Billing of 'uninsured' reduced by $276 million.

DO ALL CHARITABLE HOSPITALS FUNCTION AS THEY SHOULD? Unfortunately, not all do? Does yours?

A CLASS OF UNINSURED PATIENTS SUED SUTTER HEALTH, ALLEGING THAT IT IMPROPERLY DENIED THEM DISCOUNTS IT GRANTED INSURED PATIENTS.

On September 3, 2004, a class action was filed, alleging that it was unfair for a hospital system to reap the tax and other benefits due to its charitable status, while providing few charitable services, and in particular, while granting discounts to insured patients but dunning uninsured and generally impoverished patients, for the "sticker price" of treatment. The suit sought relief under consumer protection statutes and subsidiary equitable and contractual theories. After much pretrial skirmishing and massive discovery, a retired judge mediated a settlement representing nearly a complete victory for the class action plaintiffs. The proposed settlement ended price discrimination against the uninsured. Class members would receive refunds or discounts, and those with outstanding collection judgments would be able to get them reduced. For the "Class Period" beginning September 3, 2000, the parties estimated the retrospective relief at about $276 million. Not only would Sutter Health affiliates end price discrimination prospectively for all uninsured patients regardless of income, it would limit its collection practices, and provide free financial counseling and flexible payment terms, and expand its charitable care program. Based on a lodestar of nearly $1.4 million, the settlement provided for attorney fees of $4 million dollars. Michael Stowers attempted to intervene. He had filed a separate suit purporting to represent a class of accident victims unfairly billed by Sutter Health. Although liability had not been determined, the record provided objectively sound reasons why Sutter Health could conclude that Stowers had a weak case, if any. Therefore, Sutter Health did not choose to negotiate any settlement with him or his purported class. When the uninsured case was about to settle Michael Stowers moved to intervene, and he and three purported uninsured class members objected to the proposed settlement. The trial court denied his motion to intervene and approved the settlement between the uninsured class and Sutter Health. On July 25, 2006, Stowers opposed the settlement, alleging the parties were secretly cutting him out of the deal, and the settlement was unfair. Settlement approval was ordered by the court. Stowers appealed.

THE COURT OF APPEALS OF CALIFORNIA AFFIRMED THE ORDERS DENYING INTERVENTION AND APPROVED THE ORDERS APPROVING THE SETTLEMENT REACHED. The court held, inter alia, that because Stowers failed to follow appropriate procedures it need not address any independently given reasons given by the trial court for denying his motion to intervene.

THE COURT FOUND THAT THE JUDGE MEDIATING THE CLASS ACTION CONSIDERED THE RELEVANT CRITERIA, AND THE RECORD SUPPORTED HIS CONCLUSION THAT PROPOSED SETTLEMENT WAS REASONABLE. The court noted that out of over 385,000 class member, only 12 objected, and 102 opted out. The court recognized the settlement as a victory for the plaintiff, resulting in about $276 million in retrospective relief and end to price discrimination against the uninsured, changes in collection practices, and charitable care at reduced rates or free, depending on a given patient's income relative to the federal poverty line, with a "catastrophic" cap by which no uninsured patient would pay more than 30 percent of annual income. Although not explicitly referenced in the order approving the settlement the trial court was presented with evidence that similar settlement terms had been reached in two similar cases. The court noted that the utter failure to address relevant factors considered by the trial court justified the conclusion that Stowers had forfeited his challenge: "instead of a fair and sincere effort to show that the trial court was wrong, Stowers brief was a mere challenge to the plaintiffs to show that the court was right ... An appellant is not permitted to evade or shift his responsibility in this manner." Editor's Note: It is somewhat amusing to think that all hospitals operating as so-called charitable hospitals are, in fact, charitable hospitals! Although many may have qualified for 501 (c) (3) status and be formally set up as non-profit hospitals, there are internal interests within many of such hospitals wherein the motivation is for the hospitals, and their administrators, and an extraordinary number of (unnecessary) mid-management types to extract every dollar they can. In some cases the truly charitable institutions that sponsor so-called charitable hospitals have lost control over the operation of the hospitals they, in all good faith, sponsor. In Re Sutter Health Uninsured Pricing Cases, 2009-CA-0129.758 (1/27/2009)--CA

A. David Tammelleo JD Editor & Publisher

Meet the Editor & Publisher: A. David Tammelleo, JD, is a nationally recognized authority on health care law Practicing law for over 40 years, he concentrates in health care law with the Rhode Island firm of A. David Tammelleo & Associates. He has presented seminars oil medical, nursing and hospital law throughout the United States. In addition to his writings as Editor of Medical Law's, Nursing Law's & Hospital Law's Regan Reports, his legal articles have been published in the most prestigious health law journals. A prolific writer, his thousands of articles, as well as his achievements as an attorney and lecturer, have won him recognition ill Martindale-Hubbell's Bar Register of Preeminent Lawyers. Marquis Who's Who in American Law. Who's Who in America and Who's Who in the World.

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