Man fights 5-year legal battle with debt collection company after doctor’s error
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EDITOR’S NOTE: This is the second part in a series of stories about medical debt and Medical Recovery Services.
Here are the other installments:
— Part 3. How Medical Recovery Services takes care of business
— Part 4. Medical debt, collections and the fees you’ve probably never heard of
IDAHO FALLS — Jared Neumeier says he always paid his bills on time and had never been sent to collections in his life.
But what happened after a routine colonoscopy in 2012 changed all that.
He went in for the procedure after meeting his deductible for the year, and everything appeared to go well. In May 2013, he and his wife returned from a cruise to their Idaho Falls home to find a strange notice in their mailbox.
“It was a pretty generic letter that said, ‘Final notice. We’re taking you to court. You owe us $1,800: $900 for original debt and $900 for attorney fees,'” Neumeier recalls. “The next day I went into (the medical) office, and I told them somebody was using their name as a scam. They looked me up and said it is legitimate and from my colonoscopy.”
The doctor’s office never billed insurance, and it never showed up on an explanation of benefits. Not only that, someone put in their system that Neumeier lived on Skyline Drive when he in fact lived on Skyview Drive.
“I actually drove over to Skyline Drive and said, ‘This number doesn’t exist,'” Neumeier tells EastIdahoNews.com. “Eventually (the doctor’s office) turned it over to Medical Recovery Services, who kept billing the same address for months.”
Medical Recovery Services is an Idaho Falls-based debt collection agency. Local attorneys Bryan Smith and Bryan Zollinger pursue legal cases for the agency.
When the debt collector got the address right, it was with the final notice telling Neumeier to pay up.
But he was on his cruise, and the letter sat in his mailbox for nearly three weeks.
“When I called MRS and said, ‘Fix this,’ they said, ‘It’s too late. We just filed in court this morning,'” he says.
Neumeier was shocked.
Once the doctor’s office realized the billing error, the insurance company eventually processed the claim and paid for the procedure. The doctor wrote off the remaining $42 balance, leaving Neumeier with no medical bill.
“It was a zero dollar bill, and MRS wanted me to pay $400 just to settle for them for all the work I put them through because I didn’t act quicker,” Neumeier says.
He refused to pay Medical Recovery Services a penny and hired an attorney.
The resolution took five years, eventually involved the Idaho Supreme Court, and racked up tens of thousands of dollars in interest and attorney fees.
What Medical Recovery Services wanted
The crux of the case was whether the original medical debt was valid.
A magistrate judge, district judge and ultimately the Idaho Supreme Court ruled that Medical Recovery Services was not pursuing a valid debt. That didn’t stop MRS from continually appealing the case.
The company’s argument was that Neumeier had a procedure performed and agreed to pay for it. When he didn’t pay (regardless of not being billed correctly for it), MRS was hired by the doctor’s office to collect on that debt. This resulted in MRS spending time and resources trying to get the money.
The amount originally sought was $1,891: $958 for the procedure, $282 in prejudgment interest, $484 in attorney fees and the court filing fee of $166.
In his original complaint, MRS attorney Bryan Zollinger asserts that since Neumeier owed the debt when MRS took the economic loss to file the lawsuit, the company should be able to recover its court costs.
Attempting to recover costs is not abnormal in a civil lawsuit. At each phase of any court proceeding, the costs of pursuing a case increase for both parties. A judge will often award attorney fees to the prevailing party, which in turn increases the risk of loss for the losing party.
In this case, when the magistrate judge initially ruled against MRS in 2015, the judge awarded Neumeier nearly $5,500 to be paid by MRS so Neumeier could recoup his legal costs. MRS would get nothing from the case unless it appealed.
In the end, the Idaho Supreme Court justices upheld the rulings of the lower courts. They found that since there was an expectation between Neumeier and the doctor that insurance would be billed first before payment was due, the debt was not valid to be collected. During the five-year period, the court fees grew to more than $30,000, Neumeier says.
He was awarded all of them.
CLICK HERE TO READ THE SUPREME COURT RULING
In an interview with EastIdahoNews.com, MRS attorney Bryan Smith maintains the company was in the right with this case. He argues that had MRS not sued Neumeier, the insurance company never would have paid for the colonoscopy and says the patient should have dealt with the collection company immediately rather than trying to work it out with the doctor.
“Instead of him going to Medical Recovery on Monday, he went to the doctor on Monday. He didn’t go to Medical Recovery until Tuesday, and by Tuesday, the lawsuit had been filed,” Smith says.
Smith admits this was a strange case, but says none of it would have happened had Neumeier followed up with his doctor after the colonoscopy years earlier. In court documents, Zollinger asserts Neumeier knew he had the procedure and should have known after reviewing his insurer’s explanation of benefits that it had not been covered or paid.
“Do you think he has any obligation to go to the doctor and say. ‘I don’t remember getting a bill from your guys?’, or he is allowed to say, ‘Haven’t gotten a bill. I don’t have to pay that doctor?'” Smith asks.
Neumeier, who now lives in California, says despite Smith’s arguments, he is happy with the outcome.
“There was a certain satisfaction fighting this and winning. I won it every time. I had a lot of victories,” he says.
Not the only case
The Neumeier case is one of thousands Medical Recovery Services has pursued over the years. A search of the Idaho court system shows the company filed more than 5,600 lawsuits from 2016 through 2018 statewide.
That number is not necessarily abnormal for debt recovery agencies. Debt collectors often handle huge caseloads, and the vast majority of cases never get to the lawsuit stage. Smith tells EastIdahoNews.com that Medical Recovery Services files lawsuits in less than 1 percent of all of its accounts. If that’s true, MRS handled at least 560,000 accounts from 2016 to 2018.
What appears to make Medical Recovery Services unique is the length the company goes to collect attorney fees on cases that go to court. For instance, the company made headlines in 2014 after taking three debts under $300 to the Supreme Court after a local judge tried to curtail MRS’ attorney fees. You can read about that case here.
“The thing that frustrated me with MRS — they kept looking for some new angle to get money out of it rather than just admitting they’re wrong,” Neumeier says.
Over the next two days, EastIdahoNews.com will look take a closer look into how Medical Recovery Services functions, and explain the process of how debt recovery agencies can continue to prolong cases — sometimes for years — to collect attorney fees. If you have a medical debt collection story you think the public should know about, email news@eastidahonews.com