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Hospital Center at Orange v. Cook

Decided: February 9, 1981.


On appeal from the Essex County District Court.

Allcorn, Kole and Pressler. The opinion of the court was delivered by Pressler, J.A.D.


[177 NJSuper Page 291] This appeal raises the question of whether or not a medically indigent patient who is sued by a hospital for recovery of its unpaid bill for services may plead as a defense to the action the hospital's noncompliance with its obligations under the Hill-Burton Act*fn1 to provide a reasonable volume of free or reduced-cost

care for persons unable to pay for such services. In the only reported decision in this jurisdiction dealing with the issue the Law Division answered this question negatively. Cooper Medical Center v. Joyner , 165 N.J. Super. 482 (Law. Div. 1979). We disagree with that conclusion and hold to the contrary that persons who may be eligible for free or reduced-cost services under the Hill-Burton Act and its implementing federal and state regulations have a private right of action deriving therefrom to enforce the hospital's obligations either affirmatively or defensively. Accordingly, we reverse the order entered by the county district court denying defendant leave to amend her answer in order to plead noncompliance with the Hill-Burton Act as an affirmative defense and entering summary judgment in favor of plaintiff in the amount of its unpaid bill.

The factual context in which the issue before us arises is set forth in the affidavits herein filed and is largely undisputed. Plaintiff Hospital Center at Orange (Hospital) is a recipient of Hill-Burton Act construction funds pursuant to applicable federal and state legislation, regulation and contract. In March 1977 defendant Savannah Cook brought her minor son to the Hospital's emergency room. He was diagnosed as having sustained a fracture, was immediately admitted and discharged a week later. Defendant thereafter received a bill for services in the amount of $2,060.50, which she was unable to pay. She apparently had no recourse to any source of third-party payments and her sole income for the year preceding the hospitalization was by way of Social Security survivor's benefits for herself and her two children in the total monthly amount of $465. These benefits expired in April 1977, the month following the hospitalization, and defendant then obtained a factory job paying her a gross weekly income of $104. She apparently explained these financial circumstances to Hospital personnel after the bill was

rendered. The Hospital thereafter entered into an arrangement with her pursuant to its own voluntary program by which it agreed to reduce the bill to $862.10 if she paid it within six months. She was, however, able to pay only $350 during that time period and, accordingly, the Hospital brought suit against her in the county district court seeking $1,710.50, the full amount of the originally rendered bill less the payments actually made.

Defendant's initial response to the book-account complaint was a general denial. Thereafter, she sought leave to file an amended answer, alleging by way of affirmative defense that she was an intended beneficiary of the Hill-Burton Act and of the contracts entered into pursuant thereto between the Hospital and the governmental agencies, and that the Hospital had failed to perform its contractual obligations as to her by having failed to give her appropriate notice of the availability to her of free or reduced-cost hospital service and by failing to extend to her those free or reduced-cost services. The facts set forth by the affidavits regarding notice by the Hospital to defendant of potentially available Hill-Burton financial assistance make clear that absolutely no mention thereof was made in the original admitting forms although those forms bear the notation that defendant had no medical insurance and would, therefore, be herself responsible for the bill. It is also undisputed that no Hill-Burton reference was made on the bill ultimately rendered.*fn2 While the affidavits do raise a factual question as to whether or not a Hill-Burton notice was conspicuously posted on the premises, the Hospital makes no claim that any other form of notice thereof was given to defendant either orally or in writing. There is also a factual dispute as to whether or not defendant,

when she told the admitting personnel that she had no insurance, also stated that she had no money with which to pay the bill.

For the reasons hereafter set forth, these facts leave no doubt of the Hospital's failure to have complied with its Hill-Burton notice obligations, and thus the amended answer stated at least a prima facie defense to the action, provided such a defense is cognizable therein. The trial judge denied the motion to amend, having concluded, in reliance on Cooper Medical Center, supra , that the Hospital's failure to comply with its Hill-Burton obligations, even in respect of an intended beneficiary, did not as a matter of law constitute a defense to a bill collection suit but would only sustain recourse by defendant to administrative remedies. We disagree.

In concluding that the Hill-Burton Act does accord a private right of action and hence that the affirmative defense here sought to be raised was a viable one which should have been permitted, we rely not only on the legislation and its implementing regulations but on the weight of federal case law as well.

Explication of our reasoning requires some historical and legislative perspective. The underlying purpose of the Hill-Burton Act is to make federal funds available, through state disbursement, for the construction and modernization of hospitals and other medical facilities in order to assist the states in furnishing "adequate hospital, clinic, or similar services to all their people." 42 U.S.C.A. § 291. Prerequisite to federal funding is the adoption by the recipient state of an approved and conforming state plan to assure compliance with the purpose and policy of the act. 42 U.S.C.A. § 291c(e). Part of the state obligation in its disbursing of funds is to obtain assurances from the applicant that it will make "available in the facility or portion thereof to be constructed or ...

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