Mississippi Health System Agrees To Settle Lawsuit Filed Over Alleged Charity Care Violations
North Mississippi Medical Center on Thursday agreed to provide "almost-free care" to low-income, uninsured patients to settle a lawsuit that accused the health system of charity care violations, the New York Times reports (Johnston, New York Times, 8/6). In a written statement, the officials for 650-bed North Mississippi said that that they agreed to the settlement to "avoid the distraction and cost associated with a potential lawsuit." North Mississippi is the first to settle among about 300 not-for-profit hospitals nationwide that face similar lawsuits related to charity care violations (Appleby, USA Today, 8/6).
The lawsuits, which seek class-action status, have small differences but are essentially breach-of-contract suits filed on the grounds that not-for-profit hospitals have an explicit or implicit contract with the federal government to serve uninsured patients because they receive significant tax breaks. The lawsuits allege that the hospitals have violated contracts because they have charged uninsured patients "premium" rates, although health insurers, HMOs and government programs such as Medicare and Medicaid pay discounted rates. Some of the lawsuits also cite practices used by certain hospitals to collect unpaid bills from uninsured patients, such as liens placed on homes and assessments of interest, fines and legal fees. The lawsuits seek the creation of a trust fund that the hospitals would finance to provide affordable health care to the uninsured. The attorneys who filed the lawsuits are led by Richard Scruggs, who also participated in class-action lawsuits against the tobacco and asbestos industries in the 1990s (California Healthline, 7/1). Scruggs on Thursday said that the North Mississippi settlement could serve as "a model for a responsible solution to the crisis in uninsured health care" (Dorschner, Miami Herald, 8/6).
Under the settlement, North Mississippi would provide care at no cost to patients with annual incomes of 200% or less of the federal poverty level. North Mississippi also would provide patients with annual incomes as high as four times the federal poverty level a discount of between 15% and 50% on rates charged by Medicare (Miami Herald, 8/6). In addition, an estimated 48,000 patients served by North Mississippi in the last three years would qualify for potential refunds or to have their debts rescinded (Yu, Dallas Morning News, 8/5). North Mississippi also agreed not to place liens on the homes of patients covered under the settlement, charge interest or seek payments that exceed 10% of family incomes. The settlement would not affect bills from physicians who admit patients to the North Mississippi but are not employed by the health system. However, separate physician bills "are a minority of the cost of hospital visits," the Times reports. The settlement also would require North Mississippi to inform patients of the new policies.
Scruggs valued the settlement at about $150 million over 10 years, or about $1,000 for each patient in Alabama, Mississippi and Tennessee who currently receives care at North Mississippi and meets the income qualifications (New York Times, 8/6). However, Scruggs said that North Mississippi might not pay that amount (Dallas Morning News, 8/5). Scruggs and North Mississippi officials also declined to comment on the likely increase in patient demand for care that could result because of the settlement. Under the settlement, if patient demand for care increases by an amount that "endangers the North Mississippi system's financial health," the health system can request that a federal judge make revisions, the Times reports (New York Times, 8/6). A federal judge must approve the settlement and award attorney fees in the case. According to USA Today, the settlement "allows the hospital to walk away from the deal if the judge awards attorney fees the hospital considers excessive" (USA Today, 8/6).
According to the Times, North Mississippi "drew fire" from the American Hospital Association, which also is named as a defendant in a charity care lawsuit (New York Times, 8/6). In a statement on Thursday, AHA President Dick Davidson said that the North Mississippi settlement was not related to the larger lawsuit. He said, "We, as well as the hospitals, intend to fight (Scruggs') baseless charges vigorously because they will divert resources the hospitals need to care for their communities" (Miami Herald, 8/6). John Thomas, general counsel for Dallas-based Baylor Health Care System said, "This is a sad statement about the legal system, not the health care system" (Dallas Morning News, 8/5). Mark Rukavina, executive director of the Access Project, which seeks to expand health care availability, said, "This is very significant and will get the attention of every hospital in this country" (USA Today, 8/6).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.