Medicolegal Issues

Suing patients: Medical, ethical, and legal considerations

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Making sure medical debt collection policies reflect your hospital’s mission



Although it is common to read about patients suing their hospitals, there has been increasing public and political attention given to hospitals suing their patients to collect unpaid hospital bills. KH’s story began with an emergency appendectomy. She did not have health insurance to cover the $14,000 hospital bill. The family was unable to pay the bill, and the nonprofit hospital sued them for that bill, plus some additional expenses (totaling about $17,000), plus interest was accumulating at 9% per year. The hospital won a judgment, and it garnished the husband’s pay (10% of after-taxes pay, in this case) and placed a lien on the family’s home. Years later—because of interest and additional hospital bills—the family had paid $20,000, but still owed $26,000.1

The extent of the problem

This is neither a hypothetical case nor a rare event. Studies and press reports have noted dozens of examples of hospital collection excesses. One study found that unpaid medical bill lawsuits increased by 37% in Wisconsin between 2001 and 2018, with 5% of hospitals accounting for 25% of the lawsuits.2 Another report found almost “31,000 civil cases filed by 139 hospitals in 26 New York counties from 2015 to 2019.”3 Similar to the Wisconsin report, a small number of health care providers accounted for the majority of lawsuits. In another example, one Missouri nonprofit hospital, Heartland (rebranded “Mosaic”), created its own for-profit debt collection agency (Northwest Financial Services), which filed 11,000 lawsuits from 2009 to 2013, resulting in 6,000 wage garnishments.1 The Wall Street Journal, among others, has reported for years on the difficulties created by lawsuits against patients.4 Axios and Johns Hopkins reported that “medical debt comprises 58% of all debt collections in the United States.” And although some collection actions declined early in the pandemic, it did not appear to last.5,6

Inconsistent collection policies. Collection policies vary greatly from hospital to hospital, with an increasing number of hospitals demanding up-front payments (before services). Many of these health care institutions persuade patients to put medical debt on their credit cards, sometimes as part of an up-front (before service) process.7 If using a standard credit card, this comes with a very high interest rate. There are some special health-related credit cards, such as CareCredit, that generally have better interest rates. These cards offer no-interest short-term loans, with significant interest for longer-term loans. Thus, failure to repay the full amount when due means that the “deferred interest” (about 27%) must be paid.8 Also any of the problems patients have repaying a credit card (or other loan), of course, are no longer directly related to the hospital. These “indirect collections” still burden patients with medical debt.

Where you go matters. Because there is no common collection policy or practice among hospitals, choosing the wrong hospital may result in a lawsuit. A careful study of lawsuits for medical debt or garnishments related to that debt in 2017 in Virginia showed how being treated at certain hospitals dramatically changed the odds of wage garnishment for unpaid bills.9 It revealed that 29,286 hospital lawsuits were filed to collect medical debt—9,232 of which were wage garnishments (the most aggressive form of debt collection). Five hospitals alone accounted for the majority of garnishments in the state. Notably, nonprofit hospitals accounted for 71% of the garnishment cases. On the other hand, about 50% of the hospitals in the study did not file any lawsuits to garnish wages for medical debt.9

Why is there so much hospital debt?

One would think the Affordable Care Act (ACA) and other reforms would mean fewer people do not have health insurance—and the problems experienced by the patient in the case above. Indeed, the number of insured has increased in the United States, including through the expansion of Medi­caid. Nonetheless, in 2020, the Census Bureau reported that 28 million people did not have health insurance for any part of the year; that figure would be higher if those who had insurance for only part of the year were included.10

One reason for medical debt is the very high level of “under” insurance—that is, even with health insurance, copays for significant medical bills exceed what the patient can pay. Nearly half of adults (excluding the elderly) were enrolled in high-deductible health plans (in 2017).11 Among most employment-based plans, deductibles and co-pays have been going up for a decade.12 Overall, 20% of employer-provided plans had deductibles in excess of $3,000 ($5,000 for families).13 Of course, many families do not have anywhere near the resources to pay high deductibles, and that represents likely medical debt. The more modest copays of Medicare (often 20%) can be enough to push some elderly individuals beyond their capacity to pay.

“Out-of-network” care also may result in large hospital charges—and debt. Emergency care, for example, may be sought from the closest provider, even though out of network, and the insurance company may refuse to pay the charges. Another surprise form of billing is when a health care insurance company tentatively approves coverage and then after the patient receives care, determines it was unnecessary. In that case, even in-network charges may be denied, with the patient left to pay all the charges.

Continue to: How medical debt affects patients...


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