Politics & Government

Legislature considering changes to medical lien law after lawsuit revealed MultiCare’s collection practices

A state lawmaker who represents Tacoma wants to tighten some aspects of medical lien law, in response to some billing practices brought to light by a lawsuit against Pierce County’s largest private employer, MultiCare Health Systems.

The bill by Rep. Laurie Jinkins, D-Tacoma, would more tightly regulate any third-party vendors who issue medical liens, as well as to require medical providers to tell patients up front that they use medical liens as part of their billing practices. The bill also creates a way for a person to collect damages if a medical lien isn’t immediately removed when a person pays the debt.

“I try not to do bills about single incidents,” Jinkins said Wednesday. However, she said this legislation is “a warning shot” to ensure other health systems walk the line on use of medical liens.

“We want to see how the medical systems react,” she said.

State law allows some health care providers, including hospitals and doctors, to seek medical liens to recover the cost of providing care to patients who have no medical insurance or other ways to pay. Medical liens — essentially a claim for payment — show up on credit reports and can make it hard, for example, for a person to buy or sell property.

In the case of MultiCare, a group of former MultiCare patients sued the health system and its third-party vendor, a California-based company, alleging it had filed thousands of liens improperly starting in 2010. The vendor used a notary public who was illegally registered in Washington state to file many of the liens, the patients alleged.

MultiCare denied wrongdoing and blamed its vendor and a former employee for the aggressive collection practices. The vendor was fired and filed for bankruptcy protection, and the employee no longer works for MultiCare.

The health system settled the lawsuit last fall for $7.5 million.

The heart of the lawsuit accused MultiCare of filing medical liens instead of first billing private insurance or Medicare/Medicaid, because private settlements are more lucrative. The people who sued had been hurt in accidents through no fault of their own and had received settlements for their injuries. Satisfying the liens essentially wiped out the settlement, the former patients said, even as their insurance companies weren’t billed.

Jinkins said her bill is a good first step, even though it doesn’t address the issue of who should be on the hook first for paying medical bills. The bill requires that any third-party vendor enforcing medical liens must be registered with the state as a collection agency, which brings the business under state law that heavily regulates what it can and cannot do in recovering a debt and provides potentially heavy penalties for violating the law.

Some practices the MultiCare patients said happened to them are illegal under state regulations for debt collectors, including multiple phone calls at all hours of the day and night and letters threatening lawsuits.

The bill also requires medical providers to tell people they use medical liens, bringing a measure of transparency to the issue that doesn’t exist now. Finally, the bill adds the word “immediately” to the requirement that a lienholder release a lien once it has been paid. Existing law requires the release but doesn’t put a timeframe on it.

Darrell Cochran, the attorney who sued MultiCare over medical liens, said Thursday that given the partisan divide in Olympia, “something is better than nothing.”

“The hospitals are using out-of-state corporations, which have developed a cottage industry with this lien practice,” he said. The firms are hired on a contingency basis, meaning they earn their money as a percentage of what they can collect on behalf of the health systems. That creates incentives for aggressive collection practices, Cochran said.

Those firms are looking at the settlement in the MultiCare case and saying “that’s the blueprint for what we cannot do, but how close can we get to the line?” Cochran said.

MultiCare spokeswoman Marce Edwards said the health system believes “this bill is good public policy.” After the lawsuit was filed, Edwards said MultiCare tightened its internal controls on medical liens, including requiring a health system-employed notary to personally notarize every medical lien.

The health system now employs Avectus, a Mississippi-based company, to work on third-party collection issues. Edwards said MultiCare will continue to try to recover payments from third-party settlements because “we firmly believe that the third party who caused the need for medical treatment should pay for care we provide.”

In the case of patients covered by Medicare and Medicaid, this is especially important, Edward said, because those are taxpayer-funded programs. In the case of traditional insurance, Edwards said MultiCare does not file liens if they know a patient has coverage.

Jinkins said she spoke with MultiCare officials before filing the legislation and that she worked with the Washington State Hospital Association as well.

The House passed the bill March 9 on a vote of 97-1, and the measure is now working its way through the Senate.