A state court in Los Angeles has approved a settlement that could turn health care providers’ “retail prices” into relics.[@@]

California Superior Court Judge Wendell Mortimer has given Tenet Healthcare Corp., Dallas, a publicly traded hospital company, permission to implement a settlement agreement with a class consisting of uninsured patients treated in 114 Tenet hospitals in 16 states between June 15, 1999, and Dec. 31, 2004.

The settlement agreement calls for Tenet to help those uninsured patients by providing partial refunds for any who paid too high a percentage of Tenet hospitals’ retail prices, or “gross charge rates,” according to a copy of the settlement agreement posted on the Web site of Hagens Berman Sobol Shapiro L.L.P., Seattle. Steve Berman, managing partner of Hagens Berman, is the lead counsel for the uninsured patients.

Berman and his colleagues have filed pleadings that accuse Tenet hospitals of hurting uninsured patients by charging those patients much higher rates than the hospitals have charged patients with managed care coverage.

Tenet has vigorously denied the allegations and has made no admission of wrongdoing.

But Tenet says it once had to include huge “provisions for doubtful accounts” in its financial statements because many of the bills sent to uninsured patients turned out to be uncollectible.

In January 2003, Tenet unveiled a “Compact with Uninsured Patients” that calls for the company’s hospitals to simplify accounting and make life easier for all uninsured patients by offering uninsured patients the same kinds of discounts offered to members of managed care plans.

The settlement agreement negotiated in connection with the Los Angeles court litigation, Tenet Healthcare Cases II, is a separate document.

Some sections of the settlement agreement call for Tenet to help all uninsured patients by carrying out measures similar to those proposed in the Compact. The agreement requires, for example, that Tenet hospitals offer uninsured patients discounts similar to those the hospitals charge members of managed care plans, and the agreement also requires the hospitals to offer flexible payment plans for uninsured patients with bills for more than $1,000.

Other sections of the settlement agreement deal with compensation for uninsured patients who paid most of Tenet hospitals’ billed charges between mid-1999 and the end of 2004.

The agreement assumes that reasonable payment rates, or “gross charge thresholds,” ranged from 67% of gross charges in 2001 and 2002 up to 82% of the gross charges in 1999.

Tenet will reimburse uninsured patients for any payments made over the gross charge thresholds.

The settlement agreement gives as an example a patient who received a bill from a Tenet hospital for $2,000 in 2000, when the gross charge threshold was 75%. If the patient paid $1,800, or 90% of the gross charges, then Tenet will send that patient $300 to compensate for the difference between the $1,800 actual payment and the $1,500 threshold charge, according to the settlement agreement.

The settlement agreement does not say how much the plaintiffs and Tenet expect Tenet to pay in refunds, but Mortimer has predicted that 50,000 patients will file settlement claim forms.

Tenet says in a quarterly report filed with the U.S. Securities and Exchange Commission in May that it had accrued $30 million by March 31 as a “minimum liability” to cover the cost of resolving the uninsured payment litigation.

In the second quarter, 9.5% of Tenet patients treated in outpatient settings and 3.8% of the patients admitted to Tenet hospitals were uninsured, Tenet reports.

In theory, successful legal battles to make health care providers offer almost all patients managed care discounts could help health insurers with small, weak provider networks or no provider networks compete with managed care giants with the clout to negotiate deep discounts.

America’s Health Insurance Plans, Washington, represents U.S. health carriers of all sizes.

“Our members negotiate in good faith with all providers to create contracts that provide the best possible value for consumers,” says AHIP spokesman Mohit Ghose.