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DEFENDING HOSPITAL

COLLECTION CASES

ALAN A. ALOP
July, 2001

Copyright 2001 Legal Assistance Foundation of Metropolitan Chicago


TABLE OF CONTENTS

PAGE

I. INTRODUCTION.................................... 1

II. BACKGROUND;THE AMERICAN MEDICAL SYSTEM.......... 2

A. A LOOK AT THE NUMBERS..................... 2

B. HOSPITAL OWNERSHIP........................ 2

1. Private, Non-Profit Hospital........ 3


2. Proprietary Hospital................ 4
3. Public Hospital.................... 5

C. HOSPITAL STRUCTURE........................ 5

1. The Governing Triad................. 5


2. Revenue Sources..................... 7
3. Teaching Hospitals.................. 7
4. Health Care System Jargon........... 8

III. PRELIMINARY SUGGESTIONS.......................... 9

IV. MOTIONS TO DISMISS.............................. 12

A. ACCOUNT STATED........................... 12
B. FAMILY EXPENSE ACT....................... 24
C. STATUTE OF LIMITATIONS................... 33
D. MIXING CAUSES OF ACTION.................. 34

V. BILL OF PARTICULARS............................ 34

VI. ANSWER......................................... 46

A. REASONABLE VALUE OF SERVICES............. 47

1. Delivery of Goods and Services;


Hospital error..................... 48
2. Hospital Negligence................ 52
3. Method of Pricing/Reasonable Value. 56
4. The Burden of Proof at Trial....... 57

B. PRACTICAL SUGGESTIONS.................... 59
1. Excessive Charges.................. 59
2. Comparable Charges................. 61
3. Hospital Surplus................... 62
4. Irrational Pricing System.......... 62
5. Regulatory Condemnation............ 63
6. Audits............................. 63
7. Hospital Expenditures.............. 64
8. Teaching Hospitals................. 66
9. Administrative Waste............... 68
10. Other Waste........................ 69
11. Jury Question...................... 69

C. COST SHIFTING (Variable Pricing)......... 70

1. What Is Cost Shifting?............. 70


2. The Economics of Hospital Charges.. 74
3. The Use of Cost Shifting to Defend
the insured Patient.............. 77
4. Two Final Notes on Cost Shifting... 78

VII. AFFIRMATIVE DEFENSES........................... 95

A. ESTOPPEL................................. 95
B. FAILURE OF HOSPITAL TO PROCESS PUBLIC AID
APPLICATIONS........................... 103
C. PAYMENT IN FULL DEFENSE (Medicaid/Medicare) 132
D. LACK OF MEDICAL NECESSITY................ 136
E. BREACH OF STATUTORY DUTY PURSUANT TO STATE
TAX EXEMPTION.......................... 146
F. CONSUMER FRAUD ACT: FAILURE TO PROVIDE
FOREIGN LANGUAGE TRANSLATION........... 153
G. FAILURE OF HMO TO PAY DUE TO INSOLVENCY.. 155
H. DURESS................................... 155

VIII. COUNTERCLAIM

MALPRACTICE................................... 156

IX. THIRD-PARTY COMPLAINTS

A. VS. INSURANCE COMPANY/BREACH OF CONTRACT AND


VIOLATION OF INSURANCE CODE............ 157
B. VS. HEALTH PLAN.......................... 157
C. VS. EMPLOYER.............................. 161

X. CLAIM AGAINST PUBLIC AID...................... 171


XI. DEPOSITION OF HOSPITAL WITNESS................ 176

XII. SUMMARY JUDGMENT.............................. 189

XIII. TRIAL......................................... 197

A. TRIAL CONSIDERATIONS...................... 197


1. Overview............................... 197
2. Challenge Admissibility of the
Computer Generated Bill............... 198
3. The Hospital's Burden of Showing
the Bill is Reasonable................ 198
4. Comparable Hospital Charges............ 201

5. Cross-Examination of the Hospital


Witness............................... 201
6. Require the Hospital to Produce
Witnesses to Show Variable Pricing.... 202
7. Move For Directed Verdict.............. 202
8. Defendant: To Testify Or Not?.......... 203
9. Defendant's Evidence................... 203
10. Hospital's Motion For Directed Verdict. 204
11. Closing Argument....................... 204

B. TRIAL MEMORANDUM ......................... 209


C. PICKING THE JURY.......................... 217
D. VOIR DIRE................................. 219
E. INSTRUCTIONS.............................. 223
F. CLOSING ARGUMENT.......................... 236

XIV. SURVEY OF RESULTS............................. 252


A well person is at risk in a hospital, for
the possibilities of overdiagnosis and needless
treatment there are formidable. Patients should
avoid hospitals whenever possible.1

Thomas Preston, M.D.

1
Charles B. Inlander, Take This Book to the Hospital With You,
at 2 (1985).
DEFENDING HOSPITAL COLLECTIONCASES

I. INTRODUCTION

This is a practice guide designed to acquaint attorneys with

defenses and strategies available to defendants who have been

sued by hospitals for unpaid bills. Avenues of defense are

discussed, pleadings and discovery materials are provided, and

materials for the trial of these cases are included.

Experience demonstrates that almost any hospital case can be

successfully defended. Because these cases are filed by high-

volume collection attorneys, a modest defense litigation effort

will generally result in the plaintiff folding or accepting

defendant's settlement terms. See Survey of Legal Assistance

Foundation of Chicago cases at 231. This guide is designed to

aid you in this endeavor. It has a "litigation" format,

beginning with motions to dismiss, followed by discussions and

examples of the Answer, Affirmative Defenses, Counterclaims,

Discovery, Summary Judgment, Depositions, and the Trial.


II. BACKGROUND; THE AMERICAN MEDICAL SYSTEM

A. A Look at the Numbers

Although in many respects the American health care system is

unequaled anywhere else in the world, it is also the world's

costliest medical system. Health care is the fastest growing

industry in the nation, with revenues exceeding $1 trillion

annually. Americans annually spend 10% of the gross national

product on medical care; by way of comparison, the British spend

less than half this amount of their GNP on medical care each

year. Health care costs in this country have risen each year for

the past twenty years at twice the inflation rate.

Two more facts of which to be aware. While most middle

class and well-to-do Americans have private insurance and most

poor people are covered by Medicaid, there are 34 million low

income Americans --that's about 16% of the population under 65--

with no form of health insurance. And while the federal and

state governments' total annual public assistance expenditures in

recent years, excluding housing, is $78.5 billion, fully $53.4

billion of this amount went to doctors, hospitals and other

health care providers.

B. Hospital Ownership

In terms of ownership, there are three broad categories

of hospitals--private, non-profit hospitals, proprietary or for-

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profit hospitals, and public hospitals.

1. Private, Non-Profit Hospital.

Presently, most hospitals are in this category. These were

the model for the last century, and this form of hospital was

encouraged by laws which exempted such charitable institutions

from real estate taxes, income taxes, and sales taxes. Non-

profit hospitals are controlled by private associations or

religious organizations. While these entities are not motivated

by profit margins, their pricing practices have not differed

greatly from those proprietary hospitals that are driven by the

profit mechanism. Typically the Board of Trustees of non-profit

hospitals are unpaid positions occupied by pillars of the

community who may contribute large sums of money to the hospital,

and who, it is hoped, will leave a nice chunk of their wealth to

the hospital at the time of their death. One recent development

is that many non-profit hospitals have formed holding companies

which own and operate profit-making businesses like hotels and

restaurants.

Two caveats about non-profit hospitals. The fact that a

hospital is organized as a non-profit, charitable organization,

does not necessarily mean that its organizers are not making

large sums of money off its operations. In Chicago, before it

was closed down, the non-profit Roosevelt Memorial Hospital was

the subject of a newspaper expose that showed the hospital was

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run by two doctors who were siphoning off large amounts of money.

The two doctors had absolute power of appointment of the Board of

Trustees and had loaded the Board with their close friends.

Moreover, just because the hospital is called a non-profit

institution doesn't mean it isn't making huge profits. Many non-

profits make huge profits--they call them "excesses"--and spend

them on expanded salaries, new construction, and fancy new high-

tech equipment.

2. Proprietary Hospital.

The wave of the future is probably the proprietary hospital, or

"investor-owned" model. A massive, parent corporation operates a

chain of profit-seeking "franchises" around the nation, in

McDonaldesque fashion.2 The Humana Corporation has successfully

pioneered this concept. The proprietary or for-profit-hospital,

is a form of hospital that is growing rapidly across the country.

These now comprise about 15% of all hospitals. These

institutions are entrepreneurial creations motivated by the lure

of great profits. There is one alarming problem associated with

for-profit hospitals and that is their charges. Studies show

2
The desire to maximize profits may result in disturbing
consequences. "Some hospitals welcome doctors of dubious
reputation to their staff as long as they bring plenty of paying
patients with them. Other hospitals pay bonuses of questionable
legality to persuade a doctor to switch patients to them. As a
result, patients who don't need a hospital stay--or who might do
better at a different hospital--may unwittingly find themselves
wrongly admitted to an institution that's secretly paying their
doctor." Chicago Tribune Book Review, Nov. 25, 1991, at Sec. 5.

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that for-profit hospitals usually charge about 11% more than the

non-profits do for the same services.3 Proprietary hospitals

have to satisfy their stockholders by increasing profit returns

each year. In order to improve their bottom line, proprietary

hospitals have been known to over-utilize technology, over-test

their patients, and over-price their goods and services. They

have also been accused of "cream-skimming by selectively

admitting only those patients who can be treated at acceptably

high price-cost ratios". Health Care Financing Review, Spring

1985, at 51. Worse, in many proprietary hospitals, the

hospital's physician staff are shareholders with a piece of the

action. Critics complain that this creates an unavoidable

conflict of interest.

3. Public Hospitals.

Public hospitals usually exist to serve the poor and the

uninsured. These institutions may have statutory obligations to

fulfill. Many of our clients are dependent on public hospitals,

such as Cook County Hospital, for their medical care. In the

last decade, Cook County Hospital has not brought legal action

against LAF clients seeking payment for hospital services.

C. Hospital Structure.

1. The Triad.

Hospitals usually are structured as three-legged creatures:

3
Chicago Tribune, October 10, 1993, at Section 7, page 8.

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the three legs are the board of trustees, the chief

administrator, and the medical staff. The typical hospital is

torn among the three competing legs. One commentator has said

that this hospital structure assures that hospitals can move in

three different ways without going in any direction.

A hundred years ago the trustees had the power at the

typical hospital. But the rise of scientific medicine changed

things. It brought the doctor and his private patients into the

hospital for the first time, and began the shift of power in that

direction. The hospital soon developed as the primary source of

each community's medical resources, and the hospital trustees

soon found themselves with great power over the doctor's

professional and economic lives. Needless to say, doctors took

actions to assert their interests within the hospital. At the

same time the rise of scientific medicine made hospitals more

complex, expensive and multi-purposed. Hospitals now needed

management beyond what the trustees could supply themselves.

Administrators were brought in. The present model of hospital

structure represents a stalemate between the three legs of the

triad and is more a result of compromise than organizational

logic. But despite the awkwardness of the structure that runs

most hospitals, the last century has seen the dramatic rise of

hospitals. Hospitals have grown and proliferated and their

importance as key institutions in each community has increased.

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But as we move into the 21st century hospitals are receiving a

great deal of criticism for contributing to the deficiencies in

our health care system and, most important for our purposes, for

the inefficiencies of their management and their failures in the

realm of cost control.

2. Revenue Sources

Besides gaining revenue from patient billing, hospitals may

also get revenue from the following sources:

a. Research grants.
b. Equity (stocks) portfolio.
c. Grants and donations.
d. Interest.
e. Wholly-owned subsidiary businesses.

Some of these alternative revenue sources can be significant.

For example, in 1990 the Evangelical Health System, a large chain

of Chicago-area hospitals, derived investment earnings (primarily

from its stock portfolio) of $33.1 million.

3. Teaching Hospitals

Many hospitals pride themselves on being "teaching

hospitals". Generally this means that they have a working

affiliation with a university medical school. There is a house

staff composed of interns, residents and fellows, and senior

physicians (attending physicians) who may also be professors in

the medical school. They are responsible not only for the

treatment of patients but for teaching medical students and

residents and, perhaps, for engaging in scientific research. The

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teaching hospital probably is pulling in a significant amount of

revenue from research grants. While many teaching hospitals have

prestigious reputations, they may be, from the patient's point of

view, slower than other hospitals, less efficient, prone to

having their doctors order significantly more tests, and, most

importantly, much more expensive. The worst match-up is a

teaching hospital and a patient with a rare affliction. The

patient may be "used" to broaden the medical education of many a

young doctor, even if it means unnecessarily extending the

hospital stay of the patient. See page 60.

4. Health Care System Jargon

In the jargon of health care professionals, the

physicians, hospitals and other health care suppliers are

"providers" or "vendors". Insurance companies, health care

maintenance organizations, and governmental payers like Medicaid

and Medicare, are all called third-party payers. If the patient

has no third party payer that will cover the medical expense, she

or he is referred to as a "self-payer" or "self-insured".

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III. PRELIMINARY INQUIRY IN ALL HOSPITAL CASES

1. INSURANCE. Before anything else inquire as to the


possibility that insurance covered the hospital bill.
Your client may be unaware of coverage provided by
his/her employer or a divorced or separated spouse.

2. WHAT HAS THIS HOSPITAL DONE IN PRIOR LITIGATION?


Begin handling of the litigation by reviewing the
"Survey" at Section XIV. Ascertain the track record of
the particular hospital that is suing your client and
its counsel. This history of your opponent will give
you guidance in handling this case. If the hospital
has folded early in prior litigation, find out from
prior counsel for defendants how to do the same in your
case.

3. WHAT IS THE CAUSE OF ACTION IN THE HOSPITAL'S PLEADING?


Don't forget to analyze the cause of action asserted
in the complaint. Hospital collection complaints are
often sloppily drafted. File motion(s) for a bill of
particulars or to dismiss the complaint so that you can
respond to a properly framed pleading. For example,
many hospital collection complaints include a count
based on an "account stated" theory. Given the minimum
burden of proof for this theory, and the argument that
it is inapplicable to hospital collection cases, you
will want to file a motion to dismiss where this
theory is pled. See Section IV A.

4. GATHER THE KEY DOCUMENTS YOU WILL NEED.


Gather the key documents that you will need to pursue
your defense. For, example, you will need the itemized
computer print-out of the hospital bill. Your client
may have only a 1-2 page summary of the bill.
Eventually you will also need a copy of the patient's
medical record for the time for which the hospital
seeks reimbursement. You should consider FOIA requests
to state agencies to obtain statistical background
information on the hospital; all Illinois hospitals are
required to file financial statements with the Illinois
Health Facilities Planning Board and a wide range of
information with the Illinois Health Care Cost
Containment Council. FOIA requests to the

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federal government for Medicare reports could also
prove useful.

5. A TIMELY JURY DEMAND IS KEY TO SUCCESS. Almost every


hospital case requires that the hospital meet its
burden of proving that the amount sought is reasonable
for the services rendered. See Section VI A. Most
judges will award the hospital every dollar sought. On
the other hand, juries--who may be sympathetic to
individuals stuck with outrageously high hospital
bills--are more likely to scrutinize the charges and
slash the amount sought.

6. ENGAGE IN APPROPRIATE DISCOVERY. Discovery is essential


if the case is going to trial, and it informs opposing
counsel that your defense is not perfunctory. Many
hospitals have preferred to dismiss their actions
rather than comply with discovery or produce a witness
for deposition. Discovery materials, including sample
interrogatories, document requests, and a deposition
outline, are included in this manual.

7. DO NOT DISCUSS SETTLEMENT UNTIL AFTER YOU HAVE FILED


RESPONSIVE PLEADINGS AND DISCOVERY. Your leverage will
improve dramatically after the hospital's collection
counsel has seen the nature of what the continued
prosecution of his claim will involve.

8. DON'T OFFER TOO MUCH. Experience shows that in most


of these cases the hospital will fold rather than
respond to discovery or go to a jury trial. Modest
litigation efforts can generally result in the hospital
dismissing its claim with prejudice or settlements of
around twenty per cent of the amount sought. See the
Survey of LAFMC settlements at Section XIV.

9. PUSH FOR TRIAL. The last thing the hospital collection


attorney desires-- despite contrary posturing--is to
try a hospital collection case to a jury. It is a no-
win situation for the collection attorney in that a
two/three day proceeding would cost the attorney
hundreds of dollars in attorney time. It also subjects
his client's pricing policies to a public scrutiny
which may actually embarrass the hospital. Thus you
will often get your best settlement offer on the eve of
trial.

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10. INVESTIGATE A "CHARITY WRITEOFF". Most hospitals have
procedures to write-off "charity" debts of patients
unable to pay. In discovery find out the hospital's
formal procedure for doing so and then apply on behalf
of your client. Make sure the application is routed
through your opposing counsel. As early on in the
litigation as possible, alert opposing counsel that
she is spinning her wheels in that collection of
any judgment will be problematic.

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IV.MOTIONS TO DISMISS

A. ACCOUNT STATED

Many hospital collection complaints include a count or are

based solely on the theory of "account stated." Frequently the

complaint fails to allege the necessary elements of an account

stated claim. Furthermore, it may be argued that a hospital

debt, which is an agreement for services with no fixed market

value, may not give rise to an account stated. It is important

to move to dismiss a count based on account stated because the

court may view the hospital's burden of proof at trial on this

theory as minimal. An example of a motion to dismiss an account

stated complaint is found at page 15; a memorandum of law is

included at page 17. Note the following about the account stated

theory:

(1) Elements of an account stated. (a) transactions [note

the plural here] of a monetary character involving the parties to

the action; (b) the existence of accounts embodying such monetary

transactions; (c) an agreement by the parties to such

transactions that all items of such accounts are true and that

the balance is correct; and (d) a promise to pay such balance.

Canadian Ace Brewing Co. v. Swiftsure Beer Serv. Co., 17 Ill.

App. 2d 54, 149 N.E.2d 447 (1st Dist. 1958)

(2) Question of fact. The question of the existence of an

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account stated between the parties is one of fact rather than

law, and thus properly resolved by the jury. 1 Illinois Law and

Practice, "Account Stated," 2 (1988); L.W. Foster Sportswear Co.

v. Goldblatt Bros., Inc., 356 F.2d 906, 909 (7th Cir. 1966); and

Wolford Morris Sales, Inc. v. Weiner, 75 Ill.App. 2d 238, 221

N.E. 2d 308 (4th Dist. 1966).

(3) Evidence of unfairness. A defendant may present

evidence that the charges made in the statement of account were

unreasonable or unfair. Henry v. LeMoyne, 219 Ill. App. 313, 320

(1st Dist. 1920).

(4) Liability. A claim based on account stated can be

overcome by showing that the hospital has not first established

liability on the part of the defendant. In Dreyer Medical Clinic

v. Corral, 227 Ill.App. 3d 221, 591 N.E.2d 111 (2d Dist. 1992), a

medical clinic's account stated claim was rejected because the

clinic failed to establish the underlying liability of the

defendant. The plaintiff in Corral failed to produce any

evidence as to what services were provided to the patient and

whether the charges were reasonable. As a consequence, the Court

ruled that

an account stated is merely a form of proving damages


for the breach of a promise to pay on a contract.
Here the trial court found that plaintiff failed
to prove any liability of defendants, and, conse-
quently, plaintiff could not establish an account
stated.

Corral, 591 N.E.2d 114.

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(5) Mutual assent. An account stated can only be

established where a "mutual assent or meeting of the minds as to

the correctness of the charges" is shown. McHugh v. Olsen, 189

Ill. App.3d 508, 545 N.E.2d 379, 383 (1st Dist. 1989). Usually

the creditor asserts that mutual assent exists because it sent a

bill to the debtor and the debtor did not dispute this bill. But

if the debtor asserts that she did not receive the bill, a

question of fact exists for the trier of fact. Motive Parts v.

Robinson, 53 Ill.App.3d 935, 369 N.E.2d 119, 123 (First Dist.

1977).

Documents Attached

* Motion to Dismiss: (Account Stated): page 15.

* Memorandum in Support of Motion to Dismiss (Account

Stated): page 17.

* Interrogatories (Account Stated): page 23.

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IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
MUNICIPAL DEPARTMENT, FIRST DISTRICT

ANTHONY HOSPITAL, )
)
Plaintiff, )
vs. ) No. 01 M1 100800
)
RYNE SANDBERGSKI, )
)
Defendants. )

MOTION TO DISMISS VERIFIED COMPLAINT

Defendant, by his attorney, and pursuant to the Illinois

Code of Civil Procedure, 735 ILCS 5/2-615, move to dismiss

Plaintiff's Verified Complaint. In support of this motion the

defendant states the following:

1. Paragraph 3 of the Complaint purports to allege a cause

of action for an "account stated."

2. An account stated cause of action is inapplicable to an

action on a hospital bill which does not constitute an account

with a fixed market value.

3. A cause of action for an "account stated" must allege

four elements: (a) transactions of a monetary character

involving the parties to the action; (b) the existence of

accounts embodying such monetary transactions; (c) an agreement

by the parties to such transactions that all items of such

accounts are true and that the balance is correct; and (d) a

promise to pay such balance. Canadian Ace Brewing Co. v.

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Swiftsure Beer Serv. Co., 17 Ill. App. 2d 54, 149 N.E.2d 447 (1st

Dist. 1958); O'Neill v. Reamon, 335 Ill. App. 327, 81 N.E.2d 749

(2nd Dist. 1948).

4. The Complaint fails to set forth the elements of an

account stated designated (c) and (d) above. The Complaint is

thus deficient at law and should be dismissed.

WHEREFORE, defendants request that this Court dismiss

Plaintiff's Verified Complaint and grant such further relief as

it may deem just and proper.

ALAN A. ALOP

ALAN A. ALOP
LEGAL ASSISTANCE FOUNDATION
OF METROPOLITAN CHICAGO

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MEMORANDUM IN SUPPORT OF MOTION TO DISMISS (ACCOUNT STATED)

The Defendant, Raul Goodman, by his attorneys, the Legal

Assistance Foundation of Metropolitan Chicago, submits this

memorandum in reply to plaintiff's response to defendant's motion

to strike plaintiff's amended complaint pursuant to 735 ILCS 5/2-

615 of the Illinois Code of Civil Procedure.

I. A CLAIM FOR AN ACCOUNT STATED DOES NOT APPLY TO A BILL


FOR HOSPITAL SERVICES, WHICH HAVE NO FIXED MARKET VALUE

By its very nature, it is clear that a claim for an account

stated does not apply to a bill for hospital services, because

those services have no fixed market value. An account stated is

appropriate where "a definite ascertained sum" is due and owing.

O'Neill v. Reaman, 335 Ill. App. 327, 336, 81 N.E.2d 749, 753 (2d

Dist. 1948). There is no such definite ascertained sum in this

case. The rendition of a bill for hospital services is merely an

offer to liquidate a claim. In their response, the plaintiffs

provide no basis for their assertion that account stated would

apply to services that have no fixed value.

The contract attached to plaintiff's amended complaint does

not give any fixed sum as to the cost of the hospital services.

The partial bill attached to the amended complaint is for

hospital services and materials. The partial bill includes

charges for standard follow up visit, long arm cast applied, and

x-rays of the forearm. All of these services include the

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assistance and examination of health care professionals.

Generally, the cost of hospital services are determined according

to the following factors: the time, labor, and skill required in

providing the service; the difficulty of the service; the fee

customarily charged in the community; and the medical

professional's reputation, experience and ability. Obviously,

the same hospital service provided by a specialist, a general

practitioner, or a nurse would all have different fees.

A hospital's submission of a bill to a patient for services

rendered on an open account is merely an offer to liquidate a

claim and to reduce it to a certainty. Corbin on Contracts, ch.

72 1312 (1962). Professor Corbin states that mutual assent is

viewed differently in the case of an offer to liquidate a

doubtful or disputed claim than in the case of the mere

arithmetical accounting of liquidated items. He states:

The rendition of a bill by a lawyer or doctor or other


person who has performed services, may be an offer of
compromise of liquidation of the claim; but mere
retention of this bill in silence, unaccompanied by
other circumstances, should seldom, if ever, be held to
be an acceptance of the offer.

Corbin, 1313, p. 175.

The account stated cases that are most closely analogous to

a hospital collection action are attorney fee collection actions.

In Chinn v. Lewin, 16 F.2d 512 (D.C. Cir. 1926), which involved a

lawyer's rendering of an account to his client, the court held

that no meeting of the minds took place to create an account

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stated. The court noted that a debtor's silence for a long time

after rendition of a bill may, in transactions for merchandise

having a fixed market value, imply an account stated. The court

stated, however, that:

A different rule applies to a bill for professional


services rendered or for labor performed which has no
fixed market value, and where no previous agreement or
contract as to the amount is shown.

16 F.2d at 514. Hence, plaintiffs' argument in their response

that receipt and retention of the invoices establishes an account

stated is without merit and would not apply in this case.

The attorney fee collection actions demonstrate that the

amount stated theory is inappropriate for the provision of

service by professionals. In all the attorney fee collection

actions, attorney and client set an hourly rate that would be

charged for professional services. Even with an hourly fee

determined, Courts have determined that

[i]t is well established that when an attorney files an


action to recover fees under the theory of account
stated, the attorney has the burden of furnishing
detailed facts and computations upon which the claimed
fee was predicated, and the client is always permitted
to prove that the charges are excessive, not warranted
by custom and usage, and otherwise unreasonable.

Laff v. Chapman Performance Products, Inc., 63 Ill. App.3d 297,

306, 379 N.E.2d 773, 781 (1st Dist. 1978). See also Lieberman v.

Stollman, 230 Ill. App.3d 203, 595 N.E.2d 8 (1st Dist. 1991);

Yowell v. Ringer, 217 Ill. App. 353, 577 N.E.2d 468 (2nd Dist.

1991); In Re Marriage of Angiuli, 134 Ill.App. 3d 417, 480 N.E.2d

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513 (2nd Dist. 1985); Blum and Sang v. Kurtzon, 351 Ill. App.

107, 113 N.E.2d 475 (1st Dist. 1953) (abstract).

Among the factors considered in determining the reasonable

value of an attorney's services are the following:

... the skill and standing of the attorney


employed; the nature of the cause and the novelty
and difficulty of the questions at issue; the
amount and importance of the subject matter;
the degree of responsibility involved in the
management of the cause; the time and labor
required; the usual and customary charge in the
community; and the benefits resulting to the client.

Laff, 63 Ill. App. 3d at 307, 379 N.E.2d at 781. Without a fixed

hourly rate, the only way to determine the amount owed in

attorney's fees is by using the subjective factors listed above

and an account stated claim would be inappropriate. The

situation is the same for a hospital collection action where--as

is always the case--there is no fixed rate.

The use of an account stated claim is for specific business

transactions that are completely dissimilar to hospital

collection actions. Because of the nature of the debt claimed

and the fact that no fixed market value exists for hospital

services, Count II asserting a claim for account stated should be

stricken.

II. THE CLAIM FOR AN ACCOUNT STATED SHOULD BE STRICKEN BECAUSE


PLAINTIFFS FAILED TO ADEQUATELY PLEAD AN ACCOUNT STATED

"In an action for an account stated the complaint should

allege all the material facts on which the liability of the

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defendant depends." 1 I.L.P. Account Stated 6 (1988). These

requirements are different from those of the breach of contract

action which plaintiffs allege in Count I and then attempt to

reassert in Count II.

Rather than articulate the necessary elements of an account

stated, the plaintiffs rely on the conclusory allegation of its

amended complaint "that there is an account stated by and between

the parties." Just as the statement "a contract existed between

plaintiff and defendant" would fail to properly allege a contract

cause of action, see Pollack v. Marathon Oil Co., 34 Ill. App. 3d

861, 341 N.E.2d 101 (5th Dist. 1976), the bare allegation that an

account stated existed does not adequately plead an account

stated claim.

"An account stated is an agreement between parties who have

had previous transactions of a monetary character that all the

items of the accounts representing such transactions are true and

that the balance struck is correct, together with a promise,

express or implied, for payment of such balance." LaGrange Metal

Products v. Pettibone Mulliken Corp., 106 Ill. App. 3d 1046,

1053, 436 N.E.2d 645, 651 (1st Dist. 1983). Plaintiff failed to

plead (a) that there was any agreement regarding accounts

representing previous transactions; (b) that there was an

agreement that the items in an account were true; (c) that there

was an agreement that a balance struck was correct; and (d) that

- 21 -
there was a promise to pay such balance. See W.E. Erickson

Construction Inc. v. Congress-Kenilworth Corp., 132 Ill. App. 3d

260, 268, 477 N.E.2d 513, 519 (1st Dist. 1985); and Allied Wire

Products, Inc. v. Marketing Techniques, Inc., 99 Ill. App. 3d 29,

40, 424 N.E.2d 1288, 1296 (1st Dist. 1981).

Since Plaintiff's claim for an account stated is

insufficient at law, such claim should be dismissed.

WHEREFORE, defendant prays the Court strike the Complaint

and grant other relief deemed just.

______________________________
ATTORNEY FOR DEFENDANT

- 22 -
ACCOUNT STATED/INTERROGATORIES

10. Identify each correspondence, note or other document

that

forms the basis for the plaintiff's claim of an account stated,

and state, with respect to each:

(a) the date of the document;

(b) how this document was transmitted to the defendant;

(c) whether the plaintiff has proof of receipt by


defendant[s] of said document and, if so, the
nature of that proof; and

(d) the exact contents of each document.

11. State the date and content of each of the defendant's

telephone, written, in-person, or other communications with the

plaintiff or its agents subsequent to the earliest date specified

in Interrogatory No. 10(a) above, and the name of the plaintiff's

agent(s).

12. State whether the plaintiff has provided treatment or

services to the defendant prior to or subsequent to the dates for

which payment is sought in this action.

13. State how the defendant has allegedly agreed to or

acknowledged the verity and reasonableness of the hospital's

charges, and include the date[s] of each action of the defendant

referred to in your answer to this interrogatory.

- 23 -
IV. MOTIONS TO DISMISS:

B. FAMILY EXPENSE ACT

Hospitals frequently plead the Family Expense Act, 750 ILCS


65/15, to recover for services provided to the spouse or child of
the defendant. The Act provides:
The expenses of the family and of the education
of the children shall be chargeable upon the
property of both husband and wife, or of either
of them, in favor of creditors therefore, and
in relation thereto they may be sued jointly or
separately.
There are numerous decisions addressing various factual
patterns arising under the Act. The following points should be
noted in evaluating defenses:
1. STATUTE OF LIMITATIONS. A five-year statute of
limitations applies to bringing such an action. See Pope v.
Kaleta, 90 Ill. App. 2d 61, 234 N.E.2d 109 (1st Dist. 1967).
2. WHAT IS A FAMILY EXPENSE? Hospital and medical bills
are "expenses" covered under the act. Graul v. Andrian, 32 Ill.
2d 345, 205 N.E.2d 444 (1965).
3. ONLY A HUSBAND OR WIFE LIABLE. The Family Expense Act
attaches liability for family expenses only to a husband and
wife. Consequently, a family consisting of three children and
their grandmother would not subject the grandmother to liability
under the Act. Where a couple is living together and are not
married, does the Act make either liable for the others family
expenses or for the family expenses of the children? Some very
old cases say yes. See, Abrams v. Traster, 244 Ill. App. 533
(1st Dist. 1927) and Hoyle v. Warfield, 28 Ill.App. 628 (3d Dist.

- 24 -
1888).
4. PARENT OF AN ADULT CHILD. A parent's responsibility
for a child's expenses terminates when the child reaches
majority, Sapp v. Johnson, 15 Ill. App. 3d 119, 303 N.E.2d 429
(3rd Dist. 1973); Graham v. Graham, 44 Ill. App. 3d 519, 358
N.E.2d 308 (5th Dist. 1976), or is emancipated. In re Estate of
Hardaway, 26 Ill. App. 2d 493, 168 N.E.2d 796 (1st Dist. 1960);
Proctor Hospital v. Taylor, 279 Ill.App.3d 624, 665 N.E.2d 872
(3d Dist. 1996). Check to see if the patient was eighteen or
older--or emancipated-- at the time services were rendered. See
the Proctor case for how a minor may become emancipated in
Illinois. 665 N.E.2d at 876. If the child was eighteen or
emancipated at the time services were rendered, then the parent
is not liable under the Family Expense Act-- unless the parent
signed a guarantor agreement.
5. EFFECT OF DIVORCE. There now appears to be a rule that
the Family Expense Act will allow a creditor to recover against a
non-custodial parent for expenses incurred on behalf of a child.
Proctor Hospital v. Taylor, 279 Ill.App.3d 624, 665 N.E.2d 872
(3d Dist. 1996); Mercy Center v. Lemke, 199 Ill. App. 3d 958,
557 N.E.2d 943 (2nd Dist. 1990).
6. EFFECT OF SEPARATION. The case law regarding spouses
living apart is cloudy and, depending on the court, may turn on
which spouse was "at fault" in the departure. Abraham Lincoln
Memorial Hospital Corporation v. Gordon, 111 Ill. App. 2d 179,
249 N.Ed.2d 311 (4th Dist. 1969); Fortner v. Norris, 19 Ill. App.
2d 212, 153 N.E.2d 433 (3rd Dist. 1958); and St. Mary of Nazareth

- 25 -
Hospital v. Kuczaj, 174 Ill. App. 3d 268, 528 N.E.2d 290 (1st
Dist. 1988); or whether the individuals actually "constitute[d] a
family." Schlesinger v. Keifer, 30 Ill. App. 253, aff'd, 131
Ill. 104, 22 N.E. 814 (1889). Where "fault" is at issue, the
burden is on the creditor to prove the facts necessary to
establish liability. Berenson v. Berenson, 34 Ill. App. 2d 376,
181 N.E.2d 357 (1st Dist. 1962). See also, CILCO v. I.C.C., 204
Ill. App. 3d 1, 562 N.E.2d 4 (3d Dist. 1990).
7. RECOVERABLE AMOUNTS. Under the Family Expense Act the
creditor may only recover the reasonable value of services
rendered. Valentin v. D.G. Swanson & Co., 25 Ill. App. 2d 285,
167 N.E.2d 14 (1st Dist. 1960). But the creditor may also
recover attorney fees and interest if the patient signed an
agreement authorizing this. Boswell Memorial Hospital v.
Bongiorno, 732 N.E.2d 137 (2d Dist. 2000).
8. ESTABLISHMENT OF LIABILITY. The Family Expense Act
will only require a responsible parent or spouse to pay those
expenses which were actually provided and for which the hospital
has proved its charges were reasonable. In Dreyer Medical Clinic
v. Corral, 227 Ill.App. 3d 221, 591 N.E.2d 111 (2d Dist. 1992), a
medical clinic's Family Expense claim was rejected because the
clinic failed to establish the underlying liability of the
defendant. The plaintiff in Corral failed to produce any
evidence as to what services were provided to the patient and
whether the charges were reasonable. As a consequence, the Court
stated:
Even if we were to agree with Plaintiff that it

- 26 -
proved that Jorge was the minor son of defen-
dants...such findings do not negate the trial
court's conclusion that plaintiff failed to
present any proof of the services rendered and
the value of those services.
Corral, 591 N.E.2d 114.
9. ATTORNEY FEES TO THE PATIENT WHEN NO RECOVERY IS

PERMITTED UNDER THE ACT. Proctor Hospital v. Taylor, 279

Ill.App.3d 624, 665 N.E.2d 872 (3d Dist. 1996) holds that if the

hospital violates the Family Expenses Act by suing someone who is

not liable under the Act, like the parent of an emancipated

minor, then the hospital is liable to the defendant for its

attorney fees and costs by virtue of 750 ILCS 65/15(a)(3).

Proctor, 665 N.E.2d at 877.

10. FILE UNDER LIFE IS STRANGE: Right-wingers attached

some bizarre, abortion-related amendments to the Family Expense

Act in 1990 to the effect that creditors cannot recover for the

expenses of an abortion unless both spouses consented to the

abortion or the physician who performed the abortion certifies it

was necessary to preserve the life of the mother. 750 ILCS

65/15(b)and(c).

Litigation Strategy Note: At trial or arbitration, the hospital


will have to prove that your client is the spouse or parent of
the patient to recover under the Family Expense Act. This may
prove difficult for the plaintiff if your client is not present.
You have to decide early whether you want to flag a potential
proof problem concerning the Family Expense Act. If you lie
low on this issue prior to trial, and the hospital cannot, at
arbitration or trial, establish that your client is the spouse or
parent of the patient, you may be able to defeat the hospitals
Family Expense Act claim.

- 27 -
Documents Attached

* Motion to Strike/Family Expense Act ... page 28.

* Memorandum Re Motion to Strike/Family Expense Act ... page 31.

- 28 -
MOTION TO STRIKE/FAMILY EXPENSE ACT

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS


MUNICIPAL DEPARTMENT, FIRST DISTRICT

ST. ALOP HOSPITAL, )


)
Plaintiff, )
) No. 01 M1 187311
)
vs. )
)
I. M. NOTLIABLE, )
)
Defendant. )

MOTION TO STRIKE COMPLAINT

Defendant, by his attorneys, the Legal Assistance Foundation

of Metropolitan Chicago, moves this Court to strike the complaint

pursuant to 750 ILCS 65/15. In support of his motion, defendant

states as follows:

1. Paragraphs 1 and 2 of the complaint purport to state a

claim under a theory of breach of contract and under the "Family

Expense Act."

a. A cause of action under the "Family Expense Act,"

750 ILCS 65/15, must allege facts to indicate that services

and/or facilities were provided by plaintiff to a member of

defendant's family, i.e., a husband, wife, or children. Carson

Pirie Scott & Co. v. Hyde, 39 Ill. 2d 433, 235 N.E.2d 643 (1968);

Graul v. Adrian, 32 Ill.2d 345, 205 N.E.2d 444 (1965); In re

Enoloe's Estate, 109 Ill.App.3d 1089, 441 N.E.2d 868 (4th Dist.

1982); Abraham Lincoln Memorial Hospital Corp. v. Gordon, 111

- 29 -
Ill. App. 2d 179, 249 N.E.2d 311 (4th Dist. 1969); Louis Berman &

Co., Inc. v. Dahlberg, 336 Ill.App. 233, 83 N.E.2d 380 (1st Dist.

1948).

b. The complaint fails to set forth any facts

establishing the existence of a "family" relationship between the

defendants or between defendants and other persons to whom

hospital services were allegely rendered.

c. A cause of action for breach of contract must set

forth "substantial allegations of fact" pursuant to 735 ILCS 5/2-

601.

d. The complaint fails to set forth any basis for the

bare conclusory allegations (1) that the purported recipient of

"hospital" services provided by plaintiff was a member of

defendant's family or (2) that defendant requested that such

services be provided.

e. Therefore, the complaint fails to state a claim

either under the Family Expense Act or for breach of contract.

2. The complaint, drafted in one count, purports to state

three separate distinct causes of action, i.e., account stated,

family expense, and breach of contract.

a. The Illinois Code of Civil Procedure requires that

each cause of action be stated in a separate count and that each

be separately designated and numbered. 735 ILCS 5/2-603 and

5/2-613(a).

- 30 -
b. The three purported causes of action are not set

forth in separate and distinct counts.

c. Therefore the complaint is insufficient in law.

WHEREFORE, defendant requests that this court:

A. Dismiss the complaint with prejudice; and,

B. Grant such further relief as it may seem just and

proper.

- 31 -
MEMORANDUM/FAMILY EXPENSE ACT

The Complaint Fails to State a Claim Under the


Family Expense Act or for Breach of Contract.

