Issue of hospital foundation immunity goes to high court
By Alan Cooper, Virginia Lawyers Weekly – March 5, 2007
The issue of whether foundations set up to support teaching hospitals have charitable immunity appears to be on its way to resolution by the Supreme Court of Virginia.
The University of Virginia Health Services Foundation and two plaintiffs have filed what amounts to a joint request for an interlocutory appeal on the issue. The plaintiffs won a ruling from Charlottesville Circuit Judge Edward L. Hogshire that the foundation does not have such immunity.
Richmond attorney Lewis Stoneburner has filed a notice of appeal to a ruling by Fairfax Circuit Judge Randy I. Bellows, who sat in Charlottesville by designation, that the foundation does have immunity. Stoneburner will work with the appellate specialist L. Steven Emmert to draft his petition for appeal, which is due later this month.
“We need resolution of it obviously,” said Charlottesville attorney Christine Thomson, who represents one of the plaintiffs requesting an interlocutory appeal. “All of the U.Va. cases are on hold.”
Another judge who sat in Charlottesville by designation, Judge H. Thomas Padrick Jr. of Virginia, had ruled earlier that the foundation did not have immunity.
Judges in Norfolk and Portsmouth appear to have been unanimous in holding that physicians who work for Eastern Virginia Medical School Physicians and Surgeons Health Services Foundation, better known as EVMS Heath Services Inc., have immunity.
Earlier this month, Norfolk Circuit Judge Everett A. Martin Jr. became at least the fourth judge to make such a ruling, although in a decidedly equivocal manner.
Martin said, “If I were deciding this issue for the first time, I might conclude that the Foundation does not operate as a charity. It operates a very large medical practice. A very large part of its revenues comes from insurance payments. A very small part of the value of the services provided is attributable to indigent care…
“The foundation receives no contributions or donations from the public. It uses 70 percent of its net revenues to pay bonuses to physicians. It requires the physicians to sign contracts that contain covenants not to compete,” Martin said.
He noted, however, in Wright, Adm’r v. Silver (VLW 007-8-050) that the evidence before him differed from what Hogshire heard in that there was testimony that the U.Va. foundation “was created primarily as a billing system.”
And he referred to testimony that the Hampton Roads foundation is necessary for “EVMS to attract well qualified doctors to teach future doctors.”
Although he was not bound by the decisions of his Norfolk colleagues, Martin said, “I believe that my misgivings about the operation of the Foundation as a charity should yield to stability in the administration of the law. I thus conclude that the Foundation operates for a charitable purpose.”
Phillip J. Geib, the Virginia Beach attorney who represented the plaintiff in the case, said he viewed Martin’s opinion as an invitation to the Supreme Court to resolve the issue. Geib said he has filed a notice of appeal. “I believe that this is a case that the Supreme Court needs to pick up and make a decision on one way or another,” he said.
The Supreme Court may get yet another case to consider. Richmond lawyer Thomas W. Williamson Jr. challenged EVMS’s immunity earlier this year in a case before Norfolk Circuit Judge Charles D. Griffith and is awaiting a ruling.
Virginia Beach attorney Glen A. Huff has represented the defendants in the Hampton Roads cases, and Charlottesville attorney Donald R. Morin represents the U.Va. foundation in the request for an interlocutory appeal.
Testimony has varied at the several hearings, but they have been consistent in the insistence of the plaintiffs’ attorneys that the foundations are not true charities because they were set up to funnel money to doctors who treat patients largely as private physicians in addition to teaching at the hospitals.
The foundations have countered that their role in providing education, research and medical care for indigents makes them charities.
Much of the debate about the foundations followed the 2005 Supreme Court decision in Ola v. YMCA of South Hampton Roads Inc. (VLW 006-6-098), its most comprehensive analysis of charitable immunity in many years.
The court established a multi-part test and found that the defendant had immunity. “In the final analysis, whether an entity operates as a charity turns on the facts of each case and not on the particular type of institution,” the court ruled.