Investigation finds policies for offering charity care to low-income patients vary widely
"In Their Debt,’’ The (Baltimore) Sun (Dec. 21-23, 2008)
Maryland Department of Health and Mental Hygiene
By Fred Schulte
We started looking into hospital debt collection practices after an editor wondered how low-income people – especially those without health insurance – could afford to pay for their care.
It seemed like a fair question and a topical one, given the worsening economy. To get some answers, reporter James Drew and I spent months building databases from court files, deciphering arcane hospital financial data and charity care policies and interviewing patients, hospital representatives and state regulators. The result was “In Their Debt,’’ a three-part series published Dec. 21-23, 2008, in The (Baltimore) Sun.
The court system, where dockets brimmed with collection lawsuits filed by hospitals, proved to be a critical source for us early on. It was not only the volume of suits that seemed remarkable, but also the human stories and tactics that quickly emerged.
Take the case of Willie Mae White, a former housekeeper sued by Johns Hopkins Bayview Medical Center in Baltimore in 2007 after emergency surgery for a brain aneurysm. The hospital shocked her by demanding $36,244 even though it had sent her a form that said “your responsibility is zero.”
White, 66, was bothered by the hospital’s assertion that she had “refused to pay the amount due.” She wrote to the court noting she was grateful to the surgeon who had “saved my life,” but didn’t have the money to pay the bill. She noted that she and her husband got by on $1,080 a month from Social Security and $152 in food stamps.
Fearing she would lose her home, White agreed to send in $500 and then $50 a month until the debt was paid – which would have taken about six decades. Nearly all of this detail came directly from White’s file in the clerk’s office at Baltimore City Circuit Court.
Her case and others demonstrated that hospital policies for offering charity care to low-income patients varied widely and weren’t always applied evenly, which became a major theme of the series. For instance, some patients didn’t receive applications for charity care funds until after the hospital had won a court judgment against them for thousands of dollars.
Court records also showed that many people sued by hospitals over unpaid bills had some form of health insurance. In some cases, the hospitals were seeking insurance deductibles, which is permissible.
But hospitals also sued to collect charges that HMOs or other health insurers had declined to pay. That situation, known as balance billing, violates state insurance codes. In other cases, hospitals had sued people covered by Medicare or Medicaid, federal health care programs for the elderly and poor. Maryland law forbids hospitals from knowingly suing Medicaid patients.
Some hospitals assessed 12 percent annual interest on bills starting 60 days after the patient’s discharge. That’s twice the rate allowed for other forms of consumer debt. Because some hospital cases took years to wind through the courts, this “prejudgment” interest often piled thousands of dollars of new debt onto patients. Once we told state officials about the practice, which is legal, they promised to take steps to put an end to it.
Finally, the court records showed that while some hospitals routinely sought court orders to garnish wages, tap bank accounts or impose liens on homes, others rarely took any legal action. Some hospitals filed many thousands of cases, others just a few hundred over a period of more than five years. Though many suits involved thousands of dollars, some hospitals sued over debts as small as $50.
Documenting collections lawsuits
We used Maryland’s online Judicial Information System to help document a sharp spike in these lawsuits statewide. Unfortunately, the system only permitted downloads of a few hundred cases at a time, so the process was laborious. The data fields for most court judgments couldn’t be downloaded at all, so these had to be copied by hand and typed into an Access database.
Eventually, we documented more than 132,000 collections lawsuits filed by the state’s 46 nonprofit hospitals from the start of 2003 through June 30, 2008. In that same time period, hospitals won more than $100 million in judgments and slapped liens on at least 8,000 homes, despite national hospital industry guidelines that caution against wholesale use of the practice.
Watching some of these cases unfold in court was just as striking. We did that primarily in Baltimore City District Court, where hospitals filed nearly one-third of the total suits statewide and where many debtors are "living on the margins," as one law professor put it.
