Class Action – Charges for Uninsured Patients

McCoy v. E. Tex. Med. Ctr. Reg'l Healthcare Sys., No. Civ.A. 2:04CV223 (E.D.Tex. Aug. 31, 2005)

Patients sought certification of a class action against a hospital for its practice of charging uninsured patients higher rates for their medical care than other groups of patients. The patients based their claims on a contractual relationship that they alleged existed between the government and the hospital under 501(c)(3) of the Internal Revenue Code, which gives not-for-profit hospitals tax-exempt status. However, the United States District Court for the Eastern District of Texas dismissed the claims, finding that no cases or statutory authority supported the assertion that a not-for-profit organization enters into a contract with the United States government when it qualifies for tax-exempt status under 501(c)(3). The courts also found that 501(c)(3) does not create a private right of action, so the patients could not state a claim upon which relief could be granted, as they were only incidental beneficiaries of the statute.