Date Posted: Wednesday, September 29, 2004 at 12:30 PM CST

Contact: Richard Scruggs
The Scruggs Law Firm, P.A.
(662) 281-1212

John W. Phillips Michael L. Williams
Phillips Law Group, PLLC Williams, Love, O’Leary,
(206) 382-6163 Craine & Powers, P.C.
(503) 295-2924


FIRST TWO CLASS ACTION LAWSUITS IN NORTHWEST BY UNINSURED PATIENTS AGAINST NONPROFIT HOSPITAL SYSTEMS AND HOSPITALS FILED IN FEDERAL COURTS IN THE STATES OF OREGON AND WASHINGTON

-- 49 Such Litigations Now Underway Around The Country Covering Approximately 370 Hospitals --


FOR IMMEDIATE RELEASE

Seattle, WA, Portland, OR and Oxford, MS, September 29, 2004 – The first two class action lawsuits in the Pacific Northwest against nonprofit hospital systems and hospitals for failing to fulfill their obligations to provide charitable care to uninsured patients were filed today in federal courts by uninsured patients against Providence Health System and Providence Health System-Oregon (collectively, “Providence”), and against Legacy Health System, Legacy Good Samaritan Hospital and Medical Center, and Legacy Mount Hood Medical Center (collectively, “Legacy”). The two suits are consistent with a nationwide litigation effort by uninsured patient plaintiffs against nonprofit hospital systems and hospitals.  The lawsuits charge the defendants Providence and Legacy with, among other wrongdoings, breaching their obligations to provide charity care to uninsured patients, the basis upon which they are reaping many millions of dollars annually in tax exemptions.  Providence operates many hospitals in the States of Washington and Oregon, and Legacy operates four hospitals in the State of Oregon.

These class action lawsuits mark the 48th and 49th lawsuits respectively in the nationwide nonprofit hospital class action litigations, which commenced on June 17, 2004, and now cover approximately 370 hospitals.  The lawsuit against defendant Providence was filed in the United Sates District Court for the Western District of Washington at Seattle.  The lawsuit against defendant Legacy was filed in the United States District Court for the District of Oregon.

Richard F. Scruggs, a lead attorney in the nationwide litigation, stated, "What we are learning through these litigations are sad facts.  All these defendant nonprofit hospitals are charging the uninsured patients highly inflated sticker prices for treatment and then dispensing only a tiny fraction of their revenues on charity care.  In effect, they are using the public’s tax dollars to finance their wrongdoings, and the defendant hospital administrators appear to be more focused on wallet biopsies than fulfillment of the hospital’s obligations with respect to uninsured patients.  In many cases, the defendant nonprofit hospital systems and hospitals are engaging in Hollywood type accounting gimmicks to move funds around to mask their wealth and enrich their executives.”

As revealed in the class action lawsuit against defendant Providence, “According to their web site, www.providence.org, the mission of Defendants Providence Health System and Providence Health System – Oregon is to provide ‘universal access to health care, social justice and compassion for all members of our society’ with ‘special concern for the poor and vulnerable.’

“In fact, contrary to these representations, Providence discriminates against the very patients who are supposed to benefit most from its charity care by engaging in a pattern and practice of charging inordinately inflated rates to its uninsured patients, including Plaintiffs and the Class they seek to represent, that are far higher than the rates it charges its insured patients for the same services.  

“Providence publicly represents itself as a ‘not-for-profit medical care provider,’ and it receives millions of dollars each year in tax exemptions under Section 501(c)(3) of the federal tax code, 26 U.S.C. § 501(c)(3), as a charitable, ‘non-profit’ organization that is required by law to engage in exclusively charitable purposes.  Providence Oregon is similarly exempt from Oregon property taxes based on its charitable, ‘non-profit’ status.

“In fact, again contrary to its representations, Providence is extremely profitable.  For example, in 2002, which is the most recent year for which the data are available, Providence Oregon obtained over $1.2 billion in revenue, it held over $250 million in cash and investment securities, and the cost of its physical plant (land, buildings and equipment) was over $1.1 billion.