The complaint alleges no facts to support plaintiff's claim

that it provided hospital services to a member of defendant's

family or that Joe Smith requested that St. Anthony Hospital

provide services to Thelma Smith.

Liability under the Family Expense Act arises where the

plaintiff provides necessaries, including medical care, to a

member of defendant's family. 750 ILCS 65/15. A "family" under

the Act is limited to the husband, wife, and children. Carson

Pirie Scott & Co. v. Hyde, 39 Ill. 2d 433, 235 N.E.2d 643 (1968);

In re Enloe's Estate, 109 Ill. App. 3d 1089, 441 N.E.2d 868 (4th

Dist. 1982); Abraham Lincoln Memorial Hospital Corp. v. Gordon,

111 Ill.App. 2d 179, 249 N.E. 2d 311 (4th Dist. 1969); Louis

Berman v. Dahlberg, 336 Ill. App. 233, 83 N.E.2d 380 (1st Dist.

1948).

The complaint itself fails to identify any family

relationship between defendant and the person or persons who

purportedly received medical services from plaintiff.

Plaintiff's attachments are not even consistent in regard to

Thelma Smith. Plaintiff's "Ambulatory Care Record" at one point

identifies the "patient" as single, 25 years of age, born

11/09/62, and at another point as married, 27 years of age, born

05/20/60. It is simply not sufficient in law for plaintiff to

- 32 -
ground its complaint on the theory that because it provided

hospital services to some person or persons with the same last

name as defendant, that it is entitled to recover $1,508.00 or

any other sum from defendant.

735 ILCS 5/2-601 requires the complaint to set forth

"substantial allegations of fact" to support a claim. Plaintiff

has failed to adequately allege the requisite elements of a cause

of action under the Family Expense Act. Therefore this claim

should be stricken.

Attorney for Defendant

- 33 -
IV. MOTIONS TO DISMISS

C. Statute of Limitations

1. Contract Claim. Most hospital bills arise out of

unwritten, implied contracts. The limitations period on such

actions is five years after the cause of action accrued. 735

ILCS 5/13-205. The five year limitations period is also affected

by partial payment; the five years runs from the date of the last

payment. St. Francis Medical Center v. Vernon, 217 Ill. App. 3d

287, 289, 576 N.E.2d 1230, 1231 (5th Dist. 1991). One fuzzy

area: what happens if an insurance company makes a partial

payment of a hospital bill for a patient? Does that toll the

limitations period for the patient, thus extending the period in

which the hospital may bring suit? See Sexton v. Brach, 124

Ill.App.3d 202, 464 N.E.2d 284 (3d Dist. 1984), for a discussion

of a similar issue.

If your client has executed a written agreement to pay

the hospital bill, the hospitals attorney will argue that a ten

year limitations period applies, citing 735 ILCS 5/13-206. But

the case of Schmidt v. Niedert, 45 Ill.App.3d 9, 358 N.E.2d 1305

(1st Dist. 1976), holds otherwise. Schmidt stands for the

proposition that a five year limitations period applies when the

written agreement does not include essential terms such as price.

358 N.E.2d at 1307-08. Hospital attorneys may also assert that

the ten years limitations period in 735 ILCS 5/13-206 is

- 34 -
applicable, arguing that a bill for services constitutes "other

written evidence of indebtedness." But see Anderson v. Doss, 133

Ill. App. 2d 798, 271 N.E.2d 109 (1971).

2. Family Expense Act Claim. If a hospital is suing a

parent or spouse of the patient under the Family Expense Act, 750

ILCS 65/15, a five-year statute of limitations applies. Pope v.

Kaleta, 90 Ill. App. 2d 61, 234 N.E. 2d 109 (1st Dist. 1967).

D. Mixing Causes of Action

Complaints in hospital collection actions are often drafted

in a sloppy fashion. They may, for example, improperly combine

causes of actions in a single count, in violation of 735 ILCS

5/2-613(a). See Motion to Strike at page 28.

V. BILL OF PARTICULARS

Frequently the Complaint filed by the hospital will be

insufficiently detailed for proper understanding and response.


735 ILCS 5/2-607 of the Code of Civil Procedure allows defendants
to file a bill of particulars under these circumstances. The
bill of particulars is particularly useful in small claims cases

where discovery is ordinarily unavailable.


Documents Attached:

* Motion for Bill of Particulars at 35.

* Briefs in Support of Bill of Particulars at 38-43.


* Bill of Particulars at 44.

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS

- 35 -
MUNICIPAL DEPARTMENT, FIRST DISTRICT
RESURRECTION MEDICAL CENTER, )
)
Plaintiff, )
)
-vs- ) No. 00 M1-187777
)
GIOVANNA PIROGI, )
)
Defendant. )

MOTION FOR LEAVE TO FILE DEMAND FOR BILL OF PARTICULARS

Defendant, GIOVANNA PIROGI, by her attorneys, the Legal

Assistance Foundation of Metropolitan Chicago, moves this Court


for leave to file a demand for bill of particulars pursuant to
735 ILCS 5/2-607(a). In support of her motion, the Defendant
states as follows:

1. Plaintiff initially filed a seven paragraph complaint


alleging causes of action for breach of contract, account stated,
and family expense act.

2. Following a motion to strike the complaint by defendant,


plaintiff voluntarily dismissed paragraphs four and six of the
complaint which alleged the cause of action for account stated
and family expense act.
3. Defendant argued that the remaining five paragraph

complaint did not allege "substantial allegations of fact" as


required by the Illinois Code of Civil Procedure. 735 ILCS 5/2-

601. Mere allegations of legal conclusions are insufficient and

should not be accepted by the Court. Hoffman v. Allstate Ins.

Co., 85 Ill. App. 3d 631, 407 N.E.2d 156 (2d Dist. 1980).

4. This Court denied defendant's motion to strike the


- 36 -
complaint stating that the proper procedure to obtain more

substantial allegations of fact was to file a demand for bill of

particulars.

5. In accordance with the directions of the Court,

defendant is asking leave of the Court to file the attached

demand for bill of particulars.

WHEREFORE, defendant prays the Court grant leave to file a

bill of particulars and grant other relief deemed just.

______________________________
ATTORNEY FOR DEFENDANT

- 37 -
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
MUNICIPAL DEPARTMENT, FIRST DISTRICT

)
RESURRECTION MEDICAL CENTER, )
)
Plaintiff, )
)
-vs- ) No. 00 M1-187777
)
GIOVANNA PIROGI, )
)
Defendant. )
DEFENDANT'S RESPONSE TO PLAINTIFF'S MOTION
TO STRIKE THE DEMAND FOR BILL OF PARTICULARS

NOW COMES the Defendant, GIOVANNA PIROGI, by her attorneys,

the Legal Assistance Foundation of Metropolitan Chicago, and


submits this memorandum in response to Plaintiff's motion to strike
the demand for bill or particulars.
FACTS

Plaintiff initially filed a seven paragraph complaint alleging


causes of action for breach of contract, account stated, and family
expense act. See attached Plaintiff's Complaint, attached hereto as

Exhibit A. In addition to being woefully inadequate as to any


substantial allegations of fact, the complaint does not contain a
cause of action for quantum meruit as plaintiff has asserted at

various times.

Following the filing of defendant's motion to strike the

complaint, plaintiff voluntarily dismissed paragraphs four and six


of the complaint which alleged the causes of action for account

stated and family expense act. Plaintiff alleged that the

remaining cause of action was for breach of an oral contract, even

- 38 -
though the complaint did not allege any factual allegations that

would support that contention.

Defendant subsequently argued that the remaining five

paragraph complaint did not plead "substantial allegations of fact"

as required by the Illinois Code of Civil Procedure. 735 ILCS 5/2-

601. Illinois law is clear that mere allegations of legal

conclusions are insufficient and should not be accepted by the

Court. Hoffman v. Allstate Ins. Co., 85 Ill. App. 3d 631, 407

N.E.2d 156 (2d Dist. 1980).

However, the Court denied defendant's motion to strike the

complaint stating that the proper procedure to obtain more


substantial allegations of fact was to file a demand for bill of
particulars. In accordance with the directions of the Court,
defendant filed the demand for bill of particulars with leave of

the Court on June 3, 1992. See Notice of Demand for Bill of

Particulars, attached hereto as Exhibit B.


On August 4, 1992, plaintiff filed a motion to strike the

demand for bill of particulars for being overbroad and "for being
Interrogatories disguising themselves as a Bill of Particulars."
This motion is a frivolous attempt by the plaintiff to avoid

pleading any substantial allegations of fact in compliance with the

Illinois Code of Civil Procedure.

ARGUMENT

I. DEFENDANT IS ENTITLED TO BILL OF PARTICULARS WHEN, AS


IN THIS CASE, THE COMPLAINT IS INSUFFICIENT IN DETAIL

Under the Illinois Code of Civil Procedure, a defendant is


- 39 -
entitled to a bill of particulars if the allegations are wanting in

details. 735 ILCS 5/2-607(a). The object of the bill is to supply

a deficiency in the pleading, as in the case of informing the

defendant of the claim that he or she is called upon to defend

against. City of Chicago v. Hertz Commercial Leasing Corp., 38 Ill.

App. 3d 835, 838, 349 N.E.2d 902, 905 (1st Dist. 1976); Hemingway

v. Skinner Engineering Company, 117 Ill. App. 2d 452, 458, 254

N.E.2d 133, 136 (2d Dist. 1969).

A bill of particulars is appropriate in all actions and

proceedings where, by reason of the generality of the claim, the

adverse party is unable to know with reasonable certainty what he


or she is required to meet. Star Brewery v. Farnsworth, 172 Ill.
247, 50 N.E. 228 (1898). When a bill of particulars has been
demanded and furnished, it will limit and restrict the pleader at

trial to proof of the particular cause of action mentioned therein.


Village of Pawnee v. Knostman, 115 Ill. App. 3d 842, 852, 450

N.E.2d 1272, 1279 (4th Dist. 1983); Hemingway, 117 Ill. App. 2d at

458, 254 N.E.2d at 136.


In a pleading which is as deficient as plaintiff's complaint,
defendant is allowed to file a demand a bill of particulars

requesting more specificity. Plaintiff believes that any request

of information in order to determine the nature of the claim is

overbroad. The law does not support this assertion.


A. REASONABLE COST OF SERVICES PROVIDED BY PLAINTIFF
IS GERMANE IN A DEMAND FOR BILL OF PARTICULARS

In No. 6 of the demand for bill of particulars, defendant

requests:
- 40 -
[t]he amount claimed by plaintiff for each of the said
hospital services and facilities including the amount
paid for each purchase of medicine, surgical supplies,
and medical facilities provided to defendant and/or
member or her family as alleged in paragraph three of the
complaint.

See Notice of Demand for Bill of Particulars, attached hereto as

Exhibit B. Plaintiff objects to this request as not being germane

to the issue. However, the reasonable cost of the hospital

services and facilities is germane in all collection actions where

the charges are never fixed by written or oral agreement.

In an oral contract for materials and services, the supplier


of those services must allege that the charges for those material
and services are reasonable. In Illinois, it is established that:
where there is a contract, express or implied, under
which one party supplies another and there is no
provision setting out the amount the supplier is to be
compensated, the law implies that there is an agreement
to pay a reasonable price for the goods and services...
To recover under a contract of this nature, the supplier
has the burden of proving that his charges for materials
and services rendered are reasonable.
Protestant Hospital Builders Club v. Goedde, 98 Ill. App. 3d 1028,

1031, 424 N.E.2d 1302, 1305-1306 (5th Dist. 1981). See also Victory

Memorial Hospital v. Rice, 143 Ill. App. 3d 621, 493 N.E.2d 117 (2d
Dist. 1986).

Plaintiff never makes any factual allegations that the charges

for the hospital services and facilities are reasonable. Through

the demand of bill of particulars, defendant is attempting to


obtain enough specificity to the complaint, so that it may be

possible to answer the complaint. Plaintiff's objection that the

demand is not germane is without merit.

- 41 -
B. PLAINTIFF'S COMPLAINT DOES NOT STATE THE PARTY WHO RECEIVED
SERVICES THEREBY REQUIRING A DEMAND FOR BILL OF PARTICULARS

In paragraph 2 of the complaint, plaintiff alleges that they

"provided defendant(s) and/or a member of his family with hospital

services and facilities." See Plaintiff's Complaint, attached

hereto as Exhibit A. In addition, plaintiff originally had a

family expense act claim in the complaint before it was stricken.

Although the hospital bills attached to the motion do list the

patient as Giovanna Pirogi, the complaint asserts that other

members of the family may have received services.


In No. 3 of the demand for bill of particulars, defendant
requests that "[t]he name of the defendant and/or member of her
family who was provided with hospital services and facilities as

alleged in paragraph two of the complaint." See Notice of Demand

for Bill of Particulars, attached hereto as Exhibit B. Due to the


confusion as to whether services may have been provided to a family

member other than Giovanna Pirogi the demand for the name of the
person provided with services was requested. Such a request is
clearly within the scope of a demand for bill of particulars.
C. PLAINTIFF'S COMPLAINT DOES NOT STATE THE EXACT DATES OF
SERVICES THEREBY REQUIRING A DEMAND FOR BILL OF PARTICULARS

In paragraph 2 of the complaint, plaintiff alleges that they

"on or about 3/12/90 - 10/4/90," hospital services were provided.

See attached Plaintiff's Complaint. In No. 1 of the demand for


bill of particulars, defendant requests that "[t]he exact date[s]

that plaintiff provided defendant and/or member of her family with

hospital services and facilities as alleged in paragraph two of the

- 42 -
complaint." See Notice of Demand for Bill of Particulars, attached

hereto as Exhibit B. In addition, in No. 2 of the demand for bill

of particulars, defendant requests that "[t]he specific nature of

the hospital services and facilities provided to defendant and/or

member of her family as alleged in paragraph two of the complaint."

See Notice of Demand for Bill of Particulars, attached hereto as

Exhibit B.

The date and nature of the services provided are unclear from

the complaint. In the hospital bill attached to the complaint it

would appear that the hospitalizations were only from March 12 to

March 16, 1990 and on October 4, 1990. However, this


interpretation is not entirely consistent with the minimal factual
allegations in the complaint.
In a complaint for breach of an oral contract, there must be

an offer and acceptance detailing the terms of the contract.


Although plaintiff fails to plead any of these facts, it is
implicit in two hospital stays of over seven months apart that they

would have had to been the result of two different oral contracts.
It is not clear from the hospital bills whether these actions are
viewed to have arisen from the same set of facts. Unless plaintiff

alleges that the two hospital bills arise under the same cause of

action or substantially related causes of action, the two different

hospital stays should not be set out in the same cause of action.
Due to the confusion as to when the services may have been

provided and whether the services alleged were connected in any

way, the demand for the name of the person and specific allegations

- 43 -
into the nature of the services provided were requested. Such

requests are clearly within the scope of a demand for bill of

particulars.

WHEREFORE, defendant prays the Court deny plaintiff's motion

to strike the demand for bill of particulars, order the plaintiff

to answer the bill of particulars within 7 days, and grant other

relief deemed just.

______________________________
ATTORNEY FOR DEFENDANT

- 44 -
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
MUNICIPAL DEPARTMENT, FIRST DISTRICT

RESURRECTION MEDICAL CENTER, )


)
Plaintiff, )
)
-vs- ) No. 00 M1-187777
)
GIOVANNA PIROGI, )
)
Defendant. )

NOTICE OF DEMAND FOR BILL OF PARTICULARS

TO: Long, Lost & Love


Attorney for Plaintiff
179 W. Washington St.
Chicago, IL 60602
Please take notice that defendant demands that you file, and
serve a copy upon me, the attorney for defendant, a bill of
particulars of the allegations contained in the complaint in this
case. It is demanded that the bill, in detail state:
1. The exact date[s] that plaintiff provided defendant
and/or a member of her family with hospital services and facilities
as alleged in paragraph two of the complaint.
2. The specific nature of the hospital services and
facilities provided to defendant and/or a member of her family as
alleged in paragraph two of the complaint.

3. The name of the defendant and/or member of her family who


was provided with hospital services and facilities as alleged in
paragraph two of the complaint.
4. In what respect or manner defendant Giovanna Pirolo
personally guaranteed payment for said hospital services and
facilities as alleged in paragraph two of the complaint.

5. The name[s] of persons who witnessed defendant personally


guaranteeing payment for said hospital services and facilities as
alleged in paragraph two of the complaint.
6. The amount claimed by plaintiff for each of the said
hospital services and facilities including the amount paid for each
purchase of medicine, surgical supplies, and medical facilities
provided to defendant and/or a member of her family as alleged in
paragraph three of the complaint.

- 45 -
7. The exact date[s] that there were repeated demands for
payment due as alleged in paragraph five of the complaint.

8. The exact date[s] that defendants have refused to pay as


alleged in paragraph five of the complaint.

9. In what respect or manner defendants have refused to pay


as alleged in paragraph five of the complaint.

Dated: June 3, 2006

______________________________
Attorney for Defendant

- 46 -
VI. ANSWER: DENY THAT THE AMOUNT SOUGHT REPRESENTS THE
REASONABLE VALUE OF SERVICES RENDERED

Overview: Since most hospitals never enter into written

contracts with patients (or their guarantors) fixing the amount of

the bill, the hospital's Complaint must ground its cause of action

on the implied agreement of the patient to pay a reasonable price

for services rendered. Illinois law places the burden of proof on

the hospital to establish that the charges are reasonable.


Practice Note:

SINCE THIS BURDEN IS ON THE HOSPITAL, DO NOT RAISE


AN AFFIRMATIVE DEFENSE THAT THE BILLING EXCEEDS THE
REASONABLE VALUE OF SERVICES RENDERED. THIS WOULD
MUDDY THE QUESTION OF BURDEN OF PROOF. INSTEAD,
SIMPLY DENY IN YOUR ANSWER THAT THE AMOUNT SOUGHT
REPRESENTS THE REASONABLE VALUE OF THE SERVICES
RENDERED.

Related Documents

* Reasonable Value of Services; the Law and Practice: page 43

* IHCCCC Charge Comparisons: page 64(a)


* Trial Memorandum re Reasonable Value: page 200
* Notice of Deposition of Hospital Witness: page 73
* Interrogatories re Reasonable Value: pages 74
* Document Request re Reasonable Value: page 80
* FOIA Request to IHCCCC: page 83

- 47 -
REASONABLE VALUE OF SERVICES: The Law and Practice

A. Reasonable Value of Services Rendered

Most hospital services are provided without a written

contract. The charges for such services--the amount sought in the

collection action--is never fixed by written or oral agreement. In

Illinois it is established that:

where there is a contract, express or


implied, under which one party supplies
articles or services to another and there
is no provision setting out the amount
the supplier is to be compensated, the
law implies that there is an agreement
to pay a reasonable price for the goods
and services ... To recover under a
contract of this nature, the supplier
has the burden of proving that his
charges for materials and services
rendered are reasonable.
Protestant Hospital Builders Club v. Goedde, 98 Ill. App. 3d 1028,

1031, 424 N.E. 2d 1302, 1305-1306 (5th Dist. 1981). See also

Victory Memorial Hospital v. Rice, 143 Ill. App. 3d 621, 493 N.E.
2d 117 (2d Dist. 1986).
Thus, every hospital collection action offers a potential

defense that the plaintiff hospital is seeking an amount which


exceeds the reasonable value of services actually provided.

Illinois law unequivocally places the burden of proving the


reasonableness of the charges on the hospital. Victory Memorial

Hospital, 143 Ill. App. 3d at 623-624, 493 N.E.2d at 119. The

denial in the Answer that the amount sought by the hospital


represents the reasonable value of services should put the hospital

to the burden of establishing: (a) the delivery of each good and

- 48 -
service; (b) the method of pricing each good and service; (c) the

reasonable value of each good and service. See Dreyer Medical

Clinic v. Corral, 227 Ill. App.3d 221, 591 N.E.2d 111 (2d Dist.

1992); Reddix v. Chatham County Hospital Authority, 134 Ga. App.

860, 216 S.E. 2d 680 (1975); Culverhouse v. Jackson, 127 Ga. App.

635 (1972).

While the burden of proof lies with the hospital, the

defendant's counsel can assemble a good deal of evidence to

demonstrate that the hospital's bill is not reasonable. In closing

argument to the jury the defendant's counsel will point to numerous

factors to support the defendants position that the hospital


failed to meet its burden. Some approaches:
1. Delivery of Goods and Services; Hospital Error or Worse.

The General Accounting Office of the federal government has

estimated that 99% of all hospital bills contain overcharges. New


York Times, January 27, 1993. There are numerous types of
overcharges or errors in most hospital bills.

a. Medical Record Inconsistencies.

As early as possible in the litigation counsel for the

defendant should obtain from the hospital an itemized list of goods

and services allegedly provided the patient. The medical record


and the pharmacy ledger or record should also be obtained to check
for inconsistencies between these records and the itemized bill.

For example, the medical records may show results of six blood
tests while defendant is being charged for nine. Any billed

procedure which is not reflected in the medical records is ripe for

- 49 -
challenge. Examine the bill for anomalous charges such as a charge

for circumcision of a newborn baby girl. Discuss the itemized bill

with the defendant/patient to determine whether all procedures

listed were actually performed. For example, if the patient was

charged $500 for a catheterization, does she/he remember being

catheterized?4 If the itemized bill states that the patient was

given four injections of Hemadren daily, ask your client if this is

accurate.

b. Duplicate billings.

A frequent error is a duplicated billing in which your client

is billed twice for a service rendered but once. A slip of a

finger on the computer keyboard can cause this problem.

c. Shoddy Testing. Why should your client have to pay for

an X-ray that was botched? If two chest X-rays were administered

in two days find out in discovery if the hospital erred in the

first test.

d. Phantom Charges. Some hospitals automatically bill for

certain items ordinarily associated with particular services; in

fact their computer program may automatically impose a wide variety

of charges for a particular procedure. So if your client is being

charged for a childbirth, for example, there should be no charges


for sedation unless your client actually received the sedative
drugs.

4
I would.

- 50 -
e. Human Error. Has your client been charged for 200 face

masks rather than two? A frequent error of hospitals occurs with

respect to intravenous solutions that are administered on the day

of admission. The hospital computer will bill your client for a


full day's worth of IV solutions--for example, $189 for an IV

ampicillin antibiotic solution. That is the daily rate. But if

your client is admitted late in the day, they may only receive four

hours worth of solution and should not have to pay for a full day's

rate. There may be several hundred dollars worth of IV solutions

that the hospital did not actually provide.

Patients are often charged for the use of operating rooms on

an hourly basis. If there is a billing for eight hours in the

operating room, verify this in the medical records.

f. "Unbundling". Proper billing procedures (and Medicare

law) require the hospital to "bundle" related charges for a

particular medical procedure. For example, the charge for an

appendectomy will include the operating room, the operating

utensils, and all other goods and services normally related to this

operation. "Unbundling" occurs where the hospital unbundles some

of the charges that should be included in the "global" charge for

the appendectomy, thus duplicating some of the charges. For


example, a bill for an appendectomy may wrongly include separate

charges for the pre-operative physical, such as drawing blood,


cardiogram, and interpretation of the cardiogram.

g. Mis-Coding.

Mis-coding or inappropriate coding occurs when a hospital uses

- 51 -
the wrong DRG (diagnostic related grouping) code to label--and

therefor bill--for a procedure.5 For example, a patient who is

coded as having a urinary tract infection has a much shorter

authorized length of stay than the patient whose illness is coded

urinary sepsis. Coding these procedures differently could result

in a higher bill. Some hospitals hire specialists who are

"talented" in selecting codes which maximize hospital

reimbursement. Many hospitals have faced criminal and civil

penalties for wrongfully "upgrading" the coding of procedures and

illnesses. Ask about this in your discovery. You will need to

inquire into the DRG coding of your client's bill at the deposition
or obtain expert assistance in this regard.
h. Unnecessary Staffing.

Hospitals sometimes pad bills by unnecessarily overstaffing a

surgical procedure. Find out if the surgical assistant, for which

your client was billed $1400--was necessary in the particular

surgery performed. Medicare regulations, for example, will not

allow costs related to assistant surgeons in many procedures.

2. Hospital Negligence.

a. Hospital Errors That Increase Costs.

Closely associated with the matters above is the question of

hospital negligence. Hospital negligence in this context is not

medical malpractice that injures a patient. This is a different


species of negligence--the type of negligence that causes your

5
See page 73 for discussion of DRG.

- 52 -
client's hospital bill to increase as a result of some error or

mistake of the hospital staff.

The most dramatic example of this is in the number of days

your client spent in the hospital--particularly where some of these

days resulted from a hospital blunder. A study of about 1000

hospital patients in the Boston area is reported in Medical Care,

February, 1989 at 112. The findings of this study are that a full

30% of the patients studied experienced delays averaging almost

three days in their hospital stays. Patients going in for what

should have been a four day stay ended up staying seven days.

These delays amounted to a whopping 17% of all hospital days in the


study. Hospital-caused delays are the result of a variety of
hospital foul-ups.
The main reason patients spent unnecessary days in the

hospital is because the hospital erred in its test scheduling.


Typically, a patient would be admitted on a Monday for example,
with a pre-surgery test scheduled for the afternoon and the surgery

scheduled for Tuesday. But the hospital may have overbooked the
particular test for Monday meaning the test could not be scheduled
until Tuesday. This means the surgery is pushed back to Wednesday-

-if possible--and your client spent a needless and anxious extra

day in the hospital. That day will be billed to your client as if

nothing wrong had happened.


Similar to booking mistakes is the problem of test result

delays. The hospital may have a typical 8 hour lag to get the

results of a particular lab test from the pathology dept. But if

- 53 -
pathology is running late or if they lose the results of the test

and it has to be done over, your client is going to have to pay for

the hospitals mistakes that lengthen the hospital stay. They will

even have the nerve to bill your client for two tests when they

lost the results of the first test.

Another common foul-up is surgery delay caused when the

hospital sets too many elective surgeries for one day. Your client

may get bumped to the next day and have to pay for this even though

the hospital was negligent in its scheduling.

Surgery may be delayed because a scheduled consultation visit

by a consulting doctor does not occur when the hospital forgets to


notify the consulting doctor. You can often find these problems
described in the medical charts; your client should not have to pay
for the extra day caused by the hospital's mistake.

One of the worst abuses regarding delays in discharge is where


your client is a patient in a teaching hospital and happens to have
a rare disease or an unusual predicament. The medical staff of the

teaching hospital may want a large number of the residents to have


an opportunity to review your client's case; it may be their only
chance to see this particular affliction during their residency.

The hospital stay may drag on needlessly long to give every

resident an educational benefit. Ask your client if their

discharge from the hospital was delayed for any reason--see if they
know why. Check the medical records of the hospital carefully.

One more piece of advice about hospital delays. Some

hospitals charge a late charge or even a whole day's charge if the

- 54 -
patient is discharged after 12:00 noon. Inquire carefully with

your client about the day of discharge. If your client was

discharged at 2:00 pm due to some hospital screw-up they should not

have to pay the extra charge. See sample interrogatories at 77.

b. Nosocomial Infections.

Another type of overlooked hospital negligence is nosocomial

infections. A nosocomial infection is one acquired during a

hospitalization and produced by microorganisms that dwell in the

hospital. A nosocomial infection is one that was not present in

the patient at the time of admission. It is the hospital's "gift"

to the patient.

Between 5-10% of all hospital patients contract a nosocomial

infection during their hospital stay.6 The average nosocomial

infection adds four extra days to a hospital visit at an average

cost of $800 day. Nosocomial infections account for 15% of all

hospital charges and end up adding between $2.5 billion and 4

dollars to the annual American health care bill.7 In the November,

1986 issue of American Journal of Surgery it was estimated that

surgical wound infections alone add an average of 7 days to some

patients' hospital stays and $10 billion annually in direct and

indirect costs. Nosocomial infection rates have been found to be


higher in large teaching hospitals than in non-teaching

6
Walt Bogdanich, The Great White Lie: How America's Hospitals
Betray Our Trust and Endanger Our Lives, (Simon & Schuster,
1991).
7
Chas. Inlander, Take this Book to the Hospital With You, at
135.

- 55 -
institutions--because the teaching institutions have more people

floating around the hospital thus increasing the chances for the

spread of infection. Pneumonia is the most common hospital-

acquired infection. Sometimes pneumonia is introduced into the

lungs by contaminated respiratory therapy equipment, or by medical

personnel coughing in close quarters like intensive care units.

Other nosocomial infections can be spread by improper

preparation of hospital equipment or the failure of hospital

personnel to engage in simple sanitary precautions such as frequent

washing of the hands. Find out whether your client's hospital stay

was extended by reason of a nosocomial infection. If so you should


take the position that your client should not be asked to pay for
costs that were probably generated as the result of the hospital
not taking adequate sanitary precautions. In discovery you should

inquire whether the hospital has an active Infection Control


Committee. If it does not you will be able to argue to the jury
that the hospital has not taken all possible steps to prevent the

nosocomial infection your client contracted.


3. Method of Pricing/Reasonable Value.

"A hospital must establish that its charges are reasonable in

that they are the usual and customary charges of that particular

hospital and are comparable to the charges of other area

hospitals." Sherman Hospital v. Wingren, 169 Ill. App. 3d 161,

164, 523 N.E.2d 220, 222 (2nd Dist. 1988). See also Dreyer Medical

Clinic v. Corral, 227 Ill. App.3d 221, 591 N.E.2d 111 (2d Dist.

1992). In Victory Memorial Hospital v. Rice, 143 Ill. App. 3d 621,

- 56 -
493 N.E. 2d 117 (2d Dist. 1986), the court stated:

... any assessment of the reasonableness


of a private hospital's charges must
include consideration and recognition of
the particular hospital's 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.

Rice, supra at 143 Ill. App. 3d 625, 493 N.E.2d 120 (emphasis

supplied). The court in Rice held that a hospital which had

produced five witnesses (from the treating physician to the vice-

president of finance) to establish reasonableness, had met its


burden. The court noted that the hospital satisfied its burden by
producing "evidence ... of the internal factors used by ... [the
hospital] to determine its various charges ..." as well as

comparative data in the form of a survey of comparable hospitals


and their charges. Rice, 143 Ill. App. 3d at 625, 493 N.E.2d at

120.

The issue of the reasonableness of the hospital's charges thus


is the primary area of inquiry in pre-trial discovery and the trial
itself. In conducting the discovery, counsel should explore the

matters specifically deemed pertinent in Rice:

(a) the costs, functions and services of the hospital;

(b) internal factors used by the hospital to fix its charges;


(c) comparative charges of similar hospitals.

Sample discovery is included at pages 80-92. In cases where

discovery is not available, consider a FOIA request to the Illinois


Health Care Cost Containment Council (or to Medicare for the

hospital's annual cost report) for the hospital's reports for the

- 57 -
relevant year. See page 93.

4. The Burden of Proof at Trial.

As indicated above, the burden is on the hospital to show both

that the charges imposed are the regular charges of the hospital
and that the charges are comparable to other similarly situated

hospitals. The case of Majid v. Stubblefield, 226 Ill. App. 3d

637, 589 N.E.2d 1045 (3d Dist. 1992), offers important lessons to

defendants in medical collection actions. In Majid, a surgeon sued

his patient to recover an unpaid portion of a bill for an office

consultation and surgery. The doctor attempted to meet his burden

of proof regarding reasonableness by having his office manager

testify that the surgery charges compared favorably to the regular

charges for such surgery by two local surgeons; she testified that

she had telephoned the offices of these two doctors to learn their

charges. Because the lawsuit was a small claim conducted under

Supreme Court Rule 286(b), the trial court allowed the hearsay

testimony of the office manager:

[the office manager's] testimony, while otherwise


inadmissible hearsay, is relevant evidence admis-
sible under the relaxed rules of evidence allowed
by Supreme Court Rule 286(b).

Majid, 226 Ill. App. 3d at 641, 589 N.E.2d at 1048. Where the
normal rules of evidence are at play, a hospital should not be able

to meet its burden by having hospital employees testify as to their


hearsay conversations with employees of other hospitals. The
hospital would have to bring in a witness from a different

hospital. This could create a difficult proof problem for the

- 58 -
unprepared hospital counsel.

Majid also provides another important lesson. The office

manager only testified about the surgery charges of other doctors,

not with regard to their consultation fees. So the court ruled

that the plaintiff could not recover a consultation fee of $100

because the office manager had "presented no evidence concerning

the reasonableness of his office consultation fee". Majid, 226

Ill. App. 3d at 644, 589 N.E.2d at 1049. The typical hospital bill

has dozens--if not hundreds--of different types of charges. The

mere fact that testimony is presented that the daily room charges

at hospital X were similar to the room charges at hospital Y during


the relevant time period does not establish the reasonableness of
the myriad other charges at issue. See also Dreyer Medical Clinic

v. Corral, 227 Ill. App.3d 221, 591 N.E.2d 111 (2d Dist. 1992),

where the medical clinic's failure to introduce evidence regarding


what services were rendered..., what they were worth, or whether
these services were reasonable or necessary, prevented the clinic

from recovering any fees. 591 N.E.2d at 115.


B. Practical Suggestions.

(1) Excessive Charges. Review in detail the hospital's

itemized bill. The General Accounting Office has estimated that


99% of hospital bills contain overcharges. New York Times,

1/27/93. Look for specific charges that seem vague or too high,
such as $75.00 for a laxative, $30.00 for a "thermal therapy kit"

(plastic bag of ice cubes), $10 for a "urinal" (plastic cup) or

$8.00 for a Coca Cola. For help in identifying improper or

- 59 -
excessive charges consider hiring a firm to review the hospital

bill; see Section 6 below, re Audits. Outrageous mark-ups are

frequent and can be used effectively with a jury to ridicule the

hospital's pricing policies and thus undermine the entire claim of

the hospital. Examples:

(a) Money Magazine, December, 1994 at 142-143:

...Dr. James is busy replacing a 64 year old


knee. He traces a line on her leg with a
disposable skin-marking pen that costs the
hospital less than $1, then tosses it aside
for my sake with a flippant '28 bucks'. That's
what the insurer will be billed for it. The
plastic sheet on her leg: 59 bucks. Cost: $8.
It's a racket.
(b) According to the Chicago Reader, "News of the Weird",
September 17, 1992, as the result of a lawsuit, "a Humana hospital

in Saint Petersburg, Florida agreed to lower some of the prices it


was charging, including $50 each for Advil and Tylenol tablets".
One useful technique to gauge the reasonableness of drug

charges by the hospital is to compare their prices to those paid by


Medicaid and Medicare. The federal agency that oversees Medicare
and Medicaid, the Centers for Medicare & Medicaid Services

(formerly HCFA), bases Medicaid and Medicare reimbursement rates


for drugs on the AWP (average wholesale price). The AWP is the

average price that wholesalers give to retailers for a given


medication.8 Each year there is a AWP Red Book published that

8
In early 2001 the Justice Department revealed it was invest-
igating a scheme in which a number of drug manufacturers were
inflating the AWPs and then heavily discounting certain drugs.
This encouraged doctors to buy these drugs at the heavy discount
and get reimbursed by Medicaid at the higher, inflated AWP.

- 60 -
lists AWPs for thousands of drugs. If the AWP for a Tensilon

tablet (10mg) is $1.09, the hospital that charges $56.00 for that

same drug can be portrayed as acting in an unreasonable--if not

outrageous--fashion.

(c) Markups of 200 to 400 percent are common, but some drugs

and small items are marked up as much as 5000 percent. A hospital

can buy a Cepacol throat lozenge wholesale for 4.5 cents, then turn

around and bill you $2.25 or more per lozenge. Modern

Maturity,May/June, 2001, at 81. In the same article it is reported

that a hospital charged a patient nearly $14,000 for a used

pacemaker which the hospital purchased for $6700. Id. at 77.


(2) Comparable Charges. Each year the Illinois Health

Care Cost Containment Council ("IHCCCC") publishes a pamphlet

listing the charges of all Illinois hospitals for a wide variety of

in-patient and out-patient services. This report is available on

the net at www.state.il.us/agency/hcccc. The 1999 "Illinois

Hospital Price Survey Report stated that Provident Hospital in

Chicago charged $630 for a semi-private room while Illinois Masonic


Hospital charged $1053 for a semi-private room. Chest x-ray

charges varied from $79 at Bethany Hospital (a bargain) to $226 at

the Illinois Masonic Hospital (a ripoff!). If your client has been


charged $220 for a chest x-ray, you should be able to use the
information in these reports to persuade the jury that the price

was unreasonably high. If such data is useful you should subpoena

- 61 -
a witness from the IHCCCC.9

(3) Hospital Surplus. Obtain from the hospital through

discovery their Statement of Patient Revenue and Operating Expenses

("revenue and expense statement"). Determine whether the hospital


had "surplus revenue" for the fiscal year in question. For

example, Evanston Hospital had a $9 million surplus in 1985 on

total revenue of $147 million. This information could be used to

argue for a percentage reduction of your client's bill. Non-profit

hospitals are required by the Internal Revenue Service to file

annually a Form 990 Report which lists sources of support,

expenses, revenues and executive compensation. Federal law

requires the Form 990 to be available for public inspection. Tip:

you can probably access the hospitals reported revenue statement

at www.ahd.com under free services.

(4) Irrational Pricing System. Some hospitals lack

rational pricing systems. The price on a particular service or

good may have come about by irrational processes. For example,

many hospitals use across the board increases that are arguably

unreasonable; one hospital deponent admitted that he raised the

price of a drug ten percent each year for four years even though

the price the hospital paid for that drug dropped each of those
years. A deposition may reveal hospital inadequacies in this area.

Try also in discovery to obtain information from the hospital

9
During discovery the records the hospital submitted to the
IHCCCC for the relevant period could be obtained. If discovery
is not available--as in small claims cases--a FOIA request to the
IHCCCC might produce these records. See page 93 for sample.

- 62 -
explaining the methodology used to set prices, those responsible

for doing so, and whether any hospital documents set out these

practices.

(5) Regulatory Condemnation. In September 1987 two

hospitals were denied state reimbursement for Medicaid patients

under the Medicaid program because their charges were deemed too

high. Find out whether the plaintiff hospital has even been

excluded from Medicaid as were St. Joseph Hospital and the J.F.K.

Medical Center.

(6) Audits. Insurance companies frequently conduct

"challenge audits" or "charge audits" of hospital bills where they

suspect the bill is unreasonably high. The insurance company hires

private audit companies ("claims review firms") to do this. The

auditor reviews the accuracy of the charges and the necessity of

care provided to patients. The largest audit company, Intracorp,

estimates that 80-90% of hospital bills contain errors. The audits

generally result in striking reductions of the hospital bills.

Note that typically patients are not informed of the results of

these audits.

Where your client is being sued for a substantial amount you

may wish to consider hiring a company to audit. You will have to


pay the audit company and the hospital may have a charge for

permitting the audit. Sometimes the hospital will, if requested,


perform its own audit for a disgruntled patient.10

10
Many hospitals have a "utilization review" department or
committee which daily reviews the treatment rendered to

- 63 -
Note: In recent years small companies have set up to
conduct inexpensive "mini-audits" that consist of
expert review of the itemized hospital bill.
One example is RN Solutions, a small outfit run
by registered nurse Yvonne Schensted in
Minneapolis. Call Ms. Schensted at 1-800-851-
3323 or email at ycsrns@aol.com. Or get a list
of hospital bill advocates at www.billadvocates
.com/affiliates.htm.

