Could a Louisiana public hospital discount bills for uninsured patients who paid promptly?

Plain-English summary

Franklin Foundation Hospital, a Louisiana hospital service district hospital, proposed reducing normal charges for uninsured patients who paid at once or very soon after care. It asked whether that discount would amount to an unconstitutional donation of public property. In Opinion 03-0104, the Attorney General said the described policy was not a donation: the hospital received prompt cash payment in return for the lower bill.

The hospital reported that many uninsured accounts otherwise became bad debt after collection efforts. It said the proposed discount would be no greater than discounts already given to government payers. The AG focused on the hospital's determination that immediate funds were worth more than the potential cost of later collection. His reasoning concerned this exchange of value, not a gratuitous waiver of a debt.

Currency note

This opinion was issued in 2003. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant at issuance

Public hospital administrators

The AG concluded that the proposed discount exchanged a reduction in charges for a tangible prompt-payment benefit. Under those circumstances, he did not regard it as a prohibited donation.

Uninsured patients

The opinion described a policy limited to patients with no third-party payer who promptly paid a discounted amount. It did not set a particular discount rate or say that every patient qualified for one.

Common questions

Q: Did a public hospital's prompt-pay discount count as giving away public property? A: The AG said no for the proposed policy because immediate payment gave the hospital value in return.

Q: Was the discount available whenever a patient was uninsured? A: The opinion addressed the hospital's proposed policy for accounts with no third-party payer and payment at or immediately after service; it did not describe a general discount entitlement.

Q: Why did prompt payment matter to the AG's analysis? A: The hospital said it often could not collect full charges later. The AG viewed the prompt receipt and availability of funds as a tangible benefit, making the exchange non-gratuitous.

Background and statutory framework

The opinion quoted La. Const. Art. VII, Sec. 14(A) on the ban against loaning, pledging, or donating public property. It invoked La. C.C. Art. 1467's definition of donation as a gratuitous disposition and reasoned that the hospital's return benefit removed the proposed transaction from that category. The official letter is dated July 8, 2003.

Citations and references

Authorities in the opinion: La. Const. Art. VII, Sec. 14(A); La. C.C. Art. 1467.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/03-0104

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

o’~lal~ o[ ~ui~ia~a
DEPARTMENT OF JUSTICE
One American Place
301 Main Street, Suite 600
CIVIl DIVISION
P.O. Box 94005
BATON ROUGE
TEL.: (225} 342-7013
RICHARD P. [EYOUB
FAX: (225) 342-2090
70804-9005
ATTORNEY GENERAL

JUL 0 8 2003
Opinion Number 03-0104

53 Hospitals
90-A-2 Public Funds-Loan, pledge or grants Ms. Patty Luker, Administrator
Franklin Foundation Hospital
Hospital Service District Hospital’s offering of a discount
1501 Hospital Avenue
from normal hospital charges to uninsured patients in
return for which the Hospital will receive immediate or very
Franklin, Louisiana 70538-0760
prompt payment by the uninsured patient for services
received at the Hospital is not a donation, and therefore
Dear Ms. Luker: does not violate La. Const. Art. VII, Sec. 14(A).

On behalf of the Franklin Foundation Hospital, a hospital service district hospital located in Franklin, Louisiana which you serve as Administrator, you have requested an Attorney General’s Opinion regarding the constitutionality of a "discounted prompt-pay policy" under La. Const. Art. VII, Sec. 14.

Your letter advises that as a hospital service district hospital, the Franklin Foundation Hospital (the "Hospital"), treats patients without regard to a patient’s ability to pay. Your letter further states:

’~/Vhen the Hospital determines that no third party payer exists (including Medicare, Medicaid or commercial payer) for services rendered, or about to be rendered, then a patient self-pay account is established. More often than not, the Hospital does not receive payment on such account and therefore, it has been the Hospital’s policy, after prudent collection measures have been taken, to book or designate such accounts as bad debt. In order to encourage collection for such accounts, the Hospital is considering offering a discount from its normal charges to the uninsured individual, if the uninsured individual promptly pays the discounted amount at the time of service or immediately thereafter. Please note that the discount the Hospital will offer will be no greater than the discount from the Hospital’s charges already provided to governmental payers, such as Medicare and Medicaid. The Hospital believes it will receive a tangible benefit (immediate receipt of funds, albeit discounted) as opposed to the historical practice which generally results in the receipt of no funds...We believe that because the Hospital will receive a tangible benefit by this policy, the policy is not in contravention of Article 7, Section 14(A)."

Specifically, you have asked this office for our opinion as to whether the above described "discounted prompt-pay policy" is prohibited by La. Const. Art. VII, Sec.
14(A), which pertinently provides that "...the funds, credit, property, or things of the

Page 2

Opinion Number 03-0104
Ms. Patty Luker, Administrator
Franklin Foundation Hospital
Page -2-

state or of any political subdivision cannot be loaned, pledged, or donated to or for any person..."

Please be advised that the Hospital’s offering of a discount from normal hospital charges to uninsured patients in return for which the Hospital will receive immediate or very prompt payment by the uninsured patient for services received at the Hospital does not, in our opinion, violate La. Const. Art. VII, Sec. 14(A). Although the granting of a discount on services performed could be said to be a "thing of value", in our opinion, the granting of such a discount under the circumstance presented cannot be said to be a donation. A donation is a gratuitous disposition of property. La. C.C. Art. 1467. Merriam-Webster Dictionary defines gratuitous as "given unearned or without recompense", and "not involving return benefit, compensation, or consideration".1 According to your advice, the Hospital will receive what it considers to be a "tangible benefit", in the form of the immediate receipt of funds, in return for offering the discount.

Clearly, the Hospital has determined that the prompt receipt and availability of the funds generated by the discounted payments is of value to the Hospital, and will be worth more to the Hospital than the potential cost of collecting the full amount owed the Hospital at a later date. In such a case, the offering of the discount cannot, in our opinion, be considered to be a "donation".

We trust the foregoing to be of assistance.

Yours very truly,

RICHARD P. IEYOUB
Attorney General

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xc: Mr. Jack M. Stolier

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