Medical debt is a fact of life for millions of people in the U.S., and when patients receive a medical bill that they can’t or don’t pay, some hospitals will take them to court.
A new study by Duke Law School and the North Carolina Treasurer's office sheds new light on this practice, and how common it’s become among a small number of hospitals in North Carolina.
Sara Greene, a professor at Duke Law School and one of the study's authors, joined WFAE's Nick de la Canal to discuss the study's findings.
Nick de la Canal: Could you walk us through what happens when a hospital takes a patient to court over an unpaid bill and wins a judgment against them? How can that play out for a patient, and what can that mean for them?
Sara Greene: Absolutely. So when a hospital takes a patient to court, theoretically the patient is supposed to receive notice of the lawsuit and the hearing date — that doesn't always happen. You know, people move, there are all sorts of reasons they don't get the notice. In our study, almost 60% of patients end up with what's called a default judgment, so they don't even reply. They don't come to court. You know, we don't know exactly why, but as I said, in some cases they may not get notice or they may figure, ‘Look, I can't pay this. So why should I take off from work, potentially lose my job just to try to fight this?’
We know that most patients who do show up to court, so that other 40%, less than 10% of them will have a lawyer. So they go to court and in most cases, other studies have shown us, the hospital will win. So then there is a judgment against them for whatever amount that, you know, the principal amount — what they owe the hospital. At that moment, an 8% interest rate kicks in. And then also there's an automatic lien put on their homes. And then it starts taking a toll in other ways.
So, we know once the once a hospital decides to bring someone to court, that debt, all the sudden, you know, that's reported to credit agencies. So it's on their credit report. It starts affecting their credit score. In these days, credit scores are really really important. They affect employment opportunities. They affect how much people pay for car insurance, other types of insurance, even how much you pay for utilities. So that medical bill and the decision of the hospital to bring someone to court has effects that are profound, and they're beyond just, you know, owing a hospital.
De la Canal: So how common is this and how many hospitals in North Carolina are engaging in this practice?
Greene: So what was really interesting in our study is that five hospital systems account for 96.5% of the collection actions over the time period studied. So, there are really certain hospitals.
De la Canal: And I think the study found that Charlotte-based Atrium Health was the most aggressive debt collector among hospitals in North Carolina. It filed 2,500 lawsuits from 2017 to 2022. And then the second most litigious system was Caromont Health in Gastonia, with about 1,800 lawsuits in the same period. How does that compare with other systems and did they respond to your questions about this issue? Those two systems?
Greene: So, you know, it's a lot higher than other systems. As I said, you know, you said, Atrium is responsible for 42% of the lawsuits. So, what we have here is some hospitals, at least in this way — who are not using third-party debt collectors — don't seem to sue or only sue, you know, a few people.
So, Atrium has responded and, you know, Atrium talked about other things they do to try to work with patients. They also said that they have stopped the practice. So as any good researcher would do, we were curious about that. So, while we haven't been able to analyze the data in the same way, we did actually go to the courthouse, to the terminal, and try to see what was going on. So, Atrium was asked when they stopped the practice and as far as I know, they did not respond to that question, but here's what we found. There are many suits throughout the end of 2022, including during the holidays. In 2023, so far we found fewer cases, so it seems like there has been some kind of policy shift. I can't speak to what that shift is, so there are all sorts of ways to sue patients where Atrium might not be listed — if they sell the debt or if there's a third-party debt collector — but that's what they said.
De la Canal: Well, just to play devil's advocate for a moment — Aren't hospitals entitled to payment for services rendered?
Greene: Yeah so, you know, I think that that's a good question and of course, when people owe money to creditors, they want to pay. But here's the thing: A lot of these bills come from surprise bills. So people who actually have insurance were not told that whatever procedure they had or whoever they had as a doctor were not covered from their insurance. And then all of a sudden, they're told, they get a notice saying ‘Your insurance didn’t cover this.’ This isn't like using a credit card, buying clothes and then owing that knowing that you did that, a lot of times, people don't think that they're going to owe money.
There's also another set of patients who are entitled to charity care, so that is a program that's supposed to help people who are low-income get medical care and the hospital data themselves show that up to 60% of people who are supposed to get charity care don't. So some of these people are actually entitled to help don't get it. And then they're sued.
De la Canal: And Atrium Health is a nonprofit hospital, so we should probably note that. I guess the question here becomes, what do we do about this?
Greene: I think a good solution that is, right now, pending in the legislature is the Medical Debt De-weaponization Act. So, that limits the interest rate that medical facilities can charge. As I mentioned, interest is a big part of this. Almost 31% of the debt owed by North Carolina patients is attributable to interest so that 8% interest rate is high and it's higher than many states, so we could limit that. That's one thing we could do through that act. We can limit some types of really aggressive debt collecting. That act also limits credit reporting of these bills, at least in the first year. You know, there are also other things to look at, like making the court system more accessible to people, making it easier for people to represent themselves when they’re pro se, but those policy solutions I just mentioned are extremely important.
