Chapter 1

Uninsureds Suit for Exorbitant Hospital Charges

Alan A. Alop is Deputy Director of the Legal Assistance Foundation of Metropolitan Chicago, 111 West Jackson, Chicago, Illinois, phone: (312) 347-8310, fax: (312) 341-1041. Mr. Alop has over twenty-five years experience in litigating consumer cases, including consumer fraud, RICO, collection abuse, consumer credit matters, and defense of collection matters. He is the author of Defending Hospital Collection Cases: A Practical Guide and was lead attorney in Rosario v. Livaditis, 963 F.2d 1013 (7th Cir. 1992), a successful fraud class action against a vocational school. Mr. Alop is a 1971 graduate of the University of Chicago Law School. He worked for six years with the Duval County Legal Aid Association in Jacksonville, Florida from 1971 to 1977, as a staff attorney and later Director of Litigation. Since 1977 he has been employed as a supervisory attorney with the Legal Assistance Foundation of Chicago (LAFC), where he specialized in consumer fraud and consumer credit cases. In 1997 he was named Deputy Director of LAFC. In 1998 the National Consumer Law Center named Mr. Alop the Ninth Annual Vern Countryman Award winner. Mr. Alop has litigated over a hundred class action cases and lectured on consumer-law-related topics. This chapter contains pleadings related to a hospitals exorbitant charges to its uninsured patients.1 Section 1.1 is a state court complaint against a hospital for charging uninsured patients two to four times the amount it charges insured patients for the same treatment. It alleges that the practice is an unfair practice, a breach of the hospitals implied contract to charge the reasonable value of the services, a breach of its tax obligation as a nonprofit to provide free care, and unconscionable conduct. The complaint sought declaratory relief and an injunction. Section 1.2 is the patients memorandum of law in opposition to a motion to dismiss all of the plaintiffs claims. The memorandum also argues that the defense that Medicare requires the unconscionable charges is not true. Section 1.3 is the patients memorandum of law replying to an amicus in support of dismissal. It argues that the failure of state legislation that would have banned excessive hospital charges was not of any legal significance. It argues that the hospital failed to maintain policies to provide free care for the poor. It argues that the patients claims are properly before the court for decision. Section 1.4 is a request to the hospital for the production of documents. Section 1.5 is a set of interrogatories to the hospital.

1 See generally NCLCs Fair Debt Collection Ch. 14 (5th ed. 2004); NCLCs 8 Consumer Law Pleadings on CDRom Ch.4 (2002).

1.1

Complaint
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION

PHYLLIS POE, [PLAINTIFF 2] as next friend of [PLAINTIFF 3], and [PLAINTIFF 4], Plaintiffs, v. OUR LADY OF THE RESURRECTION MEDICAL CENTER, Defendant. )

) ) ) ) ) ) ) ) No. [REDACTED] ) ) Calendar W ) Judge Nudelman )

AMENDED COMPLAINT FOR BREACH OF CONTRACT, UNCONSCIONABLE ACTIONS, AND VIOLATION OF THE CONSUMER FRAUD ACT Phyllis Poe, [Plaintiff 2], as next friend of his daughter, [Plaintiff 3], and [Plaintiff 4], by their attorneys, the Legal Assistance Foundation of Metropolitan Chicago, complain against Our Lady of the Resurrection Medical Center, as follows: Introduction 1. In this action, plaintiffs challenge practices of Our Lady of the Resurrection Medical

Center which result in uninsured patients with poverty-level incomes being required to pay two to four times the hospital rates of patients who are insured. Factual Statement2 2. 3.
2

Plaintiff Phyllis Poe resides in Chicago, Illinois. Plaintiff [Plaintiff 2] resides with his daughter, [Plaintiff 3], in Chicago, Illinois.

The facts alleged in this section are intended to apply to each Count set out below, as if realleged therein.

[Plaintiff 3], who is twenty-four years old, suffers from mental retardation. 4. 5. Plaintiff [Plaintiff 4] resides in Chicago, Illinois. The defendant, Our Lady of the Resurrection Medical Center (the hospital), is a

non-profit hospital located on the Northwest Side of Chicago, Illinois. Plaintiff Poe 6. On November 12, 2001 plaintiff Poe was treated in the emergency room of the

hospital for heart problems. 7. In November 2001 and currently, Ms. Poe had no health insurance, a low income, and

no significant assets. She is unable to pay the hospitals bill. 8. The hospital billed Ms. Poe its full, un-discounted charges, an amount of $1509, for

services rendered on November 12, 2001. 9. Had Ms. Poe possessed health insurance at the time service was rendered to her by

the hospital, or had she been covered by governmental health insurance such as Medicaid or Medicare, the hospital would have accepted as full reimbursement a discounted amount significantly less than $1509. 10. The hospital has sued Ms. Poe to recover the $1509. At no point in the course of that

litigation did the hospital or its attorneys inform Ms. Poe that she might be eligible for charity care services. 11. The lawsuit by the hospital against Ms. Poe has inconvenienced and aggravated her. Plaintiff [Plaintiff 3] 12. On at least five instances in 2002 and 2003 the hospital provided emergency medical

treatment to [Plaintiff 3]. 13. In 2002 and 2003, [Plaintiff 3] had no health insurance, a low income, and no

significant assets. She is unable to pay the hospitals bill. 14. The hospital billed [Plaintiff 3] its full, un-discounted charges, in excess of $22,000,

for services rendered 2002 and 2003. 15. Had [Plaintiff 3] possessed health insurance at the time service was rendered to her

by the hospital, or had she been covered by a governmental health insurance such as Medicaid or Medicare, the hospital would have accepted as full reimbursement an amount significantly less than $22,000. 16. The hospital has sent numerous collection letters to the [Plaintiff 2 and Plaintiff 3] household seeking full payment. These letters have aggravated the[m]. Plaintiff [Plaintiff 4] 17. From April 27, 2003 through May 4, 2003, [Plaintiff 4] received emergency medical

treatment from the hospital. 18. On April 27, 2003, [Plaintiff 4] was admitted to the hospital on an emergency basis

due to severe abdominal pain. On April 30, 2003, [Plaintiff 4] received surgery to remove her gallbladder and multiple large stones from her bile duct. 19. Upon admission to the emergency room on April 27, 2003, [Plaintiff 4] advised the

hospital that she did not have insurance. A hospital employee asked [Plaintiff 4] why she came to the hospital if she had no insurance. [Plaintiff 4] advised that she came to the hospital because she was suffering from extreme pain. The employee demanded that [Plaintiff 4] contact friends or relatives who had a credit card to pay the bill or she would have to go to Cook County hospital. 20. In April and May of 2003 and currently, [Plaintiff 4] had no health insurance, a low

income, and no significant assets. She is unable to pay the hospitals bill. 21. The hospital billed [Plaintiff 4] its full, un-discounted charges, an amount of

$31,699.50, for services rendered from April 27, 2003 through May 4, 2003. 22. Had [Plaintiff 4] possessed health insurance at the time service was rendered to her

by the hospital, or had she been covered by governmental health insurance such as Medicaid or Medicare, the hospital would have accepted as full reimbursement a discounted amount significantly less than $31,699.50. 23. The hospital sent collection notices to [Plaintiff 4] which caused her aggravation. Facts Applicable to All Plaintiffs 24. The amounts charged to Ms. Poe, [Plaintiff 3], and [Plaintiff 4] exceed the reasonable

value of services rendered in that: a. The hospital charges are higher than most other Chicago area hospitals; in 2003 the hospital had the highest total charge to cost ratio in Illinois, 392.11%; and The charges to the plaintiffs are not the hospitals usual and customary charges, such as the charges paid by Blue Cross and HMOs; only a small percentage of the hospitals patients are required to pay the full, undiscounted hospital charges, as were the plaintiffs.

b.

25.

At all pertinent times the hospital had a policy and practice of charging uninsured

patients significantly higher rates for services than those charged to insured patients. In many instances uninsured patients like the plaintiffs are required to pay two to four times as much as an insured patient would have to pay. 26. At all pertinent times the hospital has received an exemption from state taxation by

claiming that it functions as a charity organization, dispensing free or reduced-cost services to all patients who need such assistance. 27. The hospital did not screen the plaintiffs to determine whether their incomes should

have qualified them for charity care.

28.

The hospital does not have policies and practices that ensure that low-income, needy

patients obtain free or reduced-cost services. 29. The hospital has, in the past ten years, greatly reduced the amount of free care or

reduced-cost care it provides to low-income patients. The amount of charity care provided by the hospital, when measured as a percentage of its gross charges, is now approximately one-half as much as the average non-profit hospital in Chicago. 30. The hospital has a policy and practice of attempting to collect its charges from even

the poorest of patients through collection agents, lawsuits, and the garnishment of wages. Pursuant to that policy, it instituted a lawsuit against plaintiff Poe and has hired several collection agencies that have hounded plaintiff [Plaintiff 3]. 31. The plaintiffs were not informed by the hospital of any procedure through which their

bill for hospital services could be waived or reduced. 32. The plaintiffs may need emergency medical treatment again in the near future. Should this occur, it is likely that they would be transported to the hospital given the proximity of the hospital to their residences. COUNT I: Consumer Fraud Act 33. Plaintiffs brings this Count as an action for damages, injunctive and declaratory

relief for the hospitals violation of the Illinois Consumer Fraud and Deceptive Practices Act, 815 ILCS 505/1 et seq., ("Consumer Fraud Act"). 34. At all pertinent times defendant engaged in trade or commerce within the meaning of

the Consumer Fraud Act, and plaintiffs were consumers within the Acts coverage. 35. The hospitals actions, as set out above, constitute unfair acts and practices within the

meaning of and in violation of 815 ILCS 505/2 of the Consumer Fraud Act in that:

a.

charging higher rates to the uninsured poor and attempting to collect such charges violates public policy which requires charitable organizations to provide free or reduced-cost services to the needy; charging the uninsured poor rates that are double and triple the rates charged to insured persons is immoral, unethical, and oppressive in that there is no justification for variable charges which discriminate against persons on the lowest rung of our economy; and the acts of the hospital, as set out above, injure all uninsured, low-income patients of the hospital by requiring them to pay rates that exceed those charged to insured patients.

b.

c.

36. 37.

Defendants acts, as set out above, were wilful and deliberate. Plaintiffs and other patients were damaged in the amount that their hospital charges

exceeded those charged to insured patients for the same services. 38. Compensatory relief will not wholly remedy the plaintiffs as they may need further

emergency services at the hospital and there is a public policy need for the challenged practices of the hospital to be enjoined. WHEREFORE, plaintiffs pray that this Court: A. Declare that the actions of the hospital, as set out above, constitute unfair acts or

practices under the Consumer Fraud Act; B. Enter judgment for the plaintiffs and against the defendants for (1) compensatory

damages equal to the amount of the hospital bill which should have been written off as charity care or the amounts by which the charges to plaintiffs exceed those to insured patients, whichever is greater; (2) $3000 for inconvenience and aggravation; and (3) $100,000 punitive damages; C. Enjoin the hospital from continuing to charge uninsured persons with low incomes

amounts two to four times higher than insured patients must pay; and D. Grant such other relief as the Court deems just and proper. COUNT II: Breach of Contract

39.

At the time services were provided to the plaintiffs by the hospital, no written

contract was executed fixing the exact amount to be paid to the hospital. 40. Under Illinois law, where services are provided without an agreed price term, an

implied contract exists for the reasonable value of services rendered. 41. The charges to the plaintiffs exceeded the reasonable value of services provided by

the hospital for the reasons set out above, in paragraph 24. 42. 43. The plaintiffs have performed their duties under the implied contracts. The hospital, by charging the plaintiffs amounts in excess of the reasonable value of

services rendered, has breached it obligations under the implied contract and damaged the plaintiffs in the amounts by which the bills exceed the reasonable value of services rendered. WHEREFORE, plaintiffs pray that this Court: A. contract; B. Enter judgment for the plaintiffs and against the defendants for compensatory Declare that the actions of the hospital, as set out above, constitute a breach of

damages equal to the amounts by which the charges to plaintiffs exceed the reasonable value of services rendered; and C. Grant such other relief as the Court deems just and proper. COUNT III: Breach of Statutory Obligation 44. At all pertinent times the hospital has availed itself of the tax exemptions provided by

35 ILCS 200/15-65, which allows charitable organizations to avoid property taxation. 45. In return for obtaining its tax exemption, the hospital is required under Illinois law to

provide free care where the patient is unable to pay. 46. The plaintiffs are members of the class of persons that the tax exemption statute was

intended to benefit. 47. As set out above, the hospital has breached its duties under the tax exemption statute

by failing to provide free or reduced cost care to plaintiffs and others similarly situated. 48. The hospitals breach of its statutory duty to provide free care to the indigent has

damaged the plaintiffs and members of the public. The hospital continues to engage in the same policies as set out above. WHEREFORE, plaintiffs pray that this Court: A. Declare that the actions of the hospital, as set out above, constitute violations of the

hospitals duties under the tax exemption law; B. Enjoin the hospital from continuing to charge uninsured persons with low incomes

any amounts for services; and C. Grant such other relief as the Court deems just and proper. COUNT IV: Unconscionability 49. The actions of the hospital, as set out above, are unconscionable under Illinois

common law in that: a. charging uninsured, low-income patients two to four times the rate that insured patients pay for identical services--price-gouging the poor--shocks the conscience of a reasonable person; charging uninsured, low-income patients fees for services while taking advantage of a tax exemption that requires provision of free services to the indigent is egregious and unlawful conduct; the transactions between the hospital and the plaintiffs were not negotiated transactions; a disparity in bargaining power existed, with all power residing in the hospital; and the hospitals charges may be the highest in the state.

b.

c.

d. 50.

Plaintiffs were damaged by the unconscionable practices of the defendant in that they

have been billed for services in excessive amounts and in amounts significantly higher than those charged to insured patients. WHEREFORE, plaintiffs pray that this Court: A. B. Declare that the actions of the hospital, as set out above, are unconscionable; Enjoin the hospital from continuing to charge uninsured persons higher rates than

insured persons; C. Enjoin the hospital from requiring low-income patients to pay for hospital services

that should be provided as charity care under the hospitals duty as a tax exempt charitable organization; and D. Grant such other relief as the Court deems just and proper.

One of the Plaintiffs attorneys

Alan A. Alop #91017 Nareen Kim Legal Assistance Foundation of Metropolitan Chicago 111 W. Jackson Third Floor Chicago, Illinois 60604-3502 (312) 347-8310 Attorneys for Plaintiffs

CERTIFICATE OF SERVICE

I, ALAN A. ALOP, certify that I served the attached by mailing a copy to: Michael L. Shakman Edward W. Feldman Miller Shakman & Hamilton 208 S. LaSalle St. Suite 1100 Chicago, IL 60604 Grabowski Law Center 2800 S. River Rd. Suite 410 Des Plaines, IL 60018

and depositing the same in the U. S. mail at 111 W. Jackson, Chicago, IL 60604 at 5:00 P. M. on May , 2004.

