Not-For-Profit Hospitals Class Action Litigation Press Release

Not-For-Profit Hospitals Class Action Litigation Press Release

Date: Wednesday, September 29, 2004 at 1:30 PM CDT
Contact: Richard Scruggs
Scruggs Law Firm, P.A.
(662) 281-1212

First Two Class Action Lawsuits in Northwest by Uninsured Patients Against Nonprofit Hospital Systems and Hospitals Filed in Federal Courts in the States of Oregon and Washington

– 49 Such Litigations Now Underway Around The Country Covering Approximately 370 Hospitals –

For Immediate Release

Seattle, WA, Portland, OR and Oxford, MS, September 29, 2004 – The first two class action lawsuits in the Pacific Northwest against nonprofit hospital systems and hospitals for failing to fulfill their obligations to provide charitable care to uninsured patients were filed today in federal courts by uninsured patients against Providence Health System and Providence Health System-Oregon (collectively, “Providence”), and against Legacy Health System, Legacy Good Samaritan Hospital and Medical Center, and Legacy Mount Hood Medical Center (collectively, “Legacy”). The two suits are consistent with a nationwide litigation effort by uninsured patient plaintiffs against nonprofit hospital systems and hospitals. The lawsuits charge the defendants Providence and Legacy with, among other wrongdoings, breaching their obligations to provide charity care to uninsured patients, the basis upon which they are reaping many millions of dollars annually in tax exemptions. Providence operates many hospitals in the States of Washington and Oregon, and Legacy operates four hospitals in the State of Oregon.

These class action lawsuits mark the 48th and 49th lawsuits respectively in the nationwide nonprofit hospital class action litigations, which commenced on June 17, 2004, and now cover approximately 370 hospitals. The lawsuit against defendant Providence was filed in the United Sates District Court for the Western District of Washington at Seattle. The lawsuit against defendant Legacy was filed in the United States District Court for the District of Oregon.

Richard F. Scruggs, a lead attorney in the nationwide litigation, stated, “What we are learning through these litigations are sad facts. All these defendant nonprofit hospitals are charging the uninsured patients highly inflated sticker prices for treatment and then dispensing only a tiny fraction of their revenues on charity care. In effect, they are using the public’s tax dollars to finance their wrongdoings, and the defendant hospital administrators appear to be more focused on wallet biopsies than fulfillment of the hospital’s obligations with respect to uninsured patients. In many cases, the defendant nonprofit hospital systems and hospitals are engaging in Hollywood type accounting gimmicks to move funds around to mask their wealth and enrich their executives.”

As revealed in the class action lawsuit against defendant Providence, “According to their web site, www.providence.org, the mission of Defendants Providence Health System and Providence Health System – Oregon is to provide ‘universal access to health care, social justice and compassion for all members of our society’ with ‘special concern for the poor and vulnerable.’

“In fact, contrary to these representations, Providence discriminates against the very patients who are supposed to benefit most from its charity care by engaging in a pattern and practice of charging inordinately inflated rates to its uninsured patients, including Plaintiffs and the Class they seek to represent, that are far higher than the rates it charges its insured patients for the same services.

“Providence publicly represents itself as a ‘not-for-profit medical care provider,’ and it receives millions of dollars each year in tax exemptions under Section 501(c)(3) of the federal tax code, 26 U.S.C. § 501(c)(3), as a charitable, ‘non-profit’ organization that is required by law to engage in exclusively charitable purposes. Providence Oregon is similarly exempt from Oregon property taxes based on its charitable, ‘non-profit’ status.

“In fact, again contrary to its representations, Providence is extremely profitable. For example, in 2002, which is the most recent year for which the data are available, Providence Oregon obtained over $1.2 billion in revenue, it held over $250 million in cash and investment securities, and the cost of its physical plant (land, buildings and equipment) was over $1.1 billion.

“The same year, Providence Oregon’s President and CEO, Henry G. Walker, received over $1.4 million in compensation and benefits, its four Vice Presidents received an average of over $565,000 in compensation and benefits, and the average compensation and benefits of its five highest paid employees other than its officers and directors was $460,000.

“These exorbitant ‘non-profit’ salaries have caught the attention of the Internal Revenue Service, which is expected in the near future to conduct an investigation of a number of purported ‘non-profit’ charitable organizations around the country, including Providence, according to an article in the September 2, 2004 issue of the Puget Sound Business Journal (Nonprofit Payoff: Generous Compensation for Execs Draws Scrutiny).

