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Methodist Medical Center v. Taylor





Appeal from the Circuit Court of Peoria County; the Hon. Thomas G. Ebel, Judge, presiding.


This action was commenced in the circuit court of Peoria County by the plaintiff, Methodist Medical Center, to recover from the defendants, Larry T. Taylor and Linda J. Taylor, a portion of an unpaid hospital bill. The defendants filed several affirmative defenses to the complaint and filed a countercomplaint against the plaintiff hospital. The circuit court dismissed the affirmative defenses and the countercomplaint. The matter is before this court on two interlocutory appeals, the dismissal of the counterclaim under Supreme Court Rule 304 and the dismissal of the affirmative defenses under Supreme Court Rule 308. Both appeals were consolidated pursuant to our order of August 26, 1985, and the consolidated appeal bears docket No. 3-85-0388.

The plaintiff hospital rendered services to Larry T. Taylor and billed Mr. Taylor in the amount of $30,032.45. Of that amount, a balance of $6,486.11 remains unpaid. The plaintiff brought suit on a contract theory for the balance against Mr. Taylor, and against Linda J. Taylor, who at the time of her husband's hospitalization executed a document entitled "Patient Admission, Financial and Insurance Agreement."

The defendants responded to the complaint with six affirmative defenses. They allege in those defenses that the hospital's billing policy violates the Social Security Act (Medicare) and its supporting regulations, violates the equal protection and due process clauses of the United States and Illinois constitutions, violates the public policy of the State of Illinois and constitutes an unenforceable adhesion contract. The factual allegations which support these defenses are set forth in the pleadings:

"[T]he Plaintiff Hospital has engaged in a practice known as `cost shifting' which consists of regularly accepting from the Secretary of the Department of Health and Human Services in full payment for delivering its supplies and services to its Medicare patients less than its necessary costs of such delivery to its Medicare patients and less than it is entitled to receive for treating its Medicare patients, while regularly and unfairly shifting a portion of the cost of caring for its Medicare patients, regardless of their ability to pay, to its privately insured patients, such as Defendant Larry Taylor, and other non-Medicare patients, regardless of their ability to pay."

The counterclaim, in which the counterplaintiffs seek to recover for themselves and others similarly affected, alleges the same factual basis.

The circuit court, in an order dated April 4, 1985, dismissed each affirmative defense as well as the countercomplaint.

The payment which the plaintiff hospital receives from the Secretary of the Department of Health and Human Services which was referenced in the defendants' above-quoted allegations is determined according to statute as follows:

"(v) Reasonable costs. (1)(A) The reasonable cost of any services shall be the cost actually incurred, excluding therefrom any part of incurred cost found to be unnecessary in the efficient delivery of needed health services, and shall be determined in accordance with regulations establishing the method or methods to be used, and the items to be included, in determining such costs for various types or classes of institutions, agencies, and services; * * *. * * * Such regulations shall (i) take into account both direct and indirect costs of providers of services (excluding therefrom any such costs, including standby costs, which are determined in accordance with regulations to be unnecessary in the efficient delivery of services covered by the insurance programs established under this subchapter (42 U.S.C. § 1395 et. seq.)) in order that, under the methods of determining costs, the necessary costs of efficiently delivering covered services to individuals covered by the insurance programs established by this subchapter will not be borne by individuals not so covered, and the costs with respect to individuals not so covered will not be borne by such insurance programs * * *." (Emphasis added.) (42 U.S.C. § 1395x(v)(1)(A) (1982).)

The regulations referred to in the Code have been promulgated by the Secretary, and those regulations provide, in part:

"(a) * * * All necessary and proper expenses of an institution in the production of services, including normal standby costs, are recognized. Furthermore, the share of the total institutional cost that is borne by the program is related to the care furnished beneficiaries so that no part of their cost would need to be borne by other patients." (Emphasis added.) (42 C.F.R. sec. 405.402(a) (1984).)

The defendants contend that although the costs which the Secretary of Health and Human Services pays to hospitals through the Medicare program are intended to be that "share of the total institutional costs" related to the Medicare patient, they are in truth less and the non-Medicare patient is forced to pay the difference.

• 1 In their first affirmative defense, the defendants allege that this cost-shifting by the plaintiff is unlawful under the above-quoted excerpts from the United States Code and regulations. A careful analysis of the language relied on by the defendants discloses that the Code and regulations are intended as a direction to the Secretary of Health and Human Services, not as a limitation on the billing practices of hospitals and other health care providers who receive reimbursement from the Medicare program. It is a cardinal rule of statutory construction that the court should seek to ascertain and give effect to legislative intent. However, in so doing, the court should not create new rights or limitations not suggested by the language. (Jackson v. Navik (1974), 17 Ill. App.3d 672, 308 N.E.2d 143.) Nothing in the language of the Code indicates an intention to proscribe the billing practices of health care providers. To infer such an intention — to suggest that Congress would adopt a policy with such profound impact without a more explicit enactment — would be an abuse of the court's responsibility for statutory construction. We do not agree with the defendants that the cited sections of the Code and regulations were intended to make certain hospital billing practices to non-Medicare patients unlawful.

• 2 The same Code and regulations are relied upon by the defendants as a basis for their countercomplaint against the plaintiff. Certain statutes imply a private cause of action. The United States Supreme Court has developed a four-part test to determine whether a private cause of action may be implied. (Cort v. Ash (1975), 422 U.S. 66, 45 L.Ed.2d 26, 95 S.Ct. 2080.) The first part of that test requires the plaintiff to be a member of the ...

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