It may seem counterintuitive, but many non-profit hospitals around the country charge their uninsured patients substantially more–often several times as much–for emergency room services as compared to amounts paid by all other categories of patients, including patients with medical insurance and Medicare and Medicaid patients, for the same care.  A putative class action lawsuit against the Mission Hospital system in Western North Carolina (which includes the Angel Medical Center, Blue Ridge Regional Hospital, McDowell Hospital, and Transylvania Regional Hospital), which challenges this practice, recently survived the hospital’s motion to dismiss in the North Carolina Business Court.
The lawsuit, Stephen Hefner v. Mission Hospital, Inc., et al., 12 CvS 03088 (Buncombe County, N.C.), alleges that Mission maintains, but does not make publicly available, spreadsheets that list its gross billing charges for each product and service provided.  Within the hospital industry, such lists of gross billing charges are called “Chargemasters” or “gross charges.”  The lawsuit contends that these Chargemasters, listed on an item-by-item basis, form a reference point for Mission to negotiate with insurance carriers, but are not pricing schedules for which Mission expects payment.  According to the lawsuit, hospitals like Mission have every incentive to artificially inflate their Chargemasters so they can maximize the rates they charge to insurers.  See “In N.C., Hospitals’ Rack Rate Hits the Uninsured Hard,” RALEIGH NEWS & OBSERVER (Apr. 22, 2012) (“Every incentive is for the hospitals to charge as much as possible for these procedures . . . . Hence the prices are as arbitrary as can be”).  In fact, only a small percentage of Mission’s patients actually pay these Chargemaster rates, which, according to the Complaint, are substantially more than any other class of patient is required to pay.
Following media attention on hospitals’ imposition of their highest charges on uninsured and under-insured patients accompanied by aggressive collection actions, not-for-profit hospitals came under increasing congressional and IRS scrutiny.   Congress took action to prohibit the practice by not-for-profit hospitals when it enacted the Patient Protection and Affordable Care Act, commonly known as “Obamacare.”  The Act instructs that a hospital will not be treated as not-for-profit unless it “prohibits the use of gross charges.”  The Complaint alleges that this provision became effective as to Mission on January 1, 2011.
The contract Mr. Hefner signed when he was admitted to the Mission emergency room required him to make payment in accordance with the hospital’s “regular rates and terms,” but failed to identify what the phrase “regular rates and terms” meant, or where any such “regular rates and terms” might be found.  Mr. Hefner’s lawsuit, in which he seeks to represent a class of other self-pay Mission emergency room patients, asserts causes of action of (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) constructive trust; (4) declaratory judgment; (5) restitution; and (6) injunction.  His lawsuit alleges that the Chargemaster rates at which he and other emergency room patients were billed were not Mission’s “regular payment rates.”
In an opinion dated April 18, 2013, the Honorable Calvin E. Murphy, North Carolina Business Court Judge, denied Mission’s motion to dismiss with respect to each of the causes of action.  Judge Murphy ruled that Mr. Hefner’s allegations–that Mission (1) failed to specify what rates it would use in billing for the treatment and services rendered, (2) charged Hefner its Chargemaster rates instead of its regular rates, (3) charged Hefner, as a self-pay emergency care patient, a higher rate than other patients for similar services, and (4) charged Hefner at rates which were unreasonable and unconscionable for the services provided—were sufficient to state claims for which relief could be granted, and allowed the lawsuit to proceed to discovery.
For more information contact John Bloss, co-counsel for Mr. Hefner and the putative class, at (336) 273-1600 or

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