_____________________________________ Alan A. Alop

10

1.2

Memorandum Opposing Defendants Motion to Dismiss

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION

PHYLLIS POE, [PLAINTIFF 2] as next friend of [PLAINTIFF 3], and [PLAINTIFF 4], Plaintiffs, v. OUR LADY OF THE RESURRECTION MEDICAL CENTER, Defendant.

) ) ) ) ) ) ) ) ) ) ) ) )

No. [redacted] Calendar W Judge Nudelman

PLAINTIFFS MEMORANDUM OF LAW IN OPPOSITION TO THE DEFENDANTS MOTION TO DISMISS

Alan A. Alop #91017 Nareen Kim Legal Assistance Foundation of Metropolitan Chicago 111 West Jackson Third Floor Chicago, IL 60604 (312) 347-8310 Attorneys for Plaintiffs

I. INTRODUCTION .................................................................................................................... 1 II. OUR LADYS MEDICARE DEFENSE IS GROUNDLESS.............................................. 2 A. The Thompson Letter ........................................................................................... 2 B. Uniform Charge Structure................................................................................... 5 C. Bad Debt Rules...................................................................................................... 6 III. THE AMENDED COMPLAINT PLEADS A VIOLATION OF THE CONSUMER FRAUD ACT. .................................................................................................................... 7 A. The CFA Must Be Liberally Construed To Protect Consumers. ..................... 8 B. Hospital Billing Activities Are Within The Ambit Of The CFA. ..................... 9 C. CFA Claims Of.................................................................................................... 14 D. Count I Of The Amended Complaint States A CFA Claim For Unfair Acts.16 (1) First Prong: Public Policy. .................................................................... 17 (2) Second Prong: Immoral, Unethical, Oppressive Or Unscrupulous Acts. .......................................................................................................... 19 (3) Third Prong: Substantial Injury To Consumers. ............................... 20 IV. PLAINTIFFS CLAIM FOR UNCONSCIONABLE CONDUCT STATES A CAUSE OF ACTION. ................................................................................................................... 21 V. PLAINTIFFS CLAIM FOR BREACH OF STATUTORY OBLIGATION STATES A CAUSE OF ACTION. .................................................................................................... 23 VI. PLAINTIFFS CLAIM FOR BREACH OF CONTRACT STATES A CAUSE OF ACTION........................................................................................................................... 28 A. Plaintiffs Have Sufficiently Alleged That The Charges To Them Were Not 29 B. Plaintiffs Have Sufficiently Alleged That The Charges To Them Were Not Our Lady's........................................................................................................... 31 VII. PLAINTIFFS STATE GROUNDS SUFFICIENT FOR THE RECOVERY OF COMPENSATORY AND PUNITIVE DAMAGES AND EQUITABLE RELIEF. . 32 A. Compensatory Damages..................................................................................... 32 B. Punitive Damages................................................................................................ 33 Equitable Relief................................................................................................... 34 C.

ii

I.

INTRODUCTION In this case three indigent, uninsured patients of Our Lady of the Resurrection Medical

Center (Our Lady) were billed for hospital services or sued by Our Lady for collection. For purposes of the motion to dismiss, the following must be accepted as true: 1. Our Ladys charges to the three indigent, uninsured plaintiffs, are double to quadruple its rates to insured patients, and in 2003 Our Lady had the highest charge-to-cost ratio in Illinois. Amended Complaint (Am. Comp.) at 24-25. Our Lady did not screen the plaintiffs to determine whether they were qualified for free services, does not have policies and practices to ensure that needy patients obtain free services, and did not inform the plaintiffs of the availability of free services. Am. Comp. at 27-28, 31. Our Lady has a policy and practice of attempting to collect its charges from even the poorest of patients. Am. Comp. at 30. Our Lady has received an exemption from state taxation as a charity institution, but in the past ten years has greatly reduced the amount of charity care provided. Am. Comp. at 26, 29.

2.

3.

4.

The plaintiffs allege that these actions of the hospital constitute: (1) unfair practices as defined by the Illinois Consumer Fraud Act; (2) breach of contract; (3) breach of the hospitals duty to provide charitable care to the poor in return for its tax exempt status; and (4) unconscionable acts under Illinois common law. The plaintiffs seek damages, injunctive relief, and declaratory relief. Our Lady points an accusing finger at the federal government. Our Lady contends that federal Medicare law requires them to charge somebody the full, un-discounted hospital rates, so they have selected three categories of patients to pay their full rates: (1) patients whose insurers have no negotiated agreement with Our Lady, such as those who go to Our Lady even though their insurer does not list Our Lady as an approved provider;

(2) (3)

liability insurance carriers paying medical expenses of auto accidents; and the uninsured, i.e., the poor.

Defendants Memorandum of Law in Support of Motion to Dismiss (Def. Memo.) at 3, n. 1. Our Lady does not blanch at the inclusion of category three on this list; this is their routine practice. As shown below, this Medicaid made me do it defense is groundless. Medicare does not require hospitals to charge the uninsured four times the rates it charges the insured. The federal government recently chided hospitals for taking this position. See Section IIA, (The Thompson Letter) below. Furthermore, Our Lady receives millions of dollars in tax relief each year by virtue of its tax-exempt status as a charitable institution. In return for this valuable exemption, Illinois law requires that a tax-exempt hospital provide free care to all who need and apply for it.... Alivio Medical Ctr. v. Illinois Dept of Revenue, 299 Ill. App. 3d 647, 650-651, 702 N.E.2d 189, 192 (1st Dist. 1998). The plaintiffs are all poor, uninsured, former patients of Our Lady who should have received free service but did not. Our Lady blithely ignores the fact that the plaintiffs are emblematic of thousands of indigent patients to whom this hospital has breached its duty to provide free care and to whom, instead, it has added insult to injury by charging them double and triple the rates assessed insured patients and suing them when they are unable to pay these exorbitant bills.3 II. OUR LADYS MEDICARE DEFENSE IS GROUNDLESS A. The Thompson Letter

Given the emphasis Our Lady has placed on its argument that its actions are the result of

A federal class action alleging similar claims as raised in this case was filed against Our Lady and the chain of Resurrection hospitals on June 22, 2004. Cygan v. Resurrection Medical Center et al., (N.D. Ill. 04 CV 4168).

Medicare requirements, it is necessary to rebut this proposition early. A key to this inquiry is a February 19, 2004 letter Secretary of Health and Human Services (HHS) Thompson wrote to the American Hospital Association (AHA) as follows: Your letter suggests that HHS regulations require hospitals to bill all patients using the same schedule of charges and suggests that as a result, the uninsured are forced to pay full price for their care. That suggestion is not correct and does not accurately reflect my policy....[H]ospitals can provide discounts to uninsured and underinsured patients who cannot afford their hospital bills....Nothing in the Medicare program rules or regulation prohibit such discounts....[H]ospitals have the ability to offer discounts to uninsured and underinsured individuals.... I strongly encourage you to work with AHA member hospitals to take action to assist the uninsured and underinsured and therefore, end the situation where, as you said in your own words, uninsured Americans and others of limited means are often billed and required to pay higher charges. Exhibit A, attached hereto. Secretary Thompson directed the Centers for Medicare & Medicaid Services (CMS) and the Office of Inspector General (OIG) to prepare a summary of existing HHS policy. These documents also cut against Our Ladys claims. The CMS summary provides: Ql: Can a hospital waive collection of charges to an indigent, uninsured individual? Al: Yes. Nothing in the Centers for Medicare & Medicaid Services (CMS) regulations, Provider Reimbursement Manual, or Program Instructions prohibit a hospital from waiving collection of charges to any patients, Medicare or non-Medicare, including low-income, uninsured or medically indigent individuals, if it is done as part of the hospitals indigency policy. By indigency policy we mean a policy developed and utilized by a hospital to determine patients financial ability to pay for services.... Q2: What if a hospital wants to discount charges to patients with large medical bills? A2: In the same way that a hospital can waive collection of charges for individuals under its indigency policy, a hospital may also offer discounts to those who have large medical bills. Hospitals have flexibility in establishing their own indigency policies. . . .

Q5: How is the above any different than a hospital giving a discount to Blue Cross or any other insurer? A5: For apportionment purposes, discounting charges to uninsured or underinsured patients is no different than giving an allowance to Blue Cross or other commercial insurers for non-Medicare patients.... Q11: Does CMS have any requirements as to what documentation a hospital must secure in order to make an indigency determination? If so, what are those requirements? A11: For indigent patients who are not Medicare patients, the Medicare program does not prescribe any specific rules for providers to make indigence determinations; rather, the hospital is permitted to use its own business judgment in determining whether or not a non-Medicare patient is indigent and therefore entitled to a discount pursuant to its own indigency policy.... Q12: Are hospitals required to take low-income patients to court, or seize their homes, or send claims out to a collection agency when those patients dont pay their hospital bills? A12: No. Nothing in the Medicare instructions requires the hospital to seize a patients home, take them to court, or use a collection agency. Hospitals arent required under federal law to engage in any specific level of collection effort for Medicare or non-Medicare patients. Def. Memo. Exhibit C-3-8. The OIG summary concludes in a similar vein: Hospitals have the ability to provide discounts to uninsured and underinsured patients who cannot afford their hospital bills....[T]he OIG has never brought a case based on a hospitals bona fide discounting of its bill for an uninsured or underinsured patient of limited means. Id. at C-14. After these summaries were published, HHS stated categorically that they reflect[ed] no change to existing policy. CMS, HHS, Medlearn Matters No. SE0405 (attached as Exhibit B) (emphasis in original). Another letter from Secretary Thompson, dated November 20, 2003, also stated that Medicare policy...does not prevent hospitals from offering discounted charges to indigent, uninsured or other low-income patients. Def. Memo. Exhibit A. Our Ladys Medicare defense has thus been rejected by the agency responsible for administering Medicare.

B.

Uniform Charge Structure

Our Lady relies on provisions of the Medicare Provider Reimbursement Manual (PRM) concerning the lower of cost or charges (LCC) principle. Def. Memo. at 8-10. Under LCC, services to Medicare beneficiaries will be based upon the lower of the reasonable costs of providing those services or the customary charges for the same services. PRM 2600. But this principle is no longer generally applicable to the charges of acute care hospitals like Our Lady. As the CMS summary attached to Secretary Thompsons February 19, 2004 letter explains, the LCC provision is largely irrelevant in 2004. In addition, it does not preclude the reduction of prices for those unable to pay: Q6: Does the Medicare programs lesser of costs or charges (LCC) principle alter any of the above advice or prohibit hospitals from offering discounts to the uninsured or the underinsured? A6: The LCC principles is a feature of the prior cost method of reimbursing hospitals, before the current payment rules were enacted in the 1980s and 1990s. Under these old rules, Medicare paid hospitals the lesser of the hospitals costs or charges. If that system were still in effect for most services, the LCC principle could be implicated by discounting charges for the uninsured, because if a hospital discounted its charges below its costs or failed to collect from a substantial percentage of charge-paying patients, Medicare reimbursement to the hospital may be reduced. The reality is that this LCC principle has limited applicability today...the vast majority of services provided in hospitals in America today are not subject to the LCC principle. In the cases where the LCC is applicable, however, the Provider Reimbursement Manual provides that if a hospital offers free care or care at a reduced charge to patients determined to be financially indigent, and meets the provisions in the manual, the reduced charges do not result in adjustment to charges under LCC. And since charges are not adjusted, Medicare reimbursement to the hospital is not affected either. Def. Memo. Exhibit C-4-5 (emphasis added). Nothing in the Medicare LCC rules stands in the way of Our Lady providing free and reduced price care to those who cannot otherwise afford

care. C. Bad Debt Rules

Our Lady also suggests that if it failed to use aggressive collection methods, it might not be eligible for reimbursement for bad debts. Def. Memo. at 10-11.4 However, Medicare reimbursement for bad debt is only available for the bad debt of Medicare recipients who fail to honor their deductible or copayment obligations. Collection of the bad debt of Medicare recipients is not at issue in this suit as plaintiffs are not covered by Medicare. Am. Comp. at 7, 13, 20. In order to receive Medicare reimbursement for the bad debt of Medicare patients, a hospital must engage[] in reasonable, consistent collection efforts from the Medicare patient. Def. Memo. Exhibit C-5 (A9).5 Our Lady will not lose any reimbursement if it fails to make efforts to collect from non-Medicare patients since Medicare does not pay any portion of their bills. CMS makes clear that Medicare requires no collection efforts from non-Medicare patients and no documentation of such efforts. Id. at C-6 (A11 and 12). And even as to Medicare patients, the hospital can forego any collection effort if it determines the patients are medically indigent. Id. at C-5 (A9).6

The relevance of this argument is dubious in that the Amended Complaint does not challenge Our Ladys collection methods, but rather the amounts it is attempting to collect. Even in respect to Medicare patients, the rules specifically do not require use of a collection agency or threatening or filing suit. PRM 310. The federal government has no concern about a hospital not collecting non-Medicare patient debt. Rather, the concern is if hospitals attempt to collect non-Medicare debt but do not try to collect Medicare debt, expecting the government to reimburse the Medicare bad debt. This was the problem in the two cases cited by Our Lady, Mt. Sinai Hosp. Medical Ctr. v. Shalala, 196 F.3d 703, 705-06 (7th Cir. 1999) and University Health Services, Inc. v. HHS, 120 F.3d 1145, 1147-48 (11th Cir. 1997). Reimbursement denials of the covered patients in those cases thus does not in any way suggest that hospitals must engage in any particular practices to collect 6
6 5

Our Lady states that Medicare allows hospitals to provide free or discounted care to financially indigent patients, but only if indigence is determined on a case-by-case basis subject to verification. Def. Memo. at 11. Plaintiffs do not seek relief inconsistent with that statement of the law. But the Amended Complaint alleges that Our Lady has not implemented practices and policies to effectively identify the needy, inform them of the availability of free care, and process their applications. Am. Comp. at 27, 28, 31. That is what happened to the plaintiffs. Rather than blocking the relief sought in this case, Medicare law is consonant with the plaintiffs position. III. THE AMENDED COMPLAINT PLEADS A VIOLATION OF THE CONSUMER FRAUD ACT. Resolution of the motion to dismiss requires this Court to determine whether the allegations of the Amended Complaint, when interpreted in the light most favorable to the plaintiffs, sufficiently state a cause of action. Jackson v. South Holland Dodge, Inc., 197 Ill. 2d 39, 755 N.E.2d 462 (2001). The plaintiffs Amended Complaint does state a cause of action under the Illinois Consumer Fraud Act, 815 ILCS 505/1 et seq. (CFA"). Contrary to the contentions of Our Lady, hospital billing activities do fall within the purview of the CFA, a CFA claim for unfairness sans deception is recognized in Illinois, and the allegations of plaintiffs complaint, if proven, constitute "unfair" practices under the CFA because the challenged actions offend public policy, are oppressive, and injure consumers. A. The CFA Must Be Liberally Construed To Protect Consumers.

