Providence agrees to $158M of refunds, debt erasure to settle charity care billing investigation

Renton, Washington-based Providence has cut a deal to refund or erase $157.7 million in medical care payments following allegations and a lawsuit from its home state’s attorney general that the large nonprofit had failed to inform tens of thousands of patients of charity care eligibility.

Announced Thursday by the system and Washington State Attorney General Bob Ferguson, the settlement is comprised of $20.6 million of repayments plus 12% interest to 34,229 patients who may have qualified for charity care and financial assistance, for whom any outstanding balances will also be written off, and $137.2 million of medical debt forgiveness for 65,217 others.

Providence has also agreed to a $4.5 million payment to Ferguson’s office and a commitment to following “a streamlined process to provide all patients with information about financial assistance and how to apply using simple language aligned to our organizational values,” the system said.

Ferguson’s office described the agreement as “the largest resolution of its kind in the country.”

“Most Washingtonians are eligible for significant discounts on their out-of-pocket hospital expenses, including co-pays and deductibles,” he said in the announcement. “We will ensure that hospitals honor this important law.”

Providence had already refunded nearly $230,000 to about 1,500 Medicaid accounts and forgiven $125.8 million of the outlined medical debt prior to Thursday’s settlement and court filing. However, Ferguson’s office noted that those actions came after it had filed the lawsuit in early 2022 amid investigative media reports and lawmaker scrutiny.

That suit alleged that, between 2018 and 2023, Providence had trained its staff to “aggressively” seek payments from or begin billing those who likely would have qualified for financial assistance. The script given to employees allegedly told employees, “Don’t accept the first no,” told them to ask for partial payment if a first request was declined and to use phrasing that signals that “payment is expected,” the attorney general’s office said.

The lawsuit also alleged that Providence sent thousands of Medicaid patients to debt collectors starting in 2019 and that some patients weren’t informed when their debt had been written off. 

The average payment that will be sent to patients receiving refunds is about $478 and ranges from $1 to $293,000, according to Ferguson’s office. The average write-off is for over $900 and ranges from less than $1 to $262,000. Those who qualify will be receiving a letter from the attorney general’s office informing them of the resolution as well as checks or a notice that their account balances have been written off.

Alongside the resolutions, Providence said it will be continuing a systemwide review it kicked off in recent years to ensure any patients “impacted by billing errors or past practices” receive what they are owed.

“Charity care and financial assistance are vital resources for patients who cannot afford health care,” Providence Chief Financial Officer Greg Hoffman said in a statement. “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.”

The Catholic system noted in its announcement of the resolution that it is the largest provider of charity care in the state of Washington. In 2022, the system provided $839 million in community benefits to Washingtonians as well as a total of $2.1 billion in community benefits across its entire organization.

The 51-hospital system had logged a $1.7 billion operating loss (-8.8% operating margin) and a $6.1 billion net loss during that year, prompting a reorganization and other efforts to reduce losses. As of the nine-month mark in 2023, it had whittled those numbers to a $857.3 million operating loss (-4% operating margin and $613 million net loss).

Though Providence's resolution was the largest, three other Washington providers have agreed to resolutions with Ferguson’s office over charity care practices: PeaceHealth in November 2023, CHI Franciscan in 2019 and Capital Medical Center in early 2020.