Uncharitable Care?

By Majumder, Mary Anderlik | The Hastings Center Report, July-August 2004 | Go to article overview

Uncharitable Care?


Majumder, Mary Anderlik, The Hastings Center Report


Richard Scruggs and other veterans of class action lawsuits against the nations tobacco companies have found their next target: non-profit hospitals. On June 16, 2004, the team filed separate class action lawsuits against thirteen health systems or hospitals, adding six others within a few days, with the promise of more to come. The class in each case consists of uninsured patients who were charged rates above those for insured patients or were aggressively pursued for debts.

Commentators have long noted the irony of a health care system in which the uninsured poor pay the most and are often hounded for debts they had little choice but to incur. Also, it is no revelation that hospital charges bear little or no connection to actual costs, and levels of free or reduced-fee care at many non-profit hospitals are modest. Even the use of the class action tool is not new. For example, such suits have been brought in the past to enforce hospital obligations to provide charity care under the Hill-Burton Act.

This initiative is notable for its scale, coordination, and ambition. Litigation spans twelve states. The plaintiffs' law firms have a common strategy, virtually identical pleadings, and a shared website (www.nfplitigation.com). They argue that simply allowing physicians to use tax-exempt hospitals to derive a profit violates anti-inurement restrictions that guard against using charities as instruments for private gain. The modern hospital began as the "physicians' workshop," and it remains common for physicians to bill separately for services provided in hospitals. If this is grounds for loss of tax exemption, then big changes are coming in health care.

Still, it may be too early to give up on your non-profit hospital. The plaintiffs' attorneys face formidable legal hurdles. They need to persuade judges to certify the classes, and for that they have to establish that questions of law and fact common to the class predominate over questions affecting only individual class members.

They also have to prevail on at least one of the several causes of action. To win on the central breach of contract claims, the plaintiffs must establish that federal and state tax laws create contracts between federal and state governments and the defendants, that the uninsured are intended third-party beneficiaries of these contracts, and that the defendants' conduct breached these contracts. The plaintiffs' foundational assertion is that each defendant "promised the government that it would operate as a charity provider of care for the uninsured." According to the plaintiffs, this promise included a commitment to provide "mutually affordable care" to uninsured patients, not to require the uninsured to pay a higher rate than insured patients, and not to pursue their outstanding medical debt through humiliating collection efforts. …

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