Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 78 C 578 -- Cale J. Holder, Judge.
Posner, Coffey, Circuit Judges, and Kellam, Senior District Judge.*fn*
The plaintiffs appeal the district court's order decertifying the class and dismissing the action. We affirm.
This appeal is the second time this case has come before this court. See Davis v. Ball Memorial Hospital, 640 F.2d 30 (7th Cir. 1980) ("Davis I"). This suit originally was filed on September 6, 1978 by three indigents,*fn1 formerly patients at Ball Memorial Hospital in Delaware County, Indiana ("Ball Memorial") on behalf of themselves and all low-income persons who have or expect to receive medical care and treatment at Ball Memorial Hospital. In their original complaint, the plaintiffs alleged that Ball Memorial Hospital failed to discharge its obligations under the Hill-Burton Act, 42 U.S.C. § 291 et seq. ; 42 U.S.C. § 300s et seq., and failed to give assurances that it would provide a reasonable volume of services to persons unable to pay for medical services. The Hill-Burton Act authorizes grants, loans, and loan guarantees to public and nonprofit private entities, such as hospitals and nursing homes, for the construction and modernization of medical facilities. 42 U.S.C. § 291b-291d. As a condition of such assistance, the hospitals agree that they will make available a "reasonable volume of services to persons unable to pay therefor," except when this requirement is "not feasible from a financial viewpoint."*fn2 42 U.S.C. § 291c(e)(2). According to the complaint, the plaintiffs allege they "had inadequate resources to pay for [the medical services provided to them by Ball Memorial Hospital], received no notice of the availability of uncompensated services, gained no determination of eligibility, and encountered difficulties in applying after discharge for a settlement of their bills under the program." Davis I at 33. After Ball Memorial moved to join the members of the Indiana State Board of Health, the State Health Commissioner ("state defendants"), and the Secretary of Health, Education and Welfare (now Health & Human Services) ("Secretary") as defendants, the plaintiffs amended their complaint to include these parties. The plaintiff class was divided into two classes defined as "all consumers of health care services who have been, are or will be eligible for uncompensated services from defendant Ball Memorial Hospital Association, Inc." ("Ball Memorial class") and "all consumers of health care services who have been, are or will be eligible for uncompensated services from defendant Ball Memorial Hospital Association, Inc." ("Ball Memorial class") and "all consumers of health care services who have been, are, or will be eligible for uncompensated services from any facility located in the State of Indiana which receives funds pursuant to the Hill-Burton Act, and therefore have given assurances ... to provide uncompensated care services and to follow pertinent regulatory and statutory provisions." ("statewide class"). Because Ball Memorial Hospital is located in Indiana, the Ball Memorial class was a subclass of the statewide class.
The statewide class charged the Secretary and the state defendants with violating the Due Process Clause of the Fourteenth Amendment*fn3 by failing to adopt proper notice and determination procedures in federal regulations or a state plan. The statewide class also alleged that the Secretary violated the Hill-Burton Act by failing to issue proper regulations or to monitor properly compliance with the assurance obligations. The Ball Memorial class alleged that the Ball Memorial Hospital violated both the Hill-Burton Act and the Due Process Clause of the Fourteenth Amendment because it did not fulfill its assurance obligation under the Hill-Burton Act. The plaintiffs claimed that Ball Memorial did not fulfill its assurance obligation under the Hill-Burton Act because it failed to adopt proper notice and determination procedures for providing low-cost care to indigent patients. Davis and Bright, who were Ball Memorial consumers, represented both classes. A class certification request for these classes were filed on July 16, 1979. The Secretary, arguing that the plaintiffs' claims against it had been mooted by the issuance of new federal regulations moved the court for dismissal from the lawsuit. The district court, without ruling on the class certification request, granted the Secretary's motion to dismiss, finding that the plaintiffs' due process claim had been mooted "to a great extent" by the new regulation. And, to the extent the due process claims survived, the allegations failed because the had not exhausted their administrative remedies as required by the Administrative Procedure Act, 5 U.S.C. § 553(e). The district court held that the Hill-Burton Act does not provide a private right of action against the Secretary or and the plaintiffs had failed to exhaust the administrative remedies expressly provided in the Hill-Burton Act have an enforceable interest, protected by due process in "compliance by the facilities with their assurances under the Act ...."*fn4 Davis I, 640 F.2d at 43. We further held that the Hill-Burton Act did not provide individuals with a private cause of action against the Secretary for any alleged failure to meet its enforcement obligations under the Act. Id. at 44.
