A recent settlement of allegations of both price discrimination against the uninsured and violations of state consumer fraud laws could affect pending lawsuits brought against tax-exempt hospitals by the legal consortium led by Mississippi plaintiff attorney Richard Scruggs, according to a healthcare industry analyst and a legal aid attorney.
Sources close to the case said the settlement, thought to be the first in the country against a hospital under state consumer fraud laws, could pave the way for further settlements. To date none of the Scruggs' lawsuits have been settled or have gone to trial.
News of the settlement comes as new lawsuits were filed last week by the Scruggs consortium against three not-for-profit Wisconsin health systems alleging similar complaints to those resolved in an Illinois state court.
Modern Healthcare has learned that nine-hospital Resurrection Health Care Corp., Chicago, paid an undisclosed amount April 19 to quietly settle a lawsuit brought by the not-for-profit Legal Assistance Foundation of Metropolitan Chicago against 265-bed Our Lady of the Resurrection Medical Center. The foundation sued Resurrection in May 2004 in the Circuit Court of Cook County, Ill., on behalf of four uninsured patients who alleged they were charged two to four times the amount insured patients paid and were hounded by hospital collection agencies to pay those bills (Jan. 17, 2004, p. 4). Settlement terms were confidential and the lawsuit was dismissed.
The plaintiffs sought damages equal to the amount of the hospital bill, or the difference between what they were charged and what insured patients paid, plus $3,000 for inconvenience and $100,000 in punitive damages. They also sought a ruling that Resurrection's practices were unconscionable and an order for the system to change charity-care policies. But because of the confidentiality agreement, the final terms are unknown.
While the settlement involves billing discrimination against the uninsured and the provision of charity care, it was filed in state court last year before Scruggs and a consortium of 12 law firms filed their lawsuits last year and altered their legal strategy by moving cases from federal to state courts. The Scruggs legal team also sued Resurrection in U.S. District Court in Chicago on similar allegations in June 2004 and their case against Resurrection is pending.
James Unland, a healthcare financial consultant and president of Chicago-based Health Capital Group, said the settlement means "Resurrection has chosen to do damage control rather than change its practices."
Unland said the Scruggs federal lawsuits, many of which have been dismissed by judges or plaintiffs and refiled in state courts, had little merit. "But state laws are a different matter and could be dangerous to hospitals. The settlement implies that Resurrection didn't want a trial. These hospitals don't want juries of their peers to hear some of the collection horror stories of uninsured patients. That's a dead-on loser."
In January, an Illinois state court judge allowed the case to proceed to trial after dismissing two counts. Alan Alop, the foundation's deputy director, said Cook County Circuit Judge Stuart Nudelman's March 9 order sustained the consumer fraud claims and will affect other cases raising similar allegations.
"As far as I know it's the only judicial decision in the nation that directly addresses the viability for a consumer fraud act claim against a hospital," said Alop, who said he could not comment on the settlement.
Resurrection spokesman Brian Crawford said the settlement's confidentiality provisions prohibit the system from commenting on the settlement or disclosing its terms. Crawford said Resurrection continues to adjust its charity-care policies to meet the needs of patients. "But we were not compelled to do so by this litigation," he said. "These are things we would have done anyway."
In a statement Crawford confirmed the confidential settlement: "The settlement did not entail any admission of liability on the part of Our Lady of the Resurrection Medical Center."
Des Moines, Iowa, attorney Robert Baudino of the Baudino Law Group, who represents some of the hospitals sued by Scruggs, said settlement terms must have been benign. "I have every confidence that whatever decision was made and whatever the facts of the settlement are, that Resurrection would not have entered into it if it would have any adverse impact either on any other pending uninsured litigation against them or anyone else in the country," Baudino said.
Plaintiff attorneys with the Scruggs Law Group and Clifford Law Group in Chicago who are suing not-for-profit hospitals in the Midwest and around the country did not return calls seeking comment by deadline.