Hospital May Seek Direct Damages against Billing Company for Lost Revenue

August 10, 2022 | Strategic Insights for Health System


The plaintiff hospital contracted with a revenue management company to set up billing codes, generate bills, conduct the billing process, process the related paperwork, and to handle accounts receivables. Contracted services involved billing activities from the point of contact, assisting patients with registering their billing information, and processing payments through to closing out the balance. The original revenue management company planned to spend a large sum of money, upfront, to set up the hospital's revenue processes. After taking over the contract, the defendant revenue management company is alleged to have cut corners by reducing the number of billing staff and neglecting the contracted tasks. The plaintiff hospital sued, in part, for lost revenue.

The district court granted the defendant revenue management company's motion for summary judgement based on its argument that any lost revenue constituted consequential damages which, under the terms of the contract, were expressly excluded from recovery. The appellate court reversed, noting first that the defendant appeared to admit to breaching the contract in its argument in support of...

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