Helicopter Operator PHI Bankruptcy Highlights Surprise Bills

By Jeremy Hill | July 30, 2019

The bankruptcy of helicopter operator PHI Inc. has transported the contentious issue of surprise health care bills to the steps of federal court.

Judge Harlin Dewayne Hale on Tuesday will weigh objections to PHI’s plan to exit Chapter 11 protection. Among them is a challenge by a group of consumers suing PHI’s air ambulance division over its billing practices. If their lawsuit is successful, the bankruptcy plan won’t work, they said in court papers.

The objection highlights the mounting backlash over surprise billing — when patients are unwittingly billed huge amounts for care not covered by insurance.

Surprise billing is common in emergency services scenarios like ground ambulance rides or anesthesiology — situations where consumers don’t have much ability to haggle over prices because they are injured or unconscious, for example.

Bipartisan Issue

The issue has already reached the other branches of government. In an era of political divisiveness, a bill to curb the practice has received rare bipartisan support in Congress, while President Donald Trump this year called for an end to surprise bills.

“This is kind of the one clear area of agreement between the two parties,” said Loren Adler, associate director at USC Brookings Schaeffer Initiative for Health Policy. “There is a sort of fundamental market failure.”

Lafayette, Louisiana-based PHI said in court papers that no credible allegation has been made that PHI owes the consumers money, but instead the consumers owe PHI. The patients “simply complain that they were charged too much” and rely on mischaracterized testimony to make their point. PHI wants Hale to overrule the objection.

A representative for PHI did not immediately provide a comment.

Big Bills

PHI makes more than half its money shuttling crews to offshore oil platforms in the Gulf of Mexico and other locations, but it also offers emergency medical transportation.

A group of consumers allege the company’s air ambulance division didn’t disclose prices before flying them to hospitals, then stuck them with crushing bills, according to a class-action suit in Arizona.

The lead plaintiff in the suit, a woman named Christina Wray, says in 2015 she was charged more than $57,000 for a flight from Taos, New Mexico to Albuquerque after she and her unborn child were exposed to carbon monoxide. Her insurance covered only about $5,000.

PHI offered a discount of $15,665 if the payment was made within 30 days and Wray gave a counter-offer for a total payment of $12,000. After a few extensions, the two parties didn’t agree on a reduced price and PHI reinstated the full bill.

Plan Feasibility

The patients want the Arizona court to weigh in on their legal obligation, if any, to pay money billed by PHI.

The company’s current billing practices are baked into future revenue assumptions in its bankruptcy plan, and a successful lawsuit could destroy those underpinnings, the consumers say in their federal court objection.

What’s more, not everyone who was potentially overcharged was notified of the bankruptcy, the consumers’ objection says, and confirming the plan could wipe out their own claims against PHI if they win the class action suit.

“Debtors purposefully chose not to give notice to a huge group — a group that they will seek to overcharge in the future to fund their plan,” attorneys for Wray and others wrote in the objection. “A deliberate choice to deny notice to a large, well-known group with ongoing disputed claims should preclude approval of the plan.”

PHI isn’t required to notify all of its air medical customers of its bankruptcy, even in light of potential future claims, attorneys for PHI wrote in their reply. PHI said it notified the attorneys for the consumers bringing the suit.

Messy Case

Consumers aren’t the only ones opposing the plan. The Securities and Exchange Commission also wants to block it, saying in court papers that the plan would wrongly protect third parties from future legal action, and the U.S. Trustee — the federal bankruptcy watchdog — objects on similar grounds.

Objections to third party releases are common in large Chapter 11 cases, though, and they rarely stop confirmation, Bloomberg Intelligence analyst Phil Brendel said in an interview.

Hale has presided over the case since it was filed in March. Its twists and turns have included dissent from creditors, mediation to resolve that friction and the resignation of longtime Chief Executive Officer Al A. Gonsoulin, who agreed to retire.

The case is: PHI Inc., 19-30923, U.S. Bankruptcy Court, Northern District of Texas (Dallas).

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