(7) Hospital Expenditures. If a hospital has made large,

imprudent expenditures you can argue to the jury that this unwise
spending has wrongfully increased the bill your client is being

asked to pay. Use discovery to find out about large capital


expenditures.11 If you learn, for example, that the hospital has

built too many wings and that its beds are now 40% empty you could

argue--as consumers did in the Illinois Commerce Commission when

Commonwealth Edison overbuilt its nuclear energy capacity--that

higher charges necessitated by this form of mis-management should

not be borne by hospital customers. You may learn that the

hospital expended $2 million on a new magnetic resonance imaging

particular patients to determine whether appropriate services are


being performed. The general focus of these "policing
bureaucracies" is on "overutilization"; is the patient being
given unnecessary services or is the length of stay too long? A
typical utilization reviewer is a nurse employed to read
patients' medical charts on a daily basis. These review have
been mandated by Medicare law and insurance companies. Inquire as
to whether your client's treatment was reviewed by the
utilization committee and, if so, get the documents reflecting
that process.
11
The hospital will have to obtain a permit ("Certificate of
Necessity["CON"]) from the Illinois Health Facility Planning
Board in order to proceed with a new capital project or to
purchase major medical equipment. 20 ILCS 3960/5. The
hospitals application for the CON may be obtained with a FOIA
request.

- 64 -
machine. If you dig you might further find out that the hospital

only uses that machine three or four times a week. You might be

able to get the jury to question the wisdom of a purchase like

this. Maybe you can show the jury that it would have made more

financial sense for the hospital to share MRI equipment with

another hospital. If you can get the jury to second guess the

hospital on major expenditures you can call into question the

fairness of the hospital's charges.

If the hospital has embarked on a major capital expenditure --

such as a new mahogany walled administrative building, you should

try to discover as much as you can about the project. Did any
staff object to the building and why. Get any documents that exist
in relation to this. Some states have regional or state health
planning commissions or some equivalent state agency that are

designed to oversee large capital expenditures by health care


providers--to prevent unnecessary overbuilding or duplicative
purchases of new expensive medical technology like MRI machines.

You can score more points with the jury if you show them that the
regional commission had suggested that the hospital's purchase of
its MRI machine was inadvisable. If your state has the equivalent

of a FOIA law use this to get relevant records from the regional

commission or consider subpoenaing them.

Finally, you may wish to let the jury know that the hospital
is handsomely compensating its administrators. The jury can be

informed that the hospital's chief executive is being paid $390,000

- 65 -
salary.12

8. Teaching Hospitals. Teaching hospitals-- where resident

doctors are receiving instruction-- are notoriously inefficient and

costly enterprises. They may charge significantly more than non-


teaching hospitals for identical services simply because they may

have markedly higher expenditures due to the costs of education and

research.

Teaching hospital have greater expenses than


nonteaching hospitals. They usually pay a
decent salary to postgraduates-in-training.
They must pay what it takes to attract top-
flight experts. The research that doesn't
earn any money directly for the institution
must be underwritten. Enormous sums must be
paid for new technological marvels... No
wonder the average cost of care in a teach-
ing hospital can be as much as twice that in
a nonteaching hospital.

Charles B. Inlander, Take This Book to the Hospital With You, at

22, (1985).13

In discovery, find out what percentage of the hospital's total

expenditures were related to non-patient, education and research

related matters. So your client spends one week in a teaching

hospital and gets billed $8,000. Yet if she had spent that week in

Hospital X, three miles away--a non-teaching hospital-- the bill

12
Non-profit hospitals are required by the IRS to file a Form
990 annual report. This lists revenues, expenses, executive
compensation and lobbying payments. These forms are required to
be available for public inspection at the facility.
13
Some teaching hospitals, like Illinois Masonic, only have
thirty medical students in their programs.

- 66 -
might have been $6000.14 Your argument to the jury is going to be

"why should my client's bill be inflated by $2000 just so this

hospital can train some med students who are going to go out and

earn $300,000 incomes in a couple of years?" You will tell the

jury that your client should be responsible for paying for services

related to him or her, not for subsidizing the education of young

doctors or the salaries of medical school professors. You will

ask that jury to begin their deliberations by slashing the bill 20%

for the medical schooling portion of your client's charges.15


Another example of how hospitalization in a teaching

institution may cost your client is when your client has a malady
that is interesting to the student doctors:
But what is always good for resident training...
is not necessarily good for patient care. Some-
times the patient feels his body is no more than a
custodian of an interesting and rare disease.
A house staff can increase the length of the hosp-
ital stay through "roundsmanship." With the
patient due to go home Wednesday, but with a
conference scheduled Friday morning, hold the
patient. This is diagnostic assault and battery,
and its costly....
Medical World News, Vol. 12, at 29, (December 17, 1971). Find out

14
James Obriecht, former vice-president of finance at
Chicago's Illinois Masonic Hospital, has stated that "being a
teaching hospital, our costs for teaching are $17 million to $18
million a year. That adds perhaps a thousand dollars per case in
costs". Crain's Chicago Business, July 18-24, 1994 at 33.
15
In 1963 the American Hospital Association issued its
"Principals of Payment for Hospital Care." The document
proclaimed that expenditures for medical research over and beyond
the usual care of patients should not be included in reimbursable
costs.

- 67 -
in discovery whether the hospital is affiliated with any medical

school, the terms of that affiliation, and budgetary ramifications.

9. Administrative Waste. "A hospital ought to be a house of

healing, not a monument to paperwork and bureaucracy." President


Bill Clinton, September 22, 1993. Argue that the hospital is

expending an excessive amount on administrative expenses, such as

bloated salaries for hospital administrators and unneeded layers of

administrative personnel. If the Court permits, you should inform

the jury that the CEO of the hospital receives an annual salary

that exceeds that of the President of the United States. An

article in the August, 1993 issue of the New England Journal of

Medicine reveals that in most American hospitals administrative

expenses devour 25% of every hospital dollar. In comparison,

Canadian hospital administrative expenses average 10%. Discovery

can be used to gain information of this nature.16

Juries may also be receptive to the argument that monies spent

by the hospital for advertising were imprudent; inquire whether the

hospital has engaged in any significant--and costly--advertising

campaign.

10. Other Waste. The December 1994 edition of Money

magazine, at 140, contains an article entitled "Undercover in a

16
All hospitals submit voluminous data to Medicare each year
for use in the calculation of their Medicare reimbursement rates.
Such data is probably available for FOIA request. At least one
private company, Health Care Investment Analysts. Inc. (HCIA),
300 East Lombard Street, Baltimore, MD 21202, digests all this
cost data and can, for a fee, produce an analysis of a hospital
that will include features such as the percentage of budget
devoted to administrative expense.

- 68 -
Hospital". The author exposes how most hospitals are extremely

wasteful in that they use disposable, as opposed to re-useable,

supplies and instruments. The article notes that some operations

require the use of more than $1000 worth of disposable materials

and makes the point that many hospitals are now using re-useable

goods and instruments to cut costs. Juries may be interested in

this type of information and how it impacted on your client's bill.

11. Jury Question. The question of reasonable value is a

pure question of fact for a jury, thus getting you by a motion for

summary judgment or directed verdict. Shellnut v. Randolph County


Hospital,469 So.2d 632 (Ala. App. 1985); Piggee v. Mercy Hospital,
199 Okla. 411, 186 P.2d 817 (1947); Fowle v. Parsons, 160 Iowa 454,

141 N.W. 1049 (1913); and Cole v. Wagner, 150 S.E. 339, 197 N.C.

692 (N.C. 1929). Cf. Sisters of St. Francis v. Summerson, 217 Ill.

App. 3d 377, 577 N.E.2d 177 (3d Dist. 1991). See also Section XII.
C. Cost Shifting; Variable Pricing

1. What is "cost shifting" or "variable pricing"?

Related to the issue of reasonable value is the issue of "cost


shifting." This term refers to the policy of all hospitals of
shifting hospital costs away from third-party payers (such as Blue

Cross and Medicare/Medicaid) and onto the shoulders of self-payers

such as our clients. Another way of looking at "cost shifting" is

to call it "variable pricing" because, whatever this policy is


called, it amounts to this: different payers pay different prices

for identical services. "So-called cost shifting then results in

higher charges to individuals who personally pay for all or a

- 69 -
portion of their hospital confinement..." Report of Illinois

Health Care Cost Containment Council, March 1, 1985 at 19. Thus

the poor, who do not have insurance, pay more for the same medical

treatment that more economically advantaged patients do.

Its horribly ironic, said Paul Menzel, a


professor of philosophy at Pacific Lutheran
University in Tacoma, Washington. The care
the poor was once supported by the wealthy
and the insured, but now the opposite is
happening, he said. It is the people who
are most provided for, not the people who are
least provided for, who get the benefit of
cost-shifting, Professor Menzel said.

Most patients paying the full fare have no


idea that their bill may be many times that
of the people next to them in the doctors
waiting room.
New York Times, April 2, 2001 (Gina Kolata).

For example, in an August, 1979 report, Illinois Masonic


Medical Center listed a three-tier charge system, whereby
Medicare/Medicaid paid an average $279 daily patient fee, Blue

Cross patients averaged $389 daily, and self-payers (the


uninsured), like many of our clients, averaged $463 daily. This
variable pricing policy is adopted by virtually every hospital in
America--and it is the key to the defense of a hospital collection
action. Every jury will be sympathetic to the argument that your

client is being charged more than other patients for the same
services. A memorandum of law regarding cost shifting is included

at page 200.

Variable pricing is the consequence of the practice of all


hospitals of entering into reimbursement agreements (or "provider

discount agreements") with different third-party payers that call

- 70 -
for differing reimbursement amounts to be paid for the same

services. The more powerful the third-party payor--such as the

government or Blue Cross-- the greater the discounted prices they

are able to negotiate with the hospital. All hospitals enter into

these agreements with payers. For example:

a. Blue Cross

In the 1950's Blue Cross first began to contract with each

hospital to pay less for the services rendered to its insureds than

a self-paying, uninsured patient would pay. Blue Cross negotiated


17
contracts calling for payment to the hospital of "cost plus 5%".

These contracts have generally been renewed each year over the last
40 years. This has resulted in Blue Cross typically reimbursing the
hospital for only about 50-60% of its so-called "usual charges".

b. Medicare and Medicaid.


Medicare and Medicaid use a different system for reimbursing
hospitals. "Diagnostic Related Grouping" (DRG's) are listed --

each DRG (there are more than 500 of them) is based on the
diagnosis of the patient at the time of admission. Every medical
procedure and illness is assigned a code and an associated dollar

17
Blue Cross in some jurisdictions may use different payment
plans, such as the "Competitive Allowance Program ("CAP") under
which hospitals sign a "contracting provider agreement" with Blue
Cross for direct payment of hospital bills of Blue Cross
subscribers. Payments are based on a "MAP" (Maximum Allowable
Payments) plan, where the hospital and Blue Cross agree to a
maximum reimbursement amount for a wide schedule of particular
services. See Bumgarner v. Blue Cross of Kansas, 716 F.Supp.
493, 495 (D. Kan. 1988).

- 71 -
amount and length of stay (LOS). The hospital is paid a specific

sum based on the DRG and a complicated formula, no matter how long

the patient is in the hospital or what services are rendered. The

length of the patient's stay in the hospital also is tied to the

DRG. For example, if a patient is assigned DRG number 176

(Complicated Peptic Ulcer) at discharge, the hospital will receive

a specified reimbursement amount and the patient will be expected

to stay in the hospital no more than a prescribed number of days.

The hospital will get the same DRG amount for that patient whether

the patient makes a quick recovery and is out of the hospital in

seven days or is a slow healer and takes three weeks.


Exception: Certain hospitals, such as the University
of Illinois at Chicago, Cook County Hospital,
psychiatric hospitals, rehabilitation hospi-
tals, and childrens hospitals, are paid by
Medicaid on per diem basis, rather than under
a DRG-based system. Under per diem methodol-
ogy, hospitals receive a flat rate for each
day of inpatient services provided.

c. Other Private Insurers or HMO's.

The hospital will contract with all major private insurers and

HMO's for particular rates of payment for particular services.

Frequently the agreement will simply call for a discount or

adjustment from the so-called "regular" charges of the hospital--


"provider discount agreements," "contractual allowance" or

"provider adjustments".18 Sometimes these discounts can be

18
The provider discount is not disclosed to the patient. Thus,
an insured patient who pays a 20% "co-payment" of $2000 on a
$10,000 hospital bill will probably assume that the insurance
company is paying $8000 to the hospital. In fact, the insurance
company will pay considerably less due to the provider discount

- 72 -
stunning. In Forsyth v. Humana, Inc., 827 F. Supp. 1498 (D. Nev.

1993), the court referred to a "secret" discount that existed

between Humana Insurance company and Sunrise Hospital--a Humana

owned hospital. The discount was 89%. So on a $5000 hospital bill

at Sunrise, the Humana Insurance Company only had to pay $550.

This is the sort of thing that a jury might be interested in

knowing where your client is being asked to pay the full amount of

the bill.19 Note that some HMO's are now negotiating per diem

contracts with hospitals that call for a flat, daily rate no matter

what treatment is provided.

2. The Economics of Hospital Charges

How does the typical hospital set its usual and customary
charges--that is, the rates it imposes solely on the self-payers?

A book entitled The Financial Management of Hospitals, by Howard J.


Berman, (Health Administration Press, 1986), reveals that charges
to the uninsured (self-payers) are not based on a rational system

but instead on what the author calls "financial expediency". The


hospital adds up all its revenues from third parties and donations
and all other sources and then deducts from that all its costs.

agreement. Several patients who subsequently learned of these


secret discount agreements have sued their insurance companies
arguing that their 20% co-payment should be based on the discount
amount rather than on the "billed" amount.
19
See also Money Magazine, December, 1994 at 142: "One large
West-Coast based health maintenance organization reimbursed the
hospital a pre-set $6564 for a complicated hip-replacement
operation on one of its customers. The actual bill had been
$36,835."

- 73 -
This produces a deficit figure which forms the basis for what the

self-payers will have to pay. So if that deficit is $10 million

dollars in Hospital X, the rates of self payers will be adjusted to

assure that the hospital comes up with $10 million dollars. It is

pure expediency. Thus even if the actual costs of services

rendered to self-payers was $1 million dollars, they will be asked

to come up with $10 million to cover what is needed. Mr. Berman

concluded that:

This approach to establishing charges has resulted


in the hospital industry participating in what can
perhaps be best described as overt price discrim-
ination. [H]ospital prices discriminate in favor
of patients covered by third party payers. These
patients, in effect, pay for care at cost, while
self-responsible patients pay for care on the basis
of charges that are dictated by financial expedi-
ency and need; that is, charges are established at
levels designed to generate revenues equal to cost
plus whatever additional funds are needed to meet
the hospital's financial requirements.20
In 1985 an article focused on the effect that the ever-

increasing use of "discounts-for-some pricing" would have in the


future:
Under prospective reimbursement systems, hospital
charges will not be as important as they were pre-
viously, because fewer and fewer patients will pay
on the basis of undiscounted...rates. Those who
continue to pay on the basis of charges, however,
may face even greater than ususal charge increases
because hospitals may find it necessary to offset
revenue lost from prospectively-set rates, and there
will be fewer charge paying patients among which to
allocate increased revenue needs. The likely
"victims" will be small insurance companies and self-
insured employers too small to effectively negotiate
discounted rates.

20
Berman, at 236.

- 74 -
Health Care Financing Review, Spring 1985, at 58. Another victim

of hospital discount pricing policies are the uninsured, those at

the bottom of the economic ladder.

In defending a hospital collection lawsuit, it can be argued

that this way of arriving at hospital charges is not reasonable for

three reasons: (1) it results in people who may be at the low end

of the economic totem pole covering or subsidizing the costs of

those better off; (2) it results in uninsured individuals being

required to pay more than the hospital's actual cost of services;21


and (3) it means that the charges of the hospital--to the

uninsured--are not reasonable in that they are not the "usual and
customary" charges--indeed, most patients pay less.22
As indicated above, the amount the hospital accepts in
reimbursement for particular services varies depending on the

ultimate source of the payment. Since the hospital's ordinary and


customary charges are relevant to determine the reasonable value of

21
The Senior vice-president for finance at Northwestern
Memorial Hospital in Chicago admitted that to make up for
shortfalls caused by low Medicaid reimbursement payments, the
hospital charged its full paying patients "at a rate
significantly above the expense of actually serving them." He
figured that full paying patients were charged about 25% above
the hospital's cost. Chicago Tribune, July 9, 1991 at Section 1,
page 12.
22
Cost shifting may violate state laws which prohibit unfair or
deceptive actions in trade or commerce, so-called Little FTC
laws. Cost shifting may also be unconscionable conduct within
common law doctrines of unconscionability. Some states have
enacted laws that restrict cost shifting by prohibiting the
negotiation of discounted rates by large purchasers of health
care.

- 75 -
services it has rendered, the trier of fact must be apprised of the

different charges for identical services which result therefrom.

A jury may be very surprised to hear that your client is being

charged more for the same services than a private insurance company

and the government are required to pay. Discovery should explore

all the arrangements the hospital has effected with various third-

party payers regarding reimbursement. Sample discovery at 65-74.

3. The Use of Cost Shifting to Defend the Insured Patient

If your client had health insurance at the time of the

hospitalization, you may be facing the situation where the insurer

has paid its portion of the bill and the hospital is suing your
client for the remainder--the co-payment. A typical co-payment
arrangement may have the insurance company responsible for 80% of
the charges. So you may find a client being sued for $2000 when

the hospital's stated charges were $10,000 and the insurance


company has paid its portion.
It is critical under this scenario to learn what the insurance

company has actually paid the hospital. The insurance company


probably was provided a large discount--and rather than paying 80%
-- $8000 in this case-- may have only paid $4000 under its

negotiated discount agreement. Under these circumstances the

defendant-patient should only be responsible for paying 20% of the

discounted bill--not 20% of the full charges. While the hospital


will argue that it negotiated a discount only with the insurer--not

the patient--it is unreasonable for the hospital to charge the

patient 20% of an undiscounted amount. See McConocha v. Blue Cross

- 76 -
of Ohio, 898 F. Supp. 545 (N.D. Ohio, 1995) where, in a suit

against the insurer on this theory, the court ruled that it was

reasonable for the patient to expect to have to pay only 20% of the

amount the hospital would actually receive as opposed to 20% of

full, undiscounted charges.

4. Two Final Notes on Cost Shifting.

Two caveats: (a) Many hospitals try to claim that they charge

every payer the same amount; do not get hung up on this semantical

protestation. While they may "charge" the same amounts to all

payers, the hospitals will accept as full payment from third-party

payers amounts less than the full charges.


(b) Hospital collection attorneys may contend that cost-
shifting cannot be asserted by a defendant in a hospital collection
case, citing Methodist Medical Center of Illinois v. Taylor, 140

Ill. App. 3d 713, 489 N.E.2d 351 (3d Dist. 1986). In Taylor the
defendant asserted the hospital's policy of cost-shifting as six
affirmative defenses and counterclaims, alleging that this practice

violated the Social Security Act, the equal protection and due
process clauses of state and federal constitutions, the public
policy of Illinois, etc. The court rejected these claims. In

contrast to what defendant did in Taylor, we do not raise cost-

shifting as an affirmative defense or counterclaim. Instead, we

merely use it as evidentiary support for our argument that the


hospital's bill is unreasonably high. We contend that the trier of

fact should be alerted to the hospital's cost shifting practices so

that they will be able to render an informed decision on the

- 77 -
reasonableness of the hospital's charges to our client. Surely it

is relevant, in determining the reasonableness of a particular

hospital charge, to know that another patient provided the same

service is required to pay significantly less.

- 78 -
(DEPOSITION NOTICE)
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
MUNICIPAL DEPARTMENT, FIRST DISTRICT

COLUMBUS MED-CASH CENTER, )


)
Plaintiff, )
)
vs. ) No. 00 M1 106586657
)
RAMON ALOPEZ, )
)
Defendant. )
NOTICE OF DEPOSITION

TO: Richard Corona de Leon


205 West Wackier Drive
Chicago, Illinois 60606
DEPONENT: Rick Sannis, Columbus Medical Center
YOU ARE HEREBY notified that the undersigned will take the
deposition of the above named Deponent before a Notary Public on

the following date and time:


DATE: January 19, 1990 TIME: 2:00 P.M.
PLACE: Legal Assistance Foundation of Metropolitan Chicago
111 W. Jackson Third Floor
Chicago, IL 60604
YOU ARE HEREBY FURTHER notified pursuant to the Supreme Court
Rules that you are by this notice required to have present at the

date, time and place stated, the said Deponent for oral examination

for the purpose of discovery. Said Deponent is instructed to bring

the following documents at that time:


1. All contracts, agreements or other written documents

evidencing agreements between the hospital and private third-party

payers, including but not limited to Blue Cross, regarding

- 79 -
payments, charges, and reimbursement procedures for 1986.

2. The contract or agreement between plaintiff hospital and

the State of Illinois, Department of Public Aid, regarding

reimbursement for Medicaid services, which was in effect at the

time services were rendered to defendant.

3. All documents, studies (prepared since 1999) or reports

comparing the cost of medical services at plaintiff hospital in

1986 to the costs of comparable medical services available at other

hospitals in the Chicago Metropolitan area, or otherwise, comparing

the costs of medical services available at other hospitals.

4. All documents, reports or studies (prepared since 1985)


containing any description of any program or efforts by plaintiff
to analyze or identify ways of reducing the costs of providing any
medical services to its patients.

5. All documents, studies, or reports containing any


description or evaluation of the costs of the particular individual
medical services and procedures received by defendant from

plaintiff.
6. The hospital's Revenue and Expense statement for 1986.
7. The hospital's IRS Form 990 report for 1986.

STEVEN T. LAFMCER

- 80 -
DEFENDANT'S FIRST SET OF
INTERROGATORIES TO PLAINTIFF

TO: RIGGCASER & SMITH


Attorneys for Plaintiff
135 South LaSally Street
Chicago, Illinois 60603

Plaintiff is hereby requested, pursuant to Illinois Supreme

Court Rule 213 to answer the following interrogatories within

twenty-eight days after service hereof.

[INSERT DEFINITIONS]

1. Would plaintiff have received a different amount of

payment for charges for the goods and services rendered to the

patient which are the subject of this lawsuit ("services rendered")


if defendant had been insured by:
a) Medicaid;
b) Medicare;
c) Blue Cross;
d) HMO Illinois.
2. What would have been the actual amount received by

plaintiff as reimbursement for the particular services rendered


during the relevant time period had defendant been insured by:
a) Medicaid;
b) Medicare;
c) Blue Cross;
d) HMO Illinois.

Note: If the hospital is reimbursed on a per diem basis by any of

these four payment sources, list the per diem amount that would

have been paid.


3. In the year for which the hospital seeks reimbursement,

what percentage of hospital inpatients were:

a) self payers;
b) insured by private insurance companies

- 81 -
(including Blue Cross);
c) insured by governmental programs such
as Medicaid and Medicare?

4. If defendant had been insured by Blue Cross during the

relevant time period, describe the payment mechanism or formula

that would have been used for determining the charges for the

services rendered.

5. If the answer to interrogatory no. 4 is "cost + X%",

specify the manner in which the hospital determines "cost" and a

current employee of the hospital who has knowledge of this.

6. Please specify the average rate increases for all

hospital charges during the years 1984-1985 and 1985-1986.


7. Please identify the data, statistics, and other documents
which form the basis for the answer to interrogatory number 6.
Include in your answer the name of the person(s) who compiled such

information and where such data, statistics, and other documents


are maintained.
8. Please identify any written charge comparisons between

plaintiff and other similarly situated hospitals for the relevant


time period.
9. Please identify, by name, the person(s) and/or

committee(s) responsible for setting hospital charges and for

negotiating the HMO Illinois and Blue Cross contracts.

10. State whether the hospital currently has any procedure[s]


through which the defendant could have the bill which is the

subject of this action "written-off" or otherwise forgiven due to

the defendant's indigent status. If the answer is affirmative

- 82 -
please describe these procedures.

11. Identify the agent of plaintiff with direct knowledge of

the hospital's "cost-shifting" or variable pricing practices,

including knowledge as to the hospital's reimbursement amount for

services rendered to defendant had the patient been covered by

Medicaid or Blue Cross.

12. Identify the agent or agents of plaintiff with direct

knowledge of each procedure and service for which plaintiff now

seeks payment performed on defendant in June, 1986, or any other

dates for which payment is sought.

13. Identify the agent or agents of plaintiff with direct


knowledge of the reasonable value and actual cost to plaintiff of
the goods, procedures and services for which plaintiff has brought
suit.

14. Describe the medical service provided to defendant which


is termed "Nutritional/Dietary Assessment" on the itemized bill,
page six, entry number two.

15. Identify each and every individual who provided the


medical service specified in the immediately preceding
interrogatory.

16. Identify the individual[s] who directed that the service

discussed in the last two interrogatories be performed.

17. State whether the defendant's treatment was ever reviewed


by the hospital's utilization committee (or department).

18. State the DRG code that the hospital assigned to the

defendant's treatment.

- 83 -
19. Has the hospital, in the last five years, been charged

with or accused of mis-coding of DRG's or inappropriate coding by

any governmental agency or insurance entity? If so state the

details.

20. Describe the manner in which the utilization of inpatient

services at the hospital is reviewed for medical necessity with

respect to patients covered by Medicare, Medicaid, Blue Cross,

commercial indemnity insurance, and with respect to patients

without any health insurance coverage. Identify the persons who

perform such utilization review.

21. Were any laboratory tests (including x-rays) of the


defendant delayed or rescheduled before they were performed? State
the details and the reasons for the delays.
22. Did any laboratory tests or x-rays of the defendant need

to be taken a second time by reason of error, loss, or mishap in


the original test or x-ray? Specify the details if so.
23. Did any surgery or other medical procedure performed on

the defendant need to be delayed or rescheduled? If so, specify


the details.
24. Was the defendant's discharge from the hospital delayed

for any reason? If so, specify the reason.

25. Describe the hospitals policies regarding charge audits.

- 84 -
Additional Interrogatories Regarding
Financial and Accounting Information
[Optional]

1. Identify the fiscal officer(s) responsible for the


control and management of the hospital's financial affairs.
2. Please describe the annual accounting period (hereinafter

referred to as "fiscal year") used by the hospital.


3. Does the hospital employ an independent Public Accountant

for the preparation of the following:

(a) financial statements; and


(b) reports to government agencies?

If so, please identify such person(s) or firm(s) and the statements

and reports so prepared.


4. Does the hospital, in its accounting practices, prepare
or have prepared any or all of the following or their functional

equivalents:
(a) a balance sheet;
(b) an income and expense statement;
(c) a statement of sources and applications of funds;
(d) a statement of changes in financial
position.
5. Identify all monthly, quarterly, or annual, as
appropriate, financial and statistical reports submitted to the

hospital's Board of Directors for the fiscal year that included

June, 1986.
6. Explain fully the methodology which the hospital employs

for each payor for cost finding, i.e., allocating direct and

indirect costs of operation to cost centers or departments which

produce revenue in determining amounts charged for services

- 85 -
rendered. Identify specifically all revenue-producing and non-

revenue-producing departments or cost centers.

7. Explain fully the methodology which the hospital employs

for each payer in apportioning the costs allocated to revenue-

producing cost centers or departments among different payers.

8. For fiscal year 1986 state the total annual revenues of

the hospital attributable to the provision of services rendered to:

(a) Blue Cross subscribers;


(b) Medicare beneficiaries;
(c) Medicaid recipients;
(d) persons covered by commercial indemnity
insurance and HMO's;
(e) persons without indemnity and/or services
benefit coverage but able to pay therefore.
9. For each of the past five fiscal years, state the
hospital's occupancy rate, as measured by the ratio of the average
daily patient census to the average number of beds regularly

maintained for inpatients.


10. Identify each member of the hospital's administrative
staff, house staff, staff physicians, and employees who receives

salaries or wages in the amount of $85,000 per year or more and


list the amount of wages or salaries which each earns.
11. Specify the amounts the hospital has spent on advertising

in 1998 and the nature of the advertising.

- 86 -
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, LAW DIVISION

MACNEAL MEMORIAL HOSPITAL, )


)
Plaintiff, )
)
vs. ) No. 99 L 17588
)
MARY JONES )
Defendant. )

DEFENDANT'S FIRST REQUEST FOR PRODUCTION OF DOCUMENTS

Defendant, by counsel, and pursuant to Supreme Court Rule 214,

requests that the plaintiff produce for inspection and photocopying

the following documents, production to be made at the office of the

Legal Assistance Foundation of Metropolitan Chicago, 111 West


Jackson, Chicago, Illinois 60604 within 28 days:
1. All medical records of defendant's treatment at plaintiff
hospital.

2. All records reflecting charges to defendant, including


pharmacy records and the UB-92.
3. The complete collection file maintained by plaintiff

regarding the present claim against defendant including but not


limited to all notes of contacts or communications, copies of
collection letters, collection logs, accounts, ledgers,

applications, interview forms, documents purporting to bear the

signature of defendants, and all documents or records maintained by

plaintiff's Patient Account Department regarding defendants.


4. Any and all written documents reflecting any inquiry made

by the plaintiff regarding the defendant's financial resources

and/or ability to pay for medical services.

- 87 -
5. All documents regarding the plaintiff hospital's practice

of "cost shifting" (i.e., variable pricing policy of the hospital

of accepting different reimbursement rates for services rendered to

individuals insured by Medicare, Medicaid, Blue Cross and other

third-party payers).

6. Copies of any and all applications made or contracts

entered into by the plaintiff, its agent or employees, or with

their assistance, seeking reimbursement for the cost of defendant's

medical care from any state, federal, or county welfare department

or any other third party intermediary payment program.

7. Copies of any and all correspondence or notes of


conversations, in plaintiff's possession or control, relating to
any applications referred to in the previous paragraph, or to the
action of any organization upon such request.

8. All documents, studies or reports containing any


evaluation or description of the costs of the particular individual
medical services and procedures received by defendants from

plaintiff.
9. All documents describing the manner in which, or the
basis upon which, plaintiff has determined the cost of each

individual medical service it provided to defendant.

10. All contracts, agreements or other written documents,

evidencing agreements between the hospital and third-party payers,


including but not limited to Blue Cross, regarding payments,

charges and reimbursement procedures for 1986.

11. All "annual cost reports" and any other documents,

- 88 -
studies, records, and reports which contain a determination or

designation of the "contract rate", the rate at which Blue Cross

reimbursed the plaintiff, or the fee Blue Cross was charged for all

medical services during the year 1999 or any other year for which

payment is sought.

12. Plaintiff's Revenue and Expense Statement for the years

1998-1999 and 1999-2000, or any other such document indicating all

sources of plaintiff's revenues and the amount and types of

expenditures.

13. All documents, studies, or reports comparing the cost of

medical services at plaintiff hospital to the costs of comparable


medical services available at other hospitals in the Chicago
Metropolitan area.
14. All documents, reports or studies containing any

descriptions of any programs or effort by plaintiff to analyze or


identify ways of reducing the costs of providing any medical
service to its patients.

16. All documents describing the manner in which, and the


basis upon which, plaintiff has determined the costs of each
individual medical service it provided to defendant.

17. All documents produced in connection with any utilization

review conducted with regard to the services in this case.

18. IRS Form 990 report for 1999.


19. The agreement[s] that set[s] forth the terms of

affiliation between the hospital and any school of medicine.

20. A copy of the hospital Medicare utilization review plan.

- 89 -
FOIA REQUEST

Director, IHCCCC
Illinois Health Care Cost Containment Council
4500 South 6th Street Road
Springfield, Illinois 62703

Re: FOIA Request


Illinois Masonic Medical Center
836 W. Wellington Ave.
Chicago, Illinois 60657

To Whom It May Concern:

On behalf of my client, Jonathan T. Halghian, and pursuant to


the Illinois Freedom of Information Act ("FOIA"), 5 ILCS 140/1
through 140/11 and the Illinois Health Finance Reform Act, 20 ILCS
2215/1-1 through 2215/5-2, I am requesting the following
information:

A. Copies of all inpatient hospital reports for Illinois Masonic


Medical Center in Chicago, for the years 1999 and 2000, including
but not limited to:
1. Reports or lists regarding the costs, functions services,
and pharmaceuticals provided by the hospital;
2. Reports or lists regarding the prices charged for
functions, services, and pharmaceuticals provided by the
hospital;

3. Reports or lists regarding comparative charges of other


Chicago hospitals.

B. The Statement of Patient Revenue and Operating Expenses for


the fiscal year (or years) which includes the period of November,
1999 through January, 2000. This includes the data specified in
the Illinois Health Finance Reform Act, 20 ILCS 2215/4-2(c) and
(e), including but not limited to the total gross revenue, the
total deductions from gross revenue and the gross inpatient revenue
for Illinois Masonic Medical Center, for July through December of
1990 and for all of 1991.

C. The data specified in 20 ILCS 2215/4-2(e) namely: patient


date of birth, sex, zip code, third-party coverage, date of
admission, source of admission, type of admission, discharge date,
principal and up to four other diagnoses, principal procedure and
date, patient status, other procedures and dates, total charges and
components of those charges, attending physician identification
number, hospital identification number, alphanumeric identification
number of the payor, and principal source of payment, for Illinois

- 90 -
Masonic Medical Center, for July through December of 1999 and for
all of 2000. Pursuant to 20 ILCS 2215/4-2(b), this data shall be
released on a hospital specific basis to facilitate comparisons
among hospitals by purchasers.

D. The Quarterly Reports compiled by IHCCCC for Illinois Masonic


Medical Center for July through December of 1990 and for all of
1991. These reports are compiled pursuant to Illinois regulations.
77 Ill. Admin. Code ch. XI, 2510.60 (1991).

E. "UB-82 Report 05 Detail for Individual Regions" for October


through December of 2000.

If you have any questions or need additional information,


please contact me at (312)

Thank you for your attention to this matter.

Sincerely,

- 91 -
A. AFFIRMATIVE DEFENSE: ESTOPPEL

In Michael Reese Hospital v. Sandoval, see next page,

defendants in a hospital collection case successfully asserted that

the hospital was estopped from seeking reimbursement for services

rendered. Unrebutted testimony of the defendant that hospital

personnel had represented that the services would be provided

without charge was sufficient to allow defendants to prevail. Note

the attached pleading (at page 102) which includes an allegation of

reliance on the hospital's representation.

This defense can be useful where a hospital employee has

affirmatively represented that services will be provided without


charge, or for a specific amount, or that the state or another
third party would assume responsibility for the bill. The
assertion of this defense will also likely preclude summary

judgment. Vaughn v. Speaker, 109 Ill. Dec. 245, 509 N.E. 2d 1084,

1088 (3rd Dist. 1987).


Documents

* Michael Reese Hospital v. Sandoval, at page 96.


* Affirmative Defense re Estoppel at page 103.

- 92 -
6 Ill.App.3d 306, 285 N.E. 2d
560 (1st Dist. 1972) (abstract only)
Full Opinion:
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
MUNICIPAL DEPARTMENT, FIRST DISTRICT

No. 56597
MICHAEL REESE HOSPITAL )
A Corporation )
)
Plaintiff-Appellee, ) APPEAL FROM THE CIRCUIT
) COURT OF COOK COUNTY
vs. )
)
RAUL SANDOVAL and CELIA, ) HONORABLE GEORGE A HIGGINS
SANDOVAL, ) PRESIDING JUDGE
)
Defendants-Appellants. )

MR. PRESIDING JUSTICE McGLOON delivered the opinion of the


court:
At a bench trial judgment was rendered for the plaintiff for
$2,230.10. This amount covered the alleged cost of hospital
services rendered to defendants' minor son by the plaintiff. The
defendants appeal.
We reverse and remand.
Both the defendants, who are husband and wife, testified at
trial. Since neither defendant understands or speaks the English
language, their testimony was received in Spanish and translated
for the court by an interpreter. That testimony is as follows:
Mrs. Sandoval testified that upon the birth of their son
Gonzalo, they learned the child was "pigeon toed." The child was
taken immediately to Cook County Hospital for treatment. After a
stay of several days, the defendants were told by the officials at
Cook County to take the child to the plaintiff hospital where he
could receive the necessary treatment. Allegedly the officials at
Cook County told the defendants they would not be charged by the
plaintiff.
Upon going to the plaintiff hospital in May of 1965, Mrs.
Sandoval was interviewed by a lady identified as a Mrs. Heller who
was associated with the plaintiff's charity clinic. The interview
related to the Sandoval was told that there would be no charge for
any of the treatments received with the exception that payment
would be required for casts and x-rays. Mrs. Sandoval informed the
plaintiff that she and her husband were covered by a medical

- 93 -
insurance policy. Subsequently, the defendants' child underwent
extensive out-patient treatment until January, 1966, when he was
admitted to the hospital for the first of three operations. Prior
to admission Mrs. Sandoval was again interviewed by Mrs. Heller
relative to the family financial situation. She was told that
there would be no charge for the operation with the exception of a
charity room rate of $5.00 per day. Mrs. Sandoval again mentioned
the medical insurance policy which the family had.

After the operation of January, 1966, the Sandovals


discontinued their medical insurance. Since the plaintiff had made
no claim on them for any of the previous treatment, they regarded
it as an unnecessary expense.

Prior to the second operation in August, 1968, which operation


is the basis for the instant action, Mrs. Sandoval testified that
she was again interviewed by Mrs. Heller. The format of the
interview was the same as previously, and again Mrs. Sandoval was
informed there would be no charge for the operation. This
interview procedure was again carried out prior to the third and
last operation in June, 1969, with the same results as the previous
two interviews.
Subsequent to the third operation, in August, 1969, the
defendants received two bills from the plaintiff within days of
each other. One bill is the one in question here demanding
$2,230.10 allegedly as payment for the second operation. The
second bill was $125, allegedly for costs in connection with the
third operation. Defendants paid the second bill of $125. Some
eight months after its receipt, suit was instituted on the bill for
$2,230.10.
Raul Sandoval's testimony corroborated his wife's with regard
to the circumstances under which his son was taken to the plaintiff
hospital. In addition, he testified that he didn't expect to pay
when he took the boy to the plaintiff hospital and that had he been
charged, he would have been unable to pay. He corroborated his
wife's testimony with regard to the fact that no bills were
received he had a phone conversation with an unidentified employee
of the hospital who allegedly told him that if he paid the $125, he
would not be required to pay anything more.

The plaintiff's only witness was an accounting clerk employed


by plaintiff. She testified on direct examination that the
defendant's bill from the August, 1968, hospitalization came to her
attention and was "charged in the ordinary way." She testified
that charitable allowances were allegedly arranged by applying
through the clinic associated with the plaintiff hospital whereupon
after an interview by a social worker a charitable pay rate based
on the particular income of the applicant would be established.
She testified that prior to the hospitalization of August, 1968,
the defendants were requested to come in for an interview but never

- 94 -
did so. It was unclear as to who requested this interview, the
accounting department of plaintiff or its charity clinic.

On cross-examination, the witness testified that she had


worked exclusively in the plaintiff's business office and never
worked as asocial worker or admitting clerk and that she never
interviewed the defendants prior to or during 1968. Further, she
testified that she had no personal knowledge of the operation of
that department of plaintiff hospital which requested financial
information from charitable applicants. She said that all of
plaintiff's statements regarding defendants carried the same
account number. Finally, she testified that she did interview Mr.
Sandoval in 1970 and that from her interview she would say "he was
able to pay something on the bill."

The plaintiff also called both defendants as adverse witnesses


under the provisions of Section 60 of the Civil Practice Act, and
both defendants testified that they did not expressly request a
"charitable allowance" for the hospitalization in issue here.

