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ProvidenceWatch Exclusive:
October 25, 2006

Providence settles lawsuit alleging overcharging the uninsured

Though filed separately, the legal complaints alleged the two systems billed uninsured patients higher "gross charges," or sticker prices, while they charged discounted rates to patients with insurance. According to the plaintiffs in the case, this practice effectively discriminates against the uninsured, while privileging insurance companies that negotiate lower rates for members.

In the settlement agreements, both companies agreed to provide refunds or bill reductions to uninsured patients if they paid more for services than they would if they were insured. Both systems have also agreed to improve their charity care policies for future patients, although the settlements set out different terms for those improvements. Providence places a tighter restriction on who can qualify for the discounts. For a comprehensive settlement comparison, click here.

The terms of the settlement apply to Providence's seven Oregon hospitals and three of Legacy's hospitals. The Legacy settlement does not explicitly involve a fourth Legacy hospital in Oregon. While Providence's final settlement agreement was approved in June, Legacy's settlement has only been preliminarily approved . It is expected to be finally approved in March 2007.

Uninsured Patients to Receive Retroactive Discounts

The Legacy settlement offers better protection for small claimants, as Providence will not provide refunds to patients who they charged $500 or less, unless the aggregate bill was greater than $1500. Legacy does not impose a similar restriction.

Providence's retrospective discount is 31.6% for care received at its Portland-area hospitals, 10.8% at its other hospitals in the state, and Legacy's discount is 25%. The value of these discounts cannot be measured merely by percentage discounts since different hospitals offer different charges for the same service. ProvidenceWatch calculated the before-and-after refund prices for the five most common services affecting uninsured patients in Oregon. The results show that Providence hospitals charged the highest prices, both before and after uninsured discounts, for each of the five services. See the comparison chart.

According to a Providence press release, the company will refund or adjust an estimated $1 million in past bills. It did not reveal what it anticipates future discounts will cost the company. An anticipated amount for Legacy's retroactive or future discounts is likewise unavailable, although one press account suggested their entire settlement will cost the system more than $1 million.

Both Systems to Provide Future Discounts to Poor and Uninsured

The Providence prospective discount will be equal to the rate it provided their preferred providers in the each hospital. This discount will extend to 2008.

In addition to retroactive or prospective uninsured discounts, patients may qualify for further charity care discounts at Legacy and Providence hospitals if household income is between 200-400% of the federal poverty level. Each system set a sliding scale to determine the percent discount. Legacy's scale offers more tiers than Providence's, and it includes a more generous discount to patients whose household income is 351-400% above poverty level. Whether one policy is more or less favorable for the uninsured cannot be determined.

Charity Care Discount Table for Legacy Household Income expressed as a % of Federal Poverty Guideline Percent discount 376-400 25 351-375 30 326-350 40 301-325 50 276-300 60 251-275 70 226-250 80 201-225 90 0-200 100

Charity Care Discount Table for Providence Household Income expressed as a % of Federal Poverty Guideline Percent discount 351-400 10 301-350 40 201-300 70 0-200 100

Providence Statement Suggest Settlement in Best Financial Interest of Health System

Providence's Senior Vice President Greg Van Pelt, however, suggested the settlement was a result of a financial cost-benefit analysis: "Quite frankly, the cost of litigation is so great it was in the patients' best interest and the hospitals' to get this resolved, and this [the settlement] seemed the best way to do that."

Senator Chuck Grassley (R-Iowa) is leading the way in encouraging nonprofit hospitals to improve their treatment of the poor. "Non-profit doesn't necessarily mean pro-poor patient... They may charge poor, uninsured patients more for the same services than they charge insured patients," stated Sen. Grassley.

• Comparison of Legacy and Providence Charity Care Settlements
• Comparison of Prices charged for most common services for uninsured patients, reflecting new uninsured discounts at Legacy and Providence in Oregon
• Providence Settlement Agreement
• Legacy Settlement Agreement
• Legacy Health System charity care policy
• PHS-OR charity care policy