Low-income Oregonians May Be Ensnared In Undue Medical Debt, Despite State Protections

Six years ago, Oregon lawmakers expanded hospital charity care requirements to keep low-income patients from becoming ensnared in medical debt. But a recent court case highlights how hundreds of low-income patients may face debt despite those safeguards.

The case centers on Kristine Reiger, who was admitted to St. Charles Medical Center in Bend after a car crash in May 2022. St. Charles determined her annual income of $25,240 was low enough to qualify for 100% financial assistance — but the hospital sent her to a debt collector.

Reiger sued St. Charles last year, claiming the health system breached a state law requiring nonprofit hospitals to offer free or reduced-cost care to low-income patients. However, U.S. District Court Judge Michael McShane ruled in June that St. Charles was allowed to send Reiger to collections because she never filled out paperwork for financial help.

The ruling runs contrary to a central goal of Oregon’s reforms — compelling hospitals to ensure needy patients receive free or low-cost care instead of sending them to debt collectors. While additional hospital requirements have taken effect since Reiger filed her suit, the case points to gaps other patients may have fallen through that one analysis suggests could number in the thousands.

Filed by Portland law firm Sugerman Dahab, the suit seeks class action status and claims there are “at least hundreds of people” who have had similar experiences.

“It’s really troubling that a nonprofit hospital knowingly sent a patient who qualified for help to collections, and then spent what’s likely a lot of money on legal fees defending that decision,” Service Employees International Union, or SEIU, Local 49, a union that has pushed for reforms, said in a statement provided by spokesperson Alan Dubinsky.

St. Charles is pleased with the court ruling, according to spokesperson Alandra Johnson. She added that St. Charles provides more than $100 million annually in unreimbursed care to patients, including $16 million in charity care in 2024.

Eli Rushbanks, general counsel and policy director at Dollar For, a group that helps patients access charity care, said the ruling is an early interpretation of an ambiguous area of Oregon’s medical debt laws. But he said it doesn’t answer if the laws are working as intended.

“We’re a little in the dark,” he said.

‘Can I just let things go to collections?’

Nearly a year after her visit to St. Charles’ emergency department, debt collection company Ray Klein took her to court for her unpaid medical bill, according to her suit.

Reiger began making $140 monthly payments to Ray Klein, paying a total of at least $1,339 to cover her bill, as well as fees, costs and interest, the suit states. St. Charles earlier sent Reiger a bill for $1,104. It claims she did not respond to a request for her insurance to process her invoice.

“My sense is this is extremely widespread,” said Rushbanks. He added that the number of patients in Oregon facing medical debt when they were eligible for financial aid is likely in the thousands.

He referenced research from the Debt Collection Lab, a Princeton University project that analyzes debt collection lawsuit data. The lab found that more than 50,000 Oregonians are sued each year for unpaid bills, usually by collection agencies or debt buyers, and defendants rarely have attorneys. Researchers analyzed a random sample of 1,000 cases and found that medical debt accounted for roughly one-third. That pencils out to about 17,000 suits a year.

About one in three Oregonians have incurred medical debt in the last two years, according to research nonprofit Oregon Values and Beliefs Center. Hospitals were the largest source of medical debt at 41%, and 85% of respondents said the debt significantly impacts their lives.

Abi El-Barrad, a member of tenant organizing and support group Don’t Evict PDX, said medical bills and other unexpected expenses can cause people to lose their housing. He said tenants are left wondering, “Can I just let things go to collections? What can I get away with because I just can’t pay for everything?”

Judge says interest may be illegal

Oregon lawmakers in 2019 passed a bill intended to ensure tax-exempt hospitals were fulfilling their legal obligation to provide financial aid to low-income patients.

The 2019 law sets minimum amounts hospitals must spend on community benefits. Amounts range from $1 million to hundreds of millions, and require hospitals to provide patients with applications for financial assistance. The law also requires hospitals to screen patients to see if they qualify for financial help before they transfer their debt to a collection agency. This provision was central to Reiger’s case against St. Charles.

Court filings offer conflicting accounts of St. Charles and Reiger’s efforts to contact each other and resolve her unpaid bill. What is clear, however, is that in October 2022, St. Charles screened Reiger and determined she was eligible for 100% financial assistance. St. Charles then sent Reiger information on its financial assistance program.

But the hospital didn’t tell her she had already been deemed eligible.

The Oregon Department of Justice filed a brief in support of Reiger, arguing that lawmakers put the burden of screening patients on hospitals “to avoid entangling a patient in the debt-collection process when the hospital itself already determined that the patient qualified for assistance.”

