Hidden Help: What Happened When Oregon Forced Hospitals to Boost Financial Aid?

Dan Gorenstein: Hey, it’s Dan.

This is the second episode of our 2-part series on preventing medical debt. If you missed episode 1, check that out first.

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DG: Lisa Reynolds was shocked when she first learned that Providence – a big hospital chain in Oregon – had trained its workers to pressure patients for money … including patients who qualified for financial aid.

Lisa Reynolds: It just felt like it was so clearly preying on vulnerable people who are hanging on to life by their fingernails.

DG: Lisa is a state lawmaker in Oregon.

The New York Times, back in 2022, had reported on the hospital’s aggressive practice.

Providence, like most hospitals in the U.S., will wipe out or lower bills for patients with low incomes. This is known as charity care. Or financial assistance.

After reading the article, Lisa was furious.

LS: I did a social media post like. And I don’t usually do that. This is egregious. These money grabbers. Don’t they know what their responsibility is to the community.

DG: I ask her if she’d read back what she’d written.

LS: Yes. Ok. I’m just opening the link.

LS: Okay…So .. I tweeted, uh, Providence Health System is cheating…

LS: Providence agrees to provide health care free of charge to those earning less than two times the federal poverty level… This is Oregon law. Many patients had to cut back on groceries to pay what Providence claimed they owed. Others had their bills sent to collection agencies and saw their credit scores ruined… We must hold Providence accountable for these deplorable practices and maybe Providence needs to live the values of their founding nuns who started Providence to take care of the poor.

DG: Outrage over aggressive billing practices snowballed into one of the nation’s most robust laws to protect patients from medical debt. 

Lisa Reynolds: It felt like we were really standing up for working families in Oregon. And we were holding hospitals accountable for what they should have been doing all along.

DG: Today … what happened when Oregon’s hospitals stopped sending bills to their poorest patients … lessons learned from the state’s big swing … and an epidemiologist in LA tackles medical debt.

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein. This is Tradeoffs.

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DG: Welcome to the final episode of Hidden Help … a series produced by Tradeoffs and KFF Health News about a promising way hospitals can protect their patients from medical debt.

The potential fix: what’s called “presumptive eligibility” or auto-enrollment. Hospitals screen patients and write off bills without asking people to fill out lengthy applications. 

State lawmakers across the country have begun to ask themselves what would happen if hospitals helped patients before sending bills.

We asked Tradeoffs reporter Melanie Evans to dig into Oregon, where hospitals there have been doing just that for a few years.

Hello, Melanie. 

Melanie Evans: Hi Dan. 

DG: Of the six states with auto-enrollment, the law Oregon passed in 2023 is one of the most expansive. Melanie, what makes it stand out?

ME: Dan, the legislation, it’s kind of like a one-two punch. It required hospitals to screen patients before sending a bill … and screen almost everyone. 

That means anyone who owed more than $500 … and everyone who was enrolled in Medicaid or was uninsured. 

DG: And so what happened?

ME: I think there are three big lessons here. 

The first: 

Proactive screening works. It helps patients get real relief from bills. 

Check out what happened with Oregon Health & Science University, one of the state’s largest hospitals.

Before the law, 12% of OHSU patients got help. 

After the law … 64%. 

DG: 64% … seriously?

ME: Yes. Just like you, OHSU was surprised. 

They had been pretty proud of their charity care. 

They had done a version of screening … but it was more limited. 

With this spike, OHSU wanted to know: Which number is closer to the truth? How many patients should be getting help? 

So OHSU dug into economic data looking for some indicator of patients’ actual need. 

DG: And what did they find? 

ME: About 57% of Oregonians have incomes that qualify them for help under OHSU’s financial assistance program. 

DG: I see. The truth is actually a lot more like 64%. 

ME: Absolutely. Even a hospital that thought it was offering a lot of financial aid … was in fact missing tons of people.

Thanks to Oregon’s law … those patients started to get the help they needed.

I looked at Medicare data from about two-thirds of hospitals. In their first full year under the law, charity care more than doubled, on average.

Dan, data aside, Adam Zarrin from the patient advocacy group Blood Cancer United said the law’s new protections have been a huge win.

Adam Zarrin: They don’t have to have the late nights being like, how am I going to afford my mortgage? How am I going to afford these medical bills? That just takes this stress off your shoulders as a patient and lets you focus on what’s actually important.

DG: So based on what we know so far, this law worked how lawmakers hoped – some people who had been getting bills are now getting help.