“While Providence gives private insurance companies and governmental payors like Medicaid and Medicare large discounts from these gross or ‘full sticker’ prices, it charges its uninsured patients, including Plaintiffs and the Class, 100% of the gross, full sticker amounts. As a result, Providence’s uninsured patients can be charged as much as twice the amount charged to the insured for the same services. Providence has thus realized substantial revenues from this discriminatory charging practice.”

The class action lawsuit against Legacy discloses, among other things, “Legacy publicly represents itself as a ‘not-for-profit community benefit corporation,’ and it receives millions of dollars each year in tax exemptions under Section 501(c)(3) of the federal tax code, 26 U.S.C. § 501(c)(3), as a charitable, ‘non-profit’ corporation that is required by law to engage in exclusively charitable purposes.

“In fact, again contrary to its representations, Legacy is highly profitable. In its tax year from April 1, 2002 to March 31, 2003, for example, which is the most recent period for which the data are available, Legacy obtained over $700 million in revenue, it held over $208 million in cash and investment securities, and the cost of its physical plant (land, buildings and equipment) was over $550 million.

“During the same period, Legacy’s President and CEO, Robert J. Pallari, received over $1.4 million in compensation and benefits.”

“…In essence, Legacy has enjoyed the benefits of its tax-exempt, charitable ‘non-profit’ status while failing to fully comply with its obligations to provide affordable or charitable medical care to its uninsured patients, including Plaintiffs and the Class.

“Plaintiffs and the Class are the intended beneficiaries of the federal Emergency Medical Treatment and Active Labor Act, 42 U.S.C. § 1395dd (“EMTALA”), which requires Legacy to provide emergency medical care without regard to the ability of individuals to pay for such care. Legacy has violated this federal law by requiring all uninsured patients, including Plaintiffs and the Class, to sign a written agreement agreeing to pay all medical charges not covered by insurance before it will provide them any emergency medical care. Legacy benefits from this violation not only by obtaining an agreement from the uninsured to pay for emergency medical care that they may not be required to pay for, but also by intimidating others from even pursuing emergency medical care at Legacy that they are entitled to receive under EMTALA. Plaintiffs and the Class have suffered personal harm as a result of these violations by Legacy.”

The lawsuit alleges that defendant Legacy “…has amassed hundreds of millions of dollars in cash and marketable securities that should be available, but it has not provided, to ensure affordable or charitable care for the uninsured whose care was contemplated by the provision of the charitable, non-profit tax exemption that Legacy enjoys.”

The suit highlights, “Legacy engages in discriminatory pricing practices that have a significant detrimental impact on its uninsured patients… While Legacy gives private insurance companies and governmental payors like Medicaid and Medicare large discounts from these gross or ‘full sticker’ prices, it charges its uninsured patients, including Plaintiffs and the Class, 100% of the gross, full sticker amounts. As a result, Legacy’s uninsured patients can be charged as much as twice the amount charged to the insured for the same services. Legacy has thus realized substantial revenues from this discriminatory charging practice.”

The attorneys representing the plaintiffs in the class action suit against Providence are John W. Phillips and Phillips Law Group, PLLC, (206) 382-6163, www.jphillipslaw.com, and in the class action suit against Legacy are John W. Phillips and Phillips Law Group, PLLC, (206) 382-6163, www.jphillipslaw.com, and Michael L. Williams and Williams, Love, O’Leary, Craine & Powers P.C., (503) 295-2924, www.wdolaw.com.

To learn more about the class action lawsuits by uninsured patients against nonprofit hospital systems and nonprofit hospitals, please visit www.nfplitigation.com.

Accreditation Coup De Grâce

A Reeling King/Drew Receives Huge Blow | LAT | 9.16.04

A national accrediting group Wednesday recommended pulling its seal of approval from beleaguered Martin Luther King Jr./Drew Medical Center, an extremely rare step that further threatens the public hospital’s survival.

Signaling that the medical center has failed to correct severe lapses in patient care, the national Joint Commission on Accreditation of Healthcare Organizations (JCAHO) voted to begin the process of revoking King/Drew’s accreditation.

The proposed move is primarily a huge public relations blow for the Los Angeles County-owned hospital. But it also could have crippling practical effects, including the potential loss of physician-training programs and $14.8 million in private insurance contracts. Another less likely possibility is losing $200 million in annual federal funding if the hospital cannot assure government regulators that it meets their safety standards. …

King/Drew Trauma Unit Faces Closure | LAT | 9.14.04

The Los Angeles County Board of Supervisors on Monday unexpectedly moved to shut down the trauma unit at Martin Luther King Jr./Drew Medical Center, immediately drawing the ire of physicians, politicians and community activists.

