Lawsuits against hospitals spiking Lawyers of uninsured patients say hospitals overcharge their clients; critics say the suits exploit the health-care crisis.

Posted: August 08, 2004

Mississippi plaintiff lawyer Richard Scruggs says he is trying to solve the nation's crisis of uninsured patients.

Others say the lawsuits against health systems around the nation brought by Scruggs and other class-action lawyers are simply exploiting the problem of 44 million people without health insurance to get money from hospitals.

In recent months, more than 350 hospitals - including 15 in this area - have been sued in state and federal courts for allegedly overcharging uninsured patients and using aggressive tactics to collect the bills.

"The lawsuits we have seen to date are baseless and don't begin to help solve the very real problem of the uninsured," said Alicia Mitchell, a spokeswoman for the American Hospital Association.

She said the suits were "diverting focus away from the real issue of how we as a nation are going to extend health-care coverage to all Americans."

But in announcing an agreement with a six-hospital network in rural Mississippi last week on billing uninsured patients for care, Scruggs called the settlement "a model for a responsible resolution to the crisis in uninsured health care."

Under the deal - which must be approved by a federal judge - North Mississippi Health Services agreed to provide free or discounted care to patients with incomes of up to four times the federal poverty line of $18,000 for a family of four.

The hospital network, which had not been sued, said it agreed to the settlement to avoid costly litigation.

Scruggs has filed more than 40 federal suits in 21 states against nonprofit hospital networks, including the Radnor-based Jefferson Health System.

"The case has no merit," said David F. Simon, Jefferson's general counsel. "We firmly believe that we do our fair share in terms of free care and charity care, so there would be no basis for us to approach Mr. Scruggs with respect to settling this."

Hospitals here point to the huge amounts of free care that they provide patients and say what the uninsured patients really need is available and affordable primary care, not emergency-room treatments.

"This litigation won't change that lack of access to basic health care, and that is where we think it is misguided," said Paula Bussard, senior vice president for policy and regulatory services at the Hospital and HealthSystem Association of Pennsylvania.

New Jersey hospitals provide $800 million in free care each year, said Ron Czajkowski, a spokesman for that state's hospital association.

He said earlier this year - before the lawsuits - his organization had issued guidelines to help hospitals craft charity-care policies.

"The reality is [that] as much as hospitals' first priority is to provide health care to their communities," Czajkowski said, "they also have to operate like businesses and remain fiscally sound to continue that mission."

U.S. Rep. James Greenwood (R., Pa.), who has led a congressional investigation of hospital billing practices, said lawsuits were not the answer.

"I think it is probably safe to say that the plaintiff lawyers are generally motivated by visions of large fees," Greenwood said. "Our plan has been to monitor and see if hospitals do in fact fix this system . . . and use legislation only as the last resort."

While the lawyers consortium led by Scruggs has focused on nonprofit hospitals, suits have also been filed against for-profit hospital companies, including Universal Health Systems Inc. of King of Prussia and Tenet Healthcare Corp. of Santa Barbara, Calif., which owns six hospitals in this region.

On Thursday, a suit filed against Universal in Nevada accused the company of charging uninsured patients "unfair, illegal and unconscionable rates . . . for the medical services and goods rendered."

And the suit alleges Universal used a "scheme to charge supra-inflated rates for their medical services and goods" to obtain tens of millions of dollars in profits and tax benefits.

"We have not been served with a complaint, nor have we had the opportunity to review the allegations with counsel," said Steve Filton, Universal's chief financial officer. "We feel strongly, however, that our hospitals are in compliance with all applicable laws relating to matters of billing and collection."

Tenet, which faces federal and state investigations of its billing practices, faces at least five suits by uninsured patients, including one filed in state court in Philadelphia.

Tenet spokesman Steven Campanini said the company would not comment on matters in litigation, but he said it was implementing its so-called compact with uninsured patients, which includes price discounts.

"The discounting section of the compact we expect to be fully implemented in all Philadelphia hospitals by Sept. 1," Campanini said.

Last week, Moody's Investors Service said that the lawsuits as well as congressional review of billing practices would cause hospitals to improve their charity-care policies, but would not financially impact the nonprofit hospitals.

"The chance of plaintiffs' succeeding in bringing class-action lawsuits against the not-for-profit hospital industry is many years away," said Bruce Gordon, a senior vice president at Moody's. "Any near-term risk of damage rewards to plaintiffs . . . appears low at this time."

Darren P. Lehrich, a hospital analyst with Piper Jaffray & Co. in New York, agreed that the suits were largely a nuisance at this time.

"I don't view it as meaningful risk to the companies from a liability standpoint," he said. "There is always legal action on many fronts, and I view this as just one of those things that is the cost of doing business."

Lawyers familiar with the suits also questioned the likelihood of their success.

"It is a form of extortion, because if you can get a hospital in front of their community with tales of what most people would think is outrageous behavior," you could get them to settle, said John B. Reiss, a health-care lawyer at Saul Ewing in Philadelphia who represents hospitals. "I don't think they did anything illegal."

Contact staff writer Josh Goldstein at 215-854-4733 or

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