The keystone provision of the CFA provides, in pertinent part, that: ...unfair or deceptive acts or practices...in the conduct of any trade or commerce from non-Medicare patients.

are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby. 835 ILCS 505/2. The express language of the CFA provides that "[t]his Act shall be liberally construed to effect the purposes thereof." 815 ILCS 505/11a. See also Connick v. Suzuki Motor Co. Ltd., 174 Ill. 2d 482, 503-504, 675 N.E. 2d 584, 594 (1996) ( [CFA] should be liberally construed....). The First District Court of Appeals ruled that Section 505/11a constitutes: ...a clear mandate from the Illinois legislature that our courts utilize the Act to the utmost degree in eradicating all forms of deceptive and unfair business practices and grant appropriate remedies to injured parties. People v. All American Aluminum, 171 Ill. App. 3d 27, 33, 524 N.E.2d.1067, 1070 (1st Dist. 1988). Our Lady's arguments ignore the broad sweep the legislature and the courts have accorded the CFA. B. Hospital Billing Activities Are Within The Ambit Of The CFA.

Our Lady suggests that hospital billing practices do not come within the ambit of the CFA. Yet the language of the CFA states ...unfair or deceptive acts or practices...in the conduct of any trade or commerce are hereby declared unlawful.... 835 ILCS 505/2 (emphasis added). Trade or commerce is defined in the CFA as: the advertising, offering for sale, sale or distribution of any services...and shall include any trade or commerce directly or indirectly affecting the people of this State. 815 ILCS 505/1(f). The Illinois Supreme Court relied on this provision to reject a collection agencys argument that its collection of unpaid parking tickets was not trade or commerce

within the meaning of the CFA. People ex rel. Daley v. Datacom Sys. Corp., 146 Ill. 2d 1, 2930, 585 N.E.2d 51, 64 (1991). The Court labeled the collection agencys argument a restrictive construction of those terms, noting that the CFA applies to any trade or commerce and the distribution of any services.... Id. (emphasis in original). The Court stated [t]his section [815 ILCS 505/1(f)] reveals legislative intent to extend the reach of the statute broadly. Id. Defendant sweeps aside the Courts call for a broad construction of the terms trade or commerce, claiming that the medical billing activities challenged in this action do not constitute trade or commerce. No Illinois decision has ever held that, and the cases cited by defendant do not support its contention. In Feldstein v. Guinan, 148 Ill. App. 3d 610, 499 N.E.2d 535 (1st Dist. 1986), a doctor sued his employer when the employer refused to honor a one-year employment contract. Id. at 612, 499 N.E.2d at 536-537. The Court held that the suit could not proceed because the plaintiff was not a consumer within the meaning of that term as used in the CFA. Employment relationships, in other words, are not contracts for goods or services by consumers, within the purview of the CFA. See Barille v. Sears Roebuck and Co., 289 Ill. App. 3d 171, 682 N.E.2d 118 (1st Dist. 1997) in which an employees action against her employer was held outside the scope of the CFA. Our Lady labors to make Feldstein, which was a simple employment dispute between doctors, more than it is. The Court in Feldstein carefully limited its holding to the practice of medicine as presented under the facts of this case. Id. at 615, 499 N.E.2d at 538. Even the most expansive reading of Feldstein would limit application of the CFA only where the issue is the actual provision of healthcare, not where the commercial aspects of medicine are in controversy. As the Court in Feldstein stated: ...although the practice of medicine may have a business aspect, the commercial phases of medicine which directly affect the public are not at issue here. Id. The controversy presented in this case is the business aspect of medicine, excessive billing

practices, which quite plainly affect the public in direct fashion. Thus, Feldstein is inapposite to the issues in this case. Defendants reliance on Doe v. Northwestern Univ., 289 Ill. App. 3d 39, 682 N.E.2d 145 (1st Dist. 1997), and Evanston Hosp. v. Crane, 254 Ill. App. 3d 435, 627 N.E.2d 29 (1st Dist. 1993), is equally misplaced. In Doe, six persons asserted a CFA claim against the University and a dental student working in the Northwestern University dental clinic, where they had received root canals, tooth extractions, and other dental surgery. Doe, 289 Ill. App. 3d at 42, 682 N.E.2d at 147. The plaintiffs sought damages for emotional distress due to the fact that the student who provided these dental services had tested positive for HIV. Id. The controversy in Doe thus concerned the actual provision of healthcare services, not the commercial aspects following in the wake of such services. Without analysis, Doe cited Feldstein as having excluded medical services from the purview of the CFA. Id. at 45, 682 N.E.2d at 149. But Doe expressly limited its holding in a manner that gives no support to Our Ladys argument: ...we hold that the provision of dental services for educational purposes does not constitute trade or commerce within the meaning of the [Consumer Fraud] Act. Id. The issue in Doe was not a commercial aspect of a medical provider. It centered on the actual provision of medical services, the dental surgery itself. This is a world removed from the case at bar, where the plaintiffs complain of the harsh billing practices of a hospital. Evanston Hospital provides no more support to Our Lady than does Doe. In Evanston Hospital two pro se counterclaims were asserted against the hospital, one for medical malpractice and the second, under the CFA, for deception and misrepresentations regarding the health care services provided. Id. at 436-437, 627 N.E.2d at 31. The CFA counterclaim alleged that a hospital patient was not given medical guidance that a hospital publication promised, and that he did not receive high quality patient

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care as promised by the hospitals Patient Guide. Id. at 443, 627 N.E.2d at 35. The Court held that the CFA was not applicable to medical negligence issues but noted that it was not extending that holding to the business aspects of medical practice: The misconduct alleged here and in Frahm amounts to professional malpractice, and cannot be equated with the misdeeds of an ordinary commercial enterprise, against which the Consumer Fraud Act was expressly enacted to protect consumers and businessmen. Although the practice of medicine may have a business aspect, the commercial phases of medicine which directly affect the public are not at issue here. The Consumer Fraud Act is intended to reach practices of the type which affect consumers generally and is not available as an additional remedy to redress a purely private wrong. Id. at 443-444, 627 N.E.2d at 35-36 (citations omitted; emphasis added). The decision in Evanston Hospital reiterates the same distinction made in Feldstein and Doe. While the CFA may not encompass medical service disputes such as negligence and the quality of health care, the commercial aspects of medicine fall within the scope of the CFA.7 Our Lady also points to Cripe v. Leiter, 184 Ill. 2d 185, 703 N.E.2d 100 (1998), where the Supreme Court did not allow a commercial aspect of lawyering, the billing process, to be subject to the CFA. But Cripe is based on a rationale which is inapplicable to this case. First, Cripe relies heavily on the fact that the regulation of attorney conduct in this state has been the prerogative of this court. Id. at 195, 703 N.E.2d at 105. Pursuant to that prerogative, the Supreme Court has issued rules governing attorney conduct and administered a comprehensive regulatory scheme, including disciplinary measures. Attorney fees, the issue raised by the plaintiff in Cripe, are regulated by the Court and specific provisions of the Rules of Professional Conduct address this area. The Court has backed up its rules with discipline; the decision

Our Lady also cites Frahm v. Urkovich, 113 Ill. App. 3d 580, 447 N.E.2d 107 (1st Dist. 1983), where the Court refused to subject an attack on an attorneys professional skills to the requirements of the CFA. Frahm, like Feldstein and Doe, differentiated between professional practice and commercial aspects of the profession. Id. at 584, 447 N.E.2d at 1010.

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specified instances where sanctions had been imposed on attorneys who charged excessive fees. Id. The underpinning of this rationale is the principle of separation of powers. The Supreme Court in Cripe fired a shot across the bow of the legislature, holding that regulation of the profession of law is the sole domain of the Illinois Supreme Court, and not the state legislature. Cripe is also grounded on the fiduciary status between attorney and client: Moreover, an attorneys billing for legal services cannot be separated from the attorney-client relationship. Unlike ordinary merchant-consumer relationships, the relationship between attorney and client is fiduciary in nature....Because of that fiduciary relationship, the attorneys fees are subject to scrutiny and regulation not applicable to the fees for most commercial services.

Id. at 198-199, 703 N.E.2d at 107. Our Lady strains to compare the case at bar with Cripe, but it cannot be done. There is no comparable separation of powers argument with regard to the medical profession. The Supreme Court does not regulate the medical profession or medical fees, so applying the CFA to hospital billing practices does not infringe on any constitutional principle. And even the defendant concedes that there is no fiduciary relationship regarding the billing of hospital patients, as there is in the attorney-client relationship. Def. Memo. at 16. The two pegs on which the Court in Cripe hung its decision do not exist here. Cripe provides no support to the hospitals contention that its billing practices are not trade or commerce within the meaning of the CFA.8 Two Illinois federal courts have also weighed in on the issue of whether the business Our Lady argues that extensive regulation of the billing of patients is enough to bring it within the first rationale of Cripe. Def. Memo. at 16-17. But Our Lady fails to specify any regulations that specifically prohibit excessive fees by hospitals. The AMA Code of Ethics section cited by defendant (E-6.0-6.13) does not evidence regulation as defendant claims in that: (1) it applies only to physician fees, not hospital charges; and (2) it does not preclude the imposition of excessive fees, as attorney regulations do. The oblique reference to Medicare regulations is equally uninstructive. Medicare regulations do not prohibit hospitals from exacting excessive fees.
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aspects of medical services constitute trade or commerce within the scope of the CFA. In Gadson v. Newman, 807 F. Supp. 1412 (C.D. Ill. 1992), the Court held that a business dispute between two doctors and a hospital was subject to a CFA claim. First, Gadson emphasizes that Frahm and Feldstein were only tangentially related to the business aspects of the legal and medical professions, a distinction the Court labels crucial. Id. at 1416. Second, the Court relied on the fact that legislative history of the 1973 amendments to the CFA showed that proponents of the amendments viewed the new CFA as very broad...it encompasses just about every conceivable transaction... Id. at 1418, n.1. Finally, the Court noted that the CFA requires that courts construing Section 505/2 of the CFA give consideration ...to the interpretations of the Federal Trade Commission and the federal courts relating to Section 5(a) of the Federal Trade Commission Act. Id. at 418-419. The Court then proceeded to consider federal guideposts, finding that ...Congress has repeatedly rejected proposals to strip the FTC of the power to regulate professions, and that federal courts have consistently applied the FTC Act to the business aspects of the medical profession. Id. See also Dimensions Medical Ctr., Ltd. v. Principal Fin. Group, Ltd., 1995 U.S. Dist. LEXIS 1420 (N.D. Ill. 1995) where the Court applied the CFA to a claim of wrongful billing for medical services, finding that ...the weight of Illinois Appellate authority applies the CFA to the legal and medical professions for the business related aspects of those professions. Id. at *23-24. C. CFA Claims Of Unfairness Do Not Require An Allegation Of Deception.

Plaintiffs claim in Count I is based on a CFA provision which, when boiled down to its essence, is elegantly simple: ...unfair or deceptive acts or practices...are hereby declared unlawful.... 815 ILCS 505/2 (emphasis added). It could not be more plainly set out by the legislature. The prohibition applies to unfair acts or practices or deceptive acts or practices - not

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to acts or practices that are unfair and deceptive. The clarity of the provision has not prevented a number of courts from ruling that unfair or deceptive means unfair and deceptive. See Def. Memo. at 17, n. 9. But the Illinois Supreme Court has definitively rejected that conclusion in its decision in Robinson v. Toyota Motor Credit Corp., 201 Ill. 2d 403, 775 N.E.2d 951 (2002), holding that [r]ecovery may be had for unfair as well as deceptive conduct. Id. at 417, 775 N.E.2d at 960. Our Lady relies on Laughlin v. Evanston Hosp., 133 Ill. 2d 374, 550 N.E.2d 986 (1990) to argue two points, that deception needs to be alleged in a CFA claim and that Our Ladys price discrimination is permissible. Laughlin does not establish either proposition in the circumstances of this case. First, to the extent that Laughlin has been cited to require allegations of deception in every CFA claim, Robinson implicitly overruled Laughlin.9 See Carter v. Chicago & Illinois Midland Ry. Co., 130 Ill. App. 3d 431, 474 N.E.2d 458 (4th Dist. 1985). Second, in Laughlin the price discrimination challenge was not made by consumers (patients) arguing unfair practices, as here; it was made by third-party payors (insurers) arguing [u]nfair methods of competition. Laughlin, at 376-377, 550 N.E.2d at 986-987. Nor did the plaintiffs in Laughlin allege that consumers were injured by the challenged practices. Id. at 396, 550 N.E.2d at 995 (Clark, J., concurring). Most importantly, the Court refused to label price discrimination Even before Robinson, many lower courts ignored Laughlin, holding that an unfairness claim under CFA did not require allegations of deception. Mosiman v. BMW Fin. Services, NA, Inc., 321 Ill. App. 3d 386, 390, 748 N.E.2d 313, 317 (3d Dist. 2001); Saunders v. Michigan Ave. Natl Bank, 278 Ill. App. 3d 307, 313, 662 N.E.2d 602, 608 (1st Dist. 1996). See also The Effect of Laughlin v. Evanston Hospital on Consumer Claims for Nondeceptive Acts or Practices, 9 Loyola Consumer Law Reporter 54 (1997). The Seventh Circuit recently cited Robinson in resolving a claim of unfairness that did not involve deception. Anthony v. Country Life Mfg., LLC., 2003 U.S. App. LEXIS 13622 (7th Cir. 2003). Also relying on Robinson, a Chancery Court decision has denied a motion to dismiss a CFA claim based solely on unfairness. Case v. Ameritech Services, Inc., No. 02 CH 19210. 2004 WL 73524, at *4-6 (Cir. Ct. January 15, 2004).
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an unfair method of competition under Section 505/2 of the CFA10 because it found that public policy was not offended in that case. While the Laughlin plaintiffs pointed to the public policy against price discrimination in the federal Clayton Act, the Court noted that the Illinois legislature, in the Illinois Antitrust Act, had specifically ...declined to include provisions against price discrimination. In Laughlin then, the Court was confronted with conflicting public policies; federal law made price discrimination unfair competition, but the state law rejected the federal standard and did not prohibit the practice. The Court determined that when Illinois and federal statutes contain conflicting statements of public policy, the standard set by the state will govern as the public policy in Illinois. Id. at 391, 550 N.E.2d at 993. This action does not present a case where state and federal public policies are split; both levels of government condemn price gouging of the poor and uninsured by hospitals. Even if this Court accepted Our Ladys view that federal Medicare policy mandates its imposition of its highest charges on the poor and uninsured, Laughlin suggests that the state policy of affording the poor free hospital care would trump the federal standard for purposes of the CFA unfairness test.11 D. Count I Of The Amended Complaint States A CFA Claim For Unfair Acts.

