Hospital Pricing Challenged in Class Action


A proposed class of uninsured patients claimed that a large hospital system had overcharged them for emergency room visits.

Patients of a large hospital system in California joined in a class action alleging that the hospital system had charged uninsured emergency room patients rates in excess of the reasonable value of the services provided. Defense counsel retained Laurence Baker of Stanford University and Cornerstone Research to respond to a motion to certify the class.

Professor Baker submitted a declaration on class certification, opining that individualized inquiry would be required to determine which patients were part of the proposed class.

According to the plaintiffs, charges for uninsured patients should have been based on the cost of delivering care or on the rates that would have been charged to various insured populations. The plaintiffs claimed that the hospital system had charged uninsured patients rates well in excess of any reasonable benchmark.

Professor Baker submitted a declaration for the defendant, showing that individualized inquiry would be needed to determine which patients were part of the proposed class, as it would require individualized inquiry to determine a “reasonable” charge for each uninsured patient’s care. He further showed that any proposed class-wide method for determining “reasonable” charges would create conflict among potential class members.

Professor Baker determined that:

  • The cost of care was specific to the details of each patient’s case but was not tracked or calculable for each patient.
  • There was wide variation in the rates charged to insured patients based on their insurer and its negotiated rates. Thus, although the plaintiffs proposed multiple benchmarks, which they claimed could be used to determine reasonable charges, the benchmarks themselves required individualized analysis to compute and apply.
  • Because members of the class were situated differently in relation to the costs of their care and their reimbursements from insurers, class members would have different preferences over possible approaches to measurement of “reasonable value.”

Professor Baker also showed that even if a benchmark reasonable charge could be selected and estimated, each patient would still require individualized inquiry to determine if that patient was overcharged. Some uninsured patients qualified for financial assistance programs or discounts from the hospital that ultimately reduced their charges below rates paid by insured patients. As a result, the class defined by plaintiffs almost surely included patients who were not charged more than a plausible “reasonable” value.

For more information on this case, contact Dina Older Aguilar.

Case Expert

Laurence C. Baker

Professor of Health Policy,
Bing Professor of Human Biology,
Senior Fellow, Stanford Institute for Economic Policy Research,
Stanford University;
Associate Chair for Education, Department of Health Policy,
Stanford School of Medicine;
Senior Advisor, Cornerstone Research