On remand from this court, the plaintiff amended their complaint on February 19, 1981 to reassert in modified form their causes of action against the Secretary. The plaintiffs alleged that the Secretary violated the Due Process Clause of the Fifth Amendment by failing "to require himself or Indiana Hill-Burton facilities" to afford indigent patients notice of the availability of uncompensated services and to afford procedural safeguards in determining such patient's eligibility for uncompensated services ("due process claim").*fn5 In a separate cause of action the plaintiffs alleged a claim for relief under the Administrative Procedure Act, 5 U.S.C. § 701 et seq., based on the assertion that the Secretary "has unlawfully withheld and unreasonably delayed actions which he is compelled to take under the Hill-Burton Act" in monitoring and enforcing hospitals' obligations under the Act ("APA claim"). The claims against Ball Memorial and the state defendants were not modified. the plaintiffs requested an injunction against the Ball Memorial Hospital requiring it to adopt procedures for complying with its Hill-Burton obligation to provide that amount of free of low-cost hospital care to qualifying indigents. The plaintiffs also asked the court to require Ball Memorial to submit a plan for reimbursing the plaintiffs and the members of the class for money paid or owned to Ball Memorial for hospital care which should have been provided either free or at a reduced cost. The plaintiffs sought injunctive relief against the state defendants and the Secretary requesting that the court require them to submit:
"a detailed plan specifying procedures by which defendants will comply with their duties in the future under the Act and the Constitution including regulations and a plan by which such program will be administered; and by which defendants will remedy the injury caused to the plaintiff class by their failure to administer the Hill-Burton uncompensated care program."
On May 19, 1981, the plaintiffs modified the class definitions and again moved the district court to certify the two classes. The class definitions were identical to those requested on July 16, 1979, except that they added "those persons who asserted, were asserting, or would assert eligibility for uncompensated care."*fn6 On May 28, 1981, the district court commenced a class certification hearing. The plaintiffs introduced evidence in an attempt to demonstrate that some 98 Indiana health care consumers had in the past made specific complaints to the Secretary concerning their denial of uncompensated care at 38 facilities in the state of Indiana that had received Hill-Burton funding. Further, Thomas Reed, an employee of the Indiana State Board of Health testified that 274,138 Indiana residents met the income requirements for uncompensated care under the pre-1979 eligibility levels of the Hill-Burton Act and did not have health care insurance.*fn7
The district court withheld its ruling on the class motion after the class certification hearing choosing rather to sever the case and urge the parties to settle. Approximately two weeks after the class certification hearing, the district court severed the case, ordering the case against Ball Memorial to proceed and further ordering an indefinite stay as to all issues against the state defendants and the Secretary.
The plaintiffs and Ball Memorial entered into settlement negotiations and requested the Court's approval of a settlement agreement on January 20, 1982. Under the terms of the settlement, Ball Memorial agreed to institute procedures for notifying patients of the possible availability of free or reduced cost care under the Hill-Burton Act and to adopt an eligibility of free or reduced cost care under the Hill-Burton Act and to adopt an eligibility review procedure that would provide rejected applicants with a written notice of the reasons for their rejection. The plan also established an appeal procedure for rejected applicants. Ball Memorial further agreed to release and discharge from all suits, judgments and claims several individuals including the named plaintiffs, Davis and Bright. In return, Davis and Bright executed a mutual release with Ball Memorial in which they recited that "Davis/Bright hereby agree by way of their attorneys to file and in good faith pursue a motion to exclude Ball Memorial and its patients from the class of plaintiffs described in their complaint...."
On the same day that the plaintiffs and Ball Memorial filed their proposed settlement with the court, Robert Pagoria, an aggrieved health care consumer from another Indiana Hill-Burton facility, Starke Memorial Hospital in Knox, Indiana, sought leave of the court to intervene as a plaintiff and class representative of the statewide class. Pagoria alleged that, although he qualified for free or lowcost hospital care under the Hill-Burton Act, Starke Memorial Hospital of Knox, Indiana, failed to inform him of the availability of uncompensated services through the Hill-Burton Act, and proceeded to charge Pagoria its normal fee for the services provided, and assigned Pagoria's unpaid account to a collection agency. The plaintiffs also sought leave to join Pagoria as a plaintiff and class representative of the statewide class. Neither the plaintiffs nor Pagoria notified the district court as to the reason for attempting to obtain a third named representative for the statewide class, some two-and-one-half years after such class originally sought certification.
In addition to the proposed settlement agreement, the plaintiffs filed a motion to exclude from the statewide class consumers of services from Ball Memorial Hospital. The plaintiffs ...