Is your 'non-profit' hospital entitled to immunity?

IS YOUR NON-PROFIT HOSPITAL REALLY A NON-PROFIT CHARITABLE HOSPITAL ENTITLED TO IMMUNITY? That was the issue with which the Virginia courts were confronted in this case. Often, hospitals that start out as non-profit charitable hospitals morph into for-profit hospitals. The fact that some patients

THE UNIVERSITY OF VIRGINIA HEALTH SERVICES FOUNDATION (HSF) IS A "NON-PROFIT" HEALTH CARE PROVIDER ORGANIZATION. It employs physicians who work at the University of Virginia School of Medicine (Medical School). Physicians employed by HSF are also employed by the Medical School. The physicians teach and perform research at the Medical School and render patient care services at the University of Virginia Medical Center and regional primary care offices. HSF bills patients for professional fees when their physicians treat patients. HSF was created in 1979, primarily to improve the patient billing and collection process, which was previously performed by the University of Virginia (The University). Its Articles of Incorporation state several purposes. Among them are the "exclusively charitable," scientific, and educational purposes for which the organization was created. The Articles are replete with references to charitable purposes and providing Medical Care to indigents with lees for indigents ranging from no fees whatsoever, to fifty-five percent of the charge for services provided after adjustments. If a medically indigent patient fails to complete the necessary financial paperwork, he is billed as a paying patient Further, HSF routinely files suits to obtain judgments against patients who have balances on their accounts. If HSF obtained a judgment against a medically indigent patient, the patient may still file financial status parperwork. However, if it is determined that the patient is medically indigent, a retroactive adjustment is made to the patient's account. Willard and Lisa Searcy, as Administrators of the estate of their daughter, Cara Leigh Searcy, filed a motion for judgment against Drs. Sturart Howards and Carl Lynch in the Circuit Court of Charlottesville. The Searcys alleged that Drs. Howards and Lynch, who were employees of HSF, acted negligently in commencing surgery on their daughter without reviewing a laboratory analysis of her blood. They alleged that as a direct and proximate cause of Drs. Howards' and Lynch's negligence, their daughter died. Drs. Howards and Lynch filed a special plea of charitable immunity, which was granted by the trial court. The hospital appealed.

THE SUPREME COURT OF VIRGINIA AFFIRMED THE JUDGMENT OF THE LOWER COURT DENYING THE SPECIAL PLEA OF CHARITABLE IMMUNITY. The court held, inter alia, that it was clear that the manner in which HSF actually conducted its affairs was not in accord with the charitable purpose stated in its Articles of Incorporation. The court concluded that HSF operated like a profitable commercial business with extensive revenue and assets. The court found that portion of HSF's services providing quality medical care to medically indigent patients to be commendable. However, it also found that when an organization is operated "in a manner calculated to produce a profit or gain," it is not entitled to charitable immunity. Accordingly, the Supreme Court of Virginia ruled that HSF was not immune from tort liability under the doctrine of charitable immunity.

THE FLOW OF MONEY FROM HSF TO PHYSICIANS TOTALLY UNDERMINED THE CHARITABLE PURPOSE FOR WHICH HSF WAS CREATED UNDER ITS OWN ARTICLES. The court noted that the physicians were employed by both HSF and the Medical School. Physicians' salaries were set by the Dean of the Medical School and the chair of the department for which those physicians worked. The departments' aggregate funds received tram HSF and the Medical School was used to pay physicians' salaries and benefits. The physicians' salaries consisted of two components: a guaranteed base salary, which was a fixed amount paid by the University and, in addition, an incentive payment for the physicians from their respective departments Then the two compensation components were combined. Editor's Note: For any organization or group of individuals to deliberately change the character of a hospital from a non-profit to afar profit organization is a travesty. However, for the hospital and/or its' physicians to seek to hide behind the doctrine of charitable immunity, knowing full well that the hospital or organization is, in fact, a for profit, organization, goes beyond the pale. It is unconscionable that those involved in fraudulently holding their organization out as a non-profit charitable corporation be entitled to the immunity that goes with the status of a hospital as a charitable, non profit institution. How many hospitals are doing just what the one in this Virginia case was doing? We wonder! University of Virginia Health Services Found. v. Morris, 2008 VASC (02/29/2008) S.E.2d -VA

A. David Tammelleo JD Editor & Publisher

Meet the Editor & Publisher: A. David Tammelleo, JD, is a nationally recognized authority on health care law Practicing law for over 40 years, he concentrates in health care law with the Rhode Island firm of A, David Tammelleo & Associates. He has presented seminars on medical, nursing and hospital law throughout the United States. In addition to his writings as Editor of Medical Law's, Nursing Law's & Hospital Law's Regan Reports, his legal articles have been published in the most prestigious health law journals. A prolific writer, his thousands of articles, as well as his achievements as an attorney and lecturer, have won him recognition in Martindale-Hubbell's Bar Register of Preeminent Lawyers, Marquis Who's Who in American Law, Who's Who in America and Who's Who in the World