Kadlec hospital in Richland sued by WA state over billing of lower income patients

Kadlec Regional Medical Center in Richland is being sued by the state of Washington over accusations it failed to give legally required discounts to low-income residents and aggressively collected money from people eligible for charity care.

Kadlec, the largest hospital in the Tri-Cities area, is among 14 nonprofit Swedish and other Providence-affiliated hospitals in the state named in the lawsuit filed Thursday by state Attorney General Bob Ferguson.

They also include Providence St. Mary Medical Center in Walla Walla and Providence Holy Family Hospital and Sacred Heart Medical Center, both in Spokane.

Ferguson also plans to ask a judge to require Kadlec and other hospitals to immediately provide charity care required by state law while the case is decided in King County Superior Court.

The lawsuit is seeking the full write-off of medical debts and refunds with interest for patients it said should have received financial assistance. That could total $70 million across all 14 hospitals since 2018.

The refunds and debt forgiveness could cover tens of thousands of people across the state, according to information from Ferguson’s office.

The lawsuit also seeks millions of dollars in civil penalties for practices it said started in 2018.

“Charity care helps low-income families avoid crushing medical debt by making financial assistance available to those who qualify,” Ferguson said in a news release Thursday.

“Hospitals cannot deceive Washingtonians about their legal right to access medical financial assistance,” he said. ”They must follow the law, and ensure low-income patients have access to the resources they need.”

The website for Kadlec says Providence is “committed to serving all within our communities, especially the poor and vulnerable.”

Kadlec, Providence respond

Providence said in a statement that it strongly disagrees with the allegations in the lawsuit.

“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 practice,” Providence said.

The practices of the 14 hospitals comply with and in some instances exceed the requirement of the state’s charity care law it said.

“In fact, our threshold for charity care eligibility is at least two times more generous than Washington state standards,” it said.

In 2019, Kadlec provided $12.9 million in free and low-cost care for patients, according to its website. All 14 hospitals provided $79 million in free and discounted care in 2020, Providence said.

Its hospitals have fully cooperated with the Office of the Attorney General since it raised concerns two years ago.

“That is why it is inconceivable that the AG has chosen now to file this complaint, which runs counter to the facts we provided to his office,” Providence said.

It looks forward to defending its hospital practices in court, it said.

Kadlec billing

Hospitals are required to tell patients both verbally and in writing that charity care is available and check to see if patients are eligible for charity care before attempting to collect payment, according to Ferguson’s office.

But in a training slide for Providence hospitals such as Kadlec, staff were told, “Don’t accept the first ‘no’,” when they ask patients how they want to pay.

Instead, ask for 50% payment or work on a payment plan, it said.

In other instances, Providence determined that patients were eligible for charity care financial assistance but did not tell them, including in some cases even when their bills were sent to a collection agency, the lawsuit said.

Providence is accused of sending more than 54,000 patient accounts to debt collection, despite knowing the patients were eligible for discounts under state charity care law. Providence’s own charity care policy should have made them eligible for full write-offs of their medical debt, according to the lawsuit.

“Providence’s collection measures are aggressive,” the lawsuit said.

“Providence trains staff to use scripts designed to give patients the impression that they are required to pay for their care immediately and to make multiple attempts to collect without meaningfully disclosing the availability of charity care until those collection attempts are exhausted even when told that the patient is unable to pay,” the lawsuit said.

But Providence said in its statement that it is committed to working with patients through any financial issue and provides a range of options to support them, including charity care.

“Even still, it’s our practice to always look for ways to continually enhance our services and offerings for our patients and communities,” Providence said. “If we find out we’ve fallen short of the high standards we hold ourselves to, we make immediate changes. “

Washington state’s charity law requires all hospitals to forgive some or all out-of-pocket costs of essential health care for lower-income patients.

The law covers residents whose household income is 200% or less of the federal poverty level. In 2022 that would come to $27,180 for a single person or $55,500 for a household of four.

Hospital debt collection

Providence hospitals were particularly aggressive in collecting payments from people with incomes of 151% to 200% of the poverty level, on the assumption that those patients could potentially pay, according to the lawsuit.

Between September 2019 and September 2021, the hospitals sent 46,783 accounts for patients with those income levels to debt collection agencies and continues the practice, according to the lawsuit.

It also sent 8,454 accounts of low-income Medicaid patients to debt collectors in an attempt to collect $20.3 million in out-of-pocket costs from them, the lawsuit said.

The state charity care law requires hospitals to charge no out-of-pocket payments, such as co-pays and deductibles, to state residents making up to 100% of the federal poverty level and then provide discounts on out-of-pocket expenses for patients with income at 101% to 200% of the federal poverty level.

Ferguson began investigating Providence’s charity care practices after receiving complaints about Swedish Medical Center in Seattle.

Providence hospital earnings

Providence St. Joseph Health, a nonprofit based in Seattle, generates enormous revenues and profits from its 14 affiliated hospitals, the lawsuit said.

Its hospitals in Washington reported more than $18 billion in patient service revenues in 2020. Its 14 hospitals include Swedish Hospital at First Hill in Seattle, the largest hospital in the state.

A federal report for 2019 showed Providence earned $118 million in net revenue — total revenue minus expenses — in 2019. That same year it paid its president $4.1 million in compensation and benefits and its former president $10.9 million.

The average annual compensation to Providence’s 10 next highest paid employees was $1.8 million.

People who think they might be eligible for charity care coverage since the alleged Providence actions started in 2018 should contact investigator Bau Vang with the Attorney General’s Office at 206-516-2989 or bau.vang@atg.wa.gov.

This story was originally published February 24, 2022 at 12:50 PM.