Dignity Health Lawsuit: $37M Settlement, Denials, and Breach

Dignity Health, now a subsidiary of CommonSpirit Health, has been the defendant in a long line of major lawsuits over the past two decades. The Dignity Health lawsuits of greatest financial and public consequence involve a $37 million Medicare fraud settlement, a $12 million share of a Medi-Cal false claims settlement, a $100 million pension underfunding deal, U.S. Supreme Court litigation over denial of care to a transgender patient, active class-action claims over mishandled patient remains in Sacramento, wage-and-hour cases from nurses and hourly staff, and data breach suits tied to a 2022 ransomware attack on parent company CommonSpirit.

Medicare Overbilling: $37 Million Settlement

In October 2014, Dignity Health agreed to pay $37 million to resolve False Claims Act allegations that 13 of its hospitals in California, Nevada, and Arizona had systematically overbilled Medicare and TRICARE by admitting patients for inpatient care when outpatient treatment was appropriate.¹

The government’s allegations covered three types of billing. Between 2006 and 2010, the 13 hospitals billed for inpatient stays tied to elective cardiovascular procedures such as stent placements and pacemaker implants. Between 2000 and 2008, four of those hospitals did the same for kyphoplasty, a minimally invasive spinal procedure. And across 2006 to 2010, all 13 admitted patients as inpatients for common medical diagnoses that did not require it.²

The case began as a whistleblower suit by former employee Kathleen Hawkins under the False Claims Act’s qui tam provisions, captioned United States ex rel. Hawkins v. Catholic Healthcare West, et al. Hawkins received roughly $6.25 million of the settlement. Dignity Health also entered a five-year Corporate Integrity Agreement with the HHS Office of Inspector General requiring independent audits of its claims. The settlement resolved allegations only, with no determination of liability.¹

Gold Coast Health Plan Medi-Cal Settlement

In August 2022, Dignity Health paid $12 million as part of a broader $70.7 million settlement involving Gold Coast Health Plan, Ventura County, and Clinicas del Camino Real. Federal and state authorities alleged that between January 2014 and May 2015 the defendants knowingly submitted false claims for “Additional Services” provided to Medi-Cal Adult Expansion members. The payments, prosecutors alleged, were not allowed medical expenses under Gold Coast’s contract, did not reflect fair market value, duplicated required services, or amounted to unlawful gifts of public funds under the California Constitution.³

The action was filed in 2015 as a qui tam suit by two former Gold Coast employees, Atul Maithel and Andre Galvan.⁴ Dignity Health’s share was allocated $10.8 million to the United States and $1.2 million to California. Again, the resolution involved allegations only.⁵

$100 Million Pension Settlement

The largest payout in Dignity Health’s litigation history came from a fight over its pension plan. Current and former employees argued that Dignity Health had wrongly claimed a “church plan” exemption from ERISA, the federal law that imposes funding, reporting, and disclosure requirements on private pensions. They said the exemption did not apply because the plan was established by the hospital system, not by a church, and that the exemption had been used to underfund the plan by roughly $1.8 billion.

The threshold legal question reached the U.S. Supreme Court. On June 5, 2017, in Advocate Health Care Network v. Stapleton, which consolidated Rollins v. Dignity Health with two similar cases, the Court unanimously ruled that a 1980 amendment to ERISA extended the church plan definition to plans maintained by a “principal-purpose organization” associated with a church, regardless of who established the plan.⁶

That ruling didn’t end the case. On remand, employees continued pressing underfunding claims, and the parties eventually settled. Dignity Health agreed to pay at least $100 million to a class of more than 91,000 plan participants and beneficiaries. U.S. District Judge Jon S. Tigar rejected the deal twice before granting preliminary approval on October 19, 2021, and final approval on July 15, 2022.⁷ Beyond the cash, Dignity Health agreed to provide annual reports and benefit projection tools, appoint two non-employee members to its pension subcommittee through 2027, and protect against benefit reductions through 2032.⁸

Denial of Care Under Catholic Directives

A separate line of cases has tested whether Dignity Health can refuse services that conflict with the Ethical and Religious Directives for Catholic Health Care Services, which restrict sterilization, contraception, and certain procedures related to gender transition.

