Payments For Medical Treatments: Do I Need a Refund or 'Make Good' Policy?

Like all Australian businesses, private medical service providers are to comply with the Australian Consumer Law (ACL) when dealing with patients. This means, you should be aware of the guarantees afforded to patients (ie consumers) under the ACL and ensure that your practice procedures are compliant.

In September, the Federal Court handed down a judgement against Ashley & Martin (‘A&M’) for unfair contractual terms. Patients complained that they were not entitled to refunds if they decide not to proceed with treatment after receiving medical advice (which was frequently provided after payments were made).

Another significant judgement during the same period was one against LG Electronics Australia (‘LG’) for misrepresenting to consumers of their rights (or lack thereof) under the ACL. This case is noteworthy because despite having adequate policies, procedures and training in place, LG was fined $160,000 for the violations. The violations were made by low-level customer service staff in breach of company policies and without the authorisation of senior executives.

An interesting distinction between both cases was one (A&M) affected 25,000 patients/consumers, whereas the other (LG) ultimately came down to 2 individuals’ complaints - neither consumer suffered actual loss/damage or were in fact mislead by LG. This indicates the number of complainants against a business is irrelevant when it comes to investigating contraventions of the ACL.

Below is a snapshot of both cases:

Ashley & Martin (A&M)

The ACCC took action against A&M in November 2017 where it alleged three standard forms of contract used by A&M between 2014 to 2017 contained unfair terms. 25,000 patients signed up during this period where:

• Upon signing up to a 12-month medical treatment program, patients were required to pay the full treatment costs upfront;

• The contract was typically entered into prior to receiving medical advice and providing/refusing informed consent; and

• Patients were bound by the contract even if they wish to terminate the contract within days after obtaining and considering the medical advice. Similarly, if patients develop side effects during treatment they remain contractually bound and are not entitled to refunds.

As a result, the Federal Court found the three standard form contracts to be void. A&M was ordered to:

• make full refund (less amount already refunded) to patients who entered into to the treatment program contract prior to receiving medical advice; or

• within 7 days after receiving medical advice and:

• were advised the treatment was not suitable;

• expressed to A&M they wish to terminate the contract because they did not have the opportunity to receive and/or consider the medical advice;

• expressed to A&M they wish to terminate the contract because they have considered the medical advice and no longer wish to proceed; or

• experienced side effects from the prescribed medications for the treatment which caused them to stop using the drug.

• no penalties were imposed

(NB: Under existing laws, unfair contract terms is not illegal and does not attract pecuniary penalties).

LG Electronics (LG)

In this case, ACCC alleged LG made 41 false or misleading representations to consumers, retailers and repairers regarding their rights under the ACL. However, the Full Court found only in 2 instances where LG contravened the ACL by misrepresenting certain consumer guarantees did not exist, excluded or had no effect. The 2 consumers with faulty TV sets complained LG represented:

• they were only entitled to a remedy if the they paid for the costs of assessing the failure and/or LG had no further obligations;

• any steps it took in relation to the TV set was an act of goodwill; and/or

• the consumer was only entitled to have the TV repaired (and not to a refund or a replacement) and the consumer was liable for the labour costs of the repair.

In determining the relief, the Court took into account the following:

• Both contraventions involved statements made to 2 consumers with good understanding of the ACL and neither were misled;

• The consumers did not suffer loss/damage as LG bore the costs of repair in both instances;

• The contravening statements were made by low-level customer service agents that are in violation of LG’s policies and procedures;

• LG’s customer service training and processes were not fundamentally deficient.

Nonetheless, LG was fined a total of $160,000 for the contraventions

(NB: After recent amendments, the maximum penalty per breach for making false or misleading representations are: 1) For corporations - the greater of $10 million; 3 times the value of benefit received or 10% of annual turnover in preceding 12 months if benefit cannot be determined from the offence; or 2) For individuals - $500,000).

What you should know:

The ACL gives consumers a set of guarantees when acquiring goods and services from an Australian business. As service providers, your services must:

• be provided with acceptable care and skill or technical knowledge;

• take all necessary steps to avoid loss and damage;

• be fit for the purpose or give the results that you and the business had agreed to; and

• be delivered within a reasonable time when there is no agreed end date.

Any attempts by a business to restrict (eg “credit note only”) or exclude (eg “no refund”) the statutory protections are unlawful. As a business, you should have clear policies and procedures along with adequate staff training that are in line with the ACL.

For an overview on consumer guarantees, you can refer to Australian Competition and Consumer Commission’s website.

If you have queries or wish to review your policies/procedures, have a chat with us.