Conference Call Provides More Details About Lawsuits Against Not-for-Profit Hospitals Over Charity Care

The goal of 13 federal lawsuits filed Wednesday against not-for-profit hospitals in eight states is to "require these hospitals to honor the pledge of charity care that got them tax exemption[s] in the first place," Richard Scruggs, one of the lawyers involved in the lawsuits, said in a conference call Thursday, Bloomberg/South Florida Sun-Sentinel reports (Dunn/Viele, Bloomberg/South Florida Sun-Sentinel, 6/18). The suits, which are seeking class-action status, allege that the institutions have violated their obligation as charities by overcharging uninsured patients. While the cases have small variations, they are all essentially breach-of-contract suits focused on the idea that not-for-profit hospitals have an explicit or implicit contract with the federal government to serve uninsured patients to receive significant tax breaks. The suits allege that the hospitals have violated contracts by charging uninsured patients "premium" rates, even though insurers, HMOs and government programs like Medicare and Medicaid pay discounted rates. Some suits also cite particular hospitals' use of tactics to collect unpaid bills, including placing liens on homes and assessing interest, fines and legal fees. The lawsuits, which allege that hospitals are holding onto large, untaxed sums, seek the creation of a trust fund that the hospitals would finance to provide affordable medical services to the uninsured (California Healthline, 6/17).

According to the lawsuit, hospitals in Alabama, Georgia, Florida, Illinois, Minnesota, Ohio, Tennessee and Texas used various accounting processes to "grossly distort the small amount of charity care they provide to uninsured patients." Scruggs, who also participated in the lawsuits against the tobacco and asbestos industries in the 1990s, said that the hospitals "charge the uninsured 'sticker' prices for health care, an amount higher than any other patient group, and then, when the uninsured can't pay, harass the uninsured through, among other tactics, aggressive collection efforts such as garnishment of wages and bank accounts, seizures of homes and personal bankruptcies" (Mohr, AP/Detroit Free Press, 6/18). He said that the lawsuits are the "first wave" against nationwide not-for-profit hospitals for overcharging uninsured patients.

Alicia Mitchell, a spokesperson for the American Hospital Association, said that the lawsuits "will consume already limited health care resources that hospitals need to continue their daily work of caring for the uninsured and all other patients in their communities." AHA has been criticized in some suits for allegedly "conspir[ing] with and aid[ing] and abett[ing]" the defendants, according to Bloomberg/Sun-Sentinel (Bloomberg/South Florida Sun-Sentinel, 6/18). AHA historically has encouraged hospitals to adopt voluntary reforms concerning billing and collection practices for the uninsured (California Healthline, 6/18). Baptist Health South Florida, one of the hospitals named in a suit, "vehemently dispute[d] the charges," the Miami Herald reports. Jo Baxter, a hospital spokesperson, said, "We have a tremendously generous and humane charity program," adding, "I'm mystified as to why we were selected" (Dorschner, Miami Herald, 6/18).

Ed Domansky, a spokesperson for Advocate Health Care, another hospital named in a suit, said that he could not comment on the suit, but added, "Any suggestion that Advocate profits at the expense of the uninsured is ridiculous." Ryan Davenport, a spokesperson for Fairview Health Services in Minneapolis, said, "We simply feel this suit doesn't have any merit" (Bloomberg/South Florida Sun-Sentinel, 6/18). MPR's "Marketplace" on Thursday reported on the lawsuits. The segment includes comments from Carmela Coyle, senior vice president for policy at AHA; Rep. Jim Greenwood (R-Pa.); Rich Morrison, regional vice president for government and community relations at Florida Hospital; and Scruggs (Henn, "Marketplace," MPR, 6/17). The complete segment is available online in RealPlayer.