The only public hospital serving a large swath of South Los Angeles, King/Drew treats more trauma patients than any other hospital in the region except County-USC Medical Center.

The proposed trauma closure, expected to take effect in about 90 days, amounts to a last-ditch scramble to save a foundering hospital that repeatedly has been cited by regulators for harming patients and in some cases contributing to their deaths. …

King/Drew is now in a death spiral. If they lose their accreditation—which they will, both governmental and non–governmental dollars will cease to flow, the residency programs (“cheap labor”) will close (or positions will go unmatched)—which will all add to the tremendous and ever–mounting financial burden on LA County. Where will the displaced sevice population of King/Drew go? Out into the community that is already over–burdened. Death blow to King/Drew, but a significant blow to all of southern California—the first significant domino is falling …

Safety Net in the Ballot?

ED closures spur worries of care crisis in L.A. | AMN | 9.20.04

The loss of a sixth hospital emergency department in the Los Angeles area in less than 14 months is evidence that a crisis is brewing that ultimately could deny emergency care to thousands of patients in the region and statewide, some health care officials say. …

The trend is the result of several factors, including California’s high number of uninsured residents, its low Medi-Cal reimbursement rates, and unfunded mandates requiring some hospitals to spend millions of dollars on nurse-to-patient staffing ratios and structural retrofitting to meet seismic standards, observers say. They worry that the Los Angeles shutdowns are a harbinger of what is to come in other communities in the state.

“We’re hitting a convergence of forces that have been at work for several years. It is becoming impossible for more and more hospitals to keep their doors open,” said Jan Emerson, spokeswoman for the California Healthcare Assn., a statewide hospital organization. “We are truly at a meltdown point.” …

Debating the solution

If passed, Proposition 67 would generate $500 million to $600 million annually for emergency services by raising the 911 telephone surcharge.

Proponents say:

• The initiative would protect patients’ access to care by helping to keep local hospital emergency departments and trauma centers open across California.
• It would provide equipment and training to firefighters and paramedics who respond first to emergencies.
• It would support local health clinics so EDs and trauma centers are reserved for true emergencies.
• It would help upgrade the 911 emergency telephone system.

Opponents say:

• Although the initiative would cap the surcharge for residential phone customers, there is no limit on how much cell phone and business customers could be charged, which could be a financial burden on them.
• It would benefit for-profit hospitals with public tax dollars.
• Less than 1% of the funding would go to 911 communications services.
• The initiative might make it more difficult to increase future spending on 911 services.

If Los Angeles were a state—it would be the 10^th most populous state. Many that have followed emergency services in California know that LA resides on the thinest ice and the cracks are now beginning to fissure.

Thumbs Up on Physician Class

Massive HMO suit gets thumbs up | AMN | 9.20.04

In what is being seen as a huge victory for physicians, a federal appeals court upheld class-action status for a lawsuit alleging that several major health insurers had systematically underpaid them.

The decision by a panel of the 11th U.S. Circuit Court of Appeals in Atlanta is a turning point in the case, legal experts said. Without such status, the 900,000 active and retired physicians represented would have had to pursue their claims individually.

“Five years ago when we first filed, the ripple of laughter was fairly loud,” he said. “…The vindication that is evident in this ruling is something that all the medical society leaders and doctors ought to be extremely proud of.” …

Class has grown from 600,000 to 900,000—average per class member potential payment drops to just over one thousand dollars.

Not-For-Profit Hospitals Class Action Litigation Press Release

Not-For-Profit Hospitals Class Action Litigation Press Release

Date: Monday, September 13, 2004 at 1:30 PM CDT
Contact: Richard Scruggs
Scruggs Law Firm, P.A.
(662) 281-1212

Class Action Lawsuit Filed Against Yale New Haven Hospital, Inc, Yale-New Haven Health Services Corp. and the American Hospital Association by Uninsured Patients

For Immediate Release

Oxford, Mississippi, September 13, 2004 - A class action lawsuit by uninsured patients has been brought today against Yale New Haven Hospital, Inc., (“YNHH”); Yale-New Haven Hospital Services Corp., d/b/a Yale-New Haven Health System (“YNHHS”) and the American Hospital Association (“AHA”) in the United States District Court, District of Connecticut. The suit charges the defendants YNHH and YNHHS (collectively “Yale-New Haven Defendants”) with failing to provide healthcare services to all Connecticut residents regardless of ability to pay. This failure violates, among other things, the basis of Yale-New Haven’s federal and state tax exempt status as a non-profit. The AHA is charged as a co-defendant for aiding and abetting Yale-New Haven in its wrongful practices with respect to uninsured patients.

