Politics & Government

UK HealthCare patients seek class-action status for lawsuit alleging illegal billing

UK Chandler Hospital in Lexington, Ky.
UK Chandler Hospital in Lexington, Ky. Herald-Leader

A group of Kentuckians has asked a Franklin County judge to grant class action status to a lawsuit aimed at stopping the University of Kentucky and the Kentucky Department of Revenue from garnishing people's wages for unpaid medical bills.

Lexington attorney Doug Richards has already won a separate Fayette Circuit Court judgment, which found that UK's practice of using the revenue department to collect unpaid bills is unlawful. UK appealed that ruling in March, so collections have continued.

In that case, now retired Fayette Circuit Judge James Ishmael cited previous court rulings that concluded state universities are not directly part of the executive branch of government because they are overseen by independent governing boards.

In the meantime, Richards said, he's been contacted by hundreds of people who feel they've been unfairly treated by UK HealthCare and the state. If Franklin Circuit Judge Thomas Wingate grants class-action status to the latest lawsuit, Richards said he thinks the lawsuit could affect as many as 10,000 people.

"It's wrong," Richards said, pointing out that the University of Louisville does not use the state as a collections agency. "I wonder if anyone at UK has ever thought, not just, 'can we do this, but should we do this?'"

Richards estimates the revenue department has collected about $48 million since the practice started in 2006, according to the lawsuit. In 2004, the General Assembly passed a law expanding the revenue department’s collection powers, which were originally only used to collect child support and judicial fees. The department now collects overdue payments for 18 state agencies.

The lawsuit details the cases of several plaintiffs who sought treatment at UK HealthCare.

Several of the plaintiffs were eligible for federal Medicaid assistance for low-income people and should not have received bills, according to the lawsuit. Instead, the lawsuit says, they received a bill for services without any itemization, and after that, discovered the bill was being subtracted from their wages, with 25 percent tacked on by the revenue department as a collection fee.

Richards said many of the people affected are low-income and may have frequently changing addresses that UK does not bother to verify.

"So a lot of people said, 'I never even knew that I owed anyone money,'" Richards said.

The lawsuit highlights the case of plaintiff Amelia Long, who went to a UK HealthCare facility in 2012, and visited a UK emergency room in 2013. She had health insurance through Kentucky Passport Health Care, a company that administers Kentucky Medicaid benefits for low-income residents.

Long received a bill that did not itemize UK's charges, but she assumed it would be covered by her insurance. In 2016, she was informed that her wages were being garnished by the revenue department, and that it had added a 25 percent collection fee. This was the first time she was informed that she owed UK any money, according to the lawsuit.

Long called the revenue department "and was told that it was a waste of time to dispute the bill — essentially that she could do whatever she wanted, but that the agent had never seen anybody’s bill adjusted over any kind of dispute," the lawsuit said. Because she was scared of losing her job as a vet tech, Long agreed to a payment plan.

"Plaintiff Long continued to make payments on her accounts until early February 2017, when her pregnancy compelled her to stop working temporarily and she had no income," the lawsuit says. "Plaintiff Long delivered her first child on February 22, 2017. On or about February 23, 2017 — the very next day after her baby was born — the Department levied against the full balance of Plaintiff Long’s bank account, apparently because she had not made a payment to the Department from her wages."

Richards estimated that the department had collected $5,000 from Long, distributing 80 percent to UK and keeping 20 percent for itself.

The revenue department's 25 percent collection fee "amounts to the exercise of absolute and arbitrary power over the property of the Plaintiffs and class members, and constitutes a taking of their property without due process," the lawsuit claims.

Using a state agency to garnish wages gives UK a financial advantage over its competitors, which must use private collections agencies. Many unpaid debts that are referred to collections agencies eventually end up in district court.

"The University has established no procedure, written or otherwise, that grants such rights to a protesting patient, nor did it communicate to patients what rights the patient would have at any such hearing," the lawsuit says, thereby violating the Kentucky Constitution.

Further muddying the waters, Richards said, is the fact that UK HealthCare's bills are issued through its billing arm, the Kentucky Medical Services Foundation, which UK contends is an affiliated entity that is not subject to the Kentucky Open Records Act.

The lawsuit asks for restitution of money already paid, further damages and a jury trial.

UK spokesman Jay Blanton said UK officials would not comment on the lawsuit, but "it always is our goal and our mission to provide the greatest access to patient care for all Kentuckians regardless of their ability to pay."

Department of Revenue spokeswoman Pamela Trautner said the agency does not comment on pending litigation.

Herald-Leader Reporter Linda Blackford explains how the secretive Kentucky Medical Services Foundation spends its money.