When Hospitals Sue For Unpaid Bills, It Can Be 'Ruinous' For Patients

Enlarge this image toggle caption Olivia Falcigno/NPR Olivia Falcigno/NPR

Editor's note: The day after this story published, Mary Washington Healthcare announced it will suspend its practice of suing patients for unpaid bills, stating: "We are committed to a complete re-evaluation of our entire payment process to ensure that all patients know they have access to care." When asked what they will do about any patient whose wages are currently being garnished, Eric Fletcher, Mary Washington's senior vice president, said in a statement to NPR: "We are happy to try to work with that patient and the courts and their employer to try to eliminate the garnishment." The original story appears below.

The Fredericksburg General District Court is a red-brick courthouse with Greek columns in a picturesque, Colonial Virginia town. A horse and carriage are usually parked outside the visitor center down the street.

On a sunny morning — the second Friday in June — the first defendant at court is a young woman, Daisha Smith, 24, who arrives early; she has just come off working an overnight shift at a group home for the elderly. She is here because the local hospital sued her for an unpaid medical bill — a bill she didn't know she owed until her wages started disappearing out of her paycheck.

The hospital, Mary Washington, sues so many patients that the court reserves a morning every month for its cases.

Inside the courthouse, it's not hard to figure out where to go. Right through court security, there are signs on colored paper: "If you are here for a MW case, please register at the civil window." When the elevators open, there's another Mary Washington sign. Wearing name badges, Mary Washington billing staff members walk through the halls. They've set up a kind of field office in a witness room at the back of the courtroom, where they are ready and waiting to set up payment plans for defendants.

On June 14, only a handful of the 300 people summoned to court show up. Most of the lawsuits were filed by the hospital, along with some others from medical companies affiliated with Mary Washington Healthcare.

The hundreds that did not come have default judgments made against them, meaning their wages can be garnished.

Those who did sit scattered throughout the bright, mostly empty courtroom, under the schoolhouse lamps.

At 9 a.m., the judge walks into court, and everybody rises.

"Good morning," he says. "This is what we call the hospital docket."

Enlarge this image toggle caption Jaci Starkey Jaci Starkey

Bill collection through the courts

Not every hospital sues over unpaid bills, but a few sue a lot. In Virginia, 36% of hospitals sued patients and garnished their wages in 2017, according to a study published Tuesday in the American Medical Association's journal, JAMA. Five hospitals accounted for over half of all lawsuits — and all but one of those were nonprofits. Mary Washington sued the most patients, according to the researchers.

Mary Washington defends the practice as a legal and transparent way to collect bills. It says it makes every effort to reach patients before it files papers to sue.

But others who observe and research the industry find it troubling that hospitals, especially nonprofits, are suing their patients.

"Hospitals were built — mostly by churches — to be a safe haven for people regardless of one's race, creed or ability to pay. Hospitals have a nonprofit status — most of them — for a reason," says Martin Makary, one of the JAMA study's authors and a surgeon and researcher at Johns Hopkins Medicine. "They're supposed to be community institutions."

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.

Typically these aren't huge bills. In Virginia, the average amount garnished was $2,783.15, according to the JAMA study. Walmart, Wells Fargo, Amazon and Lowe's were the top employers of people whose wages were garnished.

"If you're a nonprofit hospital and you have this mission to serve your community, [lawsuits] should really be an absolute last resort," says Jenifer Bosco, staff attorney at the National Consumer Law Center.

Bosco explains that IRS rules require nonprofit hospitals to have financial assistance programs and prohibit them from taking "extraordinary collection actions" on unpaid medical bills without first attempting to determine patients' eligibility for financial assistance.

Nonprofit hospitals, Bosco says, "have to provide some sort of financial help for lower-income people, but the federal rules don't say how much help, and they don't say how poor you have to be to qualify [or] if you have to be insured or uninsured."

As a result, she says, nonprofit hospitals have "a lot of free rein to make up their own policy of what they think is appropriate."

Enlarge this image toggle caption Olivia Falcigno/NPR Olivia Falcigno/NPR

"Hospitals sometimes can legally sue their patients for medical debts," Bosco says. "The question is whether that's something that they should be doing."

For Makary, as a doctor, the answer is simple: "It's a disgrace every place where it happens," he says.

