Plaintiff attorney Richard Scruggs last week claimed his first significant legal victory in a sweeping battle over uninsured billing practices at not-for-profit hospitals.
An Oregon Circuit Court judge in Portland granted class-action status to the claims of two uninsured patients treated at Legacy Health System, but narrowed the class proposed by the plaintiffs, excluding patients who have received a discount or waiver in fees under Legacy's charitable policies.
Lawyers for the plaintiffs said the decision gives them the traction they need as they proceed with more than 50 such lawsuits filed by the Scruggs consortium in state courts nationwide after sustaining a slew of dismissals in federal courtrooms last year (Feb. 14, p. 14).
"In some ways the hospitals took some confidence from the dismissals of the federal court cases," said John Phillips, a partner in the Phillips Law Group in Seattle, who represented the plaintiffs. "This decision particularly, I think, does shift the trend in litigation and suggests that these cases will be certified as class action.
But Melinda Hatton, vice president and chief Washington counsel for the American Hospital Association, argued that the decision represents just one isolated victory after a year-and-a-half-long effort. "The fact that this is really the first case they could plausibly count as a victory underscores how weak their claims are against hospitals that serve their communities day in and day out," she said.
The class potentially includes as many as 100,000 patients or more, Phillips said. The plaintiffs alleged in the lawsuit that Legacy breached its contractual obligations by charging the uninsured its highest, nondiscounted rates. The practices, the plaintiffs also charged, "are unfair and deceptive acts" in violation of state law. Phillips said the claim is not an attack on the hospital's not-for-profit status, as the defense argued. The plaintiffs merely claimed that "Anyone who goes to the hospital is entitled to a reasonable charge," he said.
"Legacy Health System is committed to ensuring that medical costs and lack of insurance are not barriers to people in need of healthcare," Legacy officials said in a written response. The five-hospital system charges the same rates for procedures to all patients although some health plans negotiate group discounts for their members. Officials also noted that the judge acknowledged in his decision that Legacy provided $110 million in community benefit and charity care in fiscal 2005.