U.S. business groups call for probe of medical funding industry

By Alison Frankel and Jessica Dye (Reuters) - Two business lobbying groups this week called on the Consumer Financial Protection Board to investigate the medical funding industry after a Reuters investigation revealed that private investors are funding operations for women who have sued makers of surgical implants. The American Tort Reform Association and DRI—The Voice of the Defense Bar told Reuters on Tuesday that medical funders take advantage of the people they claim to be helping. The U.S. Chamber of Commerce, another proponent of business-friendly tort reform, said in a statement Tuesday that medical funding is “a blatant abuse of the system” that leaves “actual victims with little or no recovery.” As Reuters reported, medical funders profit by purchasing bills for the medical treatment of injured plaintiffs at a deep discount from health care providers, then claiming the full amount of the bill as a lien against the patient’s legal recovery through a settlement or verdict. At least several hundred women in the sweeping litigation against manufacturers of so-called pelvic mesh, used to treat incontinence and other conditions, relied on medical funders to pay for surgery to remove their implants. Liens by funders in mesh cases, Reuters found, can spiral to as much as 10 times what health insurers would pay for the same procedures. “This is predatory lending – exactly what the CFPB was designed to prevent,” said DRI president John Sweeney in an interview. A spokeswoman for the CFPB, a federal agency established to combat financial industry abuses, declined to comment. Medical lender Daniel Christensen of Austin-based MedStar Funding said in an email that industry participants are subject to certain state commercial or lending laws. He said patients’ attorneys also provide oversight. “I am not in favor of regulation,” said Christensen, whose medical funding network was described in the Reuters investigation. “I am in favor of a person’s right to contract. If they want to take a settlement advance or if they want to obtain medical care on a lien, they should have the right to do so without the government telling them otherwise.” Christensen said funders earn high rates of return because “litigation finance is an extremely risky endeavor.” It is disingenuous, he said, for business groups such as the U.S. Chamber to express concern for plaintiffs. The groups oppose his industry “not because they suddenly developed a sense of altruism, but because eliminating litigation funding is in the best interests of those who fund them – big business and insurance.” (Reporting By Alison Frankel and Jessica Dye; Editing by Mike Williams and Christian Plumb)