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Fausz v. NPAS, Inc.

United States District Court, W.D. Kentucky, Louisville

February 21, 2017

ELLA J. FAUSZ, individually, and on behalf of a class of similarly situated persons PLAINTIFFS


          Charles R. Simpson III, Senior Judge United States District Court

         I. Introduction

         This matter is before the Court on the motion of Defendant NPAS, Inc. (“NPAS”) for summary judgment under Federal Rule of Civil Procedure 56(a), ECF No. 53. Plaintiff Ella Fausz, individually and behalf of a putative class of similarly situated persons, responded, ECF No. 56. NPAS replied, ECF No. 58.

         NPAS also moved for a hearing and oral argument on the issues that are raised in its motion for summary judgment, ECF No. 55. Fausz did not object, ECF No. 57. As NPAS's motions concern the same facts and issues, the Court will address them in a single memorandum opinion and order. For the reasons explained below, the Court will grant in part and deny in part NPAS's motion for summary judgment. The Court will also deny NPAS's motion for a hearing and oral argument on the issues discussed in the motion for summary judgment.

         II. Background

         A. Springfield Regional Medical Center's Process of Obtaining Payment

         Springfield Regional Medical Center (“the hospital”) is part of Community Mercy Health Partners, a regional healthcare system. Ex. B, ECF No. 53-4. When the hospital attempts to obtain payment on overdue patient accounts, it does not use the term “default, ” regardless of how many days the payment is overdue. Napier Dep. 3, ECF No. 53-6. Nor does the hospital use the term “delinquent” or “past due.” Id. Instead, the hospital describes the patient accounts as “aging.” Id.; see also Crum Aff. ¶ 7, ECF No. 56-6. The patient accounts are assigned an aging category in 30-day increments based on the date of discharge. Crum Aff. ¶ 7, ECF No. 56-6. After the patient accounts age for 360 days, the hospital assumes that no additional payment will be received for such accounts. Id. ¶¶ 12-13.

         The hospital engages in several steps to collect balances on patient accounts. When patients are admitted to the hospital's emergency room and are unable to provide their insurance information, the hospital later sends them statements for payment of the medical services that they received. Napier Dep. 3, ECF No. 56-5. The hospital initially seeks to be reimbursed for its services from third-party payors, including insurance companies. Id. If third-party payors do not reimburse the hospital or if a balance on the account remains after the third-party payor provides partial reimbursement, it sends the patient an account statement. Id. If the patient does not pay the balance on the account, the hospital sends a second statement. Gaffey Dep. 2, ECF No. 53-7. The hospital also sends the patient a financial aid application. Id.

         If the patient still does not pay the balance, the hospital sends the patient account to an early-out vendor. Id. at 2, 5; Napier Dep. 3, ECF No. 56-5. The hospital considers the early-out vendors an extension of its business office. Gaffey Dep. 4, ECF No. 53-7. The early-out vendor provides the patient with additional information about the account balance. Id. at 2. The early-out vendor makes “proactive communication[s]” regarding the patient's “open balances” and “options” for paying them. Id.

         Finally, the hospital sends the account to a collection agency. Napier Dep. 7, ECF No. 53-6. Accounts that the hospital sends to a collection agency have generally aged more than six months. Id. at 6. But if a patient had been making some payments, the accounts could age for longer before being sent to a collection agency. Id. at 7.

         B. NPAS

         NPAS is an early-out vendor that provided business services to the hospital. Id. at 2. NPAS agreed to “use commercially reasonably reasonable efforts to collect the amounts owed [on patient accounts], which may [have] include[d] phone calls and written communications with guarantors, and/or third party agencies or payors that may [have] be[en] responsible for the patient account. These efforts [were] intended to resolve/liquidate the accounts within a 90-day time frame.” Service Agreement 1, ECF No. 53-8.

         NPAS operates call centers in Louisville, Kentucky and in Texas. Summers Dep. 5, ECF No. 56-2. NPAS is a licensed collection agency in some states. Steadmon Dep. 4, ECF No. 56-1. It receives a portion of the monies that it recovers for its services. Summers Dep. 2, ECF No. 56-2; Service Agreement 1, ECF No. 53-8. NPAS does not engage in credit reporting. Summers Aff. ¶ 5, ECF No. 53-10.

         As described in its service agreement with the hospital, NPAS does not receive any patient accounts that are in default, patient accounts that are considered in default, or patient accounts on which it would not have a legal right to collect. Service Agreement 2, ECF No. 53-8. The service agreement, however, does not define when patient accounts are in default. Id.

         C. Fausz's Accident and Collection of her Account Balance

         In August 2011, Fausz was sitting in the front passenger seat of a car that was stopped for a red light when “somebody plowed into the back end” of the vehicle. Fausz Dep. 9, 11, ECF No. 53-3. An ambulance transported her to the hospital. Id. at 5, 8, 10. There, she was treated for whiplash and lower back injuries. Id. at 11.

         About a week after Fausz was treated for her injuries, the hospital sent Fausz's account statement to her insurance carrier, Cincinnati Insurance Company. Claim, ECF No. 56-3. The patient account balance totaled $3, 515.50. Id. When Cincinnati Insurance Company did not pay the account balance, Medical Reimbursements of America (MRA), a medical reimbursement company, mailed Fausz's attorney a series of three letters on behalf of the hospital. Napier Dep. 3, ECF No. 56-5; MRA Letter 9/1/2011, ECF No. 56-7; MRA Letter 11/15/2011, ECF No. 56-8; MRA Letter 4/12/2012, ECF No. 56-9. In September 2011, MRA sent its first letter to Fausz's attorney, which explained that it sought information about potential payment sources for Fausz's medical debt, such as sources of insurance. MRA Letter 9/1/2011, ECF No. 56-7. In November 2011, MRA send a second letter to Fausz's attorney seeking the same payment information. MRA Letter 11/15/2011, ECF No. 56-8. And in April 2012, MRA sent a third letter to her attorney, which also sought the same payment information. MRA Letter 4/12/2012, ECF No. 56-9.

         One month later, in May 2012, the hospital sent Fausz a statement explaining that she was personally responsible for paying her $3, 515.50 patient account balance. May Statement, ECF No. 12. Then in June 2012, the hospital sent her a second statement that asserted that her patient account was past due. June Statement, ECF No. 13. During this period of time, the hospital also apparently called Fausz several times to discuss payment of her patient account balance. Fausz Dep. 2, ECF No. 56-10. In July 2012, MedPay Assurance, another medical reimbursement company, sent a letter to Fausz to attempt to collect the balance on her patient account. Napier Dep. 5, ECF No. 53-6; MedPay Letter 7/5/2012, ECF No. 56-14.

         The following month, NPAS sent Fausz a letter to collect the unpaid patient account balance. NPAS Letter 8/3/2012, ECF No. 56-15. As Fausz did not pay her medical debt by December 2012, the hospital recorded in its account ledger that it estimated it would receive $0.00 in revenue on the debt. A/R Aging Ledger, ECF No. 16.

         In February 2013, the hospital referred Fausz's account to United Collections Bureau, Inc., a licensed debt collection agency. UCB Letter 2/11/2013, ECF No. 17. United Collections Bureau, Inc. sent Fausz a dunning letter in which it explained that it was ...

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