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News of the Day ... In Perspective


Providence Health System settles with uninsured patients

Providence Health System of Portland, Oregon, is the first nonprofit hospital group in the country to settle charges alleging unfair billing to uninsured patients. About 60 similar lawsuits are pending.

The settlement spells out a revised pricing system under which uninsured patients receive discounts comparable to those negotiated by insurers, with additional proposed discounts for patients at or below 400% of the federal poverty level (about $77,400 for a family of four).

The discounts would have to continue for at least two years.

The lawsuit was initiated by the Scruggs law firm, previously known for tobacco and asbestos litigation (Portland Business Journal 11/1/05).

The Scruggs campaign involves hundreds of not-for-profit hospitals in 27 states.

Scruggs and other law firms allege that nonprofit hospitals violate their federal tax-exempt status by overcharging uninsured patients, using abusive collection tactics, and devoting too little of their revenue to charity care. More than 75% of the federal cases have been dismissed. A “second offensive” has been launched in state courts.

Earlier this year, the for-profit giant Tenet agreed to offer uninsured patients the same rates it charged managed-care patients for four years. It also said it would issue partial refunds to some uninsured patients who had accused it of overbilling.

Even before the wave of lawsuits, the American Hospital Association started urging its members to review and update their billing practices with respect to the uninsured (AM News 9/19/05).

Additional information:

“Is it a crime to be uninsured?” AAPS News, February 2003

How the uninsured effectively pay twice as much even if the nominal price is the same: “Shopping at the IRS Mall” by Gerry Smedinghoff


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