Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.


United States District Court, Middle District of Pennsylvania

April 9, 1991


The opinion of the court was delivered by: Nealon, District Judge.


The Hill-Burton Act, 42 U.S.C. § 291 et seq., (hereinafter Hill-Burton or the Act), requires medical facilities that are recipients of its funds to assure a reasonable amount of uncompensated services, determined by a formula based on a percentage of operating costs or of federal assistance provided, to patients who are deemed unable to pay according to prescribed income guidelines.*fn1 In this action, plaintiff seeks generally to enforce the "assurances" of uncompensated services made by Moses Taylor Hospital (hereinafter Hospital) under the Act and, in particular, to obtain personal relief from medical costs incurred by her husband. Presently before the court is defendant's motion to dismiss all counts in the complaint of the above-captioned case for failure to state a claim upon which relief may be granted pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the reasons that follow, the court will grant defendant's motion to dismiss plaintiff's Second, Third, Fourth, Fifth and Sixth Causes of action, and deny defendant's motion to dismiss plaintiff's First Cause of Action.


A. Facts

In September of 1984, Kenneth V. White, the deceased husband of plaintiff, was hospitalized at the defendant Hospital and incurred medical bills totaling $217,321.00 before his death.*fn2 Plaintiff avers that the Hospital, contrary to the regulations promulgated by the Secretary of Health and Human Services (hereinafter Secretary), notified neither her husband nor herself, and failed to post notices of the availability of uncompensated services to those patients who were eligible and sought such services.*fn3

Because plaintiff did not pay the medical bills, the Hospital instituted a collection action against her, as administratrix of her husband's estate, in the Court of Common Pleas of Lackawanna County. Due to plaintiff's failure to respond to the action in County Court, a judgment was entered against her for $217,321.00. Plaintiff complains, throughout this process, that she possessed inadequate resources to pay expenses owed to the Hospital, that she was unaware of any potential free or reduced cost medical services, and that the Hospital failed to provide notices detailing the availability of Hill-Burton funds or to provide written notice to her of those same funds in violation of 42 C.F.R. § 124.504.*fn4

After the default judgment was entered, plaintiff learned of the availability of the free or reduced cost health care and applied to the Hospital for relief. The Hospital allegedly denied those funds to her and additionally failed to provide a written determination of her eligibility as required by 42 C.F.R. § 124.507.*fn5

B. Procedural History

In April of 1989, plaintiff filed a complaint with the Secretary against the Hospital for failing to comply with its Hill-Burton obligations. See document 1 of record, Exhibit A. On July 19, 1989, the Assistant Surgeon General for the United States Department of Health and Human Services informed plaintiff that her complaint was dismissed, but that "[u]nder section 1627 of the Public Health Service Act (42 U.S.C. § 300s-6) after a complaint has been dismissed, the person who filed the complaint may bring a private right of action in court to effectuate compliance by the facility with the regulations." Document 10 of record, Exhibit A; see also document 1 of record at ¶ 23.*fn6

On May 8, 1989, plaintiff obtained a stay of the collection proceedings in the Court of Common Pleas. On November 3, 1989, plaintiff initiated this instant suit, on her own behalf and as personal representative of the Estate of Kenneth V. White, to compel Moses Taylor to abide by their obligation to provide free or low cost medical care to eligible individuals. In her complaint, plaintiff, in addition to seeking punitive damages, posits six causes of action: (1) violation of the Hill-Burton Act; (2) denial of due process under the Fifth and Fourteenth Amendments of the United States Constitution; (3) breach of contract; (4) denial of equal protection under the Fifth and Fourteenth Amendments; (5) violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law 73 Pa.Stat.Ann. § 201, et seq.; and (6) violation of the Civil Rights Act, 42 U.S.C. § 1983 (Section 1983).*fn7 See document 1 of record. On February 28, 1990, defendant filed its motion to dismiss together with a supporting brief. See documents 6 & 7 of record. After plaintiff and defendant filed their respective briefs in support of and opposition to the pending motion, the court held several hearings and conferences. During the last hearing in late December, 1990, the court extended defendant additional time to conduct further research and to submit any additional briefs. The court has been informed that no further submissions will be forthcoming which would affect this motion. All documents necessary for consideration of the present motion are before the court. Accordingly, the motion is now ripe for disposition.


On a motion to dismiss for failure to state a claim upon which relief can be granted, the burden of proof lies with the moving parties. Johnsrud v. Carter, 620 F.2d 29, 33 (3d Cir. 1980). The court, in ruling upon a Rule 12(b)(6) motion, must accept all well-pleaded allegations of the complaint as true and construe them in a light most favorable to the non-moving parties. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974); Truhe v. Rupell, 641 F. Supp. 57, 58 (M.D. Pa. 1985) (Rambo, J.). The motion should be granted only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Hosp. Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738, 746, 96 S.Ct. 1848, 1853, 48 L.Ed.2d 338 (1976) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)).

A. Federal Claims

1) Hill-Burton Claim

A brief background outlining the origin of the Hill-Burton Act and the ensuing adoption of regulations implementing the Act may be instructive.*fn8 Congress, in 1946, enacted Title VI of the Public Health Service Act, commonly known as the HillBurton Act. Generally, the Act was intended to address problems with the adequacy and distribution of health service facilities by means of a program of grants-in-aid to the States. See Statement of Senator Hill, in Hearings on S. 191 before the Senate Comm. on Education and Labor, 79th Cong., 1st Sess. 6-9 (1945). The expressed purpose of the Act, aside from stimulating the development of new or improved medical facilities and promoting research, was:

  to assist the several States in the carrying out
  of their programs for the construction and
  modernization of such public or other nonprofit
  community hospitals and other medical facilities
  as may be necessary, in conjunction with existing
  facilities, to furnish adequate hospital, clinic,
  or similar services to all their people. . . .

