Bankrupt Hospitals Sue Insurers for Denied Claims

Got story updates? Submit your updates here. ›

A wave of hospital bankruptcies has led to high-stakes lawsuits targeting health insurers over allegedly systemic claim denials. At least nine different insurers have been sued by bankruptcy estates or trustees of three major health-care businesses, seeking a combined $427.9 million and representing 32,000 patient claims across 32 hospitals and providers in six states.

Why it matters

As more hospitals face financial distress and bankruptcy, these lawsuits represent a new legal strategy to maximize recoveries for creditors by going after insurers for denied claims. The outcomes could set important precedents around insurers' obligations to pay out on valid claims, even for bankrupt providers.

The details

The lawsuits were filed by the bankruptcy estates or trustees of Steward Health Care System LLC, CarePoint Health Systems Inc., and Jackson Hospital & Clinic Inc. They allege the insurers systematically denied valid patient claims, depriving the hospitals of critical revenue and contributing to their financial collapse.

• The lawsuits were filed in the past six months.

What’s next

The outcomes of these lawsuits could set important precedents around insurers' obligations to pay out on valid claims, even for bankrupt providers.