Our Ladys contention that the Amended Complaint does not contain sufficient

Unfair methods of competition and unfair or deceptive acts or practices...in the conduct of any trade or commerce are hereby declared unlawful.... 815 ILCS 505/2. In Perrin v. Pioneer Natl Title Ins. Co., 83 Ill. App. 3d 664, 673 404 N.E.2d 508, 514515 (1st Dist. 1980), the Court determined that price discrimination in the sale of title insurance did not offend any articulated public policy of the state. The Court found that the plaintiffs could not satisfy the second unfairness criterion, oppressive conduct, as there were no allegations that plaintiffs could not obtain title insurance from a competitor. While the plaintiffs in Perrin could not sufficiently allege the first two prongs of the unfairness standard, plaintiffs in this case have done so. Perrin also noted that the business of title insurance is [not] so affected with a public interest as to require title insurers to charge reasonable or nondiscriminatory rates. Id. at 673, 404 N.E.2d at 515. Health care charges are affected with a public interest.
11

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allegations to constitute "unfair" actions as prohibited by the CFA is wrong. In evaluating CFA unfairness claims, the Supreme Court in Robinson set out three factors, derived from federal law, that govern: (1) whether the practice offends public policy; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers. Id. at 418, 775 N.E.2d at 961. In addition, the Court in Robinson held that an unfairness claim need not satisfy all three prongs. The Court adopted the standard set out in a Connecticut decision, Cheshire Mortgage Services, Inc. v. Montes, 223 Conn. 80, 612 A.2d 113 (1992): All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three. Robinson, at 418, 775 N.E.2d at 961 (citation omitted) (emphasis added). In the case at bar the plaintiffs can satisfy all three requirements of the unfairness test.12 (1) First Prong: Public Policy.

The Amended Complaint has two basic claims of unfairness: (a) that Our Lady charges and seeks to collect from uninsured patients double and triple the amounts it charges insured patients for the same services; and (b) that Our Lady, in utter disregard of its duties under state tax exemption law, failed to provide service without charge to the indigent plaintiffs. These practices of the hospital offend several public policies of the State of Illinois. First, the Illinois Constitution provides that [t]he General Assembly by law may exempt from taxation... property used exclusively for... charitable purposes. Our Ladys reliance on 815 ILCS 505/10b(1), which precludes CFA actions where the conduct in question is specifically authorized by laws... is misplaced. As demonstrated above, no specific law authorizes the challenged practices of defendant.
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Article IX, Section 6. Pursuant to this provision, a statute allows non-profit hospitals such as Our Lady to gain exemption from state property taxation ...when actually and exclusively used for charitable or beneficent purposes... 35 ILCS 200/15-65. Our Lady has availed itself of this tax exemption. Am. Comp. at 44. In determining what is charitable and beneficent, the courts require the hospital to: ...dispense charity to all who need and apply for it...and...not appear to place obstacles of any character in the way of those who need and would avail themselves of the charitable benefits it dispenses... Alivio Medical Ctr. v. Illinois Dept of Revenue, 299 Ill. App. 3d 647, 650-651, 702 N.E.2d 189, 192 (1st Dist. 1998). Further, A hospital which treats all of its patients alike, charges no fee where the patient is unable to pay; charges a graduated fee according to ability to pay...is exempt from taxation. Id. at 651, 702 N.E.2d at 192, quoting German Hosp. of Chicago v. Board of Review of Cook County, 233 Ill. 246, 84 N.E. 215 (1908). Our Lady does not dispense charity to all who need it, such as the plaintiffs in this case. Nor does the hospital treat all its patients alike. Insured patients are charged dramatically lower rates for services than uninsured patients. Am. Comp. at 25. The Amended Complaint also alleges that Our Lady placed an obstacle in the path of the plaintiffs, by failing to inform the plaintiffs how they could avail themselves of the hospitals charity. Am. Comp. at 28, 31. The challenged practices of the hospital offend other articulated policies of the State of Illinois. For example, Section 5-17 of the Illinois Public Aid Code, 305 ILCS 5/5-17, concerns programs to increase public access to hospital care. The statute provides that (t)o help expand the availability of hospital care for all citizens of this State, it is the policy of the State to implement programs that more equitably distribute the

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burden of providing hospital care to Illinois' low-income population and that improve access to health care in Illinois. 305 ILCS 5/5-17(a)(2). Pricing practices used by Our Lady, which exaggerate the prices charged the poor and the uninsured, violate the public policy of improving access to health care among low income residents of Illinois.13 The conclusion is inescapable: the allegations that Our Ladys billing practices offend public policy are sufficient to present a claim under the CFA. (2) Second Prong: Immoral, Unethical, Oppressive Or Unscrupulous Acts. The second prong of the test for unfairness under Robinson is whether the challenged conduct is immoral, unethical, oppressive or unscrupulous. Id. at 418, 775 N.E.2d at 961. In the case of Central Standard Life Ins. Co. v. Davis, 10 Ill. App. 2d 245, 255, 134 N.E.2d 653, 658659 (3d Dist. 1956), the term oppressive was defined, in another context, in terms ranging from unreasonably burdensome and unjustly severe to an act of cruelty. Other Illinois courts have found oppressive conduct in CFA cases, such as in Fahner v. Hedrich, 108 Ill. App. 3d 83, 90, 438 N.E.2d 924, 929 (2d Dist. 1982), where the victims were in a position in which they had no reasonable alternative but to pay and agree to pay. The imposition on the plaintiffs, of charges two to three times as high as those charged insured patients, in fact the highest hospital charges in the State of Illinois, particularly in light of their indigence, constitutes oppressive conduct. The same is true for the plaintiffs here, each of whom was brought to the

Other laws in Illinois reflect similar public policy statements. The Community Benefits Act, 210 ILCS 76/1 et seq. mandates hospitals to set out objectives and goals for charity care. The Charitable Trust Act requires non-profit hospitals to annually report the level of uncompensated services provided. 760 ILCS 55/7. The Illinois Health Finance Reform Act requires hospitals to provide patient charge information to the State, recognizing that purchasers of health care need health care cost...data to enable them to make informed choices among health care providers in the market place. 20 ILCS 2215/4-1 et seq.

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hospital as an emergency patient, treated, and charged without any alternative. They did not elect to be treated at Our Lady and they did not agree to pay the highest hospital rates in the state. As in Fahner, ...failure to disclose such a large fee is deceptive, oppressive, and potentially injurious to the consumer. Id.14 (3) Third Prong: Substantial Injury To Consumers.

The third requirement of the unfairness test is substantial injury to consumers. The plaintiffs, who are indigent, should not have been billed for their treatment given Our Ladys statutory duty to provide free health care to all who need it. Plaintiffs have suffered the injury of being billed and/or sued for large medical bills which they do not owe. There are pernicious consequences of attempting to collect an inordinate sum from those who are seriously ill....These burdens may be increased as the patient and family struggle to pay for the necessary healthcare. Wooster Community Hosp. v. Anderson, 108 Ohio App. 3d 290, 295, 670 N.E.2d 563, 566 (1996). Our Ladys billing practices may also cause injuries if the plaintiffs are deterred from seeking additional medical care. A person with limited income may not seek out medical treatment if he or she knows that their wage possibly is subject to a twenty-five percent garnishment. Id. at 295, 670 N.E.2d at 566.15 Each day the billing practices of Our Lady cause substantial injury to consumers. In Saunders v. Michigan Ave. Natl Bank, 278 Ill. App. 3d 307, 314, 662 N.E.2d 602, 608 (1st Dist. 1996) the Court found a total absence of the type of oppressiveness and lack of meaningful choice necessary to establish unfairness, relying on the fact that the plaintiff could have avoided an overdraft charge and could have selected a different bank. The plaintiffs in this case had no reasonable alternative to Our Ladys harsh pricing policies; as emergency patients, they were taken to Our Lady, the nearest hospital. 24% of those with unpaid medical debt reported being deterred from seeking medical care in one study. Andulis, et al., Paying for Health Care When You Are Uninsured: How Much Support Does the Safety Net Offer? (Access Project Jan. 2003) (www.accessproject.org/medicaldebt.html).
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IV.

PLAINTIFFS CLAIM FOR UNCONSCIONABLE CONDUCT STATES A CAUSE OF ACTION. Count IV of the Amended Complaint states a cause of action for unconscionability. Our

Lady first argues, based on one case, Neade v. Portes, 193 Ill. 2d 433, 739 N.E.2d 496 (2000), that the unconscionability count is duplicative of the breach of contract claim. However, Neade simply refused to recognize a new cause of action for breach of fiduciary duty when a traditional medical negligence claim sufficiently addresses the same alleged misconduct. Id. at 445, 739 N.E.2d at 503. The claim of unconscionability is not a new cause of action. Illinois courts have recognized the concept of unconscionability long before the UCC became law. Tinsman v. Moline Beneficial Fin. Co., 531 F.2d 815, 818, n. 5 (7th Cir. 1976). The plaintiffs can plead their case in the alternative. See 735 ILCS 5/2-613(b). The issues raised by the unconscionability claim are not identical to those arising out of the breach of contract cause of action and the relief sought by the two claims is markedly different. The Court can decide, after all evidence is heard, whether one claim duplicates another. Our Lady also suggests that plaintiffs must allege both procedural and substantive forms of unconscionability. Def. Memo. at 30. But Illinois law holds that [u]nconscionability can be either procedural or substantive or a combination of both. Franks Maintenance & Engr v. C.A. Roberts Co., 86 Ill. App. 3d 980, 989, 408 N.E.2d 403, 409-10 (1st Dist. 1980). In this case it is both. Without citation to any authority, Our Lady asserts that where the law implies a

price term to a contract, there can be no procedural unconscionability, simply because the price term was implied by the law. This circular argument not only defies logic, but is based on the erroneous premise that the prices charged to plaintiffs were set, or implied by the law. In truth, the $22,000 charged plaintiff [Plaintiff 3] and the amounts charged the other plaintiffs

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were not implied by law; these figures are excessive amounts fixed by the hospital. Plaintiffs are invoking the unconscionability doctrine to ask this Court to declare the amounts sought by defendant as excessive. The procedural unconscionability includes the fact that plaintiffs like [Plaintiff 3] never had an opportunity to negotiate the $22,000 she was billed; that all bargaining power rested in the hands of the hospital; that plaintiffs had no meaningful choice as to any contractual provision; and that Our Lady did not take basic steps to disclose to plaintiffs their entitlement to charity care or to inform them how to apply for the charity care. Each of these factors was listed as relevant to procedural unconscionability in the Franks Maintenance case. Id. at 989, 408 N.E.2d at 410. Defendant is wrong when it argues that the plaintiffs have not alleged substantive unconscionability. Allegations of an excessive price or interest rate are sufficient, for pleading purposes, to state a claim for substantive unconscionability. In Brown v. C.I. L., Inc., 1996 U.S. Dist LEXIS 4917 (N.D. Ill. 1996); adopted at 1996 U.S. Dist LEXIS 4053 (N.D. Ill. 1996), the plaintiffs claimed that an excessive interest rate was unconscionable. Noting that these contract term appear unreasonably unfavorable to CIL, the Court refused to dismiss a claim for unconscionability. Brown, at *59. Other courts have also followed this course. In Cobb v. Monarch Fin. Corp., 913 F. Supp.1164 (N.D. Ill. 1995) the Court stated: At this stage of the litigation we cannot hold, as a matter of law that Cobb has failed to state a claim of unconscionability. The annual percentage rates charged by the Lender Defendants, ranging from 57% to 101%, appear unreasonably favorable to the lenders... Cobb, 913 F. Supp. at 1179. See also Von Lehn v. Astor Art Galleries, Ltd., 380 N.Y.S.2d 532

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(N.Y. Sup. Ct. 1976) (price of $67,000 for carvings worth half that unconscionable); Perdue v. Crocker Natl Bank, 38 Cal.3d 913, 702 P.2d 503 (Cal. Sup. Ct. 1985) (bank charge of $6 for overdraft costing bank 30 may be unconscionable). Charging indigent patients four times what others pay for the same services is, in one word, unconscionable. V. PLAINTIFFS CLAIM FOR BREACH OF STATUTORY OBLIGATION STATES A CAUSE OF ACTION. Plaintiffs Count III asserts that they have an implied right of action to sue a hospital which has breached its duties, under the Illinois property tax code exemption statute, to provide free care to them. Defendants motion to dismiss Count III of the Amended Complaint should be denied. The property tax code exemptions are intended to promote charity care to individuals in need by offering a tax incentive to institutions that provide services actually and exclusively used for charitable or beneficent purposes. 35 ILCS 200/15-65. [C]haritable exemptions are justified on the basis that the exempt entity confers a public benefit - a benefit which the society or the community may not itself choose or be able to provide, or which supplements and advances the work of public institutions already supported by tax revenues. Bob Jones Univ. v. United States, 461 U.S. 574, 501 (1983). The public-benefit requirement highlights the quid pro quo nature of tax exemptions: The public is willing to relieve an organization from the burden of taxation in exchange for the public benefit it provides. IHC Health Plans, Inc. v. Commissioner of Internal Revenue, 325 F.3d 1188, 1195 (10th Cir. 2003). Tax exemptions have historically been granted to certain hospitals because: the care of the sick is essential to the public welfare. The need cannot be fully met by reliance solely on private hospitals operating from profit motivation.

