Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Cal. App.: Uninsured patients’ claims against hospital overcharges reinstated, (Jan 7, 2015)

By Linda O’Brien, J.D., LL.M.

An individual adequately alleged actual injury in his class action suit against a healthcare organization for unfair and deceptive business practices in relation to hospital charges he was billed after receiving emergency healthcare services while uninsured, the California Court of Appeal in Los Angeles has ruled. Thus, the trial court order dismissing his complaint was reversed (Sarun v. Dignity Health, January 6, 2015, Perluss, D.).

Dignity Health is a nonprofit organization that operates hospital and ancillary care facilities. Tony Sarun was uninsured when, after a motor vehicle accident, he received emergency healthcare services from a hospital operated by Dignity Health. Upon admission, he signed an agreement to pay the hospital charges unless discounts applied. The agreement stated that uninsured patients might qualify for government aid programs or financial assistance from Dignity. Subsequently, Sarun received an invoice from the hospital for over $23,000, reflecting an uninsured discount but no other discounts or financial assistance. Sarun made a partial payment and did not seek any further discount or financial assistance.

Sarun filed a putative class action suit against Dignity Health, alleging claims for unfair and/or deceptive business practices under California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA). Specifically, Sarun asserted that Dignity failed to disclose (1) uninsured patients would be required to pay more than other patients receiving the same services; (2) charges on the invoice were not readily discernable from the agreement; and (3) the invoiced charges exceeded the reasonable value of the services. The trial court sustained Dignity Health’s demurrer to Sarun’s complaint and dismissed the case on the basis that Sarun did not adequately allege “actual injury.” Sarun appealed.

Unfair competition under the UCL is “any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising.” The CLRA prohibits unfair and deceptive acts and practices in a “transaction intended to result or which results in the sale or lease of goods or services to any consumer.”

The appellate court determined that Sarun’s complaint adequately alleged injury in fact. Sarun alleged that he received an invoice from Dignity for an amount that he was obligated to pay under the admissions agreement. Although Dignity had not begun collection activity, the existence of an enforceable obligation constituted actual injury or injury in fact. Further discount or financial assistance may have been available to Sarun; however, the admissions agreement he signed obligated him to pay Dignity’s full charges.

Dignity Health’s argument that Sarun was required to apply for financial assistance to allege injury in fact was rejected. The appellate court noted that the doctrine of mitigation was a limitation on liability for damages and not a basis for extinguishing standing. Finally, Dignity Health’s assertions of other grounds for affirming the trial court order primarily addressed the merits of Sarun’s claims and should be resolved by the trial court. Thus, the trial court judgment dismissing the complaint was reversed and remanded for further proceedings.

The case is No. B251767.

Attorneys: Barry L. Kramer (Law Offices of Barry L. Kramer) and Barry R. Strange and Gretchen Carpenter (Strange & Carpenter) for Tony Sarun. Darius Ogloza, David Fortney, and Brian D. Berry (Ogloza Fortney LLP) for Dignity Health.

Companies: Dignity Health

Cases: StateUnfairTradePractices CaliforniaNews