In 2010, Michigan’s Court of Appeals issued a published opinion on an important legal issue facing a number of our healthcare provider clients. The issue on appeal dealt with defining what are “usual and customary charges” for St. Joseph Regional Medical Center. At the trial court level, defendant was a non-profit corporation that owns and operates hospitals including the St. Joseph Regional Medical Center. In December of 2005, plaintiff Holland was admitted to this hospital for medical care, in particular treatment of a kidney stone. At the time plaintiff was uninsured. She signed the agreement with the hospital when she promised to pay “for all services rendered to me at the medical center’s usual and customary charges”.

The hospital and its doctors treated Ms. Holland and provided her with the medical services that she needed. They then tendered their bill to her but she refused to pay the charges billed and instead filed a lawsuit alleging that the “usual and customary charges” that she promised to pay in the contract meant the discounted payments that the hospital accepted from health insurers and other third party payors rather than the prices stated in the defendant’s “charge master”. The charge master is an index of undiscounted charges that the hospital uses to bill its healthcare services to patients.

At the trial court level the court granted the hospital’s motion for summary disposition holding that the language was unambiguous and referred clearly to the prices stated in the hospital’s “charge master” and not the discounted prices charged to insured patients.

Using a simple contractual analysis, the appellate court held that contracts are enforced according to their terms as negotiated by the parties. When examining written contracts the words within that document are given the plain and ordinary meaning. Further, courts may not impose an ambiguity on clear contract language. In this case, the plaintiff contended on appeal that the phrase “usual and customary charges” is susceptible to more than a single meaning. Essentially Ms. Holland argued that it was somehow it was ambiguous. On appeal she argued that “usual and customary charges” might mean either (1) the prices in the charge master; or (2) the discounted prices charged to insured patients.

The Court of Appeals disagreed with the argument presented by Ms. Holland and held that the phrase “usual and customary charges” was unambiguous and not in conflict with itself from a language standpoint.

It is interesting to note that both parties on appeal cited the case of Midwest Neurosurgery v State Farm Insurance, a Nebraska Supreme Court decision. They did this because Michigan law does not directly address the facts at issue in this case.

Although the case is considered a win for our medical healthcare provider clients, we would encourage our healthcare provider clients to reevaluate their intake documents in light of this decision. Most healthcare provider clients have similar language upon admission for plaintiff to sign agreeing to pay all “usually and customary charges”. I believe it is important to avoid even the possibility of an ambiguity as no one wants to get involved in litigation such as this. Accordingly, we are recommending to our healthcare provider clients that they specifically reference their master charge list on their intake documents when referring to “charges” to avoid any possibility that any patient assume that they are allowed to pay a discounted price for medical services rendered.