An Oregon nonprofit hospital has been sued in a class action suit for failing to give financial aid to low-income patients as required by federal law.
St. Charles Health System, the biggest system in central Oregon with four hospitals in the Bend-Redmond area, like other nonprofit hospitals in Oregon, is required by law to give “charity care” – or free or discounted medical care — to people with annual household incomes of up to 400% of the federal poverty level. They are also required to screen patients whose household income is at or below 200% of the federal poverty level for aid before sending the patient’s account to a debt collector.
The suit alleges that in May 2022, the plaintiff, Kristine Reiger, was treated by St. Charles after she was in a motor vehicle accident. The hospital sent her a bill for over $3,400, which she could not afford. The suit, by Sugerman-Dahab law firm in Portland and Terrell Marshall Law Group in Seattle, says Reiger should have been eligible for free care because her household income was below 200% of the federal poverty level.
But she tried for months in vain to contact someone at the hospital to work out a payment plan, the suit says, and her bill was sent to Ray Klein, a collection company.
“Oregon law protects low and moderate-income Oregonians from devastating medical bills,” Blythe Chandler, an attorney for Reiger, wrote in an email. “St. Charles has been ignoring Oregon law and illegally sending people to collection. We filed this lawsuit to return illegally collected monies and to make sure that St. Charles and its debt collector Ray Klein comply with Oregon law.”
Hospital comment
[Update: Alandra Johnson, public information officer for St. Charles, wrote in an email on Wednesday, March 6, “We have not received notice of this lawsuit being filed and therefore can’t comment on the specifics of the suit.”
[“We take our role as a local, community-based nonprofit health system seriously and are proud to provide approximately $120 million annually in unreimbursed care to our Central Oregon communities,” she wrote.
[“We regularly review our financial assistance policies and processes and believe we are in compliance with regulations. Our teams work incredibly hard to make sure patients understand the financial assistance that is available to them. Information about the Financial Assistance Program is provided on every billing statement and is easily accessible on the St. Charles website. St. Charles makes every effort to contact patients who have not paid their bills to discuss financial assistance options before engaging outside partners to help with payment collection. Patients are screened for potential financial assistance eligibility. If we believe the patient may qualify for financial assistance, we attempt to contact them through phone calls and mailings. We also proactively send a financial assistance application through the mail. Only when patients do not respond in any form after multiple attempts to contact them do we engage help from an outside party.”]
A similar lawsuit was filed last November seeking $1 million each in punitive payments from Sky Lakes Medical Center, a hospital in Klamath Falls, Ore., and Carter-Jones, the debt collection agency it contracted with, on behalf of Nathaniel Boren, a Klamath County resident who Sky Lakes sent to collections after he couldn’t pay for medical treatments. It seeks $2 million in punitive payments over a medical bill that was less than $900. He was treated “at Sky Lakes in June 2020 when he was uninsured and couldn’t afford his bills because he only had a temporary job and had ‘other obligations,’ the lawsuit states. He should have qualified for Sky Lakes’ financial assistance programs that included a 25% discount for uninsured patients, according to the lawsuit,” The Lund Report said. Sky Lakes did not screen him, but sent him into collections, the suit says.
Significant development
The St. Charles lawsuit follows a similar Washington state case, and also the increasing realization that medical costs are unsustainable — and that charity care policies are hidden and poorly observed.
Nonprofit hospitals are required to deliver a some community benefit, including free or discounted charity care and other loosely defined benefits, to maintain their tax-exempt status. The regulations on charity care are federal, in Internal Revenue Service code, Section 501 (r), under the Affordable Care Act. Practices vary by state and by hospital on how this charity care is delivered, but it’s generally based on the size of a household and its income, as a percentage of the federal poverty level. Tax-exempt hospitals are required to make a Financial Assistance Policy for charity care public as described by the I.R.S. on this page.
In a phone interview, I asked Blythe Chandler of the Terrell Marshall Law group if there is a lack of enforcement on charity care laws. “A lot of eligible people don’t get it, and that implies a lack of compliance and a lack of enforcement,” she said.
Doug Aldeen, an Austin, Texas, healthcare law expert, told us that the income and household size requirements for charity care are broad enough that millions of Americans are getting hospital bills that they should not have to pay.
A family of four that earns $120,000 in Adjusted Gross Income is at 400 percent of the Federal Poverty Level, which qualifies for charity care under many hospitals’ policies. But the hospitals make it difficult to find the policy and then place obstacles in front of applicants, Aldeen said. Enforcement is spotty.
Washington case
Earlier this year, a Washington health system, Providence Health & Services, was ordered to supply nearly 100,000 low-income patients with about $158 million in refunds and debt relief — almost two years after it was sued for 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,” The Seattle Times reported on Feb. 1, 2024. “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.”
Ferguson said the settlement was the biggest in Washington and, he thinks, nationally.
Senate report
Charity care was in the news recently when Sen. Bernie Sanders of Vermont issued a report, described here by The Washington Post, from the Senate Health, Education, Labor and Pensions (HELP) Committee saying in part: “Many nonprofit hospital systems across the country are failing to provide low-income Americans with the affordable medical care required by their nonprofit status — despite receiving billions in tax benefits and providing exorbitant compensation packages to their senior executives.”
“In 2020, the nation’s 2,978 nonprofit hospitals receive an estimated $28 billion in federal, state, and local tax benefits as a result of not paying those taxes — an average of $9.4 million per hospital,” the report says. That same year, however, those hospitals “spent only an estimated $16 billion on charity care.”
What you can do
The National Consumer Law Center collects consumer debt advice and expert tips, including articles about medical debt. The Consumer Financial Protection Bureau also has consumer tools on debt protection.
Dollar For is a nonprofit that helps in applying for financial assistance, has a calculator on its website allowing anyone to fill in income and household size figures to assess whether charity care is available. It also has a step-by-step guide, beginning with a request for a hospital’s financial assistance policy.
If your application for financial aid is denied, ask why – or seek advice for an appeal.
Red flag: When you are looking for financial aid, some places will try to direct you to “financing,” which might be an application promising interest-free or low-interest credit. This is tricky. The financing application is basically an application for consumer credit, and it will almost certainly have similar terms and conditions to credit card debt – hefty interest and penalties, for example.
Is your hospital a non-profit? Some states require non-profit hospitals to provide financial assistance to patients with income between 21% and 200% of the federal poverty level; for other states, the rules are different. You can find federal poverty income guidelines here. The National Consumer Law Center has more details in its recent review of hospital financial assistance policies across the country.
