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Lawsuit seeks $2 million over allegedly illegal hospital debt collection practices

The suit against Sky Lakes Medical Center in Klamath Falls comes despite recent protections in Oregon to ensure poor patients access charity care
The lawsuit was filed against Sky Lakes Medical Center, a hospital in Klamath Falls, Oregon, and its debt collector. | BOBJGALINDO/CC BY-SA 4.0/WIKIMEDIA COMMONS
November 28, 2023

A new lawsuit claims that Sky Lakes Medical Center is flouting requirements that it ensure its poor patients can access free care. Instead, the suit states,  the Klamath Falls hospital is using a debt collector to potentially hound thousands of low-income people for payments. 

The suit was filed earlier this month in U.S. District Court in Medford on behalf of Nathaniel Boren, a Klamath County resident who Sky Lakes sent to collections after he was unable to pay for medical treatments. It seeks $2 million in punitive payments over a medical bill that was less than $900.

The lawsuit, filed by attorneys Matthew Sutton and Michelle Freed, comes despite recent scrutiny of hospital debt collection practices and efforts to protect indigent patients. 

Reports have emerged in recent years of nonprofit hospitals aggressively seeking payments from destitute patients who qualify for free or reduced-price services. In response, Oregon lawmakers earlier this year tightened charity care requirements and directed hospitals to actively check if patients are eligible for financial help. 

The lawsuit seeks $1 million each in punitive payments from Sky Lakes and Carter-Jones, the debt collection agency it contracted with, “to deter additional wrongdoing.” Additionally, it seeks damages on behalf of thousands of patients to be proven at trial or $200 for each violation of Oregon Unlawful Trade Practices Act, whichever is greater. 

Asked for comment, Grant Kennon, Sky Lakes' vice president and chief legal officer, wrote in an email that the medical center  takes its role "as a nonprofit, community health system very seriously.  We provide financial assistance on a sliding scale to eligible patients whose yearly income is less than or equal to 250% up to 400% of the current federal poverty guideline, and flexible payment options are available to all patients.  Sky Lakes follows lawful debt collection practices at all times.  Sky Lakes cannot comment further on possible or pending litigation, but it is committed to vigorously defending its collection practices."

According to the suit, Sky Lakes and its collection agency "are in violation of their societal obligations, and in reckless or willful disregard of the risk of harm to consumers like Mr. Boren ... By pursuing these actions, Sky Lakes and Carter-Jones have each profited at the expense of thousands of Oregon consumers that cannot afford to pay their medical bills.”

Boren received medical treatment at Sky Lakes in June 2020 when he was uninsured and couldn’t afford his bills because he only had a temporary job and had “other obligations,” the lawsuit states. He should have qualified for Sky Lakes’ financial assistance programs that included a 25% discount for uninsured patients, according to the lawsuit. 

But Sky Lakes violated Oregon law by not actively screening patients to see if they qualified for financial assistance and instead only advised them of the discount if they called in and asked, the lawsuit alleges. When Boren couldn’t pay his bill, the hospital sent him to Carter-Jones, according to his lawsuit. 

The lawsuit also accuses Carter-Jones of violating the federal Fair Debt Collection Practices Act by making misleading representations and trying to collect amounts they were not authorized to. 

Sky Lakes and Carter-Jones also ignored another provision of state law restricting their ability to charge interest to patients who qualify for financial assistance, the lawsuit alleges. Instead, both companies ignored the requirements and Carter-Jones charged 9% annually on the amount of debt owed by patients, the lawsuit states.  

“Sky Lakes misrepresented its charges to Mr. Boren by stating them in such a manner which indicated that they would be free from any interest charges whereas its practice was to turn accounts over to collection where its patients would have to pay interest,” reads the lawsuit. 

Carter-Jones took Boren to court in 2022 over the debt and obtained an order requiring him to pay $794 and threatened to garnish his wages. That amount ballooned to $887, which he paid off earlier this year.

 You can reach Jake Thomas at [email protected] or via X @jakethomas2009.