Hailey Tran
Hospitals are increasingly suing patients for unpaid medical bills, with investigations showing that many use aggressive practices to collect on unpaid medical bills. More than two-thirds of hospitals have policies that allow them to sue patients or take other legal actions against them, such as garnishing wages or placing liens on property. This is despite growing evidence of the harm caused by medical debt, with patients from underserved communities continuing to face harm from medical debt. While some hospitals defend their policies, others have effectively stopped taking patients to court, even if their policies still allow it.
| Characteristics | Values |
|---|---|
| Hospitals suing patients for debts | An investigation of 500 U.S. hospitals revealed that more than two-thirds have policies that allow them to sue patients or take other legal actions against them. |
| Hospitals' profits from suing patients | Hospitals with policies allowing them to sue patients tend to have only slightly higher profits than those that don't sue. |
| Hospitals' legal expenses | Hospitals may opt not to sue patients with debts of less than a few thousand dollars to avoid legal expenses, including attorney fees of $200–$400 per hour. |
| Hospitals' debt collection practices | Hospitals often sell patient accounts to debt-buying companies, which then keep whatever they collect. They may also assign debt collection to third-party agencies. |
| Hospitals' compliance with debt collection laws | Hospitals must comply with laws that apply to debt collection, such as avoiding harassing or abusive calls and following requirements when reporting debt to consumer reporting companies. |
| Patients' rights | Patients have the right to ask debt collectors to verify that they owe the debt. They can also contact their state or local social services to see if help is available. |
| States' protections against medical debt | Some states have usury laws that limit the amount of interest that can be charged on debt. Only seven states require hospitals to provide financial assistance. |
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What You'll Learn
Hospitals suing patients for medical debts
While it is legal for hospitals to sue patients for unpaid medical bills, it is worth noting that hospitals rarely take this step. In fact, spokespeople for several medical systems have stated that they have effectively stopped taking patients to court, even if their policies still allow it. One reason for this could be the high cost of litigation, which often results in hospitals not profiting off of these lawsuits. Additionally, only a small fraction of patients are taken to court. Instead, credit reporting is the most common collection tactic used by hospitals, as it induces patients to pay their debts.
However, when hospitals do sue, it can have devastating consequences for patients. For example, Nick and Elizabeth Woodruff were sued by Our Lady of Lourdes Memorial Hospital in New York for a medical debt of over $9,300. The couple had to withdraw money from their retirement accounts and borrow from family to pay off the debt. Unfortunately, their story is not unique, as about one in five households in the United States report having unpaid medical bills.
If you are facing a lawsuit from a hospital for unpaid medical bills, it is important to know your rights and the actions you can take. Firstly, you have the right to ask the debt collector to verify that the debt is valid and that it belongs to you. Secondly, you should answer the summons within 20 days and explore various options to defend yourself. You can also contact your state or local social services to see if there is any additional help available. Additionally, if you believe you have been denied care due to your inability to pay, you can file a complaint with your state's Attorney General's office.
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Hospitals threatening patients' credit
An investigation into the billing policies and practices of more than 500 hospitals in the United States reveals a widespread reliance on aggressive collection tactics to pursue patients for unpaid medical bills. Hospitals use tactics such as lawsuits, selling patient accounts to debt buyers, and reporting patients to credit rating agencies, which can jeopardize their credit scores and their ability to rent an apartment, buy a car, or get a job.
A KHN investigation found that hundreds of hospitals maintain policies to aggressively pursue patients for unpaid bills. The investigation revealed that more than two-thirds of hospitals have policies that allow them to sue patients or take other legal actions, such as garnishing wages. This includes prominent medical centers like the Mayo Clinic.
The collection practices are prevalent across all types of hospitals, including public university systems, leading academic institutions, small community hospitals, for-profit chains, and nonprofit Catholic systems. Additionally, about a quarter of hospitals sell patients' debts to debt collectors, who can pursue patients for years for unpaid bills. Furthermore, nearly 40% of hospitals do not provide any information on their websites about their collection activities, leaving patients uncertain about the potential consequences of unpaid bills.
While hospital leaders emphasize the industry's commitment to assisting low-income patients and those struggling to pay their bills, the reality is that medical debt is taking a significant toll on patients. Many patients are forced to make sacrifices, such as taking on extra work, changing their living situations, or delaying their education.
It is worth noting that patients have certain rights and protections when it comes to medical bills and collections. Nonprofit hospitals are legally required to offer financial assistance programs, and patients can contact their state or local social services for additional help. Patients also have the right to request verification of the debt and ensure that debt collectors comply with applicable laws, avoiding harassment or abusive behavior.
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Hospitals selling patient debts
The sale of medical debt is considered an Extraordinary Collection Action (ECA) under federal law, and certain requirements must be met before a hospital can initiate the sale. However, only three states prohibit the sale of medical debt, and only two states—California and Colorado—regulate debt buyers. This means that in most states, hospitals are free to sell patient debts without restrictions, and patients are left vulnerable to aggressive collection practices.
