Collection Agency Sued for Allegedly Violating Charity Care Law

A Washington healthcare collection agency is being sued by a law firm seeking class action status for allegedly violating the state’s charity care law.

In a lawsuit filed on December 8, Seattle-based Phillips Law Group claims that Audit & Adjustment Company, Inc., based in the Seattle suburb of Lynnwood, has systematically engaged in “the unfair, deceptive and misleading practice of telling patients that they owe the full charges shown on hospital billing statements, without informing them that they may be entitled to charity care that reduces the hospital debt or eliminates it entirely depending on a patient’s income level.”

Lead attorneys John Phillips and Matthew Geyman are seeking class action status for the lawsuit filed in King County Superior Court.  In addition to statutory damages on behalf of the plaintiffs for allegedly violating the state’s charity care law, Consumer Protection Act and Fair Debt Collection Practices Act (FDCPA), Phillips and Geyman want the agency to stop pursuing collections from charity care- eligible patients.

They are also asking the court to make the agency establish procedures to allow patients to qualify for charity care that it collects on behalf of Washington hospitals, and notify current and former patients the agency has collected from in the past four years that they may be eligible for charity care that may reduce their obligation.   

Under Washington statute RCW 70.170.060, individuals and families with annual incomes below 100 percent of the federal poverty level -- $10,400 for a single person and $42,400 for a family of four living in Washington -- are deemed charity care patients for the full amount of hospital charges, provided that they are not eligible for other public or private health coverage sponsorship. The law also requires various levels of discounts for patients whose annual incomes range from 100 percent to 300 percent of the federal poverty level.  The law entitles charity care-eligible patients who have paid all or portions of their hospital bills to a refund, according to the lawsuit.

The lawsuit alleges that Audit & Adjustment’s profits depend on how much money it gets from each hospital patient and that the agency has a built-in incentive not to allow patients to apply for and obtain charity care once the debt is in collection. It claims that the agency systematically told patients they were not charity care-eligible once their account was in collection.

David Fagan, the company’s collection manger, told insideARM that the company was unable to comment at this time.

Kaulkin Ginsberg Analyst Michael Klozotsky said if the company was found to have violated state statues, the legal and social precedent that follows the judgment could have serious implications for healthcare collection agencies in both Washington and across the country.

“The spirit of the (Washington) law -- that impoverished patients ought to have greater protection, or at least options, under the law -- has already been tarnished in the opinion of many when a hospital creditor and its collection agency partner paint poor patients into a corner.  Even if the lawsuit fails, the case is likely to generate negative publicity for healthcare providers and the accounts receivable management industry.”