On appeal the defendants raise the issues that the evidence


adduced by the plaintiff failed to establish the requisite elements
of an account stated as required by law. Further, the trial court
erred in excluding as evidence the bill for $125 presented by
plaintiff to defendants in July, 1969, which defendants urge was a
"final bill." Thus, they contend that if there was an account
stated, it was one for $125 which was settled when the defendants
paid that amount. Finally, defendants raise the issue that the
plaintiff is estopped to claim a payment for hospital services
rendered in August, 1968. Specifically, defendants argue that the
plaintiff, during all of the pre-August, 1968, interviews expressly
represented that defendants' son would be provided with free
hospital services. Free and complete hospital services were
subsequently rendered. Defendants urge that this total course of
conduct should operate to estop plaintiff from now claiming
payment.

The plaintiff in its argument to the court dismisses the


motion that its claim is based upon the theory of an account
stated. This is so even though the original complaints charged an
"account stated as of September, 1968." Rather, plaintiff urges
this is simply a case whereby defendants requested and received
hospital services and are now liable therefore under the provisions
of Ill.Rev.Stat. 1967, ch. 86, par. 15. The plaintiff admits that
defendants were provided not only with essentially free operations
for their son in June, 1966, and June, 1969, but free out-patient
treatment during most of the time from May, 1965 up to a period
subsequent to the third operation. However, plaintiff seeks to
distinguish the first and third operations on the basis that prior
to these operations a specific request for a "charitable allowance"
was successfully made by defendants but that no such request was
made prior to the August, 1969 operation.

- 95 -
In assessing the validity of the defendants' contention that
the trial court erred in granting judgment to the plaintiff because
plaintiff's evidence was insufficient to sustain relief on a theory
of account stated or on any other theory, we are mindful of the
off-stated rule that a trial court's findings will not be disturbed
unless against the manifest weight of the evidence. Atkins v.
County of Cook, (1960), Ill. 2d 287, 163 N.E. 2d 826.
Nevertheless, it is the duty of the reviewing court to carefully
examine the record to determine whether the evidence justifies the
judgement; and if from a consideration of the whole record it
appears that the evidence does not justify the judgment, it must be
reversed. Friedman Electric Co. v. St. Clair County Housing
Authority of the City of East St. Louis, (1959), 23 Ill.App. 2d 16,
161 N.E. 2d 473.

A review of the record by this court reveals that defendants,


primarily Mrs. Sandoval, testified that prior to the
hospitalization in issue here they were told by an authorized agent
of plaintiff, whom Mrs. Sandoval identified, that there would be no
charge for the operation. Mrs. Sandoval testified that this
interview procedure was essentially the same as those occurring in
1966 and subsequently in 1969. Plaintiff does not question these
later occurrences.
The testimony of Mr. Sandoval corroborated that of his wife in
various respects particularly the undisputed fact that the bill for
this second operation on their son was received in August, 1969,
which was almost a year after the second operation and even
subsequent to a third operation performed in June, 1969.
In support of its case, plaintiff called as a witness one of
its accounting clerks who testified that the defendants were asked
to come in to be interviewed in August, 1968, "for a rating" and
never came. Presumably, the "rating" meant a charitable rating
which plaintiff's witness herself testified was handled by the
plaintiff's charity clinic. Nevertheless, on cross-examination the
witness admitted that she herself never interviewed the defendants
before or during 1968, nor did she have any personal knowledge of
the operation or procedures of the charity clinic, since she worked
exclusively in the business office. We think this impeaching
testimony at very least cast serious question on the credibility of
this witness particularly as regards the fact of whether or not the
defendants were in fact interviewed at plaintiff's charity clinic
in 1968 as they testified they were.

The only other testimony offered by plaintiff was that of the


defendants themselves who plaintiff call as adverse witnesses.
Each of the defendants testified that they did not specifically
request a "charitable allowance" prior to the second operation.
The futility of this testimony seems obvious in view of defendants'
uncontradicted testimony on direct examination that they never on
any occasion specifically or in so many words requested a

- 96 -
"charitable allowance." Rather, they simply went to the clinic as
requested, were interviewed on all occasions by the same person,
and on each of these occasions were told they would not be charged
except for certain specified minor costs. The plaintiff itself
admits that defendants' son was rendered free treatment in 1966 and
1969, and this admission was made in the face of defendants'
testimony that they did not request a "charitable allowance" on
these occasions.

After giving full consideration to all the evidence, we must


conclude that the finding of the trial court was against the
manifest weight of the evidence. Accordingly, we reverse and
remand to the trial court with instructions to enter judgment for
the defendants.

Judgment reversed and remanded.

DEMPSEY and McNAMARA, JJ., concur. June 15, 1972

- 97 -
AFFIRMATIVE DEFENSE - ESTOPPEL

1. The defendant is, and all times mentioned herein, has

been a resident of the City of Chicago, Cook County, Illinois.

2. The Plaintiff Hospital is, and at all times mentioned

herein, was engaging in the business of providing health care in

Cook County, Illinois.

3. Defendant's minor daughter was admitted to hospital on or

about September 15, 1993.

4. At all times relevant hereto, the defendant was employed


at a janitorial job which paid $4.40 an hour or approximately $196
a week before taxes. Defendant was the sole source of support for
his wife and six children. His expenses included $290 a month for

rent.
5. Defendant had no health insurance to cover medical
expenses for his children.

6. Prior to the hospitalization of defendant's daughter,


defendant informed plaintiff hospital and its agents that he did
not have resources sufficient to pay the necessary expenses of

hospitalizing the child.


7. Plaintiff's agent, after questioning defendant about his

financial situation, told defendant that he would only be


responsible for ten percent (10%) of the bill and that the

remainder would be charged to the State.

8. Defendant reasonably relied on the representation made by


plaintiff's agent that they would be liable for only 10% of the

medical costs.

- 98 -
9. Subsequent to the subject hospitalization, defendant made

monthly payments to plaintiff pursuant to the instruction of

plaintiff which totaled approximately $800 and which defendant

believed to represent the 10% he was obligated to pay.

10. As a result of defendant's reasonable reliance on

plaintiff's representation, plaintiff is estopped from demanding

payment of the hospital expenses in full.

- 99 -
B. AFFIRMATIVE DEFENSE - WHERE HOSPITAL FAILS TO PROCESS
PUBLIC AID OR MEDICARE APPLICATION FOR ELIGIBLE PATIENT

Frequently a patient is eligible to have the hospital bill

paid by public aid or Medicare. Hospitals often fail to properly

process applications for payment through IDPA or Social Security

and sue the patient for collection after it is too late to have the

state or the federal government pay the bill.23


A hospital's failure to process a public aid or Medicare

application, where it had reason to know the patient might be

eligible for such benefits, may provide an affirmative defense


under several theories:
(a) Breach of Statutory Duty: The hospital may be
under a statutory duty to bill IDPA (and process
all necessary paperwork) if a patient is eligible
for such coverage. Failure to process the appli-
cation may constitute a breach of a statutory duty,
thus precluding recovery. For example, Illinois
Dept. of Public Aid regulations, 89 Ill. Admin.
Code, 140.12 (h)(1) provides as follows:
If a provider [e.g. hospital] accepts an
individual eligible for medical assistance
from the Department as a Medicaid recipient,
such provider shall not bill, demand or
otherwise seek reimbursement from that
individual or from a financially responsible
relative or representative of the individual
for any service for which reimbursement
would have been available from the Department
if the provider had timely and properly billed
the Department. For purposes of this subsec-
tion, accepts shall be deemed to include:
A) an affirmative representation to an
individual that payment for service will
be sought from the Department;

23
See 89 Ill.Admin. Code Section 140.20(c) for time limits
on the submission of certain hospital claims to IDPA.

- 100 -
B) an individual presents the provider with
his or her medical card and the provider
does not indicate that other payment
arrangements will be necessary; or

C) billing the Department for the covered


medical service provided an eligible
individual.

After interviewing your client have them sign a Medicaid Claim


Inquiry form (DPA 3437)(see form at page ) and send the form to
the Department. The Department will then issue a Notice of
Decision on Medicaid Inquiry (see page ). This document will
aid you in presenting the defense. Thanks to Vivian Hessel for
this information. See pleading at 111.

(b) Payment. If the hospital could have sought and obtained


reimbursement for its charges from a governmental source,
argue that this constitutes payment of the bill. See
Estate of Wade v. Rehabilitation Institute of Chicago,
156 Ill. App. 3d 844, 846-47, 510 N.E.2d 99, 101 (1st
Dist. 1987), where this was characterized as a "feeble
attempt at an affirmative defense" as the charges in that
case were not eligible to be covered by public aid.

(c) Estoppel (or "detrimental reliance"). The hospital is


arguably estopped from collecting from the defendant
where the defendant has relied on the hospital to
properly process and forward the public aid application.
Knickerbocker Hospital v. Downing, 317 N.Y.S. 2d 688
(1971); Mt. Sinai Hospital v. Kornegay, 347 N.Y.S.2d
807(1973); Brooklyn Hospital v. Criss, 349 N.Y.S.2d 488
(1973). See pleading at page 113 and Memorandum at page
121.

(d) Breach of Fiduciary Duty/Negligence: The hospital's


failure to process an IDPA application or otherwise
assist patients in this regard may constitute breach of
a fiduciary obligation to the patient, or negligence.
In Decatur Memorial Hospital v. Cowick, (Clearinghouse
#45,196 B) (Illinois Cir. Ct. 1989) the hospital
submitted a claim to the state Medicaid agency and
the claim was denied. Later the state agency
reversed itself and asked the hospital to resubmit
the claim. The hospital refused to resubmit the
claim and instead brought an action against the
patient to recover for its services. The court did
not allow the hospital to recover for the services
that Medicaid would have paid.

See Banks v. Sec. of the Indiana Family and Social

- 101 -
Services Administration, 997 F.2d 231 (7th Circ. 1993);
Serafini v. Blake, 213 Cal. Rep. 207 (Cal. Super. 1985);
O'Neil v. Montefiore Hospital, 202 N.Y.S. 2d 436 (1960).
See also Mt. Sinai Hospital v. Korneqay, 347 N.Y.S.2d
807 (1973); Shaw v. Tait, Clearinghouse No. 30,025 B
(N.Y. Sup. 5/6/80); and Amsterdam Mem. Hosp. v. Cintron,
384 N.Y.S.2d 225 (1975). See pleading at page 109 and
memorandum of law at page 121.

(e) Breach of Duty to Mitigate Damages: The hospital's


failure to secure payment from a governmental entity
which may be responsible for the bill may constitute a
violation of the hospital's normal obligation to
mitigate damages. See Grauer v. Valve and Primer
Corp., 47 Ill. App. 3d 152, 361 N.E.2d 863
(2d Dist. 1977)
Related Documents

* Pleadings at pages 106, 109, and 111.


* Discovery re estoppel at pages 113-120.
* Memorandum of Law re Breach of Fiduciary Duty/Equitable
Estoppel at page 121.
* Memorandum of Law re Breach of Statutory Duty and Full
Payment Theory at page 124.
* DPA Form 3437 at 131(a).
* DPA Notice of Decision on Medicaid Inquiry at 131(b).

- 102 -
[Hospital's Failure to Secure Payment
From IDPA Constitutes Negligence/Breach of Fiduciary Duty.]
AFFIRMATIVE DEFENSE

1. Defendant entered Columbus Cuneo Cabrini Medical Center

on or about October 2, 1983 to give birth to her child.


Complications developed and the child was unable to leave said

hospital for approximately a two week period.

2. The plaintiff employees persons whose duty it is to

process applications for Medical Assistance - No Grant ("MA-NG")

which is a federal-state program providing payment for medical care

on behalf of qualifying families, 42 U.S.C. 1396 et seq. This

program is administered in Chicago by the Illinois Department of

Public Aid.

3. Plaintiff, by its agents, undertook to assist defendant

in applying for Medical Assistance.

4. Defendant's family was approved for MA-NG assistance for

the period of October 1, 1983 through March 31, 1984 with a spend-

down of $2,822.44.
5. Plaintiff's action against the defendants is in the

amount of $5,584.05, representing the alleged balance due for


services at said hospital.

6. Plaintiff, by its agents, received notice of approval for


defendant's family for medical assistance through the MA-NG program
on January 13, 1984.

7. In order for payment claims to be honored by the

- 103 -
Department of Public Aid, the medical services provider must submit

the claims within six months from the date on which medical

services were provided or within six months form the Department's

notice of decision approving the patient's application. 89

Illinois Administrative Code, ch. I {140.20(c).

8. The representations, statements and actions of the

plaintiff herein created in defendant an implicit trust that his

application would be speedily processed. These actions created a

fiduciary relationship between the parties herein and gave rise to

a fiduciary duty on the part of plaintiff.

9. Having undertaken to assist defendant by taking his


application for MA-NG, plaintiff had a duty to exercise due care in
processing said application.
10. Plaintiff, by its agents, breached its fiduciary duty to

the defendants, in that it negligently failed to forward the


hospital bill in the amount which exceeded the spend-down to the
Department of Public Aid.

11. As the direct and proximate result of said negligence,


the portion of the defendants' bill which exceeded the $2,822.44
spend-down was never paid by the Department of Public Aid through

the MA-NG program, and therefore the defendants suffered damages in

the amount of $2,761.61.

12. But for plaintiff negligently failing to forward the


hospital bill to the Department of Public Aid, to the extent that

the bill exceeded the spend-down amount this bill would have been

paid by the Department of Public Aid through the MA-NG program.

- 104 -
WHEREFORE....

- 105 -
[Hospital Breaches Statutory Duty
to Secure Payment From IDPA.]

AFFIRMATIVE DEFENSE

As his affirmative defense, defendant states as follows:

1. Defendant is, and at all times mentioned herein, has been

a resident of the City of Chicago.

2. The plaintiff Saint Elizabeth's Hospital is, and at all

times mentioned herein was doing business in the State of Illinois,

Cook County.

3. At the time of the hospitalization which is the subject


of this action, defendant had been working at a low-paying job,
with no provision for sick pay, and at no time relevant hereto did
he have health insurance.

4. Defendant informed plaintiff hospital, its agents,


employees, or representatives of his lack of health insurance and
his inability to pay for the expenses of his hospitalization.

5. During the hospitalization in question and within a


period of time during which timely application could have been
made, plaintiff hospital was aware, or should have been aware, of
defendant's need for assistance in meeting all or part of the
expenses for necessary care delivered by plaintiff.

6. At all times relevant hereto, defendant was eligible for


Medicaid.

7. Pursuant to 89 Ill. Admin. Code 140.12(h), Illinois

Register, December 11, 1992, plaintiff hospital had an obligation


to initiate action on an application for Medicaid to pay for

defendant's hospital and/or other medical bills.

- 106 -
8. At no time relevant hereto did plaintiff initiate any

action on an application for Medicaid or file a claim for such

benefits, and plaintiff thereby violated its duty to defendant.

9. Had timely application been made, the expense which is

the subject of plaintiff's complaint would have been paid to

plaintiff by the Illinois Department of Public Aid.

WHEREFORE, defendant prays that the complaint be dismissed and

costs be assessed in favor of defendant.

- 107 -
[Estoppel by virtue of hospital's failure
to secure payment from MANG.]

AFFIRMATIVE DEFENSE

1. Defendant entered Presbyterian St. Luke's Hospital on or

about September 8, 1974 to give birth to her child. Post surgery

complications developed and defendant was unable to leave said

hospital for a period of six weeks, finally being released on or

about October 14, 1974.

2. Defendant, after serious medical complications extended

the period of her hospitalization, informed the plaintiff that the


defendants were without resources to pay for the hospital services
rendered.
3. The plaintiff employs persons whose duty it is to take

applications for Medical Assistance - No Grant (MA-NG) which is a


Federal-State program providing payment for medical care on behalf
of qualifying families, 42 U.S.C. 1396 et. seq.

4. In the regular course of her employment, an employee of


the plaintiff took an application for MA-NG from defendant on or
about September 13, 1974, and assured her that such application

would be forwarded by the hospital to the Department of Public Aid.


5. Defendants were eligible to receive MA-NG in the month of

September, 1974 according to the standards promulgated by the


Department of Public Aid.

6. During the course of defendant's hospitalization,

plaintiff, by its agents, represented and stated to defendants (in


response to defendant's inquiries as to how the bill for medical

services would be paid) that her application had been processed and

- 108 -
that therefore the Department of Public Aid would pay same.

7. Defendant reasonably relied on such representations in

not re-applying for MA-NG when she subsequently was transferred

from OB to the General Care section of the hospital.

8. Defendants application for MA-NG was lost by the

plaintiff's agent and therefore was never processed while she was

a patient in the hospital, or anytime thereafter.

9. Plaintiff's failure to process defendant's application

resulted in damage to defendants, in that if said application had

not been lost, such application would have been accepted, and the

Department of Public Aid, through the MA-NG program, would have


paid the bill.
10. Because the plaintiff is thus responsible for the
inability of defendants to pay the bill sued upon, it is estopped

from now claiming from defendants the amounts of this bill.


WHEREFORE, defendants pray for dismissal of plaintiff's suit
with costs.

- 109 -
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
COUNTY DEPARTMENT, LAW DIVISION

MACNEAL MEMORIAL HOSPITAL, )


)
Plaintiff, )
)
vs. ) No. 83 L 17588
)
MARY JONES )
Defendant. )

DEFENDANT'S FIRST REQUEST FOR PRODUCTION OF DOCUMENTS

Defendant, by counsel, and pursuant to Supreme Court Rule 214,

requests that the plaintiff produce for inspection and photocopying

the following documents, production to be made at the office of the

Legal Assistance of Chicago, 111 West Jackson, Chicago, Illinois


60604 within 28 days:
1. All medical records of defendant's treatment at plaintiff
hospital.

2. All records reflecting charges to defendant, including


pharmacy records.
3. The complete collection file maintained by plaintiff

regarding the present claim against defendant including but not


limited to all notes of contacts or communications, copies of
collection letters, collection logs, accounts, ledgers,

applications, interview forms, documents purporting to bear the

signature of defendants, and all documents or records maintained by

plaintiff's Patient Account Department regarding defendants.


4. Any and all written documents reflecting any inquiry made

by the plaintiff regarding the defendant's financial resources

and/or ability to pay for medical services.

- 110 -
5. All documents relating to intake procedures in use at the

time of admission of the defendant to the hospital, with respect to

persons receiving inpatient or emergency services.

6. All notices posted or otherwise provided to patients

concerning their potential eligibility for governmental health

insurance programs.

7. All informational pamphlets, brochures, flyers, etc.

provided to patients concerning their potential eligibility for

governmental health insurance programs.

8. All written hospital policies concerning the hospital's

practices in obtaining or facilitating patients' obtaining


governmental health insurance to pay the hospital charges.
9. Copies of any and all applications made to any state or
federal governmental agency seeking reimbursement for the cost

defendant's medical care.


10. Copies of any and all correspondence, notes or other
documents relating to any applications specified in paragraph 9.

- 111 -
INTERROGATORIES: SET ONE

Defendant hereby propounds the following Interrogatories to

plaintiff, to be answered under oath pursuant to Illinois Supreme

Court Rule 213, within 28 days after service.

1. State the hospital's policies with regard to financial

standards for admission of persons in need of emergency and

inpatient care. Identify any document(s) setting forth such

policies and attach a copy of such document(s) to the answers to

these interrogatories.

2. Describe the intake procedures employed by the hospital

with respect to persons receiving inpatient or emergency services,


including the manner in which the patient's source of payment and
financial status and insurance coverage are determined, the manner
in which deposit requirements are administered, and the manner in

which the patient is informed of the probable out-of-pocket costs


of his/her visit, and the arrangements that are made for payment.
Identify any document(s) relating to these intake procedures which

must be completed by or on behalf of the patient.


3. Describe the admissions policy of the hospital toward a
person seeking and in need of emergency inpatient services but who

lacks private health insurance coverage or coverage pursuant to a

medical assistance program administered by the Illinois Department

of Public Aid (which programs shall be referred to inclusively


hereinafter as "state medical assistance") and is unable to pay the

required deposit.

4. Does the hospital determine the eligibility of persons

- 112 -
seeking services for state medical assistance? If so, describe the

manner in which the hospital makes such determinations in the case

of emergency care and inpatient admissions. Identify the person(s)

responsible for such determination. Identify any document(s) or

form(s) employed in such determinations and attach copies thereof

to the answers to these interrogatories.

5. What procedures does the hospital employ to assure that

persons seeking services who are eligible for state medical

assistance file the required application forms in a timely manner

and that the responsible state agency takes appropriate action with

respect to such application? Identify the person(s) responsible


for implementing such procedures. Identify any document(s) or
form(s) employed in such procedures and attach a copy of each such
fully executed document pertaining to defendant.

6. Does the hospital provide information and guidance


regarding application for state medical assistance to persons
seeking emergency and/or inpatient services? If so, describe the

manner in which the hospital provides such information and


guidance.
7. Describe the intake or admissions procedures followed

with regard to the defendant in connection with the provision of

services to him by the hospital at the time of the hospitalization

in question. State the name, title and current home address of the
person(s) administering such procedures with regard to defendant.

8. Did any agent(s) of the hospital or physician with

admitting privileges at any time conduct an inquiry into

- 113 -
defendant's ability to meet the hospital expenses incurred herein?

If so, state the name, title and current home address of the

person(s) making the inquiry, when the inquiry was made, the

results of that inquiry, and identify any records regarding such

inquiry.

9. Did any agent(s) of the hospital or physician with

admitting privileges before, during, or after the hospital stay

have any discussion with defendant regarding whether he was

eligible for state medical assistance for the medical bills which

are the subject of this lawsuit? If the answer is yes, state the

title and current home address of the person(s) with whom he had
such discussions(s), when each such discussion was had, the content
of each such discussion, and identify all records regarding each
discussion.

9a. Did any agent(s) of the hospital or physician with


admitting privileges make a preliminary determination of the
eligibility of the defendant for state medical assistance for the

medical bills which are the subject of this lawsuit? If the answer
is yes, state the title and current home address of the person(s)
who made such determination, when, what determination was made, and

whether it was reduced to writing in any form.

10. In connection with the provision of services for which

payment is sought in this action, state:


a) whether, in what manner, when, and by whom the

eligibility of the defendant for state medical assistance was

determined;

- 114 -
b) whether, in what manner, when, and by whom action

was taken to initiate on defendant's behalf an application for, or

to assure that the defendant filed a timely application for state

medical assistance and to assure that the Illinois Department of

Public Aid took appropriate action upon such application. Identify

all records regarding these actions.

11. Did the hospital or any of its agents or physicians with

admitting privileges have any information regarding whether in fact

defendant had been authorized for state medical assistance by

Illinois Department of Public Aid for any period of time before,

during or after the hospital stay? If so, state the name, title
and current home address of whomever was so informed, and state
what information was had and when and how it was obtained.
12. Describe with specificity the hospital's responsibilities

and obligations to its patients with regard to informing them


about, assisting them with, and applying for governmental health
insurance programs to cover the charges of the hospital.

- 115 -
INTERROGATORIES: SET TWO

26. During the defendant's daughter's hospitalization, the

expenses of which are the subject of this cause, did the plaintiff

hospital ascertain the defendant's and her daughter's income and

resources? Identify all records regarding this matter.

27. If the answer to Interrogatory 26 is Yes, did the

plaintiff hospital make a preliminary determination of defendant's

eligibility for medical assistance form the Illinois Department of

Public Aid?

28. If the answer to Interrogatory 27 is Yes, state the name


and position of the person making such determination.
29. Did the plaintiff hospital have in its possession copies
of Illinois Department of Public Aid (IDPA) Form 450, "Hospital

Application for Medical Assistance," or its equivalent, on the


initial date of hospitalization.
30. If the answer to Interrogatory 29 is Yes, did the

plaintiff hospital assist either the defendant or her daughter in


completing the IDPA Form 450 (or its equivalent)?
31. If the answer to Interrogatory 30 is Yes, state the name

and position of the person who assisted in completion of such form.

32. If the answer to Interrogatory 30 is Yes, did the

plaintiff hospital submit the completed form to the Illinois


Department of Public Aid?

33. If the answer to Interrogatory 32 is Yes, on what date

did plaintiff hospital submit such form to IDPA? State the name

- 116 -
and position of the person who so submitted such form.

34. If the answer to Interrogatory 32 is Yes, did the

plaintiff hospital receive a determination from IDPA? Identify and

state the content of any forms or documents relating to such a

determination?

35. If the answer to Interrogatory 34 is Yes, on what date

did the plaintiff hospital receive such determination?

36. Did the plaintiff hospital have procedures by which

patients' eligibility for IDPA Medical Assistance is determined on

the initial date of hospitalization?

37. If the answer to Interrogatory 36 is Yes, describe such


procedures and identify any and all written instructions to staff
concerning such procedures, as they were in effect on the initial
date of hospitalization.

38. Did plaintiff on the initial date of hospitalization have


a contract(s) with the Illinois Department of Public Aid whereby
IDPA pays the hospital bills of certain persons? If so, identify

said contract(s) and the name of the hospital's employee most


familiar with them.
39. State the full name, address, and position of the

individual(s) signing the Answers to these Interrogatories, and

specify which interrogatory each person answered.

- 117 -
MEMORANDUM: Fiduciary Relationship, Estoppel and Mitigation

Fiduciary Relationship Between Hospital and Defendants

The Illinois Supreme Court, in defining a fiduciary

relationship, stated in the case of Seely v. Rowe, 370 Ill. 336, 18

N.E.2d (1938) that:

Courts of equity have refused to set any bounds to


the circumstances out of which a fiduciary relation
may spring. It includes all legal relations, such
as attorney and client, principal and agent,
guardian and ward, and the like, and also every
case in which a fiduciary relation exists in fact,
where confidence is reposed on one side and
dominion and influence result on the other.
(emphasis added) (cites omitted). The relation
need not be legal, but it may be either moral,
social, domestic, or merely personal.
370 Ill. at 342, 18 N.E.2d at 877. Black's Legal Dictionary, 4th
Ed., p. 753 describes a fiduciary relation as "informal relations

which exist whenever one man trusts and relies upon another."
The existence of a fiduciary relationship is not restricted
only to such traditional legal relationships as attorney/client,

principal/agent, guardian/ward, board member/corporation, etc., but


may be found in other situations where trust and confidence is
established. In the instant case, defendants allege that they

placed their confidence in plaintiff based on its representation,

statements, and actions, that their MA-NG application would be

speedily processed. Because of the hospital's expertise in


processing Medicaid applications and its day-to-day contact with

IDPA, patients trust and rely upon the hospital to timely submit

its payment claims to IDPA. Defendant's reliance on the hospital

- 118 -
to process the Medicaid application was justified and reasonable.

Defendant's First Amended Affirmative Defense therefore alleges

facts sufficient in law to establish a fiduciary relationship

between plaintiff, a hospital, and defendants, its patients.

See Emmett v. Eastern Dispensary and Casualty Hospital, 396 F.2d

931, 935 (D.C. Dist. 1967).

EQUITABLE ESTOPPEL DEFENSE

Equitable estoppel, also known as the doctrine of detrimental

reliance, is a long-recognized doctrine which "preclude[s] a party

from asserting a right which might otherwise have existed as

against another person when the other person relies in good faith
on the party's conduct and is led thereby to change his position
for the worst." Hartford Accident & Indemnity Co. v. D.F. Bast,

Inc., 56 Ill. App. 3d 960, 962, 372 N.E.2d 829, 832 (1st Dist.

1977).
Defendants' Second Amended Affirmative Defense as alleged,
clearly sets forth facts sufficient in law to establish the defense

of equitable estoppel. The amended affirmative defense alleges


that the plaintiff assisted defendant with his MA-NG application,
that plaintiff represented that his MA-NG application would be

properly processed, and that defendant reasonably relied to his

detriment on such representations in not reapply for MA-NG. All

the elements for an equitable estoppel defense are present.

A DUTY TO MITIGATE DAMAGES ALWAYS EXISTS WHERE THE


COMPLAINING PARTY IS ASSERTING A BREACH OF CONTRACT

- 119 -
Where one party has committed a tort, breach of contract,

or other legal wrong against another, it is incumbent upon the

latter to use such means as are reasonable under the circumstances

to mitigate or minimize the resulting damages. Kelly v. Chicago

Park District, 409 Ill. 91, 98 N.E.2d 738 (1951). Plaintiff is not

entitled to recover for a loss to the extent that it has been

increased by its own failure to take affirmative steps to minimize

the loss. Corydon & Ohlrich v. Kusper Bros. Co., 345 Ill. App.

224, 102 N.E.2d 672 (1st Dist. 1951).

The caselaw clearly establishes that a party alleging a breach

of contract has a duty to mitigate its damages before proceedings


to suit. In the instant case, the plaintiff alleges a breach of
contract. Defendants' Fourth Affirmative Defense alleges that
plaintiff failed to exercise reasonable care to mitigate its

damages by failing to timely submit its payment claim to IDPA. A


timely submittal would have reduced its damages by the sum of
$2,761.61.

- 120 -
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
MUNICIPAL DEPARTMENT, FIRST DISTRICT

COLUMBUS CASH ONLY )


MEDICAL CENTER, )
)
Plaintiff, )
)
-vs- ) NO. 85 M1 19919
)
JUAN VAN ALOP and MARIA L. )
GARGIOLCIA, )
)
Defendants. )
DEFENDANTS' MEMORANDUM IN OPPOSITION
TO PLAINTIFF'S MOTION TO STRIKE
DEFENDANTS' AMENDED AFFIRMATIVE DEFENSES

I. INTRODUCTION
Plaintiff seeks to strike Defendants' Amended Affirmative
Defenses as insufficient as a matter of law pursuant to 735 ILCS
5/2-615. Based on the facts as alleged in their Amended

Affirmative Defenses, Defendants assert that as a matter of law


the plaintiff, a hospital, had a duty timely submit Medicaid claims
to the Illinois Department of Public Aid for services rendered to

the defendants. The breach of this duty forecloses the hospital


from suing defendants for these hospital costs.
II. STATEMENT OF FACTS

In its Amended Affirmative Defenses, Defendants state

that on October 23, 1893, Maria Garciolia entered Columbus Cuneo

Cabrini Medical Center to give birth to her child. Complications


developed and the child, Moving Van Alop, was unable to leave the

hospital until two weeks later. Plaintiff, by its agents, assisted

defendant Juan Van Alop in applying for Medical Assistance No Grant

- 121 -
("MA-NG") which is a Medicaid program administered by the Illinois

Department of Public Aid ("IDPA") to provide payment for medical

care on behalf of qualifying families. See 42 U.S.C. 1396 et

seq. During the course of the hospitalization, plaintiff, by its

agents, represented to defendants that the MA-NG application would

be properly processed.

Plaintiff received notice from IDPA on January 13, 1984

that Defendant Juan Van Alop's family had been approved for MA-NG

assistance for the period of October 1, 1983 through March 31, 1984

in the amount of $2,822.44. Pursuant to 89 Ill. Administrative

Code, ch. I, 140.20(c), the plaintiff was required to submit its


hospital cost claim to IDPA within six months of the date of the
approval notice, but failed to do so. Consequently, $2,822.44 of
the $5,484.05 in hospital costs related to services rendered to

defendants were not paid by IDPA to plaintiff.


Plaintiff subsequently brought the instant action against
defendants for the entire $5,584.05 hospital bill. Defendants

responded by filing four amended affirmative defenses: first, that


plaintiff had a fiduciary duty to defendants to promptly submit its
claim to IDPA; second, that plaintiff is equitably estopped from

suing defendants because of its failure to submit the claim after

representing that it would do so; third, that plaintiff had a

statutory duty to process the claim; and fourth, that plaintiff had
a duty to mitigate its damages by promptly filing its claim with

IDPA.

- 122 -
III. ARGUMENT

A. 735 ILCS 5/2-615 Provides That a Pleading


May Upon Motion Be Stricken Only Where It
Is Shown To Be Substantially Insufficient In Law.

735 ILCS 5/2-615 states "that a pleading or portion

thereof [may be] stricken because substantially insufficient in

law." A complaint, though, should not be dismissed for failure to

state cause of action unless it clearly appears that no set of

facts could be proved under the pleadings which would entitle the

plaintiff to relief. Kraustrunk v. Chicago Housing Authority, 95

Ill. App. 3d 529, 420 N.E.2d 429 (1st Dist. 1981); Interway, Inc.
v. Alagna, 85 Ill. App.3d 1094, 407 N.E.2d 615 (1st Dist. 1980).
In determining the sufficiency of a complaint on a motion
to dismiss, the trial court, as well as appellate court, is
required to accept all well-pleaded facts as true and then to

determine whether allegations of the complaint, when interpreted in


light most favorable to plaintiff are sufficient to state cause of
action against the defendant Rinck v. Palos Hills Consol. High

School District No. 230, 82 Ill. App.3d 856, 403 N.E.2d 470 (1st
Dist. 1979).
B. A Hospital Participating As a State Authorized
Medical Provider Has a Statutory Duty To Properly
Process Medicaid Applications Of Its Patients, and
Therefore, Plaintiff's Motion to Strike Defendant's
Third Amended Affirmative Defense Should be Denied.

In its Third Amended Affirmative Defense, defendants'


allege that plaintiff breached its statutory and regulatory duty to

timely submit payment claims to IDPA for hospital services

rendered. Because of this breach, IDPA did not reimburse the

- 123 -
plaintiff in amount of $2,822.44. Plaintiff cannot now seek

payment from defendants for this amount.

Pursuant to Ill. Rev. Stat., ch. 23, 5-1, et seq., the

State of Illinois has established and administers medical

assistance programs for the indigent. The purpose of these

programs is to provide:

essential medical care and rehabilitative services for


persons receiving basic maintenance grants under this
Code and for other persons who are unable, because of
inadequate resources, to meet their essential medical
needs.

Preservation of health, alleviation of sickness, and


correction of handicapping conditions for persons
requiring maintenance support are essential if they are
to have an opportunity to become self-supporting or to
attain a greater capacity for self-care. For persons who
are medically indigent but otherwise able to provide
themselves with a livelihood, it is of special importance
to maintain their incentives for continued independence
and preserve their limited resources for ordinary
maintenance needs to prevent their total or substantial
dependency.
Id. at 5-1. One of the federally-aided medical assistance
programs administered by the Illinois Department of Public Aid

("IDPA") is Medical Assistance-No Grant (MA-NG), a medicaid program


which provides payment for medical care for medically needy
families. 42 U.S.C. 1396a(a)(10)(c).

Medical providers, such as plaintiff, that wish to

participate in these medical programs for the purpose of

reimbursement for medical services rendered must comply with


stringent regulation established by IDPA. See 89 Ill. Adm. Code.,

ch. I, 140 et seq. The medical provider must follow strict

procedures in the submittal of claims. Any claim submitted more

- 124 -
than six months from the date on which medical goods or services

were rendered will be denied. 89 Ill. Adm. Code 140.20(a), (b)

and (c).

One of the participation requirements for medical

provider is that the provider:

furnish to the Department, in the form and


manner requested by it, any information it
requests regarding payments for providing
goods for services, or in connection with the
rendering of goods or services or supplies
to recipients by the provider, the agent,
employer or employee.

Id. at 140.12(f). Failure to provide information requested by

the Department regarding payments for providing goods or services


may result in the denial, suspension or termination of a medical
provider's right to participate as a vendor of goods or services to
recipients under the state's medical assistance programs. Ill.

Rev. Stat., ch 23, 12-4.25(A)(c).


The statutory language and the regulation promulgated
thereunder clearly establish a statutory duty on the part of the

plaintiff to submit to IDPA the necessary information regarding


medical services provided to defendant within the prescribed six
months regulatory period so that reimbursement may be made on these

costs. To allow a medical provider to sue a patient after having

breached this duty - resulting in the denial of any reimbursement -

would completely frustrate the intended purpose of the state and


federal statutes that created the medical assistance program for

the indigent.

In Mount Sinai Hospital v. Kornegay, 347 N.Y.S.2d 807,

- 125 -
the Court imposed a broad duty on the hospital to help potential

eligibles obtain medicaid coverage and denied the hospital's right

to sue when it was breached. The court held that the state's

statutory scheme, which has the same statutory purpose as

Illinois', "imposes on the hospital the duty to ascertain the

possible eligibility of the patient or family, give adequate

directions and information, and maintain a sufficient continuing

interest to ensure that eligible patients or families file the

appropriate application and that appropriate action is taken." Id.

at 809. The court notes in Kornegay that this duty is appropriate


in light of the fact that hospital personnel are far more
knowledgeable about legal requirements than are patients, and
hospital personnel have ongoing contacts with the Medicaid agency.
Id. Therefore, the court found that where the hospital had failed

to complete and submit a medicaid application on behalf of the


defendant patient, the hospital was barred from seeking payment
from the patient. Id. at 810.

The principles enunciated in Kornegay apply with equal


force in the instant case. The Illinois and federal statutory
scheme clearly contemplate a duty on the part of participating

medical providers to assist Medicaid eligible patients in

processing their applications. Therefore it is proper that this

Court deny plaintiff's Motion to Strike defendants' Third Amended


Affirmative Defense.

C. A Medical Provider Which Accepts An Eligible


Medicaid Patient May Not Seek Fees From Her
Or From Persons Guaranteeing Payment For Her,

- 126 -
Even if this court should find that no statutory duty existed

on the part of plaintiff to timely submit its payment claim on

behalf of defendants, the plaintiff is still foreclosed as a matter

of law from seeking payment from defendants where defendants have

been accepted by the plaintiff as eligible Medicaid patients.

Numerous courts have held that pursuant to federal24 and state

law, the state is the sole guarantor of payment to the health care

providers for treatment of medicaid eligible patients, and

therefore a provider which accepts patients as Medicaid patients

cannot seek payment from them. See Samuel v. California Department

of Human Services, 570 F.Supp. 566 (N.D. Cal. 1983); Tracy v.

Pennsylvania, 396 A.2d 913 (Pa. Commw. Ct. 1979), cert denied, 488
U.S. 907 (1980); Serafini v. Blake, 213 Cal. Rptr. 207 (App. Dep't

Super. Ct. 1985); Sparks v. George A. Sawaya, M.D., Inc., 459

N.E.2d 901 (Ohio Ct. App. 1983); Crawford v. Department of Health

and Mental Services, 1981-2 Medicare and Medicaid Guide (CCH)


31,401 (Md. City Ct., Baltimore, 1981); Amsterdam Memorial Hosp. v.

Cintror, 384 N.Y.S.2d 225 (App. Div. 1976); Mount Sinai Hosp. v.

Kornegay, 347 N.Y.S.2d 807 (Civ. Ct. 1973); Society of N.Y. Hosp.

v. Mogensen, 319 N.Y.S.2d 258 (Civ. Ct. 1971); Knickerbocker Hosp.

v. Downing, N.Y.S.2d 688 (Civ. Ct. 1970).

Note: See also statutory duties imposed by IDPA Medical Assistance


Program, Handbook for Hospitals, Sections 141 et seq.

24
See 42 U.S.C. 1396h(d) and 42 C.F.R. 447.15

- 127 -
C. PAYMENT IN FULL DEFENSE--MEDICAID AND MEDICARE.

Medicaid:

Where a hospital seeks reimbursement from public aid for a

Medicaid eligible patient, express statutory authority and a body


of case law has developed which bar the hospital from seeking
payment from the patient. See 305 ILCS 5/11-13; Ill. Admin. Code

title 89, Sec. 140.12(h) (1993).


