Two recent lawsuits allege that hospitals withheld charity care from thousands of patients. To comply with state and federal regulations, patient access departments should take several steps.
- Talk with patients about their financial responsibility.
- Determine patients’ eligibility for financial assistance.
- Make financial assistance conversations an integral part of patient access processes.
The way hospitals screen patients for financial assistance is facing intense scrutiny in light of two recent lawsuits. “The implications for patient access are significant,” says Sandra J. Wolfskill, FHFMA, director of healthcare finance policy at the Healthcare Finance Management Association.
Both lawsuits, filed by Washington state attorney general Bob Ferguson against St. Joseph Medical Center in Tacoma and Capital Medical Center in Olympia, allege that the hospitals withheld charity care from thousands of low-income patients.1,2
“More hospitals will be sued, unless they change. Advocates for consumers, as well as the government, expect legal compliance,” warns Ann M. LoGerfo, an attorney with Seattle, WA-based Columbia Legal Services. Failure to screen patients for charity care and then pursue patients for bills they do not owe are violations of the Consumer Protection Act and legal obligations, says LoGerfo. “It is an unfair and deceptive practice, and is a breach of the financial contract with the patient.”
Roadblocks Not Uncommon
The practices alleged in the lawsuits may sound egregious to the general public, but they’re surprisingly common. “Many hospitals set up roadblocks to their financial assistance programs,” says Holly Lang, a New York City-based contractor specializing in healthcare financing, public policy analysis, and nonprofit hospital strategy.
In a 2017 study of nonprofit hospitals on the East Coast, Lang found that about one in seven provided no information at all about their policy online, although it is required by federal law. “That alone is a huge problem,” says Lang, adding that she expects to see similar lawsuits filed at the state level. “I wouldn’t be surprised if we started seeing more federal involvement in this as well.”
Lang says that a well-designed, well-executed financial assistance program isn’t just good for patients — it also benefits the hospital, because of the correlation between bad debt and insufficient charity programs. Additionally, most states have minimum requirements for charity care for hospitals to obtain Certificates of Need for capital construction and expenditures.
“It’s far better to go ahead and qualify patients for charity care if they are eligible, as opposed to putting up roadblocks that place the patient in an even more precarious financial situation, just to have that account end up in bad debt,” says Lang.
High Level of Transparency
Washington state requires hospitals to streamline financial assistance application processes to make it easier for patients to apply. “Washington is one of many states that requires its hospitals to provide a high level of transparency about its financial assistance program,” says Lang.
Based on court filings and the Attorney General’s statements, the hospitals blatantly disregarded these laws, says Lang, and, instead, put in systematic barriers for financially vulnerable patients. “This means the problem started with management, who is alleged to have directed staff to put up these barriers,” she notes.
Washington state law requires hospitals to do the following:
- Provide notice of charity care availability.
- Screen patients for eligibility.
- Require only 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.
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 Medical Center, disputes the allegations in the lawsuit. “As a nonprofit charitable organization, we are committed to providing the highest quality care to everyone who needs it,” says Evans.
Evans adds that the hospital goes beyond what’s required by state law by completely covering the cost of care for people with income below 300% of the federal poverty level: “We provided $20 million in charity care to 19,115 patients in the last year alone.”
Jeff Atwood, senior vice president of marketing and communications at RCCH HealthCare Partners, which operates Capital Medical Center, says, “We are very disappointed to learn of the Office of the Attorney General’s recent filing.”
The hospital made changes to its financial assistance and charity care program after learning of the Attorney General’s concerns in 2016, according to Atwood: “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.” (For more information on patient access processes for financial assistance and what patient access departments should do now, see related stories below.)
The Washington state lawsuits might be only the tip of the iceberg. “Patient access departments should understand that there are numerous lawsuits and investigations underway relating to the failure to screen for charity care eligibility,” says LoGerfo.
Asking for deposits without first screening to see if a patient may be entitled to full charity care is unlawful, adds LoGerfo, and has cost hospitals millions in settlements. There is increasing evidence that many patient access departments are out of compliance with state and federal regulations.