This class action lawsuit against Yale-New Haven Defendants and the AHA marks the 47th lawsuit in the nationwide nonprofit class action litigations which commenced on June 17, 2004. The defendant nonprofit hospital systems and hospitals advised by the AHA in these litigations control well in excess of over 350 hospitals in aggregate. Yale-New Haven is a comprehensive health care delivery system in Connecticut. Its Corporate Members are Yale-New Haven Network, Bridgeport Network, and Greenwich Network. Yale-New Haven is partner with Yale University School of Medicine, in a specialty network, the Yale Cardiology network.

According to the class action lawsuit filed against the Yale-New Haven Defendants and the AHA: “YNHH and YNHHS enjoy enormous Federal and State tax benefits as supposedly ‘charitable’ organizations. In order to operate their hospitals free from tax, the Yale-New Haven Defendants promise the government – and, by extension, the patient population in Connecticut – that they do and will operate their hospitals on a non-profit basis and provide health care services to all Connecticut residents regardless of ability to pay.”

“In addition to enjoying the benefits of federal, state and local tax exempt status, the Yale-New Haven Defendants have also received charity care subsidies from the State of Connecticut’s Uncompensated Care Pool as compensation for unpaid medical bills. In its 2001 Form 990 for fiscal year 2002 ended September 30, 2002, YNHHS represents that its “Corporate Members provided $101.7 million . . . in free or under-compensated care.”

“Moreover, Defendant YNNH represents to the public on its website that it will ‘provide sensitive, high quality, cost effective health care services to all patients, regardless of ability to pay’.”

“In fact, the Yale-New Haven Defendants do not provide the promised care to Connecticut’s uninsured, but actually discriminate against the very uninsured Connecticut residents who are supposed to benefit most from the Yale-New Haven Defendants’ ‘charity,’ by engaging in a pattern and practice of charging inordinately inflated rates for medical care to patients who are uninsured such as Plaintiff and the Class he seeks to represent.”

“The Yale-New Haven Defendants, although enjoying the full tax advantages of a non-profit hospital system, are actually quite ‘profitable.’ For fiscal year 2002, for example, YNHHS reported net assets totaling approximately $534.0 million among 4 of its 5 tax-exempt hospitals, of which $394.6 million, or 74%, was unrestricted. This profit was realized because the Yale-New Haven Defendants avoided taxation while charging their patients anything but charitable rates. Additionally, the Yale-New Haven Defendants employed aggressive collection agents to collect on outstanding and inflated bills.”

“The Yale-New Haven Defendants charge Plaintiff and the Class substantially more for medical services than they charge their insured patients for the same services. The Yalse-New Haven Defendants also employ aggressive, abusive, and humiliating practices, including lawsuits, liens, and garnishments, to recover this inflated medical debt from Plaintiff and the Class. The abusive billing and collection practices violate the Yale-New Haven Defendants’ tax exemption agreements with the United States Government, the State of Connecticut, and the Cities of New Haven and Bridgeport and the Town of Greenwich.”

The lawsuit points out: “Additionally, Bernard W. Lane, Jr., Director, Patient Accounts at Yale-New Haven Hospital (“YNH Hospital”), is quoted on CFS’ website as follows:

‘Accounts Receivable Management

As a result of Century Financial Services’ expertise in Accounts Receivable, Collections, Pending Medicaid, and Workers’ Compensation, Yale New Haven Hospital has been able to maintain an outstanding accounts receivable despite the many changes taking place in the healthcare industry. [Emphasis added.’]”

“Defendant AHA, through internal memos called “white papers” and other publications it sponsors, provides substantial assistance and guidance to YNHHS and the nonprofit hospital industry on their billing and collection practices for uninsured patients…the AHA encourages YNHHS and its nonprofit hospital members to inflate their chargemaster prices, which only YNHHS’ insured patients are charged. These inflated chargemaster prices have the intended effect of increasing YNHHS’ outlier payment reimbursements under the DSH and Medicare reimbursement programs.”