Evan Minton

In 2017, the ACLU sued on behalf of Evan Minton, a transgender man whose hysterectomy at Mercy San Juan Medical Center was canceled two days before surgery after he disclosed he was transgender. Minton argued the cancellation violated California’s Unruh Civil Rights Act because the hospital performs hysterectomies routinely for non-transgender patients.⁹ After Minton won in the lower courts, Dignity Health petitioned the U.S. Supreme Court. On November 1, 2021, the Court declined to hear the case, leaving Minton’s win in place. Justices Thomas, Alito, and Gorsuch would have granted review.¹⁰

Rebecca Chamorro

In December 2015, the ACLU of Northern California sued on behalf of Rebecca Chamorro, a Redding woman whose request for a tubal ligation during a scheduled cesarean section was denied by Mercy Medical Center, which classified sterilization as “intrinsically evil” under the Catholic directives.¹¹ A San Francisco Superior Court judge denied an emergency injunction in January 2016, finding the sterilization policy applied equally to men and women.¹² In April 2022, a judge ruled Dignity Health could not be compelled to perform the procedure.¹³

Mishandled Patient Remains in Sacramento

Some of the most recent, and most disturbing, Dignity Health lawsuits arose from a 2025 KCRA 3 investigation titled “Dignity Delayed,” which found that at least five Dignity Health hospitals in the Sacramento area had accumulated a backlog of deceased patients’ remains at an off-site morgue operated by Mortuary Support Services of Northern California and its owner, Michael Robert Lofton. Investigators reported that the remains of at least 180 patients had been stored without completed death certificates for periods ranging from one month to more than three years, some going back to 2020. Families were never notified, and some filed missing persons reports.¹⁴

The California Department of Public Health had cited Mercy San Juan Medical Center in 2022, 2023, and 2024 for related failures. A 2024 inspection reviewed 61 deceased patients at the off-site morgue and found breakdowns in family notification, death certificate completion, and processing of remains, with more than two dozen bodies stored for one to two years. The hospital’s own quality director told inspectors in October 2024 that she was unfamiliar with the correction plans the hospital had submitted and had no data showing they were implemented.¹⁵

Several lawsuits have followed. The family of Charles Wesley Harvey, who died at Mercy San Juan on June 2, 2022, was not notified until November 28, 2025, and alleged his remains had decomposed for years at temperatures above the state-mandated 45°F limit. The family of Tonya Walker, who died at Mercy General on November 2, 2023, sued in April 2025 alleging they were never told she had died and her body sat in improper storage for seven months. A case involving Jessie Marie Peterson alleged the hospital falsely recorded that she had left against medical advice when she had in fact died. The family of Michael Gray, who died in July 2021, settled for an undisclosed amount. By January 2026, the litigation had expanded into a class action representing more than a dozen patients, with Dignity Health, CommonSpirit Health, MSSNC, and Lofton named as defendants on claims of breach of contract, negligence, intentional infliction of emotional distress, and negligent hiring and supervision.¹⁶

Dignity Health has attributed the backlog to the COVID-19 pandemic and staffing shortages and has declined to comment on the pending cases.¹⁴ MSSNC said it intends to “vigorously defend” the claims.¹⁷ The Sacramento County District Attorney’s office has not confirmed whether a criminal investigation is underway.¹⁸ California Assemblymember Maggy Krell introduced Assembly Bill 2598 in response, which would require hospitals to make reasonable efforts to notify next of kin and impose penalties of $200 per day for delays, capped at $50,000. As of June 2026, the bill had not been enacted.¹⁹

Wage and Hour Class Actions

Dignity Health workers have brought several wage-and-hour class actions, most of which ended without a class-wide recovery. In Allison v. Dignity Health, two former registered nurses alleged that nurses at three hospitals were denied proper meal and rest breaks because of interruptions from hospital-issued communication devices and were not paid for resulting work time. A trial court initially certified the class but later decertified it after 19 months of additional discovery revealed wide variation in individual nurses’ experiences, including testimony that many chose to shorten or skip breaks for personal reasons. On June 24, 2025, the California Court of Appeal affirmed the decertification, holding that individual issues predominated and that the plaintiffs’ survey suffered from methodological flaws.²⁰

