Thursday, December 13, 2007
Are foundations set up to administer the clinical practices of faculty at medical schools eligible for charitable immunity? I will discuss the issue, which has arisen in Virginia, over my next two posts. This post will discuss background information and the facts. Tomorrow's post will offer my analysis. The facts of the case in both posts are taken from the briefs.
Only nine states retain some form of charitable immunity: Alabama, Arkansas, Georgia, Maine, Maryland, New Jersey, Utah, Wyoming, and, significantly for this story, Virginia. The gist of charitable immunity is that a charity is not liable to its beneficiaries for basic negligence.
A couple of years ago, doctors at two teaching hospitals in Virginia (the University of Virginia (UVA) and Eastern Virginia Medical School), who had previously formed foundations to organize their clinical practices, began claiming charitable immunity. Virginia circuit court judges reached opposing conclusions on whether the foundations were, indeed, charities. The Supreme Court of Virginia granted an appeal in Crystal Ann MacArthur, a minor, etc., et al. v. University of Virginia Health Services Foundation (Record No. 070475). Oral arguments are scheduled for next month.
In the case, Crystal Ann was admitted to UVA Medical Center in 2002 for treatment of hydrocephalus. Allegedly, physicians delayed surgery on her emergent condition for 25 hours, resulting in her becoming permanently blind. The organization claiming charitable immunity is the UVA Health Services Foundation (HSF), a corporation comprising all of the attending physicians in the hospital. According to the founding chief executive officer of HSF:
[W]e set up the Health Services Foundation for the primary responsibility of getting the billing and collection out there straight, running it more like a business, getting more collections into the system so we could put them back into the medical school. So my first task was to set that up and find a good billing system.
To that end, HSF has a collection and billing staff of 115 people, including five who exclusively institute collection proceedings against patients who do not pay. HSF pursues these claims unless and until the patient establishes indigency. In 2005, HSF filed, on average, over 350 warrants in debt per month in an attempt to recover approximately $33 million in fees.
HSF has been extremely successful. In 2004, its receipts exceeded $244 million. What happens to that money? In general, the funds do not directly support the medical school. The vast majority of the money is paid to physicians employed by HSF (who are all also employed by the medical school and receiving base salaries of approximately $100,000).
So, what's the charitable purpose? HSF claims it is to provide medical education, medical research, and patient care without regard to the patients' ability to pay. It appears HSF's argument has two parts. First, supplementing the physicians' incomes allows the medical school to attract a great faculty (thus providing medical education and medical research). Second, HSF provides care to indigent patients.