Ok. That is lesson one. What, Melanie, is lesson two?

ME: Lesson two. 

ME: Or what I like to call that damn data.

DG: Alliterations get me every time, Melanie. 

ME: To explain this one, Dan, I’m going to take you to the heart of the action…

Steve Zika: Hey good morning everybody. Welcome to the OHSU Finance and Audit Committee meeting today. We have a relatively short agenda. I’m guessing the meeting should be well less than the scheduled time. 

ME: … the quarterly board meetings for OHSU 

DG: Scintillating!

ME: Indeed. This is board member Steve Zika. It’s in September 2024, so just a few months after Oregon’s law took effect. 

OHSU is under a bit of financial strain coming out of the pandemic. It’s also spending a lot of money to expand.

Here’s what Steve wants to know: What does Oregon’s new law mean for the hospital’s bottom line? 

Steve Zika: I’m aware of this new law. It’s well-meaning, but changing potentially how we bill lower income patients. 

ME: Steve is talking to the guy responsible for OHSU’s money, Lawrence Furnstahl. Chief financial officer. 

Lawrence supports the law, in principle.

In practice, he admits to Steve, it’s proving hard to pull off. 

LF: The problem, of course, is that we don’t have access to a universal set of data that says for every patient, here is what their family income is and what their family size is.

ME: Income and family size, Dan. This is the basic, bedrock information that hospitals use to figure out who needs help. 

In Oregon, hospitals must completely wipe out bills for patients who have household income up to double the federal poverty line … about 3,600 bucks a month for a couple. 

This is usually information that hospitals would ask patients for on a financial aid application.

But under the new law … Lawrence tells the board that OHSU instead relies on a company to pull credit records and public data to get an income estimate.

LF: It’s pretty clear those estimates are not very accurate.  So what we’re seeing is a somewhat higher level of financial assistance, but it’s not clear whether this is in fact accurate.

DG: This is the same issue Texas hospitals raised when we spoke with them in the first episode. The data can be old, incomplete. Proxies for the real thing.

ME: Right. Oregon hospitals found the results were pretty solid for patients at the lowest incomes, but they less reliable for higher-income households closer to the cutoff. 

The result: Lawrence told the board more money is going out the door than should be.

Lawrence Furnstahl (LF): We have patients who have called us up and said, look, you gave me financial assistance. I don’t need it. I’m not eligible.

ME: This takes us into our third and final lesson, Dan, which I’m going to pose as a question.

DG: Oooohhh. A little suspense. 

ME: Yes, a health policy riddle. So…

ME: There are a ton more OHSU patients who are eligible for help, right?

But where were they all coming from?

DG: Yeah, before the law, 12% of people were getting help, but now more than half of the hospital’s patients actually were qualifying for aid.

ME: And this is all impacting OHSU’s bottom line. 

Jim Carlson: We’ve got three primary issues we’re going to cover this morning. Uh the first is going to be a report on some legislation that was passed by the Oregon Legislature and the impact that it’s had. 

ME: About six months into the new law, one of Lawrence’s colleagues, Sandy Caitlin, presents to the board. 

Sandy Caitlin: Thank you Lawrence…next slide please?

ME: Her news is sobering. 

Sandy Caitlin: As a result of more patients qualifying for financial assistance, the estimated unbudgeted financial impact in the current fiscal year is estimated to be about $50 million.

DG: Unbudgeted financial impact? Is that how people in finance say they’re spending way more than they planned?

ME: Yes it happens to me every time I go to the grocery store.

DG: Melanie, this is a hospital that prided itself on its generosity. 

And clearly they were unprepared for the outpouring of need. How did the hospital – a sophisticated player – get this so wrong?

ME: I asked OHSU for an interview. They declined.

I did listen to their board meetings during and after the law’s first year.

And it’s unclear why they miscalculated.

But Lawrence did tell the board who was now getting financial assistance.

LF: A lot of patients have insurance. The insurance pays the large majority of their bill. They have a co-pay and deductible and they just paid it. They didn’t apply for financial assistance.

DG: Mystery – or at least part of it – solved. 

It’s people with private insurance … a group you might assume needs no help. 

But they do.

ME: Yeah. After the first year OHSU spent $39 million helping patients with insurance.

That is about five times more than before the law. 

A not so-fun fact, Dan, one in three adults with private health insurance carry medical debt. 

That’s according to a new survey from the Commonwealth Fund.

Economist Sara Collins says her team found nearly half of the people with debt owed at least $2,000. 

