After Washington state lawsuit, Providence health system erases or refunds $158M in medical bills

SEATTLE (AP) — Providence health care system is refunding nearly $21 million in medical bills paid by low-income residents of Washington — and it’s erasing $137 million more in outstanding debt for tens of thousands of others — to settle the state’s allegations that it overcharged those patients and then used aggressive collection tactics when they failed to pay.

The announcement Thursday came just weeks before Attorney General Bob Ferguson’s case was set for trial against Providence Health and Services, which operates 14 hospitals in Washington under the Providence, Swedish and Kadlec names.

The state argued that the medical system’s practices violated Washington’s charity care law, which is considered one of the strongest in the country. It requires hospitals to notify patients about the availability of financial aid and to screen them to see if they’re eligible for discounts before trying to collect payment.

Providence trained its staff not to accept it when patients said they couldn’t afford the bills, Ferguson said.

“Hospitals — especially nonprofits like Providence — get tax breaks and other benefits with the expectation that they are helping everyone have access to affordable health care,” Ferguson said at a news conference. “When they don’t, they’re taking advantage of the system to their benefit.”

Recently expanded, the law now covers roughly half of all residents, making them eligible for free or reduced-cost care at hospitals in the state, according to Ferguson’s office. It applies to out-of-pocket hospital costs, including co-pays and deductibles.

Those earning up to four times the federal poverty standard could qualify for assistance. For example, a family of four earning $120,000 a year could be eligible for a 50% discount, depending on the hospital.

In a statement posted to Providence’s website, the organization said it was simplifying how it provides information about financial aid to patients and working to make the application process clearer.

“Charity care and financial assistance are vital resources for patients who cannot afford health care,” said Providence Chief Financial Officer Greg Hoffman. “Providence is committed to providing support to those who need it most, and we will continually evaluate our efforts and make sure they fully meet the needs of those we serve.”

Providence has already erased about $125 million in medical debt following the state’s lawsuit two years ago, said Ferguson, a Democrat who is running for governor. Under the settlement, Providence will also pay $4.5 million to the attorney general’s office for legal fees and the costs of enforcing the charity care law.

In all, about 65,000 patients will see their outstanding debt erased and 34,000 will receive refunds, plus 12% interest, for bills they managed to pay despite difficult circumstances. The debts being erased range from less than $1 to $262,000, while those receiving refunds will get amounts varying from under $1 to $293,000, Ferguson’s office said.

The latter category includes Kevin and Evangeline Holloman, who spoke at the news conference. The couple said that after their daughter was born in 2020 at Swedish hospital in Seattle, they received a bill for $7,000 and were put on a payment plan of $250 per month.

But when they missed a payment, Swedish immediately sent them to a collection agency without informing them, they said. They eventually wiped out their emergency savings and used a tax return to pay off the balance.

“We had to restart from ground zero with our kid, and having to set aside money again in case anything were to happen,” Evangeline Holloman said. “Having your security ripped out from under you like that is really hard.”

The state is still pursuing related consumer protection claims against two debt-collection firms Providence used.

Ge Bai, an accounting professor at Johns Hopkins University who focuses on health care finance and policy, said the settlement could encourage other states to strengthen their charity care laws or seek to better enforce them. Bai was listed as an expert witness for Washington state in the case.

“Washington has a pretty comprehensive charity care law — many states don’t even have that,” Bai said. “It also has a chilling effect for hospitals in other states: State attorneys general are taking this seriously.”