Hospitals’ processes for charity care are facing intense legal scrutiny, with two highly publicized lawsuits underway.

Washington state attorney general Bob Ferguson recently filed lawsuits against St. Joseph Medical Center in Tacoma and Capital Medical Center in Olympia, alleging the hospitals repeatedly violated the state’s Consumer Protection Act by withholding charity care from thousands of low-income patients.

Washington state law requires hospitals to provide notice of charity care availability, to screen patients for eligibility, and to only require patients to provide one income-related document to prove charity care eligibility. The lawsuits allege the hospitals violated all of these requirements, and aggressively demanded payment from patients without screening them for charity care eligibility or informing them of their charity care rights.

“As a nonprofit charitable organization, we are committed to providing the highest quality care to everyone who needs it,” says Cary Evans, vice president of communications and government relations at CHI Franciscan Health, a Tacoma, WA-based health system with eight acute care hospitals, including St. Joseph. Evans added, “We completely cover the cost of care for people whose income is lower than 300% of the federal poverty level — that is triple the income level required by state law. We provided $20 million in charity care to 19,115 patients in the last year alone.”

Capital is a subsidiary of RCCH HealthCare Partners based in Tennessee. “We are very disappointed to learn of the Office of the Attorney General’s recent filing against Capital Medical Center,” said Jeff Atwood, senior vice president of marketing and communications.

The hospital made changes to its financial assistance and charity care program upon learning of the Attorney General’s concerns in 2016, according to Atwood. “We were then in discussions with the AG's office and understood an amicable resolution was the next step,” he says. “Even though Capital previously addressed the issues included in this lawsuit and is providing financial assistance and charity care to more individuals than state law requires, the Attorney General filed this lawsuit.”

Deficiencies Common

Recent research in a report from Seattle-based Columbia Legal Services found charity care deficiencies among 12 of 20 Washington hospitals.

In the report, Access Denied, the group identified five key areas where hospitals were not meeting their obligations and needed improvement:

  • Addressing language barriers.
  • Screening patients for charity care eligibility.
  • Adequately informing patients of their charity care rights.
  • Maintaining an application process that is not overly difficult or demanding for patients, and allowing charity care if eligible after the account is assigned to collection.
  • Ensuring that hospital representatives do not improperly collect on debts that patients do not owe or when patients are eligible for charity care.

Hospitals should review their policies, procedures and staff training to ensure they are consistent with the charity care law, advises Washington State Hospital Association spokeswoman Mary Kay Clunies-Ross. “The law is clear that charity care or financial assistance must be provided to low-income people for what the law considers, ‘appropriate hospital-based medical services,’” adds Clunies-Ross. “It’s not staff judgment call — it’s required by law.”

The Washington State Hospital Association developed financial assistance information for hospitals. All patients must receive notice of charity care availability, signs with information about how to access charity care must be prominently displayed, and patients who request charity cannot be billed until the charity care screening is completed.

“Patient access departments and legal counsel should work together to ensure financial assistance is being offered, and that the hospital can show that its policies and practices are align with the intent of the law,” says Clunies-Ross.

Front End Role

Financial assistance, charity care and collections used to be back-end roles, handled only after the patient was discharged, but this has changed dramatically. It’s now the job of the front end of the hospital — patient access departments.

“The implications for patient access are significant,” says Sandra J. Wolfskill, FHFMA, director of healthcare finance policy at the Healthcare Finance Management Association (HFMA).

It’s not only state regulations patient access departments must comply with. “Federal IRS 501(r) regulations are very specific about what any 501(c)(3) not-for-profit hospital must do in order to maintain their tax-exempt status,” says Wolfskill.

A 501(c)(3) hospital must meet the following requirements:

  • Establish written policies on financial assistance and emergency medical care.
  • Limit the fees charged for emergency or other medically necessary care to individuals eligible for assistance under the organization’s financial assistance policy.
  • Make reasonable efforts to determine if an individual is eligible for financial assistance under the hospital’s policy before engaging in extraordinary collection actions against the individual.

“The IRS takes compliance with their regulations seriously, and is now conducting audits to ensure provider compliance with the regulations,” says Wolfskill, noting that loss of tax-exempt status is a significant issue for nonprofit hospitals.

Talking with patients about their financial responsibility for care, including determining patient eligibility for charity care, is now a central part of the patient access role. “Financial assistance is moving from a post-service, back-end process to a part of clearing the patient for services, which is a patient access function,” says Wolfskill.

If the allegations in the lawsuits are true, the hospitals are also not following HFMA’s Patient Financial Communications Best Practices. “These recommend making financial assistance conversations an integral part of the patient access process,” says Wolfskill.

For more on this story, see the December 2017 issue of Hospital Access Management.