Sara Collins: The shock of having paid premiums for many years and needing your insurance, like you’ve never needed it before, and being stuck with thousands of dollars of medical bills. I think that’s what was so striking about what they’ve experienced.

ME: For people with insurance … the problem is the deductibles they fork over to get care.

DG: Got it. So thanks to Oregon’s auto-enrollment law … OHSU was reducing or even wiping out those deductibles.

ME: Exactly. 

ME: About 14 months after the new screening started … Lawrence returned to the board to give them the first year’s final tab. 

DG: What’d he say? 

ME: He gave them the numbers straight, as only a numbers guy can do. 

LF: The impact of HB 3320 was 66 million to the negative. 

ME: Very direct. To the point. That $66 million … it’s about 1% of what OHSU spent on operations that year. 

Lawrence also understood what that money meant for the hospital’s patients. 

Here’s how he summed up the law.   

LF: This is going to our patients. It is a good thing, but it is an expensive thing.

ME: Dan, I want to make a point about the math. Hospitals that screen up front, they will spend more on charity … but they will also spend less chasing down bills, some of which they’ll never collect. 

So just how expensive this is … that’s an open question.

DG: DG: Ok. Let’s take stock of your three lessons, Melanie. 

Oregon enacted one of the boldest state laws on auto-enrollment … and it worked.

A much greater share of eligible patients – many who are insured – got help.

And that more than doubled charity care spending on average.

ME: That’s right. 

But despite all that … earlier this year the Legislature voted to roll the law back. 

DG: And why did they do that?

ME: So all of this is happening at a tough time for hospitals. 

Shrinking Obamacare subsidies and federal Medicaid cuts that have hospitals very worried. 

Sean Kolmer: If the modeling holds from the state, we’re probably going to have an uninsurance rate of 10 to 15% in the next couple of years.//When we all built this together we had an uninsurance rate of 3%//that’s a very different world.

ME: That’s Sean Kolmer with the Hospital Association of Oregon.

Sean says hospitals were on board with the original law. 

But with all the cuts from Washington … lawmakers said hospitals asked for a lifeline.

And in April of this year … Oregon passed a second auto-enrollment bill. That means fewer patients will automatically get help.

DG: How so?

ME: Remember, hospitals had to screen practically everybody … anyone who owed $500 or more. Lawmakers raised that threshold to $1500 or more.

DG: I get it. This is a tough time for hospitals … but why did lawmakers backtrack on this?

ME: I talked to Representative Rob Nosse. He chairs the Oregon House health care committee.

Rob is as worried about the Medicaid cuts as the hospitals. 

Those cuts are expected to blow a big hole in Oregon’s budget. 

If that happens, Rob is afraid hospitals will get squeezed. 

That’s why … even though he strongly supported the original bill … he agreed to roll it back.

Rob Nosse: I don’t want any suburban or rural hospitals to close on my watch. I don’t want somebody who lives in a remote area of Oregon where it’s already difficult to deliver a baby to now have to drive four hours instead of two. 

ME: Rob says people who are no longer automatically eligible still can apply for help. 

DG: And what about Lisa Reynolds – the lawmaker who got so mad after the New York Times article and sent off that Twitter thread. 

ME: Right. She was so mad at Providence … which has since made efforts to address what the Times found.

Lisa, she also voted to water down the law. 

She supported the measure because she wanted to give hospitals a little relief as they fine-tune their screening … to avoid awarding aid to people with higher incomes. 

That said, she’s thrilled that charity care spending has gone up. 

LS: People won’t be at risk of receiving that collection notice, and that they will be told up front, hey, we got you. Right. You know, you are here at a very scary time in your life because of illness or injury, and we got your back.

ME: Even with a less aggressive law, Lisa sees auto-enrollment as this tool that helps strike a better balance between hospitals and the larger society. 

LS: The deal is that, hey, big hospital, you don’t have to pay taxes. But for that, you need to take care of poor people in the state, people who don’t have insurance, or people who can’t even afford their out-of-pocket expenses. So hospitals have been on the winning side of this deal for a long time. They enjoy millions and millions and millions of dollars in tax breaks, and it has not penciled out. They are not holding up their side of the bargain.

DG: When we come back, we go to Los Angeles to hear how public health officials there are trying to make auto-enrollment easier for hospitals.

BREAK

DG: Welcome back.

We’re talking about what we’ve learned from the handful of states that already require hospitals to use auto-enrollment before sending bills.

Before the break, Tradeoffs reporter Melanie Evans brought us to Oregon, where a lot more people are getting their bills wiped out.

