2 Articles on Medical Debts of Patients (& Debt Collection & Bankruptcy) Count As 1 for RDP

[2 articles on Medical debts of patients (& debt collection & bankruptcy) – count as 1 for RDP] In their debt

Maryland hospitals have stepped up debt collection, sometimes from the poor, and Gov. O'Malley demands review

By Fred Schulte and James Drew | [email protected] Baltimore Sun December 21, 2008 www.baltimoresun.com/news/health/bal-te.hospitaldebt21dec21,0,3882985.story

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Three decades ago, Maryland officials devised a novel system - now the only one of its kind - in which a state agency sets hospital rates for all patients. It was designed in part to guarantee hospital care whether patients could afford it or not. Hospitals received $921 million last year to cover costs of providing free and unpaid care, according to the most recent state records, and all hospital patients in Maryland contribute through the rates they pay.

But an eight-month investigation by The Sun found that over the past five years some of Maryland's 46 nonprofit hospitals have received millions of surplus dollars from the payment system even as they sued tens of thousands of patients over unpaid bills.

Many of these suits have been filed against patients in the poorest areas of the state.

The investigation found:

• Hospital debt collection lawsuits spiked sharply between 2003 and 2006 before falling slightly last year. In all, hospitals filed more than 132,000 of these suits in the past five years, winning at least $100 million in judgments.

• In some cases they added annual interest at twice the rate allowed for other types of debts. And despite national hospital industry guidelines that caution against routinely placing liens on houses, Maryland hospitals placed at least 8,000 liens in the past five years.

• Maryland, unlike some other states, lacks uniform standards and practices to determine who is eligible for free or reduced-price care at hospitals. Some people wind up facing lawsuits even though they have little means to pay their bills.

• State officials have never resolved critical gaps in the system. For instance, they don't monitor debt collection practices to ensure that patients are being treated fairly, and they cannot be sure hospitals aren't getting paid twice for some of the same bills. Hospitals deny they collect bills twice. 2

• A majority of Maryland's hospitals have received surpluses from free and unpaid care in recent years, even though the system is supposed to ensure that they merely break even over time, according to state figures.

Gov. Martin O'Malley, responding to The Sun'sfindings, ordered an "immediate and thorough review" of hospital debt collection practices and said he wants it completed by early February.

"Assuring the public that all hospitals are pursuing reasonable collection practices consistent with their missions and are not unduly profiting from the system is an essential step to continuing the system well into the future," O'Malley wrote earlier this month to the Health Services Cost Review Commission, the panel that oversees rate setting.

Carmela Coyle, president of the Maryland Hospital Association, said in an interview that hospitals typically sue only patients who can afford to pay and who ignore numerous efforts to make payment arrangements. She noted that hospitals statewide sue only about 0.5 percent of the patients they treat. "Nobody would pay their bills" if hospitals didn't sue to enforce collection, she said.

"The shame about this is ultimately what is happening in the courtroom is what hospitals want to happen in the billing office," Coyle said. "Sometimes, it is the weight of the law that brings people to that conversation."

Hospital administrators said they need to pursue unpaid bills because all patients cover the costs of those bills under Maryland's rate-setting system. Hospitals also argue that they must balance their charitable missions against the need to be paid for services.

"The board of trustees expects us to have prudent business practices," said Ronald R. Peterson, president of the Johns Hopkins Health System. "We could have bad behavior from people who are in that category of deadbeats."

But former Gov. Marvin Mandel, who helped set up the rate-setting system in the early 1970s, said that he was "astounded" by the number of lawsuits and worried that the system has veered off its mission to help the poor.

He expressed concern that some hospitals may be sending unpaid bills to debt collectors "who don't distinguish between those who don't pay and those who can't pay."

"Maybe the system has gotten too good," he said. "In their minds, everybody can pay."

No standard policies

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Hospital association officials said all of their members, at a minimum, offer free care to patients 3 who have less than $10,000 in net assets and incomes below 150 percent of federal poverty guidelines, set this year at about $33,300 for a family of four.

But the association has resisted efforts by Maryland lawmakers to standardize those policies. As a result, they vary significantly, even among hospitals that serve some of the same areas and populations. For instance, patients at Bon Secours Hospital Baltimore may be granted free or reduced-price care with income of about $42,000 for a family of four. At Maryland General Hospital, about than two miles away, income levels to qualify are about $11,000 less.

The situation gets even more complicated when a person owns property, is employed, or has assets such as a bank account. To hospitals, that can signal that a person may be able to shoulder some if not all of the bill.

Officials at several hospitals said they routinely sue patients a year or more after writing off their bills and building those losses into their rate requests. They said that money recovered from lawsuits is deducted from requests in subsequent years but that aggressive collections get them paid faster.

"I'd rather have cash today than wait two years for it, because I can make money on it," said Bruce Ritchie, vice president for finance at Peninsula Regional Medical Center. [Salisbury]

Routine lawsuits

That philosophy is reflected in more than 16,000 collection lawsuits Peninsula has filed since the start of 2003, making it among the hospitals that sue most frequently, court records show.

Johns Hopkins Hospital, Maryland's largest hospital, and Johns Hopkins Bayview Medical Center have filed about 14,000 collections lawsuits between them over the past five years. In a written statement, the Hopkins system said it sues fewer than 1 percent of its patients and that it now sues less often than it did several years ago - although it acknowledged that it consistently refers about 20 percent of its patients to collection agencies. It said it sues only those patients who have the ability to pay.

Maryland hospitals have attached liens to the homes of more than 8,000 patients, court records show, despite American Hospital Association guidelines cautioning against wholesale use of the practice. That doesn't include homes in Baltimore City, where property liens are automatically entered in all civil judgments.