42 U.S.C. § 291(a). A State wishing to participate in this program and receive federal assistance was required to submit a plan to the Surgeon General*fn9 (now the Secretary of Health and Human Services), for his approval. 42 U.S.C. § 291d.

Most importantly to the issues presented in this litigation, the Hill-Burton act required that:

  The Surgeon General . . . shall by general
  regulations prescribe —

    (e) that the State plan shall provide for
    adequate hospitals, and other facilities for
    which aid under this part is available, for all
    persons residing in the State, and adequate
    hospitals (and such other facilities) to
    furnish needed services for persons unable to
    pay therefor. Such regulations may also require
    that before approval of an application for a
    project is recommended by a State agency to the
    Surgeon General for approval under this part,
    assurance shall be received by the state from
    the applicant that (1) the facility or portion
    thereof to be constructed or modernized will be
    made available to all persons residing in the
    territorial area of the applicant; and (2)
    there will be made available in the facility or
    portion thereof to be constructed or modernized
    a reasonable volume of services to persons
    unable to pay therefor, but an exception shall
    be made if such a requirement is not feasible
    from a financial viewpoint.

42 U.S.C. § 291c(e). The second of the two "assurances " — requiring a state plan to furnish necessary services to persons unable to pay — is the one implicated in this case. Under Section 291c(e), the Surgeon General could require as a condition of approval that the State give an "assurance" that there be made available a reasonable volume of services to persons unable to pay.

The regulations issued pursuant to enforcing these "assurances" essentially mirrored the language of the statute for nearly thirty years. See American Hosp. Ass'n v. Schweiker, 721 F.2d 170, 173 (7th Cir. 1983), cert. denied, 466 U.S. 958, 104 S.Ct. 2169, 80 L.Ed.2d 553 (1984) (citing 42 C.F.R. §§ 52.61-53.63 (Supp. 1947)). Despite the "uncompensated care assurance" requirement, hospitals receiving the federal aid routinely ignored their responsibility to provide charitable care. Id. In response to this reluctance by hospitals, the Secretary in 1972 issued regulations which contained more definite standards to determine compliance with the "assurance" obligations. See 42 C.F.R. §§ 53.111, 53.113 (1974). Moreover, in 1975, Congress passed Title XVI of the Public Service Act, 42 U.S.C. § 300q et seq., which mandates, rather than permits, regulations enforcing the "assurances". See 42 U.S.C. § 300s-1(b)(1)(K). Further, Section 300s-6 firmed up the enforcement mechanism of the Hill-Burton Act, stating:

    The Secretary shall investigate and ascertain,
  on a periodic basis, with respect to each entity
  which is receiving financial assistance under
  this subchapter or which has received financial
  assistance under subchapter IV of this chapter or
  this subchapter, the extent of compliance by such
  entity with the assurances required to be made at
  the time such assistance was received. If the
  Secretary finds that such an entity has failed to
  comply with any such assurance, the Secretary
  shall report such noncompliance to the health
  systems agency for the health service area in
  which such entity is located and the State health
  planning and development agency of the State in
  which the entity is located and shall take any
  action authorized by law (including an action for
  specific performance brought by the Attorney
  General upon request of the Secretary) which will
  effect compliance by the entity with such
  assurances. An action to effectuate compliance
  with any such assurance may be brought by a
  person other than the Secretary only if a
  complaint has been filed by such person with the
  Secretary and the Secretary has dismissed such
  complaint or the Attorney General has not brought
  a civil action for compliance with such assurance
  within six months after the date on which the
  complaint was filed with the Secretary.

This statutory provision transferred the primary investigatory and enforcement power to the Secretary in order to better effectuate compliance by hospitals with their "assurance" to provide uncompensated services. The Secretary then promulgated stricter regulations in response to Title XVI. See 44 Fed.Reg. 29372-29410 (1979). Specifically relevant for this suit, a more stringent enforcement section was created which evolved into the regulations found in 42 C.F.R. §§ 124.511 & 124.512.*fn10

While it is readily obvious that an explicit "private action" does exist under Section 124.511 to effect compliance with the assurances, it is not equally obvious as to the extent of the remedy a person may seek through that "private action". There exists some case law holding that a person cannot sue the Secretary directly in order to compel him to enforce the regulations. See, e.g., Gillis v. United States Department of Health and Human Services, 759 F.2d 565 (6th Cir. 1985); Davis v. Ball Memorial Hosp. Ass'n, 640 F.2d 30 (7th Cir. 1980). Here, however, plaintiff is not seeking such relief but, instead, has initiated a suit directly against the Hospital.*fn11 This action raises two significant questions for our purposes: (1) Does plaintiff have a "private action" that encompasses personal relief; and (2) Does compliance by the Hospital require providing individual remedies under the regulations promulgated by the Secretary (i.e. does compliance necessarily include providing uncompensated services to applicants improperly denied, repayment of amounts improperly collected, or the cessation, in whole or part, of a collection action).

