Univ. of Va. Health Servs. Found. v. Morris, Record No. 070214, et al. (Va. Feb. 29, 2008)

The Supreme Court of Virginia held that a nonprofit group practice which employed physicians who work at the University of Virginia School of Medicine and was created to improve patient billing and collection processes was not entitled to charitable immunity.

The court consolidated several appeals in which special pleas of charitable immunity by the group practice were in issue. To qualify for charitable immunity under Virginia law, an entity must be organized for a recognized charitable purpose and operate in accordance with that purpose. In concluding that the group practice was not entitled to charitable immunity, the court conceded that it was structured for charitable purposes as evidenced by its articles of incorporation. However, the group practice was not operated for charitable purposes for a number of reasons. First, it was determined that the group practice functioned more like a for-profit business than a charitable organization because of its system of aggressively pursuing legal collections and ultimately increasing revenues of its parent entity. Further, the cost of the group practice's charity work was minimal compared to its overall revenue. Also, its physician incentive payment system, which distributed a large part of the group practice's revenue to its physician employees, was "diametrically opposed" to the model of how a charitable institution uses its profits or surplus. Finally, since the group practice did not receive any charitable contributions or donations, exposure to tort liability would not nullify "philanthropic[ally]-minded intentions."