Federal regulations require every provider of medical services

in a Medicaid program to execute a provider contract with the state

Medicaid agency. 42 CFR 431.10. The regulations further require


this contract to contain standard terms and provisions:
A state Plan must provide that the Medicaid agency
must limit participation in the Medicaid program
to providers who accept, as payment in full, the
amounts paid by the agency... 42 CFR 447.15.

The provider contract and 42 CFR 447.15 thus preclude the


hospital from:
(1) seeking payment beyond the Medicaid amounts (i.e asking
patients to supplement the Medicaid portion of the bill). For
example, the hospital cannot ask the medicaid patient to pay the
difference between the normal hospital bill and the medicaid rate.
But this provision does not bar the hospital from seeking normal
co-payments. See Public Health Trust of Dade County School Board,
693 So.2d 562, 566 (1996).

(2) billing for non-covered services. If Medicaid refuses


to pay a portion of the hospital bill because Medicaid deems it
medically unnecessary, the hospital may not seek to collect it
from the patient.
(3) billing the patient where the hospital was at fault.
For example, if Medicaid refuses to reimburse the hospital because
the hospital has filed the Medicaid claim untimely, the hospital
cannot seek to have the patient pay that bill. See Serafini v.
Blake, 213 Cal. Reporter 207 (Cal. Super. 1985).

- 128 -
In Evanston Hospital v. Hauck, 1 F.3d 540 (7th Cir. 1993), a

hospital accepted payment from Medicaid for a patient. When,

shortly thereafter, the patient won a multi-million dollar tort

award, the hospital attempted to refund the Medicaid funds to the

federal government so it could sue the patient for a larger amount

of money. The court did not permit the hospital to do this, ruling

that the hospital could not pursue the patient once it accepted the

Medicaid payment. See also Society of the New York Hospital v.

Mogensen, 319 NY Supp.2d 258 (1971) (court held that a hospital

could not bill a patient for services rendered where the patient

had prior Medicaid authorization).


A similar case arose in Glengariff Corp. v. Snook, 471 NYS2d
973 (N.Y. 1984). There a nursing home sued the son of a patient
based on his agreement to pay the nursing home its fees. After he

placed his mother in the nursing home the son applied for medicaid
coverage for his mother and medicaid did pay the nursing home a
substantial sum. But the nursing home then sued the son for the

rest of the bill even though he had paid for the period up to the
point medicaid coverage kicked in.
The court ruled that the federal regulatory scheme precluded the

nursing home from seeking additional funds from the son. It said

that if it allowed the guarantee signed by the son to waive the

payment in full rule then every provider would soon use that
approach, in direct contravention of public policy. The case was

dismissed. And in the case of Sparks v. Sawaya, 459 N.E.2d 901

(Ohio App 1983), a doctor accepted a patient initially as a private

- 129 -
paying patient. Later he agreed to treat her as a Medicaid

patient, but still asked her to pay him $260 in connection with a

childbirth. The patient sued the doctor for the $260 she had paid

him and for punitive damages. The appellate court ruled that once

the doctor accepted the patient on a Medicaid pay basis he could

not ask her to pay anything. The court awarded the patient her

$260 but no punitive damages.

In the case of Banks v. Sec. of the Indiana Family & Social

Serv Administration, 997 F.2d 231 (7th Cir. 1993), the Seventh

Circuit Court of Appeals ruled that two Medicaid recipients were

not entitled to notice and a hearing when their Medicaid claims


were denied. They were not entitled to due process protections
because the Court stated that the payment in full regulations
would prevent a provider that had not submitted the proper forms to

the medicaid agency from seeking reimbursement from the two


patients. See also "Defending Against Suits by Medical Providers"

1986 Special Summer Ed. Clearinghouse Rev. 454.


Medicare:

Like Medicaid, Medicare provides that once a hospital accepts


Medicare reimbursement for a patient the hospital may not pursue

the patient for further payment. 42 U.S.C. 1395cc(a)(1)(A); 42

C.F.R. 489.21(a). See also Evanston Hospital v. Hauck, 1 F.3d

540, 544 (7th Cir. 1993) and Rybicki v. Hartley, 792 F.2d 260 (1st
Cir. 1986).

- 130 -
Illinois Department of Public Aid
MEDICAID CLAIM INQUIRY

If you wish to have the Department of Public Aid determine if one of your medical
bills was or should have been paid by the Department; you must fill out this form
completely , sign and date it, and send it to the address listed below. YOU MUST
ALSO ATTACH EVIDENCE OF PENDING LAWSUIT, THREATENED LITIGATION, OR CONTACT FROM A
COLLECTION AGENCY ON BEHALF OF A PROVIDER. The Department of Public Aid will
investigate your inquiry and send you a written response within 30 days. You should
keep a copy of this form before you mail it.

Your Name:

Address:
Phone: ( )

Patient's Name (if different than above):

Patient's social Security Number:

Patient's recipient Identification Number:

case Identification Number:

Medical Provider:

Name (First) (M.I.) (Last)

Address (Street)

City State zip

Date(s) of service:

service(s) Provided:
( ) office visit ( ) Hospital Inpatient Services
( ) outpatient Surgery ( )

Additional Information:

I wish to have the Department of Public Aid review medicaid coverage for the above
medical provider and date(s) of service.

Signed: Dated:

Mail completed Form To:


Illinois Department of Public Aid Bureau
of Comprehensive Health Services
Litigation/Collection Review
201 S. Grand Ave. East, 3rd Floor
Springfield, Illinois 62763
IL478-2206
DPA 3437 (N-7-93)
100615
NOTICE OF DECISION ON MEDICAID INQUIRY -A

Date of Notice: 08-02-00


Provider: Thorek Hospital and Medical Center
Claim Amount: $3,591.50
Date of Service: 06-01-96

An investigation of your Medicaid Claim Inquiry has been completed and the following determination has been
made:

() The Department rejected the claim submitted by the provider for these medical services by mistake. The
Department is tak ing actio n regarding the provider's cla im, wh ich m ay re sult in pa ym ent of the cla im. W e w ill

(x) The Department has not received a claim for these services from the provider. The provider has twelve
mo nths from the date of service to su bm it a claim . If the provider accepte d you as a M edicaid recipien t,
the provider may not bill, demand or otherwise seek reimbursement from you for services for which
reimbursement is available or for which reimbursement would have been available if the provider had

( ) The Department has already paid the provider in full for the medical services. Medicaid payment to a

( ) The claim for payment was not timely and/or properly submitted by the provider. If the provider accepted
you as a Medicaid recipient, the provider may not bill, demand or otherwise seek reimbursement from you
for services for w hich reim bursement is av ailable or for wh ich reim bursement wo uld have been ava ilable if

( ) The patient received a service for which a third party is liable fo r payme nt. The provider may not se ek to
collect from you if the total liability of the third pa rty equ als or e xceeds the D epa rtme nts rate for the service.

( ) The patient received a se rvice for wh ich th e provider wa s required to su bm it a request for prior approval.
The Dep artme nt received no such req uest. Th e failure to request prior app roval con stitutes provide r error,

( ) Dental issues prior to March 01, 1999 should be referred to Delta Dental at 1-800-323-1743.

( ) The patient received a service for which the provider was required to submit a request for prior approval.
Such a request was received and denied by the Department. You sho uld have received a Notice of that

( ) Provider was not a Medicaid provider at the time of service.

() Pa tient wa s en rolled in________for the above date(s) of service. Provider should contact the

( ) Dental issues after March 01, 1999 should be referred to Doral Dental at 1-888-281-2070.

( ) Long Term Care issues s hould b e review ed w ith the local office cas ewo rker.

Provider
I
IL478-2208

DPA 3437B (R-10-97)


D. AFFIRMATIVE DEFENSE/LACK OF MEDICAL NECESSITY
OF SERVICES PROVIDED

In certain cases it may be possible to argue that a particular

procedure provided by the hospital was not medically necessary and

therefore the hospital may not recover for such service. If, for

example, the hospital takes a chest x-ray of a patient hospitalized

for a hangnail removal, the patient should not be required to pay

for the unnecessary x-ray. The issue of whether the hospital bears

the burden of proving the medical necessity of services rendered,

in order to recover for such services, is not resolved. Some

judges may buy the contention that the hospital's burden to


establish the reasonableness of its charges also encompasses the
burden of showing the medical necessity of each charge. Some
courts may allow the defendant-patient to raise this issue as an

affirmative defense; and some may not allow it at all. See

Sherman Hospital v. Wingren, 169 Ill. App. 3d 161, 164, 523 N.E.2d
220, 222 (2d Dist. 1988); Dreyer Medical Clinic v. Corral, 227

Ill.App.3d 221, 591 N.E.2d 111, 115 (2d Dist. 1993), and Estate of

Wade v. Rehabilitation Institute of Chicago, 156 Ill. App. 3d 844,


848, 510 N.E.2d 99, 100 (1st Dist. 1987). The Third District Court

of Appeals has recently held that the defense of lack of medical

necessity will only be recognized where the physician who requested

the challenged services was an employee of the hospital; the court


suggested that hospitals should not be penalized if a non-employee

physician requests unnecessary hospital services. Sisters of the

Third Order of St. Francis v. Summerson, 217 Ill. App. 3d 377, 577

- 131 -
N.E. 2d 177 (3d Dist. 1991).

Occasionally an insurer will deny coverage to an insured

patient on the grounds that the hospital services which were

rendered were not medically necessary. If this is your client's

situation it puts the defendant in a hospital collection action in

an excellent litigation position: if the insurer can demonstrate

that the services were indeed unnecessary, then the hospital should

not be able to recover for providing such services. On the other

hand, if the hospital can persuade the trier of fact that the

services were medically necessary, the insurer must pick up the

tab. So let the plaintiff/hospital and the third-party


defendant/insurer fight this one out themselves. To place your
client in this enviable position you will need to file an
affirmative defense against the hospital (see page 136) and a

Third-Party Complaint against the insurer (see page 153).

Related Documents

* Pleading at page 138.


* Memorandum at page 141.

- 132 -
AFFIRMATIVE DEFENSE: LACK OF MEDICAL NECESSITY

Defendant Evelyn R. Williams affirmatively raises the

following defense to plaintiff's complaint:

1. Defendant Williams was hospitalized for six days

commencing on July 26, 1978 at plaintiff St. Elizabeth Hospital.

2. Defendant at the time of her admission to St. Elizabeth

Hospital was suffering from dizziness and severe headaches.

Defendant was informed subsequent to her hospitalization that she

had suffered from blocked sinuses and an ear infection.

3. On her July 26, 1978 admission to St. Elizabeth Hospital,


defendant informed the St. Elizabeth's Admission Office of her
above described symptoms and of her Federal Employees Health
Benefit Plan insurance with Health Care Service Corporation.

4. While in the hospital defendant was periodically seen by


hospital personnel and a medical record of her condition and
treatment was kept by the hospital.

5. Defendant's was released from St. Elizabeth Hospital on


July 31, 1978.
6. Defendant's hospitalization was not medically necessary.

7. St. Elizabeth Hospital failed to inform defendant that

her hospitalization was not medically necessary and that she did

not require in-patient hospital care.


8. Defendant's health insurer, Health Care Service

Corporation, determined subsequent to her hospitalization that

defendant's hospitalization was not medically necessary and has

- 133 -
denied payment for defendant's hospital bill.

9. Plaintiff St. Elizabeth Hospital, by providing defendant

with hospital services and facilities which were not medically

necessary, breached its agreement with defendant's insurer, to

which defendant was a third party beneficiary, that St. Elizabeth

Hospital's Utilization Review committee would review Blue Cross

subscribers' hospital cases to ensure that only medically necessary

hospitalizations of Blue Cross subscribers' occurred.

10. Plaintiff St. Elizabeth Hospital, by providing defendant

with hospital services and facilities which were not medically

necessary, breached its fiduciary duty to defendant and its duty to


conform to and observe the standards established and required for
hospital care by the Illinois Hospital Licensing Act, Ill. Rev.
Stat. ch. 111-1/2 143, the Standards of Accreditation of the

American Hospital Association, and Chicago, Municipal Code, 137-


13.1.
11. Plaintiff St. Elizabeth Hospital, by providing defendant

with hospital services and facilities which were not medically


necessary, breached its implied contract to render only reasonable
and necessary services to defendant and would be unjustly enriched

by any judgement requiring payment for the unnecessary services at

issue in this case.

12. Plaintiff St. Elizabeth Hospital was negligent and in


breach of its duty of care to defendant as a hospital patient in

not reviewing defendant's medical condition and treatment to

determine the necessity of her hospitalization and in failing to

- 134 -
inform her that she did not require in-patient hospital care.

13. Since the services for which St. Elizabeth Hospital is

seeking payment were not medically necessary and in breach of the

foregoing contracts, agreements and duties, the defendant received

no value and owes the plaintiff nothing.

WHEREFORE defendant prays that this Court:

A. Enter Judgement in favor of defendant.

B. Enter an order dismissing plaintiff's complaint with

prejudice.

C. Grant such further relief as is just and equitable.

- 135 -
MEMORANDUM RE AFFIRMATIVE DEFENSE OF LACK
OF MEDICAL NECESSITY

The basic issue presented by the affirmative defenses in this

case is whether a patient can be compelled to pay for unnecessary

care rendered by a hospital. In this case the defendant's health

insurer has refused to pay for the defendant's six-day

hospitalization due to its determination that the hospitalization

was not medically necessary.

The hospital has now sued the defendant for the

hospitalization charges since the insurer will not pay. The

defendant seeks to raise affirmative defenses against the hospital


relieving her of responsibility for unnecessary hospitalization
charges while at the same time raising in the alternative, by way
of a third party complaint against the insurer, that the

hospitalization was necessary and should be paid by the insurer.


Since defendant does not have a medical background and its without
knowledge as to the medical necessity of hospitalization, she

should be allowed to raise her alternative claims against St.


Elizabeth Hospital in case the insurer is correct in its
determination that her hospitalization was not necessary.

The affirmative defenses of the defendant against St.

Elizabeth Hospital are based on breach of contract, breach of

fiduciary duty, breach of the agreement between St. Elizabeth


Hospital and Health Care Service Corporation to screen HCSC

subscriber admissions as to medical necessity and breach of the

hospital standards of care established by law and custom in the

- 136 -
hospital field.

In this case there is no written contract for services between

defendant and St. Elizabeth Hospital. Rather, St. Elizabeth's

action is based on an implied contract for the services rendered.

As recently noted in Ribloff & Co. v. Dover National Bank, 80 Ill.

App. 3d 867, 875, 400 N.E. 2d 614, 620 (1st Dist. 1980), "A

contract implied in law is equitable in its nature, predicated on

the fundamental principle that no one should unjustly enrich

himself at another's expense." In this case the defendant's

contract for services with the hospital was that she would be

admitted and remain hospitalized at St. Elizabeth only so long as


her hospitalization was medically necessary. To provide for any
other construction of this implied contract would be to allow the
hospital to unjustly enrich itself by unnecessarily providing

services and prolonging hospital stays so the hospital could


collect greater revenues. The implied contractual obligation not
to unnecessarily charge for services is even stronger in the

context of this case considering the fiduciary obligation of the


hospital to its patient. Emmett v. Eastern Dispensary and Casualty

Hospital, 396 F.2d 931, 935 (D.C. Cir. 1967). See also Dreyer

Medical Clinic v. Corral, 227 Ill.App.3d 221, 591 N.E.2d 111, 115

(2d Dist. 1993).

The situation in the instant proceeding is akin to that


presented in Neville v. Davinroy, 41 Ill. App. 3rd 706, 711, 355

N.E 2d 86, 90 (5th Dist. 1976), where the court reversed an award

of attorney fees because more than just the number of hours billed

- 137 -
had to be considered in assessing fees. The court found that the

value of services must be determined by closely examining the need

for and results of the services billed. The plaintiff in this case

has the burden of showing by evidence the reasonable value and

worth of its services. In two cases involving medical bills, the

Georgia Appellate Court denied recovery to a hospital and a

physician suing for the value of services rendered, due to their

failure to prove the reasonable value of these services. In Reddix

v. Chatham County Hospital Authority, 134 Ga. App. 860, 862-63

(1975), the court held that the hospital's failure to prove the

reasonable value of the services rendered was fatal to its claim


since it had not carried its burden of proof. In Culverhouse v.

Jackson, 127 Ga. App. 635, 636 (1972), the court similarly denied
judgment to a physician due to his failure to prove the ordinary

and reasonable value of his services. In the instant case, St.


Elizabeth must initially prove the medical necessity of defendant's
hospitalization based on its review of defendant's care to meet its

burden of proving the value of the services rendered.


In addition to the contract claim advanced by Ms. Williams as
an affirmative defense, she has also raised several duties of care

which were owed to her by St. Elizabeth and which the hospital

breached resulting in damages in the amount of the sum which St.

Elizabeth seeks to collect. First, St. Elizabeth Hospital entered


into an agreement with the insurer to establish a Utilization

Review Committee to review the admission and hospitalization of all

Blue Cross subscribers to determine whether their hospitalization

- 138 -
of all Blue Cross medically necessary. Upon information and belief

St. Elizabeth failed to comply with this requirement since

defendant's unnecessary hospitalization was not detected.

Secondly, St. Elizabeth was under a duty to review the

hospital treatment being provided to defendant in St. Elizabeth

Hospital. The Illinois Supreme Court in its landmark opinion in

its landmark opinion in Darling v. Charleston Community Memorial

Hospital, 33 Ill. 2d 326, 211 N.E. 2d 253 (1965), established that

hospital's duty of care owed to patients. The court held that the

responsibilities for Hospital Accreditation of the American

Hospital Association, the Hospital Licensing Act and the hospital


own by-law. Id. at 257. Each of these standards has been raised
in defendant's affirmative defense as responsibilities which St.
Elizabeth has violated by its conduct. The Darling court quoted

with approval Bing v. Thunig, 2 N.Y. 2d 656, 143 N.E. 2d 3, 8


(1957), in which a New York court stated:
The conception that the hospital does not undertake to
treat the patient, does not undertake to act through its
doctors and nurses, but undertakes instead simply to
procure them to act upon their own responsibility, no
longer reflects the fact. Present day hospitals, as
their manner of operation plainly demonstrates, do far
more than furnish facilities for treatment. They
regularly employ on a salary basis a large staff of
physicians, nurses and interns, as well as administrative
and manual workers, and they charge patients for medical
care and treatment, collecting for such services if
necessary, by legal action. Certainly, the person who
avails himself of 'hospital facilities' expects that the
hospital will attempt to cure him, not that its nurses or
other employees will act on their own responsibility.

The Darling court noted that the "medical profession and other

responsible authorities regard it as both desirable and feasible

- 139 -
that a hospital ensure certain responsibilities for the care of the

patient. Id. at 332, 211 N.E.2d at 253. The Supreme Court found

that the Charleston "hospital failed to review" the private,

treating physician's work or to require consultation, and thus

upheld the jury finding that this was negligence. Id. at 333, 211

N.E.2d at 258. The failure of St. Elizabeth Hospital to exercise

its review responsibility in this case to determine the medical

necessity of defendant's hospitalization is negligence and a breach

of the hospital's responsibility to defendant, requiring that the

claim for unnecessary services brought by St. Elizabeth be

dismissed.

- 140 -
E. AFFIRMATIVE DEFENSE: HOSPITAL HAS BREACHED
STATUTORY DUTY IMPOSED BY CHARITABLE EXEMPTION
FROM AD VALOREM TAXES

Most non-profit private hospitals are exempt from ad valorem

state taxes. In return for such status, the hospital must use its
facilities for 'charitable' purposes. Arguably this encompasses

the provision of free services to those unable to pay. The


hospital's breach of this statutory duty may constitute an

affirmative defense to the collection action. See Jackson County

v. State Tax Commission, 8 Clearinghouse Rev. 372 (No. 13,286A).


Discovery should be done to determine if the hospital's by-

laws or articles of incorporation provide that the hospital is to

render charitable services for the poor; if the hospital routinely


seeks payment from the indigent it may violate a fiduciary duty to
implement the purposes of the corporation and/or may also

constitute an ultra vires act. Also ascertain whether the hospital

has obtained private donations or grants expressly reserved for


provision of services to the poor. If so, the hospital may be

contravening its fiduciary duty to use such money as directed. At


the minimum you may be able to persuade the hospital to use such
funds to cover your client's bill.

In the early nineties the State of Pennsylvania sued some

hospitals for failing to provide enough free services to earn their


exemption from property taxes. Texas enacted a law in 1993 that

requires hospitals to provide charity care and community services

equal to 5% of patient revenues in order to retain their tax

exemption. No such action has occurred in Illinois. See The

- 141 -
Chicago Reporter, "Profits, Reform Threaten Tax Breaks for Non-

Profit Hospitals," December, 1993

Related Documents

* Pleading at page 148.

* Memorandum at page 150.

- 142 -
AFFIRMATIVE DEFENSE

(charitable exemption)

1 - 5. Defendants reallege and incorporated herein

paragraphs one through five of their first affirmative defense.

6. Upon information and belief, plaintiff hospital has

applied for charitable exemption from ad valorem (property)

taxation under 35 ILCS 205/19.7. Subsequently said hospital

received such charitable exemption from ad valorem taxation, to its

financial benefit.

7. At all times relevant to this cause, plaintiff hospital

was exempt from ad valorem taxation under 35 ILCS 205/19.7, as a


charitable organization.
8. As a charitable organization exempt from ad valorem

taxation, plaintiff hospital was and is required to provide free or

below-cost services to persons unable to pay for said services.


9. As persons unable to pay for hospital services,
defendants at all times mentioned herein were persons to whom

plaintiff owed a statutory duty to provide free or below-cost


hospital services.
10. At the time of the admission of the defendant to

plaintiff hospital, plaintiff hospital violated its statutory duty

under 35 ILCS 205/19.7 to the injury of the defendants by (1)

failing to make a determination as to defendants' eligibility for


free and below-cost services (hereinafter "determination of

eligibility"); (2) failing to provide services free of charge to

them, in accordance with said determination of eligibility; (3)

- 143 -
subsequently demanding payment for said service;

and (4) instituting legal action against them, all in violation of

plaintiff's statutory duty under 35 ILCS 205/19.7.

WHEREFORE, defendants pray this court dismiss plaintiff's

complaint, and grant Defendants their cost herein.

- 144 -
MEMORANDUM RE TAX EXEMPTION AFFIRMATIVE DEFENSE

The majority of the private hospitals in Chicago have applied

for and have received exemption from state ad valorem taxation

pursuant to 35 ILCS 205/19.7. In order to have been granted such

status, the hospital must have assured the state that its property

is "actually and exclusively used for such charitable or beneficent

purposes." Counsel should argue that this statute implies an

obligation on the hospital's part to provide free service to the

medically indigent and that the failure to provide such services

may be pleaded as an affirmative defense to a collection suit.


The Illinois courts have laid down specific guidelines which
must be met before such exemption can be granted. Among others the
hospital must "dispense charity to all who need and apply for it

... [and must] 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." Highland Park Hospital v.

Department of Revenue, 155 Ill.App.3d 272, 507 N.E.2d 1331, 1336


(2d Dist. 1987). See also Sisters of the Third Order of St.

Frances v. Board of Review, 231 Ill. 317, 83 N.E. 272 (1907);

Cannon v. Southern Illinois Hosp. Corp., 404 Ill. 66, 88 N.E.2d 20

(1949); Mason District Hospital v. Tuttle, 61 Ill. App. 3d 1034,

378 N.E.2d 753 (4th Dist. 1978); People ex rel County Collector v.

Hopedale Medical Foundation, 46 Ill. 2d 450, 264 N.E.2d 4 (1970).

By applying for and accepting a property tax exemption, a

hospital becomes obligated to accept and treat indigent patients

- 145 -
without charge. The breach of this obligation may be raised as an

affirmative defense in a collection suit under three theories.

First, counsel should argue that the State and the hospital

have entered into a contract, and the low-income patient is the

intended third-party beneficiary. The hospital, by applying for an

exemption, has represented to the State that it will treat indigent

patients for free, which consequently will lessen the burden of the

state to assist such individuals. The State has accepted this

offer of the hospital, and, as consideration, has exempted its

property from taxation. A contract has been created, with

obligations flowing from both parties, the benefits of which accrue


to those persons in need of hospital services, but unable to pay
for them. Defendants, who are the intended beneficiaries of this
agreement, have the right to enforce the hospital's obligation.

See Bates and Rogers Construction Corp. v. Greeley and Hansen, 109

Ill.2d 225, 232, 486 N.E.2d 902, 906 (1985); Vinylast Corp. v.

Gordon, 10 Ill. App. 3d 1043, 295 N.E.2d 523 (1st Dist. 1973).

Second, defendants have the right to enforce the hospital's


obligation as beneficiaries of a constructive trust. See Grace

Evangelical Lutheran Church v. Lutheran Church-Missouri Synod, 118

Ill. App. 3d 151, 454 N.E.2d 1038 (1st Dist. 1983); Methodist Old

Peoples Home v. Korzen, 39 Ill. 2d 149, 157, 233 N.E.2d 537, 541

(1968). Such trusts may arise where a party has obtained property
by virtue of a confidential or fiduciary relationship which has

been abused. Id. The hospital-patient relationship may rise to

this status. The State of Illinois, by exempting the hospitals'

- 146 -
property from taxation, has allowed it to retain that amount which

would ordinarily have been paid in property taxes. This amount,

however was not "given" to the hospital for its general purpose,

but is "held" by the hospital for the specific purpose of charity.

The hospital therefore acts as trustee of those funds for the

benefit of the medically indigent who are the beneficiaries of the

trust. The hospital, by failing to provide the defendants with

free services, has breached its fiduciary duty to them. As

beneficiaries of that trust, defendants may enforce the hospital's

duty by raising it as an affirmative defense in a collection suit.

Finally, as members of a particular group to whom a statutory


benefit flows, defendants may enforce the hospital's obligation to
provide free services to those in need but unable to pay. The
hospital has voluntarily applied for and received a benefit from

legislation which also places a burden on it, to provide services


to a specified segment of the public. The defendant, as a member
of that particular class, has the right to enforce the statutory

obligation of the plaintiff. See Cort v. Ash, 422 U.S. 66, 78

(1975).

F. AFFIRMATIVE DEFENSE: CONSUMER FRAUD ACT:


FAILURE TO PROVIDE FOREIGN LANGUAGE
TRANSLATION

If the hospital services are reduced to a written contract (or

a written agreement of any kind, including a guarantor agreement),

- 147 -
and if hospital personnel speak with the defendant (executor of the

contract) in a foreign language, the document signed must be

provided to the defendant in the foreign language. 815 ILCS

505/2N. The hospital's failure to do so may constitute an

affirmative defense. See pleading next page.

- 148 -
AFFIRMATIVE DEFENSE:

[Consumer Fraud Act - failure to provide


foreign language translation]

1. Defendant is, and at all times mentioned herein has

been, a resident of the City of Chicago, Cook County, Illinois.

2. Plaintiff is, and at all times mentioned herein was,

engaged in the distribution and provision of hospital and medical

services in Cook County, Illinois.

3. On or about April 7, 1980, defendant's wife was

admitted to plaintiff hospital for treatment. As a condition and


prerequisite for admission, defendant was required to sign Exhibit
B of Plaintiff's Complaint.
4. Defendant does not speak English, but only Spanish.

5. Any hospital admission discussions between plaintiff


and defendant were conducted in Spanish.
6. The alleged agreement signed by defendant on April

7, 1980 is written in the English language.


7. Plaintiff failed to give defendant a copy of said
agreement written in the Spanish language.

8. Plaintiff's conduct constitutes an unlawful practice


in violation of the Illinois Consumer Fraud and Deceptive business

Practices Act, 815 ILCS 505/2N, rendering said agreement illegal


and unenforceable.

WHEREFORE, defendant prays that the Complaint be

dismissed with prejudice, costs assessed to the plaintiff.

- 149 -
G. FAILURE OF HMO TO PAY DUE TO INSOLVENCY

Occasionally an HMO will bite the dust--declare bankruptcy or

fold. Those insured by the HMO may face hospital bills that should

have been paid by the HMO but were not. Illinois law at 215 ILCS
125/2-8 does not allow hospitals or other providers to take any

form of collection action against patients facing these

circumstances.

H. DURESS

In rare instances the common law doctrine of duress may

provide an affirmative defense to a hospital collection case.

Consider the following facts from an unreported case:

The mother of a twenty-one year old is called to the


hospital one night; her son has been hit by a car. The
hospital admissions representative tells the woman: You
must sign this document if you want to see your son.
The woman signs, believing she had no choice. The
document was a guaranty agreement calling for the woman
to pay for the adult-childs hospital expenses. It is
later ruled unenforceable as the mother was deemed to
have signed under duress.

In Illinois, common law duress exists where an individual is

induced by an unlawful act or wrongful threats to make a contract

under circumstance which deprive the person of the exercise of free

will. First Security Bank of Glendale Heights v. Bawoll, 120

Ill.App.3d 787, 458 N.E.2d 193, 198 (2d Dist. 1983).

- 150 -
VIII. COUNTERCLAIM: MALPRACTICE

The dictum "the best defense is a good offense" is true

in the context of hospital collection cases as well. If your

client has a possible claim of malpractice, he/she may be able to

recover big bucks with which to pay the hospital bill.

Always inquire into the quality of services rendered and the

outcome of the treatment. Note the two-year (in some instances

four-year) limitations period in the Code of Civil Procedure, 735

ILCS 5/13-212.

- 151 -
IX. A. THIRD PARTY COMPLAINT: VS. INSURANCE CO. FOR BREACH OF
CONTRACT/VIOLATION OF INSURANCE CODE

Where your client was covered by insurance during the

hospitalization, and the insurance company has balked at payment,

a third-party complaint which drags the insurer into the fray

frequently does wonders.25 Certain insurers like Blue Cross are


extremely amenable to settling such cases, particularly when you

can save them a buck by getting the hospital to take less than full

payment. See pleading at page 162. Note that the pleadings, in


addition to a Count I breach of contract claim, seek statutory
damages under the insurance code for the insurer's non-payment.
This claim may not be asserted against Blue Cross which is not

subject to the Insurance Code (as it does not constitute an


insurance company).
Note: Always ask your client whether
she/he may have had health or
hospitalization insurance at the
time in question. Some clients may
have such insurance through their
employment or through their spouse
or parent's employment

B. THIRD PARTY COMPLAINT vs. HEALTH PLAN

If your client was covered by a health plan at their place of


employment, any claim you may wish to assert against the health

plan falls under the Employee Retirement Income Security Act

("ERISA"), 29 U.S.C. 1001 et seq. In enacting ERISA Congress

25
If the insurance company was an employer-sponsored group
health plan, see Section IX B.

- 152 -
preempted state claims against employee health plans. Instead, a

claim for non-payment against an employee health plan must be

pleaded as an ERISA claim; a private right of action is provided at

29 U.S.C. 1132(a)(1)(b), while section 1132(G)(1) allows attorney

fees to the prevailing party. The Supreme Court has held that

Congress intended ERISA to be the exclusive vehicle for actions

asserting improper processing or denials of ERISA-plan benefits.

Pilot Life Insurance Company v. Dedeaux, 481 U.S. 41 (1987).

There had been a controversy regarding the standard of review

to be used by the trial court in reviewing a decision of an ERISA

health plan to deny coverage. Some courts used a tough standard


requiring the consumer to show that the health plan administrators
denial was arbitrary and capricious, or an abuse of discretion;
other courts used a de novo standard. The Supreme Court, in

Firestone Tire & Rubber Company v. Bruch, 489 U.S.101 (1989), held

that the "de novo" standard will apply unless the health plan gives
the administrator discretionary authority to determine

administrative eligibility for benefits or to construe the terms of


the plan. But many plans now have incorporated this magic
language. See, for example, Duhon v. Texaco, Inc., 15 F.3d 1302

(5th Cir. 1994).

Six final points:

(1) While it is clear that a claim for breach of contract


must be pleaded under ERISA, the question of whether a state law

based claim of misrepresentation against a health plan is pre-

empted by ERISA has gone both ways. The 7th Circuit answered

- 153 -
affirmatively in Pohl v. Natl Benefits Consultants, 956 F.2d 126

(7th 1992), while the Fifth Circuit said no in Perkins v. Time

Insurance Co., 898 F2d 470 (5th Cir. 1990).

(2) Occasionally, when you file an ERISA-based Third Party

Complaint against a health benefits plan, the Plan that you sue

will move to have the Third-Party Complaint removed to Federal

Court under federal removal rules set out at 28 U.S.C. Sec. 1446.

In Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58 (1987)

the Supreme Court ruled that this type of removal is appropriate;

so you will just have to litigate the claim in federal court under

those circumstances.
(3) ERISA, at 29 U.S.C. Sec. 1133, establishes minimum
procedural requirements when a health plan administrator denies a
claim. Seventh Circuit cases hold that an employee may have to

exhaust her remedies under the health plan before bringing suit.
Robyns v. Reliance Standard Life Insurance Co., 130 F.3d 1231 (7th

Cir. 1997).

(4) There is no statute of limitations in ERISA, so courts


would look to the most appropriate state limitations period.
(5) The question of whether a worker is entitled to a jury

trial on an ERISA claim is unsettled. Compare Gangitano v. NN

Investors Life Insurance Co., 733 F. Supp. 342 (S.D. Fla. 1990)

with Hollenbeck v. Falstaff Brewing Corp., 605 F. Supp. 421 (D. Mo.
1985).

(6) ERISA claims may be filed in state or federal court.

There is one other insurance scenario to be aware of, and that

- 154 -
is the situation where your client has a health plan at work that

should have covered a hospitalization but did not because the

employer had wrongfully failed to make premium payments at a

relevant time or because of some other wrongful action of the

employer. Under these circumstances your cause of action will be

against the employer rather than the insurance carrier.

But you must be sure your client makes the decision to go

after the employer only after being fully advised on the possible

consequences. If they are still working at the same place a

lawsuit against their employer could jeopardize their job. Clients

may choose not to file third party actions against their place of
employment under such circumstances because they fear losing their
jobs as a result; their job may be more important to them than a
four thousand dollar hospital bill.

Related Documents

* Third-Party Complaint vs. Insurance Co. at 165.

* ERISA Third-Party Complaint at 168.

- 155 -
C. THIRD PARTY COMPLAINT vs. EMPLOYER

A third-party complaint may be appropriate against the

client's employer where the employer's actions have caused the

insurance company to deny coverage. (e.g., employer's failure to


pay premiums causes lapse in insurance of employee-defendant).

However, your client may choose not to assert a claim against a

current employer.

D. COBRA

Advocates of those sued for hospital bills should also be

aware of "Continuation Coverage" under COBRA. COBRA is an acronym

that stands for Congressional Omnibus Budget Reconciliation Act of

1986. The COBRA statutory provisions are found at 29 USC Sec 1161-

1169.

In a nutshell, COBRA covers employees and their spouses or

dependents who have group health insurance benefits at a place of

employment that employs more than 20 workers. COBRA allows workers

or their spouses to continue the group health insurance benefits

they have at their place of employment for 18 months after what is

called a "qualifying event". The most frequent qualifying events--

as set out in 29 U.S.C. 1163-- are:

1. a termination other than for gross misconduct


2. the death of the worker

3. the divorce or legal separation of the covered employee


from the employee's spouse.

Thus, workers (and their dependents) laid off of a job where there
are 20 employees or more, are entitled to continue their health

- 156 -
coverage for up to 18 months.

Of course the catch is that the worker has to pay the full

cost of the insurance--not just the typical employee portion-- plus

up to an additional two per cent administrative costs. And it goes

without saying that most workers who suffer a qualifying event like

a termination are not going to be in any position to pay these

premiums. But nevertheless there have been some interesting

developments under the COBRA law that offer our clients remedies in

a number of situations.

COBRA affirmatively requires the administrator of the group

health plan to give the employee two separate and distinct notices
of their rights under the law. 26 U.S.C 4980B(f)(6). The first
notice has to be given at the time the worker initially enters the
group health plan. It is a general explanation of the workers

rights under COBRA. The second notice has to be given at the time
of the qualifying event. And this notice has to adequately advise
the worker of his or her COBRA rights. The worker or the dependent

then has 60 days from the date the second notice is provided in
which to elect to obtain continuation coverage under the Act.
In the case of Phillips v. Riverside Inc., 796 F. Supp. 403

(E.D.Ark. 1992) a common scenario played out. A worker was

terminated and shortly after the termination his family incurred

significant hospital bills--about $38,000. Mr. Phillips' lawyer


dug around and learned that the health plan administrator had

failed to send Phillips the COBRA second notice of rights at the

time of the qualifying event, the termination. Suit was instituted

- 157 -
against the insurance plan and the court ruled for Mr. Phillips.

The court required the plan to pay the $38,000 in hospital bills

that would have been covered during the 18 month period following

the qualifying event. The court also awarded $5 a day statutory

penalty for the 2 yrs between the qualifying event and the day the

suit was filed. The COBRA law allows the Court to impose a

statutory penalty of up to $100 a day where violations are found.

In Mlsna v. Unitel Communications, Inc., 825 F. Supp. 862

(N.D. Ill. 1993) an employee resigned from his job and the health

plan failed to send his wife notice of her rights to COBRA

continuation coverage. The court ordered the plan to pay the


hospital bills of the spouse incurred during the 18 month period
following the resignation. And in Meadows v. Cagle's Inc., 954 F.

2d 686 (11th Cir. 1992) the plan did send the second COBRA rights

notice to the employee. But the Court ruled that the notice sent
was insufficient to allow the employee to make an intelligent
decision as to whether or not to elect to continue coverage. The

court held that the employee could elect to continue coverage and
that it would be retroactive to the date of the qualifying event.
So you will always want to inquire about COBRA related

information when initially interviewing a client with unpaid

medical bills. Find out their employment history and whether there

were health plans at the prior jobs. You will need to see if the
health plan complied with its duties under COBRA.

Sometimes even if the health plan did not mess up it might be

possible to reap an advantage from COBRA. For example, a client

- 158 -
may report that they were laid off from their job less than sixty

days ago and now their son was just hospitalized. COBRA can help.

Because COBRA gives the worker 60 days to elect to buy continuation

coverage--and the coverage is retroactive to the date of the

qualifying event. The client can elect to pay for COBRA continuing

coverage and get the health plan to pick up the tab for the

hospital stay--retroactively. That is the holding in Branch v. G.

Bernd Co. 955 F.2d 1574 (11th Cir 1992), where the court said that

Congress, in enacting COBRA, wanted to assure beneficiaries of 60

days to elect to continue coverage and that COBRA did not exclude

those cases where intervening medical needs arose during that


period...that is, after the qualifying event but before the
election to get continuing coverage.
Caveat: COBRA does not apply where termination is for gross

misconduct. 26 U.S.C. 4980B(f)(3)(B).

- 159 -
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
MUNICIPAL DEPARTMENT, FIRST DISTRICT

HOSPITAL, )
)
Plaintiff, )
)
vs. ) No.
)
ALEX, )
)
Defendant, Third-Party )
Plaintiff, )
)
vs. )
)
INSURANCE COMPANY, )
)
Third-Party Defendant. )

THIRD PARTY COMPLAINT

Now comes Third-Party Plaintiff Alex, by and through his

attorneys and complains as follows:


COUNT I

1. Alex is a resident of Chicago, Illinois.

2. Defendant Insurance Company is an insurance corporation


organized under the laws of the State of Illinois and has its
principal place of business in Chicago, Illinois.

3. On or about July 5, 1991, defendant executed and delivered


to Alex a policy of health insurance, under which it agreed, for a

consideration expressed therein, to insure the plaintiff and his


family for health expenses for the period . A copy of

this policy is attached hereto as Exhibit A.

