A federal appeals court has rejected a class action suit brought by uninsured hospital patients who claimed that the practice of charging them significantly higher rates than insured patients or those covered under Medicare and Medicaid is discriminatory and violates consumer protection laws.
In its 21-page opinion in DiCarlo v. St. Mary's Hospital, a unanimous three-judge panel of the 3rd U.S. Circuit Court of Appeals took the rare step of adopting the lower court's opinion as its own.
The panel found that the opinion by Senior U.S. District Judge Dickinson R. Debevoise of the District of New Jersey was "thorough and did an excellent job of addressing [the plaintiff's] claims."
Writing for the court, 3rd Circuit Judge Julio M. Fuentes said: "While we are sympathetic to the burdens on uninsured patients who need medical care and recognize the severe economic hardships that the lack of insurance imposes on them, we find that the District Court's rigorous and persuasive analysis correctly states the law."
As a result, Fuentes said, the 3rd Circuit decided to simply attach a copy of Debevoise's opinion and "adopt that opinion as our own."
In the suit, plaintiffs lawyers argued that the practice of "price gouging" uninsured patients and charging unfair and unreasonable prices constitutes "unconscionable commercial conduct" under the New Jersey Consumer Fraud Act.
But Debevoise, in his July 2006 opinion, found that the plaintiffs were effectively asking the court to solve a political problem.
"What plaintiff is asking the court to do here is, put simply, to solve the problems of the American health care system, problems that the political branches of both the federal and state governments and the efforts of the private sector have, thus far, been unable to resolve," Debevoise wrote.
Like similar suits filed in other federal courts, Debevoise said, "This action seeks judicial intervention in a political morass."
Debevoise found that a court "could not possibly determine what a 'reasonable charge' for hospital services would be without wading into the entire structure of providing hospital care and the means of dealing with hospital solvency."
The suit raised a slew of issues, Debevoise said, "with which state and federal executives, legislatures, and regulatory agencies are wrestling and which are governed by numerous legislative acts and regulatory bodies."
As a result, Debevoise said, "for a court to presume to address these problems would be rushing in where angels fear to tread."
The suit was filed by attorneys Ronald J. Aranoff, Brian S. Cohen, Keith M. Fleischman, who was listed with this firm in court documents, and Robert J. Berg of Bernstein Liebhard & Lifshitz in New York on behalf of a proposed class of uninsured patients of St. Mary's Hospital in Hoboken, N.J., who were charged under the hospital's "master" rates -- rates that far exceed the charges billed to patients with insurance for the same services.
The lead plaintiff, Justin DiCarlo, claimed he was admitted to St. Mary's suffering from an increased heart rate and received an EKG and underwent blood tests.
Because DiCarlo had no insurance and did not qualify for Medicare, Medicaid or the New Jersey Charity Care Program, he agreed to pay "all charges" and was later billed more than $3,400, the suit said.
The suit alleged claims of breach of contract; breach of the duty of good faith and fair dealing; violation of the New Jersey Consumer Fraud Act; unjust enrichment; and breach of fiduciary duty.
In the contract claim, the plaintiffs lawyers argued that the agreement signed by DiCarlo contained an "open price term" and that, therefore, the law implies an agreement to pay only a reasonable price.
Since the hospital gave significant discounts to patients with insurance or whose bills were being paid by Medicare or Medicaid, the suit said, the higher charges imposed on uninsured patients were "unreasonable on their face" and a court inquiry into the extent of their unreasonableness was required.
The hospital's lawyers, Michael R. Griffinger and Anthony M. Gruppuso of the Gibbons firm's Newark, N.J., office, moved for dismissal of all claims, and Debevoise agreed.
Debevoise found that the contract claim was flawed because the plaintiffs lawyers failed to "take into account the peculiar circumstances of hospitals, such as St. Mary's, and the bearing these circumstances have upon the interpretation of contracts."
St. Mary's has a "uniform set of charges," Debevoise found, "that it applies to all patients, without regard to whether the patient is insured, uninsured, or a government program beneficiary."
Although the hospital negotiates discounts with insurers and accepts discounted payments from government programs, Debevoise found that the computation for all of the charges begins with the hospital's uniform charges.
Debevoise found that the consumer fraud claim also failed because "the New Jersey courts have consistently held that professionals are not covered by the Consumer Fraud Act."
And DiCarlo's claim of unjust enrichment failed, Debevoise found, because DiCarlo conceded that he never paid his hospital bill.
"Plaintiff does not purport to have given anything at all to defendants. In the absence of a benefit conferred, there can be no claim for unjust enrichment," Debevoise wrote.
Finally, Debevoise dismissed the fiduciary duty claim, saying that while the New Jersey courts have recognized that doctors owe a fiduciary duty to patients in making medical decisions, the courts have never "extended a hospital's fiduciary duty to its billing practices."
The plaintiffs lawyers conceded in court papers that the issue was one of "first impression in New Jersey" but argued that the case law suggested that a hospital's fiduciary duty should extend to its billing.
Defense lawyers disagreed, saying the claim should be foreclosed because the New Jersey courts have already held that debtors and creditors do not exist in a fiduciary relationship.
Debevoise sided with the defense, saying, "In general New Jersey does not find fiduciary duty in the debtor-creditor context, and, given that the cases cited by both sides relate only to the provision of care and not the payment therefor, it is unlikely that the New Jersey courts would expand a hospital's fiduciary duty to its billing practices."