It must first be resolved whether a private cause of action exists directly under Hill-Burton and its regulations which allows for a personal remedy, as plaintiff now contends.*fn12 In reviewing the statute and regulations the court cannot find any provision permitting a person to bring a private cause of action for personal relief. In the context of this issue, both the statute and regulations are very explicit in restricting the "private action" to only effectuating a medical facility's compliance with its assurances. See 42 U.S.C. § 300s-6 ("An action to effectuate compliance with any such assurance may be brought by a person other than the Secretary . . ."); 42 C.F.R. § 124.511(a)(4) ("the person filing it may bring a private action to effectuate compliance with the assurance"). Moreover, the extensive regulations, including the limited "private action", do not mention any private remedy for personal redress. See cf. Oldfield v. Athletic Congress, 779 F.2d 505, 508 (9th Cir. 1985) ("The presence in the [Amateur Sports Act of 1978] of administrative mechanisms for the resolution of disputes over an athlete's right to compete still further betokens the absence of an implied private right."). Finally, neither the legislative nor the administrative history reveals any intent on the part of Congress or the Secretary to provide a person with any such remedy beyond that of the limited "private action" to effectuate compliance.

Additionally, the design of the enforcement scheme also militates against finding that plaintiff has a personal cause of action directly under the Act or the regulations. See 42 U.S.C. § 300s-6; 42 C.F.R. §§ 124.-511(a)(4) & 124.512(a). The enforcement provisions in both the statute and regulations were devised to empower the Secretary with the primary investigatory and enforcement authority. If the Secretary finds that a medical facility has failed to comply, he may bring an action which will secure compliance by the facility with its "assurances" or he may request that the Attorney General institute an action for specific performance to achieve compliance. 42 U.S.C. § 300s-6; 42 C.F.R. § 124.512(a). In the absence of enforcement by the Secretary, a person other than the Secretary may then bring a "private action" to effectuate compliance, but only if he first files a complaint with the Secretary and the Secretary dismisses that complaint or the Attorney General has not brought a civil action to effect compliance. 42 U.S.C. § 300s-6; 42 C.F.R. § 124.511(a)(4). This particular provision allows the Secretary to prioritize the complaints "to promote the most effective use of [his] enforcement resources." 42 C.F.R. § 124.511(a)(4). The "private action" supplements the enforcement power of the Secretary by authorizing a person to act as a "private attorney general" in seeking to effectuate a medical facility's compliance with its "assurance" to provide uncompensated services to those unable to pay.

By way of analogy, many environmental suits under the Clean Water Act, 33 U.S.C. § 1251 et seq. (CWA), are similarly initiated by persons acting as a "private attorney general" to seek enforcement of the act. See, e.g., Pennsylvania Envtl. Defense Found. v. Bellefonte Borough, 718 F. Supp. 431, 434 (M.D.Pa. 1989); Proffitt v. Municipal Auth. of Morrisville, 716 F. Supp. 837, 839 (E.D.Pa. 1989). The enforcement provisions found in Section 1365 of CWA are comparable to those found in Hill-Burton, in that Hill-Burton requires the person to first file a complaint with the Secretary and if the Secretary dismisses the complaint and elects not to pursue the case, the person may initiate an action to effectuate compliance. Furthermore, under Section 1365, a person may commence an action to enforce an effluent standard or limitation only if he first notifies the Administrator of the Environmental Protection Agency (Administrator) and the State in which the violation occurred, and where the Administrator or State is not diligently prosecuting a civil or criminal action in court. As under Hill-Burton, CWA gives the government the "primary responsibility for insuring that [it] is properly enforced." Id. The district court in Bellefonte concluded that the purpose of a suit brought by person acting as a private attorney general under the purview of the CWA "is to protect and advance the public's interest in pollution free waterways rather than to promote private interests." Id.; see also Proffitt, 716 F. Supp. at 839 (citing Middlesex County Sewerage Auth. v. National Sea Clammers, 453 U.S. 1, 101 S.Ct. 2615, 69 L.Ed.2d 435 (1981)) ("The citizen suit is intended to supplement governmental enforcement by authorizing citizens to act as `private attorneys general' in seeking to enforce the act.")

While Hill-Burton obviously was not enacted to achieve pollution free waterways, it was enacted for an equally important public interest — that is, to construct and modernize medical facilities and furnish adequate medical care to all people. See 42 U.S.C. § 291. Accordingly, this court finds that a person does act as a "private attorney general" when he/she brings a "private action" under Hill-Burton to vindicate the public's health and welfare — namely the Hospital's "assurance" to provide uncompensated services. Hence, the plaintiff cannot institute a "private action" with any more remedial authority than that which the Secretary or the Attorney General possesses. Thus, since the statute and regulations explicitly enable the Secretary and the Attorney General to bring an action at law only to effectuate compliance, the plaintiff is likewise restricted to enforcing the Hospital's compliance with its "assurances" and may not seek personal relief.*fn13

Having determined that a personal cause of action does not exist, the court must consider whether a "private action" to effect compliance might benefit the plaintiff if compliance would include the cessation of a collection action, repayment of amounts improperly collected, and provision of uncompensated services improperly denied. The extent of what a person may acquire as relief when he/she attempts to enforce the medical facility's compliance with its assurance is not very clear. In other words, should the court determine whether a person may initiate an action under Sections 124.511 and 124.512 to enforce a hospital's "assurance" which would coincidentally forgive absolutely and completely her personal debt?*fn14 This is a question of first impression. The court in its research has not found any cases confronting this issue; nor has either party revealed any.

