In 2018, senior executives at one of the country’s largest nonprofit hospital chains, Providence, were frustrated. They were spending hundreds of millions of dollars providing free health care to patients. It was eating into their bottom line.
The executives, led by Providence’s chief financial officer at the time, devised a solution: a program called Rev-Up.
Rev-Up provided Providence’s employees with a detailed playbook for wringing money out of patients — even those who were supposed to receive free care because of their low incomes, a New York Times investigation found.
In training materials obtained by the Times, members of the hospital staff were instructed how to approach patients and pressure them to pay.
“Ask every patient, every time,” the materials said. Instead of using “weak” phrases — like “Would you mind paying?” — employees were told to ask how patients wanted to pay. Soliciting money “is part of your role. It’s not an option.”
If patients did not pay, Providence sent debt collectors to pursue them.
More than half the nation’s roughly 5,000 hospitals are nonprofits like Providence. They enjoy lucrative tax exemptions; Providence avoids more than $1 billion a year in taxes. In exchange, the IRS requires them to provide services, such as free care for the poor, that benefit the communities in which they operate.
But in recent decades, many of the hospitals have become virtually indistinguishable from for-profit companies, adopting an unrelenting focus on the bottom line and straying from their traditional charitable missions.
As Providence illustrates, some hospital systems have not only reduced their emphasis on providing free care to the poor but also developed elaborate systems to convert needy patients into sources of revenue. The result, in the case of Providence, is that thousands of poor patients were saddled with debts that they never should have owed.
Founded by nuns in the 1850s, Providence says its mission is to be “steadfast in serving all, especially those who are poor and vulnerable.” Today, based in Renton, Washington, Providence is one of the largest nonprofit health systems in the country, with 51 hospitals and more than 900 clinics. Its revenue last year exceeded $27 billion.
Providence is sitting on $10 billion that it invests, Wall Street-style, alongside top private equity firms. It even runs its own venture capital fund.
In 2018, before the Rev-Up program kicked in, Providence spent 1.24% of its expenses on charity care, a standard way of measuring how much free care hospitals provide. That was below the average of 2% for nonprofit hospitals nationwide, according to an analysis of hospital financial records by Ge Bai, a professor at the Johns Hopkins Bloomberg School of Public Health.
By last year, Providence’s spending on charity care had fallen below 1% of its expenses.
The Affordable Care Act requires nonprofit hospitals to make their financial assistance policies public, such as by posting them in hospital waiting rooms. But the federal law does not dictate who is eligible for free care.
Ten states, however, have adopted their own laws that specify which patients, based on their income and family size, qualify for free or discounted care. Among them is Washington, where Providence is based. All hospitals in the state must provide free care for anyone who makes under 300% of the federal poverty level. For a family of four, that threshold is $83,250 a year.
In February, Bob Ferguson, the state’s attorney general, accused Providence of violating state law, in part by using debt collectors to pursue more than 55,000 patient accounts. The suit alleged that Providence wrongly claimed those patients owed a total of more than $73 million.
Providence, which is fighting the lawsuit, has said it will stop using debt collectors to pursue money from low-income patients who should qualify for free care in Washington.
But the problems extend beyond Washington. In interviews, patients in California and Oregon who qualified for free care said they had been charged thousands of dollars and then harassed by collection agents. Many saw their credit scores ruined. Others had to cut back on groceries to pay what Providence claimed they owed. In both states, nonprofit hospitals are required by law to provide low-income patients with free or discounted care.
Gregory Hoffman, Providence’s chief financial officer, said that the Times’ findings about the hospital system’s treatment of poor patients “are very concerning and have our attention.” He said Providence wanted “to get things right, on behalf of our communities and on behalf of our patients,” though he acknowledged that the Rev-Up program initially had “some hiccups,” including sending Medicaid patients to debt collectors.
Melissa Tizon, a spokesperson for Providence, said the health system stopped doing that in December, although that was two years after an executive raised internal alarms about the practice. Providence has also instructed the debt collection firms it works with to not use “any aggressive tactics such as garnishing wages or reporting delinquent accounts to credit agencies,” she said.
Tizon said Providence was the largest provider of charity care in Washington. While the hospital system has been providing less of that care in recent years, she said, Providence has been treating more patients on Medicaid, the federal-state insurance program for poor people.
“Our practices comply with and in many instances exceed state requirements,” she said.
‘Don’t Accept the First No’
When the federal government created Medicare and Medicaid in the 1960s, millions more people suddenly had insurance that covered medical expenses.