4. Neither Alex nor any member of his family ever received


any notice from the Insurance Co stating that the above coverage

had been altered or cancelled or that his wife was no longer

- 160 -
insured, and on information and belief, none was ever sent.

5. Alex has paid each and every premium due under the policy.

6. Insurance Co never terminated its coverage of Alex or his

wife at any time.

7. Alex's wife entered Roosevelt Memorial Hospital on or

about June 5, 1992, and was discharged on July 6, 1972, from said

hospital. The cost of said hospitalization was allegedly

$705,814.01, for which Alex may be liable pursuant to the Illinois

Family Expense Act.

8. Alex filed a claim for payment of the hospital bill but

the Insurance Co has wrongfully refused to pay this bill, even


though the matter was covered by the policy.
WHEREFORE, Third-Party Plaintiff prays that this Court:
1. Enter judgment on behalf of Alex against Insurance

Co in the amount of $705,814.01.


COUNT II

1. In Count II Third-Party plaintiff seeks a recovery

pursuant to the Insurance Code of 215 ILCS 5/1 et seq. Insurance


Co's acts constituted an unreasonable refusal to pay the claim.
1-8. The Third-party plaintiff reincorporates the

allegations contained in 1-82 of the First Count as if fully

reproduced herein.

9. At all times relevant hereto, the transactions


between the parties were for a hospitalization insurance policy and

as such, were governed by the Illinois Insurance Code.

10. Third-Party Defendant violated the provisions of the

- 161 -
Insurance Code by:

not attempting in good faith to effectuate


prompt, fair and equitable settlement of
claims submitted in which liability has
become reasonably clear.

11. As a result, the Third-party plaintiff was damaged

in the amount of $705,814.01.

12. Third-party defendant's refusal to fairly and

promptly settle the claim is an improper claims practice as defined

by the Insurance Code. 215 ILCS 5/156.

WHEREFORE, Third-party plaintiff prays that this Court


enter judgment against Insurance Co for $705,814.01 in actual
damages, for the lesser of 25% of the amount to which Third-party
plaintiff is entitled or $5,000 in statutory penalties pursuant to

215 ILCS 5/155, any other relief deemed just and proper.

- 162 -
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
MUNICIPAL DEPARTMENT, FIRST DISTRICT

U. OF ILLINOIS MEDICAL CENTER, )


)
Plaintiff, )
)
vs. ) NO. 90 M1 111304
)
RAMON SOLORZANO, )
)
Defendant, )
Third-Party Plaintiff, )
)
vs. )
)
R. E. HARRINGTON, INC., a foreign )
corporation; and MAUREY )
MANUFACTURING CORPORATION )
EMPLOYEE HEALTH BENEFIT PLAN, )
)
Third-Party Defendants. )
)

THIRD PARTY COMPLAINT

Now comes third-party Plaintiff RAMON SOLORZANO by and


through his attorney and complains as follows:
COUNT I

1. Plaintiff, U. of Illinois Medical Center, is an


Illinois charitable corporation.

2. Defendant and third-party Plaintiff in this action

is a resident of Chicago, Illinois.

3. Third-party Defendant R. E. HARRINGTON, INC., is a


Delaware corporation, and is doing business in Illinois, and is the

claims administrator for third-party Defendant Maurey Mfg., Co.

Employee Health Benefit Plan.

- 163 -
4. Maurey Mfg. Co. is an Illinois corporation; it

established the third-party Defendant Maurey Mfg. Co. Employee

Health Benefit Plan ("the Plan") to provide hospital, medical, and

disability benefits for its employees and their dependents.

5. The Plan is an employee benefit plan subject to the

federal Employee Retirement Income Security Act of 1974 (ERISA).

This Court has jurisdiction over this matter (concurrent with

federal court jurisdiction) pursuant to 29 U.S.C. 1132 (e)(1), and

this action is authorized by 29 U.S.C. 1132 a (1)(B).

6. Third-party Plaintiff was employed by Maurey Mfg.


Corp. ("Maurey") from 1961 until March, 1990.
7. As an employee, third-party Plaintiff was a
participant in the Plan, a copy of the summary description of which

is attached hereto as Exhibit A.


8. Third-party Plaintiff had a contractual relationship
with Maurey, pursuant to which the Plan was to pay certain medical

expenses incurred by third-party Plaintiff, or any beneficiary, in


return for certain premiums which were deducted from his paychecks.
9. Pursuant to said contract, both third-party

Plaintiff and his son Gabriel Solorzano were insured by Maurey

under the Plan.

10. Third-party Plaintiff's son Gabriel entered the U.


of Illinois Hospital on or about August 10, 1988, and was

discharged on August 11, 1988, from said hospital. The charges of

hospitalization was $1,434 for which third-party Plaintiff may be

- 164 -
liable pursuant to the Illinois Family Expense Act.

11. Third-party Defendants R. E. Harrington, Inc. and

the Plan are responsible for the payment of all or a substantial

part of said costs charged to third-party Plaintiff, pursuant to

the contract with the third-party Plaintiff, but the third-party

Defendants denied the hospital's claim for payment, in violation of

the terms of the Plan.

12. At all times, the third-party Plaintiff has

performed his obligations under the contract.

WHEREFORE, Third-party Plaintiff prays that this Court:

Enter judgment on behalf of third-party Plaintiff against


the Plan and R. E. Harrington, Inc. in the amount of $1,434.00 plus
attorney's fees and any other relief the Court deems proper.

ALAN A. ALOP

ALAN A. ALOP
LEGAL ASSISTANCE FOUNDATION
OF CHICAGO
General Office

- 165 -
X. CLAIM AGAINST PUBLIC AID/BREACH
OF STATUTORY DUTY/NEGLIGENCE

Where the hospital claims that the patient's application for

public aid to pay the hospitalization was forwarded to public aid

by the hospital, and where Public Aid has never ruled on the

application (having probably lost it) a claim may be asserted

against Public Aid in the Court of Claims. Such claims may no

longer be asserted as third-party complaints in the hospital

collection suit. Children's Memorial Hospital v. Mueller, 141 Ill.

App. 3d 951, 491 N.E.2d 103 (1st Dist. 1986). The pleadings at

page 172 allege that Public Aid's failure to process and decide
defendant's application constitutes a breach of an (amorphous)
statutory duty and/or negligence.

Note: While Public Aid may raise esoteric


defenses (such as sovereign immunity and
primary jurisdiction) their best defense
is that they never received the applica-
tion. One way to combat this is to have
the hospital testify that the application
was indeed sent, which may raise a
presumption of receipt. Better yet is to
obtain through discovery the IDPA log which
is routinely kept on all incoming applica-
tions from hospitals. The log may
establish that IDPA did receive the
application.

- 166 -
IN THE CIRCUIT COURT OF COOK COUNTY
IN THE COURT OF CLAIMS

CORY WATSON, a minor and VELMA )


WATSON and EUGENE WATSON, parents )
of Cory Watson, )
)
Plaintiffs, )
)
vs. ) No.
)
JOEL BUREAU, individually and as )
Director of the Illinois Department)
of Public Aid, a governmental )
agency; DAVID DANIELS, Individually)
and as Director of the Cook County )
Department of Public Aid, )
)
Defendants. )
COMPLAINT

COUNT I

Plaintiffs claim that:

1. ILLINOIS MASONIC MEDICAL CENTER, has filed against CORY

WATSON, a minor, and VELMA WATSON and EUGENE WATSON, his parents,

a complaint, and recovered a judgment against plaintiffs in the

amount of $5,000 on July 10, 1959.

2. Joel Bureau, is the Director of the Illinois Department


of Public Aid. He is responsible for adopting and implementing all

Policies, rules, and regulation for the Illinois Department of


Public aid in conformity with the Illinois Public Aid Code,

including those relating to the Medical Assistance-No Grant Program


("MA-NG").
3. The Illinois Department of Public Aid is charged with the

statewide administration of the Illinois Public Aid Code, including

- 167 -
the MA-NG program.

4. David Daniels is the Director of the Cook County

Department of Public Aid and is charged with the administration of

the Public Aid programs, including the MA-NG program in Cook County

as agent for, and under the direction and supervision of the

Illinois Department of Public Aid.

5. The Cook County Department of Public Aid is charged with

the administration of the Public Aid programs, including the MA-NG

program, in Cook County as agent for, and under the direction and

supervision of, the Illinois Department of Public Aid.

6. Plaintiff, VELMAN WATSON, signed an application for MA-NG


on behalf of herself and her family on or about March 9, 1972 in
the Illinois Masonic Medical Center pursuant to Illinois Department
of Public Aid Manual Chapter 4001.2.

7. Plaintiffs were eligible to receive MA-NG in March, 1972,


according to the standards promulgated by the third party
defendants per Public Aid Manual Chapter 5007.

8. The said application was sent by Illinois Masonic Medical


Center to the County Department and received by the County
Department.

9. The County Department must accept or reject every

application for MA-NG received by it within thirty days and mail

written notice of acceptance or rejection to the applicant within


30 days.

10. The County Department did not process plaintiff's

application or mail such written notice to her within thirty days,

- 168 -
or at any time thereafter.

11. The County Department thus breached its statutory duty to

the plaintiffs, with no fault on the part of plaintiffs, with the

proximate and direct result that the hospital bill sued upon herein

was never paid by the defendants through the MA-NG program.

12. Defendants are liable to the plaintiffs for the $5,000

judgment entered against plaintiffs on July 10, 1953.

WHEREFORE, plaintiffs pray for judgment against the defendants

in the amount of $5,000 plus costs.

COUNT II
1. Plaintiffs incorporate herein paragraphs 1-8 or Count I
as paragraph 1-8 of Count II.
9. Upon receiving the application defendants had a duty to
exercise due care in processing the application and in notifying

the applicants of the decision taken thereon.


10. Defendants, through their agents, negligently failed to
act upon the application and negligently failed to notify the

applicant of the decision taken thereon or of the reason why no


decision was taken.
11. The plaintiffs were at all times free of contributory

negligence.

12. As the proximate and direct result of negligence the

County Department never paid the bill for hospital through the MA-
NG program.

13. But for the negligence of the defendants, this bill would

have been paid by the County Department through the MA-NG program.

- 169 -
14. Defendants are liable to the plaintiffs in the amount of

the $5,000 judgment entered against plaintiffs on July 10, 1953.

WHEREFORE, plaintiffs pray that judgment against the

defendants in the amount of $5,000 plus costs.

- 170 -
XI. DEPOSITION OF HOSPITAL WITNESS

The following is a rough outline of questions which may

be directed to various witnesses of the hospital in a discovery

deposition. See page 80 for a model "Notice of Deposition".


BACKGROUND

NAME

HOME ADDRESS

SOCIAL SECURITY NO.

WHERE CURRENTLY EMPLOYED, address, department name, title

WHO IS YOUR DIRECT SUPERVISOR; WHAT IS SUPERVISOR'S TITLE?


HOW LONG HAVE YOU BEEN EMPLOYED BY HOSPITAL
STARTED AT HOSPITAL IN 19-- IN WHAT POSITION? DUTIES and
RESPONSIBILITIES? (then and now)
HOW LONG AT THAT POSITION? NEXT POSITION
EDUCATION...INCLUDE ANY MEDICAL EDUCATION?

PRIOR JOBS

EXPLORE DOCUMENTS BROUGHT WITH DEPONENT

DIRECT ATTENTION TO THE NOTICE OF DEPOSITION; HAS THE WITNESS


BROUGHT WITH HER THE DOCUMENTS SPECIFIED THEREIN?

HOSPITAL PROCEDURES/DISPUTE MECHANISMS

DOES THE HOSPITAL CLASSIFY PATIENTS BY THE WAY THEIR BILL WILL BE
PAID? CATEGORIES: SELF PAY, THIRD PARTY PAY, INSURED, MEDICAID
ETC
PATIENTS OR INSURANCE COMPANIES EVER DISPUTE PORTIONS OF THE
HOSPITAL BILL? (EITHER THE AMOUNT OF BILL OR WHETHER GOODS OR
SERVICES ACTUALLY PROVIDED)

- 171 -
HOW OFTEN?

ANY FORMAL MECHANISMS IN PLACE AT THE HOSPITAL TO HANDLE


DISPUTES? EXPLAIN... challenge audits

DOES THE HOSP EVER AUDIT ANY PATIENT'S BILL? UNDER WHAT
CIRCUMSTANCES? PLEASE EXPLAIN THE PROCEDURES--WHO WHEN, WHY.

IS THE AUDIT PROGRAM FORMALIZED IN ANY WRITTEN DOCUMENT?

WHO SUPERVISES THE AUDIT PROGRAM?

WAS THERE AN AUDIT IN THE DEFENDANT'S CASE?

WHO IS RESPONSIBLE FOR DEALING WITH SUCH MATTERS? WHICH DEPT?

HAS ANY PARTY EVER REQUESTED AN AUDIT OF HOSPITAL BILL?


HOW OFTEN ?
EXPLAIN THE AUDIT PROCEDURES
AWARE OF THE RESULTS OF ANY AUDITS RE HOSPITAL BILLS? DESCRIBE
WHAT IS THE AVERAGE RESULT OF AN AUDIT? REDUCTION OF 40% ?

WHAT PERCENTAGE REDUCTIONS GENERALLY RESULT FROM THE AUDIT?

DRG CODING

State what DRG code the hospital assigned to the treatment provided
the defendant. When? Who did this?
Any possible alternative code that could have been assigned? Cost
implications had the other code been assigned.
What charges are normally "bundled" into the DRG code that was
assigned?
Has the hospital been charged with miscoding or inappropriate
coding by any governmental agency or insurance entity? Details.

UTILIZATION REVIEW

DOES THE HOSPITAL HAVE A UTILIZATION REVIEW department or committee


IN PLACE? TITLE?

What is the subject matter of the review? medical necessity?

- 172 -
overutilization?

SINCE WHEN? IS IT USED FOR EVERY PATIENT? DESCRIBE IT.

what records are produced from each review?

ARE THESE REVIEWS CONDUCTED BY HOSPITAL PERSONNEL OR BY OUTSIDERS?

WHO IS IN CHARGE OF THE UTILization REView PROGRAM?

WAS THERE A UTILIZATION REVIEW CONDUCTED WITH REGARD TO THE PATIENT


IN THIS CASE?

IF SO, WAS IT REDUCED TO WRITING? WHERE IS IT?

PEER REVIEW ORGANIZATION (PRO)

HAS THE HOSP EVER HAD ANY REVIEW BY ANY PRO ? WHEN, UNDER WHAT
CIRCUMSTANCES, WHY?
WHICH PRO?
WAS THIS DEFENDANT's treatment EVER SUBJECT TO A REVIEW BY A PRO?
ANY WRITTEN DOCUMENTS REGARDING THE PRO REVIEW OF THE DEFENDANT'S
CASE?
ANY DOCUMENTS WHICH DESCRIBE THE PRO AND ITS PROCEDURES?

UNNECESSARY HOSPITAL DAYS

(IF WITNESS IS CONVERSANT WITH THE MEDICAL RECORDS) IF NOT, WHO


IS?
DID THE DEFENDANT EXPERIENCE ANY DELAYS RELATED TO INCORRECT
SEQUENCING OF TESTS AT THE HOSP?

DID THE DEFENDANT EXPERIENCE ANY DELAYS RELATED TO THE ORDERING OF


TESTS OR OTHER PROCEDURES? e.g. PATIENT ADMITTED FOR A SPECIFIC
PROCEDURE BUT IT WAS NOT SCHEDULED FOR THE NEXT DAY.

IF THE PATIENT WAS ADMITTED FOR CERTAIN TESTS: COULD THESE


PROCEDURES HAVE BEEN DONE ON AN OUT-PATIENT BASIS?

DID THE DEFENDANT EXPERIENCE ANY DELAYS RELATED TO THE OBTAINING OF


TEST RESULTS?
E.G. PATIENT INADEQUATELY PREPARED FOR A TEST.
DELAY OCCURS FOR TECHNICAL REASONS.
HOSP LAB LOSES TEST RESULTS.

- 173 -
DID THE DEFENDANT EXPERIENCE ANY DELAYS RELATED TO SURGERY?
E.G. BUSY HOSP SCHEDULE; NO OPENINGS.

PATIENT ADMITTED FOR SURGERY BUT HOSP FAILS TO


SCHEDULE SURGERY FOR THE NEXT DAY

COULD THIS SURGERY HAVE BEEN PERFORMED ON AN OUT-PATIENT BASIS?

DID THE DEFENDANT EXPERIENCE ANY DELAYS RELATED TO CONSULTATIONS?


E.G. PHYSICIAN REQUESTS A CONSULTATION BUT THERE IS A DELAY
IN CARRYING IT OUT.

DID THE DEFENDANT EXPERIENCE ANY DELAYS RELATED TO HOSP EDUCATION,


TRAINING, OR RESEARCH?
E.G. PATIENT WAS AN "INTERESTING CASE" AND WAS KEPT IN HOSP
FOR TEACHING PURPOSES.

PATIENT HAD TO WAIT FOR RESEARCH PROTOCOL TO BEGIN.


patient had to stay in extra days to be available for
review for teaching purposes....
DID THE DEFENDANT EXPERIENCE ANY DELAYS RELATED TO DISCHARGE
DIFFICULTIES?
E.G. PHYSICIAN MADE DECISION TO DISCHARGE LATE IN THE DAY.
PHYSICIAN DOES NOT NOT INITIATE HOME IV OR THERAPY
SERVICE SUFFICIENTLY EARLY TO ENABLE DISCHARGE.

HOSPITAL'S RATES

ARE YOU FAMILIAR WITH THE PRICES OR RATES CHARGED BY THE HOSP?
FAMILIAR WITH THE RATES OF THE HOSP CHARGED IN 19--?
WHO IS...WHAT DEPARTMENT?

DOES THE HOSP MAINTAIN A LIST OF ITS RATES? What is this list
called? (CHARGEMASTER?)

HOW OFTEN IS IT MODIFIED? (PERIODIC, ANNUALLY?)

HOW DOES THE HOSPITAL SET ITS RATES? PROCEDURE?


WHO, WHEN, WHERE AND HOW? (FACTORS CONSIDERED)

EXPLAIN THE PROCEDURES THE HOSP USES TO MODIFY ITS CHARGES FOR AN
INDIVIDUAL ITEM SUCH AS AN EKG TEST.

- 174 -
DOES THE HOSPITAL USE ANY PRINTED FORMS IN MODIFYING INDIVIDUAL
CHARGES? WHAT FORMS? WHERE MAINTAINED?

DO THESE FORMS LIST THE JUSTIFICATION OR REASONS FOR PROPOOSED RATE


INCREASES FOR PARTICULAR GOODS OR SERVICES?

WHAT RELATIONSHIP DOES THE WITNESS HAVE TO THE PRICE SETTING


PROCEDURE?

WHAT WAS THE HOSPITAL'S AVG RATE INCREASE IN THE LAST 5 YEARS
(OR THE AVG RATE INCREASE BETW 19-- AND 19--)

HOW DID THOSE RATE INCREASES COMPARE TO OTHER HOSPITALS IN THE


CHICAGO AREA IN THOSE YEARS? IF ANSWERS: WHICH HOSPITALS, WHAT
SOURCES, WHO TOLD YOU...

COST CONTAINMENT

FAMILIAR WITH THE ILLINOIS HEALTH CARE COST CONTAINMENT COUNCIL?


WHAT IS YOUR UNDERSTANDING OF THE IHCCC?
DOES YOUR HOSP PROVIDE DATA TO IHCCCC? WHO DOES THIS AT THE HOSP?
HOW OFTEN IS DATA PROVIDED? WHAT DATA?
HOSP RECEIVE REPORTS FROM THE IHCCCC? YOU EVER RECEIVE THESE?
WHO DOES AT THE HOSP?
DOES THE HOSP HAVE A DEPARTMENT OR ANY INDIVIDUAL DIRECTLY
RESPONSIBLE FOR COST CONTAINMENT? WHO?
DOES THE HOSPITAL HAVE ANY ONE EMPLOYEE WHOSE JOB IT IS TO KEEP
HOSPTIAL COSTS DOWN? HAS THIS EMPLOYEE ISSUED ANY RECCOMMENDATIONS
OR SUGGESTIONS TO STAFF? Are these in writing?
Are there any studies by the hospital regarding cost containment?

CHARITY SERVICES FOR THE POOR

IS THE HOSP A NON-PROFIT ORGANIZATION?


IS IT TAX EXEMPT?
DOES THE HOSP PROVIDE FREE SERVICES TO THE POOR IN ANY
CIRCUMSTANCES (OTHER THAN HILL-BURTON) ? WHY?
DOES THE HOSPITAL'S CORPORATE CHARTER OR BYLAWS REQUIRE IT TO
PROVIDE FREE SERVICE TO THE POOR? DETAILS...

WHAT PROCEDURES ARE IN PLACE FOR THE PROVISION OF FREE SERVICES TO

- 175 -
THE POOR? DO YOU HAVE A CHARITY COMMITTEE? WHO IS ON IT?

HOW IS THIS CHARITY SERVICE GENERALLY INITIATED? BY THE PATIENT?


WHO AT THE HOSP HAS THE AUTHORITY TO WRIT OFF A DEBT AND NOT
REQUIRE THE PATIENT TO PAY? UNDER WHAT CIRCUMSTANCES IS THIS DONE?

ARE THERE WRITTEN PROCEDURES THAT DETERMINE WHO WILL GET FREE
HOSPITAL SERVICES?

HOW IS IT DETERMINED THEN? WHAT FACTORS ARE CONSIDERED IN


DETERMINING WHETHER THE HOSP WILL PROVIDE FREE HOSP SERVICES TO A
PATIENT?

DOES THE HOSPITAL HAVE AN OMBUDSMAN? WHO? DUTIES AND FUNCTIONS?

If a for profit hospital: earnings per share in 1996, 1997 and


1998?

COSTING

WHAT DEPT SETS THE USUAL CHARGES OF THE HOSPITAL? WHO DIRECTS THAT
DEPARTMENT? IS IT THE BUDGET DEPT?

HOW DOES THE HOSPITAL ESTABLISH ITS USUAL CHARGES FOR ITS SERVICES
AND GOODS?

ARE THE HOSPITAL'S CHARGES BASED ON IT COSTS? WHICH DEPT KEEPS


TRACK OF THE HOSPITAL'S COSTS?.

HOW OFTEN ARE THE HOSPITAL'S CHARGES MODIFIED?


HAS THE HOSP EVER CONDUCTED A STUDY ON HOW TO REDUCE ITS COSTS?
IF SO...DETAILS.
HAS THE HOSPITAL EVER TAKEN STEPS TO REDUCE ITS COST? PLEASE
DESCRIBE IN DETAIL. WHEN, WHO, WRITTEN MEMOS ON THIS? WHY HAS THE
HOSP SUED THE DEFENDANT?

DOES THE HOSPITAL MAINTAIN A MASTER LIST OF ALL CHARGES FOR ITS
SERVICES AND GOODS? WHAT IS THIS LIST CALLED? UPDATED ANNUALLY?

COST SHIFTING

EXPLAIN THE REIMBURSEMENT PROCEDURES THE HOSP HAS IN PLACE WITH


REGARD TO MEDICAID PATIENTS. BASED ON A PER DIEM RATE IS IT NOT?
HOW MUCH, WHEN , WHO HAS KNOWLEDGE ABOUT THIS. HOW IS THE PER DIEM
AMT ARRIVED AT? (IF NEGOTIATED BETWEEN PUBLIC AID AND THE HOSP,
WHO NEGOTIATES FOR THE HOSPITAL, AND WHAT FACTORS ARE USED TO

- 176 -
DETERMINE THE HOSPITAL'S REIMBURSEMENT RATE?)

SO MEDICAID DOES NOT PAY THE HOSPITAL ITS NORMAL CHARGES, CORRECT?

IF TWO PATIENTS ENTER THE HOSPital, STAY THE SAME LENGTH OF TIME,
HAVE THE IDENTICAL SERVICES PROVIDED, BUT ONE IS ON MEDICAID AND
THE OTHER A SELF-PAYOR, THE HOSP WILL RECEIVE LESS REIMBURSEMENT
FROM MEDICAID THAN IT WILL ASK THE SELF-PAYOR TO PAY, CORRECT?

EXPLAIN THE REIMBURSEMENT PROCEDURES THE HOSP HAS IN PLACE WITH


REGARD TO MEDICARE PATIENTS. DIAGNOSIS RELATED GROUP.

REPEAT ABOVE.......

EXPLAIN THE REIMBURSEMENT PROCEDURES THE HOSPITAL HAS IN PLACE WITH


REGARD TO BLUE CROSS/BLUE SHIELD. BASED ON A COST PLUS 5% BASIS?

REPEAT ABOVE....
THIS COST PLUS 5% WILL RESULT IN A BILL THAT IS LESS THAN THE HOSP
NORMAL CHARGES WILL IT NOT?
IS THIS AGREEMENT IN WRITING?
HOW IS THE COSTS PORTION OF THE BLUE CROSS FORMULA DETERMINED? WHO
DETERMINES THIS?

DO OTHER PRIVATE INSURANCE COMPANIES HAVE SIMILAR AGREEMENTS WITH


THE HOSPITAL REGARDING THE HOSPITAL CHARGES? Which ones? Describe
the nature of those agreements.
ASK ABOUT HMO'S AND PPO'S (PREFERRED PAYMENT ORGANIZATIONS)...find
out the nature of agreements between the hospital and these
entities re reimbursement for services...
WHICH ONES? TYPES OF AGREEMENTS? IN WRITING? WHO HAS KNOWLEDGE
OF THESE?
ARE YOU FAMILIAR WITH THE TERM "COST SHIFTING" (variable pricing)?
EXPLAIN YOUR UNDERSTANDING OF THAT TERM. If witness has no
knowledge...who does?
GET WITNESS COMMITTED TO THE DEFINITION THAT COST SHIFTING results
in PASSING ON COSTS TO PRIVATE Payers or self insured individuals
or uninsured folks THAT THE GOVT (or insurance companies with
clout) FAIL TO PAY FOR their insureds. (UNDERPAYMENTS BY
MEDICAID/MEDICARE and strong insurers like Blue Cross MADE UP BY
PRIVATE Payers)

TRY TO GET THE WITNESS TO ADMIT THAT PATIENTS THAT HAVE NO PRIVATE
OR GOVERNMENTAL HEALTH INSURANCE--A SMALL GROUP--ALSO GET STUCK

- 177 -
WITH SUBSIDIZING INSURED PATIENTS WHERE THE PROSPECTIVELY-SET RATES
DO NOT ADEQUATELY REIMBURSE THE HOSP. THAT IS-- HOSPITALS MAY FIND
IT NECESSARY TO OFFSET REVENUES LOST FROM A WIDE RANGE OF
PROSPECTIVELY-SET RATES BY INCREASING CHARGES MORE THAN USUAL TO
THE SELF-Payers.

YOUR HOSPITAL HAS MEDICARE AND MEDICAID PATIENTS?

YOUR HOSPITAL ENGAGES IN COST SHIFTING DOES IT NOT?

AND BECAUSE OF THIS PRACTICE, THE DEFENDANT IN THIS CASE WAS ASKED
TO PAY CHARGES WHICH WERE HIGHER THAN THEY WOULD BE IF THE HOSPITAL
DID NOT ACCEPT MED/MED PATIENTS?

OR: MR SMITH HAD TO PAY MORE IN THIS CASE BECAUSE MEDICAID AND
MEDICARE ARE NOT PAYING THEIR FAIR SHARE

IT IS FAIR TO SAY THAT THE CHARGES MADE TO THE DEFENDANT IN THIS


CASE SUBSIDIZE LOWER REIMBURSEMENT AMOUNTS RECEIVED BY THE HOSP
FROM MEDICAID? MEDICARE?

Where Defendant is being sued for "co-payment"


portion of hospital bill after an insurance company
or HMO has paid the bulk of the bill:
1. What percentage of the bill was the defendant's respon-
sibility as a co-payment? And insurance company ZZ was
responsible for the other part?
2. What is the exact amount that the insurance company or
other third party payer actually paid in this case?
3. Why is the defendant being asked to pay 20% (or other
applicable percentage) of the hospital's full,
undiscounted charges when the insurance company was
only required to pay its share based on a discounted
amount?
4. If the insurance company was only required to pay X%,
if the hospital insists on collecting this bill from
the defendant won't the defendant end up paying more
than 20% of the hospital's ACTUAL charges?

COMPARISON STUDIES

ARE YOU AWARE OF ANY COMPARISON STUDIES OF HOSPITAL CHARGES IN THE


CHICAGO AREA FOR THE YEAR 19--? Who would have such knowledge?

IDENTIFY THE HOSPITALS THAT WERE INCLUDED IN THE STUDY.


- 178 -
ARE THESE HOSPITALS WHICH YOU HAVE IDENTIFIED SIMILAR TO YOUR
HOSPITAL? TEACHING HOSP? ABOUT THE SAME NO. OF BEDS?

HAVE YOU REVIEWED THOSE STUDIES? WHEN. POSSESS THEM?

HAVE YOU COME TO ANY CONCLUSIONS WITH REGARD TO YOUR HOSPITAL'S


RELATIVE CHARGES? WHAT ARE THOSE CONCLUSIONS?

HAVE YOU EVER SEEN THE REPORT OF THE IHCCCC REGARDING HOSP CHARGES
FOR THE YEAR 19--?

DO YOU YOURSELF HAVE ANY OTHER KNOWLEDGE REGARDING HOW THE CHARGES
AT YOUR HOSP COMPARED TO OTHER HOSPITALS' CHARGES IN THE YEAR 19--?

IF SO, DETAILS RE WHO TOLD YOU, WHEN, IN WRITING, WHERE, ETC.

COST COMPARISONS WITH REGARD TO WHAT SERVICES OR GOODS? SEMI-


PRIVATE ROOM, URINALYSIS, EKG...
AT THIS POINT SHOW THE COST COMPARISONS TO THE WITNESS AND
INTERROGATE REGARDING THOSE INSTANCES WHERE PLAINTIFF HOSPITAL'S
RATES ARE SIGNIFICANTLY HIGHER THAN OTHER HOSP.

DEFENDANT'S MEDICAL RECORDS

HAVE YOU REVIEWED THE PATIENT MEDICAL RECORDS IN THIS CASE?

WHAT WAS THE PRINCIPAL DIAGNOSIS AT THE TIME OF ADMISSION?


OTHER DIAGNOSIS?

WHAT TREATMENT WAS PROVIDED TO THE DEFENDANT?


WAS THIS TREATMENT THE NORMAL OR USUAL TREATMENT FOR THIS TYPE OF
DIAGNOSIS? HOW DO YOU KNOW THIS?
(ESTABLISH NO PERSONAL KNOWLEDGE)
YOU HAVE NO PERSONAL KNOWLEDGE WHETHER THE EKG TEST (etc,
etc) ADMINISTERED ON JULY 8, 1966 WAS NECESSARY FOR THE TREATMENT
OF THIS PATIENT, DO YOU?

ESTABLISH DATE OF ADMISSION AND DATE OF DISCHARGE.


ASCERTAIN IDENTITY OF THE PRIMARY PHYSICIAN.

HAVE YOU EVER DISCUSSED THE DEFENDANT WITH THIS PHYSICIAN? IF SO


ESTABLISH DATES AND SUBJECTS OF DISCUSSION.

IF A CHARGE APPEARS ON THE ITEMIZED BILL--FOR EXAMPLE FOR A


CATHETER-- BUT THERE IS NO DOCUMENTATION IN THE MEDICAL RECORD THAT
A CATHETER WAS USED ON THE PATIENT--WOULD YOU CONCLUDE THAT THE
CHARGE WAS PROBABLY AN ERROR? SO IF A SERVICE OR MEDICATION IS NOT

- 179 -
IN THE MEDICAL RECORD.....

HOSPital ADMISSION PROCEDURES: FINANCIAL

EXPLAIN THE HOSPITAL'S ADMISSION PROCEDURES AS THEY RELATE TO


FINANCIAL MATTERS, i.e. how the bill will be paid. IS A FINANCIAL
ANAYLSIS DONE OF THE PATIENT AT ADMISSION?

does the hosp contact potential third party payers? DID THEY IN
THIS CASE? WHO DID, WHEN, WHAT WAS LEARNED?

WAS THE HOSPITAL AWARE AT THE TIME OF ADMISSION OF THE LIMITS ON


THE DEFENDANT'S INSURANCE POLICY?

ITEMIZED BILL

AT THIS POINT REVIEW THE ITEMIZED BILL WITH THE WITNESS. ACSERTAIN
WHETHER THE WITNESS HAS PERSONAL KNOWLEDGE THAT ITEM X IS ACTUALLY
PRICED CORRECTLY AND WHETHER THAT ITEM WAS NECESSARY GIVEN THE
DEFENDANT'S DIAGNOSIS. SHE PROBABLY WILL ADMIT THAT SHE DOES NOT
KNOW IF IT WAS NECESSARY.

USE THIS LITANY: 1. WHAT IS THE ITEM LISTED ON JAN 3, 1988,


"EKG." PLEASE EXPLAIN.

2. DO YOU HAVE PERSONAL KNOWLEDGE AS TO


WHETHER THIS TEST (SERVICE, WAS NECESSARY
FOR THIS PATIENT?
3. THE DEFENDANT WAS CHARGED $809 FOR THIS?

4. DO YOU BELIEVE THIS PARTICULAR CHARGE


WAS REASONABLE. IF SO PLEASE STATE THE
BASIS FOR YOUR BELIEF. IS IT BASED ON
ANY OBJECTIVE MATTER, SUCH AS A
COMPARIBLE CHARGE AT A SIMILAR HOSPITAL.
WHICH HOSP, HOW DO YOU KNOW, ETC...

IF THE WITNESS SAYS THE CHARGE IS REASONABLE BECAUSE


IT IS THE HOSPITAL'S NORMAL CHARGE, GET HER TO ADMIT

a. THAT IF THE HOSP CHARGED EVERY PATIENT $500 FOR AN


ASPIRIN THAT WOULD NOT BE REASONABLE HENCE
REASONABLENESS IS NOT DETERMINED BY THE FACT THAT
THE CHARGE IS NORMALLY APPLIED.

b. THAT IN FACT NOT EVERY PATIENT HAS TO PAY THE SAME

- 180 -
AMOUNT FOR THE EKG. SOME PATIENT'S BILLS ARE
DISCOUNTED BY VIRTUE OF COST SHIFTING (the bill
is discounted due to a negotiated agreement between
the hospital and the patient's insurer).

Show the witness comparison charges at other hospitals. If the


other charges are significantly lower in some respect, ask the
witness if they still believe the hospital's charge for X was
reasonable in light of the fact that hospital Y charges less.

"If I were to show you a study that compared your hospital's


charges to the charges of the X hospital, and if the charges at the
X hospital are 50% lower across the board, would you still maintain
that the charges in your hospital are reasonable?"
Itemized Computer Bill

REGARDING THE ITEMIZED COMPUTER PRINTOUT OF THE BILL TO THE


DEFENDANT--EXPLAIN HOW THE HOSP COLLECTS THE INFORMATION ON THAT
BILL. WHICH DEPT. IS RESPONSIBLE FOR THE COMPUTER?
HOW ARE THE INDIVIDUAL ITEMS--each charge--INPUTTED INTO THE
COMPUTER? WHEN AND BY WHOM?

IS A PAPER RECORD KEPT OF EACH ITEM THAT IS INPUTTED FOR


VERIFICATION PURPOSES? WHERE? WHO IS RESPONSIBLE?

HOW CAN THE ACCURACY OF THE COMPUTER PRINTOUT BE VERIFIED?


WAS the computer bill checked for accuracy IN THIS CASE?
WHAT TYPE OF COMPUTER WAS IN USE AT THE TIME SERVICES WERE
RENDERED? SAME COMPUTER SYSTEM STILL IN PLACE? WHAT PROCEDURES
ARE USED TO PERIODICALLY CHECK THE ACCURACY OF THE COMPUTER?
Is this make and model computer used in other hospitals?
ARE SEPARATE PHARMACY RECORDS KEPT BY THE HOSPITAL WITH REGARD TO
MEDICATIONS PROVIDED TO THE DEFENDANT? WHERE? HOW?? WHAT ARE
THESE DOCUMENTS CALLED ("PHARMACY PROFILE?")

PLEASE LIST ALL PAYMENTS MADE TOWARD THE DEFENDANT'S BILL, GIVING
THE DATE OF EACH AND THE SOURCE OF EACH.

MISCELLANEOUS

DOES THE HOSPITAL SUE ALL PATIENTS WHO HAVE NOT PAID THEIR HOSP
BILLS? IF NOT, WHICH ONES DO THEY NOT SUE AND WHY? Who makes

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these decisions?

DID YOU BRING WITH YOU A COPY OF THE HOSPITAL'S BUDGET FOR 1999?
FROM WHOM OBTAINED? WHO WAS RESPONSIBLE FOR PUTTING THIS TOGETHER?
STILL EMPLOYED AT HOSPITAL?

PLEASE EXPLAIN THE ITEMS LISTED ON PAGE AT PARAGRAPH .

Is the hospital affiliated with any medical school? Which one?

Is there a written agreement setting forth the terms of the


affiliation?

Is the hospital affiliated with any other hospital?

DOES THE HOSP EXPEND ANY FUNDS FOR PHYSICIAN RESEARCH ACTIVITIES?

DESCRIBE THE HOSPITAL'S NORMAL POST-DISCHARGE COLLECTION


PROCEDURES. WHAT DEPARTMENT PERFORMS THESE TASKS?
WHO IN CHARGE?
WHAT COLLECTION ACTIVITIES OCCURRED IN THIS CASE? WHO DID WHAT AND
WHEN. ANY WRITTEN RECORD OF IT?

IS THE HOSPITAL ENGAGED IN ANY CONSTRUCTION PROJECTS NOW? DETAILS.


PROJECTS IN LAST THREE YEARS? (Any fancy new administrative wings
with walnut walls and mahoganey desks?)
Who at the Hospital--which department and which personnel--are
responsible for submitting the annual cost reports to Medicare?
Do insurance companies ever perform charge audits of the hospital
bills? What department, or persons, responsible for dealing with
these charge (or challenge) audits? Are there written policies
governing these audits? Can a patient have an audit done? How?

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XII. SUMMARY JUDGMENT

The hospital may move for summary judgment. This motion may

be resisted on the following grounds:


(a) the issue of the reasonable value of
services rendered is an ultimate fact ques-
tion which must be determined by the jury;

(b) the hospital's affidavits are conclu-


sory and/or insufficient to meet its burden;

(c) a genuine issue of material fact exists


to whether the amount sought by the hospital
exceeds the reasonable value.

If may be possible to establish a genuine issue of fact by:

(a) having your client (or an expert) file a counteraffidavit

stating that the charges are excessive; (b) deposing the hospital's

affiant and establishing that the plaintiff hospital has a multi-

tiered system of charges (see "cost-shifting" discussion at page

70); or (c) establishing lower rates of similar hospitals through

IHCCCC materials (see discussion at page 61).

Note too that where a defense of estoppel is asserted (see

section V [B and C] above), summary judgment may be precluded by a

genuine issue of material fact related to the estoppel argument.

Vaughn v. Speaker, 156 Ill. App. 3d 962, 968, 509 N.E.2d 1084, 1088

(3d Dist. 1987).


Documents Attached

* MEMORANDUM RE SUMMARY JUDGMENT at page 190.


* MOTION TO STRIKE PARAGRAPHS OF AFFIDAVIT at page 196.