Before reaching the issue of whether a "private action" to effectuate compliance would encompass the forgiving of plaintiff's debt because of the Hospital's failure to notify the plaintiff of its obligation, certain preliminary questions must be answered. First, under Section 124.-512(b)(1) & (2), on which plaintiff heavily relies, compliance is limited to the "[p]rovision of uncompensated services to applicants improperly denied" and to the "repayment of amounts improperly collected from persons eligible to receive uncompensated services." 42 C.F.R. § 124.512(b)(1) & (2) (emphasis supplied). In order to be "improperly denied" or to have payments "improperly collected," the person must be initially eligible to receive uncompensated services under both the guidelines for fiscal eligibility in Section 124.505*fn15 and the facility's allocation plan as prescribed in 42 C.F.R. § 124.506.*fn16 This regulation states that, if a hospital fails to develop or publish its allocation plan, it must provide uncompensated services to all those applicants in Category A and Category B.*fn17 Id. at § 124.506(b)(2). This requirement applies only until the hospital has published a plan or until the facility appropriately ceases to provide uncompensated services under Section 124.508. Therefore, before plaintiff may obtain relief under Section 124.512, her eligibility must first be established. This has not been addressed by either side, and may be more appropriately brought pursuant to a summary judgment motion.*fn18

The next issue which requires consideration is the effect of the agreement entered into by the Hospital and the Secretary. In 1988, the Hospital was found to be out of compliance with its assurances because it had not submitted any documentation to verify that it had provided the requisite uncompensated services during prior years. The Hospital represented to this court that it entered into an agreement with the Secretary to bring the Hospital back into compliance through prospective actions, which included a calculation of the amount of services that had to be made available.*fn19 Hence, the Hospital argues, this suit to bring it into compliance is mooted because prospective compliance has already been arranged through the agreement with the Secretary. The record, however, has not been developed enough legally or factually for the court to evaluate these issues. For example, the agreement itself is not part of the record and the extent to which it might moot the issues herein has not been sufficiently addressed by the parties. Further argument is required concerning whether the Secretary has taken exclusive steps under Section 124.512 to compel the Hospital's compliance, thereby precluding this action in court. Also, the record is deficient as to whether the Hospital's obligation is confined to the amount of uncompensated services calculated by the Secretary in the agreement or whether an individual may seek enforcement through Section 124.512(b) resulting in relief that would require the Hospital to exceed its financial obligation. In considering that query, attention must be given to whether the Hospital has already fulfilled its financial obligation under that agreement and has, thereby, provided all the required uncompensated services, so as to render this case moot.*fn20 Since the current record is critically lacking in information concerning these issues, the court will provide the parties additional time to develop the record and submit appropriate motions.

Furthermore, as to the administrative exhaustion issue raised by defendant, the record is similarly insufficient to make a determination. The Hospital contends that, this particular compliance issue has not been presented to the Secretary, as set forth in Section 124.511. Additionally, the Hospital claims plaintiff has not sought a ruling from the Secretary on her eligibility to receive uncompensated services and, thus, is precluded from raising that issue here. The record does not reveal what precisely was presented to the Secretary pursuant to Section 124.511 or whether the administrative procedure is the sole remedy for securing a determination of her eligibility.*fn21 These, like other issues identified herein, cannot be adequately examined at this point of the proceedings and may be more suitable for a subsequent summary judgment motion.

The court would be in a better position to decide whether compliance by the Hospital would result in any personal relief for plaintiff, once the issues mentioned above are more fully explored by both sides. The question as to actual entitlement, if any, under the enforcement mechanism developed in the statute and regulations will have to await further expansion of the record and appropriate arguments as to the applicable law. It must be emphasized, however, as previously noted, that plaintiff has no personal cause of action which can be asserted directly under the statute or regulations. Nevertheless, the court will grant the parties twenty (20) days to file summary judgment motions which should address all issues necessary to resolve this case.*fn22 In that regard, it may be helpful to request the Secretary to consider submitting a brief and any other relevant documentation on these issues as amicus curiae. Copies of this Memorandum will be transmitted to the Secretary.

         2) Section 1983, Fifth Amendment and Fourteenth
                        Amendment Claims

Plaintiff alleges that she was denied her due process and equal protection rights as guaranteed by Section 1983 and the Fifth and Fourteenth Amendments.*fn23 A common thread throughout the interpretation and application of these constitutional and statutory provisions is the requisite implication of governmental action, rather than purely private conduct.*fn24 This preliminary requisite must exist before the court's analysis can proceed to the substance of the constitutional or federal law claim. Rendell-Baker, 457 U.S. at 838, 102 S.Ct. at 2769-2770. This principle "has become firmly embedded in our constitutional law that the action inhibited by the first section of the Fourteenth Amendment is only such action as may fairly be said to be that of the States." Shelley v. Kraemer, 334 U.S. 1, 13, 68 S.Ct. 836, 842, 92 L.Ed. 1161 (1948). "That Amendment erects no shield against merely private conduct, however discriminatory or wrongful." Id.

The Hospital merely mentions this issue without making a significant journey into the case law surrounding this area. See document 7 of record at 18. Plaintiff addresses this issue in the context of her Fifth and Fourteenth Amendment claims and expectedly argues that the Hospital's conduct relates to state action. In supporting her assertion, plaintiff erroneously states that the United States Court of Appeals for the Third Circuit has not confronted this precise issue, and that the United States Court of Appeals for the Fourth Circuit has found state action to exist where a hospital denied staff privileges to a physician. See document 18 of record.

