In January 2009, MultiCare Health System did all it could to save the life of a 6-year-old boy who’d been grievously injured at a monster truck show at the Tacoma Dome.
Eleven months later, the regional health-care giant sued Sebastian Hizey’s estate to recoup as much money as possible for the services it provided to the boy, who died despite the care he received at Mary Bridge Children’s Hospital.
Internal documents made public as part of an ongoing, unrelated lawsuit against MultiCare show there were two reasons for the decision to ignore the boy’s insurance coverage and go after a settlement his estate ultimately received from the organizers of the monster truck show.
First, MultiCare officials thought they could get more money from the settlement than from Medicaid, perhaps thousands more.
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Second, they wanted to send a message to local attorneys who negotiate payment of their clients’ medical bills: Prepare for a battle if you challenge our billing practices.
MultiCare scored on both fronts, the court records show.
An arbitrator ordered Sebastian Hizey’s estate to pay his full medical bill, minus a percentage the estate spent in attorneys’ fees to win the settlement from the monster truck show’s organizers.
And the message was sent, according to Erik Rasmussen, MultiCare’s general counsel at the time.
“The point I believe you wanted to make — full charges and we will fight — was made,” Rasmussen wrote in an email to MultiCare officials. Rasmussen since has left MultiCare.
MultiCare, in a statement provided to The News Tribune earlier this month, said it could not talk about individual patients because of privacy considerations.
It did say it has an obligation to collect on bills.
“To further our charitable mission, we clearly have a stewardship obligation to preserve our assets, reinvest in our communities and work to sustain the long-term viability of our organization,” the statement said.
“As part of our stewardship obligation, we need to pursue payment for services we provide. Our community, our employers, our patients, our donors and other purchasers of our services (including the state and federal government) expect this of our organization.”
That sometimes includes going to court, according to the statement.
“MultiCare rarely pursues legal action against patients to recover unpaid medical bills, but we do where circumstances indicate it is appropriate,” MultiCare said.
The health system also stated that in 2013 it “supported more than $180 million in community benefit, including funding various community health programs and providing $47 million in charity care.”
It also absorbed $146.5 million in unpaid bills, the statement said.
MultiCare runs Tacoma General Hospital, Mary Bridge Children’s Hospital, Allenmore Hospital and multiple clinics throughout the Puget Sound region.
In 2012, it took in more than $1.7 billion in revenue and paid out about $1.5 billion in expenses, finishing the year in the black to the tune of $207 million, according to the Form 900 it was required to file with the Internal Revenue Service as an income tax-exempt organization.
Its net assets and fund balances were worth more than $1.2 billion at the end of 2012, according to the 2012 Form 990, the most recent available.
The Hizey case was not the only time MultiCare has played hardball over medical bills in the last few years, the recently filed documents show.
Its collection agency at the time also filed liens against settlements won by a disabled man hurt in a car wreck and the widow of a doctor killed in another crash, and the health system fought to collect on them.
Lawyers challenging the validity of the liens contend there potentially are thousands of other such cases.
Private attorneys have complained about MultiCare’s tactics, court records show, and the state Attorney General’s Office sent a letter to MultiCare’s then president and CEO, Diane Cecchettini, in 2010 seeking an explanation for the practice of filing liens instead of billing insurance.
In its statement to The News Tribune, MultiCare, stood by its practice of filing liens, pointing out that the Legislature wrote the laws allowing such liens.
“Where a third party causes harm to a patient, we firmly believe that the third party who caused the need for medical treatment should pay for care we provide,” MultiCare said.
“This is especially true for patients covered by government programs such as Medicaid. Government programs are, by law, the ‘payers of last resort,’ and those programs expect health care providers to pursue responsible third parties in lieu of seeking payments from public funds.”
But an attorney representing a group of people suing MultiCare over the liens said the health system has sought to increase its revenues at the cost of its patients.
The Hizey case is a prime example, plaintiff’s attorney Darrell Cochran said.
“MultiCare intentionally used the tragic circumstances of this young boy’s death — latching onto the boy’s grieving family and their efforts to hold the monster truck organizers responsible for causing the death of their son — to pursue greater profit than the payments offered by Medicaid,” Cochran wrote in a pleading filed earlier this month.
