by guest contributor Alan Alop (Deputy Director, Legal Assistance Foundation of Metropolitan Chicago)
Like most hospitals in America, St. James Hospital in Chicago Heights, Illinois, is a nonprofit, charitable institution. As a nonprofit corporation, it is exempt from paying state property, sales and income taxes and federal income tax, a status that saves the hospital millions of dollars each year. In return for its tax-exempt status, Illinois law, like many states, requires the hospital to provide free services to low-income patients, a duty known as “charity care.” While St. James Hospital does provide free treatment to some patients, in recent years the amounts provided have dwindled. According to a recent study, in 2004 St. James Hospital provided $6.6 million in charity-care services to the poor; in that same year the hospital’s tax-free status saved it $14.5 million in state and federal taxes.
Also like most hospitals, St. James significantly discounts the charges it bills to most of its patients. Privately insured patients and patients covered by Medicaid and Medicare receive billing discounts as high as 80%. Uninsured patients, most frequently the poor, receive no discounts and are expected to pay the full hospital bill.
Barbara Hill is one of an estimated 45 million Americans who lack health insurance coverage. Employed as a babysitter, Ms. Hill fits within federal guidelines defining indigency. In 2004 she received treatment at St. James Hospital for a sprained ankle. The hospital billed Ms. Hill its full, un-discounted charge, and hired a collection agency to collect that amount. Ms. Hill attempted to apply for a charity care write-off of the bill but the hospital ignored her two written inquiries. She then brought an action against the hospital, challenging: (1) the hospital’s failure to provide her free charity care; and (2) the hospital’s practice of charging uninsured patients triple or quadruple what it charges insured patients for identical services. The hospital had the action removed to federal court where, on December 20, 2006, Judge Ronald A. Guzman issued an opinion denying the hospital’s motion to dismiss. Hill v. Sisters of St. Francis Health Services, Inc., 2006 WL 3783415 (N.D. Ill. Dec. 20, 2006). On May 30, 2007, the parties entered into a confidential settlement agreement that addressed the plaintiff's concerns.