Colomar v. Mercy Hosp., Inc.

• Decision Date: 17 November 2006
• Docket Number: No. 05-22409-CIV-SEITZ.,05-22409-CIV-SEITZ.
• Citation: 461 F.Supp.2d 1265
• Parties: Barbara COLOMAR, on behalf of herself and all others similarly situated, Plaintiff, v. MERCY HOSPITAL, INC., and CATHOLIC HEALTH EAST, INC., Defendants.
• Court: U.S. District Court — Southern District of Florida

461 F.Supp.2d 1265

Barbara COLOMAR, on behalf of herself and all others similarly situated, Plaintiff, v. MERCY HOSPITAL, INC., and CATHOLIC HEALTH EAST, INC., Defendants.

No. 05-22409-CIV-SEITZ.

United States District Court, S.D. Florida.

November 17, 2006.

COPYRIGHT MATERIAL OMITTED

Bryan Anthony Vroon, Vroon & Crongeyer, Atlanta, GA, Caryn Becker, Kelly Dermody, Richard Heimann, Lieff Cabraser Heimann & Bernstein, San Francisco, CA, Dewitt M. Lovelace, Lovelace Law Firm, Destin, FL, Don Barrett, Barrett Law Offices, Lexington, MS, Joseph E. Bartel, Sarasota, FL, Sidney A. Backstrom, Scruggs Law Firm PA, Oxford, MS, Theodore Jon Leopold, Ricci Leopold, Palm Beach Gardens, FL, for Plaintiff.

Alan Richard Poppe, Buchanan Ingersoll, Christina Maria Ceballos-Levy, Robert Donald Wike Landon, III, Thomas H. Seymour, Kenny Nachwalter Seymour Arnold Critchlow & Spector, Laura Ganoza, Buchanan Ingersoll, Lewis Warren Fishman, Miami, FL, Steven E. Bizar, Buchanan Ingersoll, Philadelphia, PA, for Defendants.

ORDER DENYING DEFENDANT MERCY HOSPITAL'S MOTION TO DISMISS PLAINTIFF'S SECOND AMENDED COMPLAINT

SEITZ, District Judge.

THIS MATTER is before the Court on Defendant Mercy Hospital, Inc's ("Mercy's") Motion to Dismiss the Second Amended Complaint ("SAC") [DE-55].¹ In an earlier, partial ruling on this Motion, the Court dismissed Counts Three and Four alleging unjust enrichment and a violation of the duty of good faith and fair dealing. See DE-90. The Court also partially dismissed Count Two alleging a violation of Florida's Deceptive and Unfair Trade Practices Act, Fla. Stat. § 501.201, et seq. ("FDUTPA") insofar as that claim involved allegations of deceptiveness on Mercy's part. See id. The Court reserved ruling on Count One (breach of contract) and Count Two (FDUTPA-unfairness), however, and requested supplemental briefing on the question of what legal standard governs Plaintiffs allegations of unreasonable pricing, which forms the basis for Plaintiff's breach of contract and FDUTPA claims.

Having now considered the additional briefing, and reviewed the SAC in a light most favorable to Plaintiff and drawn all reasonable inferences therefrom in Plaintiff's favor, the Court finds that the allegations of unreasonable pricing in the SAC meet Plaintiffs burden of pleading claims for breach of contract and violation of FDUTPA. Therefore, Mercy's Motion to Dismiss is denied.

I. Factual and Procedural Background

This is a putative class action filed on behalf of uninsured patients at Mercy Hospital. Plaintiff was a patient at Mercy between March 5-6, 2003. SAC [DE-47] ¶¶ 5, 41-42. At the time of her admission to Mercy, Plaintiff was uninsured and did not qualify for Medicaid or other assistance programs. SAC ¶¶ 5, 41. Plaintiff came to Mercy due to shortness of breath. Id., ¶¶ 15, 42. She had a chest x-ray, ventilation/perfusion lung scan and an EKG. Id. She was treated with steroids, oxygen and given respiratory therapy. Id. Her entire stay lasted approximately 26 hours. Id. Plaintiff does not allege any deficiency in the care she received from Mercy. Rather, her complaint targets Mercy's billing policies and practices.

Prior to receiving any treatment or services from Mercy, Plaintiff signed an "Authorization and Guarantee" form (the "contract") in which she agreed to pay all bills not otherwise covered by insurance or other means. SAC ¶ 66. However, the services she would need and the prices she would pay were unspecified in the contract. Id. ¶ 65. After Plaintiff was discharged from the hospital, she received a bill from Mercy totaling $12,863.00. SAC ¶ 43. As of the filing of the SAC, Plaintiff had made payment on the bill in the amount of $1,750.00. SAC ¶ 45. The balance was sent to collections. Id.

