Many states have enacted laws requiring healthcare accounts to be screened to determine whether the individual is entitled to some form of charity care prior to initiating collection action. A District Court judge in Oregon has largely granted motions filed by the defendants — a healthcare system and a collection operation — in a suit accusing them of violating Oregon’s charity care law and the Fair Debt Collection Practices Act.
The background: The lawsuit stemmed from a hospital’s decision to send a patient’s unpaid medical bill to a collection agency despite the patient qualifying for 100% charity care under Oregon law. The patient had not completed a financial assistance application but was income-qualified based on a hospital-administered screening. The collection agency eventually sued to recover the balance, plus interest.
- The plaintiff alleged this violated Oregon’s Unlawful Debt Collection Practices Act (UDCPA), Unlawful Trade Practices Act (UTPA), and the FDCPA, claiming the hospital was not allowed to send accounts eligible for full forgiveness to collections, and that charging interest on such debts was unlawful.
The ruling: Judge Michael McShane of the District Court for the District of Oregon ruled in favor of the defendants on most counts:
- The hospital complied with Oregon law by screening the patient and sending a financial assistance application before transferring the account to collections. The law does not prohibit transfer of eligible-but-unapplied accounts to collections, the judge noted.
- The judge agreed the patient “qualified” for charity care but emphasized that qualification alone does not entitle automatic forgiveness — an application must still be submitted.
- However, the judge denied summary judgment on the interest charge issue. Because the patient did qualify for full assistance, charging interest on the debt — even if the patient never applied — may still violate state law.
- The claims against the collection agency were dismissed, with the court ruling they were barred because the debt had already been litigated in small claims court.