“The same year, Providence Oregon’s President and CEO, Henry G. Walker, received over $1.4 million in compensation and benefits, its four Vice Presidents received an average of over $565,000 in compensation and benefits, and the average compensation and benefits of its five highest paid employees other than its officers and directors was $460,000.  

“These exorbitant ‘non-profit’ salaries have caught the attention of the Internal Revenue Service, which is expected in the near future to conduct an investigation of a number of purported ‘non-profit’ charitable organizations around the country, including Providence, according to an article in the September 2, 2004 issue of the Puget Sound Business Journal (Nonprofit Payoff:  Generous Compensation for Execs Draws Scrutiny).

“While Providence gives private insurance companies and governmental payors like Medicaid and Medicare large discounts from these gross or ‘full sticker’ prices, it charges its uninsured patients, including Plaintiffs and the Class, 100% of the gross, full sticker amounts.  As a result, Providence’s uninsured patients can be charged as much as twice the amount charged to the insured for the same services.  Providence has thus realized substantial revenues from this discriminatory charging practice.”  

The class action lawsuit against Legacy discloses, among other things, “Legacy publicly represents itself as a ‘not-for-profit community benefit corporation,’ and it receives millions of dollars each year in tax exemptions under Section 501(c)(3) of the federal tax code, 26 U.S.C. § 501(c)(3), as a charitable, ‘non-profit’ corporation that is required by law to engage in exclusively charitable purposes.  

“In fact, again contrary to its representations, Legacy is highly profitable.  In its tax year from April 1, 2002 to March 31, 2003, for example, which is the most recent period for which the data are available, Legacy obtained over $700 million in revenue, it held over $208 million in cash and investment securities, and the cost of its physical plant (land, buildings and equipment) was over $550 million.

“During the same period, Legacy’s President and CEO, Robert J. Pallari, received over $1.4 million in compensation and benefits.”

“...In essence, Legacy has enjoyed the benefits of its tax-exempt, charitable ‘non-profit’ status while failing to fully comply with its obligations to provide affordable or charitable medical care to its uninsured patients, including Plaintiffs and the Class.

“Plaintiffs and the Class are the intended beneficiaries of the federal Emergency Medical Treatment and Active Labor Act, 42 U.S.C. § 1395dd (“EMTALA”), which requires Legacy to provide emergency medical care without regard to the ability of individuals to pay for such care.  Legacy has violated this federal law by requiring all uninsured patients, including Plaintiffs and the Class, to sign a written agreement agreeing to pay all medical charges not covered by insurance before it will provide them any emergency medical care.  Legacy benefits from this violation not only by obtaining an agreement from the uninsured to pay for emergency medical care that they may not be required to pay for, but also by intimidating others from even pursuing emergency medical care at Legacy that they are entitled to receive under EMTALA.  Plaintiffs and the Class have suffered personal harm as a result of these violations by Legacy.”

The lawsuit alleges that defendant Legacy “…has amassed hundreds of millions of dollars in cash and marketable securities that should be available, but it has not provided, to ensure affordable or charitable care for the uninsured whose care was contemplated by the provision of the charitable, non-profit tax exemption that Legacy enjoys.”  

The suit highlights, “Legacy engages in discriminatory pricing practices that have a significant detrimental impact on its uninsured patients… While Legacy gives private insurance companies and governmental payors like Medicaid and Medicare large discounts from these gross or ‘full sticker’ prices, it charges its uninsured patients, including Plaintiffs and the Class, 100% of the gross, full sticker amounts.  As a result, Legacy’s uninsured patients can be charged as much as twice the amount charged to the insured for the same services.  Legacy has thus realized substantial revenues from this discriminatory charging practice.”

The attorneys representing the plaintiffs in the class action suit against Providence are John W. Phillips and Phillips Law Group, PLLC, (206) 382-6163, www.jphillipslaw.com, and in the class action suit against Legacy are John W. Phillips and Phillips Law Group, PLLC, (206) 382-6163, www.jphillipslaw.com, and Michael L. Williams and Williams, Love, O’Leary, Craine & Powers P.C., (503) 295-2924, www.wdolaw.com.

To learn more about the class action lawsuits by uninsured patients against nonprofit hospital systems and nonprofit hospitals, please visit www.nfplitigation.com

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