“The Yale-New Haven Defendants set their charges for medical services at highly inflated rates that bear no connection to the actual cost of providing the service (i.e., its “cost-to-charge ratio”). While the Yale-New Haven Defendants give private insurance companies and governmental third party payers like Medicare and Medicaid large discounts off this gross or “sticker price,” these large discounts are not provided to their uninsured patients. As a result, the Yale-New Haven Defendants’ uninsured patients can be charged as much as twice the amount charged to the insured for the same service. The Yale-new Haven Defendants have thus realized substantial revenues from this discriminatory charging practice.”

“For example, according to a June 2003 report by the Institute for Health and Socio-Economic Policy (the “IHSP Report”), Defendant YNHHS had an average charge-to-cost ratio of 192.41%, exceeding the State average of 185.05%.”

“The Yale-New Haven Defendants employ abusive collection practices, directly and through collection agencies, often hounding patients for payments on patently inflated bills…In January 2003, the Connecticut Center for a New Economy issued a report/study entitled Uncharitable Care, Yale-New Haven Hospital’s Charity Care and Collections Practices, by Grace Rollins (the “Uncharitable Care Report”). According to its Executive Summary:
‘Yale-New Haven, a non-profit, charitable teaching hospital, classifies most of its uncompensated service to the uninsured and underinsured as “bad debt.” Even in instances where patients are unable to pay and would have qualified for the Hospital’s free care programs, Yale-New Haven’s “bad debt” accounts become subject to extremely aggressive collection tactics, including lawsuits, wage garnishments, back executions, liens and foreclosures. [Emphasis added.]….’

“…Further, according to the Uncharitable Care Report:

‘Yale-New Haven does not simply write off and abandon what it reports as “bad debts.” After a maximum of 120 days, any unpaid amount that the Hospital has billed to an individual (a “self pay”) balance, is turned over to either a collections agency or collections attorneys, with few exceptions. Once turned over, the unpaid balance is tallied in the Hospital’s “bad debt” account for that fiscal year. However, Yale-New Haven’s professional collectors may continue to pursue “bad debt” patients and their families for years, even decades’.”

Richard F. Scruggs, a lead attorney in the nationwide litigation, stated, “The harm the defendant nonprofit hospital systems and hospitals have created with their so called charity care policies is more insidious in some ways than what the tobacco and asbestos industries have caused with their products. These hospital policies discourage patients who need medical care from seeking treatment at the price of aggressive collection practices. They’ve erected a bar to hospital beds. Patients will delay and delay treatment until they can no longer wait and the problem becomes most acute and far more expensive. In many instances, the boards and administrations of these nonprofits appear to have lost their moral compass.”

The law firms representing the plaintiff are: Hurwitz, Sagarin & Slossberg, LLC; Bernstein Liebhard & Lifshitz, LLP; and Vroon & Crongeyer, LLP.

To learn more about that the class action lawsuits by uninsured patients against nonprofit hospital systems and nonprofit hospitals, please visit www.nfplitigation.com.

Another Scruggs Release

Class Action Lawsuit Filed Against Yale New Haven Hospital…

Shallow Trough

Class-Action Status Is Upheld for Doctors Suing Insurers | NYT | 9.2.04

An appeals court upheld class-action status yesterday for a lawsuit brought on behalf of at least 600,000 doctors contending that six of the nation’s largest health insurers regularly reduce payments for medical services.

A three-judge panel of the United States Court of Appeals for the 11th Circuit, in Atlanta, ruled that the defendants - WellPoint Health Networks, UnitedHealth Group, Prudential Insurance, PacifiCare Health Systems, Health Net and Humana - must stand trial on charges of violating the federal Racketeering Influenced and Corrupt Organizations Act, or RICO. Health insurance lawyers had said that the appeals panel ruling would be crucial to the case’s outcome. …

Archie Lamb, one of the 175 plaintiffs’ lawyers in the case, said it would go to trial on March 6 in Miami. …

Two managed care companies, Aetna Inc. and the Cigna Corporation, have settled with the plaintiffs, which include the medical associations of California and Texas. Aetna agreed to pay the plaintiffs $120 million; Cigna agreed to pay $85 million.

Mr. Lamb said those payouts could grow to $500 million to $1 billion depending on follow-up claims by individual doctors. The lawyers have been awarded an additional $55 million, he said.

via HealthLawBlog

That’s an [add]itional (on average) $314,285.71 per trial lawyer and $1,666.67 per class member (physician)—being a lowly provider of service is obviously at the wrong end of the trough.

More Class Enrollments

6 More Class Action Lawsuits Filed Against Nonprofit Hospital Systems and Hospitals…