The issue of whether an otherwise private hospital would be transformed essentially into a state actor merely by its receipt of Hill-Burton funds has arisen in many courts under circumstances involving a physician's ability to attain or maintain staff privileges at the hospital. Virtually every circuit has concluded that state action does not exist under those circumstances. See, e.g., Loh-Seng Yo v. Cibola General Hosp., 706 F.2d 306, 308 (10th Cir. 1983); Modaber v. Culpeper Memorial Hosp., Inc., 674 F.2d 1023, 1026 (4th Cir. 1982); Newsom v. Vanderbilt University, 653 F.2d 1100, 1115 (6th Cir. 1981); Hodge v. Paoli Memorial Hosp., 576 F.2d 563, 564 (3d Cir. 1978); Schlein v. Milford Hosp., Inc., 561 F.2d 427, 428-29 (2d Cir. 1977); Briscoe v. Bock, 540 F.2d 392, 395-96 (8th Cir. 1976). Even the Fourth Circuit has reached the same conclusion. See Modaber, 674 F.2d at 1026. Although the Fourth Circuit may have been originally one of the minority circuits to find the receipt of Hill-Burton funds to be sufficient to establish state action, see, e.g., Simkins v. Moses H. Cone Memorial Hosp., 323 F.2d 959, 967-68 (4th Cir. 1963), cert. denied, 376 U.S. 938, 84 S.Ct. 793, 11 L.Ed.2d 659 (1964), the circuit has since concluded, in light of Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 477 (1974), that the contention that

  the mere receipt of Hill-Burton Act funds makes
  the recipient's every act state action is
  inconsistent with Jackson . . . Recipient hospitals
  undoubtedly "operate as integral parts of
  comprehensive joint or intermeshing state and
  federal plans or programs designed to effect proper
  allocation of available medical and hospital
  services for the best possible promotion and
  maintenance of public health." [Citation omitted].
  But the mere fact that the hospitals implement a
  governmental program does not establish the nexus
  which Jackson requires. The recipients do not
  act in an exclusively state capacity. Although
  health care is certainly an "essential public
  service", it does not involve the "exercise by a
  private entity of powers traditionally exclusively

  reserved to the State." [Citations omitted].

674 F.2d at 1026 (Footnotes omitted).

Finally, the Third Circuit also confronted this issue in a like context as in those cases mentioned above, and reached a similar conclusion. See Hodge, 576 F.2d 563. In Hodge, a physician brought a claim under Section 1983, alleging his staff privileges and office lease at the hospital were terminated without due process of law and equal protection. Id. The Third Circuit Court of Appeals, in affirming the district court's dismissal for failure to state a claim upon which relief may be granted, held "that the receipt of Hill-Burton construction funding, Medicare and Medicaid funds, and the existence of a tax exemption, as well as state licensing requirements for nonprofit hospitals, do not constitute state action under 42 U.S.C. § 1983."*fn25 Id. at 564.

In concluding this matter, a brief study of Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S.Ct. 449, 42 L.Ed.2d 477 (1974), and Blum v. Yaretsky, 457 U.S. 991, 102 S.Ct. 2777, 73 L.Ed.2d 534 (1982), may be informative. In Jackson, a consumer sought relief under Section 1983 for termination of her electric service allegedly before she was afforded notice or a hearing. The privately owned electric company was extensively regulated by the state's Public Utility Commission, which included a right by the electric company to terminate service to any customer upon reasonable notice. In holding that conduct of the electric company was not translated into state action, the Supreme Court opined:

  The mere fact that a business is subject to state
  regulation does not itself convert its action
  into that of the State . . . Nor does the fact
  that the regulation is extensive and detailed, as
  in the case of most public utilities, do so. . .
  . But the inquiry must be whether there is a
  sufficiently close nexus between the State and
  the challenged action of the regulated entity so
  that the action of the latter may be fairly
  treated as that of the State itself.

Id. 419 U.S. at 350-51, 95 S.Ct. at 453 (citations omitted). Through this closer scrutiny, the Court exhorted that neither a monopoly status granted to the company by the State, nor the fact that it provides an essential public service, nor that the State specifically authorized or approved the termination practice, especially given that the Public Utilities Commission did not specifically hold hearings on this particular provision of the company's tariff, would convert the electric company's every action into that of the State's. Lastly, the Court found absent the symbiotic relationship as that demonstrated between a private lessee leasing space for a restaurant from a state parking authority in Burton v. Wilmington Parking Auth., 365 U.S. 715, 81 S.Ct. 856, 6 L.Ed.2d 45 (1961). 419 U.S. at 357-58, 95 S.Ct. at 456-57.

Again, in Blum, the Supreme Court was asked to consider a state action question regarding decisions by private nursing homes to transfer or discharge Medicaid patients. Under the Medicaid program established by Congress, federal financial assistance is provided to States that choose to reimburse certain medical costs incurred by the poor. 457 U.S. at 993-94, 102 S.Ct. at 2780. For an individual to obtain Medicaid assistance, he must be under a particular income level and seek medically necessary services. Id. at 994, 102 S.Ct. at 2780-81. To assure the satisfaction of the latter condition, a review panel of physicians was established to assess patients' continued eligibility. In this case, the private nursing home's review panel decided that the respondents no longer required the care they were receiving and should be transferred to a lower level of care. Once notified of this decision, New York officials, responsible for administering the Medicaid program, prepared to reduce or eliminate the Medicaid assistance to the nursing home. State social service officials affirmed the decision to discontinue the benefits following administrative hearings.

In examining the state action question, the Supreme Court delineated three principles as guideposts:

  (1) "The complaining party must [ ] show that
  `there is a sufficiently close nexus between the
  State and the challenged action of the regulated
  entity so that the action of the latter may be
  fairly treated as that of the State itself;'" and
  "`the mere fact that a business is subject to
  state regulation does not by itself convert its
  action into that of the State for purposes of the
  Fourteenth Amendment.'" Id. at 1004, 102 S.Ct. at
  2786 (quoting Jackson v. Metropolitan Edison Co.,
  419 U.S. 345, 350, 95 S.Ct. 449, 453, 42 L.Ed.2d
  477 (1974).

