Legal woes persist over hospitals' practices on uninsured billing

Lawsuits and public scrutiny challenge nonprofit hospitals to re-examine and defend policies on billing, debt collection and charity care.

By Amy Snow Landa, AMNews correspondent. Sept. 19, 2005.

More than a year has passed since Mississippi trial lawyer Richard Scruggs and his high-profile legal team launched a wave of class-action lawsuits against nonprofit hospitals. But the jury is still out on whether the litigation blitz ultimately will reap rewards for lawyers and their clients.

Calling themselves the Not-For-Profit Litigation Group, Scruggs' law office and 10 other firms allege that nonprofit hospitals have failed to live up to their obligations as charity providers. They accuse the hospitals of violating their federal tax-exempt status by overcharging uninsured patients, using abusive tactics to collect payment and devoting too little of their revenue to charity care.

When lawsuits filed in federal court met with little success, lawyers shifted most of their cases to state courts. The state lawsuits allege that the hospitals have charged uninsured patients unfair prices and used debt-collection tactics that violate state unfair trade practices and consumer protection laws.

The federal lawsuits ran into early difficulty in October 2004, when a federal judge rejected the Scruggs group's bid to consolidate all of the federal cases into a single proceeding.

Within a few months of that decision, federal judges dismissed more than half of the lawsuits.

Of the approximately 80 federal cases that Scruggs and other lawyers filed, more than 75% have been dismissed, according to the American Hospital Assn., which is tracking the lawsuits and is named as a co-defendant in some of them.