Predatory billing practices harm patients, targeting those who are most vulnerable and often least able to pay, according to a new report.
By: Lucy Sherriff ArnoldVentures.org contributor
Not long after he was discharged home following a medical emergency, unplanned surgery and five-day stay in the hospital, José Bravo was startled by a knock on the door of his mobile home.
Standing on his doorstep was a police officer there to serve Bravo with a lawsuit from his hospital.
The hospital sued the 53-year-old for $200,000 in unpaid medical bills and legal fees, with 5 percent interest tacked on top.
Bravo, who works at the Texas Department of Corrections and earns just $28,000 per year, couldn't afford to pay the bills — much less hire a lawyer to defend him — so the court ruled in favor of the hospital, granting them the full amount. A month later, the hospital filed a writ of execution to seize Bravo's assets and bank savings. Two months later, Bravo filed for bankruptcy.
>1,000
Number of lawsuits hospitals in Texas have against patients in two years
In an aggressive attempt to collect medical debt, hospitals across Texas filed more than 1,000 lawsuits in the span of two years against patients like Bravo, with almost half of the legal action targeting low-income families, according to a new report released today by Dr. Marty Makary, Professor of Surgery and Health Policy at Johns Hopkins University and a vocal critic against predatory billing practices, and his team of researchers.
"The current health care system is failing the hardworking people of Texas," Makary and his co-authors concluded. "In some cases, these patients either limited their own medical care to put food on their family's table or risked financial consequences by seeking care they could not afford. What justification is there in these practices that devastate patients' lives yet make minimal impact on the finances of a hospital system?"
The report, which was supported by Arnold Ventures, provides an evidence-based look at a predatory practice by hospitals — many of them nonprofit — to extract payment for expensive medical bills by suing their own patients.
The practice poses significant financial harm to patients and underscores the unaffordability of the U.S. health care system that has resulted in part due to exorbitant and unjustified hospital costs.
Pre-pandemic, around 137 million Americans reported medical hardship, with 79 million saying they are in medical debt, totaling around $81 billion.
Number of Americans who reported medical hardship pre-pandemic
Number of Americans who said they were in medical debt pre-pandemic
$81 billion
Americans' reported medical debt pre-pandemic
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As the U.S. grapples with the coronavirus outbreak, and tens of millions of Americans lose their jobs and their health insurance coverage, predatory medical billing practices threaten families with additional financial hardship at a time when they are already struggling.
They also expose the role hospitals have played in driving U.S. health care spending to levels higher than any other developed country, an especially worrisome problem for the U.S. as it grapples with budget shortfalls and an anticipated recession.
Still, despite the unfolding national crisis, the hospitals that sue patients have provided no promises or guarantees that they will stop suing their patients over debt, and there are indications that hospitals have continued to engage in the practice, even amid the pandemic, according to Makary.
Meanwhile, the federal government has allocated $175 billion to date in relief aid to help hospitals and other healthcare providers manage and recover from the crisis, but the relief package failed to contain certain patient protections such as a prohibition against the practices revealed in Makary's report.
$175 billion
Amount the federal government has allocated to date to hospitals in pandemic relief aid
Predatory billing draws greater scrutiny
Even though most U.S. hospitals receive millions of dollars in government support to enable them to reduce or even completely write off unpaid patient bills as "charity care", many still try to recoup the costs through the courts — a predatory practice that has drawn growing scrutiny in recent years.
Nonprofit hospitals specifically are obligated under federal law to provide financial assistance to those who cannot afford care and to notify patients that they might be eligible for assistance before taking any extraordinary collection actions.
Yet hospitals across the country — both for-profit and not-for-profit — have been engaging in predatory billing practices that run counter to their public promises to care for all those in need.
"Nonprofit hospitals suing patients is probably shocking to the general public given their positive mission statements, tax exemption status, and community outreach programs," said Christi Walsh, report co-author and Clinical Director of the health care policy and research group at Johns Hopkins University.
"While many live up to their nonprofit mission...we have discovered patterns of nonprofits hospitals frequently suing patients for unpaid medical bills."
