Federal class-action lawsuit filed against St. Charles Health System, alleging failure to provide required charity care

Claims system sends low-income patients sent to debt collectors, rather than offer financial aid

BEND, Ore. (KTVZ) -- Two law firms filed a federal class-action lawsuit Friday against St. Charles Health System, accusing the hospital group of failing to provide the financial assistance to low-income patients that's required by state and federal law, and instead sending those bills to debt collectors.

The lawsuit was filed by Sugarman-Dahab in Portland and Terrell Marshall Law Group in Portland on behalf of a woman who was in a crash and who claims she tried to contact the hospital to work out a payment plan, but that her medical bill instead was sent to a debt collection agency.

St. Charles, the largest health system in Central Oregon, with four hospitals serving the region, denies violating financial assistance regulations and says it spends $120 million a year on unreimbursed care.

Nonprofit hospitals in Oregon are required by law to offer “charity care,” or discounted medical care to patients with annual household incomes of up to 400%  of the federal poverty level, the law firm noted in their news release announcing the lawsuit.

The law also requires them to screen patients whose household income is at or below 200% of the federal poverty level for assistance before sending the patient’s account to a debt collector. 

The suit alleges that in May 2022, the plaintiff, Kristine Reiger, received services from St. Charles after she was in a motor vehicle accident. The hospital sent her a bill for over $3,400, which she could not afford. The lawsuit claims Reiger should have been eligible for free care under the hospital’s charity care policy, as her household income was below 200% of the federal poverty level. 

However, after months of her trying and failing to contact someone at the hospital to work out a payment arrangement, the hospital sent her account to Ray Klein, a debt collection company, the lawsuit claims. This is in spite of the fact that St. Charles boasts that it makes “every effort” to identify charity care eligible patients and that it uses “scoring technology software” to identify which patients are eligible for charity care. 

The lawsuit claims that "on information and belief, there are at least hundreds of people in the proposed class, and that St. Charles and Ray Klein "have a standard practice of failing to screen patients for financial assistance and subsequently initiating debt collection actions … despite this failure."

In its own news release on the lawsuit, SEIU Local 49 noted that St. Charles Health System is the fourth nonprofit health system operating in Oregon to be taken to court for allegedly violating state and federal charity care laws over the last two years.

The union local said, “We’ve been sounding the alarm that our state’s financial assistance process hasn’t been working for hospital workers, or patients more broadly, for some time. 

"You know there is a large-scale problem when people who work in the hospital can’t afford the health care delivered there, nor are they able to access the supposedly available assistance offered to ease the debt. This is why we’ve advocated for and successfully won some of the strongest charity care laws in the country. 

"Having analyzed court data and talked with patients across the state as part of our Shortchanged report, we’re not surprised that St. Charles has been sued over failing to adequately screen patients,” the union said.

SEIU said the latest lawsuit "comes in the midst of a broader trend of hospitals being held to account for failing to follow the law and burdening low-income patients with bills they shouldn’t have owed."

For example, earlier this month, the Washington state attorney general reached an historic 157.8 million dollar settlement with Providence, requiring the health system to reimburse patients who never should have received bills and wipe away the debt of nearly a million individuals.

Individual reimbursements range from $1 to $293,000; the average write-off for patients still awaiting debt forgiveness from Providence will be more than $900.  

Last November, the union local noted that PeaceHealth also finalized a multi-million-dollar settlement with the Washington AG over withholding financial assistance from eligible patients, and Sky Lakes Medical Center in Klamath Falls was recently sued over similar allegations. 

SEIU Local 49 further noted, “We are encouraged to see these actions being taken to hold nonprofit hospitals accountable to their charitable missions. We are hopeful that the implementation of new charity care legislation, which we supported last session, will help our members and Oregon patients to get access to the assistance they’re legally entitled to. However, it is apparent from this most recent court filing, and those before it, that now is the time for Oregon courts to stand up and hold hospitals accountable to following the law.” 

NewsChannel 21 asked St. Charles Health System for a comment on the lawsuit Friday afternoon and received this statement.

“We have not received notice of this lawsuit being filed and therefore can’t comment on the specifics of the suit. It is important to note that St. Charles caregivers are not represented by SEIU and we are unclear on their role in this situation,” said Kayley Mendenhall, a spokesperson for St. Charles Health System.

“We regularly review our financial assistance policies and processes and believe we are in compliance with regulations. Our teams work incredibly hard to make sure patients understand the financial assistance that is available to them. We take our role as a local, community-based nonprofit health system seriously and are proud to provide approximately $120 million annually in unreimbursed care to our Central Oregon communities.”