Swedish Covenant Hospital, a nonprofit Chicago facility, failed to provide charity care to two low-income, uninsured patients, and lost one patient's financial assistance paperwork several times while threatening to send the bill to a collection agency, according to a lawsuit filed Thursday.

The case restarts an ongoing controversy in Illinois concerning whether hospitals are doing enough charitable work to receive lucrative tax breaks.

The hospital incorrectly told another patient she was ineligible for assistance and demanded cash from her, the complaint alleges. The lawsuit claims unfair practices under the Illinois consumer fraud law and seeks $50,000 in punitive damages and a change in hospital policy.

The practices alleged in the case amount to "bureaucratic barriers" that prevent eligible patients from getting free care, according to the suit, and the hospital has a policy of attempting to collect from "even the poorest of patients" through bill collectors and wage garnishment.

The hospital receives an estimated $8 million in annual tax breaks and owes the community a more reliable charity care system, the plaintiffs' attorney Alan Alop, of the legal services group LAF, said Thursday.

The hospital reported $6.2 million in charity care expenses last year, nearly 3 percent of its net revenue.

Swedish Covenant spokesperson Leigh Ginther said she couldn't comment on the lawsuit, but said every patient identified as uninsured receives an application for charity care and a personal explanation of the process. It's the patient's responsibility, she added, to return the completed paperwork.

Nonprofit hospitals won a broad definition of charity care in Illinois with a new state law passed earlier this year that will allow them to continue their tax-exempt status. Hospitals must provide free care to patients of certain income levels, and Attorney General Lisa Madigan was directed to write standards for hospital financial assistance applications.

Nearly 2 million Illinois residents are uninsured, or about 15 percent. The state constitution, court decisions and state law require Illinois hospitals that receive tax exemptions to provide charity care, but until this year the definition of charity wasn't clear.

In 2009, two large Illinois hospital systems settled class-action lawsuits that claimed they had overcharged uninsured patients. In separate settlements, Resurrection Health Care and Advocate Health Care agreed to pay refunds to tens of thousands of individuals.

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