  (2) "[A] State normally can be held responsible
  for a private decision only when it has exercised
  coercive power or has provided such significant
  encouragement, either overt or covert, that the
  choice must in law be deemed to be that of the
  State. Mere approval of or acquiescence in the
  initiatives of a private party is not sufficient
  to justify holding the State responsible for
  those initiatives under the terms of the
  Fourteenth Amendment." Id. (citations omitted).

  (3) "[T]he required nexus may be present if the
  private entity has exercised powers that are
  `traditionally the exclusive prerogative of the
  State.'" Id. at 457 U.S. 1005, 102 S.Ct. at 2786
  (quoting Jackson, 419 U.S. at 353, 95 S.Ct. at

Applying these principles, the court concluded that state action was not involved in the critical decision to terminate the Medicaid assistance. In so doing, the Court found the decisions complained about were made by physicians and nursing home administrators, all of whom are private parties, and that these decisions were not influenced by the State. Id. Also, the fact that federal regulations impose penalties on the nursing home for failing to comply with the regulations adds nothing to the claim since they do not dictate the decision to transfer or discharge. Id. at 1010, 102 S.Ct. at 2789. Moreover, government regulation of the private entity and State programs that result in substantial funding of the activities of the private entity are not persuasive in demonstrating that the State is responsible for the decisions made by the private entity. Id. at 1011, 102 S.Ct. at 2789. Finally, nursing homes do not perform a function that has been "traditionally the prerogative of the State." Id. (quoting Jackson, 419 U.S. at 353, 95 S.Ct. at 455).

Blum and the instant case are similar in that (1) government funds were provided to a private medical facility in connection with medical assistance to the underprivileged; (2) the free or reduced-cost medical care was allegedly denied the patient due to the actions of the private facility — in this case, the hospital purportedly failed to notify the patient of Hill-Burton funds, and in Blum, the nursing home determined that the patients no longer warranted the higher level of care which in turn prevented the patient from receiving the Medicaid support; (3) the government did not affirmatively command the alleged wrongful act; and (4) the funds were disbursed through a government program, regulated by the government which, for example, defined the eligibility standards for potential recipients. Additionally, there is no evidence, nor has plaintiff asserted in the case at bar, that the government is responsible for the alleged wrongful conduct challenged by plaintiff. This fact is something the Supreme Court relied on heavily in its analysis. See id. 457 U.S. at 1005, 1006-07, 1011, 102 S.Ct. at 2786, 2786-87, 2789.

As Blum and Hodge indicate, the simple fact that a hospital may receive federal funding and that the alleged wrongful activity may be related to a federal program is not sufficient to transform the actions of an ordinarily private entity into that of the State. Since this court has taken a view that no state action has occurred, it will be unnecessary to proceed any further in the analysis of plaintiff's due process and equal protection allegations.

Even if state action did exist in this context, the court would still be compelled to dismiss the Section 1983 claim. See Middlesex County Sewerage Auth., 453 U.S. 1, 101 S.Ct. 2615; Lile v. University of Iowa Hosps. and Clinics, 674 F. Supp. 288 (S.D.Iowa 1987). In Lile, the court reasoned that because the Hill-Burton statute "provides for administrative review by the Secretary, as well as private actions, with applicable rules promulgated thereunder," the Act is sufficiently comprehensive to demonstrate a congressional intent to preclude the remedy under Section 1983. 674 F. Supp. at 290 (citing in support Smith v. Robinson, 468 U.S. 992, 104 S.Ct. 3457, 82 L.Ed.2d 746 (1984); Middlesex County Sewerage Auth., 453 U.S. 1, 101 S.Ct. 2615).

This court concurs in the analysis and conclusion of the Lile court, and utilizes this as further basis to dismiss the Section 1983 claim.

B. Pendent State Claims

1) Third Party Beneficiary

In plaintiff's third cause of action, she avers that the hospital entered into a contract with the United States when the Hospital accepted federal funds in return for providing uncompensated services to those unable to pay. As one of those unable to pay, she contends that she is an intended third party beneficiary.

The Hospital referred to Murphy v. Villanova University, 547 F. Supp. 512 (E.D.Pa. 1982), aff'd. mem, 707 F.2d 1402 (3d Cir. 1983), wherein a student maintained that he was a third party beneficiary of the College Work Study Program which provides for a funding from the United States government to the University. The student alleged that because the college received those funds, and he was a benefactor of the program, he necessarily became an intended beneficiary of the funding agreement. The district court observed:

  By agreeing to make employment equivalent to
  work-study employment "reasonably available . . .
  to all students . . . who desire employment," did
  Villanova "intentionally assume" the liability to
  third-party student beneficiaries for which
  plaintiff contends? . . . Since the Secretary
  exacted this promise from Villanova at Congress'
  behest, and since Congress did not intend to
  create a statutory right of action on plaintiff's
  behalf, it would be anomalous indeed to construe
  the promise as one which the Secretary — or, a
  fortiori, Villanova — intended or understood as
  imposing on the University potential contract
  liability for such claims as [plaintiff] now

Id. at 521.

