Providence hospitals must forgive medical debt in charity care lawsuit

SEATTLE – Providence hospitals in Washington must provide nearly 100,000 low-income patients with about $158 million in refunds and debt relief, per a Thursday agreement – almost two years after being sued for allegedly failing to offer them free or discounted medical care.

The complaint, filed by state Attorney General Bob Ferguson’s office against 14 Providence hospitals in February 2022, accused the health care system of regularly pressuring patients to pay medical bills whether or not they were eligible for financial assistance under state law. Under the law, all hospitals are required to provide charity care, or free or reduced-cost medical care to those who can’t afford the full amount.

The resolution, filed Thursday in King County Superior Court, settles the lawsuit and includes an agreement that Providence will forgive $137.2 million in medical debt for about 65,000 patients and refund $20.6 million (which includes 12% interest) to about 34,000 patients.

“Providence violated the law in multiple ways,” Ferguson said at a news conference in Seattle Thursday. “Providence created barriers for tens of thousands of patients who were legally entitled to financial aid with their medical bills. They also sent many of their most vulnerable patients to collections. One of Providence’s own employees summed it up pretty well: They called the practice ‘sending the poor to bad debt.’ ”

Providence has forgiven $125.8 million in patients’ medical charges and will forgive the remaining $11.4 million after Thursday’s filing, according to the attorney general’s office. The hospital system also refunded $230,000 to about 1,500 Medicaid accounts after the lawsuit was filed.

“Today’s resolution with Providence is the largest (of its kind), both here in Washington and we believe nationally,” Ferguson added. “It is my hope this is our last case along these lines. But that’s not for us to determine, that’s for the industry.”

On average, each patient will receive about $478, though individual amounts vary widely, and average write-offs for patients still awaiting debt forgiveness total about $900. More than 200 patients will see refunds over $5,000 and about 73 patients will receive more than $10,000, Ferguson said.

In all, 99,446 patients will receive refunds or have their medical debt forgiven.

“We believe it is the right thing to do to put the litigation behind us so that we can focus on serving patients instead of continuing a dispute with a regulator who shares our same goal of ensuring patients have meaningful access to financial assistance,” a Providence statement said Thursday.

The hospital system added that it “recognizes the tough challenges many members of our community face that result in them not completing the financial assistance application process and we are also making improvements to our processes to encourage more individuals to apply for such assistance, which we are happy to offer.”

Under the state’s charity care law, established in 1989, those with a household income at or below 300% of the federal poverty level are eligible for free or discounted medical care. Protections apply to both insured and uninsured patients.

The law also requires hospitals to tell patients about charity care verbally and in writing, and screen them for eligibility before attempting to collect payments.

Between 2018 and 2023, however, Providence “routinely disregarded both of those obligations,” a statement from Ferguson’s office said. Instead, the 2022 lawsuit alleged, the hospital trained staff to repeatedly ask patients for payments or bill them without determining if they qualified for financial assistance. The lawsuit also alleged Providence sent more than 54,000 low-income patients, including Medicaid members, to debt collectors, despite knowing they were eligible for charity care.

The accounts sent to debt collection agencies totaled more than $70 million, according to the lawsuit. The AG’s office is continuing to pursue a lawsuit against debt collectors involved in these cases.

Pierce County resident Evangeline Holloman, who was present at the Thursday news conference with her husband Kevin, was admitted to Swedish Medical Center in November 2020 to give birth to their daughter. The couple was initially happy with their care at Swedish, which is affiliated with Providence and was named in the lawsuit, along with Kadlec Regional Medical Center in Richland.

But about a month and a half after getting discharged, they received their first bill (which included some emergency room visits) – about $7,000. It was more than the couple could afford, so they asked Swedish for help.

They were given a payment plan, which was “affordable, but difficult,” said Kevin Holloman, who works in human resources. After the couple moved, however, some bills were still sent to their previous address, resulting in a few late payments.

After the first missed payment, Swedish sent the couple to debt collection agency Harris & Harris, which charged them about twice as much per month as what the hospital was billing them, they said. They ended up using their entire emergency savings to pay the bill quickly, worried about how their credit score would be affected.

“We’ve had to restart from ground zero,” said Evangeline Holloman, who’s a stay-at-home parent. “Having your security ripped out from under you like that is really hard.”

In addition to refunds and debt forgiveness, Providence must implement new systems to determine whether patients are eligible for financial assistance before attempting to collect payments from them, per the resolution. The hospital system must also stop all “deceptive” collection practices identified in the lawsuit, the attorney general’s statement said.

In addition, Ferguson’s office will receive $4.5 million from Providence to reimburse costs of the investigation.

“Serving those in need, regardless of their ability to pay, is at the very heart of Providence’s Mission and values,” Providence Chief Financial Officer Greg Hoffman said in the statement. “Today’s agreement reaffirms our commitment to serving those who are most vulnerable by taking steps to proactively promote the availability of financial assistance and simplify the application process.”

The Providence statement added that the hospital system is the largest provider of charity care in the state, including providing $839 million in free and discounted medical care in 2022.

“Our financial assistance practices comply with, and in many instances exceed, the requirements of Washington’s Charity Care Act,” the hospital said. “In fact, our threshold for charity care eligibility is more generous than Washington state standards.”

The state investigation into Providence collection practices began in 2020, after Ferguson’s office started receiving complaints about these methods at Swedish.

According to the complaint, one Providence tactic gave staffers a script to follow and instructed them to “ask every patient every time” to pay their hospital bills. Another training told staffers, “Don’t accept the first no,” meaning staff should continue to ask patients how they want to pay for their treatment even after patients say they can’t afford the bill.

The training directed staff to try at least three times to collect payment after the “first no” – and then only give information on charity care after that.

Internal emails discovered during the investigation showed Providence sent thousands of patients to debt collectors because the hospital “knew those patients were more likely to pay their bills if collection attempts continued,” the statement said.

Ferguson’s office believes the hospital system’s practices amounted to more than 100,000 violations of the state Consumer Protection Act.

“These aggressive collection measures capitalize on the power and knowledge imbalance between Providence and its patients,” the lawsuit said. “Providence is fully aware of the availability of charity care. Many of Providence’s low-income patients, however, are not.”

The state updated its charity care law in 2022, expanding eligibility to include almost half of all Washingtonians. Before that, those who were at or below 200% of the federal poverty level were eligible to receive free or discounted medical care. The bill, which went into effect in July 2022, also significantly increased medical financial assistance at the state’s smaller, more rural hospitals, with free care up to 200% of the federal poverty level and discounted care up to 400%.

Under the updated medical financial assistance law, hospitals are required to notify patients of available financial assistance both verbally and in writing; screen patients for eligibility before attempting to collect payment; and only require patients to provide one income-related document to prove eligibility.

For more information about the state’s medical financial assistance law, visit affordablehospital.wa.gov.

Those affected will receive a letter from the Attorney General’s Office with information about the resolution, and will receive checks in the mail or notice that their account balances have been written off.

Patients with questions about whether they qualify for the resolution should contact Providence, not the Attorney General’s Office, which does not have patient data.