Many hospitals sue patients or turn to collectors for medical debts: Report

Hospitals are aggressively going after patients for unpaid medical bills, resorting to lawsuits, debt collectors and other means, according to an investigation by KHN.

KHN has been teaming with NPR to examine medical debts, the impacts on patients, and what health systems are doing to collect bills.

In an analysis of more than 500 hospitals, KHN found that many hospitals are relentlessly pursuing patients to collect those bills, including legal action, and in some cases, prohibiting them from receiving non-emergency care. (Read the full report from KHN.)

Among the key findings in the KHN report:

• More than two-thirds of hospitals are filing lawsuits or taking other legal measures, including garnishing wages and placing liens on homes or property;
• About two-thirds report patients with outstanding bills to credit ratings agencies, which could make it harder to get a job, car, or apartment;
• Roughly one in four sell patients’ debts to debt collectors;
• One in five won’t allow patients with outstanding debt to receive nonemergency care.

More Americans are struggling with medical debts. Roughly 4 in 10 Americans (41%) said they have some type of debt due to medical or dental bills, according to a KHN survey of 2,375 Americans released in July.

About half of those with medical debt owe less than $2,500, the KHN poll found, but some struggle to repay those debts.

Jared Walker, founder of Dollar For, a nonprofit that helps people apply for financial aid, told KHN that many patients can’t get the help they need in paying their bills.

“The system doesn’t work,” Walker told KHN. “Patients can’t find the information they need. Half the time, when they do apply for assistance, they never hear back. Basically, hospitals do what they want, and there is no accountability.”

President Biden’s administration said in April that it would be giving more scrutiny to how hospitals and health systems are collecting unpaid bills.

The U.S. Department of Health and Human Services will be requesting data from 2,000 providers on “medical bill collection practices, lawsuits against patients, financial assistance, financial product offerings, and 3rd party contracting or debt buying practices,” the White House said in a fact sheet.

The health department said it will evaluate that information in making decisions on grants. The department will also share “potential violations” with enforcement agencies, the White House said. The health department will also publish data and make policy recommendations.

The Consumer Finance Protection Bureau will go after debt collection agencies that violate patients’ rights, the Biden administration said.

Medical debt is the largest source of debt in collections, surpassing credit cards, utilities and auto loans combined, according to the White House.

The Biden administration said it was taking a closer look at health system collection practices in part because Black and Hispanic Americans are more likely to struggle with medical debt. Patients may avoid seeking healthcare because of medical debt, the administration said.

At a White House event in April, Health and Human Services Secretary Xavier Becerra said, “Too many families across the country are saddled with crushing medical debt.”

Health systems point out that they treat patients regardless of their ability to pay and provide billions of dollars annually in uncompensated care.

When the White House announced it was looking closer at health system collection practices, Stacey Hughes, vice president of the American Hospital Association, said in a statement that hospitals would work with the administration. She also said hospitals must be supported to keep their doors open.

“The health care system must be adequately financed to ensure that hospitals and health systems are able to stay open and be there for their communities in times of need,” Hughes said.

Hospitals need to consider patients’ financial circumstances early and connect them with appropriate resources to get help, said Ian Manners, chief strategy officer for TailorMed, a healthcare company that offers software solutions to identify patients who may struggle with hefty medical bills.

Even some patients with health insurance are at risk of running into debt due to medical expenses, Manners told Chief Healthcare Executive in an interview earlier this fall.

“It's important to address a common misconception, which is that the only people who are at risk of an unaffordable care episode are those who maybe don't have insurance,” Manners said. “We found that that's absolutely not the case.”