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How much charity is too much?
by Tom Scheck, Minnesota Public Radio
December 13, 2004

Left to right: Dickie Scruggs, Mississippi attorney who sued the tobacco industry; Paul Kern, uninsured Allina patient charged $1,400 for six stitches; Randy Hopper, Kern's Minnesota-based attorney. (MPR Photo/Tom Scheck)

A high-profile, national attorney and two Minnesota hospitals were in U.S. District Court in Minneapolis on Monday, arguing how much charity care a non-profit hospital should provide. Plaintiffs across the country have been filing lawsuits against non-profit hospitals for failing to provide an adequate level of charity care to the uninsured and the poor. Allina Health Systems and Fairview Health Services say they provide enough care and are asking a judge to dismiss the lawsuit.

St. Paul, Minn. — Paul Kern is one of those people who has fallen between the cracks. Kern doesn't have enough money to pay for health insurance, yet makes too much money to be on a public health insurance program. In July 2002, Kern cut his thumb on a table saw and went to United Hospital in St. Paul for treatment. He says he told emergency room workers he didn't have insurance and they told him not to worry.

"I made it very clear of my situation at the time and my inability to pay and I was basically handed paperwork that obligated me to pay for my services and I was never offered any type of application for assistance when I went in," she says.

Kern received six stitches for his care. The visit cost him $1,400.

Mississippi-based attorney Dickie Scruggs has filed about 50 class action lawsuits nationwide regarding these charity services. Scruggs earned a national reputation pursuing lawsuits against tobacco companies. He says both Allina and Fairview receive state and federal tax breaks yet provide only a limited amount of charity care.

The IRS doesn't have a standard charity care requirement for non-profit hospitals. The agency mostly looks to see if charity care is provided and if the hospital has an open, accessible emergency room.

Scruggs also says the hospitals are charging the uninsured more than those who have insurance for the same services. He also says they're using aggressive billing practices on patients who aren't paying their bills.

"The for-profit business model is identical with these institutions that it is for any other business that pays taxes and yet these people are allowed not to pay any taxes. They're usually the largest property owner and perhaps largest employer in a given area and yet they're off the tax roles and there's something wrong with that when they're not provided the service they said they'd provide," he says.

Attorneys for Allina and Fairview say their hospitals are fulfilling their charitable mission. They say Scruggs' lawsuit is without merit and asked Judge Ann Montgomery to dismiss the case. Furthermore, Allina attorney Steve Lokensgard says it's not up to Scruggs or the courts to decide if a non-profit hospital has been fulfilling its mission of providing charity care. He says that's up to the IRS and Congress.

"Allina cares very strongly about how it treats its patients, the uninsured the poor patients and we have a number of programs to help the uninsured and poor patients. But this case is really about as a matter of law, is there a private cause of action for patients to sue a non-profit hospital?" asks Lokensgard.

Lokesngard also said Allina has provided a large number of discounts to the uninsured, totalling $16 million in charity care over the last two years. Attorneys suing Allina say that care is less than one percent of the company's $1.5 billion in annual revenues.

While Allina is offering discounts, Lokensgard says the hospitals could do a better job of informing the uninsured about its charity care program. The company ran a few newspaper ads last month to highlight its commitment to charity care.

Pastor Jim Bzoskie is featured in those ads. Bzoskie, of Hastings, had heart trouble last January and was rushed to United Hospital.

"I was shipped up to United and when I got up there I told them 'listen, guys, I don't have insurance and I just want you to know that because I don't know how I'm going to pay for this.' And they told me 'Don't worry about it. Don't worry about it. Let's just get you squared away,'" he says.

Bzoskie received an angioplasty and had two stents inserted to help relieve blockage in his heart. The total cost of the care was $49,000. Allina's charity care program picked up the entire bill.

Judges in other states have dismissed similar cases. Both Allina and Fairview hope Judge Montgomery will take the same action. She took the matter under advisement.

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