(Photo: Joe Gratz via Flickr)
The Baltimore district court operates like a giant collections bazaar handling a wide array of consumer debt cases, from banks and credit card companies to bail bondsmen and hospitals. Typically, hospital lawyers hash out repayment plans in the hallways prior to going before a judge and anyone standing nearby can overhear the negotiations. The debtors almost never have a lawyer to advise them and many seemed to us to have little understanding of their rights or obligations. Many people agreed to talk with us about their debts, either on the spot or in later interviews.
The calendar is so full that officials observe a weekly ritual called the “rocket docket” to help unclog the backlog, including hospital debts. We sat in on several of these sessions while lawyers sitting behind a thick wooden table called up debtors one by one as an armed court bailiff stood by.
We wrote about college student Nickia Kelly’s experience. She came to settle a lawsuit filed by Johns Hopkins Hospital over a $1,102 charge from an emergency room visit more than four years earlier. After a brief meeting, Kelly agreed to pay $100 a month on the debt. The hospital, in turn, agreed not to press her for nearly $600 in interest and other fees.
Kelly didn’t know at the time that she might have been able to raise a defense – that Maryland has a three-year statute of limitations on debt. With no lawyer to assist her, the subject never came up. Nobody from Johns Hopkins would discuss the matter.
Most hospitals wouldn’t talk about their collections practices at all. They referred questions to the Maryland Hospital Association, whose officials granted three interviews. Generally, the association argued that its members only sued people with the ability to pay and who ignored repeated requests to do so. One official acknowledged that it was not always easy for hospitals to figure out who can pay, especially when patients or their families don’t share full details of their finances.
Regulators unaware of practices
But the volume of lawsuits surprised key state regulators – especially because Maryland hospitals receive millions of dollars in subsidies every year to cover the costs of unpaid bills and free care to the poor. Maryland is the only state in the nation that sets the rates hospitals charge, rates that include subsidies for charity care and bad debt losses. The hospitals collected $921 million in this compensation in 2007 alone.
Though the hospitals strongly denied it, state regulators said they did not know whether some hospitals were suing to collect debts already paid to them as part of the rate-setting subsidies.
State regulators also couldn’t explain why about half the state’s hospitals were earning millions of dollars in surplus payments from the subsidies, while the others posted losses, or why some hospitals that profited the most from the subsidies also were aggressive in suing patients.
Though state regulators oversee nearly every aspect of hospital operations, they have never examined these issues and conceded they may have fallen behind other states in reeling in aggressive hospital debt collection tactics. One key former legislator told us that the hospital association, undoubtedly one of the state’s most powerful lobbying forces, had managed to fight back these sorts of reforms.
The association’s reach became the focus of the last part of the series. We detailed how some other states had taken steps such as imposing uniform standards for charity care and limiting the amount of interest levied on medical debt. Lawmakers in Connecticut, for instance, had concluded that medical debt was involuntary and shouldn’t be handled the same as other consumer purchases. In 2006, California enacted legislation that limited hospitals in garnishing wages of people eligible for free care.
What will happen in the Maryland General Assembly session, which convened in Annapolis in mid-January, is far from certain. Gov. Martin O’Malley, in response to the newspaper’s findings, ordered an immediate review of hospital debt collection practices to be completed by early February.
But at least one person has benefited from tighter scrutiny of hospital collections: Willie Mae White, the housekeeper sued by Johns Hopkins for $36,224 even though she had been approved for charity care. Two months after we asked the hospital about her case, and a few days before we published the series, Johns Hopkins had a change of heart.
The hospital wiped out her debt and cut her a check for $2,207, all the money she had paid under the settlement with interest. A Hopkins spokesman told us the hospital “recognized that a mistake had been made.”
Editor’s note: “In Their Debt” was written by Sun investigative reporters Fred Schulte and James Drew. The idea came from then-projects editor John Fairhall, who has since left the paper, as has Schulte. The series was edited by investigations editor Bernie Kohn. Schulte can be reached at fredschulte@hotmail.com.
