Providence Regional Medical Center Everett. (Olivia Vanni/The Herald via AP)

Providence Regional Medical Center Everett. (Olivia Vanni/The Herald via AP)

Judge fines Providence debt collectors for deceiving low-income patients

Optimum Outcomes must pay over $827K for withholding disclosures in nearly 83,000 bill collection notices.

EVERETT — Providence debt collector Optimum Outcomes must pay just over $827,000 for violating patients’ debt collection rights, a judge ruled last week in King County Superior Court.

Judge Sean O’Donnell ruled the agency violated the state Consumer Protection Act by withholding debt collection rights disclosures — including the right to apply for financial aid — in nearly 83,000 collection notices to Providence patients. The money, a $10 penalty for each violation, will go to the state general fund.

Fox Rothschild LLP, the Seattle-based law firm representing Optimum Outcomes, did not immediately respond to a request for comment Monday.

Optimum Outcomes was the final defendant in Attorney General Bob Ferguson’s lawsuit against 14 Providence hospitals and two debt collectors for practices that allegedly kept patients from financial aid. The rulings and court settlements have garnered more than $160 million in refunds and debt forgiveness for Providence patients, as well as $1 million to continue the state’s consumer protection enforcement efforts. In all, Providence’s practices violated the Consumer Protection Act more than 100,000 times, according to the state.

“This legal victory resolves the largest charity care lawsuit in American history,” Ferguson said in a press release last week. “We delivered economic justice for Washingtonians in the form of corporate reforms and more than $160 million in direct payments, debt forgiveness and civil penalties.”

Washington is the first state to enforce its medical financial aid — or charity care — protections on a large scale. The Providence lawsuit was the largest of four charity care cases, including local hospital chains PeaceHealth and CHI Franciscan as well as Capital Medical Center in Olympia. In total, the cases have garnered more than $205 million in debt forgiveness and refunds.

(Washington State Attorney General’s Office)

(Washington State Attorney General’s Office)

Ferguson has also worked to strengthen the state’s charity care law, first established in 1989, and expand medical financial aid access across the state. About half of people in the state — or those with incomes at or below 300% of the federal poverty level — are now eligible for free or discounted care at the state’s largest hospital systems.

‘Sending the poor to bad debt’

From 2018 to 2022, Providence billed and collected money from low-income patients without letting the patients know they qualified for financial aid, according to the lawsuit filed in February 2022. The strategy deceived patients into believing they “had no choice but to pay their bills,” and put the burden on patients to self-identify their charity care status, according to the attorney general’s office.

At that time, Washington hospitals had to provide free or reduced-cost care to patients with incomes at or below 200% of the federal poverty level. The scale ranged from a one-person household, at $30,120 or less, to a four-person household, at $62,400 or less.

(Washington State Attorney General’s Office)

(Washington State Attorney General’s Office)

In 2020, Ferguson began investigating Providence after receiving complaints about collection practices that diverted patients from financial aid. Ferguson’s investigation revealed Providence trained staff to collect money with tactics such as:

• Asking patients to pay outstanding medical costs every time;

• Refusing to accept the first ‘no’;

• Asking for partial payments; and

• Suggesting to patients that payment is expected.

Per the state’s Charity Care law, hospitals must tell patients about charity care, determine if patients qualify before trying to collect payment, and only require one income-related document to apply. Hospitals also must suspend all collection attempts for a reasonable time to allow patients to apply.

Internal emails revealed Providence sent thousands of patients who likely qualified for aid — including Medicaid patients — to debt collectors to increase the chances of full payment, according to the lawsuit. When Providence later canceled debt for some Medicaid patients, the company did not notify the patients of the mistake or their eligibility for future financial help.

“We are sending the poor to bad debt and not treating them the same as other patients,” one employee warned in internal records dug up in Ferguson’s investigation.

In a court settlement Feb. 1, Providence agreed to forgive $137 million in medical debt and refund more than $20 million to nearly 100,000 patients.

‘Collectors must play by the rules’

Ferguson added two debt collection agencies, Harris & Harris and Optimum Outcomes, to the lawsuit in the summer of 2022. The agencies failed to notify patients about their right to apply for charity care, according to the lawsuit.

State law requires collection agencies to send a first collection notice with mention of charity care and the hospital’s contact information to determine if a patient qualifies.

Harris & Harris sent at least 294,000 collection notices without the disclosures to about 166,000 patients, according to the lawsuit. The agency collected nearly $25 million since contracting with Providence in 2019, earning $1.7 million in commission.

On Feb. 21, Harris & Harris agreed to pay $1 million. The collector must also provide patients with their medical debt collection rights in all first written notices going forward, per the agreement.

“Debt collectors must play by the rules,” Ferguson said in a press release at the time. “Washingtonians have a right to know about certain protections related to medical debt, and debt collectors have an obligation to inform them of those rights.”

The state will enforce its agreements with Providence and Harris & Harris, Ferguson said.

Per last week’s ruling, Optimum Outcomes must reimburse Ferguson’s office at least $400,000 for legal fees. The agency must also make reforms in compliance with state law.

Washington’s charity care law and qualification tools can be found at affordablehospital.wa.gov. Those with concerns about their hospital’s financial aid practices can file a complaint with the Attorney General’s Office.

Sydney Jackson: 425-339-3430; sydney.jackson@heraldnet.com; Twitter: @_sydneyajackson.

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