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Empire Health Foundation v. CHS/Community Health Systems Inc.

United States District Court, E.D. Washington

July 9, 2019

EMPIRE HEALTH FOUNDATION, a Washington nonprofit corporation, Plaintiff,
v.
CHS/COMMUNITY HEALTH SYSTEMS INC., a Delaware corporation; SPOKANE WASHINGTON HOSPITAL COMPANY LLC, a Delaware limited liability company; and SPOKANE VALLEY WASHINGTON HOSPITAL COMPANY LLC, a Delaware limited liability company, Defendants.

          ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT ON BREACH OF CONTRACT AND VIOLATION OF CHARITY CARE ACT

          SALVADOR MENDOZA, JR. UNITED STATES DISTRICT JUDGE.

         Plaintiff Empire Health Foundation sues Defendants CHS/Community Health Systems Inc., Spokane Washington Hospital Company LLC, and Spokane Valley Washington Hospital Company LLC (collectively “CHS”) for breach of contract, alleging it failed to fulfill the charity care commitments it made in its 2008 acquisition of two Spokane area hospitals. ECF No. 1. Before the Court is the Foundation's Motion for Partial Summary Judgment on Breach of Contract and Violation of Charity Care Act, ECF Nos. 93 & 94. The Foundation seeks partial summary judgment that CHS, by asking self-paying patients to pay deposits before screening them for charity care eligibility, both (1) breached the parties' contract, including two state agency certificates enforceable under it; and (2) violated the Charity Care Act, Revised Code of Washington (“RCW”) section 70.170.060(6) (2006), including its implementing regulation, Washington Administrative Code (“WAC”) section 246-453-020(1) (2007)-conduct that was unreasonable per se. Id. CHS opposes the motion, arguing it raises disputed facts and is unnecessary ahead of the scheduled bench trial. ECF Nos. 123 & 126. After reviewing the record and relevant legal authorities, the Court grants the motion because no genuine dispute exists as to any material fact and, as a matter of law, the Foundation is entitled to the narrow ruling it seeks.

         BACKGROUND

         In 2007, Empire Health Services and CHS entered an Asset Purchase Agreement under which Empire Health Services sold Deaconess Medical Center and Valley Hospital and Medical Center to CHS. ECF No. 14-1. The Foundation is a nonprofit community health foundation formed from the proceeds of the sale. ECF No. 1 at 1. The Foundation received all of Empire Health Services' rights and obligations when it dissolved following the sale. Id.

         Section 10.14 of the contract concerns “Indigent Care Policies.” ECF No. 95- 1 at 3-4. Section 10.14 provides,

As of the Closing Date, Buyers shall adopt the indigent care policies of CHS attached as Exhibit D hereto, including the relevant provisions of the billing and collections policy with respect to the indigent, which are at least as favorable to the indigent and uninsured as Seller's indigent care policy, including the relevant provisions of the billing and collections policy with respect to the indigent, for the Hospitals as Buyers' indigent care policy. No. patient will be turned away because of age, race, gender or inability to pay. Buyers shall use best efforts to cause the Hospitals to continue to provide services to patients covered by the Medicare and Medicaid programs and those unable to pay for emergent or medically necessary care at levels similar to the historic levels of indigent care previously provided by the Hospitals. For a period of at least ten (10) years following the Closing Date, Buyers will provide the Board of Trustees with an annual report of their compliance with this Section 10.14. Buyers will also continue to provide care through community-based health programs, including cooperation with local organizations that sponsor healthcare initiatives to address identified community needs and improve the health status of the elderly, poor, and at-risk populations in the community. This covenant shall be subject in all respects to changes in legal requirements or governmental guidelines or policies (such as implementation of universal healthcare coverage).

Id.

         Exhibit D, which section 10.14 cross-references, provides, “[i]n order to serve the health care needs of our community, and in accordance with RCW 70.170 and WAC 246-453, [each hospital] will provide ‘Charity Care' to patients or the ‘Responsible Party' without financial means to pay for ‘Appropriate hospital-based medical services.'” ECF No. 95-2 at 3, 16. Exhibit D mandates that “[e]ligibility determinations regarding Charity Care and decisions regarding collection of amounts owed to [each] Hospital by Responsible Parties shall be made in accordance with this Policy and the Procedures contained in this Policy.” Id. at 4, 17.

         Exhibit D then establishes the following procedures:

[Each] Hospital shall make an initial determination of Charity Care eligibility at the time of admission or as soon as possible following the initiation of services to the patient. [Each] Hospital will suspend all collection efforts (other than third party payors) and will not require any deposit pending an initial determination of Charity Care eligibility or pending a final determination of Charity Care eligibility in the event that the initial determination of sponsorship status indicates that the Responsible Party may meet the criteria for classification as an Indigent Person.

Id. at 6, 19. Exhibit D's requirement that the hospitals “suspend all collection efforts” and “not require any deposit pending an initial determination of Charity Care eligibility” tracks applicable statutory and regulatory law.[1]

         Pursuant to the contract, CHS applied for Certificates of Need from the Washington State Department of Health. ECF No. 95-8 at 2; ECF No. 95-9 at 2. The Department granted CHS's applications “pending agreement to the following conditions”:

[Each hospital] will provide charity care in compliance with the charity care policies provided in this Certificate of Need application, or any subsequent policies reviewed and approved by the Department of Health. [Each hospital] will use reasonable efforts to provide charity care in an amount comparable to or exceeding the average amount of charity care provided by hospitals in the Eastern Washington Region. Currently, this amount is 3.35% of the adjusted revenue. [Each hospital] will maintain records documenting the amount of charity care it provides and demonstrating its compliance with its charity care policies.

ECF No. 18-1 at 2-3; accord Id. at 5. The Department elsewhere described this condition as “requir[ing] CHS to increase the level of charity care to the regional average.” ECF No. 63-7 at 41. CHS agreed to this condition. ECF No. 18-2 at 2, 4. Then, in 2008, the Department issued the Certificates of Need and approved the ...


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