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Provision for it must be made by charitable hospitals or the state. The grant of tax exemption to these hospitals...encourages and facilitates their performance of a governmental duty which would otherwise have to be performed by the state. Legat v. Adorno, 138 Conn. 134, 144, 83 A.2d 185, 191 (1951). The Illinois courts have clearly articulated strict guidelines in determining whether a health care provider is considered a tax exempt charitable institution. See Methodist Old Peoples Home v. Korzen, 39 Ill. 2d 149, 233 N.E.2d 537 (1968), Alivio Medical Ctr. v. Illinois Dept of Revenue, 299 Ill. App. 3d 647, 702 N.E.2d 189 (1st Dist. 1998), Riverside Medical Ctr. v. Dept of Revenue, 342 Ill. App. 3d 603, 795 N.E.2d 361 (3d Dist. 2003). In order for a hospital to be exempt, [i]ncidental acts of charity are not enough, but the use of its property must be exclusively for charitable purposes. Alivio at 650, 702 N.E.2d at 192. The courts have outlined the following criteria for evaluating whether a hospital is considered charitable: (1) the use was for the benefit of an indefinite number of persons, persuading them to educational or religious conviction, for their general welfare or in some way reducing the burdens of government; (2) the charitable institution must have no capital, capital stock or shareholders, earns no profits or dividends; (3) the institution must dispense charity to all who need and apply for it, does not provide gain or profit in a private sense to any person connected with it, and does not appear to place obstacles of any character in the way of those who need and would avail themselves of the charitable benefits it dispenses; (4) the institution has the burden of proving that its property actually and factually is so used; and (5) the terms exclusively used means the primary purpose for which property is used and not any secondary or incidental purpose. Id. at 650-1, 702 N.E.2d at 192. Illinois courts have denied hospitals tax exempt status because they have not satisfied the outlined criteria. In Alivio, the court denied the hospitals tax exemption status because it held that the hospital charged the same amount regardless of the patients financial classification and because the hospital did not advertise that it provided charity care. Id. at 651-2, 702 N.E.2d at

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192-3. In Riverside, the Court held that a medical center that billed patients and later wrote off the amount as bad debt was not providing charity care. Id. at 609, 795 N.E.2d at 366. Defendants practice of charging uninsured and indigent patients more than insured patients is even more egregious conduct than that of the hospitals denied tax exemption status in Alivio and Riverside. The Illinois Supreme Court has laid out four factors to be considered in determining if a private right of action may be implied from a statute. Implication of a private right of action is appropriate if: (1) the plaintiff is a member of the class for whose benefit the statute was enacted; (2) the plaintiffs injury is one the statute was designed to prevent; (3) a private right of action is consistent with the underlying purpose of the statute; and (4) implying a private right of action is necessary to provide an adequate remedy for violations of the statute. Metzger v. DaRosa, 209 Ill. 2d 30, 36, 805 N.E.2d 1165, 1168 (2004). The four factors exist in this case. The plaintiffs in this case are clearly members of the class for whose benefit that statute was enacted. Our Lady incorrectly concludes that the hospital, the exempted taxpayer, is the primary intended beneficiary of the tax exemption provisions and that charity recipients are not intended beneficiaries. Our Lady acknowledges that the statute is designed to encourage charitable deeds, but illogically argues that this is but an indirect effect and that no particular class of charity recipients is specified. If the primary intended beneficiary of the property tax code exemption statute is the organization receiving the tax break, as defendant suggests, the Illinois courts would not demand that hospitals meet such stringent standards to prove that they are charitable institutions. See Folletts Illinois Book and Supply Store v. Isaacs, 27 Ill. 2d 600, 606, 190 N.E.2d 324, 327 (1963). Only in exchange for providing low or no-cost medical care to those people who need it, do hospitals receive a tax exemption by the state. Therefore, it is

24

clear that the plaintiffs, as the recipients of charity care, are members of a class for whose benefit the statute was enacted. Plaintiffs also satisfy the second factor as the plaintiffs injury is one the statute was designed to prevent. The underlying purpose of the statute is to provide a public benefit to the community. Our Ladys failure to provide charity health care pursuant to its tax exempt status caused injury to the plaintiffs because they were denied this public benefit. The third factor also exists as a private right of action here is consistent with the underlying purpose of the statute. The underlying purpose of the property tax exemption statute is to encourage organizations such as hospitals to operate with a charitable purpose, serving a public need, in this case providing health care to the poor. Affording the Plaintiffs a right of action will gain them free health care, a result in line with the goal of the tax exemption laws. The fourth factor is also present because an implied private right of action is necessary to provide an adequate remedy to redress Our Ladys violation of the statute. Though the state of Illinois, Department of Revenue, has authority to regulate whether or not an organization is operating according to its charitable purposes, a civil private right of action is necessary to uphold and implement the underlying premise of the statute. Our Lady argues that there is no need for a private right of action because the Department of Revenue can withhold or revoke tax exemption status if the prerequisites are not satisfied. However, nothing in the statute suggests that the legislature intended to limit the available remedies to administrative ones. Furthermore, an implied right of action is not excluded simply because a government department is granted regulatory power within a statute. See Corgan v. Muehling, 143 Ill. 2d 296, 314, 574 N.E.2d 602, 610 (1991); Rodgers v. St. Marys Hosp. of Decatur, 149 Ill. 2d 302, 308-9, 597 N.E.2d 616, 619 (1992). In Rodgers, the court found a private right of action was necessary to provide

25

an adequate remedy for violation of the X-Ray Retention Act by a hospital even though the regulation was enforced by the Department of Public Health. Id. at 619-20, 597 N.E.2d at 619. The court stated that the threat of liability was a much more efficient method of enforcing the regulation than requiring the Public Health Department to hire inspectors to monitor the compliance of hospitals with the provisions of the Act. Id. Similarly, in Corgan, the court found that the Psychologist Registration Act permitted a private right of action for nuisance even though an agency regulated its provisions. Corgan at 314, 574 N.E.2d at 610. The Court held that a private right of action under the Act was appropriate and that it was unlikely that patients injured by unqualified and unregistered psychologists would initiate their complaints through the administrative system without a potential for a tangible reward. Id. at 315, 574 N.E.2d at 610. Therefore, even though the Department of Revenue can determine an institutionss tax-exempt status in Illinois, the plaintiffs are not precluded from bringing their own claim. Defendant also cites to Schlenz v. Castle, 115 Ill. 2d 135, 503 N.E.2d 241 (1986), a lawsuit described by the Court as part of a twenty year war against revenue officials. Id. at 138, 503 N.E.2d at 242. In Schlenz, plaintiffs, individual taxpayers, argued that property belonging to third parties had been under-assessed or improperly exempted from taxation. Id. at 141, 503 N.E.2d at 243. The court held that the taxpayers had no cause of action because their interest in the taxation of any parcel of exempt property is extremely remote... Id. at 144, 503 N.E.2d at 245. Further, the Court relied on the fact that the taxpayers were afforded a comprehensive panoply of administrative remedies under the Revenue Act. Id. at 142, 503 N.E.2d at 244. Unlike in Schlenz, the plaintiffs in this case are: (1) not suing governmental officials; (2) directly affected by defendants failure to implement its charitable duties as they have been charged exorbitant rates by the so-called charitable institution; and (3) without any other

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adequate remedy at law to challenge defendants practice of overcharging them because there is no specific administrative relief available to them through the Department of Revenue.16 VI. PLAINTIFFS CLAIM FOR BREACH OF CONTRACT STATES A CAUSE OF ACTION. Plaintiffs Count II sufficiently alleges that Our Lady, by charging the plaintiffs more than the reasonable value of services rendered, breached its contractual obligations. In Illinois, where there is a contract under which one party supplies services to another and there is no provision setting out the amount to be compensated, the law implies that there is an agreement to pay a reasonable price for goods and services. Protestant Hosp. Builders v. Goedde, 98 Ill. App. 3d 1028, 1031, 424 N.E.2d 1302, 1305-06 (5th Dist. 1981). The determination of reasonableness involves a factual inquiry. [E]vidence of the amount charged alone does not indicate reasonableness. Victory Memorial Hosp. v. Rice, 143 Ill. App. 3d 621, 625, 493 N.E.2d 117, 119 (2d Dist. 1986). Illinois courts have established a two-pronged proof requirement for a hospital bill to be deemed reasonable under an implied contract theory. The charges must be the usual and customary charges of that particular hospital and they must be comparable to the charges of other area hospitals. Sherman Hosp. v. Wingren, 169 Ill. App. 3d 161, 164, 523 N.E.2d 220, 222 (2d Dist. 1988). Defendant claims that the plaintiffs have failed to allege specific facts to show that Our Defendant also distorts the ruling in Chemtech Indus., Inc. v. Goldman Fin. Group, Inc., 809 F. Supp. 729 (E.D. Mo.1992), to conclude that requirements for favorable tax treatment in a tax code do not create private rights of action in third parties. In Chemtech, a new plan sponsor was proposing to transfer, pursuant to 26 U.S.C.S. 420, excess pension assets in the new plan to a 401(h) account to fund retiree health care benefit expenses. Id. at 730. The court in Chemtech held that there was no private cause of action specifically under the Internal Revenue Code for enforcement of 26 U.S.C.S. 420 because, although benefit plans which fail to comply with these requirements will not obtain favorable tax status, 420 does not prohibit transfers which fail to meet the requirements. Id. at 734.
16

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Ladys charges to the plaintiffs were not "usual and customary charges" or were not "comparable to the charges of other area hospitals. Def. Memo. at 27. While the plaintiffs need only allege that the hospital has contravened one of the two prongs of the Sherman Hospital test, the Amended Complaint sufficiently alleges that Our Lady has failed to satisfy both of these prongs. A. Plaintiffs Have Sufficiently Alleged That The Charges To Them Were Not "comparable to the charges of other area hospitals." The plaintiffs specifically allege that Our Ladys charges are higher than most other Chicago area hospitals, and that, in 2003, Our Lady had the highest total charge-to-cost ratio of all hospitals in Illinois, 392.11%. Am. Comp. at 24(a). Contrary to defendants interpretation, the allegations in 24(a) do not in any way concede that Our Lady's charges are comparable to other Chicago area hospitals. Defendant states that the allegation is "fully consistent with Our Lady being merely slightly above the others in a tight distribution." Def. Memo. at 27. But the Amended Complaint does not allege that Our Ladys prices are only "slightly above" other hospitals in a "tight distribution." That is the language of the defendant, unsupported by any affidavit or factual data. Our Ladys claim that their prices are reasonable on this basis is a factual defense that the Court need not resolve in order to rule on the motion to dismiss. See Green v. Trinity Int'l Univ., 344 Ill. App. 3d 1079, 801 N.E.2d 1208 (2nd Dist. 2003) (Dismissal of a breach of contract claim was improper where the trial court considered a factual defense in granting a motion to dismiss). Defendant also claims that the plaintiffs allegation that Our Ladys 392.11% charge-to-cost ratio is the highest amongst Illinois hospitals, is insufficient to show that their prices are not comparable to other hospitals in the area.17 Def. Memo. at 27. As defendant

17

Defendant incorrectly relies on Fehr Constr. Co. v. Postl Sys. of Health Bldg., 288 Ill. 28

concedes, a hospitals costs can be relevant in determining the reasonableness of a hospitals charges. Def. Memo. at 27, citing Victory Memorial Hosp. v. Rice, 143 Ill. App. 3d 621, 624-5, 493 N.E.2d 117, 119-20 (2d Dist. 1986). The court in Victory ruled that: any assessment of the reasonableness of a private hospitals charges must include consideration and recognition of the particular hospitals costs, functions, and services to make a valid determination of whether such charges were reasonable for that hospital alone or compared to the charges of other area hospitals. Id. at 625, 493 N.E.2d at 120. The charge-to-cost ratio demonstrates that Our Ladys higher prices cannot be justified by arguing that the hospital needed to cover its costs. The fact that Our Lady had the highest charge-to-cost ratio in Illinois is a sufficient allegation that its charge are not comparable to other hospitals. Defendant also argues that the plaintiffs fail to state a claim because they have not alleged that the specific prices charged to each of them for their individual treatments (e.g. the charges of particular procedures, room charges, medications, etc.) were not comparable to other area hospitals. Def. Memo. at 28. While the allegations of Count II do not separately challenge each of the hundreds of itemized charges imposed on the plaintiffs, the allegation that the total amounts charged to the plaintiffs were higher than those of other hospitals is adequate to state a claim. Proof of each outrageous overcharge will be a product of discovery. The combination of

634, 124 N.E. 315 (1919), to argue that "the market generally determines what is reasonable, not a formula" and misstates the holding. Def. Memo. at 27. In Fehr, plaintiffs were contractors who sought a mechanics lien against property to pay for improvements made by the owners. The court held that the improvements were not trade fixtures but were permanent and attached to the property and determined the reasonable cash market value of the fixtures including labor to determine the lien against the property. Id. at 641, 124 N.E. at 318. Fehr is distinguishable; its holding is totally inapplicable in determining whether a hospitals charges are reasonable and comparable to other hospitals.

