If that wasnt true, then every single business in the U.S. would have to have a translator for every language known or risk violation of the law.
You are not a business. You are the 'recipient of federal assistance'. A business is to some extent free to send someone away if they don't speak english, a slave to the goverment is not.
Heck, even the hospital is not obligated to have translators, its a service offered.
Ahem, yes they are required to provide translation services. Most will contract with a phone conference service for anything but spanish.
Also, another obvious point you are missing is if someone is a non-english speaker and is illiterate, they are HIGHLY unlikely to be insured by anyone, let alone medicare!
Oh is that so ? Plenty of legal immigrants bring their parents in once they become citizens. Some of them are in fact either illiterate or at least not literate in any of the languages we know about. And after the 2 year period that the sponsor can be held liable for the parents becoming 'a public charge' is over, the parents go on medicaid. There are enough people out there whose only english language documents are their green-card, their medicaid card and their attorneys business card.
Having read the respective goverment documents a couple of years ago, it left me with the impression that the goverment doesn't limit your obligations to actual beneficiaries of the respective goverment programs (medicaid/medicare) but rather to anyone who walks into your practice. It is the fact that you receive goverment money that indentures you to their rules, not the question whether the individual patient is medicare/medicaid eligible.
But yes as a general rule, you want to think about your legal obligations are before you start a clinic-type set up. But on this point, you are definitely way off base.
If you are a 'small practicitioner' in the goverments lingo, they will let you get away with more in that respect than lets say a large multispecialty practice. But if some shyster specializing in your local immigrant community is able to collect a number of cases that show that you systematically discriminated against 'LEP persons', you (or more likely your lab organization) are in a world of hurt.
P.S.
In my humble opinion anyone seeking goverment services should be required to inquire in one of the 'native' languages of the US (english, spanish, hawaian or whatever local native american dialect applicable). By twisting the civil rights act into a pretzel, the supreme court has driven up the expense of doing business in the US without a measureable benefit for anyone but some low-end neighbourhood shysters. I personally think that your approach is reasonable, my limited experience with the goverment buerocrats makes me think that they possibly wouldn't agree.
As for whether HHS regulations on translation services apply to you, you might want to peruse the revised policy on this (emphasis added):
http://www.hhs.gov/ocr/lep/revisedlep.html
4. Q. Who is covered by the guidance?
A. Covered entities include any state or local agency, private institution or organization, or any public or private individual that (1) Operates, provides or engages in health, or social service programs and activities, and (2) receives Federal financial assistance from HHS directly or through another recipient/covered entity. Examples of covered entities include but are not limited to the following entities, which may receive federal financial assistance: hospitals, nursing homes, home health agencies, managed care organizations, universities and other entities with health or social service research programs; state, county and local health agencies; state Medicaid agencies; state, county and local welfare agencies; federally-funded programs for families, youth and children; Head Start programs; public and private contractors, subcontractors and vendors;
physicians; and other providers who receive Federal financial assistance from HHS. 