The "hospital docket" at the Fredericksburg court illustrates how far hospitals will go to pursue debts, he says: "It's almost as if the courthouse has converted into a taxpayer-funded collections agency."

"Who's garnishing my check?"

Smith is unflinching when she talks about Mary Washington and what happened to her after she went to the hospital in 2017.

At the time she didn't have insurance. She was working part time at Walmart for $11 an hour. She doesn't want to give the details about why she ended up at the hospital. "I was not myself," she says. "So I walked myself into Mary Washington to get help — to get myself on track." She says she was admitted for two weeks.

Smith says no one told her about the financial assistance program or talked to her about her bill. According to the hospital's policy, someone making less than $25,000 without health insurance should qualify for "free care." But the hospital sued her for $12,287.68. She had a default judgement against her and did not realize she had been sued until she saw her paycheck mysteriously disappearing.

"When I looked at my pay stub, I'm like, 'Why do I only have like $600-something in my account?' " She noticed "garnish" written on the bottom of her pay stub. "So I called my company and asked them, 'Who's garnishing my check?' " They told her it was Mary Washington.

With the garnishment, her take-home pay for a month of work comes to about $1,400. Her rent is $1,055. "I literally have no food in my house because they're garnishing my check," she says.

She knows she is not the only one that Mary Washington has gone after for an unpaid bill. Her relative had one, too, and got on a payment plan. Her co-worker was also sued.

"And that's crazy," she says, shaking her head. To Mary Washington Hospital, she says: "People need help. You all are just money hungry."

toggle caption Dwayne and Maryanne Moyers

A thin slice of revenue

In the courtroom, on hospital docket day in June, the judge ran through the cases quickly. One man owed $1,500 after an emergency room visit. A nurse was on the hook for over $20,000 after one of her children had a mental health evaluation. Another woman wasn't sure why she was being sued for $1,400 — it could have been from an outpatient surgery she had three years ago. The day's hearings are all over in 45 minutes.

Mary Washington Healthcare stands by its practice of suing patients and says that lawsuits are relatively rare.

"It's important to us, as a small community, and a safety net hospital, that we're doing everything we can for our patients to avoid aggressive collections," says Lisa Henry, communications director for the health care system.

Henry says Mary Washington has a months-long process for trying to reach patients before it takes legal action. "By phone, by mail, by email — any access point we're given from them when they register," she says.

"Unfortunately, if we don't hear back from folks or they don't make a payment we're assuming that they're not prepared to pay their bill, so we do issue papers to the court," she says.

Mary Washington Healthcare includes two hospitals, a network of physician practices, specialty care and outpatient centers.

Henry says the "vast majority" of patients who are eligible do get signed up for their financial assistance program, getting discounted or free care or setting up a payment plan. "A small percentage then goes on to collection and then even smaller goes to litigation," she says. "We see thousands of patients a year and less than 1% go to litigation."

In fact, Henry says that the revenue the hospital got from garnishing people's wages was only 0.21% of its $624 million total revenue in 2018. That's slightly higher than the average collected by other Virginia hospitals, according to the JAMA study, which found hospitals collected an average of 0.1% of their total revenue from garnishments.

Erin Fuse Brown, a law professor at Georgia State University whose work focuses on health care costs, says there are bigger philosophical questions here about a hospital's role.

"There has to be a balance between getting their bills paid but also being a reasonable community member," she says. Regarding lawsuits, she adds: "It doesn't seem to be worth the effort, and it's so ruinous to the patient — not just the financial obligation but the effect on your credit, on your record, the emotional effect of being sued."

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Mary Washington Healthcare has chosen to go through the legal system intentionally, Henry says. "We selected to do this because we think it is a fair and appropriate way to help our patients reach out to us — to open the lines of communication," she says. "There are many cases resolved before litigation. The court summons alone is enough to open that door of communication so that we can work with them."

Henry says the Virginia hospitals that don't sue patients are probably outsourcing their collection of unpaid bills. "Most sell their debt. We have elected not to ever sell our debt in small claims," she says. "The reason for that is the collections agencies can be aggressive."

Fuse Brown says IRS rules for nonprofit hospitals don't distinguish between whether a hospital is trying to collect an unpaid bill directly or using a private collection company. "They're recognized to be fairly harsh tactics, whether the hospital is the one doing the suing or whether it's a debt collection agent," she says. "Certainly to the patient, all of that feels equally stressful and burdensome."

