The Supreme Court has upheld the Eastern Health Board’s method of calculating hospital charges for patients injured in road traffic accidents, in litigation arising from the treatment of Derek Crilly.
Crilly had been severely injured in a road crash and received extensive hospital treatment. In August 1992, he was awarded £1,667,078.20 in damages against T. & J. Farrington Limited and John O’Connor.
A separate dispute then arose between the health authority and FBD Insurance over how charges for his hospital treatment should be calculated under section 2 of the Health (Amendment) Act 1986.
The Eastern Health Board used an average daily cost system. This divided a hospital’s annual expenditure by the number of occupied bed days during that year. Capital costs were excluded, and the applicable charge generally used the preceding year’s audited figures.
The High Court had held that the charge should more closely reflect the actual services received by the individual patient and rejected general averaging.
Denham J disagreed. She held that the 1986 Act requires a health board to impose “a charge” but does not require precise individual costing of every service received. The charge must be reasonable and must not be arbitrary, partial or unjust.
The Supreme Court found that the average daily cost method met that standard. It was transparent, consistent and practical, and there was uncontradicted evidence supporting its reasonableness.
The court also rejected FBD’s argument that the charge should resemble the fixed hospital charge provided for under section 55 of the Health Act 1970. Denham J held that the two statutes established distinct charging systems.
The appeal was allowed and the insurer’s cross-appeal dismissed. The court declared the Eastern Health Board’s average daily cost method reasonable, proper and within its statutory powers.