The practice of hospitals selling patient debts is often driven by the financial motivations of the hospitals themselves. Nonprofit hospitals, in particular, have come under scrutiny for their aggressive pursuit of patient debt. These hospitals, designated as "charitable" organizations by the IRS, have grown into large enterprises with substantial revenue. As a result, they increasingly resemble for-profit hospitals in their behavior and pricing. This shift has contributed to the rise of medical debt as a significant issue in the United States.
While hospitals selling patient debts is a growing trend, it is important to note that not all hospitals engage in this practice. Some hospitals have barred aggressive collection tactics, including leading academic medical centers at UCLA and Stanford University. Additionally, a few states have taken steps to protect patients from aggressive debt collection practices. For example, Maryland has barred hospitals from placing liens on patients' homes and protected low-income patients from wage garnishments. These efforts provide some relief to patients struggling with medical debt.
Patients facing hospital debt should be aware of their rights and protections. They can request verification of the debt and explore payment plans or financial assistance options. It is important to be cautious of scams and to seek help from reputable credit counselors or legal services if needed. By understanding their rights and available resources, patients can better navigate the complex landscape of medical debt.
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Patients' rights when sued by hospitals
- Right to Financial Assistance and Payment Arrangements: Nonprofit hospitals are legally required to offer financial assistance programs, and many other medical providers are often willing to work out payment arrangements. Patients can also contact their state or local social services to explore additional financial aid options.
- Protection from Harassment and Abusive Practices: Debt collectors, including hospitals, must comply with laws that prohibit harassing or abusive behaviour when attempting to recover debts. This includes avoiding harassing or abusive calls and adhering to regulations when reporting debts to consumer reporting companies.
- Validation of Debt: Patients have the right to request validation of the debt from debt collectors. Debt collectors can only contact individuals about valid debts that they owe and must be able to verify the existence and accuracy of the debt.
- Right to Legal Representation and Settlement: Patients have the right to seek legal representation and consult with a medical malpractice lawyer to understand their rights and options for defence or settlement. Many attorneys offer free consultations, and malpractice insurance companies often work behind the scenes to settle cases before they go to trial.
- State Protections and Limitations: Some states have specific protections against medical debt, including requirements for hospitals to provide financial assistance and prohibitions on aggressive collection practices. Additionally, all states have usury laws that limit the amount of interest that can be charged on debts, although these limits vary by state.
- Vicarious Liability: In some jurisdictions, patients may be able to hold hospitals vicariously liable for the negligence of their employees, including doctors. This means that if a doctor, as an employee or independent contractor, causes harm to a patient through negligence, the hospital may also be held responsible.
It is important to note that patients facing legal action from hospitals should seek legal advice specific to their state and circumstances to understand their full rights and options.
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State protections against medical debt
While hospitals are allowed to sue for debts, there are some state protections in place to help patients with medical debt. Firstly, it's important to note that nonprofit hospitals are required by law to offer financial assistance programs, and many other providers are often willing to work out payment arrangements. Patients should also be aware that debt collectors can only contact them about valid debts that they owe. They have the right to ask a debt collector to verify that they owe the debt, and collectors must comply with laws that apply to debt collection, such as avoiding harassing or abusive calls.
At the state level, protections vary widely. Some states have taken steps to prevent the accrual of medical debt, while others have focused on helping those already in debt. Delaware and Maine, for example, prohibit creditors from charging interest on medical debt, and New Jersey and New York have established caps on interest rates. Delaware, New Jersey, and Florida have placed restrictions on the sale of medical debt, and New York has fully prohibited the practice. Illinois prohibits lawsuits against uninsured patients who cannot pay, and Minnesota has sued a health system for charging interest rates that exceeded the allowed limit.
To better protect patients, states could strengthen penalties for noncompliant hospitals, provide patients with the right to sue, and increase funding for oversight. States can also improve access to financial assistance and ensure that nonprofit hospitals are earning their tax exemptions. Federal protections are also important, as current gaps leave many patients at risk, especially those from underserved communities. The Consumer Financial Protection Bureau (CFPB) has taken action by finalizing a rule to remove medical bills from credit reports, banning consumer reporting agencies from including medical debt information, and prohibiting lenders from considering this information in their decisions.
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Frequently asked questions
Yes, hospitals are allowed to sue for debts. An investigation by Kaiser Health News revealed that a large proportion of hospitals engage in aggressive practices to recoup medical debt. More than two-thirds of hospitals have policies that allow them to sue patients or take other legal actions, such as garnishing wages or placing liens on property.
If you are sued by a hospital for unpaid medical bills, you have certain rights and protections. You should answer the summons within 20 days and try to defend yourself. You can also contact your state or local social services to see if assistance is available. Additionally, you have the right to ask debt collectors to verify that the debt is valid and belongs to you.
There are several alternatives to hospitals suing patients for medical debts. Nonprofit hospitals are required by law to offer financial assistance programs, and many other providers are willing to work out payment arrangements. Patients can also contact the Centers for Medicare and Medicaid Services for help with unexpected out-of-network medical costs. Additionally, some states have protections in place to limit the interest that can be charged on medical debt and to require hospitals to provide financial assistance.
