Hospitals Hit for Debt-Collection Practices

Despite being nonprofits and receiving billions in subsidies, New York State hospitals went to court more than 30,000 times over the past five years to force patients to pay bills that many simply could not afford, a report released Thursday found.

The report by the Community Service Society of New York said hospitals failed to offer financial assistance to all those in need, employed aggressive debt collectors and enjoyed an unfair advantage in courtrooms.

CSS (a funder of City Limits) also found that a handful of hospitals were responsible for most of the suits, though hospitals disputed those findings.

The court clashes between patients and hospitals occurred against a backdrop of rising costs. From 2008 to 2016, premiums and deductibles rose from 5.5 percent of the average New Yorker’s household income to 7.7 percent—a significant jump during a period when hospital usage dropped and the federal Affordable Care Act became law.

A different kind of industry

CSS researchers looked at court cases filed from 2015 through 2019 by some 139 hospitals in 26 New York counties. It found just under 31,000 cases. The median overdue amount sought in the suits was $1,900—although, the report points out, that total can quickly grow since hospitals have six years to sue and can tack on 9 percent annual interest. Most times, the report said, patients didn’t even respond to the suits, resulting in default judgments.

Many industries use debt collectors and go to court sometimes to collect, but CSS argues the hospital industry is different.

New York State hospitals are non-profits that receive a tax exemption worth $2 billion a year. The state also funds hospitals for the uncompensated care they are obligated to provide low-income people. That Indigent Care Pool funding runs $1.13 billion a year.

And it’s not like healthcare consumers often have much choice in whether or where to seek care, or much ability to contest the murky assertions embedded in hospital bills. As the report notes:

Debt collection lawsuits allow hospitals to seize assets, garnish wages, freeze bank accounts, and place liens on the homes of patients who cannot pay for health care. Patients accrue hospital bills in times of serious illness and frequently without any ability to plan ahead or “shop” for the best deal. Often, patients have little medical expertise, billing proficiency, or insurance literacy. Nonetheless, when a nonprofit hospital sues a patient, the courts view that patient’s inability to pay as failure to honor a commercial contract. These medical debt court cases often ruin patients’ lives by wrecking their credit and threatening their economic security.

Elisabeth Benjamin, vice president of health initiatives at CSS, says the data indicate hospitals are taking more and more cases to court every year. One example: What is now known as NewYork-Presbyterian Lower Manhattan Hospital filed 189 collection suits from 1987 through 2014—a span of 27 years. In the six years since, it has filed 149.

“New York’s not-for-profit hospitals have more support from tax exemptions and ICP funding and other financing vehicles than any other hospital system in the country and we were shocked to see this amount of litigation. It’s so completely out of step with the compassionate care hospitals are supposed to provide,” she says. “We think hospitals should do some soul searching about whether this is what they ought to be doing.” The report is a call to action, she says, for a moratorium on hospital debt-collection litigation.

Disparities detected

Some New York counties see much higher rates of hospital debt litigation than others. In Fulton County, for instance, there are 54,000 people—and they were sued by hospitals 1,410 times. There is also evidence suggesting racial disparities in where collections tend to occur, according to the report.

A few hospitals file the majority of debt-collection lawsuits, the report contends. Three-quarters of the suits tracked by CSS were generated by four hospital systems. The most active, Northwell Health, was responsible for 51 percent of the lawsuits, according to CSS.

Northwell disputes that finding, contending that two of the hospitals the CSS considers part of Northwell—Crouse Health in Syracuse—and Maimonides Medical Center in Brooklyn—are merely affiliates and not owned by the company.

“CSS totally misrepresented the facts. There was no attempt to present this information fairly or honestly,” Terence Lynam, a spokesman for Northwell, told City Limits. “They have lost credibility issuing such a reckless report.”

Lynam says including those hospitals distorts the picture of Northwell’s approach, and that hospitals fully owned by Northwell have much lower rates of litigation. “Northwell Health does not file lawsuits on 99.9 percent of its patient bills. In the rare instances that Northwell Health takes legal action, it occurs only when a patient has been unresponsive to the multiple attempts made by Northwell Health to resolve the outstanding balance (including multiple offers for financial assistance, discounts, and counseling) and the patient has a strong ability to pay the outstanding balance.”

Crouse Health’s website prominently features the Northwell logo, although the interior of the site indicates the relationship between the companies is not a merger but is a multifaceted partnership.

The CSS report relates the story of one patient who was told to get an HIV test when his partner was raped. The patient contends he wanted to seek the test elsewhere but was told to get one in the hospital instead. It ended up costing him $1,000 when HIV tests are often free.

“Why is a hospital charging $1,000 for an HIV test?” Benjamin asks. “That’s just cruel. I feel the whole system is antiseptic. They have an antiseptic system that’s inhumane and drives people into debtors’ courthouses.”