The IRS began allowing hospitals to justify their tax exemptions by providing a broader range of loosely defined benefits to their communities beyond treating patients for free. Some hospitals took advantage of the new leeway, arguing that things like employees’ salaries counted toward the IRS requirement.
Top government officials warned that hospitals were abusing their privileged status as nonprofits.
“Some tax-exempt health care providers may not differ markedly from for-profit providers in their operations, their attention to the benefit of the community or their levels of charity care,” IRS commissioner Mark W. Everson wrote to the Senate in 2005.
Some hospital executives have embraced the comparison to for-profit companies. Dr. Rod Hochman, Providence’s CEO, told an industry publication in 2021 that “‘nonprofit health care’ is a misnomer.”
“It is tax-exempt health care,” he said. “It still makes profits.”
Since Hochman took over in 2013, Providence has become a financial powerhouse. Last year, it earned $1.2 billion in profits through investments. (So far this year, Providence has lost money.) In 2019, the latest year available, Providence received roughly $1.2 billion in federal, state and local tax breaks, according to the Lown Institute, a think tank that studies health care.
The greater the hospital system’s profits, the more money it could pump into expanding. In addition, the greater its cash reserves, the stronger its credit rating. A pristine rating allowed Providence to inexpensively borrow money, which it could then funnel into further growth.
Over the past decade, Providence has opened or acquired 18 hospitals. Hochman earned $10 million in 2020.
Even before the Rev-Up program, Providence was collecting money from poor patients, sometimes in violation of state laws, according to five current and former executives and a review of patient complaints filed with regulators.
Harriet Haffner-Ratliffe, 20, gave birth to twins at a Providence hospital in Olympia, Washington, in 2017. She was eligible under state law for charity care. Providence did not inform her. Instead, it billed her almost $2,300. The hospital put her on a roughly $100-a-month payment plan.
It was more than Haffner-Ratliffe, who was unemployed, could afford. When she fell behind on the payments, Providence dispatched a debt collector to pursue her.
For people already on the financial brink, debt collection companies can push them over the edge. The companies often inform credit-rating firms about patients’ debts, which can torpedo their credit scores. That, in turn, can make it much harder and more expensive to buy or rent a car or home or to borrow money. Haffner-Ratliffe’s ordeal chopped her credit score by about 200 points. For years, she couldn’t get a credit card.
In 2018, Providence was looking for ways to save money. It had recently merged with another nonprofit hospital system, and integrating the two was expensive.
Providence turned to the consulting firm McKinsey & Co. The firm’s assignment was to maximize the money that Providence collected from its patients, the five current and former executives said. In essence, the hospital system wanted to apply the tactics it had used with Haffner-Ratliffe to even more patients.
McKinsey’s solution was Rev-Up, whose name was an apparent reference to the goal of accelerating revenue growth.
Training materials instructed administrative staff to tell patients — no matter how poor — that “payment is expected,” according to documents included in Washington’s lawsuit and training materials obtained by the Times. Six current and former hospital employees said in interviews that they had been told not to mention the financial aid that states like Washington required Providence to provide.
One training document, titled “Don’t accept the first No,” led staff through a series of questions to ask patients. The first was “How would you like to pay that today?” If that did not work, employees were told to ask for half the balance. Failing that, staff could offer to set up a payment plan. Only as a last resort, the documents explained, should workers tell patients that they may be eligible for financial assistance.
Another training document explained what to do if patients expressed surprise that a charitable hospital was pressuring them to pay. The suggested response: “We are a nonprofit. However, we want to inform our patients of their balances as soon as possible and help the hospital invest in patient care by reducing billing costs.”
Tizon, the spokesperson for Providence, said the intent of Rev-Up was “not to target or pressure those in financial distress.” Instead, she said, “it aimed to provide patients with greater pricing transparency.”
“We recognize the tone of the training materials developed by McKinsey was not consistent with our values,” she said, adding that Providence modified the materials “to ensure we are communicating with each patient with compassion and respect.”
The Rev-Up program alarmed some Providence employees.
Taylor Davison, who worked in the emergency department of a Providence hospital in Santa Rosa, California, until last year, said Providence’s tactics had struck her as predatory. She was told to approach patients as soon as doctors had finished examining them. She was required to document in the patients’ charts that she had repeatedly pushed for payments.
Employees were urged to collect any amount, no matter how small, she said. “Here are people coming in at the worst moment of their lives, and I’m asking them to empty their wallets,” Davison said.
Providence paid McKinsey at least $45 million in 2019 for its assistance, tax filings show.