Other records show that finding ways to increase MultiCare’s revenue is a factor in setting bonuses and compensation for the top executives at the nonprofit health care provider, which is not unlike bonus plans at for-profit companies.
“Every executive at MultiCare had a performance-based incentive that was directly tied to the operating performance of the company,” Jason Adams, MultiCare’s former vice president of revenue cycle, said during a deposition earlier this year. “So if any initiative were to increase revenue and increase the margin of a target that the board set, we were handsomely rewarded.”
Patient satisfaction, growth and employee investment also were factors in determining bonuses, records show.
In 2010, as MultiCare’s case against Sebastian Hizey’s estate wended through the court system, $999,401 of Cecchettini’s total compensation of more than $1.8 million came in the form of bonus and incentive pay, according to the Form 900 MultiCare filed for that year.
On Jan. 16, 2009, 6-year-old Sebastian Hizey attended the Monster Jam truck show at the Tacoma Dome with his father, Jessie Hizey.
Virginia-based Feld Entertainment put on the show.
At one point, a piece of metal dislodged from one of the trucks, flew into the stands and hit Sebastian in the head. He suffered critical injuries and was taken to Mary Bridge for treatment.
The boy died despite the efforts of hospital staff.
The medical bills topped $55,000, including $48,147 in hospital services and another $6,732 in physicians’ services, court records show.
The boy’s father was unemployed at the time of the accident, but Sebastian was covered by Medicaid, which is the shared federal and state program that offers free coverage to the poor.
Records filed by Cochran show MultiCare at first billed Medicaid for the hospital portion of Sebastian’s bill.
Later, upon realizing the Hizey family might sue Feld for damages, a MultiCare employee called the state Department of Social and Health Services, which administered the boy’s Medicaid plan, to ask that it reject MultiCare’s request for reimbursement, the records show. The Hizey estate eventually did settle with Feld for an undisclosed amount of money.
The agency complied with MultiCare’s request.
Sebastian’s bill then was sent to the collections agency Hunter Donaldson, which at the time contracted with MultiCare, so it could try to recover the hospital bill from any settlement the boy’s family might win from Feld.
State law allows hospitals and doctors to seek up to 25 percent of such settlements to reimburse them for costs of services rendered. Going that route often results in a higher payout than seeking payment from insurance companies, especially Medicaid, which pays only a fraction of a bill.
Bethany Sexton, a MultiCare employee, confirmed the company’s strategy in the Hizey case during a May 2014 deposition. She said MultiCare decided to go after the estate’s settlement funds “because there was the potential for higher net revenue than what Medicaid may have paid.”
MultiCare spokewoman Marce Edwards explained the health system’s position further in an email to The News Tribune.
“Rates for government programs including Medicare and Medicaid are set by those agencies and reimburse us at rates that are far below what it costs us to provide care,” Edwards said. “As an organization, we need to be able to cover our costs so we can continue to provide care for our communities, provide charity and uncompensated care, and cover bad debt.”
State and federal law also requires health care providers to seek money from third-party settlements before seeking reimbursement from Medicaid or Medicare, MultiCare now argues.
On March 29, Hunter Donaldson filed a lien against any settlement Sebastian’s estate might win, seeking the $48,147 in hospital bills.
The estate refused to pay, the records state.
After several internal meetings with corporate lawyers and financial officers, MultiCare decided to sue the estate, records show. Its outside law firm, Davis Wright Tremaine, filed the suit in Pierce County Superior Court on Dec. 8, 2009.
The lawsuit did not mention Sebastian’s age or how he was hurt. It simply stated that Mary Bridge had provided services to him and that the bill remained unpaid.
The hospital sought “the value of health care services provided but not paid for, in an amount of not less than $48,147.75, together with pre- and post-judgment interest thereon,” according to the lawsuit.
MultiCare also sought its “reasonable costs and attorneys’ fees” and “such other and further relief that the court deems just and equitable.”
