legal argument is promissory estoppel. 

The concept of promissory estoppel is an equitable form of relief, wherein a party who relies on a promise to his determent is entitled to recover. 

The Court in Aircraft Inventory Corp. vs. Falson Jet Corp, 18F Supp 2d 409 (1998) p 416 states:

The elements of promissory estoppel are as follows: 

  1. A clear definite promise by the promisor
  2. The promise must be made with the expectation that the promise will rely thereon.
  3. The promise must in fact reasonable reply on the promise and reliance on the promise.
  4. Detriment of a definite and substantial nature must be incurred in reliance on the promise.

In our situation, the insurance company made a clear and definite promise to pay as evidenced by the pre-certification. There is no question that issuing the pre-certification for the operation the insurance provider expected the doctor would rely on it and perform the operation expecting payment. 

The physician did rely on the promise to pay; and by devoting the time and skills necessary for the operation, the physician suffered a detriment of a definite and substantial nature in reliance on that promise. The doctor cannot say give me the time and operation back. 

Medical providers have the legal tools necessary to force the Insurance Companies to return sums improperly taken from them.

The Assistant Surgeon

Every major operation requires the services of an Assistant Surgeon. He or she is that anonymous doctor ready to step in and take over surgery in case the Surgeon becomes incapacitated during the medical operation. When it comes time to submit his or her bill for medical care, the assistant surgeon often faces objections from both the insurance company and the patient.

When a patient is scheduled for an operation, the surgeon’s office will make the necessary arrangements with the patient’s insurance plan to approve the medical services. Since the surgeon, then will almost always select the physician who will be the assistant surgeon, an anomaly can arise where the surgeon is within network but the assistant surgeon is not. 

Insurance companies will often take the position that since the assistant surgeon was not within the plan, the bill for medical services should not be paid or should be paid at out of network rates. 

When representing the assistant surgeon, I have advised, the insurance carrier that 13:35-4.1 of the – New Jersey Administrative Code requires the services of an assistant surgeon; and that once the operation was approved at in net work rates for the Surgeon, the assistant surgeon is also covered. I have successfully sued insurance companies on that basis for the Assistant Surgeons. 

Sometimes it is the patient who objects to payment claiming “I never hired the Assistant Surgeon. I don’t know who he/ or she is and I never heard of him/ or her.” In a recent case I sued the patient on behalf of an assistant surgeon. When the patient raised this claim in Court, I submitted the law requiring an assistant surgeon, the operative report and the doctor’s bill to the Judge. The Court held the patient liable and entered judgment against him. I’m now garnishing his salary. 

The Assistant Surgeon is a vital and necessary participant in any operation. His or her bill deserves to be paid.

Defeating Bogus Malpractice Claims: A Case Study

One nightmare faced by Doctors who attempt to get paid for medical services, is a threat by the patient to “sue for malpractice.” The specter of a malpractice suit will often frighten the best Doctor to forget the money lawfully owed to him. However this is not always the case. This is how a I handled an attempt at such blackmail for a New Jersey physician. 

My client, a surgeon had successfully performed surgery on a patient for an agreed fee. After fruitless efforts to be paid, the Doctor turned the matter over to me to pursue collection. I then sent out a demand letter to the patient, who responded with a letter threatening to sue the physician for “ malpractice” if I filed suit against him. 

After a review of the letter, my client told me that he had properly performed the operation and was justified in requesting full payment . I then filed suit for the unpaid medical bill on behalf of the Doctor. The patient responded on his own with a counter-claim for medical malpractice and then proceeded to hire an attorney to represent him. 

Once the counterclaim was filed, I advised the Doctor that the malpractice carrier had to be notified at once so that a defense of the malpractice claim could be initiated. This was done and the insurance company attorney filed an answer asking for a dismissal of the malpractice claim due to failure to have an affidavit of merit and that the claim was filed more than two (2) years after the operation raising a defense of statue of limitations. 

On our first court appearance the Judge gave the patient's attorney until a specified date to obtain the affidavit of merit or face dismissal. Meanwhile the patient and his attorney scrambled in vain, to find a physician willing to say malpractice had been committed. On the return date the patient and his attorney faced the unenviable dilemma of dismissal of the malpractice counter-claim and judgment for the doctor for his medical services. 

I told the patients attorney the only way we would settle was for:

  1. Payment in ten (10) days pf the physician's bill
  2. The patient's consent to voluntary dismissal of the counterclaim for medical malpractice against the doctor due to the patient's failure to obtain an affidavit of merit and that the patient could never raise such a claim again. 
  3. That if the Doctor's malpractice rates went up because of this fictitious claim that the Doctor reserved the right to sue the patient for the rate increase.

The patient and his attorney agreed to these terms and signed a court stipulation of settlement which recited them. The Doctor was paid in seven (7) days and now knows if he has a rate increase he can go after the patient for the money. 

I decided to write this article with my client's blessing so that other physicians know that blackmail by patients should not stop lawful efforts to collect for medical services.

The Patient has Kept the Insurance Check

An all too common problem that drives Doctors crazy involves a bit of larceny. The insurance plan has approved the medical services, the Physician then renders them the insurance company pays the bill but the Doctor is not paid because the patient has cashed the insurance check and kept the funds.

What can the medical provider do?

The answer is plenty. Suit can be instituted against the patient and his or her spouse if married. In these suits the patient has no defense as the medical services were rendered and the patient kept funds he or she was not entitled to.

In most cases answers are not filed and default judgement is obtained.

