Hospitals look mighty craven in deep digs into their draconian debt collection

axioshospitaldebtsuitchart-300x261While medical debt menaces far too many patients, especially those who already struggle because they are poor, sick, and injured, big hospitals are too willing to exploit the legal system with aggressive collection efforts that generate little revenue but lots of grief for patients.

Those are some of the takeaways from a raft of articles and deeper digs into medical debt from the likes of the news site Axios (see here, here, here, and here), the Pulitzer Prize-winning investigative site ProPublica, and the news columns of the Wall Street Journal.

Axios and ProPublica have built their reports around commendable work by researchers at Johns Hopkins medical school, who followed up their important 2019 published study on Virginia hospitals suing their patients.

There’s a lot to take in from the latest information, including how staggering and nationally disproportionate were the draconian debt collection efforts by two Virginia health systems — at Virginia Commonwealth and the University of Virginia (see figure above, courtesy Axios and Johns Hopkins).

Under withering public criticism, both systems have reined in their hounding of patients, which resulted in the two systems filing more than twice as many lawsuits against their patients than did all other institutions among the top 100 largest hospitals in the country.

Suing patients during a pandemic

ProPublica has pulled from Johns Hopkins data this angering reality:

“Last year as Covid-19 laid siege to the nation, many U.S. hospitals dramatically reduced their aggressive tactics to collect medical debt. Some ceased entirely. But not all. There was a nearly 90% drop overall in legal actions between 2019 and the first seven months of 2020 by the nation’s largest hospitals and health systems, according to a new report by Johns Hopkins University. Still, researchers told ProPublica that they identified at least 16 institutions that pursued lawsuits, wage garnishments and liens against their patients in the first seven months of 2020.”

ProPublica says this of what may the leading meanie among the bunch:

“Researchers said they could not determine all of the amounts sought by the 16 institutions taking legal action in the first half of 2020, but of those they could, Froedtert Health, a Wisconsin health system, sought the most money from patients — more than $3 million.”

The investigative site, summarizing what researchers found as the larger picture with hospitals and debt collection, reported this:

“The Johns Hopkins findings … are part of an ongoing series of state and national reports that look at debt collections by U.S. hospitals and health systems from 2018 to 2020. During those years more than a quarter of the nation’s largest hospitals and health systems pursued nearly 39,000 legal actions seeking more than $72 million, according to data Johns Hopkins researchers obtained through state and county court records. More than 65% of the institutions identified were nonprofit corporations, which means that in return for tax-exempt status they are supposed to serve the public rather than private interest. The amount of medical debt individuals owe is often a small sliver of a hospital’s overall revenue — as little as 0.03% of annual receipts — but can ‘cause devastating financial burdens to working families,’ the report said. The federal Consumer Financial Protection Bureau has estimated medical debt makes up 58% of all debt collection actions. The poor or uninsured often bear the brunt of such actions, said Christi Walsh, clinical director of health care and research policy at Johns Hopkins University. ‘In times of crisis you start to see the huge disparities,’ she said.”

Hospitals, of course, have a mostly free hand in setting prices. And they take huge markups, multiples of a much-disputed baseline, as can be found in what the hard-negotiating federal government will pay, other researchers have found. Health insurers and sometimes big employers wrangle with hospitals and get them to provide sometimes steep discounts, which the public is only getting at glimpse at now, under new federal disclosure regulations.

But for the poor and uninsured, institutions — which are supposed to provide robust counseling about charitable options — too often take harsh steps. They likely, for example, will charge them the full and highest prices for goods and services. They then use civil courts to sue debtors, who often cannot afford counsel and may not even appear to contest claims of sums owed. Hospitals get the courts to tack on interest and penalties that can make debtors’ burdens unbearable.

Hospitals also may place onerous liens against poor patients with property or potential health insurance payments, arguing that this ensures hospitals will get their due. But these legal claims hang around and unfairly may ensnare family and loved ones.

Presto, a charity makes $281 million in medical debt vanish

The draconian zeal, though, looks to be not fiscal responsibility by hospitals but little more than corporate cruelty, as the Wall Street Journal suggests in its news article on an organization named RIP Medical Debt and nonprofit Ballad Health, a dominant hospital system in Tennessee and Virginia.

RIP is a charitable organization and says it reached an agreement with Ballad to buy up and wipe out $278 million owed by 82,000 low-income patients. The story does not disclose what this will cost RIP. But previous reports on its laudable efforts, including with churches and other nonprofits, have found that the charity pays pennies on the dollar to buy up and wipe out medical debts, which often are aggregated and sold by financial institutions on secondary markets.

The newspaper story includes more than a few flummoxing lines about Ballad and its dealings with poor patients:

“Many likely qualified for free care under Ballad’s policy but didn’t get it, executives at Ballad involved in the agreement said. The patients lacked applications, they said. RIP Medical Debt will abolish the total amount and is expected to notify households of the debt relief this month. Some bills are 10 years old. ‘They still owe that money,’ said Allison Sesso, RIP Medical Debt’s executive director. ‘It’s a weight on them.’ As many as one in five residents in some ZIP Codes have Ballad debt that will be relieved, she said.”

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 health care. This has become an ordeal due to the skyrocketing cost, complexity, and uncertainty of treatments and prescription medications, too many of which turn out to be dangerous drugs.

As patient advocates look to ways to slash at bankrupting health care costs, they have put hospitals squarely in their sights, as these institutions have become a major driver of spending, taking up roughly 1 of every 3 dollars spent in this area (~$1.2 trillion in 2018 alone).

Sure, hospitals and the people in them need to make a reasonable return. But grinding down patients and their families by grubbing mercilessly for every penny is a poor way for any enterprise to treat its customers. We have a lot of work to do to ensure that our hospitals and health systems provide safe, excellent, and compassionate care in an accessible and affordable fashion — and that they do not become onerous money machines that seek to drain ill and injured patients of their hope and finances.

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