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the allegations in the plaintiffs Amended Complaint, that Our Lady has both higher prices than other area hospitals and a higher charge-to-cost ratio, sufficiently plead that the prices charged to the plaintiffs were not reasonable. B. Plaintiffs Have Sufficiently Alleged That The Charges To Them Were Not Our Lady's "usual and customary charges." The charges applied to the plaintiffs cannot be considered "usual" or "customary" because the hospital imposes significantly lower prices to the large majority of their patients. Most patients who receive medical care at Our Lady have insurance of some kind. Our Lady charges all of these insured individuals what they call a "discounted rate." The only people who are charged the higher rates are a very small group -- patients whose insurers lack a negotiated agreement with Our Lady, liability insurance carriers paying medical expenses of auto accidents, and uninsured individuals such as the plaintiffs in this case. Def. Memo. at 3, n. 1. Defendant is trying to argue that their "usual and customary charges" are in fact the higher, un-discounted prices which are seldom imposed. Since most patients are charged the "discounted rate," the median discounted rate is in fact the "usual and customary charge" of the hospital. The Amended Complaint alleges that only a small percentage of the hospitals patients are required to pay the full, un-discounted hospital charges.... Am. Comp. at 24b. This is a sufficient pleading to establish that Our Lady did not charge the plaintiffs its usual rates. VII. PLAINTIFFS STATE GROUNDS SUFFICIENT FOR THE RECOVERY OF COMPENSATORY AND PUNITIVE DAMAGES AND EQUITABLE RELIEF. A. Compensatory Damages

Plaintiffs seek compensatory damages based on Our Ladys violation of the Consumer Fraud Act and for Our Ladys breach of implied contract. Am. Comp. at 9, 10. The measure for damages in an action for fraud is determined from the loss to the plaintiff rather than from the

30

gain to the defendant. Martin v. Allstate Ins. Co., 92 Ill. App. 3d 829, 835, 416 N.E.2d 347, 352 (1st Dist. 1981). Generally, the measure of damages for fraud is such an amount as will compensate the plaintiff for the loss occasioned by fraud, or, as it has been expressed, the amount which plaintiff is actually out of pocket by reason of the transaction. Id. The courts have allowed compensatory damage awards under the Consumer Fraud Act to include recovery for aggravation and inconvenience. Roche v. Fireside Chrysler-Plymouth, 235 Ill. App. 3d 70, 86, 660 N.E.2d 1218, 1228 (2nd Dist. 1992). Our Lady argues that the plaintiffs prayers for compensatory damages should be stricken because the plaintiffs have not yet paid any of the amounts charged by the hospital. Def. Memo. at 13. The plaintiffs have sufficiently alleged grounds for compensatory damages based on the amount of the outstanding bills they have received which should have been written off as charity care. Am. Comp. at 8. The plaintiffs have also sufficiently alleged damages flowing from aggravation and inconvenience. Am. Comp. at 11, 16, 23. The plaintiffs are not seeking a windfall because they have not received free care as defendant alleges. Plaintiff Poe has been billed $1,509 and has been sued by Our Lady for a bill of $1,509. Am. Comp. at 8, 10. Plaintiff [Plaintiff 3] has been billed over $22,000 and has been sent numerous collections letters to her and her family. Am. Comp. at 14, 16. Plaintiff [Plaintiff 4] has been billed over $31,699.50 and has also received numerous collection notices. Am. Comp. at 21, 23. B. Punitive Damages

Plaintiffs seek punitive damages based on Our Ladys violation of the Consumer Fraud Act. Am. Comp. at 6. Illinois courts have established that: ...punitive damages may be awarded when torts are committed with fraud, actual malice, deliberate violence or oppression, or when the defendant acts willfully, or

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with such gross negligence as to indicate a wanton disregard of the rights of others. Punitive damages are not awarded as compensation, but serve instead to punish the offender and to deter that party and others from committing similar acts of wrongdoing in the future. Bates v. William Chevrolet/Geo, Inc., 337 Ill. App. 3d 151, 160, 785 N.E.2d 53, 60 (1st Dist. 2003) (citations omitted). Our Lady alleges that the plaintiffs prayer for punitive damages should be stricken because it is unsupported by requisite allegations of fact. Def. Memo. at 13. However, the plaintiffs sufficiently allege that defendants acts were wilful and deliberate based on specific facts -- that Our Lady charged higher rates to the uninsured poor and attempted to collect such charges in violation of the public policy which requires charitable organizations to provide charity care to the needy. Am. Comp. at 35, 36. The allegations that excessive prices were deliberately and wilfully imposed on the uninsured plaintiffs and that these practices constituted oppressive and unethical actions are enough to properly plead for punitive damages. C. Equitable Relief

In Illinois, an injunction may be granted when the plaintiff establishes that his remedy at law is inadequate and he will suffer irreparable harm without the injunctive relief. Sadat v. American Motors Corp., 104 Ill. 2d 105, 115, 470 N.E.2d 997, 1002 (1984). The plaintiffs seek injunctive and declaratory relief. The plaintiffs seek a declaration that Our Lady may not continue to charge uninsured persons like the plaintiffs higher rates than insured persons and that defendant must provide charitable care to the plaintiffs. The plaintiffs also seek injunctive relief along these lines. The plaintiffs Amended Complaint has sufficient allegations of fact necessary to support equitable relief. There is a public policy need for the challenged practices of the

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hospital to be reviewed and enjoined if they are unlawful. Am. Comp. at 38. For the purpose of this motion it is accepted that the hospital is charging the uninsured poor inflated prices rather than providing free care. Am. Comp. at 24-30. Thus, when the plaintiffs are taken to Our Lady for treatment in the future, they will, absent equitable relief, again be subject to the hospitals unlawful billing practices. Am. Comp. at 32. The need for equitable relief is palpable. Moreover, when an injunction is sought pursuant to a statute, the traditional requirements are dispensed with and the requirements of the statute are controlling. The logic behind the rule is that since the legislature has seen fit to enact legislation, it may be presumed that there is a need for injunctive remedy. People ex rel. Edgar v. Miller, 110 Ill. App. 3d 264, 269, 441 N.E.2d 1328, 1331 (4th Dist. 1982) (citations omitted). See also BPI v. ICC, 171 Ill. App. 3d 948, 969-70, 525 N.E.2d 1053, 1065-66 (1st Dist. 1988) and South Central Bell v. Louisiana Public Serv. Comm., 570 F. Supp. 227, 233 (M.D. La. 1983). The Consumer Fraud Act has a provision authorizing injunctions. 815 ILCS 505/10a(c). Consequently, while the plaintiffs did allege the traditional allegations for equitable relief, it was not necessary to do so given the presumption of the need for equitable relief.

Respectfully submitted,

One of Plaintiffs Attorneys

Alan A. Alop 91017 Nareen Kim Legal Assistance Foundation of Metropolitan Chicago 111 West Jackson Third Floor Chicago, IL 60604

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CERTIFICATE OF SERVICE

I, NAREEN KIM, certify that I served the attached by mailing a copy to: Michael L. Shakman Edward W. Feldman Miller Shakman & Hamilton 208 S. LaSalle St. Suite 1100 Chicago, IL 60604 Grabowski Law Center 2800 S. River Rd. Suite 410 Des Plaines, IL 60018

and depositing the same in the U. S. mail at 111 W. Jackson, Chicago, IL 60604 on or before 5:00 P.M. on July 29, 2004.

_____________________________________ Nareen Kim

Alan A. Alop 91017 Nareen Kim Legal Assistance Foundation of Metropolitan Chicago 111 West Jackson Third Floor Chicago, IL 60604

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1.3

Plaintiffs Reply Memo

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION

PHYLLIS POE, [PLAINTIFF 2] as next friend of [PLAINTIFF 3], and [PLAINTIFF 4], Plaintiffs, v. OUR LADY OF THE RESURRECTION MEDICAL CENTER, Defendant.

) ) ) ) ) ) ) ) ) ) ) ) )

No. [redacted] Calendar W Judge Nudelman

PLAINTIFFS MEMORANDUM OF LAW IN REPLY TO THE AMICI CURIAE MEMORANDUM OF LAW

Alan A. Alop #91017 Nareen Kim Legal Assistance Foundation of Metropolitan Chicago 111 West Jackson Third Floor Chicago, IL 60604 (312) 347-8310

TABLE OF CONTENTS

Introduction..........................................................................................................................1 A. B. Failed Legislation Provides No Support to the Position of the Defendant..............3 The Public Policy of Illinois Is That Non-Profit Hospitals Should Provide Free Service to Indigent Persons ............................................................................4 The Plaintiffs Have Presented A Justiciable Case or Controversy..........................5 Whether the Hospital Has Breached Its Implied Contract With the Plaintiffs Is An Issue That Should Be Resolved By This Court.............................9 Unconscionable Hospital Bills Are Not Exempt From Judicial Reviews. ..............9 The Billing Practices of Our Lady Are Unfair Within the Meaning of the Consumer Fraud Act...............................................................................................10

C. D.

E. F.

Introduction

This case raises the issues of whether three patients have been over-charged by a hospital, or whether they should have been charged anything at all. Amici Curiae (Amici or the industry) and Our Lady paint a grim picture of the future of hospitals, healthcare, and health insurance in America should plaintiffs prevail. In the words of the amici, the claims asserted by plaintiffs threaten their [hospitals] ability to survive and would jeopardize access to health care for everyone in the community. Memorandum of Law of Amici Curiae at 9 (hereafter Amici Br.). The lady doth protest too much.... William Shakespeare, Hamlet (III, ii, 239). Plaintiffs do not seek a re-ordering of planetary priorities. This law suit revolves around three indigent Chicagoans. No matter what its resolution, this action will not change healthcare as we know it in the Twenty-First Century. Plaintiffs simply seek a measure of justice for themselves. Amici and defendant make echoing claims that the plaintiffs controversy should not be subjected to judicial scrutiny. But unless this Court unravels the knots of this case, the plaintiffs will be without a remedy, stuck with excessive hospital bills which they dispute, and subject to the same problem the next time an emergency vehicle transports them to the hospital. Finally, Amici and the defendant make broad pronouncements that they have no obligations to provide free or reduced cost service to the poor: No hospital offends public policy by not giving any individual free care. Defendants Reply Memorandum of Law at 10 (hereafter Def. Reply Memo.). .....there is no duty (or ability) by private hospitals to provide free care to the vast poor and aged populations.

Def. Reply Memo. at 12. The industry and the defendants argue that they are not subject to the Consumer Fraud Act. They contend that a hospitals obligations under the Illinois tax laws are not enforceable by those the laws were designed to protect. In the same vein, they baldly assert, without authority, that basic common law concepts like breach of contract and unconscionability do not apply to hospital billing practices. Arguing that healthcare is too important or controversial to be submitted to the courts, defendant and the industry suggest, in essence, that they are above the law. But hospitals are centers of commerce as well as centers of medicine, and this case alleges wrongs of the hospital for which the plaintiffs have no other source of remedy. Those that view themselves above the law tarnish the good that they do, diminish public confidence, and deflect attention from their good works. Grigoleit Co. v. Illinois Pollution Control Bd., 245 Ill. App. 3d 337, 613 N.E.2d 371, 379 (3rd Dist. 1993)(special concurrence). The claims raised by plaintiffs in this case are not unusual. Patients, the news media and many advocacy groups have been complaining of unfair hospital billing practices for a decade. See Sick of Hospital Bills, Time Magazine, 48-52, Sept. 27, 2004. In response to accusations of overbilling the uninsured and the poor, two of the industry amici, the Illinois Hospital Association and the Metropolitan Chicago Healthcare Council, promulgated guidelines in 2003 for Illinois hospitals in providing free care to the poor. Illinois Hospital Association, Report of the Task Force on Charity Care and Collection Practices for the Uninsured. (attached as Exhibit A). But Our Lady has violated these rules with respect to the three plaintiffs by: (1) imposing fees on the plaintiffs whose incomes are within 100% of the federal poverty guidelines and who have no significant assets; (2) failing to properly communicate the availability of the free care to plaintiffs through signage, brochures, or placing a note in the billing statement; and

(3) pursuing collection lawsuits against indigent patients like plaintiff Poe in this action. These two amici have thus set out explicit prescriptions for hospitals to provide free care to the poor, but when an Illinois hospital is alleged to be ignoring these rules, these amici rush to the aid of Our Lady, arguing that this Court does not have the expertise to resolve this case. Motion of Amici For Leave to File Brief at 3 (hereafter Amici Motion). A. Failed Legislation Provides No Support to The Position of the Defendant. Amici and the defendant claim that a piece of failed legislation, Senate Bill 2579, somehow supports their position in this case. Amici Br. at 3-5, Def. Reply Br. at 13. That bill would have required Illinois hospitals to provide free care to patients whose incomes are at or below federal poverty guidelines. S.B. 2579, Section 15. In addition, it would have mandated hospitals to provide care at cost to patients with incomes between 100-200% of federal poverty guidelines. While S.B. 2579 passed the Senate unanimously on March 25, 2004, it was never voted on by the House of Representatives, and so died with the end of the legislative session. Defendants and the industrys reliance on the legislatures failure to enact this bill adds nothing to their arguments in that: [t]he act of refusing to enact a law has utterly no legal effect, and thus has no place in a serious discussion of the law. [A legislative body] can no more express its will by not legislating than an individual Member can express his will by not voting.

South 51 Development Corp. v. Vega, 335 Ill. App. 3d 542, 556, 781 N.E.2d 528, 540 (1st Dist. 2002)(citations omitted). As the United States Supreme Court recognized, a legislatures failure to act lacks persuasive significance because several equally tenable inferences may be drawn from such inaction. Central Bank of Denver v. First Interstate Bank of Denver, 511 U.S. 164, 187 (1994). Since legislative intent is not discernible from the inaction of a legislative body, the

industry and defendant cannot claim that the failure of S.B. 2579 to make it out of the last legislative session has any significance for this case whatsoever. B. The Public Policy of Illinois Is That Non-Profit Hospitals Should Provide Free Service to Indigent Patients.

Amici argues that the amount of free care provided to indigent patients by non-profit hospitals is left to the discretion of each hospital. Amici Br. at 6. Again the industry postures itself above the law, and again this characterization is distorted, for Illinois tax exemption law and a series of judicial decisions hold that a non-profit hospital does not have absolute discretion in determining the extent of free services it provides, if it wants to retain its tax exempt status. The tax exemption statute, 30 ILCS 200/15-65, and the decisions interpreting it, set out nondiscretionary requirements for a hospital to maintain its tax exempt status. See Methodist Old Peoples Home v. Korzen, 39 Ill. 2d 149, 233 N.E.2d 537 (1968), Alivio Medical Ctr. v. Illinois Dept of Revenue, 299 Ill. App. 3d 647, 702 N.E.2d 189 (1st Dist. 1998), Riverside Medical Ctr. v. Dept of Revenue, 342 Ill. App. 3d 603, 795 N.E.2d 361 (3d Dist. 2003). This statute and these decisions crystallize the public policy in Illinois of affording free hospital care to the poor. A charitable institution like Our Lady must actually provide exclusively charitable care to the community. Id. at 609. This duty is breached where the primary use of a medical facility is to provide care to patients who are able to pay, either individually or through Medicare, Medicaid or private insurance. Id. The Amended Complaint in this case alleges that the hospital: 1. did not screen the plaintiffs to determine whether they should be afforded free care as indigents, or inform them of this possibility; 2. does not have policies and procedures in place that ensure that free care is dispensed to the poor; and 3. has, in the last ten years, greatly reduced the amount of free care or reduced-cost care provided to low-income patients.