St. Charles’ attorneys argued the hospital acted properly and the text of the law does not require hospitals to automatically reduce a patient’s debt if a screening determines they are eligible and they must still apply.

The judge dismissed most of the suit. However, he allowed Reiger’s attorneys to pursue their claim that St. Charles illegally charged interest on her debt because her income was less than 200% of the federal poverty level, which means she qualified for financial assistance.

Rushbanks said the remaining part of the suit could end up including a large number of patients if it’s granted class action status.

Debt Collection Lab research found St. Charles was the creditor in 5% of medical debt collection cases in Oregon — the second most of any health system behind Asante. Over one-third of Oregonians facing debt collection lawsuits had incomes less than 200% of the federal poverty level, the lab found.

Attorneys for Reiger did not respond to requests for comment.

Lawmakers try again to close gaps

Oregon lawmakers again tightened hospital financial aid requirements in 2023 in response to reports that patients continue to face debt from care that should have been free or reduced cost.

SEIU Local 49 issued a report in 2022 that found hospitals got around requirements by making their financial aid applications excessively complicated, while actively sending patients to collections.

The new law requires nonprofit hospitals to screen patients who are uninsured or owe more than $500 for presumptive eligibility. Hospitals must also create appeals processes for denials of financial assistance and give refunds to patients later deemed eligible.

But the law’s requirements went into effect over the next two years, offering no help to patients like Carol Justice.

About a year after retiring from an administrative job at the city of Portland, Justice said she decided to undergo bariatric surgery in 2022. She agreed to the surgery after trying to lose weight to relieve the pain in her arthritic right knee that had become so debilitating she would break into a cold sweat while shopping.

Justice underwent what she called “easy peasy” surgery at the Oregon Health & Science University in Hillsboro that went so well she was back at her Cornelius home the same day. But two months later, she received the roughly $20,000 bill for the surgery.

“I wanted to throw up,” she recalled. “I don’t have any way to pay for this. I was scared to death.”

Justice, 61, isn’t old enough to qualify for Medicare and is still covered by an  insurance policy from her last job that costs nearly $1,000 a month. She said her modest pensions are not enough to cover medical debt on top of her mortgage and other bills. She worried she would lose her house or be saddled with payments for the rest of her retirement.

Justice said she struggled to get more information from the hospital about the cost of her surgery and set up a fundraiser on GoFundMe. Around this time, she said a friend suggested she ask the hospital about qualifying for financial aid. She said she called the hospital repeatedly but never heard back and OHSU did not provide her with information about its financial aid policies.

After two months of trying to reach the hospital, she climbed into her car with a bundle of financial documents and drove to OHSU’s offices on Marquam Hill. She said she eventually found the right office where an employee entered her financial information into a computer, and told Justice, “You’re 100% covered.”

“I’m just crying, and the lady’s looking at me like I’m crazy,” Justice said.

OHSU spokesperson Erik Robinson responded in an email declining to comment on Justice’s experience, while writing, “we strive to communicate clearly and openly with patients who may need assistance with medical bills.” Robinson said the hospital shares that information with patients.

Additionally, he wrote that OHSU is following the new legal requirement to screen all patients with bills that are $500 or more, resulting in more people qualifying for financial aid.

How well are the laws working?

Portland attorney Michael Fuller operates a pro bono debt clinic that defends clients who say they’ve been sued for bills they don’t owe or are being charged too much interest.

His clinic represents roughly six to 12 people per year. Medical debt accounts for the “vast majority” of cases from clients facing unexpected debt, he said.

“There’s not too many other things in this world that the law allows to just instantly bankrupt you,” he said.

Patients end up getting referred to debt collectors in what he called a “race to the bottom.” Fuller described how a patient may think they are fine after giving a hospital their insurance, but there might be a mix-up with the billing code, their insurance does not cover the care or the hospital never bills the insurance. But he said the patient often doesn’t consider asking for financial aid because they think they are covered.

Since lawmakers began passing financial assistance laws in 2019, Fuller said he’s seen cases where it appears hospitals did not follow them. Recently, he said he had a case where a hospital appears to not have screened a patient for eligibility.

But he said determining how well the laws are working will require numbers on how many people are filing for bankruptcy from medical debt.

Rushbanks, of Dollar For, said the best data he’s seen on how well the law is working was presented at OHSU’s January board meeting. Documents state that the hospital’s screening process now identifies 64% of patients as eligible for financial assistance, compared to the 12% before the 2023 law was implemented.