A federal case, Darling and Jara v. Dignity Health, alleged that understaffing forced patient-care employees to do electronic medical record work off the clock or during breaks. In July 2021, the court conditionally certified a class of more than 40,000 non-exempt hourly employees. The named plaintiffs eventually settled their individual claims, and all opt-in plaintiffs were dismissed without prejudice in January 2023.²¹

2022 Ransomware Data Breach

In October 2022, parent company CommonSpirit Health suffered a ransomware attack that disrupted operations at more than 100 facilities across 13 states, produced an estimated $150 million in business-interruption losses, and compromised the protected health information of more than 623,000 patients.²² Unauthorized network access occurred between September 16 and October 3, 2022, but breach notifications did not go out until April 2023.²³

Class actions followed, including Perkins v. CommonSpirit Health in the Northern District of Illinois and Bonnie Maser v. CommonSpirit Health, alleging negligence, inadequate cybersecurity, and delayed notification. By May 2024, the major suits had been dismissed for lack of standing. In Maser, a magistrate judge found the plaintiff could not show that the alleged financial harm was “fairly traceable” to the breach; the consolidated Illinois cases were dismissed on the same grounds.²³ A separate 2024 vendor breach involving Pinnacle Holdings Ltd, a subcontractor of a CommonSpirit business associate, affected an additional 19,027 Washington residents.²⁴

Who You’re Actually Suing

Dignity Health merged with Catholic Health Initiatives in early 2019 to form CommonSpirit Health, a nonprofit system with approximately $29 billion in annual revenue, 142 hospitals, and more than 700 care sites across 21 states.²⁵ Individual facilities still operate under the Dignity Health brand, but the parent entity named in newer complaints is typically CommonSpirit, and recent Sacramento remains cases name both. The California Attorney General approved the 2019 merger subject to conditions including maintaining emergency and women’s healthcare services for ten years, funding a $20 million homeless health initiative, and offering full financial assistance to patients earning up to 250% of the federal poverty level.²⁶

1
U.S. Department of Justice. Dignity Health Agrees to Pay $37 Million to Settle False Claims Act Allegations
2
U.S. Attorney’s Office, Northern District of California. Dignity Health Agrees to Pay $37 Million to Settle False Claims Act Allegations
3
U.S. Department of Justice. California County Organized Health System and Three Health Care Providers Agree to Pay $70.7 Million
4
California Attorney General. Attorney General Bonta, U.S. Department of Justice Secure $70.7 Million Settlements
5
U.S. Department of Justice. Gold Coast Dignity Settlement Agreement
6
Supreme Court of the United States. Advocate Health Care Network v. Stapleton, 581 U.S. (2017)
7
Cohen Milstein. Dignity Health Judge Blesses $100M ERISA Deal on Third Try
8
IKR Law. Dignity Health Church Plan Settlement
9
ACLU. Dignity Health v. Minton
10
SCOTUSblog. Dignity Health v. Minton
11
ACLU. Hospital Refuses Pregnancy-Related Care
12
Courthouse News Service. Catholic Hospital Need Not Do Tubal Ligation
13
Santa Clara University. Denial of Tubal Ligations in Catholic Hospitals
14
KCRA 3. Dignity Delayed Investigation and Death Notification Bill
15
KCRA 3. Sacramento County Hospital Human Remains Investigation
16
MedPage Today. Dignity Health Patient Remains Lawsuits
17
KCRA 3. Lawsuit Over Dignity Health Off-Site Morgue Contract
18
KCRA 3. Lawsuit Against Dignity Health Over Patient Remains
19
CalMatters Digital Democracy. AB 2598
20
Justia. Allison v. Dignity Health, A169225
21
Thierman Buck. Dignity Health Adv. Jara
22
Fierce Healthcare. CommonSpirit Health Reported IT Security Incident
23
HIPAA Journal. CommonSpirit Health Data Breach Lawsuit Dismissed for Lack of Standing
24
HIPAA Journal. CommonSpirit Health Vendor Ransomware Data Breach
25
Healthcare Dive. Dignity CHI Merger Creates Largest Nonprofit Health System by Revenue
26
Source on Healthcare. California Attorney General Conditionally Approves Merger of Dignity Health and Catholic Health Initiatives