In her First Amended Complaint ("FAC"), Plaintiff alleged that the bill she received from Mercy was inflated and unfair when compared to the rates charged to, and accepted from, patients with insurance or patients covered by Medicaid or Medicare. See FAC ¶ 45. She argued that Mercy's differential pricing alone was sufficient to constitute a breach of contract because Florida law requires the amount of an open pricing contract to be reasonable. See Payne v. Humana Hosp., 661 So.2d 1239, 1242 (Fla. 1st DCA 1995); Mercy Hosp. v. Carr, 297 So.2d 598, 599 (Fla. 3rd DCA 1974). While the Court agreed with Plaintiff that an open pricing term (like the price of Mercy's services in the contract) must be reasonable, Florida law requires more than mere allegations of differential pricing to establish unreasonableness. See Hillsborough County Hosp. Auth. v. Fernandez, 664 So.2d 1071, 1072 (Fla. 2d DCA 1995) ("evidence of these contractual discounts [to Medicare patients and the like], standing alone, is insufficient to prove that Tampa General's charges were unreasonable."). Therefore, the Court dismissed Plaintiffs FAC, but granted leave to re-plead with additional facts which would establish unreasonableness. Because the FDUTPA claim relied on similar allegations of unreasonableness, the Court dismissed that count but also granted leave to replead.

Thereafter, Plaintiff filed her SAC, adding the following factual allegations regarding the reasonableness of Mercy's prices:

(1) Plaintiff was charged nearly $12,863 for medical services, while the actual costs of the services were only $2,098;

(2) CHE hospitals (of which Mercy belongs) generally charge uninsured patients rates at 370% of Medicare reimbursement rates;

(3) Mercy in particular charges uninsured patients rates at 450% of Medicare reimbursement rates;

(4) CHE hospitals rank among the top 13% of all hospitals nationwide in charges (including both for-profit and non-profit hospitals);

(5) CHE's cost-to-charge ratio is 394%, meaning that on average CHE hospitals charge almost four times their costs to uninsured patients;

(6) CHE hospitals rank in the top 10% of hospitals nationwide in terms of cost-to-charge ratio.

See Second Amended Complaint [DE-47] ¶¶ 30-32, 43-45. Mercy responded with the instant Motion to Dismiss, contending that these new allegations do not cure Plaintiff's complaint.

II. Motion to Dismiss Standard

Federal Rule of Civil Procedure 12(b)(6) provides that a party may move the Court to dismiss a claim for "failure to state a claim upon which relief can be granted." Rule 12(b)(6) tests the legal sufficiency of a party's claim for relief. Such a motion does not decide whether the plaintiff will ultimately prevail on the merits, but instead whether she has properly stated a claim and should therefore be permitted to offer evidence to support it. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). The rule provides that dismissal is inappropriate unless "the movant demonstrates `beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle h[er] to relief.'" Harper v. Blockbuster Entertainment Corp., 139 F.3d 1385, 1387 (11th Cir.1998) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). To survive a Rule 12(b)(6) motion to dismiss, a complaint generally need only provide a short and plain statement of the claim and the grounds on which it rests. Conley, 355 U.S. at 47, 78 S.Ct. 99. When a claim is challenged under Rule 12(b)(6), a court will presume that all well-pleaded allegations are true and view the pleadings in the light most favorable to the plaintiff. Scheuer, 416 U.S. at 236, 94 S.Ct. 1683; Arango v. U.S. Dept. of Treasury, 115 F.3d 922, 923 (11th Cir.1997).

III. Analysis

A. Unreasonable Pricing Claims

A thorough review of the case law from Florida and elsewhere leads to the conclusion that no single factor can be used to determine the reasonableness of Mercy's hospital charges. Rather, several non-exclusive factors are relevant to the inquiry. As discussed in more detail below, those factors include but are not necessarily limited to: (1) an analysis of the relevant market for hospital services (including the rates charged by other similarly situated hospitals for similar services); (2) the usual and customary rate Mercy charges and receives for its hospital services; and (3) Mercy's internal cost structure. Consideration of the SAC in light of these factors establishes that Plaintiff has stated a claim for breach of contract and violation of FDUTPA based on unreasonable pricing.

1. Market Analysis

Mercy argues that even with the new allegations, Plaintiffs SAC still fails to state a claim and that, in fact, the new allegations affirmatively establish that Plaintiff can plead no facts that would entitle her to relief. The thrust of Mercy's argument is that Plaintiff can only establish an unreasonable pricing claim by pleading and proving that Mercy's charges grossly exceed the range of prices other hospitals in the same market charge. Mercy maintains that Plaintiff concedes in ¶ 30 of the SAC that CHE's and Mercy's prices are within the range of what other hospitals charge, and therefore Plaintiff has pled herself out of court. Paragraph 30 states in full that:

According to statistics derived from the figures that all hospitals are required to provide to the government, in 2004, CHE's Chargemaster prices — and, accordingly, the prices charged to uninsured patients — were, on average, 370% higher than Medicare reimbursement rates for non-outlier reimbursements, compared with the national average of 292%. Based upon these figures, on average, CHE's prices, and, therefore, charges to uninsured patients, fall in the top thirteen percent of all hospitals (including both for profit and not-for-profit) across the country. Mercy's argument based on ¶ 30 fails both as a matter of fact and law. First, Plaintiffs SAC contains sufficient allegations that Mercy's charges are not "within the range" of the market. Second, and more importantly, a market analysis is not the sole measure of evaluating reasonableness.

(a) Plaintiff's Market...