But concerns from hospitals have convinced lawmakers to scale back the state’s requirements.

Melanie is here with me for the second half … as we shift our focus down the Pacific coast to California, which will go live with its auto-enrollment requirements next July.

ME: And we’re joined by Noam Levey. He is a senior correspondent at KFF Health News and one of the best reporters in the country on medical debt. Noam, we’re so glad you’re here.

NL: Hey there, glad to be with you.

DG: Noam, when we reached out to you to be part of this series, you pretty quickly told us that you wanted to report on Los Angeles County. Why? Other than the weather.

NL: It was just the weather, Dan. I’d sort of been following what LA had been doing for a couple of years because they had a kind of innovative group of public health folks down there who were really interested in medical debt and were kind of thinking about a lot of different ways to tackle the problem. 

ME: Lucky for us, you were interested because as I was kind of reporting across the country, L.A. County just kept coming up again and again. People that I was talking to about presumptive eligibility had heard what was going on in LA and were really interested about kind of where it was at.

DG: And so Noam, can you break it down? What exactly is the county doing to make auto enrolment easier there?

NL: Well, so a lot of other places have sort of left it to hospitals to kind of figure out how to do this. And what LA proposed to do was help set up a system that all the hospitals could use so that everybody who goes into a hospital could get screened like quickly and easily. 

DG: In your article, you write about the leading role that Dr. Naman Shah has played in all of this. 

Noam, why is a physician and epidemiologist with the County’s Department of Public Health focused on preventing medical debt?

NL: He’s a sort of true public health official. He still sees patients once a week at a tuberculosis clinic. And I think it’s really important that Doctor Shah had this mindset of a public health physician. 

Naman Shah (NS): Prevention is our bread and butter. We like doing things … before they happen, right? Not after the damage is done. We like doing things at scale where we can reach the most patients, and we like doing things in a win-win way where it’s sustainable, where it’s effective.

NL: So they came to this with this idea that you could prevent people from going into debt. And that was sort of the genesis of their thinking about presumptive eligibility.

DG: And it’s fascinating. I mean, what you just said, right, is that this doc saw medical debt as much as a threat to someone’s health as TB or diabetes.

NL: Yeah. Not only did he see this as a big public health threat, he measured it. 

NS: Burdensome medical debt affects 1 in 10 adult residents in the county. That’s more than tobacco. It’s more than asthma. It’s on par with diabetes. And the amount of medical debt was staggering, more than $3 billion. The impacts of medical debt were staggering. People forgo their prescriptions, people forgo appointments, and then you get into worse health. And you can just see how this cycle just descends and descends and descends.

DG: So the idea here was that the county would set up an auto-enrollment presumptive eligibility system and make this system available to the vast array of hospitals in the county. Is that right?

NL: Yeah. That’s right. It’s like a Costco model. Like you buy a lot of this, and then each hospital can pay 50% off or 75% off of what it would normally cost if they had to do it themselves. I think the thing that’s important to also note is that the county is not sort of setting up the system itself. L.A. County, they don’t have the resources to set this up, but they could convene the hospitals, the hospital association, the largest safety net health insurer, and say, hey, guys, let’s sit down. Let’s figure something out here. How can we, like, select a system? How can we build it out and how can we deploy it? 

DG: Melanie has told us from her reporting in Oregon and Texas that hospitals think the data that they get from these sorts of tools leaves a lot to be desired. Is L.A. doing anything about that to address those sorts of concerns?

NL: So they are starting with just providing access to one of these imperfect off the shelf screening tools. But going forward, the county is working with the state of California to get access to better data, from things like taxes, so hospitals can get real life income data and they can more accurately determine who is actually qualifying for aid. 

ME: Yeah, I heard something similar, Dan, from hospitals in Texas and Oregon. They want help from the state to get better data. Tax data is an option. The nonprofit Dollar For, which helps patients get charity care, is looking into this. They told me there are some technological barriers. It’s a work in progress.

DG: I was honestly kind of stunned to see in Oregon and now in LA that hospitals are on board with these new charity care requirements. I mean, the Hospital Association of Southern California is actually paying for the screening tool, along with one of the big private Medicaid plans in the county. Noam, what’s the motivation here?

NL: I mean, we have to be a little bit careful about sort of saying they’re totally on board with it. 

DG: Fair.