The Hill-Burton Act differs, however, from that implicated in Murphy. Courts, even before an explicit private action was instituted, found indigent patients to benefit from the relationship between the government and the medical facility. See, e.g., Saine v. Hosp. Auth. of Hall County, 502 F.2d 1033 (5th Cir. 1974); Euresti v. Stenner, 458 F.2d 1115 (10th Cir. 1972); Corum v. Beth. Israel Medical Center, 373 F. Supp. 550 (S.D.N.Y. 1974); Organized Migrants in Community Action, Inc. v. James Archer Smith Hosp., 325 F. Supp. 268 (S.D.Fla. 1971); Cook v. Ochsner Foundation Hosp., 319 F. Supp. 603 (E.D.La. 1970). With a view toward these cases, Congress implanted a private right of action which has evolved into the language now in dispute. To that degree, Congress did intend the third party patient to have a private action.*fn26 Despite Congress' creation of a private cause of action, the court finds that private action in Section 300s-6 also reflects Congress' intention to create exclusive remedies for the enforcement of the statute which pre-empts and precludes any other form of action. The Supremacy Clause of the United States Constitution empowers Congress with the ability to preempt state law. Louisiana Public Service Comm'n v. F.C.C., 476 U.S. 355, 368, 106 S.Ct. 1890, 1898, 90 L.Ed.2d 369 (1986).

  Pre-emption occurs when Congress, in enacting a
  federal statute, expresses clear intent to
  pre-empt state law, when there is outright or
  actual conflict between federal and state law,
  where compliance with both federal and state law
  is in effect physically impossible, where there
  is implicit in federal law a barrier to state
  regulation, where Congress has legislated
  comprehensively, thus occupying an entire field
  of regulation and leaving no room for the States
  to supplement federal law, or where the state law
  stands as an obstacle to the accomplishment and
  execution of the full objectives of Congress.

Id. at 368-69, 106 S.Ct. at 1898 (internal citations omitted) (emphasis supplied). Additionally, "[p]re-emption may result not only from action taken by Congress itself; a federal agency acting within the scope of its congressionally delegated authority may pre-empt state regulation." Id. at 369, 106 S.Ct. at 1899.

In Int'l Paper Co. v. Ouellette, 479 U.S. 481, 107 S.Ct. 805, 93 L.Ed.2d 883 (1987), the Supreme Court considered whether the State nuisance law was pre-empted by the Clean Water Act (CWA). The CWA established an extensive permit system designed to regulate the discharge of polluting effluents. To decide whether to issue the permit, the Administrator of the Environmental Protection Agency had to balance the competing public and industrial use of the waterway. After opining that "[a] state law also is pre-empted if it interferes with the methods by which the federal statute was designed to reach [its] goal," id. at 494, 107 S.Ct. at 813, the Court found that the "application of [State] law . . . would allow respondents to circumvent the [ ] permit system, thereby upsetting the balance of public and private interests so carefully addressed by the Act." Id. at 494, 107 S.Ct. at 813. It further concluded, "It would be extraordinary for Congress, after devising an elaborate permit system that sets clear standards, to tolerate common-law suits that have the potential to undermine this regulatory structure." Id. at 497, 107 S.Ct. at 814.

In this case, the Hill-Burton Act was established to construct and modernize medical facilities to furnish quality medical care and to make available a reasonable volume of medical services to persons unable to pay. 42 U.S.C. § 291 & 291c(e). A comprehensive regulatory scheme was developed to enforce the "assurance" under Hill-Burton to provide uncompensated services while maintaining the financial integrity of the medical facility. If this court permitted plaintiff to proceed with the contract claim, it would effectively sanction the plaintiff's circumvention of the administrative procedures which must be followed before initiating his/her private action and, thereby, would prevent the Secretary from having the opportunity to enforce the Hill-Burton obligation, something Congress explicitly intended.*fn27 Furthermore, if state law claims could be maintained without regard to the Hill-Burton regulations, it would disrupt the Secretary's balancing of the consumer's ability to obtain free medical services with the desire to not financially overburden the medical facility. See 42 C.F.R. § 124.513. Also, allowing a state contract suit would potentially bankrupt hospitals and would contravene the policy of the Hill-Burton Act to furnish adequate medical care. Such an action based on state law would interfere with the implementation of the Hill-Burton Act, and thus is pre-empted. Accordingly, plaintiff's action must be restricted to the procedural mechanisms and limited private action established in the regulations. Plaintiff's third cause of action will be dismissed.

The court notes that this conclusion is somewhat irrelevant in the respect that even if plaintiff possessed a viable contract action, she could receive no more relief than what she could receive directly under the Hill-Burton Act and its regulations.

2) The Pennsylvania Unfair Trades Practices and Consumer Protection Law

Plaintiff, in her fifth cause of action, avers that the Hospital violated the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 Pa.Stat.Ann. § 201-1 et seq. (hereinafter CPL). Section 201-3 of the act declares "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce" to be unlawful. The CPL delineates seventeen different acts which may constitute "unfair or deceptive acts or practices." 73 Pa.Stat.Ann. 201-2.

In the complaint, plaintiff failed to specify which definition of "unfair or deceptive acts or practices" in Section 201-2 is applicable to her case. In reviewing these seventeen definitions, the court is unsure whether any of these provision would apply. It is not the court's responsibility to locate a cause of action under this statute for plaintiff.

