Nonprofit Hospital Forgives Debts And Stops Suing So Many Poor Patients

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For years, Heartland Regional Medical Center, a nonprofit hospital in the small city of St. Joseph, Mo., had quietly sued thousands of its low-income patients over their unpaid bills.

But after an investigation by NPR and ProPublica prompted further scrutiny by Sen. Charles Grassley, the hospital overhauled its financial assistance policy late last year and forgave the debts of thousands of former patients.

The hospital "deserves credit for doing the right thing after its practices were scrutinized," Grassley, R-Iowa, wrote last week in a letter to his Senate colleagues, "but it should not take congressional and press attention to ensure that tax-exempt, charitable organizations are focused on their mission of helping those in need."

The changes at Heartland, which now goes by Mosaic Life Care, are a boon to its poorest patients. But after NPR and ProPublica's investigation into Mosaic, ProPublica has since found numerous cases across the country of nonprofit hospitals, which pay no income tax, filing suits by the thousands.

Enlarge this image toggle caption Steve Hebert for ProPublica Steve Hebert for ProPublica

Some have filed more suits than Mosaic ever did. In Evansville, Ind., for example, Deaconess Hospital filed more than 20,000 lawsuits from 2010 through 2015, according to ProPublica's analysis of state court data. Deaconess reconsidered its financial assistance policies after questions from ProPublica last week and said it would be making changes.

Grassley, in a floor speech announcing the results of his investigation, said, "Let me be clear: Nonprofit hospitals should not be in the business of aggressively suing their patients," he said. "In essence, because of the favorable tax treatment these hospitals receive, they have a duty to help our nation's most vulnerable."

As part of Mosaic's revamped policies, it instituted a "medical debt grace period" late last year. Typically patients who have been sued by the hospital are no longer eligible for financial assistance. But during the grace period, former patients with outstanding debts were allowed to be evaluated for assistance.

The program resulted in 3,342 people receiving a total of $17 million in debt relief, Mosaic said. The largest bill was $225,000, though the average was a more modest $5,000.

Despite those numbers, patients featured in our 2014 story had a mixed experience trying to get their bills resolved.

After Mosaic secured two court judgments against Keith Herie, a 53-year-old drill operator, it seized about $20,000 from his wages over the course of eight years. But Herie still owed the hospital more than $26,000 when we published our story, partly due to interest on the debt. During the grace period, Mosaic determined that Herie's income was too high for his debt to be completely forgiven, but offered to settle it for $8,300. He accepted, paying it with the proceeds from a worker's compensation settlement he received.

"It feels awesome to be able to close the books on it permanently," he says.

The story was different for Keith Berry, who is on disability, and his wife, Tammy, who works at the fast food chain Taco John's. As we reported back in 2014, Tammy Berry earned just above $8 an hour, but the couple was faced with bills exceeding $11,000.

The couple has yet to find financial relief, although they appear to qualify for free care. In fact, during the grace period, the hospital seized a portion of Tammy Berry's pay, although she earns barely enough to be garnished under state law. Three months of garnishments extracted only about $300.

In December, ProPublica contacted Keith Berry to see if he had heard of Mosaic's forgiveness program. He had not, but said he would contact the hospital. In January, Berry told ProPublica that when he had called, he'd been told that he didn't qualify for help because the bill was "too old."

"They didn't seem to want to deal with me," he said.

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In a statement, Mosaic said that it publicized the grace period by advertising on TV, on the radio and in the newspaper, as well as sending about 100,000 postcards to households in the area, including the Berrys'. Mosaic said it had also attempted to call both Keith and Tammy Berry with no success. Additionally, the hospital had no record of Keith Berry inquiring about financial assistance, the statement said. Meanwhile, Tammy Berry's paycheck is currently being garnished.

In remarks late last year to the St. Joseph News-Press, the hospital's president and CEO Dr. Mark Laney said a lesson the hospital learned from the scrutiny of its collection practices was to be more "proactive" in identifying patients who qualified for aid. "We were doing the medically right thing for the person, but on the financial responsibility part, we were doing the wrong thing," he said.

Not being proactive is a widespread problem for hospitals, according to a national study of hospitals by the University of Michigan Institute for Healthcare Policy and Innovation last year. The institute found that fewer than half of the 1,800 hospitals it studied were notifying patients about their financial assistance policy before attempting to collect unpaid bills.

"It's an important problem," IHPI director Dr. John Z. Ayanian tells NPR and ProPublica. "Now we need a stronger system of oversight and monitoring to see how well [hospitals] are implementing those policies."

This year, new federal rules went into effect that set clearer guidelines for nonprofit hospitals on the steps they should take before suing a patient for failing to pay a bill. But a "big question" remains, says Chi Chi Wu, an attorney with the National Consumer Law Center: Who will enforce the rules?

The IRS is understaffed, experts say, and doesn't have a history of aggressive enforcement. The Mosaic case "demonstrates that noncompliance is a distinct possibility unless someone holds the hospital's feet to the fire," Wu says.

Enlarge this image toggle caption Steve Hebert for ProPublica Steve Hebert for ProPublica

Since our stories first aired, ProPublica has found more nonprofit hospitals filing thousands of suits in several states, from Kansas to Alabama to New Jersey. In April, ProPublica reported on the extremely high volume of suits over medical debt in Nebraska, and many of the suits stemmed from hospital bills.

Even as it files as many as 4,000 suits every year, according to court records, Deaconess Hospital has — on paper — a somewhat generous financial assistance policy. Those with income below the federal poverty line are eligible for free care, and those with income below three times the poverty line are eligible for reductions in their bills. But there's evidence that, as occurred with Mosaic, suits are nevertheless being filed against low-income patients.

Katherine Rybak of Indiana Legal Services says she has often seen low-income clients who clearly qualified for assistance under the hospital's policy but didn't know about it and had been sued anyway. She says, however, that the hospital often was cooperative in resolving these situations for her clients once she got involved.

The hospital's aggressiveness has come despite its very robust finances. In 2015, the last publicly available report, the hospital disclosed a profit of $150 million. The hospital's CEO Linda White was paid $1.74 million.

In a response to questions from ProPublica, the hospital said in a statement that it made a "proactive" effort to "work with patients to ensure that financial options are explored from the beginning."

But, it wrote, "we will enhance our processes to further benefit our patients by offering financial assistance through the life of the account," including after a patient has been sued.

And, in response to questions about its financial assistance policy, which is less generous than the other large nonprofit hospital in Evansville, St. Mary's, Deaconess said it would be changing that as well, allowing those with incomes at twice the poverty line to receive free care.

The hospital said the timing of these changes was prompted by ProPublica's questions, but that a review of its policies had already been underway.