Nonprofit hospitals hound patients with draconian debt collections

Patrick Malone & Associates P.C. | DC Injury Lawyers
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Patrick Malone & Associates P.C. | DC Injury Lawyers

Nonprofit hospitals added almost $40 billion to their bottom lines in the last year and lavished a $3.5 million average salary on their chiefs. But their relentless grubbing for cash apparently was unsated still. The institutions, exempted from federal, state and local taxes in exchange for “community benefits” like charity care and financial support for patients in need, are acting like Dickensian debt collectors, harassing patients with lawsuits and wage garnishments.

Pro Publica, the Pulitzer Prize-winning investigative web site, partnered with MLK50, a local news organization, to describe the avalanche of financial travail with which Methodist Le Bonheur Healthcare has inundated its poor and middle-class patients in Memphis, Tenn. The hospital, affiliated with the United Methodist Church, has filed more than 8,300 lawsuits pursing “aggressive collection practices [that] stand out in a city where nearly 1 in 4 residents live below the poverty line.” As the journalists reported of Le Bonheur:

“Its handling of poor patients begins with a financial assistance policy that, unlike many of its peers around the country, all but ignores patients with any form of health insurance, no matter their out-of-pocket costs. If they are unable to afford their bills, patients then face what experts say is rare: A licensed collection agency owned by the hospital. Lawsuits follow. Finally, after the hospital wins a judgment, it repeatedly tries to garnish patients’ wages, which it does in a far higher share of cases than other nonprofit hospitals in Memphis. Its own employees are no exception. Since 2014, Methodist has sued dozens of its workers for unpaid medical bills, including a hospital housekeeper sued in 2017 for more than $23,000. That year, she told the court, she made $16,000. She’s in a court-ordered payment plan, but in the case of more than 70 other employees, Methodist has garnished the wages it pays them to recoup its medical charges.”

Le Bonheur is so dogged in wringing payments from patients — even to the shock of its board members, who claim they didn’t know of the hospital’s aggressive legal behaviors — that it might put Inspector Javert of Les Misérables infamy to shame. The hospital, with revenues of $2.1 billion and a health system that includes six hospitals, dominates whole mornings of proceedings of the Shelby County General Sessions Court. There, largely black and minimum wage-earning onetime Le Bonheur patients learn how their hospital bills, with interest owed, pile into unapproachable sums, with the powers of the courts grinding them down for payment. The news organizations show how the hospital, for example, chased one low-earning patients for almost a decade to try to get her to pay back a $12,109 emergency room care bill that has zoomed to $33,000, thanks to interest and lawyer fees — more than twice what she earned.

Beware getting sick in Memphis if you don’t have a Cadillac health insurance plan!

Virginia hospitals garnish patient wages

The Tennessee outrages are not unique. Johns Hopkins researchers found by examining 20,000 lawsuits and other court and medical records that “36% of hospitals in Virginia garnished patient wages to collect payment for medical bills in 2017,” according to a Becker’s industry report, which added that, ”Most of the hospitals that garnished wages (71%) were nonprofit.”

NPR and the Wall Street Journal both bounced off that research to scrutinize the practices of Mary Washington Healthcare, reporting on the aggressive debt collection practices of the Fredericksburg, Va., not-for-profit regional system of two hospitals, three emergency departments, and more than 40 health care facilities and wellness services.

NPR reported that Mary Washington, with more than $600 million in annual revenue, hounds debtors with such zeal that it reserves with a court a morning each month just to run through its collection lawsuits. It says it tries to help patients with financial support so they can avoid debt, and it tries multiple times to reach out to those who owe it money before it launches its debt collection efforts against mostly working poor individuals.

The Johns Hopkins researchers who studied hospital debt collection practices in Virginia expressed outrage at them, with health policy expert Dr. Martin Makary telling NPR: “To see these aggressive, and even predatory, collection strategies affect everyday teachers, farmers, even nurses — it’s heartbreaking and it’s wrong and it needs to stop.”

Makary is offering his expertise to testify against Mary Washington in court, and he has been joined by lawyers and others providing counseling to the hospital’s patients. Under fire from the public over its campaigning against its own patients to recoup what amounts to 0.21% of its annual revenue, Mary Washington has announced that it will suspend and reevaluate its lawsuits.

Public blaming and shaming seem to be one way to get hospitals to knock off — at least for a time — their extreme debt collection practices, NPR reported:

“There are no good national data on the practice, but journalists have reported on hospitals suing patients all over the United States, from North Carolina to Nebraska to Ohio. In 2014, NPR and ProPublica published stories about a hospital in Missouri that sued 6,000 patients over a four-year period.”