NL: Because, I mean, initially when the state of California was debating a law that would require hospitals to do this kind of screening, the state hospital association was opposed to it. But it’s the law now. So all the hospitals in California have to do this. And so for LA County to come forward and say like, hey let’s help make this easier and potentially cheaper for individual hospitals to do this, that’s obviously a pretty good inducement. But I think two other things going on here which are important. One is this idea that hospitals are chasing patients who don’t have the ability to pay and maybe this is a money loser. And we don’t have super great data for how the math actually works out there. But, there’s some sort of anecdotal evidence, that this is true, that there’s a cost associated with trying to bill Joe Smith if Joe Smith can’t pay the bill.

DG: Right, right. For every $100 that the hospital collects, it costs them $120 to collect it or whatever.

NL: Whatever, exactly. And so if there’s a system where you can take that cost of collecting out, that’s potentially attractive to a hospital.

The second thing here is, a lot of people who work in hospitals, like they’re not Darth Vader. I mean, they’re sure there are some greedy hospital executives out there, but like most of the people I’ve met generally went into hospital work because, you know, they want to take care of people. And, you know, the idea that they’re chasing poor people who can barely put a roof over their head isn’t attractive to a lot of people who run hospitals. And so if there’s a way to sort of make this system work a little bit better, and it doesn’t cost the hospital very much, I think that’s an attractive idea.

DG: It’s obviously too early to know how things are going to work out in LA County, but it seems like one lesson that you could pull from this collective reporting that both of you have done is that if policymakers are going to force hospitals to screen more people, hospitals will need some help from the government to pull it off. Does that seem to be a reasonable takeaway here?

NL: I think so. What I take from LA is that they are trying to help make it easier for hospitals to do what the county wants, which is for hospitals to offer more charity care. And that’s a mindset that I think could help in other places too. I mean, our system is already nuts. It’s like crazy on top of crazy, right? And then there’s this just bonkers system of billing people and trying to figure out who’s eligible for what kind of assistance? So is there a role that government can play in simplifying that? Absolutely.

ME: Yeah, I’ve talked to researchers who argue regulation creates a level playing field and clear expectations for patients. That means whatever hospital a person happens to go to, they know what they’re getting. Right now, there are few federal standards on what hospitals must do. So states can have a big impact here, Dan.

DG: Final question as we wrap things up. Let’s imagine that Los Angeles County, Oregon, Texas, figure out how to make the screening tools better, get hospitals on board. And we see, most importantly, lots of people avoiding big bills. Based on your collective decades of covering health care costs, medical debt, and the role of hospitals, how far could auto enrollment go towards addressing the medical debt crisis in the country? 

NL: I think it could go a ways, for sure. I mean, hospital bills are the biggest bills typically that patients get. There are, we know, millions of people are getting these bills who should qualify for assistance. And so when these kinds of things get done, you’re alleviating a lot of suffering out there. Will it eliminate the medical debt problem entirely? No, no, it will not. I mean, it doesn’t do anything for bills that come from physicians. We know that dentists are billing people and sending them into debt, ambulance companies. And ultimately, we as a country have to figure out how to better protect people from getting huge bills no matter where they go and no matter what their income is. But I think this seems to be some pretty low hanging fruit that could have a meaningful impact on a lot of lives.

DG: And Melanie, you have invested a year’s worth of time into really scrutinizing auto enrollment, presumptive eligibility. And my instinct is that you’ve done that because you see real, meaningful promise here.

ME: I wanted to report on this because people who are eligible for financial assistance are being billed by hospitals. That drives some people into debt. It ruins their credit. Some people even stop seeking care altogether. 

I have seen policymakers, for years, try to tackle how hospitals bill low-income patients, with mixed success. Now, they’re looking at this emerging tool and research suggests its success will depend on when and how it’s used. 

In Texas, we saw hospital use varied. That can be the difference between no bill or being in debt. 

The clear lesson I take from Oregon is that this policy protects more patients from debt. We ran the numbers. Spending on charity care more than doubled, on average. 

But there are still open questions about how to make it all work. I’m very curious to see how this plays out. 

DG: Melanie, Noam, thank you both very much for your reporting on this incredibly important topic.

NL: Thanks so much, Dan.

ME: Yes, Dan. Thank you so much. 

DG: Thanks for listening to Hidden Help, a special series from Tradeoffs and KFF Health News.

To see more reporting from Noam and Melanie, visit our website … tradeoffs.org/hiddenhelp.

While you’re there, sign up for our newsletter to get more of our coverage and news about upcoming events for the series … all delivered straight to your inbox. 

I’m Dan Gorenstein, this is Tradeoffs.