Hospitals reacted with resentment last week at getting the same legal treatment as the marketers of tobacco and asbestos.
Charging them with abusive billing and collection practices, attorneys sued 13 not-for-profit hospitals and health systems and the American Hospital Association on behalf of uninsured patients, alleging they use their tax exemptions to benefit board members and physicians while charging high prices to uninsured patients. A news release said more lawsuits against other major hospitals are expected.
At a news conference, attorney Richard Scruggs of Scruggs Law Firm, Oxford, Miss., accused the hospitals of "breaching their agreement with the state and federal governments to provide charity care," and complained of scant government enforcement. "We think it's the role of trial lawyers when those sorts of things go unchecked by the normal government counterweights," said Scruggs, whose firm launched litigation that resulted in a $206 billion tobacco settlement.
Scruggs said the defendants were selected because they have large reserves and aggressive collection tactics. Scruggs accused the hospitals of "hoarding" cash that should be used for patient care, keeping reserves in offshore bank accounts and operating "a myriad of unrelated businesses" that don't benefit patients.
The AHA called the lawsuits "baseless and misdirected," and said they would sap resources needed to provide patient care and divert attention from the need for universal health coverage.
Several hospitals and systems issued statements defending their billing and collections practices. "It's simply outrageous that not-for-profit hospitals would be targeted in this manner," said Andy Galloway, a spokesman for the Central Georgia Health System, parent of the 500-bed Medical Center of Central Georgia in Macon. "We will expend millions of dollars as an industry in legal fees and publicity to offset this, and these charges are completely meritless."
Galloway said one plaintiff in the lawsuit against his hospital had two jobs, and her husband was also employed. He said the patient did not qualify for Medicaid and signed a statement in which she agreed to accept responsibility for paying the billed charges. "They are two working adults with three jobs and no health insurance. What does that say about the state of our health system?" Galloway said. "It's not the problem of not-for-profit hospitals. It's a societal problem."
The charges-which include breaches of charitable trust, consumer fraud, deceptive business practices, unjust enrichment and violations of the Emergency Medical Treatment and Active Labor Act-delve into murky legal waters. At the news conference, Scruggs insisted there is specific legal language in federal and state laws that requires hospitals to provide charity care, but a spokesman with the Internal Revenue Service said there is no such requirement. Rather, current IRS rules only require hospitals to operate an emergency room that is open to all patients regardless of their ability to pay.
The lawsuits were filed as the industry comes under intense scrutiny. Some systems have revamped their practices. Provena Health in Mokena, Ill., a defendant in the suit, began revising its charity-care and collections practices last year in response to community complaints regarding one of its hospitals, Provena Covenant Medical Center, Urbana, Ill.
The changes did not head off a tax challenge of Provena Covenant, which lost its property tax exemption earlier this year. The hospital recently paid a $1.1 million tax bill, which it hopes to recover on appeal.
Provena Health scrapped policies that allowed patients to be deemed charity cases only upon admission, required hospital chief financial officers to sign off on accounts before they are sent to a collection agency or legal review, and formed committees of community members to advise hospital administrators.
Claudia Lennhoff, executive director of the Champaign County (Ill.) Health Care Consumers, said Provena Covenant "is on its way to being a positive role model for the hospital industry." She added that she "certainly would not be suing Provena Covenant based on their current charity-care and debt collection practices."
But Lennhoff said many other hospitals have refused opportunities to work with community organizations to end harmful billing and collections practices.