Texas Mutual Insurance Gains 'Great Victory' in Appeals Court Case Over Hospital Bills

Nov 14, 2008, 15:52 ET from Texas Mutual Insurance Company

AUSTIN, Texas, Nov. 14 /PRNewswire/ -- Texas Mutual Insurance Company won a substantial victory Nov. 13 in a Texas appeals court case challenging an abusive pattern of questionable hospital bills for injured workers covered by workers' compensation insurance.

The Austin Court of Appeals overturned a Travis County District Court ruling about the interpretation of a Texas Division of Workers' Compensation guideline dealing with hospital fees.

"This Court of Appeals ruling puts a stop to questionable billing practices of certain hospitals in Texas that inflate costs in the workers' compensation system and ultimately drive up premiums for Texas employers," Russell Oliver, president of Texas Mutual Insurance, said.

The guideline allowed an exception to the general rule that hospitals be paid on a per diem basis for treatment of injuries involving workers' compensation claims. The so-called "stop-loss exception," dating back to 1997, dictated that hospital bills exceeding $40,000 in instances when services were deemed "unusually extensive" and "unusually costly" would be reimbursed at 75 percent of the billed charges.

Vista Medical Center Hospital in Pasadena, Texas, and CHRISTUS Health Gulf Coast of Houston, Texas -- including CHRISTUS St. Catherine Hospital in Katy, Texas, and CHRISTUS St. John Hospital in Nassau Bay, Texas -- had argued in court that they did not need to demonstrate anything more than that a bill exceeded the $40,000 threshold. The Travis County District Court agreed with the hospitals.

On Nov. 13, however, a three-judge panel of the Austin Court of Appeals unanimously overruled the lower court. The court stated that the hospitals did, in fact, need to show that a hospital stay is "unusually extensive" and "unusually costly" before they can receive a 75 percent reimbursement.

In its opinion, the Court of Appeals noted that the lower court's interpretation of this matter led to "the absurd and unreasonable result" that reimbursement under the stop-loss exception had replaced the per diem standard.

Texas Mutual successfully argued that a system that put no restraints on hospital charges and allowed hospitals to receive 75 percent any time they chose to charge workers' compensation insurers $40,000 or more would not be adhering to medical cost controls mandated by Texas lawmakers in 1989. Texas Mutual's co-appellants in this case were Liberty Mutual Insurance Company, Zenith Insurance Company and Zurich American Insurance Company.

About Texas Mutual Insurance Company

Austin-based Texas Mutual Insurance Company is the state's leading provider of workers' compensation insurance, with approximately 25 percent of the market. Since 1991, the company has provided a stable, competitively priced source of workers' comp insurance for all Texas employers. Preventing workplace accidents and minimizing their consequences is a major part of Texas Mutual's mission.

    For more information, visit http://www.texasmutual.com.

     Media Contact:
     John Egan
     Elizabeth Christian & Associates Public Relations
     (512) 472-9599

SOURCE Texas Mutual Insurance Company