Texas was selected as the focus of Makary's report after health care professionals and student medics reported possible predatory billing practices in their hospital. The state is among more than a dozen to crack down on surprise medical billing, another common predatory practice by medical providers, yet Texans still face the risk of being sued for medical debt.
Between January 2018 and February 2020, 1,003 suits were filed in court by 28 Texas hospitals, both profit and nonprofit, the 'Eroding the Public Trust' report found.
The lawsuits sought to recoup $17.8 million — a small fraction of the overall revenue for Texas hospitals.
"Medical debt lawsuits and wage garnishments usually recover a relatively small amount of money and don't really help a hospital's bottom line," said Jenifer Busco, an attorney at National Consumer Law Center specializing in medical debt, who reiterated the report's uncovering.
"These findings are troubling and raise a lot of questions," Busco added. "How many of these patients are being sued for debts at nonprofit hospitals, when they should have been eligible for charity care or other assistance? Did patients have an opportunity to challenge some of these bills under the Texas surprise billing laws or other consumer protections?"
In fact, University Medical Center in Lubbock, sued for just 0.03 percent of its total 2018 gross revenue, which was more than $2.7 billion.
The courts granted almost half of the medical debt filings in favor of the hospital, by default, because the patient being sued was unable to appear at the court hearing. One patient, a man in his 50s, was sued for seven times his annual salary, which at the time was just $28,000, according to the report.
The practices are outrageous, said Cheryl Fish-Parcham, Director of Access Initiatives at Families USA, a nonprofit organization campaigning for affordable health care.
"The classic Hippocratic oath says 'With regard to healing the sick, I will take care that they suffer no hurt or damage'," she said. "Suing patients who can't make ends meet and who aren't able to defend themselves seems totally counter to this."
Suing those least able to pay
The practices identified in Makary's report aren't isolated to Texas. Virginia, Georgia and California are just some of the states where hospitals have found to be taking out lawsuits against patients for medical debt.
In 2017, 36 percent of hospitals sued patients and garnished their wages in Virginia alone, according to a 2019 report by Makary's team published in the Journal of the American Medical Association (JAMA). Five hospitals accounted for more than half of all lawsuits — and all but one of those were nonprofits.
While Texas law prohibits debt collectors from garnishing wages for medical debt, hospitals can file a writ of garnishment in a court, meaning they can siphon money from an individual's bank account to pay back debt.
The report uncovered a troubling trend of lawsuits targeting those who can least afford to pay. Texas has one of the worst uninsured rates in the country, with 20 percent of people lacking health insurance pre-pandemic. Patients who worked in transportation services, warehouse work, or who were self-employed were the most common targets.
A small portion of the lawsuits denoted the patients' insurance status — making it difficult to fully understand a patients' ability to pay — but of the 125 suits that contained that information, half of them were filed against "self-pay" patients, meaning they likely did not have insurance coverage to help pay for their medical bills.
Furthermore, researchers noticed that hospitals failed to submit claims to secondary insurance before they pursued legal action.
The legal process left many patients confused and scared.
"When served with their lawsuits, patients stated that the court provided no evidence or itemized bills, and because many patients were unable to obtain legal representation, not much else was understood," the report states. "The ambiguous legal process, unfamiliarity with consumer rights, and fear of potential long-term financial consequences further complicate the situation."
These aggressive attempts to recoup medical costs may also prevent patients from seeking necessary care.
"It violates everything sacred about the doctor-patient trust relationship," Makary added. "Universally, when we told doctors that their patients had been sued by their hospitals, the doctors were livid and said it was wrong for a hospital to go to such extreme measures."
Some hospital CEOs said they were not even aware they were suing patients or, even if they were, they assumed they were suing those with the "means to pay" and to "keep the hospital lights on".
Makary said the report underscores why the United States needs a standardized billing structure for hospitals as well as stronger protections to eliminate surprise medical billing, banish predatory billing practices and increase price transparency.
"We went into medicine to help people, not to ruin their lives financially," Makary said.
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