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Thousands of WA patients getting refunds in PeaceHealth billing case

By Claire Withycombe, The Seattle Times
Published: November 21, 2023, 8:12am

OLYMPIA — Thousands of low-income Washington patients will receive refunds from PeaceHealth, the nonprofit health system, for hospital bills because they were probably eligible for financial help but did not receive it.

On Monday, Washington Attorney General Bob Ferguson announced up to $13 million in refunds PeaceHealth has agreed to dole out to roughly 15,500 patients. PeaceHealth billed thousands of patients it knew were likely eligible for financial help under state law, and also failed to screen patients, Ferguson said.

“I appreciate PeaceHealth’s cooperation in reaching this resolution that fully refunds Washingtonians for millions of dollars in medical payments, plus interest, without the need for litigation,” Ferguson said in a statement.

The state recently made more Washingtonians eligible for free or discounted hospital care. But at the time, Washington households making up to 200% of the federal poverty level were eligible for free or discounted care for out-of-pocket hospital expenses.

PeaceHealth, which is based in Vancouver, will pay $4.2 million back to about 4,500 patients directly via checks in the mail. Eight of those patients will receive refunds of more than $10,000 and nearly 50 will get refunds of more than $5,000. The payments will include interest. PeaceHealth knew those patients were likely eligible for financial help, but billed them and did not let them know they were potentially eligible, Ferguson said.

PeaceHealth said in a news release those patients “did not apply for assistance or respond to outreach.”

“Since 2018, our practice has been to counsel and share information about financial assistance with patients and their loved ones at every step of their journey — before receiving care, on-site, after returning home, and at any time in the billing process,” Alison Taylor, a spokesperson for PeaceHealth, said in an email.

PeaceHealth must also refund up to $9.2 million, including interest, to about 11,000 patients who may have qualified for help with their medical bills had they been “properly screened” for eligibility, Ferguson said. Those patients will be notified by the Attorney General’s Office by mail, and they will have to file a claim to pursue a refund.

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PeaceHealth also agreed to pay the Attorney General’s Office $2 million, which will cover the costs of the investigation and fund potential future cases, Ferguson said.

“PeaceHealth is committed to identifying every single person who can benefit from charity care,” PeaceHealth General Counsel Tom Karnes said in a statement Monday. “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.”

The Attorney General’s Office started investigating PeaceHealth in 2020.

The health system, which operates hospitals in Bellingham, Friday Harbor, Longview, Sedro-Woolley and Vancouver, said it cooperated with the investigation and provided “tens of thousands of documents” and supplied “evidence that … [it] did everything required by law — and more — to inform its patients about the availability of financial assistance.”

PeaceHealth also said it had awarded $258 million in charity care to about 66,000 patients since 2018, including $83 million to 25,000 patients whose income the hospital system did not verify.

Medical debt plagues many Americans: As of June 2021, the U.S. Consumer Financial Protection Bureau found $88 billion in medical debt on credit records. The total is likely higher because not all medical debts in collections are provided to consumer reporting companies, the bureau said in a February 2022 report. Nationally, about two-thirds of people who file for bankruptcy cite medical debt as a key contributor, Ferguson said.

“Millions of Washingtonians live in fear of a health emergency that would devastate their finances, even those with insurance,” Ferguson said.

Recent changes to the state’s law concerning charity care expanded who is eligible for that help.

As of July 1, 2022, all Washingtonians within 300% of the federal poverty level now qualify for charity care for their full out-of-pocket hospital bill, as long as care is considered “medically necessary.” Those within 400% of the federal poverty level are eligible for discounted care, which is up to about $54,360 for a one-person home or $111,000 for a family of four.

About 4 million people fall into those income groups in Washington, roughly half the state’s population.

The new law also establishes two tiers of financial assistance — one for large health care systems with three or more hospitals (Tier 1, which accounts for about 80% of the state’s hospital beds) and another for smaller, independent hospitals (Tier 2).

At Tier 1 hospitals, about 3 million residents have access to free hospital care, while another million have access to discounted care. Tier 2 hospitals, which are often public hospital districts in rural counties, offer slightly smaller discounts for residents and aren’t required to offer discounts to those between 300% and 400% of the poverty level.

In a statement Monday, PeaceHealth said it would ask patients when they register about their household income and size, and, regardless of how a patient answers, will “continue to provide” all patients with information about financial help and how to apply for it, and notify any patients who are potentially available for financial help to seek reimbursement for past payments.

Washington has filed three other lawsuits to force hospitals to follow the state’s charity care rules. A case against Providence Health and Services is expected to go to trial in early February, Ferguson said. In September 2022, The New York Times published an investigation finding Providence pressured patients to pay even when they may have qualified for financial help.