- 183 -
MEMORANDUM RE SUMMARY JUDGEMENT

Issue: In an action by a hospital for the


reasonable value of services, whether summary
judgment for the hospital is proper when
the affidavit of the hospital's employee
states that she is familiar with prevailing
prices and that the fees charged are
"customary and reasonable" and "are in
accordance with the prevailing rates or
prices."

The hospital's summary judgment motion should be opposed on

two grounds. First, the hospital's affidavit may be stricken

because it does not comply with the requirement of Illinois Supreme

Court Rule 191(a). Second, summary judgment is improper because

the issue of reasonable value of services is a jury question.


The affidavit in support of plaintiff's summary judgment
motion should be stricken because it does not meet the requirements
of Illinois Supreme Court Rule 191(a) that the affidavit "shall not

consist of conclusions but of facts admissible in evidence." The


affidavit of the patient accounts manager merely states the
conclusion that the charges were "customary and reasonable," and

"in accordance with the prevailing rates or prices." The affidavit


recites no facts to support the assertion. Affidavits not
supported by facts are insufficient as a matter of law. Kosten v.

St. Anne's Hospital, 132 Ill.App. 3d 1073, 1079, 478 N.E.2d 464,

468 (1st Dist. 1985).

Even if the affidavit meets the Rule 191(a) requirements,


summary judgment should be denied because the plaintiff has not met

the burden of showing "that there is no genuine issue as to any

material fact and that the moving party is entitled to judgment as

- 184 -
a matter of law." 735 ILCS 5/2-1005.

The Illinois Supreme Court has ruled that summary judgement is

proper "if what is contained in the pleadings and affidavits would

have constituted all of the evidence before the court and upon such

evidence there would be nothing left to go to the jury, and the

court would be required to direct a verdict." Fooden v. Bd. of

Governors of State Colleges and Universities, 48 Ill. 2d 580, 587,

272 N.E.2d 497, 500 (1971), cert. den., 408 U.S. 943 (1972). On a

summary judgment motion the court has a duty to construe evidence

strictly against the moving party and in favor of the opponent.

Hill v. Durkin, 58 Ill. App. 3d 1003, 374 N.E.2d 1147 (3d Dist.
1978). Even if facts are undisputed, a genuine issue exists if
fair-minded persons could draw different conclusions from the
facts. Torrence v. DeFrates, 56 Ill. App. 3d 118, 371 N.E.2d 1281

(4th Dist. 1978).


Because the issue of value is a jury question, the plaintiff's
affidavit--which presents mere conclusions on value--is insuffi-

cient to support summary judgment.


Illinois courts have held that testimony on value is not
binding on the court in cases involving the value of collateral,

A.A. Store Fixture Co., Inc. v. Kouzoukas, 87 Ill. App. 3d 631, 410

N.E.2d 131 (1st Dist. 1980), attorney's fees, Richheimer v.

Richheimer, 59 Ill. App. 2d 354, N.E.2d 346 (1st Dist. 1965),


executor's fees, In re McCalmont's Estate, 16 Ill. App. 2d 246, 148

N.E.2d 23 (2d Dist. 1958), realty, Illinois Power and Light Corp.

v. Talbott, 321 Ill. 538, 152 N.E. 406 (1926), and physician's

- 185 -
fees, Rubenstein v. LeSage, 135 Ill. App. 424 (2d Dist. 1907).

Although none of these cases on value involved summary judgments,

the holdings indicate that questions of value are for the fact-

finder to decide.

In the only Illinois case to rule on summary judgment in an

action by a hospital for the reasonable value of services, the

Third District affirmed a summary judgment for the hospital. Pekin

Memorial Hospital v. Schilling, 121 Ill. App. 2d 473, 257 N.E.2d

124 (3d Dist. 1970). The case, however, is distinguishable. In

Pekin the hospital sued a township's supervisor of general

assistance for the reasonable value of services rendered to


indigents. The hospital filed three affidavits in support of its
summary judgment motion, including an affidavit by the attending
physician which described the condition of the patient and stated

that the fees were the usual, regular, and proper charges for the
services. The defendant offered no counter-affidavits. The
defendant apparently did not question the reasonableness of the

charges. 121 Ill. App. 2d at 476, 257 N.E.2d at 126. The court
noted that the defendant had sufficient opportunity to object to
the itemized bill but did not object to the charges.

Federal summary judgement cases and directed verdict cases in

other states support the position that an affidavit does not

justify summary judgment when reasonable value of services is an


issue. Federal courts have held that summary judgment is improper

on the issue of value. In Gillentine v. McKeand, 426 F.2d 717 (1st

Cir. 1970), the First Circuit held that an affidavit on the

- 186 -
question of value is merely an expression of opinion and does not

negate the existence of an issue of fact on a summary judgment

motion. In Duane v. Altenburg, 297 F.2d 515, 518 (7th Cir. 1962),

the Court held that an affidavit does not negate the existence of

material fact when motives or opinions on value are involved.

State courts in Iowa, Oklahoma, and North Carolina have held

that the issue of reasonable value of medical services is a jury

question. In Fowle v. Parsons, 141 N.W. 1049 (Iowa, 1913), the

Iowa Supreme Court reversed a directed verdict for plaintiff doctor

in an action to recover for services in performing surgery on

defendant's foot. Plaintiff and his assistant testified that the


value was $187.50. The defendant presented no opposing evidence
and admitted the performance of services but disputed the value.
The court said that jurors must be "permitted to exercise a

judgment founded on the common knowledge of mankind." 141 N.W. at


1050. The court reasoned that a jury would be justified to find a
different figure based on factors such as the witnesses' demeanor,

the reasons given by the witness as the basis for his opinion, the
character of the injury or disease, and the length of time required
to perform the operation. Id.

In an action by a hospital to recover compensation for

professional services under an implied contract, the Oklahoma

Supreme Court reversed a directed verdict for the hospital even


though the defendant did not dispute the hospital's evidence on

value. Piggee v. Mercy Hospital, 186 P.2d 817 (Oklahoma 1947).

The only testimony on value was given by the owner of the hospital

- 187 -
who testified that the fee charged was the "usual, regular, and

reasonable charge for the services rendered." 186 P.2d at 819.

The court cited the following justifications for holding that the

jury must be allowed to determine value: (1) expert opinion on the

value of attorney's services is opinion evidence and is not

conclusive; (2) the testimony of experts on the value of

professional services is not binding on the jury; and (3) the jury

can weigh expert testimony in light of the jurors' knowledge. See

also Shellnut v. Randolph County Hospital, 469 So.2d 632 (Ala. App.

1985).

Although Fowle and Piggee both involved directed verdicts, the


rationale of the cases should apply also to summary judgment
because the issue in both directed verdict and summary judgment
cases is whether the evidence should be submitted to the jury. The

Illinois Supreme Court in Fooden, supra, said that summary judgment

is proper if a directed verdict would be proper.


In a suit by a hospital for the reasonable value of services
rendered to the defendant infant, the North Carolina Supreme Court
held that the reasonable value of services is a jury question when
defendant claims the fees were excessive. Cole v. Wagner, 150 S.E.
339, 197 N.C. 692 (N.C. 1929). The court reversed the trial
court's grant of judgment on the pleadings in favor of defendant.
The issue of summary judgment is clouded by the rule that
facts alleged in affidavits are taken as true on a summary judgment
motion if the opposing party offers no counter-affidavit to
contradict those facts. Wooding v. L & J Press Corp., 99 Ill. App.
3d 382, 425 N.E.2d 1055 (1st Dist. 1981). Two responses to this

- 188 -
exist. First, as stated above, the hospital's affidavit might be
considered a conclusion or opinion, rather than a "fact." The
First District has stated: "It is well established that even
though the party opposing the motion for summary judgment fails to
file counter-affidavits, the moving party is not entitled to
summary judgment unless the affidavits filed in support of the
motion establish, as a matter of law, her right to judgment."
Fryison v. McGee, 106 Ill. App. 3d 537, 539, 436 N.E.2d 12, 14 (1st
Dist. 1982). Second, a simple counter-affidavit from the defendant
could defeat the motion for summary judgment. For example, in Blum
& Sang v. Kurtzon, 351 Ill. App. 107, 113 N.E.2d 475 (1st Dist.
1953) (abstract only; see full opinion), an attorney sought summary
judgment on his claim for fees against his former client. The
client's affidavit that he believed he had already paid the lawyer
an amount exceeding the value of services rendered created a
triable issue of fact.

- 189 -
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
MUNICIPAL DEPARTMENT, THIRD DISTRICT

COLUMBUS CASH )
MEDICAL CENTER )
)
Plaintiff, )
)
vs. ) No. 99 M1 1335
)
FERNANDO EMEDIN and )
CAROLINA EMEDIN, )
)
Defendants. )
MOTION TO STRIKE

The defendants, through their undersigned counsel, move this


Court to strike certain statements contained in the affidavit of
Arlene Goldman, and in support thereof would show:
1. In paragraph 7 of the affidavit, Goldman states:
The goods, services and treatments administered and
provided to CAROLINA DEMEDIN from January 1, 1985
to February 5, 1985 were customary and reasonable
in treating the illness which she suffered...

This statement is a conclusion rather than a fact and, in addition,


constitute a medical conclusion which affiant cannot make.

2. In paragraph 7 of the affidavit, affiant further states:

... the rates or prices charged for these goods,


services and treatments are in accordance with the
prevailing rates charged in Chicagoland area at
that time.

This statement also constitutes a conclusion rather than a factual


statement demonstrating the comparison. [Cite Majid case].

WHEREFORE, defendants move this Court to strike paragraph 7 of

the affidavit of Arlene Goldman.


XIII. TRIAL

A. Trial Considerations

- 190 -
1. Overview

Because of the widespread (and accurate) perception that

hospital bills are frequently outrageously high, juries may be

sympathetic to your defenses, particularly where an indigent

patient has been dealt a crippling bill. See below: Picking a Jury

in Hospital Collection Cases. The most sympathetic case may be one

where a hospital has received thousands of dollars insurance

coverage for particular services and is now squeezing your client

for more money. You may be able to argue that the hospital has

already received from the insurance company the reasonable value of

services rendered. For example, if the hospital has received


$9,000 of a $10,000 bill and sues your client for $1,000, you only
have to persuade the jury that the bill was just 10% too high to
get your client entirely off the hook. Of course, even if the

hospital has received nothing of its $10,000 billing, defendant's


counsel still may have the compelling argument that the hospital
charges other patients only $3000 for the same services. See

section on cost-shifting at 70 above.


Always prepare a Trial Memorandum for the court. This will
key the court into your approach and the law. Model at 210.

2. Challenge the Admissibility of the


Computer-Generated Bill

The hospital must produce the relevant records and/or

witness at trial to meet its burden of proof. A simple computer

- 191 -
summary of charges may be insufficient. Computer-generated

business records are admissible under the business records

exception to the hearsay rule only if a proper foundation is laid.

The foundation requires: (1) a demonstration that the computer

equipment is standard; (2) that the entries are made in the regular

course of business at or reasonably near the time of the happening

of the event recorded; and (3) that the sources of information and

the method and time of preparation suggest trustwothiness. Grand

Liquor Co. v. Dept. of Revenue, 67 Ill 2d 195, 202, 367 N.E.2d 1238

(1977). In Buddeke v. MacNeal Memorial Hospital, 49 Ill. App. 3d


431, 364 N.E.2d 446 (1st Dist. 1977) a hospital bill was not
allowed into evidence where the hospital witness did not know how
charges were inputted into the hospital computer. See also Dreyer

Medical Clinic v. Corral, 227 Ill. App.3d 221, 591 N.E.2d 111 (2d

Dist. 1992), where the medical clinic's witness did not know "how
the computerized bills were generated or checked for accuracy".
But see Victory Memorial Hospital v. Rice, 143 Ill. App. 3d 621,

625, 493 N.E.2d 117, 120 (2d Dist. 1986).


3. The Hospital's Burden of Showing the
Bill is "Reasonable."

A bill or statement of account standing alone "cannot serve as


proof that plaintiff's charges are fair and reasonable."

Protestant Hospital Builder's Club v. Goedde, 98 Ill. App. 3d 1028,

1031, 424 N.E.2d 1302, 1306 (5th Dist. 1981). The hospital may
need to produce a number of witnesses at trial to meet its burden.

In Victory Memorial Hospital v. Rice, 143 Ill. App. 3d 621, 493

- 192 -
N.E.2d 117 (2d Dist. 1986) an Illinois appeal court reversed a

directed verdict against a hospital in a collection suit. The

court noted that the hospital bears the burden of demonstrating

that its charges were reasonable, but found that the hospital had

presented enough evidence to let the case go to the jury for

verdict. It is noteworthy that the hospital presented the

testimony of:

1. treating physician;

2. director of data processing;

3. vice-president of finance;

4. credit manager; and


5. defendant.
Note too the lessons of Majid v. Stubblefield, 226 Ill.
App. 3d 637, 589 N.E.2d 1045 (3d Dist. 1992). In Majid, a surgeon

sued his patient to recover an unpaid portion of a bill for an


office consultation and surgery. The doctor attempted to meet his
burden of proof regarding reasonableness by having his office

manager testify that the surgery charges compared favorably to the


regular charges for such surgery by two local surgeons; she
testified that she had telephoned the offices of these two doctors

to learn their charges. Because the lawsuit was a small claim

conducted under Supreme Court Rule 286(b), the trial court allowed

the hearsay testimony of the office manager:


[the office manager's] testimony, while otherwise
inadmissible hearsay, is relevant evidence admis-
sible under the relaxed rules of evidence allowed
by Supreme Court Rule 286(b).

Majid, 226 Ill. App. 3d at 641, 589 N.E.2d at 1048. Where the
- 193 -
normal rules of evidence are at play, a hospital should not be able

to meet its burden by having hospital employees testify as to their

hearsay conversations with employees of other hospitals. This

could create a difficult proof problem for the unprepared hospital

counsel.

Majid also provides another important lesson. The office

manager only testified about the surgery charges of other doctors,

not with regard to their consultation fees. So the court ruled

that the plaintiff could not recover a consultation fee of $100

because the office manager had "presented no evidence concerning

the reasonableness of his office consultation fee". Majid, 226


Ill. App. 3d at 641, 589 N.E.2d at 1049. The typical hospital bill
has dozens--if not hundreds--of different types of charges. The
mere fact that testimony is presented that the daily room charges

at hospital X were similar to the room charges at hospital Y during


the relevant time period does not establish the reasonableness of
the myriad other charges at issue. See also Dreyer Medical Clinic

v. Corral, 227 Ill. App.3d 221, 591 N.E.2d 111 (2d Dist. 1992),
where the medical clinic failed to present any evidence of how its
charges compared to other providers in the community.
4. Comparable Hospital Charges.

See the survey at page 84(a) showing disparities in hospital

billing practices. You may wish to introduce a survey, such as the


annual Illinois Health Care Cost Containment Council "Hospital Care

Buyer's Guide" charge comparison, into evidence. See Victory

Memorial Hospital v. Rice, 493 N.E.2d at 120. Or you can use

- 194 -
survey material to cross-examine the hospital witness if they admit

to being familiar with it. To get the IHCCCC survey into evidence

you can subpoena it or try to have a certified copy admitted as an

official record.

5. Cross-Examination of the Hospital


Witness.

Prepare carefully for the cross examination of the

hospital witness. Demonstrate that the witness does not have

knowledge of three things: (1) what services and goods were

actually provided to the defendant; (2) whether such goods and

services were actually needed; and (3) what is the reasonable value

of those goods and services (which turns on the hospital's

customary charges and comparisons to other hospitals). Unless the

witness has a medical background they will not be able to state why

certain tests or procedures were used. They will have to admit

that they do not know if a test was medically necessary. You may

also get them to concede that they do not know if tests reflected

in the bill were actually performed or if goods that were charged

foe were actually provided. If the witness is allowed to testify

that the hospital's charges are comparable to other hospitals, you

can probably show that the witness has very little knowledge
regarding rates charged by other hospitals during the relevant time

period. What other hospitals is she aware of? Are they similar
institutions? What rates does she have knowledge of? Only room
rates? Does she know the comparable rates for procedures actually

charged to the defendant? Does the witness maintain written

- 195 -
records supporting the cost comparisons she has observed? Does she

really have any idea whether Hospital X charged more or less than

the plaintiff hospital for an EKG in July, 1997?

6. Require the Hospital to Produce Witnesses and


Documents to Show Variable Pricing.

You may choose to have the hospital produce at trial documents

(and a witness to explain them) regarding the hospital's cost-

shifting practices. See above at page 70. See the Notice to

Produce at Trial at page 206.


7. Move for Directed Verdict.

After the hospital has rested its case you should move for a
directed verdict, arguing that all of the evidence when viewed in
its aspect most favorable to the hospital does not satisfy the
hospital's burden of providing the amount it seeks is the

reasonable value of services rendered. See Pedrick v. Peoria &

Eastern Railroad Co., 37 Ill.2d 494, 509-510, 229 N.E.2d 504, 513-
14 (1967). A model motion for directed verdict is found at 213.
8. The Defendant: To Testify or Not?

You may decide not to produce your client at trial to testify

(unless of course you are required to do so by a Notice to

Produce). Sometimes the defendant's testimony can only help the

plaintiff. On the other hand, an articulate or moving defendant--

who expresses sincere outrage over an excessive bill--will help the


case.
9. Defendant's Evidence.

a. Your Client. Call your client if she can present some

- 196 -
compelling factual testimony. Where there have been excessive

charges for simple items such as aspirin or paper goods, have your

client purchase such goods at a drug store, save the receipt, and

testify about the cost "on the outside." Perhaps she can testify

that certain goods or treatments for which she was billed were not

provided. Maybe she can relate a hospital snafu that cost her an

extra day in the hospital.

b. Expert Testimony. In the best scenario you have lined up

a heath care economist, registered nurse or someone else who can

point out the unreasonable methods of pricing utilized by the

plaintiff or numerous examples of improper charges.


c. Hospital Witnesses. You will need to call someone from
the hospital to testify regarding the hospital's variable pricing
system. Make sure that the hospital produces a witness who can

list what charges it accepts as full payment from Medicaid,


Medicare, Blue Cross and HMO Illinois.
d. Comparible Hospital Charges. Sometimes comparisons of

hospital charges at other institutions may be beneficial. A witness


from the IHCCCC may be useful in this regard or you may try to gain
admission for such evidence as an official record.

10. Hospital's Motion For Directed Verdict.

The standard in most states is that if the defendant has


introduced as little as a scintilla of evidence in support of his

claim that the hospitals bill is unreasonable, the case should go


to the jury. Shellnut v. Randolph County Hospital, 469 So.2d 632,

634 (Ala. App. 1985). See also Bay Island Drainage v. Nussbaum,

- 197 -
388 Ill. 131, 134, 56 N.E.2d 615, 616 (1944) (if evidence

introduced by either side tends to establish claim of the party

opposing the motion for directed verdict, the motion should be

denied). See also arguments in Memorandum Re Summary Judgment at

page .

11. Closing Argument.

Closing argument is the time to make an emotional pitch to the

jury. Pick a "theme" and weave your argument around it. One

possible theme: "Should a week in the hospital cost as much as a

year in college?" See Closing Argument below at 236.

Related Documents

* Notice to Produce at Trial: Page 206.

* Trial Memorandum: page 209.

* Sample Voir Dire Questions: page 219.

* Sample Motion For Directed Verdict: page 222.

* Picking the Jury: page 217.

* Jury Instructions: page 223.

- 198 -
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
MUNICIPAL DEPARTMENT, FIRST DISTRICT

GRANT HOSPITAL )
)
Plaintiff, )
)
vs. ) No. 88 M1 203240
)
MIGUEL HUERTAS, )
)
Defendant. )
NOTICE TO PRODUCE

Defendant, by his attorney, pursuant to Illinois Supreme Court

Rule 237 (b) requests that plaintiff produce the following persons
and documents for trial on whatever date this case shall be brought
to trial:
1. All medical records of defendant's treatment at plaintiff

hospital.
2. All records reflecting charges to defendant, including
pharmacy records.

3. The complete collection file maintained by plaintiff


regarding the present claim against defendant including but not
limited to all notes of contacts or communications, copies of

collection letters, collection logs, accounts, ledgers,

applications, interview forms, documents purporting to bear the

signature of defendants, and all documents or records maintained by


plaintiff's Patient Account Department regarding defendants.

4. Any and all written documents reflecting any inquiry made

by the plaintiff regarding the defendant's financial resources

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and/or ability to pay for medical services.

5. All documents regarding the plaintiff hospital's practice

of "cost shifting" (i.e., policy of the hospital of accepting lower

reimbursement rates for services rendered to individuals insured by

Medicare, Medicaid, Blue Cross and other third-party payers).

6. The agent of plaintiff with direct knowledge of the

hospital's "cost-shifting" practices, including knowledge as to the

hospital's reimbursement amount for services rendered to defendant

had the patient been covered to Medicaid.

7. Copies of any and all applications made or contracts

entered into by the plaintiff, its agent or employees, or with


their assistance seeking reimbursement for the cost of defendant's
medical care from any state, federal or county welfare department
or any other third party intermediary payment program.

8. Copies of any and all correspondence or notes of


conversations, in plaintiff's possession or control, relating to
any applications referred to in the previous paragraph, or to the

action of any organization upon such request.


9. The agent or agents of plaintiff with direct knowledge of
each procedure and service for which plaintiff now seeks payment

performed on defendant in June, 1986, or any other dates for which

payment is sought.

10. The agent or agents of plaintiff with direct knowledge of


the reasonable value and actual cost to plaintiff of the procedures
and services referred to in number 9 above.
11. All documents, studies or reports containing any

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evaluation of the costs of the particular individual medical
services and procedures received by defendants from plaintiff.
12. All documents describing the manner in which, or the
basis upon which, plaintiff has determined the cost of each
individual medical service it provided to defendant.
13. An itemized list of what the charge (or reimbursement
amount) of each service rendered to defendants would have been if
said services had been charged to:
a. Medicaid;
b. Medicare; or
c. Blue Cross
d. HMO Illinois

14. All "annual cost reports" and any other documents,


studies, records and reports which contain a determination or
designation of the "contract rate", the rate at which Blue Cross
reimbursed the plaintiff, or the fee Blue Cross was charged for all
medical services during the year 1986 or any other year for which
payment is sought.
15. Plaintiff's Revenue and Expense Statement for the years
1984-1985 and 1985-1986, or any other such document indicating all
source of plaintiff's revenue and the amount and types of
expenditure.
16. The agent or agents or plaintiff familiar with each of
the documents referred to above.

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B. TRIAL MEMORANDUM

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS


MUNICIPAL DEPARTMENT, FIRST DISTRICT

)
THE CHILDREN'S MEMORIAL HOSPITAL, )
)
Plaintiff, )
)
-vs- ) No. 00 M1-103189
)
PONCIANO LOPEZ and )
FRANCISCA LOPEZ, )
)
Defendants. )
)
TRIAL MEMORANDUM

INTRODUCTION

In this action the plaintiff, Children's Memorial Hospital


(hereafter "hospital"), seeks to recover damages for services
rendered to the defendants, Ponciano and Francisca Lopez. This

memorandum discusses the legal issues in this case.


I. CHILDREN'S MEMORIAL HOSPITAL MUST PROVE THAT THE AMOUNT IT
SEEKS REPRESENTS REASONABLE VALUE OF THE SERVICES RENDERED

This case concerns the hospital's action to recover for


services it rendered defendants' daughter, Elidia Lopez. As in

most hospital collection actions, there is no agreement between the


parties as to the actual prices of the services rendered. The rule
in such cases is well established:

In Illinois where there is a contract, express or


implied, under which one party supplies articles or
services to another and there is no provision setting out
the amount the supplier is to be compensated, the law
implies that there is an agreement to pay a reasonable
price for the goods and services. To recover under a
contract of this nature, the supplier has the burden of
proving that his charges for materials and services

- 202 -
rendered are reasonable. A statement of account,
standing alone, is not proof of the reasonableness of a
supplier's charges. (citations omitted).

Protestant Hospital Builders v. Goedde, 98 Ill.App.3d 1028, 1031,

424 N.E.2d 1302, 1305-06 (5th Dist. 1981). Since defendants deny

that the amount sought by the hospital is appropriate, the ultimate

issue in this action is the question of what was the reasonable

value of the services rendered by the hospital.

The determination of reasonableness involves a factual

inquiry. "[E]vidence of the amount charged alone does not indicate

reasonableness." Victory Memorial Hospital v. Rice, 143 Ill. App.


3d 621, 625, 493 N.E.2d 117, 119 (2d Dist. 1986). Caselaw
establishes a two-pronged proof requirement for hospitals:
This court, in Victory Memorial Hospital v.
Rice, 143 Ill. App. 3d 621, 625, 493 N.E.2d
117, established what a plaintiff hospital
must prove for damages in order to recover
payment for its bills under an implied
contract theory. A hospital must establish
that its charges are reasonable in that they
are the usual and customary charges of that
particular hospital and are comparable to the
charges of other area hospitals.
Sherman Hospital v. Wingren, 169 Ill. App. 3d 161, 164, 523 N.E.2d

220, 222 (2d Dist. 1988).


A. The Charges to the Defendant Are Not the
Usual and Customary Charges of the Hospital.

The defendant in this case was not charged the hospital's

usual and customary charge because this hospital engaged in "cost


shifting". Cost shifting--or variable pricing--is a practice
utilized by most hospitals in which different payers pay different

amounts for identical hospital services. For example, a patient

- 203 -
covered by Medicaid may pay $1,500 for an appendectomy while a

self-paying patient may have to pay $2,500 for the same operation.

Cost shifting in the context of hospital charges has been

defined by the Illinois Health Care Cost Containment Council

(IHCCCC):

"Cost shifting" affects hospital prices for certain


payers. Hospital prices are not used as the basis of
payment by all payers. Major payers that pay for
hospital services on other than a charge basis are
Medicare, Blue Cross/Blue Shield, and the Illinois
Medical Assistance Program. . . .

Hospital prices must be established to combine with other


revenues described above to produce sufficient income for
hospitals to continue operations. So called "cost
shifting" then results in higher charges to individuals
who personally pay for all or a portion of their hospital
confinement and to insurers and employers whose hospital
benefits are based on hospital prices.

"Report to the Honorable Members of the 84th Session of the


Illinois General Assembly by the IHCCCC," March 1, 1985, at 19,
attached hereto as Exhibit A (emphasis added). Cost shifting is a

prevalent practice in Illinois hospitals. The Illinois legislature


recognized this in creating the IHCCCC, which is statutorily
responsible for "[m]inimizing cost shifting between publicly
supported patients and private payers." Ill.Rev.Stat. ch. 111-1/2,

6502-2(b)(2). In 1986, the IHCCCC elaborated on cost shifting and

its effect on the public:


Cost shifting occurs when the provider's cost of services
rendered (as opposed to the charge to the patient) is
more than the payment and the difference is shifted to
other payers. In other words, cost shifting occurs when
some individuals are asked to pay for the cost of other
individual's services. Cost shifting normally occurs
when there are cross subsidies among payers. Cross
subsidies among payers occur when some payers pay less
and some payers pay more for an identical service. Cross
- 204 -
subsidization among payers is inequitable and should be
minimized.

IHCCCC, "Health Care In Illinois, A System In Transition," March

1982 at 17, attached hereto as Exhibit B (emphasis added).

The impact of cost shifting by the hospital in the present

action is clear. It is possible, if not probable, that the non-

Medicaid covered defendants in this cause have been charged an

amount for services which exceeds the amount the hospital accepts

from other payers, for identical services. It is also possible

that the amount defendants' insurer, Shelastomer Chicago, did pay


on this bill would have been sufficient to cover the entire bill if
the defendants had been charged a lesser amount. The effect is
anomalous, for it results in indigent individuals, such as the

defendants herein, subsidizing other poor and even those patients


with certain insurance coverage. It is a nationwide problem on
which Congress has legislated, but which continues to bedevil

hospitals and patients alike. See 42 U.S.C. 1395x(v)(1)(A) and

Saint Mary of Nazareth Hospital v. Schweiler, 718 F.2d 459, 473

(D.C. App. 1983) ("non-Medicare payers are forced to bear some of


the costs of the Medicare program").
The inquiry into cost shifting is clearly relevant to this

case. Under the Victory Memorial Hospital v. Rice, supra,


analysis, the hospital's usual and customary charges as well as its

costs must be scrutinized to make the determination of the

reasonableness of the bill. The cost shifting inquiry will reveal


that the charges to defendant are higher because the hospital

customarily has lower actual charges for other payers. The inquiry

- 205 -
will also show that the hospital's costs are not equitably recouped

in its charges; that self-payers and non-Medicaid patients like the

defendants are forced to subsidize other payers. These factual

matters are intrinsically relevant to the adjudication of the

reasonableness of the hospital bill.


B. The Hospital Will Not Be Able to Establish
That Its Charges to the Defendant Are
Comparable to Charges At Other Area Hospitals.

[Here discuss Majid, Dreyer, Victoria Memorial Hospital and

Sherman Hospital cases.]


II. MEDICAL PROCEDURES AND SERVICES PROVIDED TO ELIDIA LOPEZ BY
CHILDREN'S MEMORIAL HOSPITAL LACKED PROPER MEDICAL NECESSITY

Defendants should not be compelled to pay for unnecessary care


rendered by a hospital. The hospital's action is based on an

implied contract for the services rendered. As noted in Rubloff &

Co. v. Dover National Bank, 80 Ill.App.3d 867, 875, 400 N.E.2d 614,
620 (1st Dist. 1980), "[a] contract implied in law is equitable in

its nature, predicated on the fundamental principle that no one


should unjustly enrich himself at another's expense." Therefore,
Elidia Lopez' hospital bill are to be examined in light of whether

the services were medically necessary. To provide for any other


construction of the implied contract would be to allow the hospital

to unjustly enrich itself by unnecessarily providing services and


prolonging hospital stays so the hospital could collect greater

revenues.

The implied contractual obligation not to unnecessarily charge


for services is even stronger in the context of this case

considering the fiduciary obligation of the hospital to its

- 206 -
patient. Emmett v. Eastern Dispensary and Casualty Hospital, 396

F.2d 931, 935 (D.C. Cir. 1967). The situation in the instant

proceeding is akin to that presented in Neville v. Davinroy, 41

Ill.App.3d 706, 711, 355 N.E.2d 86, 90 (5th Dist. 1976), where the

court reversed an award of attorney fees because more than just the

number of hours billed had to be considered in assessing fees. The

court found that the value of services must be determined by

closely examining the need for and results of the services billed.

The hospital has the burden of showing by evidence the

reasonable value of its services. Inherent in this inquiry is

whether the medical services were necessary in the first place.


The "assessment of the reasonableness of a private hospital's
charges must include consideration and recognition of the
particular hospital's costs, functions and services." Victory

Memorial Hospital v. Rice, 143 Ill. App. 3d. 621, 625, 493 N.E.2d
117, 120 (2d Dist. 1986). In addition, the reasonableness of the
charges is measured against "the usual and customary charges for

services" in the particular hospital. Id. at 625, 493 N.E.2d at


120, cited with approval in Sherman Hospital v. Wingren, 169 Ill.

App. 3d 161, 164, 523 N.E.2d 220, 222 (2d Dist. 1988) (emphasis

supplied). See In Re Estate of Wade, 156 Ill. App. 3d 844, 846,

510 N.E.2d 99, 100 (1st Dist. 1987) (initial inquiry of the court

is the reasonableness and necessity of the private duty nursing


services). In the instant case, the hospital must initially prove

the medical necessity of Elidia Lopez' hospitalization in order to

meet its burden of proving the value of the services rendered.

- 207 -
The hospital was under a duty to review the hospital treatment

it provided to Elidia Lopez in the hospital. The Illinois Supreme

Court in its landmark opinion in Darling v. Charleston Community

Memorial Hospital, 33 Ill.2d 326, 211 N.E.2d 253 (1965),

established that hospitals can be held liable, even for the

negligence of private physicians with staff privileges, for failing

to comply with the hospital's duty of care owed to patients. The

court held that the Standards for Hospital Accreditation, the state

licensing regulations and the hospitals own by-laws demonstrate

that the medical profession and other responsible authorities

regard it as both desirable and feasible that a hospital assume


certain responsibilities for the case of the patient. Id. at 257.
Each of these standards has been violated by the hospital's
conduct. The Darling court cited with approval Bing v. Thunig, 2

N.Y.2d 656, 143 N.E.2d 3, 8 (1957), in which a New York court


stated:
The conception that the hospital does not undertake to
treat the patient, does not undertake to act through its
doctors and nurses, but undertakes instead simply to
procure them to act upon their own responsibility, no
longer reflects the fact. Present day hospitals, as
their manner of operation plainly demonstrates, do far
more than furnish facilities for treatment. They
regularly employ on a salary basis a large staff of
physicians, nurses and interns, as well as administrative
and manual workers, and they charge patients for medical
care and treatment, collecting for such services, if
necessary, by legal action. Certainly, the person who
avails himself of "hospital facilities" expects that the
hospital will attempt to cure him, not that its nurses or
other employees will act on their own responsibility.

The Darling court noted that the "medical profession and other
responsible authorities regard it as both desirable and feasible

- 208 -
that a hospital ensure certain responsibilities for the care of the
patient. Id. at 332, 211 N.E.2d at 253. The Supreme Court found
that the Charleston "hospital failed to review" the private,
treating physician's work or to require consultation, and thus
upheld the jury finding that this was negligence. Id. at 333, 211
N.E.2d at 254. The failure of the hospital to exercise its review
responsibility in this case to determine the medical necessity of
Elidia Lopez' hospitalization is negligence and a breach of the
hospital's responsibility to defendants' daughter requiring that
the claim for these unnecessary services brought be dismissed.
See also Dreyer Medical Clinic v. Corral, 227 Ill. App.3d 221, 591
N.E.2d 111, 115 (2d Dist. 1992), where the medical clinic failed to
present any evidence that its services were necessary.

- 209 -
C. PICKING THE JURY IN A HOSPITAL COLLECTION CASE

1. LOOK FOR JURORS WHO ARE NOT AFRAID TO COMPLAIN ABOUT THINGS. THE
BEST JUROR IS ONE WHO HAS AT SOME POINT IN HER LIFE COMPLAINED ABOUT
A BILL. MAYBE
IT WAS JUST A $1 MISTAKE ON A RESTAURANT CHECK--YOU WANT THE JUROR WHO
HAS COMPLAINED ABOUT THAT $1 MISTAKE RATHER THAN THE JUROR WHO LET IT
SLIDE.

IN YOUR VOIR DIRE--ASK THE POTENTIAL JUROR IF THEY HAVE EVER


COMPLAINED
ABOUT A BILL OR THOUGHT THEY HAD BEEN OVERCHARGED FOR SOMETHING.
BEWARE OF THOSE WHO ANSWER NEGATIVELY. GRAB THE JUROR WHO DID SOMETHING
ABOUT IT WHEN THEY WERE WRONGLY CHARGED .

2. STAY AWAY FROM JURORS WHO ARE ACCOUNTANTS, BOOKKEEPERS OR THOSE IN


THE HEALTH CARE PROFESSION, OR THE SPOUSES OF THESE PEOPLE. THEY
WILL NOT BE
INCLINED TO SECOND GUESS THE HOSPITAL BILLING PROCEDURES. AND TRY TO
AVOID ENGINEERS...I HAVE NEVER MET AN ENGINEER SYMPATHETIC TO THE
PLIGHT OF A POOR PERSON. AND--IT SHOULD BE OBVIOUS---NEVER ALLOW A
BILL COLLECTOR ON YOUR JURY.

3. TEACHERS, ARTISTS, AND LOW PAID INDIVIDUALS ARE YOUR BEST JURORS.
IN FACT YOUR IDEAL JUROR WOULD BE A LOW PAID ART TEACHER.

4. PEOPLE WHO HAVE BEEN HOSPITALIZED ARE PREFERABLE TO THOSE WHO HAVE
NEVER BEEN HOSPITALIZED. A JUROR WHO HAS BEEN A HOSPITAL PATIENT IS
ONE WHO
HAS SEEN HOW HIGH HOSPITAL BILLS CAN BE.

5. JURORS WHO DO NOT HAVE HEALTH INSURANCE ARE VERY DESIRABLE. THEY
MAY HAVE A NEGATIVE VIEW OF THE AMERICAN HEALTH CARE SYSTEM AND THIS
WILL AID YOUR PRESENTATION.

6. ELDERLY JURORS WHO HAVE GOOD REASON TO FEAR HIGH MEDICAL BILLS MAY
BE VERY GOOD JURORS. HOWEVER, AVOID SENIOR CITIZENS WHO HAVE VERY
COMFORTABLE EXISTENCES AND AMPLE HEALTH INSURANCE...NO RETIRED BANK
PRESIDENTS PLEASE.
7. WHEN YOUR CLIENT IS BEING SUED BY A HOSPITAL WHICH IS AFFILIATED
WITH A RELIGIOUS DENOMINATION, YOU SHOULD CAREFULLY SCREEN POTENTIAL
JURORS OF THAT RELIGION. FOR EXAMPLE, IF YOUR CLIENT IS BEING S UED
BY MORMAN GENERAL HOSPITAL YOU WANT TO BE SURE THAT A MORMAN JUROR
WILL NOT ALLOW THEIR RELIGIOUS BELIEFS TO HAVE THEM LEAN TOWARD THE
HOSPITAL. THIS CAN BE A DELICATE SITUATION BUT YOU HAVE TO DEAL WITH
IT.

- 210 -
8. YOU ARE LOOKING FOR OPEN MINDED PEOPLE, PEOPLE WILLING TO
QUESTION AND EXAMINE WHAT LARGE INSTITUTIONS LIKE HOSPITALS DO. YOU
WANT TO STAY AWAY FROM AUTHORITARIAN PERSONALITIES--LIKE A LOT OF
ARMED FORCES PERSONNEL, BIG CORPORATION EMPLOYEES OR GOVERNMENTAL
BUREAUCRATS--WHO MAY BE WILLING TO ACCEPT ANYTHING THE HOSPITAL SAYS
WITHOUT QUESTION.

- 211 -
D. SAMPLE VOIR DIRE QUESTIONS

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS


MUNICIPAL DEPARTMENT, FIRST DISTRICT

ST. ANTHONY HOSPITAL )


)
Plaintiff, )
)
vs. )
)
TOMAS JONES, )
)
Defendant. )
DEFENDANT'S PROPOSED LIST OF ADDITIONAL VOIR DIRE QUESTIONS

The defendant, by his attorneys, the Legal Assistance


Foundation of Metropolitan Chicago, submits the following list of

additional voir dire questions to the Court for further inquiry of


prospective jurors.
1. Do you rent or own your dwelling?

2. Have you or a member of your immediate family ever been


hospitalized? If, so, please describe the details.
3. Have you or a relative of yours ever been employed by a
hospital? If, please describe the details.
4. Have you or a relative of yours ever been employed by an

insurance company? If so, please describe the details.


5. Do you think a hospital might ever make a mistake on its

bill to a patient?

6. Do you think a computer bill might ever have mistakes in


it?

7. Have you ever questioned a bill you received a being too

- 212 -
high? If yes, what did you do about it?

8. Do you think it is possible that a hospital might charge

a patient an unreasonably high amount for services provided?

9. Would you tend to give greater belief to the testimony of

a hospital employee or to the testimony of a patient, or would you

give each the same weight all other things being equal?

10. Have you or a member of your family ever been employed as

a bill collector?

11. Do you have any feeling against the defendant Tomas Jones

just because the hospital has sued him in this case?