The Wall Street Journal said this:

“Some Arizona hospitals have put legal claims on their patients’ personal-injury settlements in Medicaid cases. A three-judge panel for the state appeals court in March said the practice, along with the statute allowing it, violated federal law. University of Kentucky HealthCare, a nonprofit, was sued for using its state revenue department to collect on patient bills. Patients had their state tax returns levied or wages garnished. In February, a Fayette Circuit Court judge ruled against the hospital; the case has been appealed to the state Supreme Court. States also are taking aim at nonprofits. The Oregon Senate on June 17 passed legislation requiring nonprofit hospitals to maintain financial-assistance policies that include specific reductions in bills based on a patient’s household income. In Massachusetts, a state nurses union is backing a proposal that would require some nonprofits that pay large salaries to their chief executives to also contribute to a Medicaid enhancement fund. Nationwide, the mean salaries of chief executives at nonprofit hospitals rose 93% since 2005 to reach $3.1 million in 2015, according to an October 2018 study in Clinical Orthopaedics and Related Research.”

Critics assail Johns Hopkins for debt collection practices

Among the institutions that researcher Makary has taken aim at over their debt collection practices? His own: Johns Hopkins. It is in the midst of a major union organizing battle and activists have assailed the respected hospital and health care system for its treatment of debt-owning patients. As the Baltimore Sun reported:

Johns Hopkins Hospital has filed more than 2,400 lawsuits in Maryland courts since 2009 against patients with unpaid bills, including a large number of residents from distressed neighborhoods surrounding the East Baltimore medical campus. The number of cases has been increasing, from 20 in 2009 to a peak of 535 in 2016, according to a report released by the Coalition for a Humane Hopkins, which includes patients and neighborhood, faith and activist groups such as the AFL-CIO and National Nurses United, a union involved in a contentious organizing effort at Hopkins.”

The newspaper noted of the critics’ report:

“[It cited a] 2008 investigation by The Baltimore Sun that found 46 hospitals in the state filed more than 132,000 lawsuits for unpaid bills from 2003 to 2008 and won at least $100 million in judgments. In some cases, hospitals added annual interest at twice the rate permitted for other types of debts or placed liens against patients’ homes. The hospitals pursued the suits even though they collected millions of dollars from other patients, in the form of higher rates for hospital services, to cover costs for low-income patients who lacked insurance or enough insurance to cover out-of-pocket expenses. Hopkins dramatically curtailed its debt collection practices for several years after the Sun investigation, only to start again more recently, the coalition report found.”

In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent medical care. This has become a major ordeal due to the skyrocketing cost, complexity, and uncertainty of treatments and prescription medications, too many of which prove to be dangerous drugs. Big Pharma, doctors, and insurers bear their share of the blame for soaring health care costs. But hospitals’ profit seeking is an inarguable and unacceptable major driver of this bad trend.

Care-giving institutions turning on their patients, especially the poor, the working poor, and the middle-class, to wring a few pittances more in profits offers an outrage on multiple levels. “Nonprofit” hospitals get all kinds of tax breaks because they are supposedly in the business of helping the downtrodden.

But are they as forceful in letting patients know about the availability of financial assistance programs to help them with treatment costs as they are about dunning them for the overdue bills? They may claim they provide $62.4 billion in community benefits for their tax-exempt status valued in 2011 at $24.6 billion. But do they provide as much charitable care as they claim, or do they get their greatest tax advantage from claiming the difference in their charges and what they get paid in government programs for those in need such as Medicaid? Have nonprofit hospitals locked themselves into their own spending race, needing to build shiny new buildings and add pricey and trendy equipment, so they keep their tax-exempt status? Without delving too deep into the tangle of tax laws and hospitals, suffice it to say that knowledgeable parties, like Sen. Chuck Grassley, the Republican from Iowa who has chased hospitals about their tax-exempt status for a decade, have their doubts about whether institutions are doing the best they can by patients and their communities in exchange for their sizable tax breaks.

Medical economics are tough. But hospitals may wish to keep in mind just how much their livelihoods rely on maintaining public trust. That will be a huge challenge, if institutions exploit their patients, flying after them for unpaid bills, hitting them with surprise expenses, and failing to be transparent about their charges or even ‘spit balling’ them. President Trump has announced an executive order under which his administration will use various means to increase the transparency of hospital charges. These moves inadvertently may increase patient prices, for example, by letting lower charging hospitals know they can hit patients for more because their competitors do — with the assent of businesses, insurers, and doctors. We’ll see how this plan gets executed.

We have lots to do, meantime, in ensuring hospitals don’t doom patients to lives of medieval servitude due to excessive medical debt and medical bankruptcy. Relief from the debtor nightmare can’t just occur due to altruism and charity, and it would be better if it were rooted in fairness and reality — not just ripping one’s own customers to the nth degree.  And what lesson does this impart next time someone gets sick? You’d better stay away from the hospital until you absolutely must go, because the hospital will ruin your financial life — so people avoid getting med care they need. Unacceptable.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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