Credit agencies must face some antitrust medical debt reporting claims

SACRAMENTO, Calif. (CN) — A class action against the big three credit-reporting agencies over not reporting certain medical debt will move forward after a judge offered a mixed ruling on a motion to dismiss the case.

Experian Information Solutions, Equifax and TransUnion successfully had Sherman Act and Cartwright Act claims by two plaintiffs, Dr. Derrick Adams and Cape Emergency Physicians, dismissed.

However, a Sherman Act claim by AmeriFinancial Solutions remains intact, as do claims of tortious interference with existing contracts in both California and New Jersey.

At issue in the case is what the plaintiffs have called “a transparent conspiracy” — the credit-reporting agencies’ decision to not report unpaid medical bills under $500 on consumer credit reports. They said the decision violated the antitrust acts, as it illegally hampered trade and hurts access to medical care by pushing providers out of some markets. The Sherman and Cartwright Acts — federal and California laws, respectively — both regulate trade.

U.S. District Judge Daniel Calabretta, a Joe Biden appointee, said it was plausible for an injury to stem from unlawful conduct, as AmeriFinancial has a relationship with the defendants. However, it’s not as clear for the medical provider plaintiffs: Adams and Cape Emergency Physicians.

“In particular, the court is skeptical about the level of control the medical providers exercise over the collection agencies,” the judge said. “There is no doubt the medical providers authorize the collection agencies to share the medical debt information with the defendants. However, authorizing the collection agency, and directing the collection agency, are different.”

Calabretta determined that the medical provider plaintiffs failed to argue a relationship that would make an injury they received come from supposed illegal conduct.

AmeriFinancial, as a collection agency, is in a different category.

“Under the devaluation of service injury, plaintiffs allege that defendants, via an alleged agreement, stopped reporting certain types of medical-debt information on their consumer reports,” Calabretta said. “As a result, plaintiffs contend that they experience a devalued service from defendants, which removed an incentive for patients to repay their bills.”

In his Wednesday decision, Calabretta also noted that he dismissed the plaintiffs’ initial complaint because they didn’t properly argue an antitrust injury. The plaintiffs said they’ve removed that concern in their amended complaint.

In their new complaint, the plaintiffs said that AmeriFinancial gives medical debt information to the defendants — essentially creating a contract that requires it to provide complete files on a monthly basis.

Failing to report certain debt devalued the reports issued by the defendants and injured the plaintiffs in the form of unpaid medical bills, delayed payment and higher costs to collect those payments, the plaintiffs argued.

“There are more than one million active physicians in the United States, along with numerous other medical providers of different types,” the plaintiffs said in their complaint. “Their unpaid bills under $500 have been removed from consumer credit reports and will no longer be reported by the three credit reporting agencies.”

Pivoting to the tortious interference claims, Calabretta addressed the accusations under both California and New Jersey law.

In California, a plaintiff — in this case, Adams, who is based in Lincoln — must show a contract existed, the defendant knew about it, took steps toward or actually breached it and that damages occurred.

“The court finds it plausible that defendants had some understanding that by eliminating certain aspects of debt-reporting, there may be a decrease in payment to plaintiff,” the judge said, finding in favor of Adams.

Cape Emergency Physicians, based in New Jersey, made a similar claim under that state’s law. The judge noted that arguments for both tortious claims were similar. He also ruled in favor of the plaintiff and denied the motion to dismiss on this claim.

“Here, the [complaint] appears to acknowledge a justification for the defendants’ conduct in an effort to improve the financial well-being of patients who take on medical debt unexpectedly,” Calabretta said. “However, even where a valid justification exists, such conduct cannot be employed through fraudulent, dishonest or illegal methods. Plaintiff contends that the defendants’ conduct is an unlawful horizontal conspiracy.”

Attorney Bennett Rawicki, representing the plaintiffs, praised the ruling in a statement to Courthouse News.

“The court’s ruling is a significant validation of this case against the credit reporting agencies’ anticompetitive agreement to reduce the quality of reporting medical debt on consumers’ credit reports,” he said. “The court has allowed to continue the medical-provider plaintiffs’ claims for tortious interference with their contracts with patients, and the nationwide antitrust claim brought by the collection agency plaintiff. We look forward to pursuing these claims on behalf of our clients and the classes.”

Attorneys for the defendants couldn’t immediately be reached for comment.