12. The defendant in this case speaks Spanish. While he


understands a little English his testimony will be in Spanish.
Will you hold this against him in any way?
13. If the law, as it is explained to you by the judge,

requires the hospital to present certain evidence in order to


recover damages, and if the hospital fails to present that
evidence, would you be able to enter a verdict in the favor of the

defendant?
14. Do you and all members of your immediate family have
medical insurance? If yes please specify the insurance company,

HMO, or other entity that provides the medical coverage.

15. Can you give me your committment that if the

hospital fails to prove all the things the law requires it to


prove, that you will then find in favor of the defendant?

ALAN A. ALOP
- 213 -
- 214 -
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS
MUNICIPAL DEPARTMENT, THIRD DISTRICT

ELVIS HOSPITAL, )
)
Plaintiff, )
)
vs. ) No. 77 M1 142090
)
HARPO AND CHICO SOSA )
)
Defendants. )

MOTION FOR DIRECTED VERDICT

The defendants, at the close of all the evidence of the


plaintiff, move the Court for entry of an order directing a verdict
in favor of the defendants. In support of this motion the
defendants would show:

1. All of the evidence viewed in its aspect most favorable


to plaintiff shows as a matter of law that plaintiff has not proved
the allegations of its complaint.

2. All of the evidence viewed in its aspect most favorable


to plaintiff shows a matter of law that plaintiff has not proved
that the amount sought for the services and goods provided to

defendant is the reasonable value thereof.


WHEREFORE, the defendant moves the Court for entry of an order

directing a verdict in favor of the defendant.

One of Defendants' Attorneys

- 215 -
E. JURY INSTRUCTIONS

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS


MUNICIPAL DEPARTMENT, FIRST DISTRICT

ST. ANTHONY HOSPITAL )


)
Plaintiff, )
)
vs. ) No.
)
TOMAS JONES, )
)
Defendant. )

DEFENDANT'S PROPOSED
JURY INSTRUCTIONS

Defendant Tomas Jones, by his attorneys, requests the Court to

instruct the jury on the law set forth in these requests. These

requests are filed pursuant to Section 5/2-1107 of the Illinois


Code of Civil Procedure (735 ILCS 5/2-1107 and Supreme Court Rule
239).

- 216 -
Faithful performance by you of your duties is vital to the
administration of justice.

The law applicable to this case is contained in these


instructions and it is your duty to follow them. You must consider
these instructions as a whole, not picking out one instruction and
disregarding others.

If is your duty to determine the facts, and to determine them


from the evidence produced in open court. You are to apply the law
to the facts and in this way decide the case. Neither sympathy nor
prejudice should influence you. Your verdict must be based on
evidence and not upon speculations, agues or conjecture.

The evidence which you are to consider consists of testimony


of the witnesses and the exhibits offered and received. The
production of evidence in court is governed by rules of law. From
time to time it has been my duty as judge to rule on the
admissibility of evidence. You must not concern yourself with the
reason for these rulings.
Arguments, statements, and remarks of counsel are intended to
help you in understanding the evidence and applying the law, but
are not evidence. If any argument, statement or remark has no
basis in the evidence, then you should disregard that argument,
statement or remark.
Neither by these instructions nor by any ruling or remark
which I have made do I or have I meant to indicate any opinion as
to the facts.

I.P.I. No. 1.01


Defendant's Instructions No. 1
Given Refused

In determining whether a proposition has been proved, you


should consider all of the evidence bearing on the question without
regard to which party produced it.
- 217 -
I.P.I. No. 1.02
Defendant's Instruction No. 2

Given Refused

In considering the evidence in this case, you are not required


to set aside your own observation and experience in the affairs of
life but you have a right to consider all the evidence in the light
of your own observation and experience in the affairs of life.

I.P.I. No. 1.04


Defendant's Instruction No. 3

- 218 -
Given Refused

You are the sole judges of the credibility of the witnesses


and of the weight to be given to the testimony of each of them. In
determining the credit to be given any witness you may take into
account his ability and opportunity to observe, his memory, his
manner while testifying, any interest, bias or prejudice he may
have, and the reasonableness of his testimony considered in the
light of all the evidence in this case.

I.P.I. No. 2.01


Defendant's Instruction No. 4

Given Refused
- 219 -
Any verdict you reach must be unanimous. And in your
deliberations you should examine the questions submitted with a
proper regard and consideration for the opinions of each other.
You should listen to each other's arguments with an open mind, and
you should make every reasonable effort to reach a verdict.

I.P.I. No. 1.05


Defendant's Instruction No. 5

Given Refused

- 220 -
When I say that a party has the burden of proof on any
proposition, or use the expression "if you find" or "if you
decide", I mean you must be persuaded, considering all the evidence
in the case, that the propositions on which he has the burden or
proof is more probably true than not true.

I.P.I. No. 21.01


Defendant's Instruction No. 6

Given Refused

- 221 -
- 222 -
The fact that the defendants did not appear or testify at
this trial should not be held against them, or considered in any
fashion.

Defendants' Instruction No. 7

Given Refused

In this case, the plaintiff hospital provided services and


goods to the defendant. The hospital claims that the reasonable
- 223 -
value of such services and goods is $ , of which
$ has been paid to date, leaving an alleged balance of $
. The defendant denies that the reasonable value of such
services and goods is $ .

You must decide what goods and services were in fact delivered
to the defendant by the plaintiff hospital.

Then you must fix the amount of money which is the reasonable
value of the goods and services that were delivered to the
defendant by the plaintiff hospital. Once you have established
that amount you must deduct from it all amounts already paid on
this bill. You may then fix a judgment sum in an amount anywhere
from $0 to $ .

I.P.I. No. 30-06 Modified


Defendant's Instruction No. 8
Given Refused

In a case like this, where the plaintiff hospital and the


defendants did not agree beforehand to a price for the goods and
services rendered, the hospital has the burden of proving two
things. First, the hospital has the burden of proving that it has
- 224 -
provided the goods and services for which it seeks reimbursement.
Second, the hospital bears the burden of proving that all charges
it has made for such goods and services are reasonable.

Dreyer Medical Clinic v. Corral, 227 Ill.App.3d 221, 591 N.E.2d 111
(2d Dist. 1992).

Protestant Hospital Builders Club Inc. v. Goedde, 98 Ill. App.3d


1028, 424 N.E.2d 1302 (5th Dist. 1981).

Defendants' Instruction No. 9

Given Refused

- 225 -
In order to meet its burden of proof that its charges were
reasonable, the hospital must show that its charges to the
defendant were comparable to the charges of other similar
hospitals for similar services and that its charges to the
defendant were its usual and customary charges. In making the
determination of whether the hospitals charges were reasonable,
you may also consider the amounts the hospital will accept as
payment in full for similar services where the government or other
entities are paying the bill.

Protestant Hospital Builders Club Inc. v. Goedde, 98 Ill. App.3d


1028, 424 N.E.2d 1302 (5th Dist. 1981).

Defendant's Instruction No. 10


Given Refused

Forms of verdict are supplied with these instructions. After


- 226 -
you have reached your verdict, fill in and sign the appropriate
form of verdict and return it to this court. The verdict should be
signed by each of you. You should not write or mark upon this or
any of the other instructions given to you by the court. Please
return all instructions and forms of verdict to the court.

The parties in this case are:

Plaintiff: St. Anthony Hospital

Defendant: Tomas Castillo

If you find for the hospital and against Tomas Castillo


on the complaint, then you should use the form of verdict which
says:

"We, the Jury, find for the plaintiff and against


the defendant on the plaintiff's complaint. We
assess damages in the sum of $ ."

If you find for the defendant and against the


plaintiff then you should use the form of verdict
which says:
"We, the Jury, find for the defendant and against
the plaintiff."

I.P.I. No. 45.01


Defendant's Instruction No. 11

Given Not Refused

We, the Jury, find against the plaintiff and for the defendant
on plaintiff's complaint.

- 227 -
Chairperson

- 228 -
F. CLOSING ARGUMENT (Sample)

THIS IS THE CASE OF ONE WOMAN, MARGIE JONES, STANDING UP AGAINST A


A LARGE INSTITUTION AND IT'S VAST BUREAUCRACY. Margie Jones is
standing up against AN INSTITUTION THAT WOULD NOT LISTEN WHEN she
RAISED TROUBLING QUESTIONS ABOUT AN OUTRAGEOUSLY HIGH Hospital
BILL. A hospital bill that simply does not make any sense when you
look behind its numbers.

MARGIE JONES IS TRYING TO TELL THIS INSTITUTION THAT THEIR BILLING


PRACTICES and their charges ARE JUST PLAIN WRONG, that they are
going to have to fix their system. AND THAT SHE IS not GOING TO
take this kind of treatment without putting up a fight.

This IS A CASE THAT MUST HAVE RAISED MANY QUESTIONS IN YOUR MIND AS
YOU HEARD THE EVIDENCE UNFOLD, QUESTIONS THAT MAKE YOU WONDER
ABOUT HospitalS LIKE THE ONE IN THIS CASE. IN FACT...QUESTIONS
THAT MAKE REASONABLE PEOPLE LIKE MARGIE JONES GET VERY UPSET AT
INSTITUTIONS LIKE THE Hospital IN THIS CASE.

THE BIGGEST QUESTION IN THIS CASE IS WHY IN THE WORLD WAS she
CHARGED $9000 FOR FOUR DAYS IN THE Hospital?

AND THE OTHER BIG QUESTION HERE IS WHY WAS MS. JONES CHARGED $9000
for arm surgery WHEN OTHER PATIENTS WHO HAD THE SAME ARM SURGERY
AND THE SAME SERVICES WOULD ONLY HAVE BEEN CHARGED $2700?

I ALSO WANT YOU TO CONSIDER SOME other questions raised by this


case.....

FIRST AND FOREMOST... WAS IT REASONABLE FOR THE Hospital TO CHARGE


MARGIE JONES MORE THAN $9000 FOR FOUR DAYS IN THE Hospital?

WHY DID THE Hospital CHARGE MARGIE JONES FOR THINGS and services

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SHE NEVER RECEIVED?

DID THE Hospital THINK IT WAS OK TO CHARGE MARGIE JONES $14 FOR
EACH TYLENOL TABLET? DID THEY THINK SHE WOULDN'T NOTICE? Was this
a reasonable charge?

WHY DOES THIS Hospital SPEND FULLY ONE-FOURTH OF ITS OPERATING


BUDGET NOT ON PROVIDING MEDICAL SERVICES BUT RATHER ON
ADMINISTRATIVE MATTERS--THAT IS--PAPER PUSHING BUREAUCRATS?

DID THE Hospital THINK IT WAS FAIR TO CHARGE MARGIE JONES FOR AN
EXTRA DAY SHE SPENT IN THE Hospital-- A DAY SHE SPENT THERE BECAUSE
THE Hospital MADE A MISTAKE IN THEIR SCHEDULING OF HER LAB TEST?

IS THIS Hospital TAKING proper STEPS TO HOLD DOWN ITS COSTS OR IS


IT LETTING ITS PATIENTS DEAL WITH THAT SIDE OF THINGS

AND WHY DID THIS Hospital CHARGE A LOT MORE MONEY TO MARGIE JONES
FOR SOME OF ITS SERVICES--more money THAN OTHER HospitalS CHARGE
FOR THOSE VERY SAME THINGS?

WHAT YOU SAW AND HEARD IN THIS CASE WAS MARGIE JONES STANDING UP
AGAINST THE Hospital. MS JONES STOOD UP AGAINST THIS INSTITUTION
TO SEND THEM A MESSAGE. SHE IS SENDING A CRYSTAL CLEAR MESSAGE TO
THE Hospital AND THAT MESSAGE IS THAT PATIENTS MUST BE TREATED FAIR
AND SQUARE and that this hospital has a lot of work to do to make
that come about.

MARGIE JONES--LIKE ANY OTHER PATIENT FACED WITH A Hospital BILL--


ASKED FOR ONLY FOR ONE THING--FAIR TREATMENT BY THE Hospital IN THE
BILLING PROCESS.

BUT AS THE EVIDENCE SHOWED IN THIS CASE, SHE DID NOT GET A FAIR
SHAKE FROM THE Hospital. I WANT TO REVIEW WITH YOU NOW SOME OF
THAT EVIDENCE.

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AND WHILE I DISCUSS THE EVIDENCE I WANT YOU TO KEEP IN MIND A
MATTER OF LAW THAT THE JUDGE IS GOING TO INSTRUCT YOU ON.

I AM REFERRING TO WHAT'S CALLED THE BURDEN OF PROOF. THE BURDEN OF


PROOF IS JUST LAWYER JARGON FOR WHICH SIDE--THE PLAINTIFF OR THE
DEFENDANT--HAS THE RESPONSIBILITY OF PROVING SOMETHING. THE JUDGE
IS GOING TO INSTRUCT YOU THAT IN THIS CASE IT IS THE Hospital THAT
BEARS THE BURDEN OF PROVING THAT ITS CHARGES TO MARGIE JONES ARE
REASONABLE. ITS THE Hospital--NOT MS JONES-- THAT HAS TO ESTABLISH
THE REASONABLENESS OF ITS CHARGES. And to meet that burden the
hospital has to prove its case by a preponderance of the evidence--
-that means that when you weigh up all the evidence, the hospital
has to establish the greater weight of the evidence in order to
prevail today---if you add up all the exidence and believe its a
tie---then the defendant wins.

SO A BIG PART OF YOUR JOB IS GOING TO BE DECIDING WHETHER OR NOT


THE Hospital HAS MET ITS BURDEN IN THIS CASE OF PROVING THAT ITS
CHARGES WERE REASONABLE. IF THE Hospital DOESNT MEET THAT BURDEN,
IT SHOULD NOT RECOVER ONE CENT. But even if you do find that the
hospital established its case by the preponderance of the evidence,
even then your job is not done. Then your job is to make a
determination of what the reasonable value of its services was, and
only award the hospital that amount of money.

SO NOW LET'S FOCUS ON SOME OF THE EVIDENCE. Let us look at the


evidence and SEE WHETHER THE Hospital's CHARGES to Ms Jones WERE
REASONABLE.

YOU HEARD NURSE WILSON TESTIFY. SHE WORKS AT THE Hospital AND SHE
SAID THAT DUE TO A SCHEDULING ERROR THAT MARGIE JONES' LAB TEST HAD
TO BE PUT OVER FROM MARCH 7 TO MARCH 8. SHE SAID THAT this delay
COST MS JONES A DAY IN THE Hospital THAT SHE DIDNT HAVE TO BE THERE
AS A RESULT OF THE Hospital'S MISTAKE. AND THAT MEANS THAT MARGIE
JONES WAS BILLED $550 FOR THE Hospital room on MARCH 7 JUST BECAUSE
THE Hospital MADE A MISTAKE. I submit to you that because it was

- 231 -
the hospital's error, it is not reasonable to charge Margie Jones
for that extra day she was forced to stay in the hospital.

YOU ALSO HEARD MR THOMPKINS TESTIFY...HE WAS THE Hospital'S VICE


PRESIDENT. HE HAD SOME INTERESTING THINGS TO SAY. REMEMBER WHAT
HE SAID ABOUT HOW THE Hospital CHARGES DIFFERENT PEOPLE DIFFERENT
AMOUNTS FOR THE SAME SERVICES?

HE SAID THAT IF MARGIE JONES HAD BEEN ON MEDICAID, THAT HER BILL
WOULD HAVE BEEN $2700 IN TOTAL INSTEAD OF THE $9000 THAT THE
Hospital IS NOW CLAIMING.

THINK ABOUT THAT FOR A SECOND... Another PATIENT GOES INTO THIS
Hospital, HAS Arm surgery AND THE Hospital ACCEPTS $2700 AS FULL
PAYMENT FOR THE FOUR DAY STAY. BUT AT THE SAME TIME--- MARGIE
JONES has arm surgery AT THE SAME Hospital, she has THE SAME
TREATMENT, THE SAME SERVICE, THE SAME EVERYTHING, BUT MARGIE JONES
GETS A BILL FOR $9000. I submit to you that this is not a
reasonable bill.

Now I ASKED MR THOMPKINS IF HE THOUGHT it WAS FAIR to bill one


patient $2700 and another patient $9000 for the same service.
AND HE SAID "YES." That's what working at one hospital for twenty
years will do to you---that's what I call blind loyalty.

BUT THANK GOD THE DECISION ON THAT QUESTION IS NOT IN MR THOMPKINS'


HANDS BUT RATHER IN YOURS. TODAY YOU WILL BE DECIDING WHAT WAS
FAIR AND WHAT WAS UNFAIR--NOT MR. THOMPKINS. IT WILL BE YOUR JOB--
YOUR DUTY AS JURORS-- TO DECIDE IF IT WAS REASONABLE TO CHARGE
MARGIE JONES $9000 FOR THE SAME Hospital SERVICES FOR WHICH OTHER
PATIENTS WERE BILLED $2700.

WHAT ELSE DID MR THOMPKINS SAY? REMEMBER THAT HE SAID THAT IF MS


JONES HAD BLUE CROSS INSURANCE AT THE TIME SHE WENT TO THE Hospital
THAT BLUE CROSS WOULD HAVE ONLY BEEN EXPECTED TO PAY $5600 FOR MS
JONES' Hospital STAY.

- 232 -
THAT'S ABOUT SIXTY PERCENT OF WHAT MS JONES IS BEING ASKED TO PAY.
DID MR THOMPKINS THINK IT WAS FAIR TO CHARGE MS JONES THOUSANDS OF
DOLLARS MORE THAN WHAT A BLUE CROSS PATIENT WOULD HAVE TO PAY?
YES HE DID--THE Hospital APPARENTLY BELIEVES THIS-- BUT I AM
CONFIDENT THAT YOU WILL NOT ALLOW THIS TO HAPPEN.

MR THOMPKINS SAID ONE MORE THING THAT I WANT YOU TO GIVE SOME
THOUGHT TO.

HE SAID THAT 25% OF THE Hospital's operating BUDGET--ONE QUARTER OF


EVERY DOLLAR--GOES TO ADMINISTRATIVE EXPENSE...THAT MEANS THAT ONE
FOURTH OF ALL Hospital CHARGES GO TO PAY MR THOMPKIN'S SALARY AND
THE RATHER LARGE SALARIES OF COUNTLESS OTHER BUREAUCRATS AT THE
Hospital--OR Hospital ADMINISTRATORS AS THEY LIKE TO CALL
THEMSELVES. SUCH AS THE Hospital's chief executive, WHO GETS MORE
THAN $200,000 A YEAR FROM THE Hospital AND A LEASED VEHICLE.

ITS YOUR JOB TODAY TO DECIDE IF THATS REASONABLE, BECAUSE THATS


PART OF THE REASON THE BILL WAS SO HIGH IN THIS CASE. SOMEONE HAS
TO PAY THE BIG BUCKS TO MR. THOMPKINS AND HIS CREW. Is it
reasonable yhat a charitable organization, a non-profit hospital,
pays its top people this much and ends up having to charge higher
rates as a result.

AND WHEN YOU GO BACK TO DELIBERATE YOU HAVE TO CONSIDER other


things in the Hospital BUDGET TO DECIDE THIS CASE. NOTICE THAT THE
YEAR MS. JONES WAS IN THE Hospital THE Hospital TOOK IN 15% MORE IN
REVENUES THAN IT SPENT.

THAT MEANS THAT THIS NON-PROFIT Hospital CHARGED ITS PATIENTS 15%
MORE THAN IT HAD TO IN ORDER TO BREAK EVEN THAT YEAR. SO YOU
SHOULD START YOUR FIGURING BY CUTTING 15%--$1350-- OFF MS JONES'
BILL RIGHT FROM THE START.

REMEMBER TOO WHAT NURSE WILSON SAID ABOUT SOME OF THE CHARGES ON
THIS ITEMIZED BILL. [DISPLAY BILL TO JURY].

- 233 -
SHE SAID THAT MS JONES WAS CHARGED $14 FOR A TYLENOL TABLET ON
MARCH 7. AND ANOTHER $14 FOR A TYLENOL TABLET ON MARCH 8 AND THE
SAME TWO TIMES MORE ON MARCH 10. THAT'S $56 FOR FOUR TYLENOL
TABLETS. MARGIE JONES TESTIFIED THAT WHEN SHE GOT OUT OF THE
Hospital SHE PURCHASED 100 TYLENOL TABLETS FOR $2.50. SO THE
Hospital ADMITTED IT WAS CHARGING $14 FOR THE SAME MEDICATION THAT
ANYONE CAN BUY FOR A FEW PENNIES EACH.

NURSE WILSON ALSO SAID THAT MARGIE JONES WAS CHARGED $550 FOR THE
USE OF HER SEMI-PRIVATE ROOM EACH NIGHT AT THE Hospital. WHEN I
ASKED HER HOW MUCH CLARENDON Hospital, LOCATED JUST FOUR BLOCKS
DOWN THE STREET, CHARGED FOR A SEMI-PRIVATE ROOM, SHE SAID $400.
SO WHY DOES THIS Hospital CHARGE AN EXTRA $150 A NIGHT FOR A ROOM?

AND WHY SHOULD IT EVEN COST $400 TO HAVE A ROOM AT ANY Hospital I
ASK YOU? THE HOLIDAY INN CHARGES A LOT LESS AND YOU DON'T EVEN
HAVE TO SHARE YOUR ROOM THERE!

NURSE WILSON ALSO STATED THAT WHILE MARGIE JONES WAS CHARGED FOR
FOUR EKG TESTS AT $90 EACH, THAT THE MEDICAL HISTORY ONLY SHOWED
TWO EKG TESTS ACTUALLY WERE PERFORMED.

NURSE WILSON THOUGHT THAT TWO OF THE EKG TESTS PROBABLY WEREN'T
DONE ON MS JONES AND THAT SHE SHOULDNT HAVE BEEN BILLED FOR THEM.
AND, INCIDENTALLY, WHAT DID CLARENDON Hospital CHARGE FOR THE SAME
EKG TEST? HALF AS MUCH AS THIS Hospital, ONLY $45. AND DO YOU
REMEMBER WHAT MR THOMPKINS SAID IT COST THE Hospital TO DO AN EKG
TEST? HE SAID ABOUT $25. SO THE Hospital IS CHARGING $90 FOR A
TEST THAT COSTS IT ONLY $25.

I ALSO WANT TO REMIND YOU ABOUT THE CHARGES TO MS JONES FOR


CATHETER TUBING ON MARCH 9. MS JONES TESTIFIED THAT SHE NEVER DID
HAVE A CATHETER AND NO ONE FROM THE Hospital DISPUTED THIS. SO MS
JONES WAS CHARGED $112 FOR A CATHETER SHE NEVER RECEIVED.

Think also about the fact that this hospital is a teaching

- 234 -
hospital. Fully 25% of every dollar this hospital gets goes toward
the training of hundreds of young doctors and pays the salaries of
their teachers--other doctors at the hospital and the research
costs associated with a teaching hospital. Now there is nothing
wrong with the fact that this hospital teaches and trains the next
generation of doctors...thats fine. But the problem is that the
patients of this hospital--like Mrs Jones--are required to pay
hospital charges that are 25% higher in order to pay for these
doctors schooling. Imagine that---Mrs Jones is being asked to pay
an extra $2000 here to pay for the medical schooling of some
doctors who are going to go out and earn $200,000 a year soon...Ask
yourself if that makes sense?

If you dont think it makes any sense---and it sure doesnt--you


ought to consider slashing that $2000 off of Mrs Jones hospital
bill.

AND FINALLY, DON'T FORGET THE TESTIMONY OF THE Hospital


ADMINISTRATOR RESPONSIBLE FOR THE Hospital BUDGET. WHEN I ASKED
HIM HOW THE Hospital'S RATE INCREASES OVER THE PAST 5 YEARS
COMPARED TO INFLATION, HE SAID THAT IN EACH OF THE LAST 5 YEARS THE
Hospital RATE INCREASES HAVE BEEN GREATER THAN INFLATION. SO LAST
YEAR, FOR EXAMPLE, WHEN THE CONSUMER PRICE INDEX WENT UP 5.4%, HE
SAID THE Hospital PRICES WENT UP AN AVERAGE 9%.

AND HE SAID THE Hospital DID NOT HAVE ANYONE on staff WHOSE
SPECIFIC JOB WAS TO FIGURE OUT HOW TO CONTROL THE INCREASING COSTS
AND CHARGES OF THE Hospital. That is--the hospital hasn't taken
cost cutting or saving money seriously enough to assign that
responsibility to anyone. So I am asking you to cut another 5% off
of Mrs Jones' bill because that's the least amount the bill would
have been reduced if the hospital really cared about reducing its
costs and its charges to patients.

NOW THESE EXAMPLES OF THE TESTIMONY THAT I HAVE JUST DISCUSSED


RAISE SERIOUS QUESTIONS ABOUT THE Hospital'S BILLING PRACTICES.

- 235 -
THIS Hospital HAS BILLED ITS PATIENT FOR THINGS SHE NEVER RECEIVED.
MS JONES WAS BILLED FOR A CATHETER AND TESTS THAT
WERE NEVER PERFORMED ON HER.

THIS Hospital HAS A PRACTICE OF BILLING DIFFERENT PEOPLE DIFFERENT


CHARGES FOR THE SAME SERVICES.

WHAT MATTERS IS NOT WHAT THE Hospital TREATED YOU FOR BUT INSTEAD
WHO IS PAYING THE BILL. IF MEDICAID IS PAYING THE BILL IN THIS
CASE WOULD HAVE BEEN $2700. IF BLUE CROSS HAD BEEN PAYING THE
BILL WOULD HAVE BEEN $5600. BUT THE Hospital HAD TO ADMIT THAT
PEOPLE LIKE MARGIE JONES--PEOPLE WHO DON'T HAVE INSURANCE-- THEY
GET BILLED THE MOST BY THIS Hospital. THEY GET BILLED THE HIGHEST
AMOUNTS, FOR THE SAME SERVICES OTHERS PAY LESS FOR.

That boils down to this: IF YOU HAVE THE GOVERNMENT IN YOUR


CORNER, THAT IS, IF MEDICAID IS PAYING YOUR BILL, YOU END UP
PAYING THE LOWEST AMOUNT. IF YOU HAVE A BIG INSURANCE COMPANY
BEHIND YOU, LIKE BLUE CROSS, YOUR BILL IS LOWER TOO. BUT IF YOU'RE
LIKE MARGIE JONES, AND YOU DON'T HAVE THE PROTECTION OF THE
GOVERNMENT OR AN INSURANCE COMPANY, THIS Hospital MAKES YOU PAY THE
MOST FOR SERVICES. I am going to call that what it really is: its
a case of the hospital taking advantage of people who ordinarily
don't have the power or wherewithal to fight back. Its a case of
making the people who can least afford it pay more than others have
to pay. Its unfair, its wrong, but you can stop it, you can
prevent that result in this case.

THIS Hospital ALSO CHARGES MORE THAN THE OTHER Hospital THAT WAS
DISCUSSED, CLARENDON Hospital. WHILE CLARENDON CHARGES $400 A
NIGHT FOR A SEMI-PRIVATE ROOM, THIS Hospital CHARGES MORE THAN 37%
MORE FOR ITS SEMI-PRIVATE ROOM. AND THIS Hospital CHARGES 100%
MORE THAN CLARENDON FOR A URINE TEST. The hospital makes no
excuses for this either...they really did not even attempt to

- 236 -
justify their higher room rates or even to explain that.

AND THINK OF IT...$14 FOR A TABLET OF TYLENOL THAT YOU CAN BUY FOR
PENNIES. IF THE Hospital MARKUP ON TYLENOL--I MAKE IT ABOUT 720%--
IS THE SAME FOR THE OTHER MEDICATION GIVEN MS JONES OR THE TESTS
DONE ON HER-- THEN THIS Hospital IS BILLING IN AN OUTRAGEOUS
MANNER. BUT REMEMBER, MS JONES DOESNT EVEN HAVE TO SHOW THAT THE
Hospital ACTED OUTRAGEEOUSLY. THE QUESTION IS simply WHETHER THEY
ACTED REASONABLY IN BILLING MS JONES. AND NO ONE WHO LOOKS AT WHAT
THE Hospital DID IN THIS CASE CAN CONCLUDE THAT THE Hospital here
HAS ACTED IN A REASONABLE MANNER.

THE Hospital bill here IS RIDDLED WITH ERRORS. IT IS RIDICULOUSLY


HIGH AND ITS not based on WHAT services were PROVIDED BUT RATHER
ON WHO IS PAYING THE BILL. THIS BILL IS UNREASONABLE FOR ALL THESE
REASONS. AND MS JONES IS ASKING YOU, THE JURY, TO TELL THE
Hospital THAT THIS WILL NOT BE ALLOWED TO HAPPEN...at least not
here and now.

Soon the judge will give you instructions on the law that you will
apply to this case. And like I mentioned before , the judge will
tell you is that the burden in this case is on the hospital to
establish its case by a preponderance of the evidence. That means
that the hospital has to prove, for example, that its charges were
reasonable. And it has to prove the bill was reasonable by the
greater weight of the evidence. So that means it is not Ms Jones'
responsibility to prove that the hospital charges were
unreasonable...no, not at all. Instead, the burden is squarely on
the hospital to establish the reasonableness of its charges.

The hospital did not meet its burden in this case......

One more thing about the instructions. The judge will instruct
you that the hospital can only recover the reasonable value of
services provided. And the key ingredient here--reasonableness--
the instructions will tie what is REASONABLE to two factors---what

- 237 -
other hospital charge and what this hospital customarily and
usually charges.

The evidence here shows that the bill the hospital seeks to collect
is NOT reasonable because it is higher than other hospitals charge
[OR the hospital did not meet its burden by showing what other
hospitals charge] and this bill is NOT the customary bill for these
services....the evidence showed that most patients paid LESS for
the same services.

YOU THE JURY CAN SEND A MESSAGE TO THE Hospital BY YOUR VERDICT IN
THIS CASE. THAT MESSAGE IS THAT big INSTITUTIONS LIKE this
Hospital WILL NOT BE ALLOWED TO CHARGE PEOPLE THOUSANDS OF DOLLARS
FOR SERVICES UNLESS THEY MEET THE REQUIREMENTS OF THE LAW.

THE Hospital CAN RECOVER FOR THEIR SERVICES BUT ONLY WHERE THEY ARE
BILLING PEOPLE THE RIGHT AMOUNT BASED ON WHAT THE Hospital
ACTUALLY DID, AND A FAIR AMOUNT, BASED ON WHAT IS REASONABLE. IT
SHOULD NOT DEPEND ON WHO IS PAYING THE BILL LIKE IN THIS CASE. THE
CHARGES MUST BE REASONABLE AND THE Hospital IS GOING TO HAVE TO
meet its burden under the law by showing IT IS REASONABLE, WHICH
HAS CERTAINLY NOT OCCURRED IN THIS CASE.

THE MESSAGE TO THE Hospital SHOULD also BE THAT HIGHER MEDICAL


CHARGES WILL NOT BE TOLERATED WHERE AN INSTITUTION LIKE THIS HAS
RAISED ITS PRICES SIMPLY BECAUSE IT IS EASIER TO DO THIS THAN TO
HOLD DOWN ITS COSTS. HIGH PAID Hospital ADMINISTRATORS ARE GOING
TO HAVE TO WORK FOR THEIR SALARIES RATHER THAN SIMPLY RAISING
Hospital RATES YEAR IN AND YEAR OUT.

SKYROCKETING Hospital CHARGES LIKE THOSE IN THIS CASE, ARE


FINANCIALLY CRIPPLING PEOPLE LIKE MS JONES WHO DO NOT HAVE
INSURANCE.

AND THIS PHENOMENON IS HURTING people WHO DO HAVE INSURANCE AS

- 238 -
WELL, AS PREMIUMS CLIMB EVERY YEAR. MORE AND MORE PEOPLE ARE
FINDING THEMSELVES UNABLE TO PAY higher and higher INSURANCE
PREMIUMS, AND ENDING UP LIKE MS JONES, HAVING TO FACE A Hospital
BILL ON THEIR OWN.

AS I TOLD YOU AT THE BEGINNING OF THIS CASE, THIS IS THE CASE OF


ONE INDIVIDUAL WHO CHOSE TO STAND UP AGAINST EVER-SPIRALING
MEDICAL COSTS. MARGIE JONES HAS STOOD UP HERE AT THE RISK OF HER
CREDIT RECORD AND HER GOOD NAME.

SHE HAS HAD THE COURAGE TO SAY THAT SHE WILL PAY THE Hospital ONLY
WHAT IS DEEMED REASONABLE AND ONLY FOR WHAT SHE RECEIVED.

AND SHE IS STANDING UP AGAINST THIS Hospital'S POLICY OF CHARGING


DIFFERENT PEOPLE DIFFERENT AMOUNTS FOR THE SAME SERVICES. That
policy makes those who can least afford it pay for those who least
need it in our society......

ENTER A VERDICT FOR MS JONES AND AGAINST THE Hospital IN THIS CASE
AND YOU WILL SEND A MESSAGE TO THE Hospital ADMINISTRATORS, IN FACT
TO Hospital ADMINISTRATORS ALL ACROSS THIS CITY.

YOU WILL BE TELLING THEM TO GET THEIR HOUSE IN ORDER, TO CLEAN UP


THEIR BILLING PROCEDURES AND PUT CONTROLS ON THEIR BILLING
DEPARTMENT THAT WILL MAKE SURE THAT EVERY PATIENT IS BILLED FAIRLY
AND ACCURATELY.

YOU CAN SEND THAT MESSAGE TO THE Hospital WITH YOUR VERDICT IN THIS
CASE BECAUSE TODAY--for this day only-- YOU ARE THE BOARD OF
DIRECTORS OF THIS Hospital. Today you are the board of directors
for this hospital-- because today you have the power to make things
right, to make things fair.....

YOU HAVE THE AUTHORITY TO RIGHT A WRONG, TO PUT JUSTICE AND


FAIRNESS BACK INTO THIS Hospital's PROCEDURES.

- 239 -
THIS TRIAL AND YOUR VERDICT WILL BE THE ONLY CHANCE MS. JONES HAS
TO GET a measure of JUSTICE FROM THE SYSTEM. AFTER TODAY SHE WILL
NOT GET ANOTHER OPPORTUNITY TO HAVE THIS MATTER RESOLVED IN A FAIR
MANNER.

I MENTIONED TO YOU EARLIER THAT THE Hospital HAS THE BURDEN OF


PROVING THAT ITS $9000 BILL WAS REASONABLE. BUT THE EVIDENCE SHOWS
UNMISTAKEABLY THAT THE Hospital has NOT MET ITS BURDEN OF PROOF IN
THIS CASE. IT HAS NOT DEMONSTRATED by the greater weight of the
evidence THAT THE $9000 BILL WAS REASONABLE. It hasn't come close.

WHEN I BEGAN I TOLD YOU THAT THIS CASE RAISED A LOT OF QUESTIONS.
LET'S REVIEW THOSE 6 QUESTIONS AND ANSWER THEM RIGHT NOW.

THE FIRST QUESTion WAS WHY DID THE Hospital CHARGE $9000 FOR A FOUR
DAY Hospital STAY THAT OTHER PATIENTS WOULD HAVE ONLY HAD TO PAY
$2700 FOR.

THE ANSWER IS THAT THIS Hospital HAS A POLICY-- A POLICY THAT MOST
PEOPLE DON'T KNOW ABOUT-- THAT ALLOWS THIS TO HAPPEN....it's called
cost shifting or variable pricing.

THE SECOND QUEST WAS WAS IT REASonable FOR THE Hospital TO CHARGE
MORE THAN $9000 FOR THIS 4 DAY STAY? AND THE ANSWER TO THIS
QUESTION IS CLEARLY "NO". THE Hospital DIDNT SHOW IT TO BE
REASonable AS THEY HAD TO AND OF COURSE THERE JUST WASNT ANY WAY
THEY COULD HAVE SHOWN IT TO BE REASonable.

I ALSO ASKED AT THE BEGINNING WHY THE Hospital CHARGED MARGIE JONES
FOR THINGS SHE NEVER RECEIVED AND FOR A DAY IN THE Hospital CAUSED
BY Hospital ERROR.....

AND I ASKED IF THE Hospital THOUGHT IT WAS OK TO CHARGE $14 FOR


EVERY TYLENOL TABLET.... $14 for a tablet that Ms Jones herself
purchased outside the hospital for only four cents!

- 240 -
AND FINALLY I ASKED WHY THIS Hospital CHARGES MORE THAN OTHER
Hospital.....(elaboration)

YOUR MAIN RESPONSIBILITY TODAY IS TO FIGURE OUT WHAT AMOUNT-- IF


ANY-- WOULD BE REASONABLE FOR MARGIE JONES TO PAY. I WANT TO GIVE
YOU MY SUGGESTIONS NOW ON HOW YOU SHOULD DETERMINE THAT FIGURE.

FIRST YOUR STARTING POINT SHOULD BE NOT THE $9000 THE Hospital IS
DEMANDING BUT THE $2700 THE Hospital WOULD HAVE ACCEPTED IF MARGIE
JONES WAS A MEDICAID PATIENT. BECAUSE IT JUST WOULDNT BE FAIR TO
MAKE MS JONES PAY MORE THAN OTHER PATIENTS.

THEN YOU SHOULD TAKE 15% OFF THAT $2700--WHICH WOULD BRING IT DOWN
TO ABOUT $2300...THAT'S THE 15% PROFIT THE Hospital MADE EVEN
THOUGH ITS A NON-PROFIT CORPORATION.

THEN YOU SHOULD DEDUCT ANOTHER $450 FOR THOSE THREE TESTS THAT MS
JONES WAS BILLED FOR AND WHICH THE Hospital CANNOT SHOW THEY REALLY
WERE DONE. THAT BRINGS US TO $1850.

THEN I WOULD URGE YOU TO SEND THE Hospital A REAL CLEAR MESSAGE--
THAT THEY ARE NOT DOING THEIR JOB IN KEEPING COSTS DOWN OR CARING
ABOUT SPIRALLING Hospital COSTS. And it is not fair to ask Ms
jones to pay the schooling costs of doctors. YOU CAN SEND the
hospital a NICE MESSAGE by SLASHING THE BILL DOWN TO $500. THAT
WOULD BE FAIR TO MS JONES AND MIGHT CONVINCE THIS Hospital THAT
WHEN IT COMES TO BILLING AND COST Reductions, THEY CAN DO THINGS a
lot BETTER than the way they do them now.

THERE IS ONE final QUESTION THAT I WANT TO LEAVE YOU WITH, AND THIS
IS A QUESTION I WOULD ASK OPPOSING COUNSEL, MR. HUNTINGTON, TO
ANSWER FOR YOU WHEN HE ADDRESSES YOU IN A MOMENT.

AND THAT QUESTION MR. HUNTINGTON, IS, SHOULD MARGIE JONES BE


REQUIRED TO PAY MORE FOR FOUR DAYS IN THE Hospital THAN IT COSTS
TO SEND SOMEBODY TO COLLEGE FOR A YEAR? MEMBERS OF THE JURY--YOU

- 241 -
AND I BOTH KNOW THE ANSWER TO THIS QUESTION. LET YOUR VERDICT
TELL THE Hospital WHAT YOU BELIEVE.

OUR JURY SYSTEM DEPENDS ON PEOPLE like you TAKING TIME OUT FROM
your busy LIVES TO SERVE--AND WE APPRECIATE YOU DOING SO.

MEMBERS OF THE JURY--ON BEHALF OF MARGIE JONES I WANT TO AGAIN


THANK YOU FOR YOUR ATTENTION AND CONSIDERATION.

- 242 -

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