In plaintiff's brief, however, she refers to Section 201-2(4)(xvii) which states that "unfair or deceptive acts or practices" means "[e]ngaging in any other fraudulent conduct which creates a likelihood of confusion or of misunderstanding." In utilizing this definition as a basis for her cause of action, she argues that "Defendant's fraudulent and mendacious conduct confused the Plaintiff and caused her to misunderstand the nature of the Defendant's Hill-Burton obligation." Document 18 of record. The essential element of this provision is fraud prevention. Commonwealth by Creamer v. Monumental Properties, Inc., 459 Pa. 450, 329 A.2d 812 (1974). The Pennsylvania courts have defined fraud for purposes of this statute as "any kind of artifice employed by one person to deceive another." Chatham Racquet Club v. Commonwealth, 127 Pa.Cmwlth. 209, 561 A.2d 354 (1989) (quoting Commonwealth v. National Apartment Leasing Co., 108 Pa.Cmwlth. 300, 306, 529 A.2d 1157, 1160-61 (1987)).

The court questions whether plaintiff has alleged this claim with enough specificity to withstand a motion to dismiss. Irrespective, this claim is still subject to dismissal for the same reason provided in the analysis disposing of the contract claim. As announced above, the comprehensive statutory and regulatory scheme implies Congress' intent to make a remedy under the Hill-Burton Act exclusive and the execution of this state statute would impede the implementation and policy of the Hill-Burton Act and its regulations. Consequently, this cause of action must also be dismissed.

The court again notes that even if this claim survived, she could obtain no more relief than that which she could receive directly under the Hill-Burton Act.*fn28

C. Punitive Damages

Plaintiff also prays for "punitive damages in an amount equal to a sum which will [ ] insure future compliance with the above act." Document 1 of record at 10-11. In this case, the court finds punitive damages to be totally unwarranted and, thus, will dismiss this portion of her complaint.*fn29

1) Federal Claims

"Punitive damages in general represent a limited remedy, to be reserved for special circumstances." Savarese v. Agriss, 883 F.2d 1194 (3d Cir. 1989) (citing Cochetti v. Desmond, 572 F.2d 102, 105-06 (3d Cir. 1979)). Such damages are rationalized principally on three grounds: (1) "[they] are `assessed for the avowed purpose of visiting a punishment upon the defendant;'" (2) "[they] deter[ ] persons from violating the rights of others;" and (3) "[they] are justified as a `bounty' that encourages private lawsuits seeking to assert legal rights." Smith v. Wade, 461 U.S. 30, 103 S.Ct. 1625, 75 L.Ed.2d 632 (1983) (Rehnquist, J., dissenting) (emphasis in original) (internal citations omitted). In Wade, the Supreme Court announced the proper standard to be considered in determining whether the imposition of punitive damages is appropriate. The Court held that a jury may impose punitive damages in a Section 1983 case not only when evil intent is demonstrated, but also when the defendant(s) exhibit reckless or callous indifference to the rights of others. Id. at 56, 103 S.Ct. at 1640. The petitioner, who was charged with a Section 1983 violation, argued that the most prudent test for punitive damages is one limited to "actual malicious intent — `ill will, spite or intent to injure.'" Id. at 37, 103 S.Ct. at 1630. After surveying state common law and finding that it more or less has expanded the application of punitive damages in tort cases to include conduct by defendant manifesting a reckless indifference to the rights of others, the Court stated, "we discern no reason why a person whose federally guaranteed rights have been violated should be granted a more restrictive remedy than a person asserting an ordinary tort cause of action." Id. at 48-49, 103 S.Ct. at 1636. Accordingly the Court concluded that punitive damages may be assessed "when the defendant's conduct is shown to be motivated by evil motive or intent, or when it involves reckless or callous indifference to the federally protected rights of others." Id. at 56, 103 S.Ct. at 1640.

In this action, plaintiff has not asserted any facts which would demonstrate that defendant acted with malicious or evil intent, or with reckless or callous indifference to plaintiff's federal rights. Hence, the punitive damages demand as to the federal claims must be dismissed. Additionally, in finding that the underlying Section 1983, Fifth Amendment and Fourteenth Amendment claims shall be dismissed, a punitive damages request must receive the same fate.

2) Pendent State Claims

Pennsylvania courts have embraced the rule in Restatement (Second) of Torts which states: "Punitive Damages may be awarded for conduct that is outrageous, because of the defendant's evil motive or his reckless indifference to the rights of others." § 908(2), quoted in, Feld v. Merriam, 506 Pa. 383, 395, 485 A.2d 742, 747 (1984). As similar to the above standard involving federal rights, punitive damages may be awarded "when the act is done with reckless indifference, as well as, bad motive." Delahanty v. First Pennsylvania Bank N.A., 318 Pa. Super. 90, 130, 464 A.2d 1243, 1263 (1983).

In the case at bar, however, the court has dismissed all the state claims for failure to state a claim upon which relief may be granted. When this occurs, the Pennsylvania Supreme Court has opined,

  Since punitive damages are an element of damages
  arising out of the initial cause of action, if
  that cause of action is dismissed

  the punitive damages which are incident to actual
  damages cannot stand.

  If no cause of action exists, then no independent
  action exists for a claim of punitive damage
  since punitive damages is (sic) only an
  element of damages.

Kirkbride v. Lisbon Contractors, Inc., 521 Pa. 97, 101, 555 A.2d 800, 802 (1989) (emphasis in original). Thus, "[i]t is essential . . . that facts be established that, apart from punitive damages, are sufficient to maintain a cause of action." Rhoads v. Heberling, 306 Pa. Super. 35, 44, 451 A.2d 1378, 1383 (1982).

It then follows in this case that since the underlying cause of action for the pendent state claims has been dismissed, the punitive damages request surrounding those claims must be likewise dismissed in accordance with Kirkbride.*fn30

Consequently, plaintiff's demand for punitive damages will be dismissed for failing to state a claim upon which relief may be granted.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.