Matthew Sullivan of Davis Wright Tremaine was the lead attorney for MultiCare on the case. In July 2010, he prepared a memorandum outlining what he believed to be the best strategy going forward.
MultiCare had a strong case but not a perfect one, Sullivan wrote.
MultiCare had accepted partial payment of about $800 from Medicaid on the $6,732 physicians’ bill, he pointed out, which gave the appearance of inconsistency. Why take insurance money on one bill but not the other?
Other factors also hurt the health system’s case, Sullivan wrote, including “the nature of Sebastian Hizey’s death.”
Still, MultiCare was within its rights to seek reimbursement from the settlement and “ostensibly has a duty to attempt to recover payment from a liable third party,” according to Sullivan’s memorandum.
That’s because Medicaid is considered a “payer of last resort,” the place to go when all other efforts have failed, Sullivan argued. Even then, Medicaid might reject a claim where a third party, such as Feld Entertainment, is responsible for the injuries incurred, he said.
“In short, DSHS has the discretion to pay for medical care in a situation in which a third party is liable for the injury, but it is under no obligation to pay for that care,” Sullivan wrote.
There was something else to consider, Sullivan said.
“If MultiCare is primarily concerned with recovering the highest dollar amount on the Hizey bill, we recommend attempting to settle this matter,” Sullivan’s memo reads.
“On the other hand, if MultiCare is primarily concerned with sending a message to Mr. Moore (and other plaintiff’s attorneys) that it will always attempt to recover the full amount of its invoices from liable third parties, proceeding with litigation is reasonable, as it seems likely MultiCare will be able to recover at least a percentage of the amounts owed on the Hizey bill.”
The estate’s attorney, Brad Moore, argued, among other things, that MultiCare had pulled a classic “bait and switch,” first seeking payment under Medicaid but then switching course when it saw the potential for a bigger payout under a possible court settlement between the estate and Feld.
What’s more, Moore argued, no one at MultiCare ever told Sebastian’s father that MultiCare sometimes offered a discount of up to 40 percent for patients willing to pay cash for the services they received.
As a result, the estate “faces unduly harsh consequences of paying 100 cents on the dollar,” something many uninsured patients did not face, Moore argued in court documents.
MultiCare pushed ahead with the lawsuit, and the case went to arbitration.
In October 2011, arbitrator Kenneth Scearce of Seattle found for MultiCare, saying its charges were reasonable and that it had the legal right to try to collect them.
“The law clearly provides that the provider can and in fact must seek recovery from the settlement funds paid by the third party payor since Medicaid is only a last resort,” Screace wrote in his decision.
“In addition, it is MultiCare’s business prerogative as to who(m) to offer a discount to, and it is not appropriate for a court to substitute its personal preferences for matters that are better left to the free market to sort out in terms of ‘fairness.’ ”
Scearce granted two concessions to Sebastian’s estate.
He subtracted about $16,000 from the hospital bill to account for part of the costs the estate’s attorneys incurred in suing the monster truck show, and he rejected MultiCare’s request for pre-judgment interest and attorney fees.
The final tally: The estate owed MultiCare $32,259.
Two days after Scearce’s decision, Rasumssen, MultiCare’s senior vice president and general counsel, sent an email to then Chief Financial Officer Vincent Schmitz and Adams, apprising them of the news.
“We are fortunate the arbitrator did not reduce full charges ...,” Rasmussen wrote.
In May 2008, Bruce Zurcher, a disabled man, was hurt in a car crash for which he was not responsible.
He was taken to Puyallup’s Good Samaritan Hospital, which is operated by MultiCare, for treatment.
Zurcher received assurance from hospital staff members that his bills would be covered by his insurance provider, Medicare, his lawyer, Michael Fisher, said later.
Instead, MultiCare referred Zurcher’s case to its collection agency, Hunter Donaldson, seeking payment from Zurcher, recently filed court documents show.
A dispute ensued.
“Hunter Donaldson has refused to submit the bills to Medicare because it does not want to accept the reduced rate that Medicare would pay,” Fisher wrote in a Dec. 6, 2010, letter to the state Attorney General’s Office.