If a patient files an answer, I will subpoena a copy of the endorsed check from the Insurance provider and then file a motion for summary judgement. This is a motion in which I, as the Physician's attorney, will state to the Court that there are no facts in dispute- the situation being the Doctor rendered the services, the patient endorsed the insurance check, a copy of which is attached to the motion and kept the funds. I ask the Court for judgement against the patient in the amount of the Physician's bill. Judges very quickly grant judgement under these circumstances.

In one recent case the patient hired an attorney who filed an answer 'claiming he wasn't provided proper medical care." I subpoenaed a copy of the indorsed check from the insurance company and advised the attorney that if the services owed were inadequate, the check should have been returned which it was not. I then filed a motion for summary judgement. Needless to say judgement was entered for the Doctor and the Judge had no sympathy for the patient.

Once judgement is obtained, the endorsement on the back of the subpoenaed check serves another purpose- it tells me where the patient banks and I can then levy and execute on that bank account. Also most patients job information is obtained by the Doctor when the insurance information is taken and salaries can be garnished.

If a patient filed Chapter 7- Bankruptcy which is the format to discharge all debts, a formal complaint may be filed in the Bankruptcy Court objecting to discharge of the debt to the amount of the insurance check. So If a Doctor's bill is $10,000.00 and the insurance check is $6,000.00, a formal complaint will object to discharging the $6,000.00 kept by the patient. In Chapter 13- Bankruptcy which involves not discharge but a re-payment plan, there is no right to oppose bankruptcy.

In conclusion when the patient keeps the check, Doctors do not have to take it lying down or gnash their teeth. There are legal remedies which can force the patient to pay up. 

Tips to successful collections: Foresight For the Creditors

As long as people engage in business whether for the sale of goods or the sale of services, there will be collection cases. A large number of debtors who do not pay are not the poor, but rather the "deadbeats" who can afford to pay but choose not to. When creditors come to see me about such cases, I always point out that a judgment against such debtors is only as good as the assets that are collectable. How do creditors learn about debtor's assets?

If you are giving credit to a business have the customer fill out a credit application Form listing credit references including banking institutions. The reason for this that if the customer has to be sued and judgment entered, its bank account being known can be seized by the creditor's attorney. If the customer is a corporation, try to get a personal guarantee by a corporate office. This way, if the corporation goes bankrupt you can proceed against the guarantor. Make sure you photocopy the checks you receive from the customer so that you confirm its banking institution or notice a change down the road in banks.

If you are giving a really large credit line, demand a UCC-1 lien be filed against the business' property and have a search done to see if there are previous liens filed. If business assets are sold as a result of a judgment, the first UCC-1 lien holder has the first rights to the proceeds of sale. 

If you are giving professional services such as Doctor or Dentist or an Accountant, make sure your new patient fills out an information sheet listing the name and address of the patient and spouse with their job addresses and telephone numbers. If the patient is a child, both parents should be listed. This is because spouses are liable for the necessary medical and dental debts of each other and parents for their children. If someone not in those categories says "I'll pay the bill," have them sign a written guarantee as oral guarantees are worthless. You can always tell your patient you need the spouse's work telephone in case of emergencies. The importance of the job information is that a salary can be garnished after a judgment is obtained. Make sure you photocopy checks you receive so you know where they bank.

If you are a painter, house contractor, roofer, etc, you have in addition to the above another right. If the customer does not pay your bill, you have within several months of completion, depending on which state, the right to file a mechanics lien against the premises giving you priority over any mortgage.

What happens if you already have a debtor but you didn't make a copy of that first check. They paid but now will not pay the balance? Relax-every banking transaction is required to be photocopied by Federal Law. Just go to your bank and tell them the date you deposited the check, the amount and who it was from and they will send you a copy for a nominal cost. 

Most of your debtors will pay and you will never have to use this information but for those few who will not, you will be aimed and ready to give your collection attorney the necessary information needed to collect a judgment.

The Spouse is Liable for Medical and Dental Necessities

Often the Physician confronts the following situation. The patient owes the money on a bill but is unemployed while the spouse has a good job. Luckily for the doctor the laws of New Jersey and New York allow the spouse to be sued for the medical and/or dental services along with the patient. The law recognizes that a spouse is equally  responsible with the patient  for medical and dental necessities. This way once a judgment is obtained against both of them, the salary of the working spouse can be garnishment.

Patient Information Is Important

Every medical office needs to get as much asset information as possible on a new patient. One does not know which patient will keep an insurance check and fail to pay the doctor.

Make sure your patient information sheet lists the patient’s employment address and telephone number; the name of the spouse and his or her employment address and telephone number. Remember a spouse can be joined in suit for medical necessities and salaries can be garnished after judgment is obtained. Also if you get a co-pay check – photo copy it so you will know where the patient banks

Collecting Attorney’s Fees

A doctor generally cannot collect legal fees for collection as each party pays its own legal fees under American law. The exception exists where a physician has the patient sign an agreement at the time of engagement stating that if the patient fails to pay the medical bill, he or she will be responsible for all collection costs including “reasonable attorney’s fees”. When I have such a signed agreement, I add on attorney’s fees in any suit.

Don’t Keep that Insurance Check

Judges don’t like people who keep insurance checks — Recently I tried a case for an emergency repair company where the homeowner kept  the insurance proceeds for water damage repairs and refused to pay it over to my client. The homeowner claimed she used to proceeds to purchase replacement items which cost additional sums not covered by her insurance policy. The Judge ruled that she had improperly withheld the funds and gave us judgment against her.