Providence Health faces Oregon consumer protection investigation

The Oregon Department of Justice has opened an investigation into the financial practices of Providence Health & Services, the state’s largest hospital group.

The consumer protection arm of the department is leading the probe, said Kristina Edmunson, spokesperson for the department. It is at this point a civil investigation rather than criminal, she added.

Edmunson declined to elaborate on the subject and scope of the investigation.

But Oregon’s investigation comes about 10 months after the Washington state attorney general filed two lawsuits against Providence and several of its Washington hospitals. Despite its stated mission of serving the poor, Attorney General Bob Ferguson claimed, Providence “engaged in unfair and deceptive practices” aimed at collecting payment from the destitute, even if it meant sending their bills to a collection agency.

Providence did not immediately comment on the Oregon investigation.

In late September, The New York Times published a lengthy investigative series looking at strategies Providence adopted at the suggestion of consultants from McKinsey & Co. to increase collections from poor patients. The news organization found that Providence and other nonprofit hospitals routinely tried to compel patients to pay even when they were eligible for free care.

Providence is one of the largest hospital chains in the country with major operations up and down the West Coast, New Mexico and west Texas. Its total operating revenue surpassed $27 billion in 2021. It finished the year with $1.1 billion in cash in the bank and total assets of $34.8 billion. Providence paid its top executive, Rod Hochman, $10 million in 2020.

Providence, founded by Catholic nuns, has a stated mission of serving the poor. In return for complying with that mission, the government has granted Providence nonprofit status, meaning it pays no income taxes.

Ferguson claims Providence has adopted a new hard-nosed strategy its founding nuns wouldn’t recognize.

“Rather than screening patients for charity care eligibility, Providence trains and encourages its agents to create the impression that all of its patients are obligated to pay for their care regardless of their income level,” Ferguson alleged in the lawsuit. “Even when Providence identifies charity care qualified patients, it sends many of their accounts to Debt Collectors in hopes that it can extract some payment from patients Providence knows cannot afford to pay.”

Providence denies all wrongdoing. In an email to employees sent the morning after the Times story published, Providence called it an “absurd narrative.”

“Last year, we provided charity care to 266,000 individuals in need,” Providence told its employees. “We also continue to increase our community benefit levels year over year even as we sustain significant operating losses as a family of organizations — including more than nearly $1 billion in losses so far this year. These losses do not and will not affect our commitment to our Mission.”

Providence did, however, begin contacting patients and refunding payments in September, after being contacted by the Times but before its story was published. The health system said that was already in the works.

Ferguson expanded his case against Providence in August. He amended the complaint to include two new defendants, Harris & Harris and Optimum Outcomes, both collections agencies hired by the hospital chain.

The legal and PR problems come as Providence and most of the rest of the region’s hospitals are struggling mightily to adapt to a difficult new post-COVID reality of labor shortages that has bogged down the normal patient discharge process.

Replacing a generation of nurses burned out and fed up by the pandemic and bearing the cost of patients stuck in treatment wards has pushed hospitals deeply into the red. Providence losses in the first half of the year totaled a prodigious $5.24 billion.

Much of that loss stemmed from investment setbacks. On an operating basis, expenses exceeded revenue by $934 million.

— Jeff Manning,

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