“Rather, Hunter Donaldson has filed a lien against Mr. Zurcher in an attempt to extort Mr. Zurcher into paying the full amount of the billed medical expenses.”
Ten days later, the Attorney General’s Office sent a letter to MultiCare CEO Cecchettini, inquiring about the case.
“If the allegation contained in Mr. Fisher’s letter are true, we are concerned that the practices identified — specifically the failure or refusal to file a claim on Zurcher’s behalf with Medicare — may constitute violations of Washington’s Unfair Business Practices ... commonly referred to as the Consumer Protection Act,” wrote Christopher Welch, a senior investigator with the Attorney General’s Office.
“The primary basis of our concern is that Good Samaritan appears to have selectively chosen to forgo compensation by Medicare in anticipation of recovering a full payment directly from Mr. Zurcher should he obtain compensation through the legal process.”
MultiCare sent a letter back, explaining, among other things, its rights under state law to attach liens to people’s settlements, and the Attorney General’s Office dropped the matter.
It was unclear from the court records how the case ultimately was resolved.
Fisher complained to MultiCare on the behalf of other patients as well.
Jason Adams, MultiCare’s former vice president of revenue cycle, later complained about the lawyer in an email to other of the system’s executives, including Rasmussen and assistant general counsel Barbara Barronian.
“I am very aware of Mr. Fisher,” wrote Adams, who later quit MultiCare. “He is inaccurate in his claims toward MultiCare and Hunter Donaldson.”
Adams went on to joke that “it was a sunny day today, and Mr. Fisher is surely not going to make it rain,” according to his Feb. 8, 2011, email.
Another attorney, Edward Wolfe, complained to Hunter Donaldson, in 2010 about the way it had treated the estate of Dr. James McClurkan. The Bremerton pediatrician and retired Navy doctor was killed in 2009 when he was hit by a car while bicycling in Kitsap County.
The letter was copied to the administrator of Tacoma General, which is run by MultiCare and where McClurkan received treatment, and to DSHS.
Wolfe wrote that Hunter Donaldson already had accepted more than $16,000 on MultiCare’s behalf from McClurkan’s auto insurance,
Now, instead of billing the doctor’s health insurance company, it was seeking another $52,000 from the settlement McClurkan’s widow negotiated with the responsible driver’s liability carrier, which had a limit of $100,000.
“You are surely aware that if this billing is submitted to Medicare, that Medicare will only pay a portion of the billing,” Wolfe wrote. “Hunter Donaldson’s position that it will not bill a patient’s health insurance but instead require that billings be first submitted to the liability carrier is unconscionable.
“After estate costs and burial expenses, that would leave Dr. McClurkan’s widow with less than $10,000.”
Wolfe then offered to settle the matter for $25,000, which was accepted by Ralph Wadsworth, the managing partner of Hunter Donaldson and a close business associate of Adams, court documents show.
“On one last note, we have been very successful in our efforts to convince most of the larger, more active (personal injury) firms that we stand on solid legal ground,” Wadsworth wrote in a May 12, 2010, email to Adams and Barronia, one of MultiCare’s in-house lawyers.
“While my gut reaction is to pursue Mr. Wolfe and ‘knock him off his feet,’ as a practical matter, we are, perhaps, better served to let a sleeping dog lie rather than run the very real risk of some small office such as Wolfe’s to file a class action suit. We certainly would prevail but at what expense?”
MultiCare fired Hunter Donaldson earlier this year after MultiCare officials concluded the collections agency had used “improper practices” in some of its dealings. The California-based company recently filed for bankruptcy protection.
Shortly after jettisoning Hunter Donaldson, MultiCare promised to make good on any improperly filed liens and set up a hot line for patients who believed an improper lien had been filed against them.
The hot line received fewer than 200 calls, MultiCare reported.
MultiCare paid out about $85,000 to patients who reported an improperly filed lien, according to MultiCare’s statement.
Last year, Cochran’s firm sued MultiCare and Hunter Donaldson, alleging they conspired to use inappropriately filed liens to generate revenue. Cochran has sought class-action status for the lawsuit, which grinds on in Pierce County Superior Court.