She says it's hard to know at a national level how many nonprofit hospitals sue patients who haven't paid their bills, how many sell the debt, and how many write it off. "I haven't seen any good studies that tried to estimate the number of hospitals that are doing this or the percentage of patients who are subjected to this type of debt collection activity," Fuse Brown says.

She adds, it's a shame information about hospitals' collection practices isn't widely available. "Wouldn't you like to know that if you were a patient?" she asks.

"Do you owe this money?"

On June 14, a group of doctors, pre-med students and a lawyer headed to the Fredericksburg court early, and as patients collected in the hall outside the double doors of the courtroom, the group approached them, asking, "Are you here because you've been sued by Mary Washington?" Nearly everyone nodded cautiously. And most were open to talking about and sharing what happened to them.

This group is part of an advocacy campaign to support patients who are being sued by the hospital. The effort is led by Johns Hopkins researcher Makary, the author of the JAMA study.

He first found out about this hospital's lawsuits last fall while working on The Price We Pay, his forthcoming book on dysfunction in the American health care system. He was so outraged by what is happening to patients in Fredericksburg that he has started showing up every month when hospital cases are heard in the court.

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"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 says.

Part of the advocates' strategy to help patients fight these lawsuits is to encourage them to contest their bills, rather than admit they owe the money.

"The No. 1 thing we need them to do is when the judge asks that initial screening question, 'Do you owe this money?' the answer they need to say is, 'No,' " Makary explains. "That allows us to make the arguments and to have a hearing."

If they say yes, which many of them do, "That's kind of the kiss of death — you're going to get a judgment against you," says Joseph Kirchgessner, the local attorney working with the advocacy team.

The underlying thinking is that patients rarely have a chance to negotiate the cost of medical services in advance and that bills may be unreasonable, especially in light of their financial circumstances. A patient who contests may be able to negotiate a better price or have the bill forgiven.

Kirchgessner says he plans to argue that hospital contracts, often signed under duress during a medical crisis, aren't valid. Makary is ready and willing to be an expert medical witness, to testify about whether there are hospital markups or unnecessary procedures.

But Kirchgessner hasn't had a chance to defend a Mary Washington case in court yet, he says, because each time he gets close to a trial date, the hospital withdraws its case against the patient. This leaves the issue unresolved. The hospital can still try to collect, or bring a future lawsuit.

The advocates are also politely asking hospitals like Mary Washington to end the practice of suing over unpaid bills. Makary has chatted with doctors in the hospital cafeteria, imploring them to tell their administrators to stop. (Makary has been doing that himself, at his own hospital — Johns Hopkins Hospital — which was also recently reported to be suing patients over their bills.) He sent a letter to Mary Washington Healthcare's CEO and board members asking that they stop the suits.

"We've told the hospital that we will plan to be there on every single court date until the hospital decides to stop suing low-income patients for bills that they simply can't afford," Makary says.

Mary Washington's Henry says that because all of the court records are public, they are subject to more scrutiny than hospitals that use collection agencies.

"We're really unclear as to why Mary Washington Healthcare in particular has become the face of this," she says. "I don't think we're alone — all hospitals are struggling with, 'How do we collect appropriately from our patients to stay open as a safety net hospital?' "

A "wild card" case

Thanks to the volunteer advocates, Smith now has an attorney — Kirchgessner.

He says taking her case "was a bit of a wild card" since it's too late for her to contest the bill. All he can do for her now is try to get the garnishment lowered or removed altogether. "There are certain laws in Virginia about how people are garnished, how much they can take," he explains.

The next step is to meet with Smith to work out her income and expenses and make a plan.

Since her paycheck started being garnished, Smith had to take on another job to keep up with her rent. "The second job's not helping much, but it's something," she says. She is also now working full time at the group home and is enrolled in Medicaid.

If her check weren't being garnished, she says, "I'd be fine. I would have everything that I needed — saving money, everything would be paid, food would be in the house." She's glad to have a lawyer helping her with her case. There is a new hearing date set for July.

Now, if she has a medical issue, "I go to urgent care," she says. "I stay away from Mary Washington."