By contrast, several institutions are reluctant to take patients to court no matter how much they owe.

Bon Secours filed fewer than 400 collection cases from January 2003 through June 2008. Officials said their religious beliefs and desire for social justice keep lawsuits to a minimum. 4

Executives at Washington Adventist Hospital in Takoma Park said they sue patients as a "last resort" when they are certain the person has the means to pay the bill. The court data reflect that view. Adventist rarely sues, even though it lost $5.3 million last year on unpaid and charity care, the most of any Maryland hospital.

Carroll Hospital Center said it sues based on debts over $500, credit rating, and work history. "A mortgage is an indicator for suit," the hospital wrote.

Calvert Memorial Hospital said it will seek a lien on a home or car if the debt is $500 or more. And Garrett County Memorial Hospital said it considered the ownership of two cell phones and a savings account as evidence a person could pay bills.

'Created to help people'

When state officials began regulating hospital rates in 1974, they saw the system as a model for the nation; a way to hold down soaring health care costs and prevent hospitals from "dumping" patients who were poor or lacked insurance. The system made it worth the hospitals' while to treat all comers.

"In order to take care of losses in the emergency room, they were raising costs in the hospital," Mandel said. "The hospitals, including Hopkins, were not created to lose money, but they weren't created to be moneymakers. They were created to help people." … [cut a couple paragraphs for space reasons]

Twenty-five of the 47 hospitals are listed in the latest state database as having surpluses from free and unpaid care over the five-year period - and some of these institutions are among those that sue patients most often.

Each hospital reports to the commission annually the value of charity care it provided in the previous year, as well as a figure for "bad debt," the sum of bills which hospitals either can't or don't collect.

But the hospitals do not report actual income from the rate formula. The commission does not know whether its revenue figures within a particular year are completely accurate, Murray and other commission officials acknowledged. "We don't know exactly what they collected," Murray said.

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Still, Johns Hopkins officials acknowledged in interviews that they generate surpluses from the system. Hopkins, Bayview and the University of Maryland Medical Center showed combined surpluses of at least $130 million in the past five years in the final numbers provided by the commission. 5

Officials at the University of Maryland, which reported about $55.7 million of that surplus, declined to be interviewed for this article. In an e-mailed statement to The Sun, officials said that the payments even out over time and that any surpluses are reinvested into "patient care activities" at the hospital.

Murray said the agency relies on the hospitals to deduct any money they collect from judgments from the numbers they submit for recovery through the rate-setting process. Coyle, the hospital association president, insisted that hospitals do so faithfully.

"Anything we collect from a lawsuit is offset against our payments in the future, so there is no double-dipping here," Coyle said.

Commission officials said that while some hospitals report income from debt collections to them every year voluntarily, others don't.

The commission has never required this information, so officials aren't sure if every hospital is deducting these collections from their claims for unpaid bills.

Commission chairman Donald A. Young said the agency will do a thorough review. "We need to find out exactly what is going on," he said.

What we found

• Hospitals filed more than 132,000 debt collection suits in the past five years, winning at least $100 million in judgments.

• Hospitals sometimes added annual interest at twice the rate allowed for other types of debts.

• Hospitals placed liens on houses 8,000 times in the past five years.

• Maryland lacks uniform standards to determine who qualifies for reduced-price or free hospital care.

• The state doesn't closely monitor hospitals' debt collection practices.

• A majority of Maryland's hospitals have received surpluses from free and unpaid care in recent years, though they are supposed to break even in the long run.

Medical Bills Leading Cause of Bankruptcy, Harvard Study Finds February 3, 2005 http://www.consumeraffairs.com/news04/2005/bankruptcy_study.html 6

Illness and medical bills caused half of the 1,458,000 personal bankruptcies in 2001, according to a study published by the journal Health Affairs.

The study estimates that medical bankruptcies affect about 2 million Americans annually -- counting debtors and their dependents, including about 700,000 children.

Surprisingly, most of those bankrupted by illness had health insurance. More than three-quarters were insured at the start of the bankrupting illness. However, 38 percent had lost coverage at least temporarily by the time they filed for bankruptcy.

Most of the medical bankruptcy filers were middle class; 56 percent owned a home and the same number had attended college. In many cases, illness forced breadwinners to take time off from work -- losing income and job-based health insurance precisely when families needed it most.

Families in bankruptcy suffered many privations -- 30 percent had a utility cut off and 61 percent went without needed medical care.

The research, carried out jointly by researchers at Harvard Law School and Harvard Medical School, is the first in-depth study of medical causes of bankruptcy. With the cooperation of bankruptcy judges in five Federal districts (in California, Illinois, Pennsylvania, Tennessee and Texas) they administered questionnaires to bankruptcy filers and reviewed their court records.

Dr. David Himmelstein, the lead author of the study and an Associate Professor of Medicine at Harvard commented: "Unless you're Bill Gates you're just one serious illness away from bankruptcy. Most of the medically bankrupt were average Americans who happened to get sick."

Today's health insurance policies -- with high deductibles, co-pays, and many exclusions -- offer little protection during a serious illness. Uncovered medical bills averaged $13,460 for those with private insurance at the start of their illness. People with cancer had average medical debts of $35,878.

"The paradox is that the costliest health system in the world performs so poorly. We waste one-third of every health care dollar on insurance bureaucracy and profits while two million people go bankrupt annually and we leave 45 million uninsured" said Dr. Quentin Young, national coordinator of Physicians for a National Health Program.

"With national health insurance ('Medicare for All'), we could provide comprehensive, lifelong coverage to all Americans for the same amount we are spending now and end the cruelty of ruining families financially when they get sick."