Business Law

Sarun v. Dignity Health (Nov. 12, 2019, B288062) __ Cal.App.5th __ [2019 WL 5883550]

Issue class could be certified to address hospital’s billing of uninsured patients at chargemaster rates.

Following an automobile accident, plaintiff Tony Sarun received emergency care at Northridge Hospital Medical Center.  Sarun, who had no health insurance, signed an agreement requiring him to pay the hospital’s “full charges, unless other discounts apply.”  “Full charges” were defined as “the Hospital’s published rates (called the chargemaster), prior to any discounts or reductions.” After receiving an invoice reflecting chargemaster rates and an “uninsured discount,” Sarun filed a putative class action alleging unfair or deceptive business practices under the UCL and violations of the Consumers Legal Remedies Act. Sarun claimed that the hospital’s billing practices and prices were not adequately disclosed or readily ascertainable, and that its admissions contract contained an “open price” term (see Civ. Code, § 1611), making self-pay patients liable only for the reasonable value of the services provided. Sarun moved to certify a class of individuals who had received treatment at the hospital and were billed at chargemaster rates (with or without an uninsured discount).  The trial court denied certification, ruling that (1) the class was not ascertainable, (2) common issues of fact did not predominate, and (3) a class action was neither manageable nor a superior method for resolving the litigation. The trial court did not address Sarun’s alternative request for certification of an issue class limited to whether the hospital’s admissions contract included an “open price” term.

The Court of Appeal reversed in part. The court modified the class definition to cover uninsured individuals who received emergency care, signed the admissions contract, and were directly billed at chargemaster rates (with or without the uninsured discount). The court then directed the trial court to certify an issue class regarding whether the hospital’s admissions contract contained an open price term. First, the Court of Appeal explained that the trial court had used an unduly restrictive standard in finding the class was not ascertainable. Here, the class was ascertainable because its members could ultimately be identified based on objective characteristics, even if their identities were unknown at the class certification stage. Second, there was no need for the trial court to determine whether the hospital’s chargemaster rates were unreasonable; that issue could be litigated in follow-on damages litigation. And since all patients signed the identical admissions contract, the “open price” term issue was susceptible to class-wide adjudication. Finally, the Court of Appeal restricted the class to uninsured emergency care patients at the hospital, which cabined the trial court’s manageability concerns. 

The bulletin describing the Court of Appeal’s decision was originally prepared for the California Society for Healthcare Attorneys (CSHA) by H. Thomas Watson and Peder K. Batalden, Horvitz & Levy LLP, and is republished with permission. For more information regarding this bulletin, please contact H. Thomas Watson, Horvitz & Levy LLP, at 818-995-0800 or htwatson@horvitzlevy.com.

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