WA Non-Profit Health System Will Reimburse Patients in Charity Care Agreement

PeaceHealth, a Washington-based non-profit health system, has agreed to pay $4 million to 4,000 patients after it failed to disclose charity care policies before collecting payments.

The agreement comes after the State of Washington filed a complaint for injunctive and other relief against the health system. The Attorney General and Assistant Attorneys General alleged that PeaceHealth violated the Washington Consumer Protection Act and the Charity Care Act, which mandates all Washington hospitals to provide free and reduced-cost care to low-income patients.

On July 1, 2022, the Charity Care Act expanded patients’ household income eligibility for charity care from at or below 200 percent of the federal poverty level (FPL) to at or below 400 percent FPL.

Charity care regulations require hospitals to make reasonable efforts to determine a patient’s insurance status, annual family income, and eligibility for charity care before initiating any collection efforts.

According to the lawsuit, PeaceHealth attempted to collect pre-service deposits and estimates for certain procedures without screening patients for charity care eligibility first. The health system also tried to collect payments from patients during registration without checking eligibility, the complaint stated.

PeaceHealth has used a predictive analytics tool in its billing cycle since 2018, which uses publicly available data to proactively identify patients who presumptively qualify for charity care. The complaint alleged that the health system continued billing patients who presumptively qualified for charity care, sending them up to four bills and making collection calls without disclosing their likely eligibility. The health system collected millions of dollars from these patients, according to the complaint.

PeaceHealth provided charity care to these patients after transmitting the fourth and final bill but did not refund any partial payments made or notify the patients they had been awarded charity care.

According to the press release from PeaceHealth, the health system cooperated with the investigation by the Attorney General. It supplied documents and other evidence to show it followed the law and informed its patients of the availability of financial assistance.

When patients exceed charity care eligibility requirements but still struggle to pay, the health system said it continues to offer financial assistance.

The non-profit health system has agreed to reimburse $4 million to around 4,000 patients who did not apply for assistance or respond to outreach. This amount is less than 1.6 percent of the $258 million PeaceHealth has provided in charity care since 2018.

As part of the agreement, PeaceHealth will also improve how it screens patients for financial assistance for hospital-based services by asking about their household income and size at registration. The health system will provide all patients with information about financial assistance and how to apply for it regardless of their answer.

Additionally, the health system will pay $2 million in costs and attorney fees and notify any additional patients eligible to seek similar reimbursement for past payments.

“PeaceHealth is committed to identifying every single person who can benefit from charity care,” Tom Karnes, PeaceHealth general counsel, said in the press release. “We welcome this opportunity to continue to lead the way in charity care, providing physical and financial healing to the most vulnerable in our communities.” 

“Rather than expending time and resources on litigation, we entered into an agreement so that we can continue with our healing mission and commitment to health justice,” Karnes added.

Non-profit health systems receive their status because, in return for being exempt from paying federal, state, and local property taxes, they must invest their profits in charity care and community initiatives. However, just how much charity care these health systems provide and if they deserve non-profit status has been questioned in the past few years.

For example, a report from the Lown Institute found that non-profit hospitals received more in tax breaks than they spent on charity care in 2020. Meanwhile, the American Hospital Association (AHA) has maintained that non-profit hospitals consistently deliver sufficient charity care to their patients.