Shawn Vestal: Instead of offering charity care, hospital chain hounded poor patients

If you want a depressing example of the grotesque contortions built into our health-care system, look no farther than the recent debt-collection practices of Providence Health & Services.

Providence is one of the biggest hospital chains in the country and operator of 14 hospitals in Washington, including Sacred Heart and Holy Family in Spokane. It is legally obliged to provide free care to low-income patients as a requirement of its tax-free, not-for-profit status, which saves the chain more than $1 billion in taxes every year.

What it’s done instead, according to the allegations in a lawsuit from the state attorney general and a broader new investigation from The New York Times, is develop “elaborate systems to convert needy patients into sources of revenue.”

“The result, in the case of Providence, is that thousands of poor patients were saddled with debts that they never should have owed,” the Times reported last weekend.

During the same period, Providence actually shrank the amount of charity care it provides. In 2018, charity care accounted for 1.24% of its expenses (compared to an average 2% for all nonprofit hospitals). Last year, it fell below 1%, the Times reported.

In other words, instead of caring for the neediest people at no cost – as the law requires – it hounded them without even mentioning the possibility of charity care and turned them over to debt collectors.

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

When the lawsuit was filed in February, Providence officials denied the allegations. The suit also names Providence affiliates Swedish Health Services and two debt collection agencies.

“The Providence family of organizations is extremely disappointed that the Office of the Washington State Attorney General has chosen to file inaccurate and unfair charges against us regarding our charity care and financial assistance practices,” it said in a statement.

Officials with the hospital chain were less definitive in their responses to the Times investigation, which included details from Providence debt-collection activities in California and Oregon as well. The company’s chief financial officer told the Times its findings were “very concerning and have our attention.”

Another official acknowledged the tone of the debt-collection materials Providence used – including scripts for debt collectors that omitted charity care information and pressed patients to pay regardless of their ability – “was not consistent with our values.”

Non-profit hospitals are required by federal law to provide charity care to patients, though the amount of that care is not specified. Washington law requires nonprofit hospitals to provide free care for anyone whose household income falls under 200% of the federal poverty guidelines.

It also requires hospitals to determine whether patients are eligible for such care and offer it.

What the hospitals receive as nonprofit entities is significant. In addition to the enormous tax savings, Providence can issue low-interest tax-exempt bonds and debt financing, and collect tax-free charitable donations, the lawsuit notes.

Meanwhile, its net revenues – profits – were $118 million in 2019, its executive salaries are, naturally, exorbitant, and it maintains large reserves and a venture capital fund, the suit says.

Providence grew concerned about the budgetary impact of its charity care in 2018 and developed an in-house debt-collection program – called RevUp and built on a go-go culture resembling a high-pressure sales team – in which patients entitled to charity care were instead badgered to pay. When Rev-Up didn’t produce payments, poor patients were sent to debt collectors.

Providence employees raised red flags in 2019 – “we are sending the poor to bad debt,” according to one email – but the practice continued.

Since 2018, according to the lawsuit, Providence has sent more than 44,000 accounts, totalling roughly $477 million in outstanding charges, to debt collectors for patients it is legally required to treat for free. It sent another 10,000-plus accounts of Medicaid enrollees – whose status all but guarantees they’re eligible for charity care – to debt collectors, over charges of $22 million.

It collected almost $4.5 million and continued to do so until March – a matter of weeks after the lawsuit was filed.

As noted above, the boiler-room atmosphere of Providence’s collection practices stood in stark contrast with its public statements about its values.

On the one hand, according to the lawsuit, there was the RevUp training that directed Providence staff to “avoid asking questions that allow the (patient) to assume there is an option NOT to pay.”

On the other, there’s its public statement responding to the Times story, headlined, “Our commitment to caring for the poor and vulnerable has never been stronger.”