Lorens v. Catholic Health Care Partners

Charity Care Class Action Suit

Lorens v. Catholic Health Care Partners, No. 1:04
CV 1151 (N.D. Ohio, Jan. 13, 2005)

An uninsured patient filed a class action
suit against a hospital, alleging that the hospital breached its contract with
the federal government under 26 U.S.C. §501(c)(3)
and breached the charitable trust that it created when it accepted tax-exempt
status by charging uninsured patients higher rates than insured patients for
the same services. With respect to the breach of contract claim, the patient
alleged that as a tax-exempt, charitable organization, the hospital had a contractual
duty to provide charitable care to third-party beneficiaries such as the plaintiff.
The District Court for the Northern District of Ohio rejected the breach of contract
argument and granted the hospital’s motion to dismiss, holding that the Internal
Revenue Code does not create a binding contract between the hospital and the
federal government, there is no course of action under which the patient may
sue to enforce §501(c)(3), and that even if there were a contract and
an implied course of action, the patient would have no standing to enforce
such a contract. The court also granted the hospital’s motion to dismiss on
the breach of charitable trust claim, finding that the tax code does not create
a charitable trust.