Am. Comp. at 27-29 and 31. It is plaintiffs view that: (1) they may assert the hospitals failure to satisfy these statutory obligations by virtue of an implied right of action; and/or (2) that plaintiffs are thirdparty beneficiaries18 of Our Ladys express or implied contract with the State of Illinois to provide free care to all patients who need and apply for it, and that Our Lady has breached this contract with the State; and (3) that the public policy of Illinois, as reflected in the tax exemption laws, supports their claim of unfairness under the Consumer Fraud Act.19 C. The Plaintiffs Have Presented A Justiciable Case or Controversy. Our Lady and the industry claim that the case at hand is not justiciable: The problem of the uninsured in the U.S. is a complex public health policy issue, not proper for judicial resolution. Def. Reply Memo. at 1. The solution to this social problem, like others, must emerge from an open, spirited debate between the people and their elected representatives. Amici Motion at 3. Many defendants wave the red flag of justiciability. But sometimes thorny issues get resolved one case at a time. Sometimes aggrieved persons rightly turn to the courts to achieve the justice the marketplace or government has not provided. This case is one such instance, where three individuals seek a remedy under the common law of contract and ...[I]f a contract is entered into for the direct benefit of a third person, the third person may sue for a breach of the contract, even though the third person is a stranger to the contract and the consideration. Olson v. Etheridge, 177 Ill. 2d 396, 404, 686 N.E.2d 563 (1997). Even if this Court found no public policy in Illinois favoring the provision of free hospital services to the poor by tax exempt hospitals, this would not defeat the unfairness claim, as public policy is but one requirement of the three-pronged CFA unfairness test and not all requirements need be satisfied. Robinson v. Toyota Motor Credit Corp., 201 Ill. 2d 403, 418, 775 N.E.2d 951, 961 (2002). Plaintiffs would still argue that the hospitals billing practices are unfair under the two remaining standards used to evaluate unfairness claims.
19 18

other laws already in place, laws written to protect them. Two cases are cited as authority for the non-justiciability of the issues raised by plaintiffs. Def. Reply Memo. at 1 and Amici Br. at 6-7. Neither has anything to do with a patient being charged an excessive fee by a hospital. In Charles v. Seigfried, 165 Ill.2d 482, 651 N.E.2d 154 (1995), plaintiff sought to create a new cause of action against social hosts who serve alcoholic beverages to minors. Id. at 493. The Court declined, citing Illinois long history of legislative preemption of all alcohol-related liability... Id. at 496. There is no analogous history of preemption with regard to the claims raised by the plaintiffs. Indeed, Illinois courts deal with consumer fraud, breach of contract and unconscionability claims on a daily basis. In the second case relied on by the industry, Committee For Educ. Rights v. Edgar, 174 Ill. 2d 1, 672 N.E.2d 1178 (1996), the Court refused to adjudicate a case it deemed political in nature. Id. at 38-39. Committee For Educ. Rights involved a constitutional challenge to the entire statutory scheme of school financing in Illinois. Plaintiffs contended that disparities in the quality of education existed in Illinois due to the funding mechanism used to finance public schooling. Deeming this a sensitive and controversial area, the Court found that the case presented nonjusticiable political questions and called for a legislative solution. Id. at 39-40. The Court noted: What constitutes a high quality education and how it may best be provided, cannot be ascertained by any judicially discoverable or manageable standards. Id. at 39. Both Our Lady and the industry strain to argue that this Court is not well-suited to decide the issues raised in this case. For example, the industry posits three significant practical implementation questions to which....the courts are not well-suited to address. Amici Br. at 3.

Yet when they drafted their statewide rules for providing free care to the indigent, amici were able to deal with these three significant practical implementation questions to which....the courts are not well-suited to address in two pages. Id. Amici did not have a problem in defining indigence; they simply used the federal definition. See Exhibit A at 3-5. Amici did not have a problem in deciding whether rural hospitals should be treated differently than urban hospitals or in considering the financial condition of the hospital; all hospitals are treated uniformly by amicis rules. Id. This Court, with the benefit of input from the litigants and amici, is well-equipped to resolve the issues raised in this matter. This case only involves one hospital and three plaintiffs. Are the plaintiffs indigent? The Court can examine the hospitals current internal guidelines and federal poverty guidelines and make a decision that the plaintiffs are poor. Courts decide cases of this nature on a daily basis. For example, plaintiffs allege that the prices they were charged for hospital services were unconscionably high. As in other cases raising claims of unconscionable prices or interest rates, the Court is not called upon to set out a pricing schedule for the defendant. The only decision the Court has to make is whether or not the prices imposed on these three plaintiffs were unconscionable. See Von Lehn v. Astor Art Galleries, Ltd., 380 N.Y.S.2d 532 (N.Y. Sup. Ct. 1976). The issues presented in this action are concrete and justiciable. The Illinois Supreme Court has set out factors that determine justiciability where, as here, declaratory relief is sought. First, there must be an actual controversy....[I]t requires a showing that the underlying facts and issues of the case are not moot or premature... The case must therefore present a concrete dispute admitting of an immediate and definitive determination of the parties rights, the resolution of which will aid in the termination of the controversy or some part thereof. The second, and somewhat related requirement, is that the party seeking the declaration must be interested in the controversy.... [T]he party seeking relief must possess a personal claim, status, or right which is capable of being affected. The dispute must, therefore, touch the legal relations of parties who stand in a position adverse to one another.

Underground Contractors Assn v. City of Chicago, 66 Ill. 2d 371, 375-76, 362 N.E.2d 298, 30001 (1977) (citations omitted). The language quoted from Underground Contractors applies to the circumstances of the plaintiffs in this case. Absent relief from this Court plaintiffs will still have the question of their liability on these debts hanging over their heads and they will still be subject to the collection tactics of the defendant. Plaintiffs have no place to turn but this Court for relief against the overreaching acts of the hospital. 20 They seek certain declarations of their rights, such as, inter alia : (1) that under the hospitals current guidelines they should have been provided free services and (2) that indigent, uninsured patients should not be charged four times the rates the insured are charged.

D.

Whether the Hospital Has Breached Its Implied Contract With the Plaintiffs Is An Issue That Should Be Resolved By This Court.

The assertion of amici that this Court lacks the expertise or the authority to adjudicate plaintiffs breach of contract claim rings hollow, especially given precedent in which Illinois courts have determined whether particular hospital bills are reasonable. See Sherman Hosp. v. Wingren, 169 Ill. App. 3d 161, 164, 523 N.E.2d 220, 222 (2d Dist. 1988); Protestant Hosp. Builders v. Goedde, 98 Ill. App. 3d 1028, 1031, 424 N.E.2d 1302, 1305-06 (5th Dist. 1981); Victory Memorial Hosp. v. Rice, 143 Ill. App. 3d 621, 625, 493 N.E.2d 117, 119 (2d Dist. 1986). The test for this claim is already determined by well-established law: If Our Ladys charges are

Our Lady attaches a decision of the Cook County Board of Review to its reply brief; it holds that an individual taxpayer had no standing to challenge the tax exempt status of a hospital. Irving v. Resurrection Health Care Corp., (August 24, 2004). While the decision did not reach the merits, it suggests that the plaintiffs cannot use this administrative forum to challenge the hospitals actions.

20

not both their usual and customary charges and comparable to the charges of other area hospitals, then the bill is not reasonable. Majid v. Stubblefield, 226 Ill. App. 3d 637, 642, 589 N.E.2d 1045, 1048 (3d Dist. 1992). Plaintiffs have sufficiently pleaded that the amounts they were billed did not represent the hospitals usual and customary charges by pleading that only a small percentage of the hospitals patients are required to pay the full, undiscounted hospital charges. Am. Comp. at 24b. If only a few are required to pay the hospitals full sticker price, the sticker price is not the usual and customary charge. This is enough to plead the breach of contract. E. Unconscionable Hospital Bills Are Not Exempt From Judicial Review. The amici and defendant posit no convincing rationale to explain why an excessive hospital bill should be immune from judicial scrutiny under common law principles of unconscionability. The term unconscionable encompasses the absence of meaningful choice by one of the parties as well as contract terms which are unreasonably favorable to the other party. Larned v. First Chicago Corp., 264 Ill. App. 3d 697, 700, 636 N.E.2d 1004, 1006 (1st Dist. 1994). The plaintiffs had no meaningful choice of hospitals or contract terms as they were carried to the hospital in emergent situations. Am. Comp. at 6, 12 and 17. The terms and conditions of their services were set by the hospital. The charges that the hospital imposed on them can be characterized as unreasonably favorable to the hospital. The Amended Complaint alleges that the hospitals charge-to-cost ratio exceeds 392%. Am. Comp. at 24(a). In the

case of Frostifresh Corp. v. Reynoso, 52 Misc. 2d 26, 27-28, 274 N.Y.S.2d 757, 758-59 (N.Y. 1966), revsd on other grounds, 54 Misc. 2d 119, 281 N.Y.S.2d 964 (N.Y. App. Term 1967), the Court held a cost to charge ratio of 329% ($1145.88 charge for a $348 freezer) to be unconscionable. Whether it is a freezer or hospital services, there comes a point where a Court

is justified in declaring that a price exceeds conscionable standards. Do the prices imposed on the plaintiffs cross that line? This Court should, as is required with unconscionability claims under the Uniform Commercial Code, give the parties a reasonable opportunity to present evidence as to the commercial setting, the purpose and effect of the challenged charges. Franks Maintenance & Engg, Inc. v. C.A. Roberts Co., 86 Ill. App. 3d 980, 989, 408 N.E.2d 403, 409 (1st Dist. 1980). F. The Billing Practices of Our Lady Are Unfair Within the Meaning of the Consumer Fraud Act.

Robinson v. Toyota Motor Credit Corp., 201 Ill. 2d 403, 775 N.E.2d 951 (2002), establishes that an unfair act, committed in commerce, may be actionable. The high prices that

Our Lady charged the three plaintiffs in themselves constitute unfair acts. In the case of Murphy v. McNamara, 36 Conn. Super. 183, 416 A.2d 170 (Conn. 1979), a woman was charged $1268 for a television set with a retail value of $499. Id. at 36 Conn. Super. 185. The Court sustained her claim that the excessive purchase price constitute[d] an unfair trade practice... under the Connecticut version of the Consumer Fraud Act.21 Id. at 36 Conn. Super. 193-94. Moreover, the fact that the prices charged to the uninsured plaintiffs are two to four times higher than those charged insured patients compounds the unfairness of the hospitals billing practices. The argument of amici that hospital billing practices are exempt from challenge under the Consumer Fraud Act (CFA) boils down to whether the Illinois Supreme Court is going to treat hospital billing charges like it treated attorney fees in Cripe v. Leiter, 184 Ill. 2d 185, 703 N.E.2d 100 (1998). But the reasoning of the Court in Cripe suggests that hospital bills will be subject to

The Connecticut and Illinois Consumer Fraud Acts have identical language prohibiting unfair or deceptive acts or practices in the conduct of any trade or commerce. Cf. Connecticut version in Murphy v. McNamara, 36 Conn. Super at 187 with Illinois law at 815 ILCS 505/2.

21

10

the embrace of the CFA; Cripes treatment of attorney fees revolved around factors that do not apply to hospital bills. For example, the Court in Cripe noted that [h]istorically the regulation of attorney conduct in this state has been the prerogative of this court. There is no analagous historical regulation of hospital billing by the Supreme Court. Moreover, the Court in Cripe dwelled on the adequacy of its regulation of attorney fees, setting out verbatim the entire Rule 1.5 of the Rules of Professional Conduct, which provides specific parameters for attorney billing practices. Id. at 184 Ill. 2d at 195-96, 703 N.E.2d at 105-06. Defendant and amici have cited no comparable regulation of hospital billing practices regarding the uninsured; while defendant cited the AMA Code of Ethics, that directive does not apply to hospital fees. The Supreme Court of Illinois is not regulating hospital fees. Neither is the AMA. Nor is there a fiduciary relationship between hospital and patient as there is with attorney and client, another reason the court in Cripe found no need to make attorney fees come within the scope of the CFA. Id. at 184 Ill. 2d at 198-99, 703 N.E.2d at 107. There is no reason not to subject outrageous hospital billing practices to the requirements of the CFA. This Court should heed ...the legislatures mandate to use the Consumer Fraud Act to the utmost degree. People v. All Amer. Aluminum Constr. Co. Inc., 171 Ill. App. 3d 27, 33, 524 N.E.2d 1067, 1070 (1st Dist. 1988). The Motion to Dismiss should be denied. Respectfully submitted,

One of Plaintiffs Attorneys

Alan A. Alop 91017 Nareen Kim

11

Legal Assistance Foundation of Metropolitan Chicago 111 West Jackson Third Floor Chicago, IL 60604

12

CERTIFICATE OF SERVICE

I, NAREEN KIM, certify that I served the attached by mailing a copy to: Michael L. Shakman Edward W. Feldman Miller Shakman & Hamilton 208 S. LaSalle St. Suite 1100 Chicago, IL 60604 Edwin E. Brooks Michael R. Callahan Katten Muchin Zavis Rosenman 525 W. Monroe Street Chicago, IL 60661 John T. Bomher Mark D. Deaton Illinois Hospital Association 1151 E. Warrenville Rd. Naperville, IL 60566 Grabowski Law Center 2800 S. River Rd. Suite 410 Des Plaines, IL 60018

James A. Serritella Burke, Warren, MacKay & Serritella, P.C. 330 N. Wabash Ave. 22nd Floor Chicago, IL 60661

Benjamin C. Weinberg David F. Buysse Assistant Attorney Generals 100 West Randolph, 13th Floor Chicago, IL 60601

Phil Karst Illinois Catholic Health Association 65 Eat Wacker Place. Suite 1620 Chicago, IL 60661

Kevin Scanlan Metropolitan Chicago Healthcare Council 222 S. Riverside Plaza Chicago, IL 60606

and depositing the same in the U. S. mail at 111 W. Jackson, Chicago, IL 60604 on or before 5:00 P.M. on September 28, 2004.

_____________________________________ Alan A. Alop Alan A. Alop #91017 Nareen Kim Legal Assistance Foundation of Metropolitan Chicago 111 West Jackson Third Floor Chicago, IL 60604

1.4

Plaintiffs First Request for Production of Documents

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION

Phyllis Poe et al., Plaintiffs, vs.

Our Lady of the Resurrection Medical Center, ) Defendant. ) __________________________________________)

) ) ) ) ) No. [redacted] ) Judge Nudelman )

PLAINTIFFS FIRST REQUESTS FOR PRODUCTION OF DOCUMENTS Pursuant to Supreme Court Rule 214 (Rule), Plaintiffs hereby serve their first requests for production of documents to Defendant. All responses and documents should be produced within the time specified under the Rule and with an affidavit of completeness as required by the Rule. INSTRUCTIONS If it is maintained that any responsive documents are subject to the work-product privilege, attorney-client privilege, or any other confidentiality or privilege claim, then please provide a concise statement of the grounds upon which such claim of privilege is asserted, and if such a claim involves a document, then identify the general nature of any such document, the identity and position of its author, the date it was written, and the identity and positions of all recipients. In producing documents, please produce an identical copy of the original. The copy shall be legible and bound or stapled in the same manner as the original.

The relevant time period applicable to the following document requests is January 1, 2000 to the present. Unless otherwise indicated, these requests seek documents during this time frame. DEFINITIONS 1. You and Your means Our Lady of the Resurrection Medical Center together with

all present and former directors, officers, employees, agents, representatives or any other persons acting on its behalf. 2. Defendant shall refer to Our Lady of the Resurrection Medical Center together with

all present and former directors, officers, employees, agents, representatives or any other persons acting on its behalf. If Resurrection Health Care has taken actions on behalf of the Defendant, please answer the document request by noting that and providing the documents requested. 3. Words used in the masculine gender include the feminine and vice versa. Words used

in the singular include the plural. The words or and and means and/or. 4. Person means any individual, corporation, proprietorship, partnership, association or

any other entity. 5. Identity when referring to a person, as defined above, means the: a. b. c. The name of that person; The address of that person; If the present residence or business address is unknown, state the last known address or any other information of the Defendant that might reasonably lead to the person being located; The telephone number of that person (home and business, where applicable), or that persons last known telephone number; and If that person is an individual, state his employer, his position with the employer, and the employers address. 2

d.

e.

