April 22, 2022

Hospitals’ Potential Liability for Failing to Disclose Emergency Room Facility Fees Explored by California Court of Appeal

California hospitals should be aware of a new California Court of Appeal decision that explores whether hospitals can be held liable for failing to disclose their emergency room fees to patients prior to evaluating/treating them for emergency medical conditions. Prior cases addressing the issue uniformly have found in favor of the hospitals on a variety of grounds. The new case, Torres v. Adventist Health, discusses the issue in depth and, despite holding in favor of the hospital, contains dicta that appears to give plaintiff lawyers a roadmap into how to successfully plead such a cause of action. However, the roadmap it provides is problematic (and not likely to be followed in future cases) as the court did not consider important considerations that make its discussion of the issues incomplete.

Factual Background

In this case, Kasondra Torres alleged that she went to the Adventist hospital emergency room to receive treatment for an emergency medical condition, received the treatment, and signed a contract agreeing to pay the hospital charges. She sued, claiming that the hospital violated the Consumer Legal Remedies Act (CLRA) by failing to disclose that she would be charged an Evaluation and Management Services Fee (“EMS Fee”) for use of the hospital’s emergency room in addition to the fees charged for the supplies and services provided.  She claimed that she was unaware of the fee and that the hospital had a duty to disclose it to her prior to providing the emergency services.

Adventist hospital moved for judgment on the pleadings, claiming that it complied with California law regarding disclosure of hospital prices by posting its chargemaster listing all of its charges on a state-run website and posting a sign in its emergency room informing patients that its chargemaster was available for review in accordance with the California statute and that this disclosure was adequate. The motion was granted, and the appeal followed.

Court’s Evaluation of the Plaintiff’s Allegations

The Court of Appeal determined that failing to disclose a material fact can be actionable under the CLRA inter alia where “the defendant has exclusive knowledge of a material fact not known or reasonably accessible to the plaintiff.” The plaintiff alleged that the chargemaster was unusable and effectively worthless for the purpose of providing pricing information to consumers; the chargemaster failed to include the standardized CPT codes recognized in the industry; and the chargemaster used coding and highly abbreviated descriptions that are meaningless to consumers. Accordingly, the SAC further alleges that the chargemaster was meaningless for purposes of pricing transparency. The hospital responded by claiming that the fact that it provided the disclosures required by California statute provided adequate disclosure as a matter of law.

The court reviewed the hospital’s chargemaster and other information that was available online and determined:

“Torres has stated facts sufficient to plead a lack of reasonable access to (1) the facts that trigger Hospital’s imposition of an EMS Fee and (2) the formula used to determine which level of EMS Fee to impose on an emergency room patient. In short, we cannot conclude as a matter of law that an objectively reasonable person who reviewed Hospital’s chargemaster and its form of 25 common outpatient procedures could discern the circumstances in which the EMS Fee is charged or how the amount of the EMS Fee is determined.”

Despite having found that inadequate disclosure had been properly pled, the court held that the complaint did not state a cause of action for violation of the CLRA because it failed to allege that the failure to disclose the EMS Fee was material or that the plaintiff relied on it:

 “A cause of action under the CLRA must be stated with reasonable particularity. . . . [F]or a plaintiff to adequately plead reliance, the plaintiff must allege and prove that he or she would have behaved differently if the information had been disclosed.”

The court therefore held that “[I]t is not reasonable to infer that Torres would have behaved differently by seeking treatment elsewhere. . . . [The services Torres received were described] as “high severity with significant threat.” Therefore, without more particular facts alleged, it is reasonable to infer that Torres suffered severe injuries that posed a significant threat based on these facts. In turn, it is not reasonable to infer Torres would have obtained treatment elsewhere if the facts about the existence, imposition and amount of the EMS Fee had been disclosed.”

Problems With the Court’s Analysis

The court’s holding suggests that a patient who went to the emergency room with a less acute medical problem (an injury or illness that was neither life threatening or creating acute pain) might be able to state a claim for violation of the CLRA. This suggestion is very problematic for several reasons. 

First, it overlooks the fact that the federal Emergency Medical Treatment and Active Labor Act (“EMTALA”) requires hospitals to provide emergency medical treatment to anyone who shows up in the emergency room without consideration of the patient’s ability to pay for the treatment. Requiring a hospital to provide detailed pricing information in the emergency room prior to providing treatment likely would discourage patients needing treatment from receiving it because they would be concerned about the cost. 

In a prior case, Gray v. Dignity Health (2021) 70 Cal.App.5th 225, the court recognized “requiring individualized disclosure that the hospital will include an ER charge in its emergency room billing, prior to providing any emergency medical services, is at odds with the spirit, if not the letter, of the hospital’s statutory and regulatory obligations with respect to providing emergency medical care.”  Thus, even if a patient could allege that he or she would have sought treatment elsewhere if informed of the hospital charges, no violation of the CLRA should be held to exist because disclosure of the charges prior to providing services would be inconsistent with EMTALA.

Second, It would be difficult to accurately inform a patient of what emergency services would cost prior to rendering them because: (1) until the patient has been examined and diagnosed, it is not possible to determine the level of services that the patient needs or the cost of those services; (2) in the emergency room context it is not possible to accurately determine whether the patient has insurance that will pay the claim or the amount that the patient will be responsible for after the insurance company pays; (3) in the emergency room context it is not possible to accurately determine if the patient will qualify for the hospital’s charity care policies or is entitled to any other discounts that the hospital offers to patients with no or inadequate insurance.

Practical Implications

The court did not discuss the impact of EMTALA on the hospital’s disclosure requirements or the practicalities of providing pricing information in the emergency room context. Its failure to do so may encourage plaintiff lawyers to attempt to raise CLRA claims in situations where they can attempt to adequately allege reliance on the non-disclosure. In order to protect themselves from these potential claims, hospitals should consider providing additional detail in their chargemasters and other disclosures (for example by including CPT codes, more detailed descriptions of what the charges are for and when they are applied, and making sure that the chargemaster descriptions are meaningful to a consumer and do not use cryptic abbreviations).