S.D. Supreme Court Asked to Reinstate Lawsuit on Hospital Pricing

The South Dakota Supreme Court was asked earlier this week to reinstate two class-action lawsuits that allege two hospital systems charge unreasonable prices to patients who are not covered by health insurance or government programs.

The two lawsuits were dismissed earlier by Circuit Judge Gene Paul Kean, who ruled that Sherry Nygaard and Robert Dosch had no legal grounds to pursue their lawsuits.

Nygaard sued Sioux Valley Hospitals and Health System over charges she felt were excessive for intestinal surgery. Dosch sued Avera Health after treatment of a broken hip.

A nearly identical lawsuit was dismissed earlier this year against Rapid City Regional Hospital.

An attorney for the two patients told the high court that the hospitals breached an implied contract and violated a state law on deceptive trade practices.

Uninsured patients must sign a contract that does not specify a price, but the law requires that such charges should be reasonable, said Eric Magnuson, a lawyer from Minneapolis.

The hospitals also claim to be charitable institutions that bill patients according to their ability to pay, Magnuson said.

“The truth is they charge uninsured patients two or three times more than they charge anybody else,” Magnuson said. “They mislead the public.”

But lawyers for the two hospital systems said the hospitals have done nothing wrong.

Roberto Lange of Sioux Falls, representing Sioux Valley Hospital, said the hospital complies with such contracts by charging uninsured patients the standard rate.

The lawsuits attempt to change health care policy, but such issues should be handled by Congress or the South Dakota Legislature, not by the court system, Lange said.

The Supreme Court will decide the two cases in written opinions to be issued later.

Lawyers for the hospitals said there is no law requiring that uninsured patients get discounted rates. Insurance companies negotiate rates and government programs set prices for Medicare and Medicaid patients, they said.

The hospitals’ lawyers said if such lawsuits are allowed, judges and juries would be asked to determine reasonable charges for each patient.

Thomas Welk of Sioux Falls, a lawyer representing Avera Health, said questions arose on whether Dosch was a proper party to represent other patients in the class-action lawsuit. Another person could have substituted for Dosch, but lawyers for the patients failed to do so, he said.

The Dosch case involved questions about whether he waited too long to sue and whether he could have dealt with his claims of unreasonable charges when he filed for bankruptcy.

Justice Steven Zinter said he believes the law should allow some way for patients to challenge hospital charges they allege are too high.

Lange said Sioux Valley’s standard rates are available at the hospital’s business office, and an uninsured patient could request a discount as a charity case. If the hospital does not grant a discount and seeks to collect on the bill, a patient could use the collection case to challenge the amount, he said.

Magnuson said the two cases should be reinstated so the patients get a chance to present facts they believe will back up their allegations.

The 2005 Legislature passed a bill requiring hospitals to disclose prices for 25 of their most common inpatient procedures. The law, which goes into effect July 1, requires initial reports to start with prices from last July.

The South Dakota Association of Healthcare Organizations will coordinate the price postings to the state’s Web site.

Sioux Valley already lists on its Internet site the median, average, minimum and maximum prices charged for procedures. An official of Avera Health said it will begin listing prices on its Web site within a few days.