6.

Identity when referring to a document, as defined above, means to provide the

following information: a. b. c. d. e. f. The date of the document; The title of the document; The author of the document; The person for whom the document was prepared; The subject matter covered by the document; and The custodian of the document, including his name, address and telephone number.

7.

The term "document," either singular or plural, is defined as originals or, if not

available, true copies of all memoranda, reports, appraisals, evaluations, correspondence, communications, interoffice communications, e-mails, intra-office memoranda, intercompany communications, agreements, contracts, deeds, bills of sale, purchase orders, purchase and sale confirmations, closing statements, account statements, invoices, checks, bank statements, journals, ledgers, telegrams, handwritten notes, periodicals, pamphlets, reports, computer or business machine printouts, accountants' work papers, accountants' statements and writings, notations or records of meetings, printers' galley, books, papers, diary, promissory notes, evidence of indebtedness, trust deeds, mortgage instruments, security agreements, trust agreements, loan applications, leases, documents creating or reflecting a security interest, loan agreements, financing statements, deposit slips, speeches, public relations issues, advertising, merger agreements, proxy statements, prospectuses, annual or other reports including financial statements filed with appropriate state and federal authorities, documents filed with stock exchanges, office manuals, employee manuals, 3

company rules and regulations, reports of experts, drafts and preliminary copies of any of the foregoing, tape recordings or other sound or visual reproduction materials and any other written matter, tangible or physical objects however produced or reproduced upon which words or phrases are affixed or from which by appropriate transcription such written matter or tangible thing may be produced, any writings, drawings, graphs, charts, photographs, phonorecords, and any other data compilations from with information can be obtained, any and all computer media, including e-mails, internal electronic communications, and any information generated or stored on any computer or computer disc, tape or hard drive in the possession, custody or control of the person herein served or his agents, attorneys, or employees. 8. Executive Officer shall mean any and all persons appointed or elected by the

Shareholders, Board of Trustees or similar governing authority of Defendant. 9. Trustees shall mean members of the Board of Trustees or like governing authority,

both appointed and elected, of Defendant. 10. Financial Statement shall mean a written document or statement prepared by an

independent accounting firm or group in the ordinary course of business, signed by a member of said firm or group and showing the gross income or other forms of revenue, itemized expenses, depreciation and other forms of deductions from gross income or revenue and net income or revenue, and the assets, liabilities and net worth expressed in dollars and itemized. 11. Uninsured shall mean your patients who did not have health insurance at the time of

treatment and were not covered by Medicaid or Medicare or any similar state or federal program. 12. Related Entity means any partnership, corporation, or other legal entity that is a

predecessor, successor, subsidiary, parent, partner, branch, department, division, or affiliate of you. 4

It also means any such legal entity owned or controlled by you. 13. Relating to or pertaining to means referring to, describing, evidencing, constituting, discussing, memorializing, summarizing, or recording. 14. Chargemaster means a list(s) of standard gross charges for individual items of medical services, supplies and medications. 15. Patient means an in-patient at defendants main facility.

DOCUMENT REQUESTS Request No. 1 All documents which establish or identify or address standard charges or rates for individual items of services, supplies and medications billed by Defendant to its uninsured patients for the time period of January 1, 2000 through the present. Request No. 2 All documents which establish or identify or address standard charges or rates for individual items of services, supplies or medications billed by Defendant to insured patients or health insurance companies for the period of January 1, 2000 through the present. Request No. 3 All documents which evidence or identify or address the difference in rates charged or billed to uninsured patients for medical services, supplies and medications as compared to such rates charged or billed to health insurance companies, insured patients or patients covered by Medicare for the time period of January 1, 2000 through the present. Request No. 4 5

All communications, correspondence, memoranda, e-mails, and documents prepared by any employee or officer of Defendant which mention, address or discuss prices, rates or charges billed by Defendant to uninsured patients or which discuss or address the differences in rates and charges for uninsured patients as compared to insured patients for the same services, supplies or medications during the time period of January 1, 2000 through the present. Request No. 5 All policies and procedures relating to how you determine and collect charges or rates to bill insurance companies, insured patients, government programs, uninsured individuals, and indigent charity patients for medical services for the time period of January 1, 2000 through the present. Request No. 6 All policies and procedures relating to your (or anyone acting on your behalf, including third-party collection agencies who attempt to collect your unpaid bills) practices or policies of collecting medical bills, including the filing of liens and the garnishment of wages, for the time period of January 1, 2000 through the present. Request No. 7 All policies and procedures relating to the write off of partial or entire balances to patients, insurance companies, employees, board members, and physicians for the time period of January 1, 2000 through the present.

Request No. 8 All agreements or contracts with insurance companies or other payers in which the Defendant (or any related entity acting on behalf of the Defendant) has granted discounts, concessions, or other favorable terms not offered to uninsured patients during the time period of January 1, 2000 through the present. If summaries of these agreements are maintained by you then a copy of such summary is also requested. Request No. 9 All internal accounting reports relating to annual aggregate discounts and write-offs granted to insurance companies for the time period of January 1, 2000 through the present. Request No. 10 All documents which evidence the actual cost to Defendant of services, supplies or drugs provided each Plaintiff. Request No. 11 All documents which evidence the amount of the price markup over actual costs for services, supplies or medications provided each Plaintiff. Request No. 12 All documents related to the Plaintiffs, including all medical records and billing records for any medical care to Plaintiffs, all documents signed by the Plaintiffs, all applications for financial assistance, all records, notes, memoranda, and any documents regarding any of the Plaintiffs eligibility or qualifications for financial assistance, and any and all records concerning any communications between Defendant and the Plaintiffs. Request No. 13 7

All documents relating to your Charity Care Policy, any Community Benefit Reports, Community Benefit Assessment, Community Benefit Strategy and/or Charity Care Audits for the time period of January 1, 2000 through the present. Request No. 14 All documents which compare any charges of Defendant to the charges of any other hospital or other health care organization. Request No. 15 All documents that analyze, tabulate, recommend, or justify charges for services, drugs, or supplies on your chargemaster lists for the time period of January 1, 2000 through the present. Request No. 16 All documents related to an agreement between you and any collection agency or employees collecting bills on your behalf for the time period of January 1, 2000 through the present, and any document describing the Defendants practice of reporting unpaid bills to credit reporting agencies. Request No. 17 Copies of internal or external reports or findings of accountants, consultants, reimbursement experts, actuaries, or others regarding charges, reimbursement, price setting methodologies, financial or billing, or collection policies and/or procedures, whether implemented or not. This includes, but is not limited to comparisons of charges to other facilities or average charges; reports relating to mathematical methods of establishing charges based upon analysis of payer utilization, sometimes referred to as rate optimization charge optimization, and similar reports concerning rationales for establishing charges or rates based upon payer, market area or competitors, or other basis for the

time period of January 1, 2000 through the present. Request No. 18 All documents which evidence the total amount of charges which have been billed to uninsured patients and/or which evidence the amount of charges which have been billed to uninsureds in excess of charges to insured patients for the same services, supplies or medications on an annual basis for the period of January 1, 2000 through the present. Request No. 19 All documents which mention or discuss or address any reasons that Defendant has decided not to offer the same or similar rates, charges or discounts to uninsured patients as are offered to insured patients or health insurance companies for the same services, supplies and medications for the period of January 1, 2000 through the present. Request No. 20 All documents, including all e-mails, correspondence, communications, and memoranda prepared by any employee or officer of Defendant which address charges, rates or pricing discounts for uninsured patients for the time period of January 1, 2000 through the present. Request No. 21 All annual reports prepared by Defendant for the time period of January 1, 2000 through the present. Request No. 22 All Cost to Charge Ratio Reports during the time period of January 1, 2000 through the present. Request No. 23 9

All documents related to your policies and procedures regarding medical treatment of uninsureds and financial treatment of uninsureds during the time period of January 1, 2000 through the present. Request No. 24 All documents which identify the categories of patients who are required to pay full, undiscounted charges as listed on the chargemaster, and/or the percentage of all patients who are full-payers. Request No. 25 All documents which discuss or summarize the discounts which private insurers and others receive off the chargemaster prices and/or the percentage of patients who receive discounts from the chargemaster charges. Request No. 25 All documents which discuss your policies or practices re uninsured patients and the billing or waiver of charges for such patients.

Respectfully submitted, this ____ day of March, 2005.

_______________________________ Alan A. Alop One of Plaintiffs Counsel Alan Alop 10

Nareen Kim Legal Assistance Foundation of Metropolitan Chicago 111 West Jackson Third Floor Chicago, IL 60604

CERTIFICATE OF SERVICE This is to certify that I have this day served a copy of the within and foregoing Plaintiffs First Requests For Production Of Documents by depositing a true and correct copy of same in the United States Mail, postage prepaid, addressed as follows to: Edward W. Feldman Miller, Shakman & Hamilton LLP 208 S. LaSalle Street Suite 1100 Chicago, IL 60604 This 7th day of March, 2005.

_________________________________ Alan A. Alop

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1.5

Plaintiffs First Set of Interrogatories

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, LAW DIVISION

PHYLLIS POE, and [PLAINTIFF 2] as next friend of [PLAINTIFF 3], Plaintiffs, v. OUR LADY OF THE RESURRECTION MEDICAL CENTER, Defendant.

OUR LADY OF THE RESURRECTION MEDICAL CENTER, Plaintiff, vs. PHYLLIS POE, Defendant.

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

No. [redacted] Calendar W Judge Nudelman

No. [redacted] (Consolidated)

PLAINTIFFS FIRST SET OF INTERROGATORIES The plaintiffs in case no. [redacted], through their attorneys, requests defendant in that case, pursuant to the Rules of the Supreme Court of Illinois, to respond to the following discovery requests under oath within 28 days. I. DEFINITIONS For the purpose of these discovery requests, the following definitions shall apply:

(a) Unless otherwise specified, the time period referenced in these interrogatories is January 1, 2000 through the present. (b) Identify, when used with respect to an individual, means to state the person's full name, social security number, last known telephone number and home address, present business affiliation and position or job title, if known. (c) Defendant means or refers to Our Lady of the Resurrection Medical Center (hereafter Our Lady). (e) Plaintiffs refers to Phyllis Poe, [Plaintiff 2], [Plaintiff 3], and [Plaintiff 4]. (f) Identify, when used with respect to a document, means to state the date, author,

addressee, type of document (e.g., letter), date document obtained, and to identify its last known custodian and location. (g) Document means writings or recordings of every kind and description whether made by hand, mechanical, electronic, microfilm, photographic or other means. It includes information generated by or stored in a computer. (h) Patient refers to inpatient services at Our Lady. (i) If defendant declines to produce any document or fails to respond to an interrogatory

due to a claim of privilege, please (1) identify the subject matter (e.g. letter, memorandum), date, and author of the privileged communication or information, and all recipients; (2) identify those persons to whom the contents of each alleged privileged communication or document has been disclosed; (3) state what privilege is claimed; and (4) state the basis upon which the privilege is claimed. (j) If any document requested was, but no longer is, in defendants possession or subject to defendants control, state: (1) date of its disposition; (2) the manner (e.g. lost, destroyed, etc);

and (3) explain the circumstances leading to the disposition of the document. (k) Please supplement all answers and documents produced in the future if additional information is obtained or if additional documents related to these discovery requests are obtained. (l) Chargemaster means a list(s) of standard gross charges at Our Lady for items of medical services, supplies, medications, etc. II. INTERROGATORIES 1. State the amount of revenue (in dollars) Our Lady received for providing medical

services each year, beginning 2000 through 2004, from (a) third-party payors excluding Medicaid and Medicare; (b) Medicaid; (c) Medicare; (d) Uninsured patients; (e) self-payors other than the uninsured; and (f) others. 2. State, for each year from 2000through 2004, the percentage of patients (a) who

are required to pay the full amount of the hospitals chargemaster charges; (b) whose bills are paid by Medicare; (c) whose bills are paid by Medicaid; (d) who receive discounts by virtue of agreements with third-party payors; and (e) who receive charitable write-offs or discounts. If there are other significant categories, identify them as well and state the percentages for these categories. 3. For each hospitalization of the plaintiffs, state the amount of the bill rendered to

them and the actual costs to Our Lady of such services. 4. For every hospital bill rendered to the plaintiffs, state the actual amount Our Lady

would have accepted to pay each bill in full had the plaintiff been insured by: a) b) c) d) Medicaid; Medicare; Health Care Service Corp.; Health Care Service Corp. Mutual Legal Reserve Co.; and

e) 5.

Unicare Health Insurance Co. of the Midwest.

Identify and describe the agreements between Our Lady (or Resurrection Health

Care) and Health Care Service Corp., Blue Cross, Health Care Service Corp. Mutual Legal Reserve Co., Unicare Health Insurance Co. of the Midwest between 2000 and 2004 that were used for determining the discounted charges for services rendered at Our Lady. 6. Please identify any written charge comparisons between plaintiff and other

similarly situated hospitals for the relevant time period. 7. Please identify the person(s) responsible for setting Our Ladys charges and the

persons who negotiate discounted charges to third party payors. 8. Identify the agent of Our Lady who has knowledge of the hospital's practice of

discounting charges for third-party payors other than Medicare and Medicaid. 9. Identify the agent or agents of Our Lady who has knowledge of the reasonable

value and actual cost to plaintiffs of the goods, procedures and services for which plaintiffs were billed. 10. Identify the witnesses and all opinion witnesses of Our Lady who will testify for

the plaintiff at trial and state the matters that they will address in their testimony.

One of Plaintiff's Attorneys ALAN ALOP NAREEN KIM LEGAL ASSISTANCE FOUNDATION OF METROPOLITAN CHICAGO 111 West Jackson, Third Floor Chicago, Illinois 60604 (312) 347-8310 CERTIFICATE OF SERVICE

I, ALAN ALOP, certify that I served the attached by mailing a copy to: Michael L. Shakman Edward W. Feldman Miller Shakman & Hamilton 208 S. LaSalle St. Suite 1100 Chicago, IL 60604 before 5:00 p.m. on March 7, 2005. Grabowski Law Center 2800 S. River Rd. Suite 410 Des Plaines, IL 60018

Alan Alop