Columbia Legal Services’ recent analysis found charity care deficiencies among 12 of 20 Washington hospitals.3 The report identified five primary areas in which hospitals were not meeting their obligations.
- Hospitals are not adequately addressing language barriers.
- Hospitals are not screening patients for charity care eligibility as legally required.
- Hospitals do not adequately inform patients of their charity care rights.
- Many hospitals require an application process that is difficult and demanding for patients, or refuse charity care after the account is assigned to collection.
- Hospitals and debt collectors improperly collect on accounts when the patients actually were eligible for charity care.
The report’s findings were disappointing, but not terribly surprising to the researchers. “We had been hearing through clients and outreach that many hospitals were not fulfilling their social promises or legal obligations around charity care,” says LoGerfo.
When Spanish-speaking callers asked for information about financial assistance, 80% of sites surveyed disconnected the calls at least once. “Treatment of Spanish speakers was worse than we had expected,” says LoGerfo. “But on the plus side, some hospitals had much better policies than we anticipated.”
Presumptive eligibility for patients who clearly are eligible, such as those already enrolled in very low-income-related programs, is one example. Also, some hospitals provide charity care to patients at higher income levels than the law requires.
LoGerfo suggests that initial screening for charity care can be done at the same time patients are registered. “When patients come to the hospital, as long as the patient is stable enough, hospitals ask numerous financial questions, including detailed insurance information, employer information, and other data, to ensure that they will be paid,” notes LoGerfo.
At the same time, registrars also can ask the patient’s family size and income, and notify patients that they can apply for charity care. “Even better, if patients are clearly eligible, the application process should be skipped, and patients should be granted charity care,” says LoGerfo.
Financial assistance, charity care, and collections used to be “back-end” roles, handled only after the patient was discharged. This has changed dramatically. “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.
Earlier financial discussions can prepare patients for higher out of-pocket costs, but it’s not enough to simply set up payment plans for everyone. Conversations need a much broader scope. “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.
To comply with federal requirements, hospitals must follow several steps.
- Establish written financial assistance and emergency medical care policies.
- Limit amounts charged for emergency or other medically necessary care to individuals eligible for assistance under the hospital’s financial assistance policy.
- Make reasonable efforts to determine whether an individual is eligible for financial assistance 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,” warns Wolfskill.
- Washington State Office of the Attorney General. AG Ferguson sues Tacoma’s St. Joseph for withholding charity care from thousands. Sept. 5, 2017. Available at: www.atg.wa.gov/news/news-releases/ag-ferguson-sues-tacoma-s-st-joseph-witholding-charity-care-thousands. Accessed Nov. 1, 2017.
- Washington State Office of the Attorney General. AG Ferguson sues Capital Medical Center for withholding charity care from thousands of low-income patients. Sept. 22, 2017. Available at: www.atg.wa.gov/news/news-releases/ag-ferguson-sues-capital-medical-center-withholding-charity-care-thousands-low. Accessed Nov. 1, 2017.
- Duhamel T, Gonzalez T, Geyman M, et al. Access denied: Washington’s charity care system, its shortfalls, and the effect on low-income patients. Seattle, WA: August 2017. Available at: http://columbialegal.org/sites/default/files/170824CharityCareReportFINAL-DIGITAL.pdf. Accessed Nov. 1, 2017.
- Holly Lang, New York, NY. Email: firstname.lastname@example.org.
- Ann M. LoGerfo, Columbia Legal Services, Seattle, WA. Phone: (206) 287-8615. Email: Ann.LoGerfo@columbialegal.org.
- Sandra J. Wolfskill, FHFMA, Director, Healthcare Finance Policy, Healthcare Finance Management Association, Westchester, IL. Phone: (708) 531-9600. Email: email@example.com.
- The Healthcare Financial Management Association’s Patient Financial Communications Best Practices recommend making financial assistance conversations an integral part of the patient access process. To download a PDF of best practices for the ED, at the time of service, in advance of service, and for all patient financial interactions, go to http://bit.ly/1s2u63E.
- The Baltimore, MD-based Hilltop Institute evaluates each state’s charity care policies. For more information, go to: http://bit.ly/2znQzoi.